Exhibit 99.1
NEWS
For Release Immediate
Contacts (News Media) Jim Rosensteele, SVP, Corporate Communications
317.817.4418
(Investors) Tammy Hill, SVP, Investor Relations
317.817.2893
Conseco Reports Third Quarter Results
Carmel, Ind., November 8, 2004 -- Conseco, Inc. (NYSE: CNO) today reported net
income applicable to common stock of $57.9 million, or 36 cents per diluted
common share, for the quarter ended September 30, 2004. Results for the quarter
included net after-tax realized investment losses of $0.1 million, or nil per
share.
William Kirsch, Chief Executive Officer, said, "Solid progress is being achieved
at Conseco, reflecting the positive momentum we are building. The business plan
we are executing is designed to achieve ratings improvement, build shareholder
value and position Conseco for continued profitable growth over the long term.
"Importantly for this quarter, we delivered earnings that met our expectations,
while continuing to improve our operations and further advance our risk
management controls. I am especially pleased with the dedication I have seen in
Conseco's managers and employees, who are working harder than ever to build the
long-term value of our core businesses.
"This quarter's earnings further strengthen our solid capital position, bringing
overall debt-to-total capital (excluding accumulated other comprehensive income)
below 19% at September 30, 2004, and our book value per share (excluding
accumulated other comprehensive income) increased to $18.25. Another positive
development during the quarter was the receipt of a favorable ruling from the
IRS on our $6.7 billion tax loss from a predecessor business, a ruling that
supported our tax position.
"Conseco's mission is to be a premier provider of insurance products to
America's working families and seniors. Our team is working with purposeful
urgency to transform weaknesses into strengths and to earn `excellent' insurance
company ratings. While there is much work yet to do, we are delivering
measurable results on all five of our key business priorities."
o Sales. At Bankers Life, we continue to invest in captive distribution.
We have expanded into new geographic markets, adding 23 sales offices
so far this year, bringing the total number of Bankers branches to
157. We have also invested in our existing branches by replacing 40
under-performing branch managers, and by recruiting a steady stream of
new sales agents. At Conseco Insurance Group ("CIG"), we are building
for long-term growth following our double-notch rating upgrade from
A.M. Best in June. We are also updating our product portfolio and
giving top-priority to rebuilding our independent agent distribution
network.
o Systems simplification. We are currently on track to eliminate seven
redundant systems by yearend and seven more in 2005. Besides
contributing to cost savings, creating a more efficient back office
will make it easier for our people to better serve our agents and
policyholders.
o Operational improvements. Conseco Insurance Group is taking a fresh
look at its business processes in order to create a more
customer-driven, service-oriented organization. CIG has realigned its
operations workforce into six functional areas - claims, IT,
policyholder services, performance management, operations planning,
and agent care - each focused on improving service levels and
positioning the organization for growth. CIG and Bankers have also
strengthened their operations teams by recruiting new talented and
experienced executives into pivotal positions.
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Conseco (2)
November 8, 2004
o Expense reductions. Despite the substantial investments we have been
required to make this year in Sarbanes-Oxley compliance, systems
simplification and other business initiatives, we believe we are on
track to achieve or exceed our 2004 and 2005 expense goals.
o Sarbanes-Oxley compliance. Our SOX project team includes 60 dedicated
specialists working assiduously to implement our SOX 404 objectives by
yearend.
Mr. Kirsch continued: "Based on our progress, we are confirming our most recent
earnings guidance for 2004, which anticipates that net income applicable to
common stock for the fourth quarter will be in the range of $63 million to $68
million. We are currently in the process of preparing our operating plan for
next year, and we will provide our 2005 guidance range when we report earnings
for the full year 2004. Based on our planning work to date, at present we know
of no reason why the consensus estimate for 2005 of $1.71 per share will not
fall within our guidance range." The company's earnings guidance is based on
numerous assumptions and factors. If they prove incorrect, actual earnings could
differ materially from estimates (see note on forward-looking statements below).
The company's guidance excludes any impact from realized investment gains or
losses.
"Our number one priority for the remainder of 2004 and 2005," Kirsch said, "will
be to make the investments necessary to earn an 'A' category rating from A.M.
Best as soon as is prudently possible. To that end, 2005 will be a year
dedicated to achieving operating excellence as the basis for driving consistent
performance over time. Accordingly, we will continue to focus on the five
business drivers we believe are key to creating the strongest platform for
growth, profitability and shareholder value over the long term."
