Conseco Reports Fourth Quarter and Year-end Results

Conseco Reports Fourth Quarter and Year-end Results

    Business Editors

    CARMEL, Ind.--(BUSINESS WIRE)--March 14, 2005--Conseco, Inc. (NYSE:CNO)

--	Fourth quarter 2004 net income applicable to common stock: $76.9 million, up 55% over 4Q03
--	Fourth quarter 2004 pretax earnings: $130.0 million, up 16% over 4Q03
--	Fifth consecutive quarter of solid earnings
--	Financial transformation completed during 2004
--	Book value per share, excluding accumulated other comprehensive income, (a non-GAAP measure) increased to $19.18(a) at year-end 2004, from $17.09(a) at year-end 2003

    Conseco, Inc. (NYSE:CNO) today reported net income applicable to common stock of $76.9 million for the quarter ended December 31, 2004, up $27.3 million, or 55%, compared to the year-earlier quarter.
    On a diluted per-share basis, net income was 46 cents for the quarter ended December 31, 2004. Results for the quarter included net after-tax realized investment gains of $7.3 million. Comparison of per-share results to the prior-year period is affected by the $1.6 billion equity offering and $800 million debt refinancing completed in mid-2004, which increased weighted average diluted shares outstanding by approximately 86%, compared to the year-earlier quarter. Earnings per diluted share in 4Q03 were 49 cents and included net realized investment gains and venture capital losses of $.8 million.
    For the full year of 2004, Conseco reported net income applicable to common stock of $229.3 million, or $1.63 per diluted common share. Results for 2004 included net after-tax realized investment gains of $17.7 million. Results for full-year 2003 are not comparable because of the company's reorganization and adoption of fresh-start accounting in the third quarter of 2003.

    Financial transformation complete

    President and CEO William Kirsch said, "Conseco's financial transformation was begun in September 2003 and successfully completed in 2004. Five consecutive quarters of solid earnings and strong cash flow since emerging from bankruptcy, together with our successful equity offering and debt refinancing, have enabled us to end 2004 with impressive financial strength. Our insurance subsidiaries' consolidated Risk-Based Capital ratio (a non-GAAP measure) grew by year-end to 318%, compared to 287% at the end of 2003. Our year-end debt-to-total-capital ratio, excluding accumulated other comprehensive income, (a non-GAAP measure) of 18%(b) reflects relatively low leverage compared to ratios of 20%-30% at peer insurance companies, reflecting our commitment to continue to operate from a strong financial foundation in order to compete effectively against companies with higher ratings. As a result, the company is positioned to achieve important future growth.

    Book value increase

    "As a consequence of our IRS closing agreement in 3Q04 and Conseco's establishment of sustained operating earnings since emergence, we reduced by $947 million the valuation allowance on our deferred tax assets, thereby eliminating the Goodwill and Other intangible assets on our balance sheet. Year-end 2004 book value per share, excluding accumulated other comprehensive income, (a non-GAAP measure) increased to $19.18(a), from $17.09(a) at the end of 2003.

    2004: significant progress on many transformational initiatives

    "Heading into 2004," Kirsch said, "the challenge was to complete Conseco's financial restructuring and to build a platform for sustainable earnings growth, with substantial competitive advantages. Conseco's distribution partners and our 4,350 officers, managers and employees successfully met that challenge with enthusiasm and resolve. As pleased as I am to report another solid quarter of financial results, I am even more pleased that the Conseco team in 2004 delivered impressive results by:

    -- Completing our financial restructuring

    -- Delivering a record sales year at Bankers Life

    -- Implementing administrative system conversions

    -- Entering into the IRS closing agreement

    -- Demonstrating compliance with the control standards required
    by Sarbanes-Oxley

    -- Focusing on operational excellence and accelerating expense
    reductions

    I sincerely appreciate the extra effort and the good teamwork by all of our dedicated associates and distribution partners who contributed to make 2004 a year of important transformation."

