Presentation to Association of Insurance Financial Analysts...

© 2005 Conseco Services, L.L.C. © 2005 Conseco Services, L.L.C.

Presentation toAssociation of Insurance Financial Analysts

March 7, 2006

© 2006 Conseco Services, L.L.C. 2

Non-GAAP Financial Measures

This presentation contains the following financial measures that differ from the comparable measures under Generally Accepted Accounting Principles (GAAP): Net operating income, Book value per common share excluding accumulated other comprehensive income and Debt-to-total capital ratio excluding accumulated other comprehensive income. Reconciliations between those non-GAAP measures and the comparable GAAP measures are included in the appendix.

The non-GAAP measures used in this presentation should not be considered as substitutes for the most directly comparable GAAP measures.


The Conseco Value Proposition

Conseco Has Expertise Across Important Middle

Market Products

Specified disease

Equity-indexed life and annuity products (longevity solutions)

Long-term care

Medicare supplement

Whole life products

Final expense / Term insurance for protection

Able to Access Consumers Across Multiple Channels

With an Agent (Retail)• Bankers • CIG - Independents

• Without an Agent: (Direct)• Colonial Penn

At Work: (Worksite Marketing)

PMA Worksite Division (CIG-owned)

CIG - Independents

Strong Trends Are Impacting Middle Market Consumers

Rising medical costs

Decline of societal safety nets (government and employer)

Increased longevity

Greater awareness of need for retirement planning

The Right Products and The Right Channels for Today’s Middle-Market Consumer


Growing at over 5% per annum compared to overall household growth of 1.6%

Underserved by majority of financial service providers who have migrated up-market

Trends indicate strong need for risk protection

36

10

77

Affluent

MiddlemarketLower

market

Millions of U.S. Middle-Market Households ($25K-$100K income)

Seniors

Small Employers

K-12 Teachers

Targeted Segments (Approx. 30 million households)

Growth Strategy: Target Underserved, Attractive Segments of U.S. Middle Market

Seniors: Growth fueled by boomers, need for retirement income solutions, and expansion of government-sponsored medical programs

Small Employers: Decline of paid benefits exposes individuals at small employers who need access to basic protection and health products

K-12 Teachers: An underserved segment with high demand for tax-sheltered annuities and related products

Other43-52

12-16

10-14

3-4


WorksiteRetail

Multiple Channels / Multiple Brands to Access Middle-Market Consumers

’05 New Premium: $286M

87%

Middle Market –Large and Underserved

Direct Marketing


9%

Focused on Growing Senior Market

Fast-Growing Segments –Targeted for Additional Investment


4%


Strong Brand Results

BLC ’05 Sales up 7% over prior year

CIG ’05 Sales up 22% over prior year

CP ’05 Sales up 13% over prior year

“New” brand for ‘06

Total CNO Production Up 10% Over Prior Year

Bankers Life

Conseco Insurance Group

Pre-Tax Operating Income: $254 million

Pre-Tax Operating Income: $257 million


Bankers Brand Strategy forFuture Growth

’06 Growth InitiativesImproving branch productivity

Preparing for expansion in NY –the only state without Bankers (and re-entering Massachusetts Medicare Supplement market)

Will leverage successful prescription drug program

Broadening health and financial product portfolio to better address retirement and longevity needs

Why We Will SucceedOver 1 million policyholders, with proven ability to cross-sell products (average 1.4 policies per household)

Largest senior-focused career agency with over 4,500 agents

Agents are in the homes of more than 3 million seniors every year

Leading positions in Medicare Supplement and LTC provide credibility to senior market

Senior market is growing as boomers retire and assess income and protection needs


Expanding media channels of highly successful graded-benefit life product to include direct mail and affinity-based programs

Expanding direct response TV ad model to include products other than graded-benefit life, such as simplified issue life

Testing direct marketing of health products

8Confidential. For internal use only.

