Slide 1: Schedule 14A Proxy Statement
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 14A Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 Filed by the Registrant Filed by a Party other than the Registrant Check the appropriate box: Preliminary proxy statement Confidential
Slide 2: Schedule 14A (continued)
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 14A (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): _________________
Slide 3: Materials prepared for presentation to RiskMetrics Group
The following materials were prepared for use in a presentation given to RiskMetrics Group on April 30, 2009 and may be provided to certain shareholders of Conseco, Inc. after April 30, 2009. Conseco, Inc. 11825 North Pennsylvania Street Carmel, IN 46032 April 30, 2009 3
Slide 4: RiskMetrics Presentation April 30, 2009
RiskMetrics Presentation April 30, 2009
Slide 5: Agenda
Agenda Business Overview Recent Financial Performance Investment Portfolio Review Board of Directors Summary Q&A 5
Slide 6: Business Overview
SJ CONSECO, Business Overview
Slide 7: Conseco Highlights
Conseco Highlights Target Market Defined and differentiated by focus on senior middle income market Products Small face amount protection products (4 million policies in force) Not ratings dependent Virtually no variable business (no sales since 2002) Distribution Bankers: “kitchen table” sales mode
Slide 8: Few Competitors in Our Target Space
Few Competitors in Our Target Space Legend Mutual Stock Life Source: KBW Research 8
Slide 9: Unique Value Proposition Aligned to Important Target Market Trends
Unique Value Proposition that is Closely Aligned to Important Target Market Trends Strong Trends Are Impacting Conseco Has Expertise Able to Access Consumers Middle Market Consumers Across Important Middle Across Multiple Channels Market Products Rising medical costs Specified Disease With an Agent
Slide 10: Product Shift aligned with profitability – New Sales Across Business Units
Product Shift aligned with profitability – New Sales Across Business Units (NAP $ in millions) (a) Bankers Colonial Penn CIG 306.5 294.4 268.4 233.6 218.4 98.2 78.4 71.8 68.8 56.4 (a) Measured by new annualized premium, which includes 6% of annuity and 10% of single premium whole life deposits and 1
Slide 11: Fix, Focus, Grow Key Accomplishments
Fix, Focus, Grow Key Accomplishments 6/07 Q3 2007 Q4 2007 9/06 Expanded credit facility to Completed consolidation of Recapture of 12/06 $870 million at LIBOR + shared services in Carmel, Colonial Penn Jim Prieur VNB 200 Sale of excess space in Life Block hired introduced Carmel 12/06 4/07 Q3 2007 L
Slide 12: Analyst Commentary
Analyst Commentary FBR Analyst – Indianapolis Business Journal Article 3/14/09 Conseco has reported better numbers in the past, said Binner, the Friedman Billings analyst. But they were pumped up due to problems that have been uncovered since the 2006 arrival of CEO Jim Prieur and Chief Financial Of
Slide 13: Bankers Overview
Bankers Overview Solid business with expanding low cost New Annualized Premiums ($ millions) distribution 306.5 294.4 9% compounded annual sales growth (versus 268.4 low single digit growth rate for industry) 233.6 Focused on the middle-class senior market 218.4 with Medicare supplement, life, annui
Slide 14: Bankers Agent Force Growth and Productivity Improvements
Bankers Agent Force Growth and Productivity Improvements NAP per Agent (productivity) Number of Productive Agents (a) Yearly Average 2004 – 2008 Monthly Average 2004 – 2008 These improvements are enabling Bankers to grow total NAP to a target of 10% growth per year while the life insurance industry
Slide 15: Colonial Penn Overview
Colonial Penn Overview Focus on lower middle-income retirees with New Annualized Life Premiums ($ millions) simple, low cost life insurance products Approximately 17% compound annual sales growth since 2004 Direct response model with media and mail based lead generation with robust telemarketing sup
Slide 16: CIG Overview
CIG Overview Focus on middle income working Americans New Annualized Premiums ($ millions) and retirees with supplemental health and 98.2 protection products Distribution through approximately 2,400 78.4 independent producers, including 565 from 71.8 Performance Matters Associates (“PMA”), a 68.8 wh
Slide 17: Recent Financial Performance
Recent Financial Performance 17
Slide 18: Historical Financial Performance
Historical Financial Performance ($ in millions) Total Assets / Equity ex AOCI(L) (a) Pre – Tax Operating Income (b) $33,593.1 $33,971.2 $28,769.7 $449.7 $342.3 $318.0 (a) Amounts do not reflect changes for the adoption of any Accounting Pronouncements in 2009 which require retrospective application
Slide 19: Fixing LTC Run-off: The Separation of Senior Health
Fixing LTC Run-off: The Separation of Senior Health Run-off Segment Pre-Tax Operating Earnings ($MM) (a) Management Actions Taken Prior to Separation Stabilized LTC business Strengthened reserves by $200MM in 2007 - 2008 Installed experienced management team focused exclusively on LTC Pursued premiu
Slide 20: Senior Health Separation Transaction Overview
Senior Health Separation Transaction Overview Key Transaction Terms Senior Health* (which housed 87% of run-off LTC business) was transferred for no consideration to a not-for-profit business trust set up to own and operate the business for the benefit of its LTC policyholders Pre-separation capital
