Slide 1: First Quarter 2010 Financial and Operating Results
Exhibit 99.1 First Quarter 2010 Financial and Operating Results For the period ended March 31, 2010 Conseco, Inc. May 5, 2010 Unless otherwise specified, the periods cited in our performance comparisons are Q1 2010 vs Q1 2009.
Slide 2: Forward-Looking Statements
Forward-Looking Statements 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, con
Slide 3: Non-GAAP Measures
Non-GAAP Measures This presentation contains the following financial measures that differ from the comparable measures under Generally Accepted Accounting Principles (GAAP): operating earnings measures; book value, excluding accumulated other comprehensive income (loss) per share; operating return m
Slide 4: Q1 2010 Summary CNO
Q1 2010 Summary CNO § Core sales* of $87 million, up 4% § Net operating income** $38.2 million, up 2% • 14 cents per diluted share • Reflects dilution from the issuance of shares of common stock and convertible debentures § Consolidated RBC up 10 points to 319% § Holding company liquidity: $131.2 mi
Slide 5: CIG Segmentation
CIG Segmentation CIG § Splitting into two segments: • Other CNO Business • Washington National § Other CNO Business comprised primarily of closed blocks from CIG • Will be separately managed from current/growing business • Accounts for about two-thirds of CIG’s capital § Segmentation is another step
Slide 6: Collected Premiums CNO
Collected Premiums CNO ($ millions) Collected Premiums-Trailing 4 Quarters § Total collected premiums for trailing 4 quarters down Q1 2009 Q2 2009 Q3 2009 $4,549.3 $4,494.9 13% $4,423.1 Q4 2009 Q1 2010 $4,114.8 § Decline at Bankers due to $3,937.2 CIG termination of PFFS reinsurance contracts and CP
Slide 7: Q1 2010 Summary of Results CNO
Q1 2010 Summary of Results CNO ($ millions, except per-share amounts) Pre-Tax After Tax EPS Bankers Life $53.2 Colonial Penn 5.3 Conseco Insurance Group 25.7 Corporate operations and interest expense (24.5) Income before net realized investment losses and valuation allowance for deferred tax assets*
Slide 8: Quarterly Earnings CNO Consolidated
Quarterly Earnings CNO Consolidated ($ millions) *Management believes that an analysis of earnings before net realized investment gains (losses), corporate interest, loss on extinguishment or modification of debt and taxes (“EBIT,” a non-GAAP financial measure) provides a clearer comparison of the o
Slide 9: Operating ROE CNO
Operating ROE CNO Operating ROE*, Trailing 4 Quarters Average common shareholders’ equity, excluding AOCL and net operating loss $2,702.0 $2,574.1 $2,503.9 $2,551.1 $2,679.2 carryforwards, trailing 4 quarters ($ millions): *Operating return excludes gain (loss) on extinguishment or modification of d
Slide 10: Q1 2010 reflects dilution from issuance of 65.9 million shares
§ Q1 2010 reflects dilution from issuance of 65.9 million shares of common stock and $240.5 million of convertible debentures Weighted average diluted shares (in millions): 184.8 185.2 185.8 217.5 292.1 *Operating earnings per share exclude loss on extinguishment or modification of debt, net realize
Slide 11: Book Value CNO
Book Value CNO ($ millions, except per-share amounts) 3/31/09 6/30/09 9/30/09 12/31/09 3/31/10 Shareholders’ Equity (excluding AOCL) $3,431.7 $3,461.9 $3,479.7 $3,796.7 $3,823.1 Accumulated Other Comprehensive Loss (1,840.5) (1,046.9) (146.0) (264.3) (103.0) Total Shareholders’ Equity $1,591.2 $2,41
Slide 12: Consolidated RBC Ratio CNO
Consolidated RBC Ratio* CNO § RBC ratio continues to improve § Primarily driven by Q1 2010 statutory earnings *Risk-Based Capital (“RBC”) requirements provide a tool for insurance regulators to determine the levels of statutory capital and surplus an insurer must maintain in relation to its insuranc
