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Conseco Inc. Case Analysis

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Conseco Inc. Case Analysis By: Aaron Rogers & Suzanne Davis Submitted on: 5/1/2004 Submitted to: Professor Herrity California Baptist University BUS 547a - Strategic Management (Spring 2004) Table of Contents Identification Overview of the Case Identification of Problems Analysis Strategic Management Tasks Generic Strategy Drivers of Change Key Success Factors Recommendations Additional Findings Sources Identification Conseco Inc. is a diverse financial organization providing services in insurance, risk management, investments, consumer finance and lending services markets. The company's customers are primarily middle income individuals and families and senior citizens. Conseco was incorporated in 1979 as a life insurance holding company and quickly devoted its efforts to rapid acquisition of other financial companies throughout the industry. The company was often characterized as entrepreneurial due to a history of growth through acquisition. The company grew to $95 billion in assets, 13 million customers and 14,500 employees by the year 2001. One of the riskiest acquisitions Conseco made was that of Green Tree Financial Corporation, which ultimately tripled the cash management departments wire transfer volume. The Cash Management department will be the focus of the analysis and recommendation set forth by the authors of this paper. During the rapid growth period of Conseco, the board of directors hired former CEO of General Electric Capital Corporation, Gary Wendt. The leadership provided by Mr. Wendt to the organizational structure was to strategically push decision making and accountability down to the business units. His philosophy, to first re-define the business units and then for the business units each to become committed to process excellence meanwhile he tied the officer's compensation to those specifically designed goals. ...read more.


These changes resulted in a more flattened organization. A organization in which employees at all levels were educated in the goals of their specific business unit and where year-end bonus compensation was tied to the meeting of business unit goals (Thompson & Strickland C-665). The managers of the SBU's were given the freedom to make strategic business decisions. This very freedom is what allowed Robert McNutt to pursue the creation and implementation of an unbudgeted web-based cash management system, though it could be argued that the decision to go forward with the new system was not truly an option. The textbook makes clear that McNutt's team was short of staff and was overworked (Thompson & Strickland C-661 & C-662). That fact being stated, the Cash Management team had to come up with a way to automate the wire-transfer system or they were "sunk" (a key success factor). Also, McNutt was under "top-heavy" pressure to make sure that whatever systems he put in place complied with the corporate objectives of cost-cutting and process streamlining. The strategy that was implemented by Cash Management group was to streamline their processes. The objectives for the project were simply to eliminate the cumbersome and tedious manual processes, and evolve into the new system. Implementation of the strategy to achieve this objective appeared to be well thought out and widely accepted within the centralized corporate structure. As stated above the other key factor was the monetary compensation tied into the success of controlling overhead costs. This focused low-cost strategy was starkly different than Conseco's previous two decades of pursuing broad differentiation through continuous acquisition. ...read more.


Additional Findings Insurer Ratings from www.conseco.com (4/30/2004) Subsidiary Claims-Paying/ Financial Strength A.M. Best Standard & Poor's Fitch Moody's Bankers Life and Casualty B 9/11/03 BB- 11/19/03 B 9/12/03 Ba3 12/4/03 Bankers National Life NR-2 Bpi N/R N/R Conseco Annuity Assurance (formerly American Life and Casualty) B 9/11/03 BB- 11/19/03 B 9/12/03 Ba3 12/4/03 Colonial Penn Life Insurance Company B 9/11/03 BB- 11/19/03 B 9/12/03 Ba3 12/4/2003 Conseco Health Insurance Co. (formerly Capitol American Life) B 9/11/03 BB- 11/19/03 B 9/12/03 Ba3 12/4/03 Conseco Life B 9/11/03 BB- 11/19/03 B 9/12/03 Ba3 12/4/03 Conseco Life of New York B 9/11/03 BB- 11/19/03 B 9/12/03 N/R Conseco Life of Texas NR-2 N/R N/R N/R Conseco Senior Health (formerly American Travellers Life) B 9/11/03 CCC 11/19/03 CCC- 4/12/04 Caa1 12/4/03 Washington National Ins. Co. B 9/11/03 Bpi N/R Ba3 12/4/03 2004 Earnings expectation to be on the low end of the initial $175-$200 million projection due to lower interest rates and higher mortality rates in the first quarter than expected. (CBS Marketwatch 4/30/2004) Facing more the $6.5 billion in debt, on 12/17/2002, Conseco Inc. filed for what would become the 3rd largest bankruptcy in US history. The company emerged from the BK on 9/10/2003 a smaller, leaner, restructured, and arguably more focused organization than before. (www.hoovers.com 4/27/2004) Conseco Inc. sold off Conseco Finance (formerly Green Tree Financial) in June of 2003. The company has been re-branded as Green Tree Servicing Inc. (www.cfo.com and others 4/30/2004) Sources Strategic Management: Concepts and Cases by Thompson and Strickland, Thirteenth Edition, ISBN: 0-07-244371-5 Insurer Ratings pulled from: http://www.conseco.com/conseco/selfservice/about/cprofile/ratings.jhtml?cat=cprofile&subcat=ratings 2004 Earnings Estimation pulled from: http://www.marketwatch.com/news/yhoo/story.asp?source=blq/yhoo&siteid=yhoo&dist=yhoo&guid=%7B3649A76E%2DD698%2D4F75%2DAABA%2DE9BC000DECB7%7D BK and Green Tree Servicing information pulled from several sources including: www.hoovers.com, www.reuters.com, www.forbes.com, www.cfo.com ?? ?? ?? ?? 1 Conseco Case Analysis, Aaron & Suzanne ...read more.

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