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 Third Quarter Results
Carmel, Ind., November 5, 2008 - Conseco, Inc. (NYSE: CNO) today reported
results for the third quarter of 2008. "We are pleased with the performance of
our core businesses during the quarter," said Conseco CEO Jim Prieur, "with
income before net realized investment losses, corporate interest and taxes of
$106.6 million. This slightly exceeds the favorable end of the estimated ranges
we provided in our October 23 announcement. All business lines contributed to
earnings, and Bankers Life returned to its expected level of profitability,
reflecting, in part, measures implemented to improve its long-term care
business. Sales grew across all segments, with quarter-over-prior year quarter
increases in new annualized premium of 16% at Bankers Life, 6% at Colonial Penn,
and 5% at Conseco Insurance Group."
Third quarter 2008 results:
o Total New Annualized Premium ("NAP") (1): $97.0 million, up 13% from
3Q07 ($92.3 million, excluding Private-Fee-For-Service, up 6 percent
from 3Q07)
o Income (loss) before net realized investment losses, losses related to
the proposed transfer of Senior Health Insurance Company of
Pennsylvania ("Senior Health," formerly known as Conseco Senior Health
Insurance Company prior to its name change in October 2008) to an
independent trust, corporate interest and taxes ("EBIT") (2): $106.6
million, compared to $(17.4) million in 3Q07
o Net operating income (loss) (3): $58.9 million, compared to $(21.7)
million in 3Q07
o Net operating income (loss) per diluted share: 32 cents, compared to
(12) cents in 3Q07
o Net loss applicable to common stock: $182.0 million, compared to $52.7
million in 3Q07 (including $240.9 million of net realized investment
losses and losses related to the proposed transfer of Senior Health to
an independent trust, in 3Q08 vs. $31.0 million of net realized
investment losses in 3Q07)
o Net loss per diluted share: 98 cents, compared to 28 cents in 3Q07
(including $1.30 of net realized investment losses and losses related
to the proposed transfer of Senior Health to an independent trust, in
3Q08 vs. 16 cents of net realized investment losses in 3Q07)
Nine-month 2008 results:
o NAP (1): $331.1 million, up 1% from the first nine months of 2007
($269.1 million, excluding Private-Fee-For-Service, up 3 percent from
the first nine months of 2007)
o EBIT (2): $221.3 million, compared to $(33.9) million in the first
nine months of 2007
o Net operating income (loss) (3): $113.0 million, compared to $(67.7)
million in the first nine months of 2007
o Net operating income (loss) per diluted share: 61 cents, compared to
(40) cents in the first nine months of 2007
o Net loss applicable to common stock: $674.9 million, compared to
$122.5 million in the first nine months of 2007 (including $787.9
million of net realized investment losses and losses related to the
proposed transfer of Senior Health to an independent trust in the
first nine months of 2008 vs. $54.8 million of net realized investment
losses in the first nine months of 2007)
o Net loss per diluted share: $3.65, compared to 72 cents in the first
nine months of 2007 (including $4.26 of net realized investment losses
and losses related to the proposed transfer of Senior Health to an
independent trust in the first nine months of 2008 vs. 32 cents of net
realized investment losses in the first nine months of 2007)
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Conseco (2)
November 5, 2008
Financial strength at September 30, 2008:
o Book value per diluted share, excluding accumulated other
comprehensive income (loss) (4), was $20.79, compared to $24.41 at
December 31, 2007
o Debt-to-total capital ratio, excluding accumulated other comprehensive
loss (4), was 23.6%, compared to 20.9% at December 31, 2007
Operating results
Results by segment for the quarter were as follows ($ in millions, except per
share data):
Three months ended
September 30,
-------------------------
2008 2007
---- ----
(Restated)
EBIT (2), excluding costs related to a litigation settlement and loss related
to an annuity coinsurance transaction:
Bankers Life.................................................................... $ 67.8 $ 67.5
Colonial Penn................................................................... 6.5 7.0
Conseco Insurance Group......................................................... 36.1 18.2
Other Business in Run-off....................................................... 2.9 (19.5)
Corporate Operations, excluding corporate interest expense...................... (6.7) 2.3
------- ------
EBIT, excluding costs related to a litigation settlement and loss related
to an annuity coinsurance transaction.................................. 106.6 75.5
Costs related to a litigation settlement....................................... - (16.4)
Loss related to an annuity coinsurance transaction............................. - (76.5)
------- -------
Total EBIT................................................................. 106.6 (17.4)
Corporate interest expense........................................................ (13.7) (20.2)
------- ------
Income (loss) before net realized investment losses and taxes.............. 92.9 (37.6)
Tax expense (benefit) on period income............................................ 34.0 (15.9)
------- ------
Net operating income (loss).............................................. 58.9 (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).................... (85.9)(5) (31.0)
------- ------