    Operational excellence moving rapidly

    "Conseco is a very different company from a year ago," said Kirsch, "and we are well positioned to accelerate our pace of productivity. Our mission is to continue to take the tough actions and to make the investments necessary to earn an 'A' category financial strength rating as soon as possible, in a manner which positions us to grow shareholder value over the long term. Tight management of our business initiatives will enable us to fulfill our vision to make Conseco a premier insurance company providing life and supplemental health insurance products to middle America. We have been very focused on delivering continued progress on each of these initiatives:

    -- Sales and revenue growth. We are building distribution in
    products where we can compete profitably today, and which will
    serve as the foundation for a family of products and
    distribution upon which we can continue to build after we
    achieve 'excellent' ratings. Bankers Life (captive and direct
    distribution) had a record sales year, achieving an 8% overall
    increase versus 2003. Life and health new annualized premium
    of $189 million represented an increase of 10% versus $171
    million in 2003. First-year annuity deposits of $949 million
    were virtually flat with 2003. Another important milestone for
    Bankers in 2004 was the expansion of its distribution reach
    with sales offices in new geographic markets, increasing the
    total number of Bankers branches to 158. As part of its growth
    strategy, Bankers invested in its existing branches by
    replacing many under-performing branch managers, and by
    increasing its new agent recruitment by 13% compared to 2003.
    Sales at Conseco Insurance Group (independent distribution)
    for 2004 included $54 million in new annualized life and
    health premium, and $39 million in first-year annuity
    deposits, reflecting the challenges of rebuilding independent
    distribution. To address this challenge, Conseco Insurance
    Group introduced a major new cancer product in the last half
    of 2004, four new products in the first quarter of 2005
    (Medicare Supplement, bonus equity-indexed annuity, universal
    life and equity-indexed universal life), and plans two more
    new products (worksite universal life and a proprietary
    equity-indexed annuity) in the second quarter of 2005. Conseco
    Insurance Group is actively recruiting new agents in the
    health and annuity lines that are expected to fuel near-term
    sales growth.

    -- Operational excellence. We are implementing a best-in-class
    operating platform that provides excellent customer service in
    a scalable, low-cost environment. Our goal is to attain
    operational excellence with back office efficiency that can
    process existing business more efficiently and achieve
    best-in-class customer service in a low-cost environment by
    upgrading management talent, investing in systems and
    engineering enhanced productivity through more effective
    workflow and business processes. In technology, we are
    consolidating and simplifying our data processing and
    management systems in order to provide fast, real-time access
    to our policyholders and distribution partners, reducing
    redundancy, and thereby eliminating impediments to scale. At
    Conseco Insurance Group, we have reduced our administrative
    systems from 33 in April 2003 to 23 currently; we expect to
    convert or eliminate another four systems by early April. We
    are applying rigorous cost/benefit analysis to all remaining
    conversions to make sure they will improve service as well as
    reduce costs and accommodate scale. Typical of all large
    systems projects, investments precede savings. However, we are
    highly confident that we will meet our long-term expectations
    regarding cost and customer service.

    -- Expense reductions and in-force management. Until we earn
    higher ratings, earnings growth will be supported by our
    ability to effectively manage our expenses and maximize the
    profitability of our in-force blocks. We are therefore
    aggressively eliminating non-strategic costs, rationalizing
    organizational redundancies, streamlining back office
    operations, and improving claims adjudication processes,
    especially in our closed block long-term care business.
    Despite our substantial investments in talent, Sarbanes-Oxley
    compliance, systems simplification, new products and other
    business initiatives, we hit our goal for expense savings in
    2004, and we are highly confident that we will achieve or
    exceed our previously expressed savings goal of $30 million
    for 2005.

    -- Best practices in governance and compliance. Sarbanes-Oxley
    404 compliance was exceptionally challenging for Conseco, due
    in large part to our legacy of prior acquisitions, which had
    not been integrated. Achieving SOX 404 compliance demonstrated
    Conseco's resolve to embrace compliance and to maintain the
    strong internal controls required in the new governance
    environment. We are leveraging our Sarbanes-Oxley activities
    to go beyond simple compliance and proliferate best practices
    throughout the organization.

