Agency Upgrades Conseco

Conseco's managers also have cut expenses, shifted to safer investments and worked out an arrangement deal with Florida insurance regulators that could help the company clear up the problems at Conseco Senior Health, Riegel and Robinson write.

Florida regulators have asked Conseco to offer current home health care policyholders in Florida and other states that adopt the Florida recommendations a choice between paying substantially more to keep their current benefits, paying somewhat more to keep reduced benefits or paying nothing and getting paid-up contingent benefits.

Moody's wants to see how policyholders react to the deal before making a decision about Conseco Senior Health's insurance financial strength rating, Riegel and Robinson write.

Managers of other Conseco units still have to keep agents, attract profitable business and maintain current risk-adjusted capital levels, the analysts write.

But, in general, Conseco's efforts to revamp its operations should give the company "additional time to execute its business strategy and provide greater flexibility in terms of financial leverage and interest coverage," the analysts write.

If Conseco succeeds at refinancing its bank debt, expands its capital base and generates more than $210 million in 2004 statutory operating earnings, that "would place additional upward pressure on the ratings," the Moody's analysts write.