Net loss applicable to common stock before losses related
to the proposed transfer of Senior Health to an independent trust........ (27.0) (52.7)
Recognition of losses related to the proposed transfer of Senior Health to an
independent trust............................................................ (155.0)(6) -
------- ------
Net loss applicable to common stock............................................... $(182.0) $(52.7)
======= ======
Per diluted share:
Net operating income (loss).................................................. $.32 $(.12)
Net realized investment losses............................................... (.46) (.16)
Losses related to the proposed transfer of Senior Health to an independent
trust...................................................................... (.84) -
----- -----
Net loss applicable to common stock.......................................... $(.98) $(.28)
===== =====
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Conseco (3)
November 5, 2008
In our Bankers Life segment, pre-tax operating earnings were $67.8 million in
the third quarter of 2008, compared to $67.5 million in the third quarter of
2007. The third quarter 2008 earnings improved over the previous two quarters'
results reflecting, in part, measures implemented to address higher than
expected claims in Bankers long-term care business. Third quarter 2008 earnings
compared to the same period in the prior year reflected improved margins from
the long-term care block and reduced expenses. Such favorable variances were
offset by reductions in margins from the PDP and PFFS business assumed through
our quota-share agreements with Coventry.
In our Colonial Penn segment, the pre-tax operating earnings were $6.5 million
in the third quarter of 2008, compared to $7.0 million in the third quarter of
2007. Results for the third quarter of 2008 were negatively impacted by a $1.3
million adjustment to the amortization of the cost of policies produced that is
not expected to recur. This variance was partially offset by the positive income
impacts following the recapture of a modified coinsurance agreement in the
fourth quarter of 2007.
In our Conseco Insurance Group segment, pre-tax operating earnings were $36.1
million in the third quarter of 2008, compared to $18.2 million in the third
quarter of 2007. Results in this segment in the third quarter of 2007 included
an $11 million increase to the amortization of insurance intangibles related to
an unprofitable block of universal life insurance business and an $11 million
increase to expenses related to operational initiatives and consolidation
activities.
In our Other Business in Run-off segment, pre-tax operating earnings were $2.9
million in the third quarter of 2008, compared to a loss of $19.5 million in the
third quarter of 2007. Third quarter of 2008 results included an increase in
earnings of approximately $20 million resulting from a decrease in the
interest-adjusted benefit ratio. Such decrease was driven by increased
terminations and higher investment earnings (primarily resulting from the
increase in yields following the recognition of unrealized losses in the second
quarter of 2008 on investments expected to be transferred to an independent
trust).
The Corporate Operations segment includes our investment advisory subsidiary and
corporate expenses. The third quarter of 2008 reflects $2.9 million of expenses
incurred related to the proposed transfer of Senior Health to an independent
trust.
Net realized investment losses in the third quarter of 2008 of $85.9 million
(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) include $50 million of other-than-temporary impairment losses.
Such net realized investment losses include a deferred tax valuation allowance
of $30 million, as it is more likely than not that tax benefits related to
investment losses recognized in the third quarter of 2008 will not be utilized
to offset future taxable income.
As previously announced, the Company has entered into an agreement to transfer
the stock of Senior Health to an independent trust and expects to record
accounting charges totaling approximately $1.2 billion related to the
transaction, $503.7 million and $155.0 million of which were recognized in the
second and third quarters of 2008, respectively. The recognition of these losses
in the second and third quarters has no effect on the total charges expected to
be recognized related to the transaction. Consummation of the plan to transfer
Senior Health 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.
The results from the third quarter of 2007 reflect: (i) a charge of $76.5
million related to the 100% coinsurance of an older block of fixed and
equity-indexed annuities; and (ii) additional costs of $16.4 million related to
a litigation settlement we entered into in the second quarter of 2006.
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Conseco (4)
November 5, 2008
Sales results
In addition to the sales of proprietary products, Bankers Life, through a
partnership with Coventry, distributes Medicare PDP and Private-Fee-For-Service
plans through Bankers career agents.
At Bankers Life (career distribution), total NAP in 3Q08 was $65.8 million, up
16% over 3Q07 primarily due to higher Private-Fee-For-Service sales and higher
sales of annuities (total NAP, excluding Private-Fee-For- Service, was $61.2
million, up 6 percent from 3Q07).
At Colonial Penn (direct distribution), total NAP was $12.1 million, up 6% over
3Q07 as we continue to benefit from our investment in marketing.
