Conseco Reports Fourth Quarter and Year-End Results

CARMEL, Ind., March 31, 2008 /PRNewswire-FirstCall/ - Conseco, Inc.
(NYSE: CNO) today reported results for the fourth quarter of 2007.
"As we stated when we issued preliminary results, we are making steady
progress on our plans to position Conseco for future profitable growth," CEO
Jim Prieur said. "New business at both Bankers Life and at Colonial Penn
continues to be strong, and the expected future margins related to new
business at Conseco Insurance Group increased despite declining sales. Asset
quality remains a high priority and our portfolio continues to perform within
expectations. While we are not without our challenges, we are moving forward
with our strategies to further stabilize our long-term care closed block of
business and fully remediate the material weakness in internal controls."
Fourth quarter 2007 results:
-- Net operating income (1) before valuation allowance for deferred tax
assets: $19.5 million, compared to $24.6 million in 4Q06
-- Net operating income before valuation allowance for deferred tax assets
per diluted share: 11 cents, compared to 10 cents in 4Q06
-- Net income (loss) applicable to common stock: $(71.5) million,
compared to $5.7 million in 4Q06 (including $23.0 million of net
realized investment losses and $68.0 million valuation allowance for
deferred tax assets in 4Q07 vs. $9.4 million of net realized investment
losses in 4Q06)
-- Net income (loss) per diluted share: (38) cents, compared to 4 cents
in 4Q06 (including 12 cents of net realized investment losses and 37
cents of valuation allowance for deferred tax assets in 4Q07 vs. 6
cents of net realized investment losses in 4Q06)
-- Income before net realized investment losses, corporate interest and
taxes ("EBIT") (2): $52.9 million, compared to $55.3 million in 4Q06
-- Sales (3): $87.3 million, down 1% from 4Q06

Full Year 2007 results:
-- Net operating income (loss) (1) before valuation allowance for deferred
tax assets: $(34.1) million, compared to $130.1 million in 2006
-- Net operating income (loss) before valuation allowance for deferred tax
assets per diluted share: (28) cents, compared to 61 cents in 2006
-- Net income (loss) applicable to common stock: $(194.0) million,
compared to $68.0 million in 2006 (including $77.8 million of net
realized investment losses and $68.0 million valuation allowance for
deferred tax assets in 2007 vs. $24.1 million of net realized
investment losses in 2006)
-- Net income (loss) per diluted share: $(1.12), compared to 45 cents in
2006 (including 45 cents of net realized investment losses and 39 cents
of valuation allowance for deferred tax assets in 2007 vs. 16 cents of
net realized investment losses in 2006)
-- EBIT (2): $19.0 million, compared to $257.9 million in 2006
-- Sales (3): $415.5 million, up 4% over 2006

Financial strength at December 31, 2007:
-- Book value per common share, excluding accumulated other comprehensive
income (loss) (4), was $24.42, compared to $26.98 at December 31, 2006
-- Book value per diluted share, excluding accumulated other comprehensive
income (loss) (4), was $24.41, compared to $25.57 at December 31, 2006
-- Debt-to-total capital ratio, excluding accumulated other comprehensive
income (loss) (4), was 20.9%, compared to 17.3% at December 31, 2006

Operating results
Results by segment for the quarter were as follows ($ in millions, except
per share data):
Three Months Ended
December 31,
2007 2006
(Restated)
EBIT (2), excluding costs related to a
litigation settlement and loss related
to a coinsurance transaction:
Bankers Life $58.3 $67.5
Conseco Insurance Group 7.7 27.9
Colonial Penn. (.2) 5.4
Other Business in Run-off (10.0) (45.1)
Corporate Operations, excluding corporate
interest expense (2.9) (.4)
EBIT 52.9 55.3
Corporate interest expense (19.1) (16.0)
Loss on extinguishment of debt -- (.7)
Income before net realized investment
losses and taxes 33.8 38.6
Tax expense on period income 14.3 14.0
Income before net realized investment
losses and valuation allowance for
deferred tax assets 19.5 24.6
Valuation allowance for deferred tax assets 68.0 --
Net income (loss) before net realized
investment losses (48.5) 24.6
Preferred stock dividends:
5.50% Class B mandatorily convertible
preferred stock -- (9.5)
Net operating income (loss) (48.5) 15.1
Net realized investment losses, net of
related amortization and taxes (23.0) (9.4)
Net income (loss) applicable to common stock $ (71.5) $5.7
Per diluted share:
Net operating income before valuation
allowance for deferred tax assets $.11 $.10
Valuation allowance for deferred tax assets (.37) --
Net operating income (loss) (.26) .10
Net realized investment losses, net of
related amortization and taxes (.12) (.06)
Net income (loss) applicable to common stock $(.38) $.04