’06 Growth Initiatives Why We Will Succeed

Colonial PennBrand Strategyfor Future Growth

Best-in-class direct marketing unit with expertise in media purchasing and response conversion

Highly recognizable brand

Large licensed call center staff to handle incoming leads

Able to increase sales conversion rates by sharing leads across distribution channels


Expanding internal sales team

Recruiting independent agents interested in “new home”

Forging alliances with national distributors to develop proprietary products

Expanding number of wholesalers

Implementing new product development team and process

Enhancing distribution value proposition

New agent appointments in 2005:Up 163% in healthUp 67% in lifeUp 166% in annuities

Over 2 million inforce policies provide base for cross-selling

Several large distributors are already on board and co-sponsoring national advertising campaigns

Broad array of new products in 2005 and 2006

Enhanced agent technology platform

Conseco Insurance Group Brand Strategy for Future Growth

’06 Growth Initiatives Why We Will Succeed


Washington National Brand Strategy for Future Growth

’06 Growth Initiatives Why We Will SucceedFocus on 403(b) market targeting K-12 teacher segment

Focus on voluntary products sold at the worksite

Kick-off meeting with top distributors (2/06)

Launch Educator’s Choice Series of fixed and indexed annuities (2/06)

Launch universal life at the worksite

New investments in owned distribution (PMA)

Build out sales team

Huge demand for voluntary products sold at the worksite

Long history in the business: 18,000 employer slots

Expertise in worksite products

Relationships with existing worksite distribution and TSA distributors

Owned large marketing organization (PMA)

Able to cross-sell portfolio


FINANCIAL OVERVIEW


Diversified Products and Earnings

Medicare Supplement

Specified Disease

Long-Term Care

Life

Annuities

EBIT by Product Line

2005 Total: $555 million

Approximately 60% of earnings generated from health products

Balanced earnings mix reduces reliance on any single product

Makes Conseco less vulnerable to competitor tactics

Breadth of portfolio creates cross-sell opportunities within a household and improves persistency


Growing Track Record

Grew year-over-year Operating EPS by 17%

2004 Operating EPS: $1.512005 Operating EPS: $1.76

Positive Momentum

Pre-Tax Operating Income

$93

$110$105

$119$124

$133$127

$119

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2004 2005


Distribution as of 12/31/05

AAA $8,466,216,905AA 1,676,561,323A 5,635,629,857BBB 5,721,448,786BB 716,148,978B and below 278,254,797

Solid Investment Portfolio

2005 2004

Average Invested Assets $24,219.7 $23,586.4

Net Investment Income $1,385.0 $1,292.4

Earned Yield 5.72% 5.48%

Prepayment Income 28.1 9.8

Adjusted Net Investment Income $1,356.9 $1,282.6

Portfolio Yield 5.60% 5.44%

Average portfolio yield increased 16 bps in a down rate environment

BB3.18%

BBB25.44%

A25.05%

AA7.45%

B and below1.24%

AAA

37.64%


Actively Managing Health Margins($ in millions)

2005 2004 Change

Bankers:LTC Earned Premium 562.3$ 534.7$ 27.6$

Net Margin 196.4$ 201.5$ (5.1)$ Int. Adj. Benefit Ratio 65.1% 62.3%

Med Supp Earned Premium 654.2$ 643.0$ 11.2$ Net Margin 186.0$ 199.8$ (13.8)$ Benefit Ratio 71.6% 68.9%

CIG:Specified Disease Earned Premium 358.9$ 362.0$ (3.1)$

Net Margin 197.0$ 213.9$ (16.9)$ Int. Adj. Benefit Ratio 45.1% 40.9%

Med Supp Earned Premium 300.7$ 357.1$ (56.4)$ Net Margin 122.2$ 131.6$ (9.4)$ Benefit Ratio 59.4% 63.1%

Run-off:LTC/Maj Med Earned Premium 359.1$ 395.8$ (36.7)$

Net Margin 182.5$ 173.2$ 9.3$ Int. Adj. Benefit Ratio 49.2% 56.2%

2006 Outlook

Stable benefit ratio on higher premium; Rate increases approved in majority of states

Improved benefit ratio on growing book; Average rate increase of 12.5% taking effect in ‘06

Improved benefit ratio on stable book

Lower benefit ratio on shrinking book; Average rate increase of 10.5% taking effect in ‘06