At Conseco Insurance Group (independent distribution), total NAP was $19.1
million, up 5% over 3Q07 with continued focus on producing more profitable
business.
Conference Call
The company will host a conference call to discuss results at 9:00 a.m. Eastern
Standard Time on November 6, 2008. The webcast 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 event to register and download any necessary audio software.
During the call, we will be referring to a presentation that will be available
Thursday morning through the investors section of the company's website.
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.
- -------------------------------------------------------------------------------
(1) 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).
(2) Management believes that an analysis of earnings or loss before net
realized investment gains (losses), losses related to the proposed transfer
of Senior Health to an independent trust, 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 tables on page 2 and 8.
(3) Management believes that an analysis of Net income (loss) applicable to
common stock before net realized investment gains or losses, losses related
to the proposed transfer of Senior Health to an independent trust, 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 tables on page 2 and 8. 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.
(4) The calculation of this non-GAAP measure differs from the corresponding
GAAP measure because accumulated other comprehensive income (loss) has been
excluded from the value of capital used to determine this measure.
Management believes this non-GAAP measure is useful because it removes the
volatility that arises from changes in the unrealized appreciation
(depreciation) of our investments. The corresponding GAAP measures for
debt-to-total capital and book value per common share were 30.5% and
$14.64, respectively, at September 30, 2008, and 22.0% and $22.94,
respectively, at December 31, 2007.
-more-
Conseco (5)
November 5, 2008
(5) Such amount includes a deferred tax valuation allowance of $30 million as
it is more likely than not that tax benefits related to investment losses
recognized in the third quarter of 2008 will not be utilized to offset
future taxable income.
(6) Amount for the three months ended September 30, 2008, includes: (i) net
realized investment 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. The net realized losses of
$175 million include a deferred tax valuation allowance of $61 million as
it is more likely than not tax benefits related to investment losses
recognized in the third quarter of 2008 will not be utilized to offset
future taxable income.
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 Senior Health
Insurance Company of Pennsylvania 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.
- Tables Follow -
Conseco (6)
November 5, 2008
CONSECO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Dollars in millions)
September 30, December 31,
2008 2007
---- ----
(unaudited)
ASSETS
Investments:
Actively managed fixed maturities at fair value (amortized cost:
September 30, 2008 - $21,040.4; December 31, 2007 - $20,992.7)..................... $18,925.9 $20,510.9
Equity securities at fair value (cost: September 30, 2008 - $34.0;
December 31, 2007 - $34.0)......................................................... 34.2 34.5
Mortgage loans....................................................................... 2,348.9 2,086.0
Policy loans......................................................................... 362.0 370.4
Trading securities................................................................... 280.5 665.8
Other invested assets ............................................................... 93.4 134.3
--------- ---------
Total investments.................................................................. 22,044.9 23,801.9
Cash and cash equivalents - unrestricted.................................................. 352.3 407.5
Cash and cash equivalents - restricted.................................................... 12.0 21.1
Accrued investment income................................................................. 351.5 319.3
Value of policies inforce at the Effective Date........................................... 1,631.1 1,722.8
Cost of policies produced................................................................. 1,859.0 1,423.0
Reinsurance receivables................................................................... 3,412.4 3,592.8
Income tax assets, net.................................................................... 2,042.8 1,909.4
Assets held in separate accounts.......................................................... 22.0 27.4
Other assets.............................................................................. 333.7 289.6
--------- ---------
Total assets....................................................................... $32,061.7 $33,514.8
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Liabilities for insurance products:
Interest-sensitive products.......................................................... $13,175.6 $13,169.4
Traditional products................................................................. 12,738.1 12,537.4
Claims payable and other policyholder funds.......................................... 965.9 928.0
Liabilities related to separate accounts............................................. 22.0 27.4
Other liabilities...................................................................... 444.6 510.0
Investment borrowings.................................................................. 823.9 913.0
Notes payable - direct corporate obligations........................................... 1,187.6 1,193.7
--------- ---------
Total liabilities.................................................................. 29,357.7 29,278.9
--------- ---------
Commitments and Contingencies
Shareholders' equity:
Common stock ($0.01 par value, 8,000,000,000 shares authorized, shares issued
and outstanding: September 30, 2008 - 184,725,949; December 31, 2007 - 184,652,017).. 1.9 1.9
Additional paid-in capital............................................................. 4,076.0 4,068.6
Accumulated other comprehensive loss................................................... (1,137.7) (273.3)
Retained earnings (accumulated deficit)................................................ (236.2) 438.7
--------- ---------