Quarterly results by segment were as follows ($ in millions) (1):
Successor Predecessor
-------------------------------------------- -------------
Three Months Three Months One Month Two Months
Ended Ended Ended Ended
Sept. 30, 2004 June 30, 2004 Sept. 30, 2003 Aug. 31, 2003
-------------- ------------- -------------- -------------
Earnings before taxes:
Bankers Life $55.8 $ 53.7 $22.1 $ 41.6
Conseco Insurance Group 67.6 68.6 17.1 266.9
Other Business in Run-off 16.5 15.6 2.8 (100.4)
Corporate Operations (34.8) (27.5) (8.2) 2,084.3
Realized gains (losses), net of related
amortization, and venture capital income (loss) (0.2) (3.6) 4.0 (33.4)
------ ------ ----- -------
Earnings before taxes 104.9 106.8 37.8 2,259.0
Tax expense 37.6 38.5 13.6 17.7
------ ------ ---- -------
Net income 67.3 68.3 24.2 2,241.3
Preferred stock dividends:
10.50% Class A convertible exchangeable preferred
stock (retired June 11, 2004) - 18.4 5.3 -
5.50% Class B mandatorily convertible preferred
stock (issued May 12, 2004) 9.4 5.3 - -
------ ------ ----- --------
Net income applicable to common stock $ 57.9 $ 44.6 $18.9 $2,241.3
====== ====== ===== ========
<FN>
- -----------------
(1) The company emerged from Chapter 11 bankruptcy on September 10, 2003.
Results for periods following the emergence from Chapter 11 reflect
fresh-start accounting adjustments as required by generally accepted
accounting principles ("GAAP"). Accordingly, financial results for periods
following the company's emergence from bankruptcy are not comparable to
results prior to emergence. Activity of the company for periods after
September 1, 2003 is included in the post-bankruptcy or "successor company"
financial statements. Activity of the company for periods prior to
September 1, 2003 is included in the pre-bankruptcy or "predecessor
company" financial statements.
</FN>
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Conseco (3)
November 8, 2004
Pre-tax earnings in our Bankers Life segment were in line with our overall
expectations and included approximately $3 million of net investment income
related to prepayment income on commercial mortgages and favorable income on
non-traditional invested assets.
Pre-tax earnings in our Conseco Insurance Group segment totaled $67.6 million in
the third quarter and included approximately $4 million of net investment income
related to prepayment income on commercial mortgages and favorable income on
non-traditional investments. CIG's earnings were negatively impacted by changes
in lapse assumptions related to the specified disease block of business,
totaling approximately $4 million before tax. These changes reflect better
persistency in this block of business and resulted in an increase to reserves of
approximately $6 million, partially offset by reduced amortization expense of $2
million. This change in estimate had the effect of increasing the reported loss
ratio on specified disease business to 76.98% for the quarter. The loss ratio on
this business for the last 12 months was approximately 68%, which was generally
in line with our expectations.
Pre-tax earnings in our Other Business in Run-off segment were generally in line
with our expectations.
Corporate Operations include "40|86 Advisors," our investment advisory
subsidiary, and the expenses of our corporate operations. Included in the third
quarter results of Corporate Operations were $13.5 million of severance and
other transition costs related to the management change announced in August.
Corporate Operations also included $11 million of interest expense on our bank
debt for the third quarter.
New sales
Third quarter new annualized premium sales of supplemental health and life
products at Bankers Life totaled $45 million, essentially flat compared to 3Q03.
Sales of supplemental health and life products at Conseco Insurance Group
totaled $13 million, down 35% from 3Q03, driven primarily by a $6 million
decrease in Medicare supplement sales through independent agents. First-year
annuity deposits for the quarter were $254 million at Bankers Life, up 20%
compared to 3Q03. At Conseco Insurance Group, first-year annuity deposits for
the quarter were $11 million, up 120% compared to 3Q03.