    -- A unified performance culture. We are upgrading management
    talent throughout the organization. The 15 senior operating
    officers added since August 2004 have, in the aggregate,
    nearly 300 years of relevant experience in financial services.
    Our management team shares the vision of transforming Conseco
    into the premier insurance company serving middle America with
    life and supplemental health products. We are working together
    to instill a unified, performance-based culture at all levels
    of our company by aligning individual goals with our business
    priorities and by linking rewards to individual and business
    segment performance.

    2005 outlook

    "In 2005, we are determined to continue to do the hard work and make the investments in new products, operations, systems and compliance necessary to maximize shareholder value over the long term," Kirsch said. "At Conseco Insurance Group, this will include: supporting new product launches, strengthening our worksite platform and product offerings, building our marketing and distribution capability (adding more 'feet on the street'), enhancing agent care and policyholder service, further strengthening our call center and continuing our systems simplification initiatives. At Bankers Life, this will include leveraging our investments in new 2004 branches and branch managers, rolling out new products to meet the needs of policyholders, and completing our initiatives to streamline policy issue and achieve customer service excellence.
    "For 2005, our priority will be to maximize long-term value by investing in future growth opportunities. We remain confident that our earnings for 2005 will at least meet the lower end of the current 2005 analyst estimates published by First Call of $1.68 of net income per share, based on our year-end 2004 diluted shares outstanding. This outlook is based on numerous assumptions and factors. If they prove incorrect, actual earnings could differ materially from estimates. The company's guidance excludes the impact of realized investment gains or losses." (See note on forward-looking statements below).

Operating results

Results for the full year of 2004 are not comparable to 2003 because of the company's reorganization and adoption of fresh-start accounting in the third quarter of 2003. Results by segment were as follows ($ in millions):

Three Three Three Months Months Months Ended Ended Ended December September December 31, 2004 20, 2004 31, 2003 -------------------------------- Earnings before taxes: Bankers Life $ 63.0 $ 55.8 $ 60.0 Conseco Insurance Group 61.0 67.6 68.8 Other Business in Run-off 18.8 16.5 10.7 Corporate Operations (24.1) (34.8) (29.0) Realized gains (losses), net of related amortization, and venture capital income (loss) 11.3 (0.2) 1.2 ------- ------- ------- Earnings before taxes 130.0 104.9 111.7 Tax expense 43.6 37.6 39.6 ------- ------- ------- Net income 86.4 67.3 72.1 Preferred stock dividends: 10.50% Class A convertible exchangeable preferred stock (retired June 11, 2004) - - 22.5 5.50% Class B mandatorily convertible preferred stock (issued May 12, 2004) 9.5 9.4 - ------- ------- ------- Net income applicable to common stock $ 76.9 $ 57.9 $ 49.6 ======= ======= =======
    Earnings before realized gains and income taxes for the fourth quarter of 2004 in our Bankers Life segment were $63.0 million and included favorable annuity results. Also, Bankers Life's net investment income included prepayment income on fixed maturity investments and favorable income on non-traditional invested assets totaling approximately $2 million.
    Earnings before realized gains and income taxes in our Conseco Insurance Group segment totaled $61.0 million in the fourth quarter. Conseco Insurance Group's results included lower margins due to a $5 million adjustment from lower than expected persistency in Medicare supplement, and adjustments arising from our annual review of estimates of the cost of reinsurance ($3 million) and amortization of the value of policies in force ($5 million). These unfavorable items were partially offset by prepayment income on fixed maturity investments and favorable income on non-traditional invested assets totaling approximately $4 million, and an $8 million reduction to operating expenses related to an actuarial gain from changes made to a post-retirement health plan at one of our life insurance subsidiaries.
    Earnings before realized gains and income taxes in our Other Business in Run-off segment were $18.8 million, reflecting improved long-term care benefit ratios arising from our claims adjudication initiatives.
    Corporate Operations include "40/86 Advisors," our investment advisory subsidiary, and the expenses of our corporate operations. Corporate Operations included approximately $12 million of interest expense on our bank debt for the fourth quarter of 2004. Corporate operations for the fourth quarter also reflected a $3 million reduction to expenses related to the favorable outcome of a legal dispute. As previously reported, Corporate Operations included $13.5 million of severance and other transition costs in the quarter ended September 30, 2004, related to the management change announced in August.
    Our effective income tax rate for the fourth quarter of 33.5% included the effect of certain permanent differences and a small adjustment to state income taxes.

