Quarterly Financial Supplement - 4Q08
Table of Contents
Page
Consolidated balance sheet
2
Consolidated statement of operations
3
Earnings per share analysis
4
Computation of weighted average shares outstanding
5
Analyses of income before taxes and selected data:
Bankers Life
6-7
Colonial Penn
8
Conseco Insurance Group
9-10
Premiums collected on insurance products:
Bankers Life
11
Colonial Penn
12
Conseco Insurance Group
13
Statutory information
14
Notes
15
Conseco, Inc.
Consolidated balance sheet (in millions)
Mar-07
Jun-07
Sep-07
Dec-07
Mar-08
Jun-08
Sep-08
Dec-08
Assets
Investments:
Actively managed fixed maturities at fair value
$20,583.4
$20,263.3
$17,899.6
$17,859.5
$17,531.1
$17,552.1
$16,641.7
$15,277.0
Investments to be transferred pursuant to an annuity coinsurance transaction at fair value
0.0
0.0
2,564.1
0.0
0.0
0.0
0.0
0.0
Equity securities at fair value
29.7
40.2
35.5
34.5
34.4
34.3
34.2
32.4
Mortgage loans
1,479.8
1,547.6
1,706.2
1,855.8
1,908.1
1,976.3
2,047.3
2,159.4
Policy loans
409.3
410.3
389.5
370.4
367.0
364.3
362.0
363.5
Trading securities
823.2
800.6
691.2
665.8
361.2
266.5
280.5
326.5
Securities lending collateral
593.8
460.7
407.5
405.8
387.7
295.9
282.0
393.7
Other invested assets
171.5
201.3
177.6
132.7
86.6
86.6
90.8
95.0
Total investments
24,090.7
23,724.0
23,871.2
21,324.5
20,676.1
20,576.0
19,738.5
18,647.5
Cash and cash equivalents - unrestricted
250.7
499.2
308.2
361.9
505.4
297.7
307.9
894.5
Cash and cash equivalents - restricted
21.5
29.8
25.8
21.1
36.5
21.5
12.0
4.8
Accrued investment income
320.1
316.1
307.4
281.0
304.4
288.4
306.7
298.7
Value of policies inforce at the Effective Date
1,876.8
1,838.9
1,587.3
1,573.6
1,529.5
1,492.8
1,493.7
1,477.8
Cost of policies produced
1,182.2
1,296.7
1,359.4
1,423.0
1,549.4
1,658.7
1,859.0
1,812.6
Reinsurance receivables
786.7
777.0
3,587.4
3,513.0
3,432.9
3,366.6
3,303.9
3,284.8
Income tax assets, net
1,519.1
1,670.2
1,693.8
1,610.2
1,740.5
1,540.6
1,779.6
2,053.7
Assets held in separate accounts
28.7
28.6
28.3
27.4
25.0
24.6
22.0
18.2
Other assets
323.5
357.6
311.9
283.1
337.6
330.2
326.6
277.1
Assets of discontinued operations
3,434.0
3,441.5
3,548.3
3,552.4
3,556.6
3,412.6
3,225.1
0.0
Total assets
33,834.0
33,979.6
36,629.0
33,971.2
33,693.9
33,009.7
32,375.0
28,769.7
Liabilities
Liabilities for insurance products:
Interest-sensitive products
13,050.8
13,066.0
13,218.7
13,169.4
13,119.5
13,105.0
13,175.6
13,332.8
Traditional products
9,319.1
9,388.6
9,468.6
9,548.4
9,638.0
9,713.9
9,841.3
9,828.7
Claims payable and other policyholder funds
832.5
830.7
885.0
909.7
926.1
953.2
873.1
1,008.4
Liabilities related to separate accounts
28.7
28.6
28.3
27.4
25.0
24.6
22.0
18.2
Other liabilities
679.2
695.9
566.7
492.3
531.6
478.1
422.8
457.4
Liability for assets to be transferred pursuant to an annuity coinsurance transaction
0.0
0.0
2,564.1
0.0
0.0
0.0
0.0
0.0
Investment borrowings
647.7
868.9
913.7
913.0
848.3
824.2
823.9
767.5
Securities lending payable
593.5
460.6
408.5
409.5
394.0
300.2
290.7
408.8
Notes payable - direct corporate obligations
999.3
1,197.8
1,195.7
1,193.7
1,191.7
1,189.7
1,187.6
1,328.7
Liabilities of discontinued operations
2,983.1
3,086.4
3,094.2
3,071.9
3,080.0
3,038.7
3,034.0
0.0
Total liabilities
29,133.9
29,623.5
32,343.5
29,735.3
29,754.2
29,627.6
29,671.0
27,150.5
Shareholders' equity
Preferred stock
667.8
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Common stock
1.5
1.9
1.9
1.9
1.9
1.9
1.9
1.9
Additional paid-in capital
3,449.9
4,121.2
4,089.4
4,068.6
4,070.5
4,073.6
4,076.0
4,076.0
Retained earnings (accumulated deficit)
622.7
562.9
510.2
438.7
432.9
(54.2)
(236.2)
(688.0)
Total shareholders' equity before accumulated other comprehensive loss
4,741.9
4,686.0
4,601.5
4,509.2
4,505.3
4,021.3
3,841.7
3,389.9
Accumulated other comprehensive loss
(41.8)
(329.9)
(316.0)
(273.3)
(565.6)
(639.2)
(1,137.7)
(1,770.7)
Total shareholders' equity
4,700.1
4,356.1
4,285.5
4,235.9
3,939.7
3,382.1
2,704.0
1,619.2
Total liabilities and shareholders' equity
$33,834.0
$33,979.6
$36,629.0
$33,971.2
$33,693.9
$33,009.7
$32,375.0
$28,769.7
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
4Q08
Book value per share at period-end (1) (2)
$27.01
$24.83
$24.69
$24.42
$24.40
$21.77
$20.80
$18.35
Book value per share assuming conversion of convertible securities (1) (3)
$25.14
$24.83
$24.69
$24.42
$24.40
$21.77
$20.80
$18.35
Conseco, Inc.