Slide 13: Q1 Summary Bankers
Q1 Summary Bankers § Earnings of $53.2 million, up 19% • Higher Life income due to: • Favorable mortality (+$5 million) • Reserve changes from Q1 2009 (+$5 million) • Lost earnings from blocks reinsured in 2009 (-$3 million) • Higher PFFS/PDP income due to: • Favorable PFFS IBNR development (+$2 mil
Slide 14: Sales & Distribution Results Bankers
Sales & Distribution Results Bankers ($ millions) Quarterly NAP* § NAP up 1% • Increases in Life (+25%), LTC (+14%) and Med Supp (+5%), offset by • Lower sales of Annuities (-25%), consistent with overall industry results and driven by lower market interest rates Policies issued and not included in
Slide 15: Medicare Sales Update Bankers
Medicare Sales Update Bankers Issued Policies § Strong growth in Med Supp/ Med Advantage sales for Q4 Q4 2008- Q4 2009- Q1 2009 Q1 2010 2009-Q1 2010 period vs Q4 2008-Q1 2009 • Med Supp issued policies up 79% Medicare 43,086 +79% • Med Advantage/PFFS up 15% Supplement 24,120 • PDP down 53% Med Advan
Slide 16: Q1 Earnings Bankers
Q1 Earnings Bankers ($ millions) Trailing 4 Quarter Operating Return on Equity: 11.8% Management believes that an analysis of income before net realized investment gains (losses), net of related amortization (a non-GAAP financial measure), is important to evaluate the financial performance of our bu
Slide 17: Q1 Summary Colonial Penn
Q1 Summary Colonial Penn § Earnings of $5.3 million, up 4% • Primarily due to favorable mortality and growth in our block of life insurance policies § Sales (NAP) up 7% • Lead generation momentum building following 2009 capital limitations • Increased lead activity will drive return to pre-2009 sale
Slide 18: Q1 Earnings Colonial Penn
Q1 Earnings Colonial Penn ($ millions) Trailing 4 Quarter Operating Return on Equity: 14.0% Management believes that an analysis of income before net realized investment gains (losses), net of related amortization (a non-GAAP financial measure), is important to evaluate the financial performance of
Slide 19: Q1 Summary CIG
Q1 Summary CIG § NAP of $16.7 million, up 12% • Third consecutive quarter of positive sales comparisons § Strong sales growth in both CIG Sales and PMA § Strong recruiting results § Earnings of $25.7 million, down 18% • Lower Specified Disease income due primarily to reserve releases in Q1 2009 (-$5
Slide 20: Q1 2010 Sales Results CIG
Q1 2010 Sales Results CIG ($ millions) § Specified Disease sales up 28% § New worksite groups up 64% Q1 2009 Q1 2010
Slide 21: Q1 Earnings CIG
Q1 Earnings CIG ($ millions) Management believes that an analysis of income (loss) before net realized investment gains (losses), net of related amortization (a non-GAAP financial measure), is important to evaluate the financial performance of our business, and is a measure commonly used in the life
Slide 22: Realized Gains/Losses Recognized Through Net Income CNO
Realized Gains/Losses Recognized Through Net Income CNO ($ millions) Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Gross gains $89.5 $83.6 $99.5 $110.5 $50.9 Gross losses (4.4) (63.3) (84.1) (96.4) (35.5) Losses due to recognition of other-than-tempor- ary impairments recognized in earnings (92.0) (36.6)
Slide 23: Unrealized Gain/Loss CNO
Unrealized Gain/Loss* CNO ($ millions) *Includes debt and equity securities classified as available for sale. Excludes investments from variable interest entities which we consolidate under GAAP. 23
Slide 24: Q1 2010 Impairments CNO
Q1 2010 Impairments CNO ($ millions) Amount Recognized through Accumulated Gross Other Comprehensive Amount Recognized Amounts Loss through Net Income Corporates $1.2 $0.0 $1.2 Alt-A 3.1 (1.9) 5.0 Prime Jumbos 0.0 (0.7) 0.7 Commercial Mortgage Loans 10.9 0.0 10.9 Other 2.5 0.0 2.5 Total $17.7 $(2.6)
