Financial services group Conseco Inc, which became one of the biggest US insurers by acquiring rivals during 1990s, on Wednesday said it had filed for bankruptcy, the third largest filing after WorldCom and Enron.
Conseco listed 52.2 billion dollars in assets in its latest quarterly report, making it the wealthiest firm to come to the court since Enron Corp and WorldCom Inc.
Chapter 11 bankruptcy frees a company from the threat of creditors' lawsuits while it reorganises its finances. The debtor usually retains control of the business and its assets. Although the filing was not surprising given Conseco's recent woes, it marked a dramatic downfall for a company whose stock was once a Wall Street darling.
The filing excluded the insurance companies, such as Conseco Services LLC and Conseco Capital Management, which continue to operate as separate legal entities, Conseco said in a statement.
Conseco said its insurance subsidiaries were adequately capitalised to carry on alone.
"Policyholders will not be affected by the parent company restructuring," it said. But the assets and operations of Conseco Finance Corp would be sold while in bankruptcy, Conseco said. The group said it had already struck an outline deal of the sale with CFN Investment Holdings LLC.
Under the most commonly used measure to rank bankruptcies, Conseco's ranks third in the United States based on the $52.3 billion in assets the company and its subsidiaries reported as of September 30.
WorldCom's total assets at its July filing were $104 billion, followed by Enron's US $64 billion. Before Conseco's filing, the third-largest bankruptcy as the 1987 filing by Texaco, which had nearly US $36 billion in assets at the time. Adjusted for inflation, that amount would be more than US $56 billion today, according to the research web site www.bankruptcydata.com.
Conseco maintains the use of assets to measure bankruptcies is inappropriate in its case because its insurance operations are not included in the bankruptcy filing. Also, Conseco says its debt entering bankruptcy is much smaller than several other companies' debts at the time they filed.
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