Tuesday, April 01, 2008

Canseco Insufficient Transparency.

Canseco (CNO) reported results very late Monday night probably hoping to miss the news cycle on Tuesday. Therefore they would be old news on Wednesday and well you can figure out the rest.

The press release commences with an exculpatory statement pointing to a previous preliminary announcement which indicated the news would be tough. But Canseco wants you to have the warm and fuzzy feeling that things are going to improve.
The press release is full of instances which beg more questions than are answered.

1. Q4 results were negatively influenced by an $11 million dollar hedging inefficiency. That accounts for 15% of the loss. No further explanations are offered. In today’s market most derivatives and hedges are suspect. You would think they could cough up some more relevant details.

2. Q4 results were also negatively influenced by a $14.8 million charge because they have changed estimates of future mortality rates in the universal life product category. Mortality rates do not fluctuate radically in the western world. They are usually subject to regulatory scrutiny. So suddenly they have decided people will be dying sooner. Or is it they have under priced the products and cannot get out of the contracts.

Hey I know insurance companies have their own quirks about accounting and operations but quite frankly this press release does not help the cause of transparency.