Slide 25: Asset Allocation at 3/31/10 CNO
Asset Allocation at 3/31/10* CNO ($ millions) *Excludes investments from variable interest entities which we consolidate under GAAP (the related liabilities are non-recourse to Conseco). 25
Slide 26: Investment Quality: Fixed Maturities CNO
Investment Quality: Fixed Maturities* CNO Actively Managed Fixed Maturities by Rating at 3/31/10 (Market Value) § 93% investment grade: 7% AAA 12% AA 7% BBB 43% A 31% 3/31/09 6/30/09 9/30/09 12/31/09 3/31/10 % of Bonds which are Investment Grade: 91% 91% 93% 93% 93% *Excludes investments from variab
Slide 27: Alt-A at 3/31/10 CNO
Alt-A at 3/31/10 CNO ($ millions) Market Book % of Avg. Avg. Avg. 60+ Avg. Accum. % of Rating Value (mil.) Value (mil.) Alt-A* FICO Support Delinq. Loss Portfolio* AAA $4.2 $4.2 2.0% 720 10.9% 6.5% 0.3% 0.02% AA $53.9 $56.9 25.0% 707 13.0% 9.0% 0.7% 0.24% A $16.2 $16.5 7.5% 721 9.8% 8.7% 0.3% 0.07%
Slide 28: Prime Jumbo at 3/31/10 CNO
Prime Jumbo at 3/31/10 CNO ($ millions) % of Market Book Prime Avg. Avg. Avg. 60+ Avg. Accum. % of Rating Value (mil.) Value (mil.) Jumbo* FICO Support Delinq. Loss Portfolio* AAA $129.7 $141.0 21.0% 736 6.6% 2.7% 0.07% 0.59% AA $73.0 $76.6 11.8% 744 7.6% 5.2% 0.36% 0.33% A $161.1 $176.6 26.0% 740 8
Slide 29: CMBS at 3/31/10 CNO
CMBS at 3/31/10 CNO (GAAP book value - $ millions) AAA AA A BBB Pre-2004 $200.8 $26.3 $37.4 $5.9 $0.0 2004 $136.4 $10.1 $10.6 $17.3 $0.0 2005 $208.3 $22.0 $5.9 $13.1 $23.3 2006 $24.9 $14.7 $0.0 $18.1 $0.0 2007 $176.5 $0.0 $0.0 $0.0 $0.0 2009 $71.3 $0.0 $0.0 $0.0 $0.0 Total BV $818.2 $73.1 $53.9 $54.
Slide 30: CMBS at 3/31/10 CNO
CMBS at 3/31/10 CNO ($ millions) Market Book % of Avg. Avg. 60+ Avg. Cum. % of Rating Value (mil.) Value (mil.) CMBS* Support Del. & FCR Loss Portfolio* AAA $833.9 $818.2 86.1% 30.7% 3.4% 0.32% 3.78% AA $62.8 $73.1 6.5% 20.7% 1.3% 0.09% 0.29% A $39.3 $53.9 4.1% 8.4% 1.1% 0.15% 0.18% BBB $25.6 $54.4
Slide 31: Commercial Mortgage Loans at 3/31/10 CNO
Commercial Mortgage Loans at 3/31/10 CNO By Vintage § Current LTV of approximately 63% § Trailing debt service coverage ratio (DSCR) stable at approximately 1.53 § Three delinquent loans at 3/31/10, totaling $12 million 31
Slide 32: CNO Summary
CNO Summary CNO § Core sales and lead generation continue to be strong § Impact of health care reform • Medicare Supplement and Medicare Advantage • Potential opportunities in Supplemental Health market § Demographics are trending favorably • First of Boomer population will become Medicare-eligible
Slide 33: Questions and Answers
S CONSECO. Questions and Answers 33
Slide 34: Appendix
S CONSECO. Appendix 34
Slide 35: Covenant Metrics CNO
Covenant Metrics CNO Prior Amendment Level New 2011 Level* New 2012 Level 2.0x 1.75x 1.5x Statutory Surplus ($ millions) $1,300 $1,200 $1,100 250% 225% 200% *Also applicable in 2010 for Debt to Capital ratio only. 35 **Excludes Accumulated Other Comprehensive Loss, as defined by the senior credit fa
Slide 36: Q1 2010 Liquidity CNO
Q1 2010 Liquidity CNO ($ millions) Cash Balance 12/31/09 $146.1 Sources Dividends from insurance subsidiary $25.0 Net Proceeds from New Convertible Debentures 61.4 Surplus Debenture Interest 12.0 Management and Investment Fees and Other 6.9 Total Sources 105.3 Uses Interest 15.5 Debt Repayments: Ret
Slide 37: Net Investment Income CNO
Net Investment Income CNO ($ millions) General Account Investment Income § Q1 2010 increase in yield due primarily to higher call premiums on fixed maturities Yield: 5.67% 5.65% 5.63% 5.66% 5.76% 37
Slide 38: Commercial Mortgage Loans at 3/31/10 CNO
Commercial Mortgage Loans at 3/31/10 CNO Geographic Distribution New England 9.2% Pacific Middle 9.4% West North Atlantic Central East North 6.4% 11.9% Central Mountain 22.1% 9.4% East South South Central Atlantic 5.4% 20.3% West South Central 5.9% 38