In our Bankers Life segment, pre-tax operating earnings were $58.3 million
in the fourth quarter of 2007, compared to $67.5 million in the fourth quarter
of 2006. Results for the fourth quarter of 2007 were adversely affected by an
$11 million reduction in earnings from our equity-indexed products primarily
due to hedging ineffiencies. This adverse variance was partially offset by
higher income from our marketing and quota-share agreements with Coventry in
the fourth quarter of 2007 compared to the same period of the prior year.
In our Colonial Penn segment, the pre-tax operating loss was $.2 million
in the fourth quarter of 2007, compared to pre-tax earnings of $5.4 million in
the fourth quarter of 2006. Results in this segment were negatively impacted
by $8.4 million of expenses in the fourth quarter of 2007 related to the
introduction of Medicare Advantage products through this distribution channel.
In our Conseco Insurance Group segment, pre-tax operating earnings were
$7.7 million in the fourth quarter of 2007, compared to $27.9 million in the
fourth quarter of 2006. Significant factors affecting the segment's earnings
in these periods included:
-- During the fourth quarter of 2007, we recognized additional
amortization expense of $14.8 million to reflect changes in our
estimates of future mortality rates on our universal life business, net
of planned increases to associated policyholder charges.
-- Our benefit ratios increased in the fourth quarter of 2007 on our
specified disease and Medicare supplement business. These increases
negatively affected fourth quarter 2007 earnings by approximately
$8 million compared to the same period of the prior year.
-- Earnings in the fourth quarter of 2007 were also negatively affected by
$4.2 million of trading losses related to the termination of interest
rate swap agreements held in our trading portfolio.
-- During the fourth quarter of 2007, we recognized additional operating
costs and expenses of approximately $3.0 million related to operational
initiatives and consolidation activities.
-- Earnings in the fourth quarter of 2006 were negatively affected by
$16.1 million related to the segment's life insurance results in
connection with management's intent regarding the administration of
certain policies. This compares to a similar charge in the fourth
quarter of 2007 of $2.0 million.

In our Other Business in Run-off segment, we recognized a pre-tax
operating loss of $10.0 million in the fourth quarter of 2007, compared to a
loss of $45.1 million in the fourth quarter of 2006. Earnings in the fourth
quarter of 2006 were negatively impacted by claim reserve strengthening
resulting from adverse claim experience on claims incurred in previous
quarters. In the fourth quarter of 2007, there were no comparable significant
adjustments for claim experience related to previous quarters.
The Corporate Operations segment includes our investment advisory
subsidiary and corporate expenses.
Net realized losses of $23.0 million (net of taxes) in the fourth quarter
of 2007 consisted of losses from market value declines and from sales of
mortgage-backed securities collateralized by sub-prime residential mortgage
loans.
Based on our evaluation of the recovery of deferred tax assets, we
determined the need to increase the valuation allowance by $68 million
(primarily related to tax benefits resulting from the losses recognized in
2007).
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 plan (PFFS) through Bankers career agents.
At Bankers Life (career distribution), total New Annualized Premium
("NAP") in 4Q07 was $58.3 million, up 4% over 4Q06. For the year, Bankers'
NAP was up 10% from 2006 total of $268.6 million.
At Colonial Penn (direct distribution), total NAP was $9.3 million, up 25%
over 4Q06 as we continue to benefit from our investment in marketing. For the
year, NAP rose 27% over 2006 total of $33.3 million.
At Conseco Insurance Group (independent distribution), total NAP was $19.7
million, down 18% from 4Q06. For the year, NAP fell 21% from 2006 total of
$99.2 million.
Conference Call
The company will host a conference call to discuss results at 8:30 a.m.
Eastern Daylight Time on April 1, 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 Tuesday 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
http://www.conseco.com.
(1) 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 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, http://www.conseco.com.
(2) 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 tables on page 2 and 8.
(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 $310 per enrolled policy, PFFS sales equal
$2,100 per enrolled policy.
(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 22.0% and $22.94, respectively, at December 31,
2007, and 17.6% and $26.50, respectively, at December 31, 2006.