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Conseco (4)
November 8, 2004
Supplemental health product loss ratios
Loss ratios on major supplemental health lines of business in each of our
segments were as follows:
Successor Predecessor
------------------------------------------------ ----------------
Three Months Three Months One Month Two Months
Ended Ended Ended Ended
Sept. 30, 2004 June 30, 2004 Sept. 30, 2003 Aug. 31, 2003
-------------- ------------- -------------- -------------
Bankers Life segment:
Medicare Supplement:
Earned premium $160 million $161 million $53 million $106 million
Loss ratio 70.19% 69.04% 66.50% 59.83%
Long-Term Care:
Earned premium $135 million $133 million $42 million $85 million
Loss ratio 89.10% 89.12% 87.81% 96.60%
Interest-adjusted loss ratio(a) 62.01% 62.39% 62.37% 79.27%
Conseco Insurance Group segment:
Medicare Supplement:
Earned premium $87 million $94 million $32 million $63 million
Loss ratio 63.41% 62.87% 68.24% 61.73%
Specified Disease:
Earned premium $91 million $92 million $30 million $60 million
Loss ratio 76.98% 64.35% 60.68% 82.48%
Other Business in Run-off segment:
Earned premium $98 million $101 million $42 million $83 million
Loss ratio 97.93% 95.19% 103.24% 217.91%
Interest-adjusted loss ratio(a) 56.45% 55.73% 74.39% 188.54%
<FN>
- ----------------------
(a) Calculated as the product's: (i) insurance policy benefits less interest
income on the accumulated assets which back the insurance liabilities;
divided by (ii) earned premium.
</FN>
Collected premiums
Collected premiums in each of our operating segments by product line were as
follows ($ in millions):
Successor Predecessor
------------------------------------------------ -------------------
Three Months Three Months One Month Two Months
Ended Ended Ended Ended
Sept. 30, 2004 June 30, 2004 Sept. 30, 2003 Aug. 31, 2003
-------------- ------------- -------------- -------------------
Bankers Life segment:
Annuity products $254.2 $230.4 $ 63.5 $149.4
Supplemental health products 294.3 293.2 96.6 191.6
Life products 46.4 41.1 12.0 30.3
------ ------ ------ ------
Total collected premiums $594.9 $564.7 $172.1 $371.3
===== ===== ===== =====
Conseco Insurance Group segment:
Annuity products $ 16.1 $ 15.9 $ 5.2 $ 11.5
Supplemental health products 180.3 181.8 65.0 128.3
Life products 93.7 90.2 34.5 73.8
------ ------ ------ ------
Total collected premiums $290.1 $287.9 $104.7 $213.6
===== ===== ===== =====
Other Business in Run-off segment:
Long-term care products $92.7 $92.1 $30.1 $70.6
Major medical products 3.6 5.3 17.9 31.8
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Conseco (5)
November 8, 2004
About Conseco
Conseco, Inc.'s insurance companies help protect working American families and
seniors from financial adversity: Medicare supplement, long-term care, cancer,
heart/stroke and accident policies protect people against major unplanned
expenses; annuities and life insurance products help people plan for their
financial futures. For more information, visit Conseco's web site at
www.conseco.com.
Cautionary Statement Regarding Forward-Looking Statements. Our statements, trend
analyses and other information contained in this press release relative to
markets for Conseco's products and trends in Conseco's operations or financial
results, as well as other statements contain forward-looking statements, within
the meaning of the federal securities laws and the Private Securities Litigation
Reform Act of 1995. Forward-looking statements typically are identified by the
use of terms such as "anticipate," "believe," "plan," "estimate," "expect,"
"project," "intend," "may," "will," "would," "contemplate," "possible,"
"attempt," "seek," "should," "could," "goal," "target," "on track," "comfortable
with," "optimistic" and similar words, although some forward-looking statements
are expressed differently. You should consider statements that contain these
words carefully because they describe our expectations, plans, strategies and
goals and our beliefs concerning future business conditions, our results of
operations, financial position, and our business outlook or they state other
"forward-looking" information based on currently available information.
Assumptions and other important factors that could cause our actual results to
differ materially from those anticipated in our forward-looking statements
include, among other things: (i) the potential adverse impact of our
predecessor's Chapter 11 petition on our business operations, and relationships
with our customers, employees, regulators, distributors and agents; (ii) our
ability to operate our business under the restrictions imposed by our senior
bank credit facility or future credit facilities; (iii) our ability to improve
the financial strength ratings of our insurance company subsidiaries and the
impact of prior rating downgrades on our business; (iv) our ability to obtain
adequate and timely rate increases on our supplemental health products including
our long-term care business; (v) general economic conditions and other factors,
including prevailing interest rate levels, stock and credit market performance
and health care inflation, which may affect (among other things) our ability to
sell products and access capital on acceptable terms, the market value of our
investments, and the lapse rate and profitability of policies; (vi) our ability
to achieve anticipated expense reductions and levels of operational
efficiencies; (vii) customer response to new products, distribution channels and
marketing initiatives; (viii) mortality, morbidity, usage of health care
services, persistency and other factors which may affect the profitability of
our insurance products; (ix) performance of our investments; (x) changes in the
Federal income tax laws and regulations which may affect or eliminate the
relative tax advantages of some of our products; (xi) our ability to satisfy the
requirements of Section 404 of the Sarbanes Oxley Act in a timely manner; (xii)
regulatory changes or actions, including those relating to regulation of the
financial affairs of our insurance companies, including the payment of dividends
to us, regulation of financial services affecting (among other things) bank
sales and underwriting of insurance products, regulation of the sale,
underwriting and pricing of products, and health care regulation affecting
health insurance products; (xiii) the ultimate outcome of lawsuits filed against
us and other legal and regulatory proceedings to which we are subject; and (xiv)
the risk factors or uncertainties listed from time to time in our filings with
the Securities and Exchange Commission.
