UPDATE 1-Conseco unit's coinsurance deal to hit its earnings

* Unit to coinsure about 237,000 policies with Wilton Re

* Deal to raise co's capital ratios

* Sees Q4 $30 mln pre-tax deferred cost of reinsurance

Nov 20 (Reuters) - Insurer Conseco Inc (CNO.N) said it signed an agreement with Wilton Reassurance Co, under which its unit Bankers Life and Casualty Co will coinsure about 237,000 life insurance policies with Wilton Re, and expects the deal to hurt its earnings.

The Midwestern U.S. life and accident insurer said future income from operations would be reduced by the earnings from the coinsured portion of the block.

Pre-tax earnings from these, before overhead, were about $2 million in the third quarter.

Wilton Re will pay a ceding commission of about $45 million and 50 percent coinsure these policies, which will continue to be administered by Bankers Life, Conseco said.

"This transaction is expected to increase Conseco's consolidated risk-based capital ratio by 9 percentage points, along with increasing statutory capital by the amount of the ceding commission," said Chief Executive Jim Prieur.

Under the agreement, Bankers Life will transfer about $95 million in investment securities and policy loans, and $140 million of statutory policy and other liabilities to Wilton Re.

For the fourth quarter, Conseco expects to record an increase to its deferred tax valuation allowance of about $19 million, and a pre-tax deferred cost of reinsurance of about $30 million, which will be amortized over the life of the block, and reduce quarterly pre-tax income from operations by about $500,000.

The transaction is expected to close in the fourth quarter.

Shares of the Carmel, Indiana-based company were down 1 percent at $5.14, in early trade Friday on the New York Stock Exchange. (Reporting by Brenton Cordeiro in Bangalore; Editing by Jarshad Kakkrakandy)