Total shareholders' equity........................................................... 2,704.0 4,235.9
--------- ---------
Total liabilities and shareholders' equity........................................... $32,061.7 $33,514.8
========= =========
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Conseco (7)
November 5, 2008
CONSECO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in millions, except per share data)
Three months ended Nine months ended
September 30, September 30,
------------------ ------------------
2008 2007 2008 2007
---- ---- ---- ----
(Restated) (Restated)
Revenues:
Insurance policy income...................................... $ 886.8 $ 822.0 $2,634.1 $2,352.6
Net investment income (loss):
General account assets..................................... 359.5 392.6 1,069.3 1,152.7
Policyholder and reinsurer accounts and other
special-purpose portfolios............................... (24.3) 3.2 (71.9) 50.4
Net realized investment losses............................... (270.6) (55.6) (549.5) (118.8)
Fee revenue and other income................................. 4.9 8.5 13.8 17.5
-------- -------- -------- --------
Total revenues........................................... 956.3 1,170.7 3,095.8 3,454.4
-------- -------- -------- --------
Benefits and expenses:
Insurance policy benefits.................................... 885.1 885.8 2,639.6 2,628.5
Interest expense............................................. 22.5 33.3 74.1 84.8
Amortization................................................. 81.5 92.1 303.5 323.7
Costs related to a litigation settlement..................... - 16.4 - 64.4
Loss related to an annuity coinsurance transaction........... - 76.5 - 76.5
Gain on reinsurance recapture................................ (30.5) - (30.5) -
Other operating costs and expenses........................... 134.9 151.9 434.3 447.9
-------- -------- -------- --------
Total benefits and expenses.............................. 1,093.5 1,256.0 3,421.0 3,625.8
-------- -------- -------- --------
Loss before income taxes................................. (137.2) (85.3) (325.2) (171.4)
Income tax benefit on period income............................. (46.4) (32.6) (111.5) (63.0)
Valuation allowance for deferred tax assets..................... 91.2 - 461.2 -
-------- -------- -------- --------
Net loss................................................. (182.0) (52.7) (674.9) (108.4)
Preferred stock dividends....................................... - - - 14.1
-------- -------- -------- --------
Net loss applicable to common stock...................... $ (182.0) $ (52.7) $ (674.9) $ (122.5)
======== ======== ======== ========
Loss per common share:
Basic:
Weighted average shares outstanding........................ 184,726,000 187,733,000 184,688,000 169,270,000
=========== =========== =========== ===========
Net loss................................................... $(.98) $(.28) $(3.65) $(.72)
===== ===== ====== =====
Diluted:
Weighted average shares outstanding........................ 184,726,000 187,733,000 184,688,000 169,270,000
=========== =========== =========== ===========
Net loss................................................... $(.98) $(.28) $(3.65) $(.72)
===== ===== ====== =====
- more -
Conseco (8)
November 5, 2008
Operating results
Results by segment for the nine months ended September 30 were as follows ($ in
millions, except per share data):
Nine months ended
September 30,
------------------------
2008 2007
---- ----
(Restated)
EBIT (2), excluding costs related to a litigation settlement and loss related to
an annuity coinsurance transaction:
Bankers Life.................................................................... $ 131.5 $ 183.5
Colonial Penn................................................................... 18.5 18.3
Conseco Insurance Group......................................................... 89.4 95.0
Other Business in Run-off....................................................... 13.8 (175.9)
Corporate Operations, excluding corporate interest expense...................... (31.9) (13.9)
------- -------
EBIT, excluding costs related to a litigation settlement and loss related
to an annuity coinsurance transaction................................. 221.3 107.0
Costs related to a litigation settlement....................................... - (64.4)
Loss related to an annuity coinsurance transaction............................. - (76.5)
------- -------
Total EBIT.................................................................. 221.3 (33.9)
Corporate interest expense........................................................ (44.0) (53.2)
------- -------
Income (loss) before net realized investment losses and taxes.............. 177.3 (87.1)
Tax expense (benefit) on period income............................................ 64.3 (33.5)
------- -------
Subtotal................................................................. 113.0 (53.6)
Preferred stock dividends:
5.50% Class B mandatorily convertible preferred stock........................ - (14.1)
------- -------
Net operating income (loss)....................................................... 113.0 (67.7)
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).................... (129.2)(1) (54.8)
------- -------
Net loss applicable to common stock before losses related
to the proposed transfer of Senior Health to an independent trust........ (16.2) (122.5)
Recognition of losses related to the proposed transfer of Senior Health to an
independent trust............................................................ (658.7)(2) -
------- -------
Net loss applicable to common stock............................................... $(674.9) $(122.5)
======= =======
Per diluted share:
Net operating income (loss).................................................. $ .61 $(.40)
Net realized investment losses............................................... (.70) (.32)
Losses related to the proposed transfer of Senior Health to an
independent trust.......................................................... (3.56) -
------ -----
Net loss applicable to common stock.......................................... $(3.65) $(.72)
====== =====
<FN>
- -------------
(1) Such amount includes a deferred tax valuation allowance of $30 million as
it is more likely than not that tax benefits related to investment losses
recognized in the third quarter of 2008 will not be utilized to offset
future taxable income.