Other factors and assumptions not identified above are also relevant to the
forward-looking statements, and if they prove incorrect, could also cause actual
results to differ materially from those projected. All written or oral
forward-looking statements attributable to us are expressly qualified in their
entirety by the foregoing cautionary statement. Our forward-looking statements
speak only as of the date made. We assume no obligation to update or to publicly
announce the results of any revisions to any of the forward-looking statements
to reflect actual results, future events or developments, changes in assumptions
or changes in other factors affecting the forward-looking statements.
- Tables Follow -
Conseco (6)
November 8, 2004
CONSECO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Dollars in millions)
Successor
----------------------------------
September 30, December 31,
2004 2003
---- ----
(unaudited)
ASSETS
Investments:
Actively managed fixed maturities at fair value (amortized cost:
September 30, 2004 - $20,745.9; December 31, 2003 - $19,470.7)..................... $21,306.3 $19,840.1
Equity securities at fair value (cost: September 30, 2004 - $62.5;
December 31, 2003 - $71.8)......................................................... 67.6 74.5
Mortgage loans....................................................................... 1,089.4 1,139.5
Policy loans......................................................................... 465.9 503.4
Trading securities................................................................... 908.9 915.1
Other invested assets ............................................................... 133.2 324.1
--------- ---------
Total investments.................................................................. 23,971.3 22,796.7
Cash and cash equivalents:
Unrestricted......................................................................... 1,078.0 1,228.7
Restricted........................................................................... 18.9 31.9
Accrued investment income................................................................. 318.1 315.5
Value of policies in force at the Effective Date.......................................... 2,706.9 2,949.5
Cost of policies produced................................................................. 327.7 101.8
Reinsurance receivables................................................................... 1,019.2 983.9
Income tax assets......................................................................... 12.2 24.6
Goodwill.................................................................................. 785.3 952.2
Other intangible assets................................................................... 149.4 155.2
Assets held in separate accounts.......................................................... 31.9 37.7
Other assets.............................................................................. 558.9 395.8
--------- ---------
Total assets....................................................................... $30,977.8 $29,973.5
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Liabilities for insurance and asset accumulation products:
Interest-sensitive products.......................................................... $12,432.5 $12,480.4
Traditional products................................................................. 11,641.1 11,485.2
Claims payable and other policyholder funds.......................................... 922.3 892.3
Liabilities related to separate accounts............................................. 31.9 37.7
Other liabilities...................................................................... 847.8 573.0
Investment borrowings.................................................................. 584.8 387.3
Notes payable - direct corporate obligations........................................... 788.6 1,300.0
--------- ---------
Total liabilities.................................................................. 27,249.0 27,155.9
--------- ---------
Commitments and Contingencies
Shareholders' equity:
Preferred stock........................................................................ 667.8 887.5
Common stock ($0.01 par value, 8,000,000,000 shares authorized, shares issued
and outstanding: September 30, 2004 - 151,123,275; December 31, 2003 -
100,115,772)......................................................................... 1.5 1.0
Additional paid-in-capital............................................................. 2,535.8 1,641.9
Accumulated other comprehensive income................................................. 302.8 218.7
Retained earnings...................................................................... 220.9 68.5
--------- ---------
Total shareholders' equity......................................................... 3,728.8 2,817.6
--------- ---------
Total liabilities and shareholders' equity........................................... $30,977.8 $29,973.5
========= =========
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Conseco (7)
November 8, 2004
CONSECO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in millions, except per share data)
(unaudited)
Successor Predecessor
------------------------------------ --------------
Three months One month Two months
ended ended ended
September 30, September 30, August 31,
2004 2003 2003
---- ---- ----
Revenues:
Insurance policy income.............................................. $ 737.8 $256.2 $ 516.8
