Exhibit 12.1
CONSECO, INC. AND SUBSIDIARIES
Computation of Ratio of Earnings to Fixed Charges,
Preferred Dividends and Distributions on Company-Obligated Mandatorily
Redeemable Preferred Securities of Subsidiary Trusts - Consolidated Basis
(Dollars in millions)
Successor Predecessor
----------------------------- ------------
Pro forma
Four months Four months Eight months
ended ended ended
December 31, December 31, August 31,
2003(b) 2003 2003(c)
------------ ------------ ------------
Pretax income from operations:
Net income ............................................................ $ 101.8 $ 96.3 $ 2,201.7
Add income tax expense (benefit) ...................................... 56.2 53.2 (13.5)
Add discontinued operations ........................................... -- -- (16.0)
------------ ------------ ------------
Pretax income from operations ...................................... 158.0 149.5 2,172.2
------------ ------------ ------------
Add fixed charges:
Interest expense on corporate debt, including amortization ............ 25.9 34.4 223.2
Interest expense on investment borrowings ............................. 2.4 2.4 8.3
Interest added to policyholder account balances ....................... 145.5 145.5 307.9
Portion of rental (a) ................................................. 6.4 6.4 8.9
------------ ------------ ------------
Fixed charges ...................................................... 180.2 188.7 548.3
------------ ------------ ------------
Adjusted earnings .................................................. $ 338.2 $ 338.2 $ 2,720.5
============ ============ ============
Ratio of earnings to fixed charges .............................. 1.88X 1.79X 4.96X
============ ============ ============
Ratio of earnings to fixed charges, excluding interest added to
policyholder account balances ............................... 5.55X 4.46X 10.04X
============ ============ ============
Fixed charges ............................................................. $ 180.2 $ 188.7 $ 548.3
Add dividends on preferred stock, including dividends on
preferred stock of subsidiaries (divided by the ratio of income
before minority interest and extraordinary charge to pretax income) ... 16.3 43.2 --
------------ ------------ ------------
Fixed charges plus preferred dividends and distributions
on Company-obligated mandatorily redeemable
preferred securities of subsidiary trusts ................... $ 196.5 $ 231.9 $ 548.3
============ ============ ============
Adjusted earnings (loss) ........................................... $ 338.2 $ 338.2 $ 2,720.5
============ ============ ============
Ratio of earnings to fixed charges, preferred dividends
and distributions on Company-obligated
mandatorily redeemable preferred securities of
subsidiary trusts ........................................... 1.72X 1.46X 4.96X
============ ============ ============
Ratio of earnings to fixed charges, preferred dividends and
distributions on Company-obligated mandatorily redeemable
preferred securities of subsidiary trusts, excluding interest
added to policyholder account balances ...................... 3.78X 2.23X 10.04X
============ ============ ============
CONSECO, INC. AND SUBSIDIARIES
Computation of Ratio of Earnings to Fixed Charges,
Preferred Dividends and Distributions on Company-Obligated
Mandatorily Redeemable Preferred Securities of Subsidiary Trusts
- Consolidated Basis, Continued
(Dollars in millions)
Predecessor
--------------------------------------------------
Year Ended December 31,
--------------------------------------------------
2002 2001 2000 1999
-------- -------- -------- --------
Pretax income (loss) from operations:
Net income (loss) ............................................. $(7,835.7) $ (405.9) $(1,191.2) $ 595.0
Add income tax expense (benefit) .............................. 864.3 (57.6) (168.8) 403.6
Add discontinued operations ................................... 2,216.8 100.6 381.9 (117.3)
Add minority interest ......................................... 173.2 119.5 145.3 132.8
Add cumulative effect of accounting change .................... 2,949.2 -- 55.3 --
-------- -------- -------- --------
Pretax income (loss) from operations ....................... (1,632.2) (243.4) (777.5) 1,014.1
-------- -------- -------- --------
Add fixed charges:
Interest expense on corporate debt, including amortization .... 346.7 369.5 438.5 249.1
Interest expense on investment borrowings ..................... 16.4 30.5 15.8 51.1
Interest added to policyholder account balances ............... 496.6 523.3 560.7 606.9
Portion of rental (a) ......................................... 13.8 15.1 14.1 13.1
-------- -------- -------- --------
Fixed charges .............................................. 873.5 938.4 1,029.1 920.2
-------- -------- -------- --------
Adjusted earnings (loss) ................................... $ (758.7) $ 695.0 $ 251.6 $1,934.3
======== ======== ======== ========
Ratio of earnings to fixed charges ...................... (d) (f) (h) 2.10X
======== ======== ======== ========
Ratio of earnings to fixed charges, excluding
interest added to policyholder account
balances ............................................ (d) (f) (h) 4.24X