Consolidated statement of operations (in millions)
1Q07
2Q07
3Q07
4Q07
2007
1Q08
2Q08
3Q08
4Q08
2008
Revenues
Insurance policy income
$693.5
$699.9
$754.7
$747.6
$2,895.7
$785.1
$830.0
$821.8
$816.7
$3,253.6
Net investment income (loss):
General account assets
337.1
341.2
350.5
321.7
1,350.5
310.0
311.9
312.8
319.8
1,254.5
Policyholder and reinsurer accounts and other special-purpose portfolios
4.9
42.3
3.2
(31.1)
19.3
(26.0)
(21.6)
(24.3)
(3.8)
(75.7)
Net realized investment losses
(34.7)
(28.2)
(57.3)
(37.8)
(158.0)
(45.6)
(30.5)
(93.3)
(93.0)
(262.4)
Fee revenue and other income
3.8
5.2
8.5
6.3
23.8
4.0
4.9
4.9
5.9
19.7
Total revenues
1,004.6
1,060.4
1,059.6
1,006.7
4,131.3
1,027.5
1,094.7
1,021.9
1,045.6
4,189.7
Benefits and expenses
Insurance policy benefits
701.4
729.0
778.8
706.7
2,915.9
767.7
815.9
797.0
831.9
3,212.5
Interest expense
23.6
27.9
33.3
32.5
117.3
28.7
22.9
22.5
23.7
97.8
Amortization
111.3
108.6
86.4
120.5
426.8
109.8
101.5
77.6
79.0
367.9
Gain on extinguishment of debt
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(21.2)
(21.2)
Costs related to a litigation settlement
13.0
35.0
16.4
0.0
64.4
0.0
0.0
0.0
0.0
0.0
Loss related to an annuity coinsurance transaction
0.0
0.0
76.5
0.0
76.5
0.0
0.0
0.0
0.0
0.0
Other operating costs and expenses
129.1
136.9
136.5
137.9
540.4
131.1
136.1
117.0
136.1
520.3
Total benefits and expenses
978.4
1,037.4
1,127.9
997.6
4,141.3
1,037.3
1,076.4
1,014.1
1,049.5
4,177.3
Income (loss) before income taxes and discontinued operations
26.2
23.0
(68.3)
9.1
(10.0)
(9.8)
18.3
7.8
(3.9)
12.4
Income tax expense (benefit) on period income
9.2
7.8
(26.7)
5.7
(4.0)
(3.5)
9.1
2.4
4.5
12.5
Valuation allowance for deferred tax assets
0.0
0.0
0.0
68.0
68.0
0.0
298.0
30.0
75.9
403.9
Income (loss) before discontinued operations
17.0
15.2
(41.6)
(64.6)
(74.0)
(6.3)
(288.8)
(24.6)
(84.3)
(404.0)
Discontinued operations, net of income taxes
(17.5)
(70.4)
(11.1)
(6.9)
(105.9)
0.5
(198.3)
(157.4)
(367.5)
(722.7)
Net income (loss)
(0.5)
(55.2)
(52.7)
(71.5)
(179.9)
(5.8)
(487.1)
(182.0)
(451.8)
(1,126.7)
Preferred stock dividends
9.5
4.6
0.0
0.0
14.1
0.0
0.0
0.0
0.0
0.0
Net loss applicable to common stock
($10.0)
($59.8)
($52.7)
($71.5)
($194.0)
($5.8)
($487.1)
($182.0)
($451.8)
($1,126.7)
Conseco, Inc.
Earnings per share analysis ($ in millions, except per share amounts)
1Q07
2Q07
3Q07
4Q07
2007
1Q08
2Q08
3Q08
4Q08
2008
Income (loss) before net realized investment losses,
net of related amortization and income taxes:
Bankers Life
$45.5
$70.5
$67.5
$58.3
$241.8
$29.1
$34.6
$67.8
$40.0
$171.5
Colonial Penn
4.6
6.7
7.0
(0.2)
18.1
3.7
8.3
6.5
6.7
25.2
Conseco Insurance Group
27.7
3.7
(67.3)
9.6
(26.3)
23.3
32.3
34.2
31.5
121.3
Corporate operations:
Interest expense on debt
(16.1)
(16.9)
(20.2)
(19.1)
(72.3)
(16.4)
(13.9)
(13.7)
(15.2)
(59.2)
Gain on extinguishment of debt
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
21.2
21.2
Other corporate expenses, net
(14.7)
(25.5)
(5.9)
(2.9)
(49.0)
(6.7)
(16.2)
(3.7)
(0.1)
(26.7)
Net realized investment losses, net of related amortization
(20.8)
(15.5)
(49.4)
(36.6)
(122.3)
(42.8)
(26.8)
(83.3)
(88.0)
(240.9)
Income (loss) before taxes and discontinued operations
26.2
23.0
(68.3)
9.1
(10.0)
(9.8)
18.3
7.8
(3.9)
12.4
Taxes
9.2
7.8
(26.7)
5.7
(4.0)
(3.5)
9.1
2.4
4.5
12.5
Valuation allowance for deferred tax assets
0.0
0.0
0.0
68.0
68.0
0.0
298.0
30.0
75.9
403.9
Income (loss) before discontinued operations
17.0
15.2
(41.6)
(64.6)
(74.0)
(6.3)
(288.8)
(24.6)
(84.3)
(404.0)
Discontinued operations, net of income taxes
(17.5)
(70.4)
(11.1)
(6.9)
(105.9)
0.5
(198.3)
(157.4)
(367.5)
(722.7)
Net loss
(0.5)
(55.2)
(52.7)
(71.5)
(179.9)
(5.8)
(487.1)
(182.0)
(451.8)
(1,126.7)
Less dividends on 5.5% Class B mandatorily convertible preferred stock
9.5
4.6
0.0
0.0
14.1
0.0
0.0
0.0
0.0
0.0
Net loss applicable to common stock
($10.0)
($59.8)
($52.7)
($71.5)
($194.0)
($5.8)
($487.1)
($182.0)
($451.8)
($1,126.7)
Diluted earnings (loss) per share
($0.07)
($0.35)
($0.28)
($0.38)
($1.12)
($0.03)
($2.64)
($0.98)
($2.45)
($6.10)
Net realized investment losses, net of related amortization and taxes, per share (diluted)
($0.09)
($0.06)
($0.17)
($0.13)
($0.46)
($0.15)
($0.09)
($0.45)
($0.48)
($1.18)
Valuation allowance for deferred tax assets
$0.00
$0.00
$0.00
($0.37)
($0.39)
$0.00
($1.61)
$0.00
($0.24)
($1.86)
Discontinued operations
($0.12)
($0.41)
($0.06)
($0.03)
($0.61)
$0.00
($1.08)
($0.85)
($1.99)
($3.91)
Diluted earnings (loss) per share, excluding net realized investment losses,
valuation allowance for deferred tax assets and discontinued operations
$0.14
$0.12
($0.05)
$0.15
$0.34
$0.12
$0.14
$0.32
$0.26
$0.85
Conseco, Inc.