Slide 21: Senior Health Separation Transaction and Related Charges
Senior Health Separation Transaction and Related Charges During 2008, Conseco recorded accounting charges totaling $1.0 billion related to the transaction, comprised of Senior Health's equity (as calculated in accordance with generally accepted accounting principles), an additional valuation allowan
Slide 22: Impact of Credit Facility Amendment on Key Debt Covenants
Impact of Credit Facility Amendment on Key Debt Covenants ($ millions) Modified Q4 2007 Q3 2008 Q4 2008** Covenant Levels*** Debt/Capital Ratio* Covenant Maximum 30.0% 30.0% 30.0% 32.5% Actual 21.0% 23.6% 28.3% Interest Coverage Covenant Minimum 2.00X 2.00X 2.00X 1.50X Actual 3.34X 2.64X 2.35X Statu
Slide 23: Investment Portfolio Review
Investment Portfolio Review 23
Slide 24: Asset Allocation at 12/31/08
Asset Allocation at 12/31/08 Overall highly rated Overall mark-to-market and credit migration consistent with Pressure on ALT-A delinquency credit cycle trends Low, but rising delinquency Pressure on financials and Some Alt-A downgrades trends cyclicals Seasoned portfolio BBB market pricing pressure
Slide 25: Rating Agency Commentary on Investment Portfolio
Rating Agency Commentary on Investment Portfolio AM BEST- Report Revision Date - 03/04/2009 The overall credit quality of the portfolio is solid. The corporate bond portfolio is also well diversified by industry sector. A.M. Best notes that CNO's credit risk on BIG securities is partially mitigated
Slide 26: Unrealized Losses at 12/31/08
Unrealized Losses at 12/31/08 ($ millions) Net Unrealized 2008 Book Value Market Value Gain/(Loss) Impairments Corporates $13,532 $11,436 $(2,096) $98 US Treasuries 340 371 31 - States and Political 440 386 (54) - Foreign Governments 11 9 (2) - CDOs 134 97 (37) - Mortgage Pass-throughs 76 77 1 - CMO
Slide 27: Non-Agency CMOs at 12/31/08
Non-Agency CMOs at 12/31/08 Our non-agency CMOs are diversified by type and vintage 27
Slide 28: Board of Directors
SJ CONSECO, Board of Directors 28
Slide 29: Board Structure and Governance
Board Structure and Governance Nine members being elected Eight members are independent, including Chairman Two independent directors added in 2007 following extensive search Hired new CEO (September 2006) and CFO (April 2007) Active Board 14 Board Meetings in 2008 More than 30 Board Committee Meeti
Slide 30: Board of Directors Biographies
Board of Directors Biographies R. Glenn Hilliard, 66, has served as chairman of our board of directors since September 2003. During the period from August 2004 until September 2005, he served as executive chairman and at all other times since September 2003 he has served as non-executive Chairman. M
Slide 31: Board of Directors Biographies
Board of Directors Biographies C. James Prieur, 57, has been chief executive officer and a director since September 2006. Before joining Conseco, Mr. Prieur had been with Sun Life Financial since 1979. He began his career in private placements, then equity and fixed income portfolio management, risi
Slide 32: Board of Directors Biographies
Board of Directors Biographies Michael T. Tokarz, 59, joined our board of directors in September 2003. Mr. Tokarz is the chairman of MVC Capital, Inc. (a registered investment company). In addition, he has been a managing member of the Tokarz Group, LLC (venture capital investments) since 2002. He w
Slide 33: Qualifications of Mr. Roberts
Qualifications of Mr. Roberts Mr. Roberts has worked in the insurance and securities industry since 1964 Joined Conseco's board of directors in September of 2003. From 2000 to 2007, Mr. Roberts served as principal of Roberts Ventures L.L.C., consultant for merger & acquisition and product developmen
Slide 34: Summary
SJ CONSECO, Summary 34
Slide 35: Progress on Conseco’s Turnaround
Progress on Conseco’s Turnaround Emerged from bankruptcy in September 2003 with new Board of Directors Jim Prieur hired in September 2006 – “Fix Focus and Grow” Strategy Sold $3 billion annuity block Recaptured life block ($50 million of traditional life insurance premium in force that had been cede
Slide 36: Questions and Answers
SJ CONSECO, Questions and Answers 36
Slide 37: Appendix
5 CONSECO. Appendix
Slide 38: Amended and Restated Long-Term Incentive Plan
Amended and Restated Long-Term Incentive Plan Amendment and restatement of the Plan incorporates the provisions of the Plan as currently in effect and includes the following key modifications: Limits on Full-Value Awards. Eliminating Liberal Share Counting Provisions. Shareholders’ Re-Approval of Pe
Slide 39: Information Related to Certain Non-GAAP Financial Measures
Information Related to Certain Non- GAAP Financial Measures The following provides additional information regarding certain non-GAAP measures used in this presentation. A non-GAAP measure is a numerical measure of a company’s performance, financial position, or cash flows that excludes or includes a
Slide 40: Information Related to Certain Non-GAAP Financial Measures
Information Related to Certain Non- GAAP Financial Measures A reconciliation of EBIT to net income (loss) applicable to common stock is as follows (dollars in millions): 2006 2007 2008 EBIT, excluding costs related to a litigation settlement and loss related to a coninsurance transaction: Bankers Li