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 Reports Preliminary Third Quarter Results
Carmel, Ind., October 23, 2008: Conseco, Inc. (NYSE:CNO) today announced
preliminary third quarter results. Income (loss) before net realized investment
losses, corporate interest and taxes ("EBIT") (1) is expected to be in the range
of $95 to $105 million for the third quarter of 2008, compared to $66.6 million
in the second quarter of 2008 and $(17.4) million in the third quarter of 2007.
Financial results for Bankers Life improved over the previous two quarters'
results, reflecting, in part, measures implemented to address higher than
expected claims in its long-term care business. The improvements in the
long-term care business are partially offset by lower than expected margins from
our private-fee-for-service business. Pre-tax operating earnings (2) in this
segment are expected to be approximately $65 million in the third quarter of
2008, compared to $34.6 million in the second quarter of 2008 and $67.5 million
in the third quarter of 2007. Aggregate operating earnings for our other
segments are expected to be approximately the same in the third quarter of 2008
as in the second quarter of 2008.
The Company also expects to report total new annualized premium ("NAP") (3) of
approximately $97.0 million for the third quarter of 2008, compared to $85.6
million in the second quarter of 2008 and $86.0 million in the third quarter of
2007.
The table at the end of this release reconciles the expected ranges of EBIT and
income from operations, both non-GAAP measures, to the expected range of net
income.
The Company expects to report net realized investment losses (excluding the
increase in unrealized losses on those investments expected to be transferred to
an independent trust and net of amortization and taxes and including the
establishment of a valuation allowance for deferred tax assets related to such
losses) in the range of $80 to $100 million in the third quarter of 2008.
As previously announced, the Company has entered into an agreement to transfer
the stock of Conseco Senior Health Insurance Company ("Conseco Senior") to an
independent trust and expects to record accounting charges totaling
approximately $1.2 billion related to the transaction, $503.7 million of which
were recognized in the second quarter of 2008. The Company expects to recognize
additional losses of approximately $155 million in the third quarter of 2008,
which will have the effect of reducing the charges expected to be recognized
upon the completion of the transaction. The recognition of these losses has no
effect on the total charges expected to be recognized related to the
transaction. Consummation of the plan to transfer Conseco Senior to an
independent trust, 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.
Conseco is in compliance with all covenants of its bank facility and expects to
continue to remain so.
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Conseco (2)
October 23, 2008
The Company expects that the amount included in accumulated other comprehensive
loss related to its investment portfolio will be approximately $1.1 billion at
September 30, 2008, an increase of approximately $.5 billion over the second
quarter of 2008. Such increase is primarily attributable to spread widening as a
result of increased risk premiums and overall illiquidity in the credit markets.
Conseco will report results for the third quarter of 2008 after the market
closes on Wednesday, November 5, 2008. The Company will host a conference call
to discuss results at 9:00 a.m. Eastern Standard Time on Thursday, November 6,
2008.
The webcast of the conference call can be accessed through the investors section
of the Company's website: http://investor.conseco.com/. Listeners should go to
the website at least 15 minutes before the event to register, download and
install any necessary audio software.
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.
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(1) Management believes that an analysis of earnings or loss before net
realized investment gains (losses), corporate interest and taxes ("EBIT," a
non-GAAP financial measure) provides a clearer comparison of the operating
results of the company quarter-over-quarter because it excludes: (i)
corporate interest expense; and (ii) net realized investment gains (losses)
that are unrelated to the company's underlying fundamentals. A
reconciliation of EBIT to Net Income applicable to common stock is provided
in the table on page 4.
(2) Management believes that an analysis of Net income (loss) applicable to
common stock before net realized investment gains or losses, net of related
amortization and income taxes, ("Net Operating Income," a non-GAAP
financial measure) is important to evaluate the financial performance of
the company, and is a key measure commonly used in the life insurance
industry. Management uses this measure to evaluate performance because
realized investment gains or losses can be affected by events that are
unrelated to the company's underlying fundamentals. A reconciliation of Net
Operating Income to Net Income applicable to common stock is provided in
the table on page 4. Additional information concerning this non-GAAP
measure is included in our periodic filings with the Securities and
Exchange Commission that are available in the "Investor - SEC Filings"
section of Conseco's website, www.conseco.com.
(3) Measured by new annualized premium, which includes 6% of annuity and 10% of
single premium whole life deposits and 100% of all other premiums, PDP
sales equal $200 per enrolled policy ($310 in 2007),
Private-Fee-For-Service sales equal $2,250 per enrolled policy ($2,100 in
2007).
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Conseco (3)
October 23, 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.
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Conseco (4)
October 23, 2008
Operating Results ($ in millions)
Three months ended
------------------------------------------
Sept. 30, June 30, Sept. 30,
2008 2008 2007
---- ---- ----
(Range of
expected results) (As reported) (Restated)
EBIT, excluding costs related to a litigation settlement and an
annuity coinsurance transaction................................. $95.0 - $105.0 $ 66.6 $ 75.5
Costs related to a litigation settlement........................... - - (16.4)
Costs related to an annuity coinsurance transaction................ - - (76.5)
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Total EBIT.................................................... 95.0 - 105.0 66.6 (17.4)
Corporate interest expense......................................... (13.7) (13.9) (20.2)
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Income (loss) before net realized investment losses and taxes. 81.3 - 91.3 52.7 (37.6)
Tax expense (benefit) on period income............................. 28.3 - 32.3 19.3 (15.9)
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Net operating income (loss)................................... 53.0 - 59.0 33.4 (21.7)
Net realized investment losses (excluding the increase in unrealized
losses on those investments expected to be transferred to an
independent trust and net of related amortization and
taxes and the establishment of a valuation allowance for
deferred tax assets related to such losses)..................... (100.0) - (80.0) (16.8) (31.0)
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Net income (loss) applicable to common stock before losses
related to the transfer of Conseco Senior to an
independent trust......................................... (47.0) - (21.0) 16.6 (52.7)
Recognition of losses related to the transfer of Conseco Senior
to an independent trust......................................... (155.0)(1) (503.7)(1) -
---------------- ------- -------
Net loss applicable to common stock................................ $(202.0) - $(176.0) $(487.1) $(52.7)
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<FN>
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(1) Amount for the three months ended September 30, 2008, includes: (i)
net realized losses of approximately $175 million related to the third
quarter increase in unrealized losses on investments expected to be
transferred to an independent trust; partially offset by (ii) a net
gain of approximately $20 million related to the recapture of a block
of previously reinsured long-term care business which is expected to
be included in the business transferred to an independent trust.
Amount for the three months ended June 30, 2008 includes: (i) net
realized losses of $205.7 million related to unrealized losses on
investments expected to be transferred to an independent trust as of
June 30, 2008; and (ii) an increase of $298.0 million related to the
deferred tax valuation allowance resulting from the expected effects
of the proposed transaction.
</FN>
As previously announced, the Company expects to record accounting charges
totaling $1.2 billion related to the transfer of Conseco Senior to an
independent trust. The recognition of the losses summarized above will have the
effect of reducing the expected total charge upon the completion of the
transaction and have no effect on the total losses expected to be recognized.