Computation of weighted average shares outstanding
1Q07
2Q07
3Q07
4Q07
2007
1Q08
2Q08
3Q08
4Q08
2008
(000s)
Basic
Shares outstanding, beginning of period
152,165.1
150,845.2
188,699.3
186,345.5
152,165.1
184,652.0
184,655.5
184,725.9
184,725.9
184,652.0
Weighted average shares issued during the period:
Shares issued under stock option and restricted stock plans
54.6
18.0
21.1
15.8
241.5
1.4
29.5
0.0
36.5
57.3
Shares withheld for the payment of the exercise price of stock options and taxes
(3.0)
(0.7)
(0.5)
(4.6)
(8.7)
(0.4)
(0.6)
0.0
(10.7)
(5.5)
Shares acquired
(1,280.3)
0.0
(986.6)
(670.1)
(2,494.1)
0.0
0.0
0.0
0.0
0.0
Conversion of preferred stock into common shares
0.0
18,281.4
0.0
0.0
23,475.0
0.0
0.0
0.0
0.0
0.0
Other
0.0
(4.9)
0.0
0.0
(5.0)
0.0
0.0
0.0
0.0
0.0
Weighted average basic shares outstanding during the period
150,936.4
169,139.0
187,733.3
185,686.6
173,373.8
184,653.0
184,684.4
184,725.9
184,751.7
184,703.8
Basic shares outstanding, end of period
150,845.2
188,699.3
186,345.5
184,652.0
184,652.0
184,655.5
184,725.9
184,725.9
184,753.8
184,753.8
Diluted
Weighted average basic shares outstanding
150,936.4
169,139.0
187,733.3
185,686.6
173,373.8
184,653.0
184,684.4
184,725.9
184,751.7
184,703.8
Common stock equivalent shares related to:
Stock option and restricted stock plans
130.3
262.7
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Class B mandatorily convertible preferred stock
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Weighted average diluted shares outstanding during the period
151,066.7
169,401.7
187,733.3
185,686.6
173,373.8
184,653.0
184,684.4
184,725.9
184,751.7
184,703.8
Diluted shares outstanding, end of period
188,784.7
188,962.0
186,472.1
184,708.7
184,708.7
184,681.2
184,792.3
184,761.1
184,755.7
184,755.7
Conseco, Inc.
Bankers Life
Analysis of income before taxes (in millions)
1Q07
2Q07
3Q07
4Q07
2007
1Q08
2Q08
3Q08
4Q08
2008
Insurance policy income
$412.0
$424.0
$473.6
$470.4
$1,780.0
$497.0
$543.4
$537.7
$531.8
$2,109.9
Net investment income (loss):
General account invested assets
140.7
142.2
145.8
150.0
578.7
149.4
153.5
155.2
159.0
617.1
Equity-indexed products
(3.0)
11.9
(2.1)
(17.4)
(10.6)
(17.3)
(17.5)
(14.0)
(0.6)
(49.4)
Other special-purpose portfolios
3.2
1.0
0.5
(0.5)
4.2
(2.8)
(0.8)
(2.9)
(3.0)
(9.5)
Net realized investment losses
(5.2)
(1.9)
(1.3)
(11.5)
(19.9)
(19.3)
(12.1)
(48.4)
(36.9)
(116.7)
Fee revenue and other income
1.2
2.7
3.8
4.3
12.0
1.6
2.1
3.1
4.2
11.0
Total revenues
548.9
579.9
620.3
595.3
2,344.4
608.6
668.6
630.7
654.5
2,562.4
Insurance policy benefits
342.6
338.2
404.9
394.9
1,480.6
434.9
497.2
470.3
477.5
1,879.9
Amounts added to policyholder account balances:
Annuity products and interest-sensitive life products other than equity-indexed products
44.7
45.1
45.9
45.2
180.9
44.2
43.5
43.1
44.9
175.7
Equity-indexed products
2.4
13.5
9.0
(1.7)
23.2
0.6
(6.3)
3.1
37.4
34.8
Amortization related to operations
82.0
69.2
47.8
65.0
264.0
75.0
66.6
53.5
39.7
234.8
Amortization related to net realized investment losses
(0.7)
(0.9)
0.6
(1.5)
(2.5)
(2.5)
(1.9)
(8.0)
(3.4)
(15.8)
Other operating costs and expenses
36.9
45.3
46.5
45.1
173.8
44.1
45.1
41.3
51.9
182.4
Total benefits and expenses
507.9
510.4
554.7
547.0
2,120.0
596.3
644.2
603.3
648.0
2,491.8
Income before income taxes
$41.0
$69.5
$65.6
$48.3
$224.4
$12.3
$24.4
$27.4
$6.5
$70.6
Supplemental health product underwriting margins (in millions)
1Q07
2Q07
3Q07
4Q07
2007
1Q08
2Q08
3Q08
4Q08
2008
Medicare supplement:
Earned premium
$163.1
$161.4
$160.4
$159.5
$644.4
$161.4
$157.8
$159.9
$159.9
$639.0
Benefit ratio
64.6%
67.4%
69.4%
67.6%
67.2%
64.6%
71.3%
72.5%
74.7%
70.8%
Underwriting margin (earned premium less policy benefits)
$57.8
$52.6
$49.1
$51.6
$211.1
$57.1
$45.4
$43.9
$40.3
$186.7
PDP and PFFS:
Earned premium
$37.7
$47.0
$96.7
$90.1
$271.5
$118.7
$171.5
$165.6
$153.7
$609.5
Benefit ratio
93.3%
80.9%
85.4%
83.6%
85.1%
93.9%
95.1%
95.1%
100.8%
96.0%
Underwriting margin (earned premium less policy benefits)
$2.5
$8.9
$14.2
$14.8
$40.4
$7.2
$10.2
$8.2
$(1.2)
$24.4
Long-term care:
Earned premium
$153.3
$155.2
$156.4
$156.3
$621.2
$156.2
$156.3
$156.2
$155.6
$624.3
Benefit ratio before interest income on reserves
102.7%
95.4%
106.5%
103.3%
102.0%
111.6%
114.7%
102.1%
102.2%
107.6%
Interest-adjusted benefit ratio
72.1%
64.6%
75.2%
71.2%
70.8%
79.0%
81.4%
68.1%
67.4%
74.0%
Underwriting margin (earned premium plus interest income
on reserves less policy benefits)
$42.7
$55.1
$38.7
$44.9
$181.4
$32.8
$29.1
$49.8
$50.7
$162.4
Conseco, Inc.
