NEWS Exhibit 99.1
For Release Immediate
Contacts (News Media) Anthony Zehnder, Corporate Communications
312.396.7086
(Investors) Scott Galovic, Investor Relations
317.817.3228
Conseco Declines Proposal from Steel Partners II, L.P.;
Proposal Would Reduce Conseco's Financial Flexibility and
Potentially Disadvantage Other Shareholders
Carmel, Ind., May 29, 2008: Conseco, Inc. (NYSE:CNO) today announced that it is
declining to support a proposal made by Steel Partners II, L.P. to increase its
percentage ownership of Conseco up to 22%. A copy of the response letter sent to
Steel Partners by Conseco is attached to this press release.
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.
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May 29, 2008
Steel Partners II, L.P.
590 Madison Avenue
32nd Floor
New York, NY 10022
Attn: Mr. Jack L. Howard
Dear Jack:
Thank you for your letter of May 19th, 2008. On behalf of the Board of Directors
of Conseco, Inc. ("Conseco" or the "Company"), we appreciate your interest in
the Company as demonstrated by your group's substantial share ownership. The
Conseco Board discussed your letter at a regularly scheduled meeting.
You indicated in the letter your intention to seek permission to become a
"controlling person" as defined by the various state insurance codes. The letter
also indicated that you intend to seek permission from our regulators to
increase your shareholding from 10% up to 22%, the maximum you calculated as
permissible without tripping the limitations on utilization of the Company's tax
loss carry-forward under Section 382 of the Internal Revenue code. Your stated
intention is to accomplish this through a "modified Dutch auction" structure.
The Letter sought the support of Conseco in complying with "all applicable law
and regulatory filings" and supporting your application with the regulators.
In order to increase its holding above 10%, Steel Partners will be required to
file an Acquisition of Control (Form A) Application with, and receive the
approval of, the insurance regulatory authorities in Arizona, Indiana, Illinois,
New York, Pennsylvania and Texas, the six states in which Conseco's insurance
subsidiaries are domiciled. In considering the Form A application by Steel
Partners, the insurance regulators generally must find that the applicant meets
certain statutory standards. Among these statutory standards, the applicable
insurance regulatory authorities must determine that the Form A applicant has
the experience and integrity appropriate to be in control of 100% of a regulated
insurance company, as no further approvals are generally required to increase
the potential controlling person's shareholding. The insurance authorities may
seek specific undertakings by the potential controlling person or by the
Company. The Form A process involves extensive disclosure by the potential
controlling person and all of its directors, officers and controlling persons as
well as disclosures regarding the Form A applicant's future plans for the
company that is the subject of the Form A Application. In certain states, the
Form A approval process also often involves extensive public comment and public
hearings. If you choose to pursue the Form A process, we will comply with any
regulatory obligations that we have, but otherwise we will not support or agree
not to object to your applications for the reasons discussed below.
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Conseco appreciates the interest of you, and any other shareholder, in
purchasing its shares. However, as we have publicly disclosed, Conseco has
substantial tax loss carry-forwards that, as you noted, are an extremely
valuable asset. As we have also publicly disclosed, including in our most recent
10-Q, the utilization of such tax loss carry-forwards depends, among many other
things, on the application of Section 382 of the Internal Revenue Code. Section
382 substantially limits a corporation's ability to utilize its tax loss
carry-forwards if the corporation undergoes an "ownership change" as defined by
Section 382. The determination of whether a corporation has undergone an
ownership change is highly complex, but, in general, increases in ownership by
those individuals or institutions owning 5% or more (by value) of the
corporation's stock (whether through share repurchases or issuances by the
corporation) that aggregate to over 50% during any three year period (the
"Section 382 Limit") result in an ownership change and, therefore, potentially
severely restricts the corporation's ability to utilize its tax loss
carry-forwards.
A substantial increase in holdings by one shareholder already owning more than
5%, such as Steel Partners, may therefore limit future actions by the Company or
by its other significant shareholders. Should the Section 382 Limit be
approached the Company would be forced to restrict its share repurchases for up
to three years, including any repurchases that might otherwise have resulted
from the Company's previously announced authorized share repurchase program, its
on-going strategic review or otherwise. The Company also would be unable to
consider any action involving a new issuance of shares to any shareholder who
owns 5% or more (by value). Further, should the Section 382 Limit be approached,
the Company might be obliged to seek to limit the ownership positions of all
current and prospective shareholders to a level below 5% (or equal to their
existing positions, if already above 5%) in the interests of maintaining the
value of the Company's valuable tax assets on behalf of all shareholders. The
complexity of the Section 382 calculation, and uncertainty about events that
would affect the calculation over three years into the future, suggests that the
Company should be prudent in maintaining a substantial margin in its Section 382
calculation in order to maintain the value of its tax loss carry-forwards.
To date, the 10% ownership limit established by the state regulatory authorities
has provided comfort to the Company that the Section 382 Limit would not be
breached. The Company believes it is not in the interests of all shareholders
for any individual shareholder to exceed this limit. We believe it is
inappropriate to give preference to one shareholder over others and therefore,
and for the reasons discussed above, we will not support your proposal.
As we previously announced, we are engaged in a review of strategic alternatives
which we believe will enhance shareholder value. This is the highest priority
for our Board and our executive management team, and we strongly disagree with
the suggestions to the contrary in your letter. We are available to discuss
these matters with you if you require further clarification. Thank you again for
your interest in Conseco.
Sincerely,
C. James Prieur
Chief Executive Officer, Conseco, Inc.
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