Slide 39: Commercial Mortgage Loans at 3/31/10 CNO
Commercial Mortgage Loans at 3/31/10 CNO ($ millions) By Maturity 39
Slide 40: Expenses CNO
Expenses CNO ($ millions) Adjusted Operating Expenses* § Q1 2010 expenses returned to a more stable level after higher expense in Q4 2009 due to litigation cost, IT expense and investment in Operations re-engineering *Adjusted operating expenses exclude primarily acquisition costs, capitalization of
Slide 41: Segment Performance Bankers
Segment Performance Bankers ($ millions) Pre-Tax Operating Income* § Earnings up 19%, positively affected by: • Higher Life income due to favorable mortality and reserve changes • Higher PFFS/PDP income due to favorable IBNR development and higher PDP margins PTOI-Trailing 4 Quarters: $187.1 $215.8
Slide 42: Premiums - Medicare Supplement Bankers
Premiums - - Medicare Supplement Bankers ($ millions) § First-year premiums up 38% Med. Supp. First-Year Prems.-Tr. 4 Qtrs: $81.9 $83.6 $86.5 $91.7 $99.2 Med. Supp. Total Premiums-Quarterly: $155.8 $155.2 $168.9 $173.8 $176.6 Med. Supp. NAP-Quarterly: $18.4 $19.2 $19.9 $56.8 $19.4 Med. Supp. NAP-Tra
Slide 43: Premiums - Long-Term Care Bankers
Premiums - - Long-Term Care Bankers ($ millions) Long-Term Care - First-Year Premiums* § First-year premiums up 14% Q3 2009 Q4 2009 Q1 2010 Q1 2009 Q2 2009 (Direct) (Direct) (Direct) (Direct) (Direct) $9.8 $9.8 $9.1 $9.5 $8.6 First-Year Prems.-Tr. 4 Qtrs: $35.9 $30.0 $22.1 $17.7 $18.3 Total Premiums
Slide 44: Premiums - Life Insurance Bankers
Premiums - - Life Insurance Bankers ($ millions) Life - First-Year Premiums Q3 2009 Q4 2009 $23.4 § Fluctuations in first-year Q2 2009 $23.0 Q1 2010 premiums primarily reflect Q1 2009 $19.4 $20.2 variance in sales of single $16.8 $10.5 $10.8 -premium policies $7.8 $9.6 SPWL $6.2 § Non-SPWL premiums
Slide 45: Premiums - Annuity Bankers
Premiums - - Annuity Bankers ($ millions) Annuity - - First-Year Premiums § First-year premiums down 26% as result of current interest rate environment First-Year Prems.-Tr. 4 Qtrs: $1,294.1 $1,308.7 $1,270.3 $1,057.1 $979.1 Total Premiums-Quarterly: $302.1 $275.4 $284.7 $198.2 $224.4 45
Slide 46: Annuity Surrenders Bankers
Annuity Surrenders Bankers IA Surrenders § Surrenders: both indexed and non- (annualized quarterly rate) indexed annuity surrenders lower than prior year § Total account value: • IAs - $1.7 billion • Non-IAs - $4.8 billion § Average account value: • IAs - $41,000 Non-IA Surrenders (annualized quarte
Slide 47: Benefit Ratio - PDP Bankers
Benefit Ratio* - PDP Bankers § Down 7%, impacted by improved pricing and plan design changes *We calculate benefit ratios by dividing insurance policy benefits by insurance policy income. 47
Slide 48: Benefit Ratio - Medicare Supplement Bankers
Benefit Ratio* - Medicare Supplement Bankers § Q1 2010 impacted by higher incurred claims *We calculate benefit ratios by dividing insurance policy benefits by insurance policy income. 48
Slide 49: Interest-Adjusted Benefit Ratio - Long Term Care Bankers
Interest-Adjusted Benefit Ratio* - Long Term Care Bankers § Q1 2009 impacted by prior- period rate increase activity affecting lapses Trailing 4 Quarter Avg.: 71.4% 67.6% 68.2% 67.9% 69.6% Qtrly. non-int. adjusted: 105.1% 103.2% 108.3% 104.3% 114.4% *We calculate interest-adjusted benefit ratios by
Slide 50: Segment Performance Colonial Penn
Segment Performance Colonial Penn ($ millions) Pre-Tax Operating Income* § Earnings up 4% • Primarily due to favorable mortality and growth in our block of life insurance policies PTOI-Trailing 4 Quarters: $26.6 $29.3 $30.2 $29.4 $29.6 Revenues-Quarterly: $57.1 $62.7 $58.1 $57.8 $58.1 Revenues -Tr.