Bankers Life
Average liabilities for insurance products (in millions) (continued)
1Q07
2Q07
3Q07
4Q07
2007
1Q08
2Q08
3Q08
4Q08
2008
Annuities:
Mortality based
$283.9
$286.0
$287.8
$268.9
$281.6
$250.3
$253.2
$254.2
$253.8
$252.9
Equity-indexed
657.4
730.0
826.2
936.1
787.4
1,043.6
1,147.1
1,255.8
1,365.7
1,203.0
Deposit based
4,548.3
4,520.9
4,487.6
4,472.7
4,507.4
4,445.9
4,419.8
4,442.8
4,548.8
4,464.3
Health
3,461.7
3,532.4
3,601.0
3,683.7
3,569.7
3,768.1
3,848.8
3,921.2
3,983.8
3,880.5
Life:
Interest sensitive
355.8
360.7
366.1
374.2
364.2
380.1
382.8
387.5
393.4
385.9
Non-interest sensitive
276.3
292.0
306.7
321.2
299.1
335.9
351.0
365.7
378.3
357.8
Total average liabilities for insurance products, net of reinsurance ceded
$9,583.4
$9,722.0
$9,875.4
$10,056.8
$9,809.4
$10,223.9
$10,402.7
$10,627.2
$10,923.8
$10,544.4
Analysis of income before taxes (in millions)
1Q07
2Q07
3Q07
4Q07
2007
1Q08
2Q08
3Q08
4Q08
2008
Value of policies in force at the effective date
Balance, beginning of period
$904.9
$852.8
$840.2
$815.5
$904.9
$781.6
$761.7
$745.3
$759.6
$781.6
Amortization related to operations
(46.9)
(33.1)
(20.7)
(30.7)
(131.4)
(36.2)
(29.4)
(16.7)
(19.3)
(101.6)
Amortization related to net realized investment (gains) losses
0.1
0.3
(0.2)
0.3
0.5
0.4
0.3
1.0
0.6
2.3
Cumulative effect of accounting change
(2.6)
0.0
0.0
0.0
(2.6)
0.0
0.0
0.0
0.0
0.0
Adjustment related to unrealized (gain) or loss on actively
managed fixed maturities
(2.7)
20.2
(3.8)
(3.5)
10.2
15.9
12.7
30.0
20.8
79.4
Balance, end of period
$852.8
$840.2
$815.5
$781.6
$781.6
$761.7
$745.3
$759.6
$761.7
$761.7
Cost of policies produced
1Q07
2Q07
3Q07
4Q07
2007
1Q08
2Q08
3Q08
4Q08
2008
Balance, beginning of period
$740.5
$777.0
$848.1
$895.2
$740.5
$941.6
$1,025.9
$1,103.9
$1,264.3
$941.6
Deferred acquisition expenses
76.0
69.8
78.9
81.6
306.3
80.5
74.8
85.7
65.2
306.2
Amortization related to operations
(35.1)
(36.1)
(27.1)
(34.3)
(132.6)
(38.8)
(37.2)
(36.8)
(20.4)
(133.2)
Amortization related to net realized investment (gains) losses
0.6
0.6
(0.4)
1.2
2.0
2.1
1.6
7.0
2.8
13.5
Cumulative effect of accounting change
(1.6)
0.0
0.0
0.0
(1.6)
0.0
0.0
0.0
0.0
0.0
Adjustment related to unrealized (gain) or loss on actively
managed fixed maturities
(3.4)
36.8
(4.3)
(2.1)
27.0
40.5
38.8
104.5
(95.7)
88.1
Balance, end of period
$777.0
$848.1
$895.2
$941.6
$941.6
$1,025.9
$1,103.9
$1,264.3
$1,216.2
$1,216.2
Conseco, Inc.