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) our ability to obtain adequate and timely rate increases on our
supplemental health products including our long-term care business; (ii)
mortality, morbidity, 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; (iii) changes in our assumptions
related to the cost of policies produced or the value of policies inforce at
the Effective Date; (iv) the recoverability of our deferred tax asset; (v)
changes in accounting principles and the interpretation thereof; (vi) 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; (vii) performance of our
investments; (viii) 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; (ix) the
ultimate outcome of lawsuits filed against us and other legal and regulatory
proceedings to which we are subject; (x) 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; (xi) our ability to continue to recruit and retain productive
agents and distribution partners and customer response to new products,
distribution channels and marketing initiatives; (xii) 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; (xiii) the risk factors or uncertainties listed
from time to time in our filings with the Securities and Exchange Commission;
(xiv) 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; (xv) 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 returns on and the market value of our investments, and the lapse rate and
profitability of policies; and (xvi) changes in the Federal income tax laws
and regulations which may affect or eliminate the relative tax advantages of
some of our 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 -

CONSECO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Dollars in millions)

December 31,
2007 2006
(Restated)
ASSETS
Investments:
Actively managed fixed maturities at fair
value (amortized cost:
December 31, 2007 - $20,992.7;
December 31, 2006 - $22,946.9) $20,510.9 $22,802.9
Equity securities at fair value
(cost: December 31, 2007 - $34.0;
December 31, 2006 - $23.9) 34.5 24.8
Mortgage loans 2,086.0 1,642.2
Policy loans 370.4 412.5
Trading securities 665.8 675.2
Other invested assets 134.3 178.8

Total investments 23,801.9 25,736.4

Cash and cash equivalents:
Unrestricted 407.5 385.9
Restricted 21.1 24.0
Accrued investment income 319.3 344.5
Value of policies inforce at the Effective
Date 1,722.8 2,136.5
Cost of policies produced 1,423.0 1,106.7
Reinsurance receivables 3,592.8 850.8
Income tax assets, net 1,909.4 1,794.3
Assets held in separate accounts 27.4 28.9
Other assets 289.6 316.0

Total assets $33,514.8 $32,724.0

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Liabilities for insurance products:
Interest-sensitive products $13,169.4 $13,021.1
Traditional products 12,537.4 12,108.0
Claims payable and other policyholder
funds 928.0 835.0
Liabilities related to separate accounts 27.4 28.9
Other liabilities 510.0 611.8
Investment borrowings 913.0 418.3
Notes payable - direct corporate
obligations 1,193.7 1,000.8

Total liabilities 29,278.9 28,023.9

Commitments and Contingencies
Shareholders' equity:
Preferred stock -- 667.8
Common stock ($0.01 par value,
8,000,000,000 shares authorized, shares
issued and outstanding:
December 31, 2007 - 184,652,017;
December 31, 2006 - 152,165,108) 1.9 1.5
Additional paid-in capital 4,068.6 3,468.0
Accumulated other comprehensive loss (273.3) (72.6)
Retained earnings 438.7 635.4

Total shareholders' equity 4,235.9 4,700.1

Total liabilities and shareholders'
equity $33,514.8 $32,724.0

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

Three months ended Year ended
December 31, December 31,
2007 2006 2007 2006
Revenues: (Restated) (Restated)
Insurance policy
income $814.7 $746.1 $3,167.3 $2,989.0
Net investment income:
General account
assets 364.6 366.0 1,517.3 1,435.2
Policyholder and
reinsurer accounts
and other
special-purpose
portfolios (31.1) 44.6 19.3 71.2
Net realized investment
losses (36.6) (18.6) (155.4) (47.2)
Fee revenue and other
income 6.3 5.2 23.8 19.2

Total revenues 1,117.9 1,143.3 4,572.3 4,467.4

Benefits and
expenses:
Insurance policy
benefits 805.2 846.6 3,433.7 3,033.0
Interest expense 32.5 22.2 117.3 73.5
Amortization 125.6 105.6 449.3 441.6
Loss on extinguishment
of debt -- .7 -- .7
Costs related to a
litigation settlement -- -- 64.4 174.7
Loss related to an
annuity coinsurance
transaction -- -- 76.5 --
Other operating costs
and expenses 156.2 144.2 604.1 576.7

Total benefits and
expenses 1,119.5 1,119.3 4,745.3 4,300.2

Income (loss)
before income
taxes (1.6) 24.0 (173.0) 167.2

Income tax expense
(benefit) on period
income 1.9 8.8 (61.1) 61.2
Valuation allowance
for deferred tax
assets 68.0 -- 68.0 --

Net income (loss) (71.5) 15.2 (179.9) 106.0

Preferred stock dividends - 9.5 14.1 38.0

Net income (loss)
applicable to common
stock $(71.5) $5.7 $(194.0) $68.0

Earnings (loss) per
common share:
Basic:
Weighted average
shares
outstanding 185,687,000 152,062,000 173,374,000 151,690,000

