Exhibit 99.1
NEWS
For Release Immediate
Contacts (News Media) Tony Zehnder, Corporate Communications 312.396.7086
(Investors) Scott Galovic, Investor Relations 317.817.3228
Conseco Announces Plan to Transfer
Conseco Senior Health Insurance Company to Independent Trust;
Transfer Subject to Regulatory Approval
Conseco to Report Second Quarter Results on Tuesday, August 12
Carmel, Ind., August 11, 2008: Conseco, Inc. (NYSE: CNO) today announced a plan
to transfer Conseco Senior Health Insurance Company (CSHI) to an independent
trust to be named Senior Health Care Oversight Trust (the "Independent Trust")
for the exclusive benefit of CSHI's long-term care policyholders. Consummation
of the plan, which is conditioned on the receipt of the approval of the
Pennsylvania Insurance Department, is expected to take place in the fourth
quarter of 2008.
Under the terms of the proposed transaction, all of the stock of CSHI, including
its approximately $2.9 billion in assets (as calculated in accordance with
statutory accounting principles) supporting CSHI's long-term care liabilities
will be transferred to the Independent Trust. Immediately prior to the
transaction, Conseco has agreed to contribute $175 million of additional capital
to CSHI and the Independent Trust. Following the transfer, CSHI will be re-named
Senior Health Insurance Company of Pennsylvania ("Senior Health") and will be
run by management transferred from Conseco.
To effect the transfer, Conseco has formed a trust (the "Transition Trust"),
which has filed for regulatory approval with the Pennsylvania Insurance
Department to separate CSHI from Conseco. Upon receipt of such approval and
satisfaction of all other closing conditions, the Transition Trust will merge
with and into the Independent Trust. The Independent Trust will be the surviving
entity and the owner of CSHI. The filing made by the Transition Trust with the
Pennsylvania Insurance Department will be available today in the Form 8-K filed
by Conseco.
Conseco expects to record accounting charges totaling approximately $1.2 billion
related to the transaction, comprised of CSHI's equity (as calculated in
accordance with generally accepted accounting principles), an additional
valuation allowance for deferred tax assets, and the capital contribution to
CSHI and the Independent Trust. Just over $500 million of the accounting charge
will be recognized in Conseco's second quarter 2008 financials. Please refer to
the attached table for additional information.
-more-
Conseco (2)
August 11, 2008
Upon completion of the transaction (which is currently expected in the fourth
quarter of 2008), the Independent Trust will be governed by a well-qualified and
knowledgeable Board of Trustees independent of Conseco, and, following the
transfer of CSHI to the Independent Trust, will be subject to oversight from the
Pennsylvania Insurance Department. Management to be transferred from Conseco to
Senior Health will include John Wells, who will continue to serve as the
President and Chief Executive Officer of Senior Health Insurance Company of
Pennsylvania, and his senior management team for operations and finance.
"This unique structure aligns the interests of the Independent Trust, management
and regulators with the policyholders," Conseco CEO Jim Prieur said. "It is a
balanced solution for all of Conseco's constituents, including CSHI's
approximately 142,000 long-term care policyholders, and provides Conseco greater
flexibility in serving its 4 million other policyholders."
"Most of CSHI's long-term care business came as a result of Conseco's
acquisition of insurance companies 11 years ago," Prieur said. "Conseco has
worked diligently since then to stabilize that business by contributing $915
million in capital and installing experienced management. Our efforts have
produced significant improvements in performance and customer service over the
past four quarters."
Conseco CFO Ed Bonach added: "Following the closing, Senior Health will be
operated for the benefit of CSHI's long-term care policyholders without a profit
motive, so as to ensure that any future benefits from rate increases or policy
changes will accrue to policyholders. CSHI's existing capital and a final
contribution of additional capital by Conseco at the time of separation will be
available to support those long-term care policyholders, in addition to CSHI's
current policy reserves. At the closing, Conseco will contribute $175 million,
principally in cash and notes, to CSHI and the Independent Trust, bringing
CSHI's total adjusted statutory capital to approximately $300 million."
Conseco's contract with Long Term Care Group (LTCG) for policy administration
and system improvements would remain with Senior Health. In addition to its own
policies, Senior Health will administer approximately 22,000 non-CSHI Closed
Block long-term care policies of other Conseco insurers, with Conseco retaining
responsibility for those liabilities. Immediately prior to the closing, CSHI's
non-long-term care business will be assigned to Conseco. All expenses to
establish the Independent Trust are being paid by Conseco.
There will be a public comment period expected to last until the end of
September. The length of the comment period is at the discretion of the
Pennsylvania Insurance Department.