Colonial Penn
Analysis of income before taxes (in millions)
1Q07
2Q07
3Q07
4Q07
2007
1Q08
2Q08
3Q08
4Q08
2008
Insurance policy income
$29.3
$29.4
$32.5
$34.6
$125.8
$44.4
$47.5
$46.4
$46.5
$184.8
Net investment income (loss):
General account invested assets
9.5
9.4
9.4
9.5
37.8
9.7
10.1
10.1
10.2
40.1
Trading account income related to reinsurer accounts
0.9
(6.4)
2.3
3.0
(0.2)
(0.5)
0.0
0.0
0.0
(0.5)
Change in value of embedded derivatives related to modified coinsurance agreement
(0.9)
6.4
(2.3)
(3.0)
0.2
0.0
0.0
0.0
0.0
0.0
Net realized investment gains (losses)
(0.2)
0.3
0.3
(0.6)
(0.2)
(0.6)
0.7
(1.5)
(0.2)
(1.6)
Fee revenue and other income
0.2
0.1
0.2
0.2
0.7
0.3
0.5
0.5
0.5
1.8
Total revenues
38.8
39.2
42.4
43.7
164.1
53.3
58.8
55.5
57.0
224.6
Insurance policy benefits
25.6
23.9
26.3
25.2
101.0
35.0
35.5
33.9
33.8
138.2
Amounts added to annuity and interest-sensitive life product account balances
0.3
0.3
0.3
0.3
1.2
0.3
0.3
0.3
0.3
1.2
Amortization related to operations
4.8
4.9
5.1
5.5
20.3
7.4
7.4
9.2
8.0
32.0
Other operating costs and expenses
3.7
3.1
3.4
13.5
23.7
7.5
6.6
7.1
8.4
29.6
Total benefits and expenses
34.4
32.2
35.1
44.5
146.2
50.2
49.8
50.5
50.5
201.0
Income (loss) before income taxes
$4.4
$7.0
$7.3
($0.8)
$17.9
$3.1
$9.0
$5.0
$6.5
$23.6
Average liabilities for insurance products (in millions)
1Q07
2Q07
3Q07
4Q07
2007
1Q08
2Q08
3Q08
4Q08
2008
Annuities - mortality based
$89.5
$89.0
$88.5
$87.9
$88.7
$87.2
$86.5
$85.6
$84.4
$85.9
Health
23.5
23.0
22.7
22.3
22.9
21.5
20.9
20.5
20.2
20.7
Life:
Interest sensitive
26.8
26.3
25.5
25.1
25.9
25.0
25.1
25.0
24.7
25.0
Non-interest sensitive
558.7
558.4
558.6
559.7
558.9
561.4
561.9
562.8
565.4
562.9
Total average liabilities for insurance products, net of reinsurance ceded
$698.5
$696.7
$695.3
$695.0
$696.4
$695.1
$694.4
$693.9
$694.7
$694.5
Analysis of income before taxes (in millions)
1Q07
2Q07
3Q07
4Q07
2007
1Q08
2Q08
3Q08
4Q08
2008
Value of policies in force at the effective date
Balance, beginning of period
$71.7
$69.4
$67.2
$65.2
$71.7
$119.4
$115.5
$112.1
$108.7
$119.4
Effect of reinsurance recapture
0.0
0.0
0.0
56.3
56.3
0.0
0.0
0.0
0.0
0.0
Amortization related to operations
(2.3)
(2.2)
(2.0)
(2.1)
(8.6)
(3.9)
(3.4)
(3.4)
(3.4)
(14.1)
Balance, end of period
$69.4
$67.2
$65.2
$119.4
$119.4
$115.5
$112.1
$108.7
$105.3
$105.3
Cost of policies produced
1Q07
2Q07
3Q07
4Q07
2007
1Q08
2Q08
3Q08
4Q08
2008
Balance, beginning of period
$88.9
$99.9
$109.5
$122.1
$88.9
$130.4
$147.8
$159.7
$169.8
$130.4
Deferred acquisition expenses
13.5
12.3
15.7
11.7
53.2
20.9
15.9
15.9
9.6
62.3
Amortization related to operations
(2.5)
(2.7)
(3.1)
(3.4)
(11.7)
(3.5)
(4.0)
(5.8)
(4.6)
(17.9)
Balance, end of period
$99.9
$109.5
$122.1
$130.4
$130.4
$147.8
$159.7
$169.8
$174.8
$174.8
Conseco, Inc.
Conseco Insurance Group
Analysis of income (loss) before taxes (in millions)
1Q07
2Q07
3Q07
4Q07
2007
1Q08
2Q08
3Q08
4Q08
2008
Insurance policy income
$252.2
$246.5
$248.6
$242.6
$989.9
$243.7
$239.1
$237.7
$238.4
$958.9
Net investment income (loss):
General account invested assets
185.8
188.9
192.6
160.3
727.6
149.4
147.3
146.4
149.6
592.7
Equity-indexed products
(3.8)
16.9
(2.7)
(11.7)
(1.3)
(10.5)
(10.0)
(6.8)
(1.1)
(28.4)
Trading account income related to policyholder and reinsurer accounts
0.8
(0.5)
2.3
(1.2)
1.4
(4.2)
(0.1)
(8.3)
(5.9)
(18.5)
Change in value of embedded derivatives related to modified coinsurance agreements
(0.3)
2.5
(0.4)
(0.4)
1.4
1.4
1.5
2.7
1.1
6.7
Other trading accounts
(0.9)
1.3
(3.9)
(9.3)
(12.8)
0.0
0.0
0.0
0.0
0.0
Net realized investment losses
(29.3)
(25.4)
(51.6)
(25.4)
(131.7)
(9.1)
(15.2)
(38.8)
(30.2)
(93.3)
Fee revenue and other income
0.3
0.2
0.2
0.3
1.0
0.8
0.5
0.1
0.3
1.7
Total revenues
404.8
430.4
385.1
355.2
1,575.5
371.5
363.1
333.0
352.2
1,419.8
Insurance policy benefits
218.8
221.0
216.0
195.1
850.9
209.1
208.6
203.6
199.6
820.9
Amounts added to policyholder account balances:
Annuity products and interest-sensitive life products other than equity-indexed products
58.5
58.4
57.0
43.5
217.4
40.5
37.9
38.4
36.8
153.6
Equity-indexed products
8.5
28.6
19.4
4.2
60.7
3.1
(0.8)
4.3
1.6
8.2
Amortization related to operations
38.4
47.2
41.4
51.2
178.2
30.2
31.2
24.9
36.3
122.6
Amortization related to net realized investment losses
(13.2)
(11.8)
(8.5)
0.3
(33.2)
(0.3)
(1.8)
(2.0)
(1.6)
(5.7)
Interest expense on investment borrowings
1.1
4.2
6.2
6.1
17.6
5.8
5.5
5.6
5.5
22.4