(2) Amount for the nine months ended September 30, 2008, includes: (i) net
realized losses of approximately $381 million related to the third quarter
increase in unrealized losses on investments expected to be transferred to
an independent trust; and (ii) an increase to the deferred tax valuation
allowance of $298 million; partially offset by (iii) 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. The net realized losses of
$381 million include a deferred tax valuation allowance of $133 million as
it is more likely than not that tax benefits related to these investment
losses will not be utilized to offset future taxable income.
</FN>
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Conseco (9)
November 5, 2008
CONSECO, INC. AND SUBSIDIARIES
COLLECTED PREMIUMS
(Dollars in millions)
Three months ended
September 30,
----------------------
2008 2007
---- ----
Bankers Life segment:
Annuity............................................................................... $316.7 $250.9
Supplemental health................................................................... 478.7 402.8
Life.................................................................................. 51.9 49.1
------ ------
Total collected premiums.............................................................. $847.3 $702.8
====== ======
Colonial Penn segment:
Life.................................................................................. $ 43.6 $ 29.3
Supplemental health................................................................... 2.2 2.6
------ ------
Total collected premiums.............................................................. $ 45.8 $ 31.9
====== ======
Conseco Insurance Group segment:
Annuity............................................................................... $ 27.4 $77.5
Supplemental health................................................................... 142.9 145.6
Life.................................................................................. 67.8 71.3
------ ------
Total collected premiums.............................................................. $238.1 $294.4
====== ======
Other Business in Run-off segment:
Long-term care........................................................................ $ 72.3 $ 75.2
Major medical......................................................................... .5 .5
------ ------
Total collected premiums.............................................................. $ 72.8 $ 75.7
====== ======
BENEFIT RATIOS ON MAJOR SUPPLEMENTAL HEALTH LINES OF BUSINESS
Three months ended
September 30,
----------------------
2008 2007
---- ----
(Restated)
Bankers Life segment:
Medicare Supplement:
Earned premium........................................................................ $160 million $160 million
Benefit ratio(a)...................................................................... 72.5% 69.4%
PDP and PFFS:
Earned premium........................................................................ $166 million $97 million
Benefit ratio(a)...................................................................... 95.1% 85.4%
Long-Term Care:
Earned premium........................................................................ $156 million $156 million
Benefit ratio(a)...................................................................... 102.1% 106.5%
Interest-adjusted benefit ratio (a non-GAAP measure)(b)............................... 68.1% 75.2%
Conseco Insurance Group (CIG) segment:
Medicare Supplement:
Earned premium........................................................................ $50 million $57 million
Benefit ratio(a)...................................................................... 73.0% 68.6%
Specified Disease:
Earned premium........................................................................ $92 million $90 million
Benefit ratio(a)...................................................................... 82.6% 81.9%
Interest-adjusted benefit ratio (a non-GAAP measure)(b)............................... 48.5% 49.1%
Other Business in Run-off segment:
Earned premium........................................................................ $74 million $77 million
Benefit ratio(a)...................................................................... 141.8% 158.4%
Interest-adjusted benefit ratio (a non-GAAP measure)(b)............................... 69.8% 96.2%
<FN>
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(a) The benefit ratio is calculated by dividing the related product's insurance
policy benefits by insurance policy income.
(b) The interest-adjusted benefit ratio (a non-GAAP measure) is calculated by
dividing the product's insurance policy benefits less interest income on
the accumulated assets backing the insurance liabilities by insurance
policy income. Interest income is an important factor in measuring the
performance of longer duration health products. The net cash flows
generally cause an accumulation of amounts in
</FN>
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Conseco (10)
November 5, 2008
the early years of a policy (accounted for as reserve increases), which will be
paid out as benefits in later policy years (accounted for as reserve decreases).
Accordingly, as the policies age, the benefit ratio will typically increase, but
the increase in the change in reserve will be partially offset by interest
income earned on the accumulated assets. The interest-adjusted benefit ratio
reflects the interest income offset. Since interest income is an important
factor in measuring the performance of these products, management believes a
benefit ratio, which includes the effect of interest income, is useful in
analyzing product performance. 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.
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