Net income
(loss) $(.38) $.04 $(1.12) $.45

Diluted:
Weighted average
shares
outstanding 185,687,000 152,062,000 173,374,000 152,509,000

Net income
(loss) $(.38) $.04 $(1.12) $.45

CONSECO, INC. AND SUBSIDIARIES
OPERATING RESULTS

Results by segment for the year ended were as follows ($ in millions):
Year Ended
December 31,
2007 2006
(Restated)
EBIT (2), excluding costs related to a
litigation settlement and loss related
to a coinsurance transaction:
Bankers Life $ 241.8 $ 265.3
Conseco Insurance Group 102.7 198.4
Colonial Penn 18.1 21.6
Other Business in Run-off (185.9) (34.5)
Corporate Operations, excluding corporate
interest expense (16.8) (18.2)

EBIT, excluding costs related to a litigation
settlement and a loss related to an annuity
coinsurance transaction 159.9 432.6

Costs related to a litigation settlement (64.4) (174.7)
Loss related to an annuity coinsurance
transaction (76.5) --

Total EBIT 19.0 257.9

Corporate interest expense (72.3) (52.9)
Loss on extinguishment of debt -- (.7)

Income (loss) before net realized investment
losses and taxes (53.3) 204.3

Tax expense (benefit) on period income (19.2) 74.2

Income (loss) before net realized investment
losses and valuation allowance for deferred
tax assets (34.1) 130.1

Valuation allowance for deferred tax assets 68.0 --

Net income (loss) before net realized
investment losses (102.1) 130.1
Preferred stock dividends:
5.50% Class B mandatorily convertible
preferred stock (14.1) (38.0)

Net operating income (loss) (116.2) 92.1

Net realized investment losses, net of
related amortization and taxes (77.8) (24.1)

Net income (loss) applicable to
common stock $(194.0) $68.0

Per diluted share:
Net operating income (loss) before
valuation allowance for deferred tax
assets $(.28) $.61
Valuation allowance for deferred tax assets (.39) --
Net operating income (loss) (.67) .61
Net realized investment losses, net of
related amortization and taxes (.45) (.16)
Net income (loss) applicable to common stock $(1.12) $.45

CONSECO, INC. AND SUBSIDIARIES
COLLECTED PREMIUMS
(Dollars in millions)
Three months ended
December 31,
2007 2006

Bankers Life segment:
Annuity $221.9 $247.6
Supplemental health 420.4 327.7
Life 50.7 46.6
Total collected premiums $693.0 $621.9
Conseco Insurance Group segment:
Annuity $58.0 $121.9
Supplemental health 147.2 153.2
Life 68.8 73.9
Total collected premiums $274.0 $349.0
Colonial Penn segment:
Life $31.7 $26.8
Supplemental health 2.5 2.9
Total collected premiums $34.2 $29.7
Other Business in Run-off segment:
Long-term care $74.4 $ 75.9
Major medical .6 .7
Total collected premiums $75.0 $ 76.6

BENEFIT RATIOS ON MAJOR SUPPLEMENTAL HEALTH LINES OF BUSINESS
Three Months Ended
December 31,
2007 2006
Bankers Life segment: (Restated)
Medicare Supplement:
Earned premium $159 million $162 million
Benefit ratio(a) 67.6% 65.3%
PDP and PFFS:
Earned premium $90 million $13 million
Benefit ratio(a) 83.6% 42.5%
Long-Term Care:
Earned premium $156 million $153 million
Benefit ratio(a) 103.3% 101.8%
Interest-adjusted benefit ratio
(a non-GAAP measure)(b) 71.2% 72.0%
Conseco Insurance Group (CIG) segment:
Medicare Supplement:
Earned premium $55 million $62 million
Benefit ratio(a) 66.0% 64.1%
Specified Disease:
Earned premium $89 million $90 million
Benefit ratio(a) 80.6% 73.1%
Interest-adjusted benefit ratio
(a non-GAAP measure)(b) 46.5% 40.7%
Other Business in Run-off segment:
Earned premium $77 million $82 million
Benefit ratio(a) 146.6% 182.7%
Interest-adjusted benefit ratio
(a non-GAAP measure)(b) 82.2% 128.3%

(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 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, http://www.conseco.com.

SOURCE Conseco, Inc.

CONTACT: media, Tony Zehnder, Corporate Communications, +1-312-396-7086, or
investors, Scott Galovic, Investor Relations, +1-317-817-3228, both of
Conseco, Inc.