Costs related to a litigation settlement
6.5
17.5
8.2
0.0
32.2
0.0
0.0
0.0
0.0
0.0
Loss related to an annuity coinsurance transaction
0.0
0.0
76.5
0.0
76.5
0.0
0.0
0.0
0.0
0.0
Other operating costs and expenses
74.6
75.2
79.3
70.9
300.0
68.6
63.6
60.8
71.1
264.1
Total benefits and expenses
393.2
440.3
495.5
371.3
1,700.3
357.0
344.2
335.6
349.3
1,386.1
Income (loss) before income taxes
$11.6
($9.9)
($110.4)
($16.1)
($124.8)
$14.5
$18.9
($2.6)
$2.9
$33.7
Supplemental health product underwriting margins (in millions)
1Q07
2Q07
3Q07
4Q07
2007
1Q08
2Q08
3Q08
4Q08
2008
Medicare supplement:
Earned premium
$60.4
$58.2
$57.3
$55.4
$231.3
$53.7
$51.2
$50.3
$49.2
$204.4
Benefit ratio
66.9%
68.9%
68.6%
66.0%
67.6%
65.8%
71.9%
73.0%
62.8%
68.4%
Underwriting margin (earned premium less policy benefits)
$20.0
$18.1
$18.0
$18.8
$74.9
$18.4
$14.3
$13.6
$18.3
$64.6
Specified disease:
Earned premium
$90.0
$89.9
$90.2
$89.0
$359.1
$92.0
$92.0
$92.4
$94.0
$370.4
Benefit ratio before interest income on reserves
75.7%
73.2%
81.9%
80.6%
77.8%
81.7%
80.4%
82.6%
63.8%
77.1%
Interest-adjusted benefit ratio
42.8%
40.4%
49.1%
46.5%
44.7%
48.1%
46.7%
48.5%
30.1%
43.3%
Underwriting margin (earned premium plus interest income
on reserves less policy benefits)
$51.4
$53.7
$45.9
$47.6
$198.6
$47.7
$49.1
$47.6
$65.8
$210.2
Long-term care:
Earned premium
$9.5
$9.4
$9.2
$9.6
$37.7
$8.8
$8.7
$8.6
$8.5
$34.6
Benefit ratio before interest income on reserves
120.7%
338.6%
162.2%
150.5%
192.4%
136.4%
133.8%
193.5%
216.9%
169.6%
Interest-adjusted benefit ratio
63.6%
276.1%
86.9%
89.3%
128.5%
66.4%
57.0%
115.2%
137.4%
93.5%
Underwriting margin (earned premium plus interest income
on reserves less policy benefits)
$3.5
$(16.4)
$1.2
$1.0
$(10.7)
$3.0
$3.7
$(1.3)
$(3.2)
$2.2
Conseco, Inc.
Conseco Insurance Group
Average liabilities for insurance products (in millions) (continued)
1Q07
2Q07
3Q07
4Q07
2007
1Q08
2Q08
3Q08
4Q08
2008
Annuities:
Mortality based
$234.0
$230.9
$229.0
$227.2
$230.3
$223.5
$221.1
$219.8
$218.3
$220.7
Equity-indexed
1,561.0
1,633.4
1,688.2
858.7
1,435.3
889.9
895.9
893.9
884.4
891.0
Deposit based
2,941.0
2,845.8
2,747.7
816.1
2,337.7
788.4
767.5
741.3
713.0
752.6
Separate accounts
28.8
28.7
28.4
27.8
28.4
26.2
24.8
23.3
20.1
23.6
Health
2,909.1
2,878.1
2,947.0
2,976.4
2,927.5
2,978.0
2,989.6
3,000.4
3,004.5
2,993.1
Life:
Interest sensitive
3,065.4
3,058.3
3,057.5
3,000.7
3,045.5
2,963.0
2,954.3
2,937.5
2,927.2
2,945.5
Non-interest sensitive
1,358.1
1,346.1
1,386.2
1,430.5
1,380.2
1,420.7
1,402.7
1,381.8
1,369.8
1,393.8
Total average liabilities for insurance products, net of reinsurance ceded
$12,097.4
$12,021.3
$12,084.0
$9,337.4
$11,384.9
$9,289.7
$9,255.9
$9,198.0
$9,137.3
$9,220.3
Analysis of income (loss) before taxes (in millions)
1Q07
2Q07
3Q07
4Q07
2007
1Q08
2Q08
3Q08
4Q08
2008
Value of policies in force at the effective date
Balance, beginning of period
$988.2
$954.6
$931.5
$706.6
$988.2
$672.6
$652.3
$635.4
$625.4
$672.6
Additional acquisition expense on inforce policies
0.5
0.0
0.0
1.4
1.9
0.0
0.0
0.0
0.0
0.0
Amortization related to operations
(29.9)
(37.9)
(36.1)
(33.9)
(137.8)
(22.7)
(19.6)
(15.1)
(16.8)
(74.2)
Amortization related to net realized investment (gains) losses
12.1
10.8
8.4
(0.2)
31.1
(0.1)
0.1
0.1
0.2
0.3
Effect of annuity coinsurance transaction
0.0
0.0
(191.2)
0.0
(191.2)
0.0
0.0
0.0
0.0
0.0
Adjustment related to unrealized (gain) or loss on actively managed fixed maturities
(16.3)
4.0
(6.0)
(1.3)
(19.6)
2.5
2.6
5.0
3.2
13.3
Other
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(1.2)
(1.2)
Balance, end of period
$954.6
$931.5
$706.6
$672.6
$672.6
$652.3
$635.4
$625.4
$610.8
$610.8
Cost of policies produced
1Q07
2Q07
3Q07
4Q07
2007
1Q08
2Q08
3Q08
4Q08
2008
Balance, beginning of period
$277.3
$305.3
$339.1
$342.1
$277.3
$351.0
$375.7
$395.1
$424.9
$351.0
Deferred acquisition expenses
35.9
36.5
28.9
26.8
128.1
21.9
21.1
20.4
27.2
90.6
Amortization related to operations
(8.5)
(9.3)
(5.3)
(17.3)
(40.4)
(7.5)
(11.6)
(9.8)
(19.5)
(48.4)
Amortization related to net realized investment (gains) losses
1.1
1.0
0.1
(0.1)
2.1
0.4
1.7
1.9
1.4
5.4
Effect of annuity coinsurance transaction
0.0
0.0
(19.3)
0.0
(19.3)
0.0
0.0
0.0
0.0
0.0
Adjustment related to unrealized (gain) or loss on actively managed fixed maturities
(0.5)
5.6
(1.4)
(0.5)
3.2
9.9
8.2
17.3
(12.4)
23.0
Balance, end of period
$305.3
$339.1
$342.1
$351.0
$351.0
$375.7
$395.1
$424.9
$421.6
$421.6
Conseco, Inc.