    Income tax assets

    Upon our emergence from bankruptcy on September 10, 2003, we established a valuation allowance for the entire balance of our net deferred tax assets. As of December 31, 2004, based on the completion of five quarters with operating earnings and other criteria required by generally accepted accounting principles, we reduced a portion of the valuation allowance on our net deferred tax assets. This adjustment had the following impact on our December 31, 2004 balance sheet: 1) increased Income tax assets by $947 million; 2) eliminated Goodwill and Other intangible assets; and 3) increased Additional paid-in capital in Shareholders' equity by approximately $62 million. The adjustment had no effect on net income. We continue to have a valuation allowance on the remainder of our net deferred tax assets in the amount of approximately $1.6 billion at December 31, 2004.

    Fourth quarter sales

    Fourth quarter new annualized premium sales of supplemental health and life products at Bankers Life totaled $46 million, up 7% compared to 4Q03. Fourth quarter sales of supplemental health and life products at Conseco Insurance Group totaled $12 million, down 43% from 4Q03, driven primarily by a $6 million decrease in Medicare supplement sales through independent agents. This decrease in sales resulted from implementation of rate increases early in the year on both new business and inforce policies. First-year annuity deposits for the quarter were $288 million at Bankers Life, up 52% compared to 4Q03. At Conseco Insurance Group, first-year annuity deposits for the quarter were $13 million, compared to $5 million in 4Q03.

    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.

    (a) These book value per share amounts exclude accumulated other
    comprehensive income from the value of capital used to
    determine this measure. Accordingly, such non-GAAP measure
    differs from the GAAP book value per share measures of $21.41
    per share at year-end 2004 and $19.28 per share at year-end
    2003. Management believes this non-GAAP measure is useful,
    because it removes the volatility from changes in accumulated
    other comprehensive income (loss) in the value of capital.
    Such volatility is often caused by changes in the estimated
    fair value of our investment portfolio resulting from changes
    in general market interest rates rather than the business
    decisions made by management. However, the non-GAAP measure
    does not replace the corresponding GAAP measure.

    (b) This debt-to-total-capital ratio excludes accumulated other
    comprehensive income from the value of capital used to
    determine this measure. Accordingly, such non-GAAP measure
    differs from the GAAP debt-to-total capital ratio of 16% at
    year-end 2004. Management believes this non-GAAP measure is
    useful for the same reasons as summarized above in note (a).
    However, the non-GAAP measure does not replace the
    corresponding GAAP measure.

    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) our ability to improve the financial strength ratings of our insurance company subsidiaries and the impact of prior rating downgrades on our business; (ii) the ultimate outcome of lawsuits filed against us and other legal and regulatory proceedings to which we are subject; (iii) our ability to obtain adequate and timely rate increases on our supplemental health products including our long-term care business; (iv) mortality, morbidity, usage of health care services, persistency and other factors which may affect the profitability of our insurance products; (v) our ability to achieve anticipated expense reductions and levels of operational efficiencies; (vi) the adverse impact of our Predecessor's bankruptcy proceedings on our business operations, and relationships with our customers, employees, regulators, distributors and agents; (vii) performance of our investments; (viii) customer response to new products, distribution channels and marketing initiatives; (ix) the risk factors or uncertainties listed from time to time in our filings with the Securities and Exchange Commission; (x) 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; (xi) changes in the Federal income tax laws and regulations which may affect or eliminate the relative tax advantages of some of our products; and (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.
    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 --

Product loss ratios on major supplemental health lines of business:

Three Three Three Months Months Months Ended Ended Ended December September December 31, 2004 20, 2004 31, 2003 -------------------------------------- Bankers Life segment: Medicare Supplement: Earned premium $160 million $160 million $159 million Loss ratio 70.99% 70.19% 61.56%

Long-Term Care: Earned premium $136 million $135 million $130 million Loss ratio 89.75% 89.10% 85.48% Interest-adjusted loss ratio (a non-GAAP measure)(a) 62.12% 62.01% 59.27%

Conseco Insurance Group segment: Medicare Supplement: Earned premium $80 million $87 million $98 million Loss ratio 65.67% 63.41% 66.02%

Specified Disease: Earned premium $89 million $91 million $91 million Loss ratio 72.46% 76.98% 61.92%

Other Business in Run-off segment: Earned premium $94 million $98 million $109 million Loss ratio 99.00% 97.93% 99.07% Interest-adjusted loss ratio (a non-GAAP measure)(a) 52.32% 56.45% 64.45%

(a) The interest-adjusted loss 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 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 loss 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 loss ratio reflects the interest income offset. Since interest income is an important factor in measuring the performance of these products, management believes a loss ratio which includes the effect of interest income is useful in analyzing product performance.

Collected premiums ($ in millions): Three Three Three Months Months Months Ended Ended Ended December September December 31, 2004 20, 2004 31, 2003 ------------------------------------ Bankers Life segment: Annuity products $288.6 $254.2 $190.3 Supplemental health products 297.9 294.3 311.3 Life products 50.4 46.4 46.6 -------- -------- -------- Total collected premiums $636.9 $594.9 $548.2 ======== ======== ========

Conseco Insurance Group segment: Annuity products $18.3 $16.1 $12.9 Supplemental health products 176.6 180.3 207.0 Life products 86.6 93.7 97.0 -------- -------- -------- Total collected premiums $281.5 $290.1 $316.9 ======== ======== ========

Other Business in Run-off segment: Long-term care products $96.7 $92.7 $104.5 Major medical products 0.8 3.6 21.4

CONSECO, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET December 31, 2004 and 2003 (Dollars in millions) 2004 2003 ----------- ---------- ASSETS Investments: Actively managed fixed maturities at fair value (amortized cost: 2004 - $20,985.8; 2003 - $19,470.7) $21,599.0 $19,840.1 Equity securities at fair value (cost: 2004 - $62.3; 2003 - $71.8) 68.3 74.5 Mortgage loans 1,123.8 1,139.5 Policy loans 448.5 503.4 Trading securities 902.3 915.1 Other invested assets 164.4 324.1 ----------- ----------

Total investments 24,306.3 22,796.7

Cash and cash equivalents: Unrestricted 776.6 1,228.7 Restricted 18.9 31.9 Accrued investment income 308.4 315.5 Value of policies in force at the Effective Date 2,629.6 2,949.5 Cost of policies produced 409.1 101.8 Reinsurance receivables 975.7 983.9 Income tax assets 967.2 24.6 Goodwill - 952.2 Other intangible assets - 182.7 Assets held in separate accounts 32.9 37.7 Other assets 330.8 368.3 ----------- ----------

Total assets $30,755.5 $29,973.5 =========== ==========

LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Liabilities for insurance and asset accumulation products: Interest-sensitive products $12,508.2 $12,480.4 Traditional products 11,679.0 11,485.2 Claims payable and other policyholder funds 942.1 892.3 Liabilities related to separate accounts 32.9 37.7 Other liabilities 498.3 573.0 Investment borrowings 433.9 387.3 Notes payable - direct corporate obligations 758.9 1,300.0 ----------- ----------

Total liabilities 26,853.3 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: 2004 - 151,057,863; 2003 - 100,115,772) 1.5 1.0 Additional paid-in capital 2,597.8 1,641.9 Accumulated other comprehensive income 337.3 218.7 Retained earnings 297.8 68.5 ----------- ----------