Net investment income:
General account assets........................................... 329.7 106.0 232.5
Policyholder and reinsurer accounts.............................. (9.8) (2.1) 11.7
Venture capital income (loss) related to investment in
AT&T Wireless Services, Inc................................... - (2.7) 2.0
Net realized investment gains (losses)............................... 6.0 6.7 (35.9)
Fee revenue and other income......................................... 5.2 2.2 9.0
--------- ------ ---------
Total revenues................................................... 1,068.9 366.3 736.1
-------- ------ ---------
Benefits and expenses:
Insurance policy benefits.......................................... 688.4 243.3 390.9
Provision for losses............................................... - - 24.5
Interest expense (contractual interest of $73.7 for the two
months ended August 31, 2003).................................... 12.9 7.0 55.4
Amortization....................................................... 91.9 26.9 61.3
Other operating costs and expenses................................. 170.8 51.3 108.0
Reorganization items............................................... - - (2,163.0)
-------- ------ ---------
Total benefits and expenses...................................... 964.0 328.5 (1,522.9)
-------- ------ ---------
Income before income taxes....................................... 104.9 37.8 2,259.0
Income tax expense on period income..................................... 37.6 13.6 17.7
-------- ------ ---------
Net income....................................................... 67.3 24.2 2,241.3
Preferred stock dividends............................................... 9.4 5.3 -
-------- ------ ---------
Net income applicable to common stock............................ $ 57.9 $ 18.9 $ 2,241.3
======== ====== =========
Earnings per common share:
Basic:
Weighted average shares outstanding..............................150,885,000 100,098,000
=========== ===========
Net income....................................................... $.38 $.19
==== ====
Diluted:
Weighted average shares outstanding..............................189,195,000 144,671,000
=========== ===========
Net income....................................................... $.36 $.17
==== ====
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Conseco (8)
November 8, 2004
CONSECO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS, continued
(Dollars in millions, except per share data)
(unaudited)
Successor Predecessor
------------------------------------ --------------
Nine months One month Eight months
ended ended ended
September 30, September 30, August 31,
2004 2003 2003
---- ---- ----
Revenues:
Insurance policy income............................................. $2,223.2 $256.2 $ 2,204.3
Net investment income:
General account assets.......................................... 960.1 106.0 928.4
Policyholder and reinsurer accounts............................. (8.9) (2.1) 30.1
Venture capital income (loss) related to investment
in AT&T Wireless Services, Inc................................ - (2.7) 10.5
Net realized investment gains (losses).............................. 27.5 6.7 (5.4)
Fee revenue and other income........................................ 17.1 2.2 35.5
-------- ------ ---------
Total revenues.................................................. 3,219.0 366.3 3,203.4
-------- ------ ---------
Benefits and expenses:
Insurance policy benefits......................................... 2,074.6 243.3 2,136.4
Provision for losses.............................................. - - 55.6
Interest expense (contractual interest of $268.5 for the
eight months ended August 31, 2003)............................. 65.1 7.0 202.5
Amortization...................................................... 272.4 26.9 343.7
Gain on extinguishment of debt.................................... (2.8) - -
Other operating costs and expenses................................ 485.6 51.3 423.5
Reorganization items.............................................. - - (2,130.5)
-------- ------ ---------
Total benefits and expenses..................................... 2,894.9 328.5 1,031.2
-------- ------ ---------
Income before income taxes and discontinued operations.......... 324.1 37.8 2,172.2
Income tax expense (benefit) on period income.......................... 115.7 13.6 (13.5)
-------- ------ ---------
Income before discontinued operations........................... 208.4 24.2 2,185.7
Discontinued operations, net of income taxes........................... - - 16.0
-------- ------ ---------
Net income...................................................... 208.4 24.2 2,201.7
Preferred stock dividends.............................................. 56.0 5.3 -
-------- ------ ---------
Net income applicable to common stock........................... $ 152.4 $ 18.9 $ 2,201.7
======== ====== =========
Earnings per common share:
Basic:
Weighted average shares outstanding............................. 126,016,000 100,098,000
=========== ===========
Net income...................................................... $1.21 $.19
===== ====
Diluted:
Weighted average shares outstanding............................. 145,592,000 144,671,000
=========== ===========
Net income...................................................... $1.15 $.17
===== ====
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