Bankers Life
Premiums collected on insurance products (in millions)
1Q07
2Q07
3Q07
4Q07
2007
1Q08
2Q08
3Q08
4Q08
2008
Annuities
Equity-indexed (first-year)
$85.4
$91.5
$128.4
$132.1
$437.4
$132.3
$132.8
$150.1
$107.6
$522.8
Other fixed (first-year)
126.0
108.1
122.1
89.1
445.3
95.3
127.3
172.3
302.9
697.8
Other fixed (renewal)
0.8
0.9
0.4
0.7
2.8
1.1
1.0
0.7
0.7
3.5
Subtotal - other fixed annuities
126.8
109.0
122.5
89.8
448.1
96.4
128.3
173.0
303.6
701.3
Total annuities
212.2
200.5
250.9
221.9
885.5
228.7
261.1
323.1
411.2
1,224.1
Supplemental health
Medicare supplement (first-year)
22.2
20.0
19.3
21.0
82.5
19.1
19.4
19.8
23.0
81.3
Medicare supplement (renewal)
144.8
133.8
133.6
141.4
553.6
140.8
131.2
134.0
149.3
555.3
Subtotal - Medicare supplement
167.0
153.8
152.9
162.4
636.1
159.9
150.6
153.8
172.3
636.6
Long-term care (first-year)
11.6
12.2
11.7
11.5
47.0
11.0
10.6
10.8
10.3
42.7
Long-term care (renewal)
146.6
143.2
142.8
142.8
575.4
145.6
144.6
144.0
148.8
583.0
Subtotal - long-term care
158.2
155.4
154.5
154.3
622.4
156.6
155.2
154.8
159.1
625.7
PDP and PFFS (first-year)
16.0
25.9
78.5
86.0
206.4
70.4
116.1
86.2
80.6
353.3
PDP and PFFS (renewal)
22.6
19.0
14.4
15.4
71.4
46.0
46.3
81.2
87.2
260.7
Subtotal - PDP and PFFS
38.6
44.9
92.9
101.4
277.8
116.4
162.4
167.4
167.8
614.0
Other health (first-year)
0.2
0.2
0.3
0.2
0.9
0.4
0.5
0.6
0.6
2.1
Other health (renewal)
2.3
2.3
2.2
2.1
8.9
2.2
2.1
2.1
2.2
8.6
Subtotal - other health
2.5
2.5
2.5
2.3
9.8
2.6
2.6
2.7
2.8
10.7
Total supplemental health
366.3
356.6
402.8
420.4
1,546.1
435.5
470.8
478.7
502.0
1,887.0
Life insurance
First-year
21.4
25.3
21.2
21.3
89.2
18.5
22.5
19.5
20.2
80.7
Renewal
26.7
26.8
27.9
29.4
110.8
29.5
31.3
32.4
35.5
128.7
Total life insurance
48.1
52.1
49.1
50.7
200.0
48.0
53.8
51.9
55.7
209.4
Collections on insurance products
Total first-year premium collections on insurance products
282.8
283.2
381.5
361.2
1,308.7
347.0
429.2
459.3
545.2
1,780.7
Total renewal premium collections on insurance products
343.8
326.0
321.3
331.8
1,322.9
365.2
356.5
394.4
423.7
1,539.8
Total collections on insurance products
$626.6
$609.2
$702.8
$693.0
$2,631.6
$712.2
$785.7
$853.7
$968.9
$3,320.5
Conseco, Inc.
Colonial Penn
Premiums collected on insurance products (in millions)
1Q07
2Q07
3Q07
4Q07
2007
1Q08
2Q08
3Q08
4Q08
2008
Life insurance
First-year
$6.7
$7.0
$7.4
$7.6
$28.7
$8.4
$8.9
$8.8
$8.9
$35.0
Renewal
20.0
19.0
21.9
24.1
85.0
34.5
34.9
34.8
34.9
139.1
Total life insurance
26.7
26.0
29.3
31.7
113.7
42.9
43.8
43.6
43.8
174.1
Supplemental health (all of which are renewal premiums)
Medicare supplement
2.3
2.5
2.3
2.3
9.4
2.1
2.1
2.0
1.9
8.1
Other health
0.3
0.2
0.3
0.2
1.0
0.2
0.2
0.2
0.2
0.8
Total supplemental health
2.6
2.7
2.6
2.5
10.4
2.3
2.3
2.2
2.1
8.9
Collections on insurance products
Total first-year premium collections on insurance products
6.7
7.0
7.4
7.6
28.7
8.4
8.9
8.8
8.9
35.0
Total renewal premium collections on insurance products
22.6
21.7
24.5
26.6
95.4
36.8
37.2
37.0
37.0
148.0
Total collections on insurance products
$29.3
$28.7
$31.9
$34.2
$124.1
$45.2
$46.1
$45.8
$45.9
$183.0
Conseco, Inc.