Total shareholders' equity 3,902.2 2,817.6 ----------- ----------

Total liabilities and shareholders' equity $30,755.5 $29,973.5 =========== ==========

CONSECO, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS (Dollars in millions, except per share data) (unaudited)

Three months Three months ended ended December 31, December 31, 2004 2003 -------------- ------------- Revenues: Insurance policy income $726.1 $749.6 Net investment income: General account assets 334.4 321.0 Policyholder and reinsurer accounts 33.0 55.2 Venture capital loss related to investment in AT&T Wireless Services, Inc. - (2.8) Net realized investment gains 13.1 5.1 Fee revenue and other income 4.4 11.1 -------------- -------------

Total revenues 1,111.0 1,139.2 -------------- -------------

Benefits and expenses: Insurance policy benefits 720.6 724.6 Interest expense 14.4 29.8 Amortization 98.8 106.0 Other operating costs and expenses 147.2 167.1 -------------- -------------

Total benefits and expenses 981.0 1,027.5 -------------- -------------

Income before income taxes 130.0 111.7

Income tax expense on period income 43.6 39.6 -------------- -------------

Net income 86.4 72.1

Preferred stock dividends 9.5 22.5 -------------- -------------

Net income applicable to common stock $76.9 $49.6 ============== =============

Earnings per common share: Basic: Weighted average shares outstanding 151,073,000 100,114,000 ============== =============

Net income $0.51 $0.50 ============== =============

Diluted: Weighted average shares outstanding 186,944,000 100,258,000 ============== =============

Net income $0.46 $0.49 ============== =============

CONSECO, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS, continued(1) (Dollars in millions, except per share data) (unaudited)

Successor Predecessor ------------------------ ----------- Four Eight Year months months ended ended ended December 31, December 31, August 31, 2004 2003 2003 ------------ ----------- ----------- Revenues: Insurance policy income $2,949.3 $1,005.8 $2,204.3 Net investment income: General account assets 1,294.5 427.0 928.4 Policyholder and reinsurer accounts 24.1 53.1 30.1 Venture capital income (loss) related to investment in AT&T Wireless Services, Inc. - (5.5) 10.5 Net realized investment gains (losses) 40.6 11.8 (5.4) Fee revenue and other income 21.5 13.3 35.5 ------------ ----------- -----------

Total revenues 4,330.0 1,505.5 3,203.4 ------------ ----------- -----------

Benefits and expenses: Insurance policy benefits 2,795.2 967.9 2,136.4 Provision for losses - - 55.6 Interest expense (contractual interest of $268.5 for the eight months ended August 31, 2003) 79.5 36.8 202.5 Amortization 371.2 132.9 343.7 Gain on extinguishment of debt (2.8) - - Other operating costs and expenses 632.8 218.4 423.5 Reorganization items - - (2,130.5) ------------ ----------- -----------

Total benefits and expenses 3,875.9 1,356.0 1,031.2 ------------ ----------- -----------

Income before income taxes and discontinued operations 454.1 149.5 2,172.2

Income tax expense (benefit) on period income 159.3 53.2 (13.5) ------------ ----------- -----------

Income before discontinued operations 294.8 96.3 2,185.7

Discontinued operations, net of income taxes - - 16.0 ------------ ----------- -----------

Net income 294.8 96.3 2,201.7

Preferred stock dividends 65.5 27.8 - ------------ ----------- -----------

Net income applicable to common stock $229.3 $68.5 $2,201.7 ============ =========== ===========

Earnings per common share: Basic: Weighted average shares outstanding 132,280,000 100,110,000 =========== ============

Net income $1.73 $0.68 =========== ============

Diluted: Weighted average shares outstanding 155,930,000 143,486,000 =========== ============

Net income $1.63 $0.67 =========== ============

(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. 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.

--30--DDT/sf*

CONTACT: Conseco, Inc. Tony Zehnder, 312-396-7086 (News Media) Tammy Hill, 317-817-2893 (Investors)

KEYWORD: INDIANA INDUSTRY KEYWORD: INSURANCE EARNINGS SOURCE: Conseco, Inc.

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