======== ======== ======== ========
Fixed charges ..................................................... $ 873.5 $ 938.4 $1,029.1 $ 920.2
Add dividends on preferred stock, including dividends
on preferred stock of subsidiaries (divided by the ratio
of income before minority interest and extraordinary
charge to pretax income) ...................................... 3.2 19.8 17.0 2.4
Add distributions on Company-obligated mandatorily
redeemable preferred securities of subsidiary trusts .......... 173.2 183.9 223.5 204.3
-------- -------- -------- --------
Fixed charges plus preferred dividends and distributions
on Company-obligated mandatorily redeemable
preferred securities of subsidiary trusts ........... $1,049.9 $1,142.1 $1,269.6 $1,126.9
======== ======== ======== ========
Adjusted earnings (loss) ................................... $ (758.7) $ 695.0 $ 251.6 $1,934.3
======== ======== ======== ========
Ratio of earnings to fixed charges, preferred
dividends and distributions on
Company-obligated mandatorily redeemable
preferred securities of subsidiary trusts ........... (e) (g) (i) 1.72X
======== ======== ======== ========
Ratio of earnings to fixed charges, preferred dividends
and distributions on Company-obligated mandatorily
redeemable preferred securities of subsidiary trusts,
excluding interest added to policyholder
account balance ..................................... (e) (g) (i) 2.55X
======== ======== ======== ========
- ----------
(a) Interest portion of rental is estimated to be 33 percent.
(b) For purposes of the pro forma ratio of earnings to fixed charges,
fixed charges for the four months ended December 31, 2003 have been
reduced and earnings have been increased by $8.5 million to reflect
the reduction in interest expense resulting from the repayment of $350
million of indebtedness under our senior credit facility using a
portion of the proceeds from the offering of the common stock and
class B preferred stock. In addition, preferred stock dividends for
the four months ended December 31, 2003 have been reduced by $26.9
million to reflect the reduction in preferred stock dividends
resulting from the redemption of all outstanding class A preferred
stock, net of the dividends on the newly issued class B preferred
stock.
(c) Earnings for the eight months ended August 31, 2003 included
reorganization items totaling $2,130.5 million. The reorganization
items included: (i) $3,151.4 million related to the gain on the
discharge of prepetition liabilities; (ii) $(950.0) million related to
fresh start adjustments; and (iii) $(70.9) million related to
professional fees. The ratios for the eight months ended August 31,
2003, including such reorganization items would be as follows: (i)
ratio of earnings to fixed charges - 1.08X; and (ii) ratio of earnings
to fixed charges excluding interest added to policyholder account
balances - 1.17X. There were no preferred stock dividends or
distributions on Company-obligated mandatorily redeemable preferred
securities of subsidiary trusts during the eight months ended August
31, 2003.
(d) For such ratios, earnings were $1,632.2 million less than fixed
charges. Earnings for the year ended December 31, 2002 included: (i)
special and reorganization charges of $110.9 million; (ii) goodwill
impairment charges of $500 million; and (iii) provision for losses
related to loan guarantees of $240.0 million, as described in greater
detail in the notes to the consolidated financial statements included
elsewhere in this prospectus.
(e) For such ratios, earnings were $1,808.6 million less than fixed
charges. Earnings for the year ended December 31, 2002 included: (i)
special and reorganization charges of $110.9 million; (ii) goodwill
impairment charges of $500 million; and (iii) provision for losses
related to loan guarantees of $240.0 million, as described in greater
detail in the notes to the consolidated financial statements included
elsewhere in this prospectus.
(f) For such ratios, earnings were $243.4 million less than fixed charges.
Earnings for the year ended December 31, 2001 included: (i) special
charges of $80.4 million; and (ii) provision for losses related to
loan guarantees of $169.6 million, as described in greater detail in
the notes to the consolidated financial statements included elsewhere
in this prospectus.
(g) For such ratios, earnings were $447.1 million less than fixed charges.
Earnings for the year ended December 31, 2001 included: (i) special
charges of $80.4 million; and (ii) provision for losses related to
loan guarantees of $169.6 million, as described in greater detail in
the notes to the consolidated financial statements included elsewhere
in this prospectus.
(h) For such ratios, earnings were $777.5 million less than fixed charges.
Earnings for the year ended December 31, 2000 included: (i) special
charges of $305.0 million; and (ii) provision for losses related to
loan guarantees of $231.5 million.
(i) For such ratios, earnings were $1,018.0 million less than fixed
charges. Earnings for the year ended December 31, 2000 included: (i)
special charges of $305.0 million; and (ii) provision for losses
related to loan guarantees of $231.5 million.