Conseco Insurance Group
Premiums collected on insurance products (in millions)
1Q07
2Q07
3Q07
4Q07
2007
1Q08
2Q08
3Q08
4Q08
2008
Annuities
Equity-indexed (first-year)
$106.9
$104.1
$70.7
$54.7
$336.4
$38.2
$33.4
$23.7
$20.8
$116.1
Equity-indexed (renewal)
2.1
2.6
2.5
1.0
8.2
1.8
2.1
1.8
1.9
7.6
Subtotal - equity-indexed annuities
109.0
106.7
73.2
55.7
344.6
40.0
35.5
25.5
22.7
123.7
Other fixed (first-year)
9.4
4.2
2.5
1.9
18.0
1.0
1.0
1.4
0.4
3.8
Other fixed (renewal)
1.7
2.1
1.8
0.4
6.0
0.6
0.6
0.5
0.6
2.3
Subtotal - other fixed annuities
11.1
6.3
4.3
2.3
24.0
1.6
1.6
1.9
1.0
6.1
Total annuities
120.1
113.0
77.5
58.0
368.6
41.6
37.1
27.4
23.7
129.8
Supplemental health
Medicare supplement (first-year)
6.6
5.2
4.2
3.4
19.4
2.8
2.3
2.1
2.4
9.6
Medicare supplement (renewal)
53.2
50.9
50.6
51.8
206.5
50.3
47.3
46.4
50.2
194.2
Subtotal - Medicare supplement
59.8
56.1
54.8
55.2
225.9
53.1
49.6
48.5
52.6
203.8
Specified disease (first-year)
7.3
7.7
7.7
8.7
31.4
9.4
9.8
9.7
10.5
39.4
Specified disease (renewal)
84.8
81.4
81.0
80.6
327.8
84.8
82.7
82.6
85.1
335.2
Subtotal - specified disease
92.1
89.1
88.7
89.3
359.2
94.2
92.5
92.3
95.6
374.6
Long-term care (all of which are renewal)
10.0
9.2
8.8
8.7
36.7
8.8
8.8
8.1
8.0
33.7
Other health (first-year)
0.0
0.0
0.0
0.3
0.3
0.0
0.0
0.1
0.0
0.1
Other health (renewal)
2.9
2.8
2.6
3.0
11.3
2.4
2.3
2.5
2.4
9.6
Subtotal - other health
2.9
2.8
2.6
3.3
11.6
2.4
2.3
2.6
2.4
9.7
Total supplemental health
164.8
157.2
154.9
156.5
633.4
158.5
153.2
151.5
158.6
621.8
Life insurance
First-year
1.2
1.1
1.3
1.1
4.7
0.7
1.2
2.0
0.4
4.3
Renewal
76.0
68.9
70.0
67.7
282.6
71.2
65.7
65.8
62.8
265.5
Total life insurance
77.2
70.0
71.3
68.8
287.3
71.9
66.9
67.8
63.2
269.8
Collections on insurance products
Total first-year premium collections on insurance products
131.4
122.3
86.4
70.1
410.2
52.1
47.7
39.0
34.5
173.3
Total renewal premium collections on insurance products
230.7
217.9
217.3
213.2
879.1
219.9
209.5
207.7
211.0
848.1
Total collections on insurance products
$362.1
$340.2
$303.7
$283.3
$1,289.3
$272.0
$257.2
$246.7
$245.5
$1,021.4
Conseco, Inc.
Statutory information - consolidated basis (4) (in millions)
1Q07
2Q07
3Q07
4Q07
2007
1Q08
2Q08
3Q08
4Q08
2008
Net gain (loss) from operations before interest expense, costs related to a litigation settlement
and federal income taxes
$18.0
($47.9)
$7.0
($111.4)
($134.3)
$12.8
$20.8
$69.8
$60.0
$163.4
Interest expense on surplus debentures held by parent company
17.3
17.5
17.6
17.5
69.9
16.3
12.4
12.8
14.9
56.4
Net gain (loss) from operations before costs related to a litigation settlement and federal
income taxes
0.7
(65.4)
(10.6)
(128.9)
(204.2)
(3.5)
8.4
57.0
45.1
107.0
Costs related to a litigation settlement
9.5
37.6
29.5
(14.9)
61.7
0.0
0.0
0.0
0.0
0.0
Net gain (loss) from operations before federal income taxes
(8.8)
(103.0)
(40.1)
(114.0)
(265.9)
(3.5)
8.4
57.0
45.1
107.0
Federal income tax expense (benefit)
(5.1)
(0.8)
25.7
(2.9)
16.9
(1.3)
1.4
(0.2)
(13.1)
(13.2)
Net gain (loss) from operations before net realized capital gains (losses)
(3.7)
(102.2)
(65.8)
(111.1)
(282.8)
(2.2)
7.0
57.2
58.2
120.2
Net realized capital gains (losses)
3.3
4.4
(18.3)
(27.9)
(38.5)
(7.2)
(21.1)
(87.5)
(101.3)
(217.1)
Net income (loss)
($0.4)
($97.8)
($84.1)
($139.0)
($321.3)
($9.4)
($14.1)
($30.3)
($43.1)
($96.9)
Capital and surplus
$1,558.3
$1,571.2
$1,486.3
$1,336.2
$1,336.2
$1,326.6
$1,310.2
$1,330.8
$1,311.5
$1,311.5
Asset valuation reserve (AVR)
186.8
189.7
176.4
161.3
161.3
162.2
155.7
99.3
55.0
55.0
Capital, surplus and AVR
1,745.1
1,760.9
1,662.7
1,497.5
1,497.5
1,488.8
1,465.9
1,430.1
1,366.5
1,366.5
Interest maintenance reserve (IMR)
249.5
253.9
211.7
196.7
196.7
208.5
194.9
179.1
147.7
147.7
Total statutory capital, surplus, AVR & IMR
$1,994.6
$2,014.8
$1,874.4
$1,694.2
$1,694.2
$1,697.3
$1,660.8
$1,609.2
$1,514.2
$1,514.2
Notes
(3) Assumes conversion of all convertible securities.
(1) Excludes accumulated other comprehensive loss.
(2) Shareholders' equity (excluding preferred stock) divided by common shares outstanding.
(4) Based on statutory accounting practices prescribed or permitted by regulatory authorities for Conseco's insurance subsidiaries after appropriate elimination of
intercompany accounts among such subsidiaries. Such accounting practices differ from GAAP.