Slide 51: Premiums - Life Insurance Colonial Penn
Premiums - - Life Insurance Colonial Penn ($ millions) Life - First-Year Premiums § Sales (NAP) up 7% • Lead generation momentum building following 2009 capital limitations • Increased lead activity will drive return to pre-2009 sales levels • NAP from lead-based programs up 32% over Q1 2009, and 76
Slide 52: Segment Performance CIG
Segment Performance CIG ($ millions) Pre-Tax Operating Income (loss)* § Earnings down 18% • Lower Specified Disease income due primarily to reserve releases in Q1 2009 • Lower Life income due primarily to lost earnings on blocks reinsured in 2009 • Higher Annuity income due to lower surrenders on in
Slide 53: Premiums - Medicare Supplement
Premiums - - Medicare Supplement ($ millions) Medicare Supplement - - First-Year Premiums § First-year collections down 20% • Focus on core products (i.e., Specified Disease) First-Year Prems.-Tr. 4 Qtrs: $8.3 $7.9 $8.0 $7.2 $6.9 Total Premiums-Quarterly: $42.8 $44.4 $46.9 $43.7 $40.7 NAP-Quarterly:
Slide 54: Premiums - Specified Disease CIG
Premiums - - Specified Disease CIG ($ millions) Specified Disease - First-Year Premiums § NAP up 28% • Increased focus on Specified Disease products • Momentum increasing in Worksite market First-Year Prems.-Tr. 4 Qtrs: $40.2 $41.5 $43.6 $45.4 $47.7 Total Premiums-Quarterly: $93.0 $95.1 $96.2 $99.0
Slide 55: Premiums - Annuity CIG
Premiums - - Annuity CIG ($ millions) Annuity - - First-Year Premiums § First-year collections down 79% • Increased focus on core products First-Year Prems.-Tr. 4 Qtrs: $98.5 $84.7 $83.0 $71.8 $57.7 Total Premiums-Quarterly: $19.5 $22.3 $25.2 $11.4 $5.1 55
Slide 56: Interest-Adjusted Benefit Ratio - Specified Disease
Interest-Adjusted Benefit Ratio* - Specified Disease § Up 17% vs Q1 2009, which was impacted by reserve releases Trailing 4 Quarter Avg.: 41.8% 42.6% 41.2% 46.0% 47.8% Qtrly. non-int. adjusted: 76.0% 83.3% 76.6% 82.0% 82.3% *We calculate interest-adjusted benefit ratios by dividing insurance policy
Slide 57: 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 am
Slide 58: Information Related to Certain Non-GAAP Financial Measures
Information Related to Certain Non-GAAP Financial Measures A reconciliation of net income applicable to common stock to net operating income (and related per-share amounts) is as follows (dollars in millions, except per-share amounts):
Slide 59: Information Related to Certain Non-GAAP Financial Measures
Information Related to Certain Non-GAAP Financial Measures Book value, excluding accumulated other comprehensive income, per share This non-GAAP financial measure differs from book value per share because accumulated other comprehensive income has been excluded from the book value used to determine
Slide 60: Information Related to Certain Non-GAAP Financial Measures
Information Related to Certain Non-GAAP Financial Measures Operating return measures Management believes that an analysis of return before loss on extinguishment or modification of debt, net realized gains or losses, and increases to our valuation allowance for deferred tax assets (“net operating in
Slide 61: Information Related to Certain Non-GAAP Financial Measures
Information Related to Certain Non-GAAP Financial Measures A reconciliation of return on common equity to operating return on common equity (excluding accumulated other comprehensive income (loss) and net operating loss carryforwards) is as follows (dollars in millions, except per share amounts):
Slide 62: Information Related to Certain Non-GAAP Financial Measures
Information Related to Certain Non-GAAP Financial Measures A reconciliation of pretax operating earnings (a non-GAAP financial measure) to segment operating income (loss) and consolidated net income (loss) for the quarter ended March 31, 2010, is as follows (dollars in millions): (Continued on next
Slide 63: Information Related to Certain Non-GAAP Financial Measures
Information Related to Certain Non-GAAP Financial Measures A reconciliation of common shareholders’ equity, excluding accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-GAAP financial measure) to common shareholders’ equity at March 31, 2010, is as follows (dol
Slide 64: Information Related to Certain Non-GAAP Financial Measures
Information Related to Certain Non-GAAP Financial Measures A reconciliation of average common shareholders’ equity, excluding accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-GAAP financial measure) to average common shareholders’ equity at March 31, 2010, is
Slide 65: Information Related to Certain Non-GAAP Financial Measures
Information Related to Certain Non-GAAP Financial Measures Debt to capital ratio, excluding accumulated other comprehensive income (loss) This non-GAAP financial measure differs from the debt to capital ratio because accumulated other comprehensive income has been excluded from the value of capital
Slide 66: Slide 66