Morgan Stanley provided financial advice to Conseco and Skadden, Arps, Slate,
Meagher & Flom LLP acted as legal counsel.
The company will host a conference call to discuss today's announcement at 11:00
a.m. Eastern Daylight Time today, August 11, 2008. Additional information will
be included in Conseco's Form 8-K filing with the SEC. The webcast of the
conference call can be accessed through the Investors section of the company's
website as follows: http://investor.conseco.com/ . Listeners should go to the
website at least 15 minutes before the scheduled event to register and download
any necessary audio software.
-more-
Conseco (3)
August 11, 2008
In light of this significant pending transaction and its impact on Conseco's
financial statements, Conseco's second quarter 2008 earnings will be released
before the market opens on Tuesday, August 12, 2008. The company will host a
conference call to discuss its second quarter 2008 financial results at 1:00
p.m. Eastern Daylight Time on Tuesday, August 12.
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.
-more-
Conseco (4)
August 11, 2008
Conseco, Inc.
Accounting charges expected to be recognized
related to the Conseco Senior Health Insurance Company transaction
(dollars in millions):
Charges to be recognized in the second quarter of 2008:
Recognition of unrealized losses on investments expected to be transferred
to the Independent Trust (1)................................................................ $ 205.7
Increase to deferred tax valuation allowance based on recent results
which have had a significant impact on taxable income and the
expected effects of the proposed transaction................................................ 298.0
--------
Total charges to be recognized in the second quarter of 2008.............................. 503.7
--------
Charges expected to be recognized upon the completion of the transaction:
Write-off of remaining shareholders' equity of CSHI and transaction expenses (1) (2).......... 478.6
Additional capital contribution (1)........................................................... 175.0
--------
Total charges expected to be recognized upon the completion of the transaction............ 653.6
--------
Total expected charges:....................................................................... $1,157.3
========
<FN>
- -------------------
(1) Amount is before the potential tax benefit. A deferred tax valuation
allowance will be established for all future potential tax benefits
generated by these charges, since management has concluded that is it more
likely than not that such tax benefits will not be utilized to offset
future taxable income.
(2) Amount will be based on the actual shareholders' equity of CSHI at the
completion of the transaction and the actual expenses incurred to complete
the transaction. Such final amount will be different than the estimate
provided in this summary.
</FN>
-more-
Conseco (5)
August 11, 2008
Cautionary Statement Regarding Forward-Looking Statements. Our statements, trend
analyses and other information contained in these materials 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) general economic, market and political
conditions, including the performance and fluctuations of the financial markets
which may affect our ability to raise capital or refinance our existing
indebtedness; (ii) our ability to obtain adequate and timely rate increases on
our supplemental health products including our long-term care business; (iii)
mortality, morbidity, the increased cost and usage of health care services,
persistency, the adequacy of our previous reserve estimates and other factors
which may affect the profitability of our insurance products; (iv) changes in
our assumptions related to the cost of policies produced or the value of
policies inforce at the Effective Date; (v) the recoverability of our deferred
tax asset and the effect of potential tax rate changes on its value; (vi)
changes in accounting principles and the interpretation thereof; (vii) our
ability to achieve anticipated expense reductions and levels of operational
efficiencies including improvements in claims adjudication and continued
automation and rationalization of operating systems; (viii) performance and
valuation of our investments, including the impact of realized losses (including
other-than-temporary impairment charges); (ix) our ability to identify products
and markets in which we can compete effectively against competitors with greater
market share, higher ratings, greater financial resources and stronger brand
recognition; (x) the ultimate outcome of lawsuits filed against us and other
legal and regulatory proceedings to which we are subject; (xi) our ability to
remediate the material weakness in internal controls over the actuarial
reporting process that we identified at year-end 2006 and to maintain effective
controls over financial reporting; (xii) our ability to continue to recruit and
retain productive agents and distribution partners and customer response to new
products, distribution channels and marketing initiatives; (xiii) our ability to
achieve eventual upgrades of the financial strength ratings of Conseco and our
insurance company subsidiaries as well as the potential impact of rating
downgrades on our business; (xiv) the risk factors or uncertainties listed from
time to time in our filings with the Securities and Exchange Commission; (xv)
our ability to continue to satisfy the financial ratio and balance requirements
and other covenants of our debt agreements; (xvi) regulatory changes or actions,
including those relating to regulation of the financial affairs of our insurance
companies, such as 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; (xvii) changes in
the Federal income tax laws and regulations which may affect or eliminate the
relative tax advantages of some of our products; and (xviii) the receipt of
regulatory approval and consummation of the plan to transfer Conseco Senior
Health Insurance Company to an independent trust. 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.
- # # # # -