Stable benefit ratio on shrinking book


Aggressively Reducing Spending($ in millions)

2004 2005 Reduction

General Insurance Expensesexcluding Commissions $461.4 $418.1 $43.3

Capitalized Systems Development 34.2 15.9 18.3

Total $434.0 $61.6$495.6

Expense Reduction by Segment:

CIG $16.5BLC 8.9Run-off 4.0Corporate 13.9

$43.3


Recognized Benefits of Tax NOL

Conseco has a $4.2 billion NOL arising from its investment in Conseco Finance Corp. (Green Tree Financial)

Additional NOL’s and other amounts of $0.9 billion are also available to offset future taxable income

$1,504$1,044$2,548Totals

387-0-387Other deferred tax items (net timing differences)

-0-397397Capital Loss Carryforwards

150162312Other NOL’s and amounts related to D&O loans

$967$485$1,452CFC NOL

Net Deferred Tax AssetValuation AllowanceDeferred Tax Asset

12/31/05(in millions)


Potential Benefits of Tax NOL

Tentative settlement with IRS on treatment of CFC NOL is expected to result in additional valuation allowance release of approximately $275 million upon final government approvals, in the absence of any additional information at that time

Release of the remaining non-capital loss components of the valuation allowance ($372 million after the above release) would be subject to periodic recoverability assessments and would depend on objective evidence of increased sustainable future earnings, such as ratings upgrades


Deploying Capital to Build Value

Current strategy is weighted toward policyholder and creditor metrics given current ratingsDebt-to-Total Capital of 16%RBC Ratio of 358%

Existing loan agreements limit capital available for shareholder dividends and share buybacks

Successful execution of our growth strategies are expected to produce substantial excess capital and debt capacity

Mandatorily Convertible Preferred will convert to Common in 2007, eliminating $38 million of annual cash dividend

We will consider commencing a modest Common Stock dividend as soon as practicable given rating considerations and loan covenant limitations

Future capital management strategies could include share repurchases and may include M&A provided appropriate accretive opportunities are available that are consistent with our growth strategies


The CNO Value Proposition

The right products and the right channels to reach today’s middle market consumers

Diversified, balanced earnings streams

Aggressively reducing spending

Strong balance sheet

Firm foundation for growth

Opportunities to build value through capital deployment


APPENDIX


Information Related to Certain Non-GAAP Financial Measures

The following provides additional information regarding certain non-GAAP measures used in this presentation. Also refer to our latest Form 10-K and Form 10-Q for information concerning non-GAAP measures.

• Net operating income

• Book value per common share, excluding other comprehensive income

• Debt-to-total capital ratio, excluding accumulated other comprehensive income



Net Operating IncomeManagement believes that an analysis of net income applicable to common stock before net realized gains or losses (“net operating income”, a non-GAAP financial measure) is important to evaluate the 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 a follows (dollars in millions):

Three months ended Year endedDecember, December 31,

2005 2004 2005 2004Net operating income $70.4 $69.6 $286.9 $211.6

Net realized gains (losses), net of related amortization and taxes (2.8) 7.3 - 17.7

Net income applicable to common stock $67.6 $76.9 $286.9 $229.3



Book value per common share, excluding accumulated other comprehensive incomeThis non-GAAP financial measure differs from book value per common share because accumulated other comprehensive income has been excluded from the book value used to determine the measure. Management believes this non-GAAP financial measure is useful because it removes the volatility that arises from changes in accumulated other comprehensive income. 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. A reconciliation of book value per share, excluding accumulated other comprehensive income, to book value per share is as follows (dollars in millions, except per share amounts): December 31,

2005 2004Shareholders' equity $4,519.8 $3,902.2Less preferred stock (667.8) (667.8)

Common shareholders' equity 3,852.0 3,234.4Accumulated other comprehensive income (71.7) (337.3)

Common shareholders' equity excluding accumulated other comprehensive income $3,780.3 $2,897.1

Common shares outstanding (in millions) 151.5 151.1

Book value per share $25.42 $21.41

Book value per share excluding accumulated other comprehensive income $24.95 $19.18



Debt-to-total capital ratio, excluding accumulated other comprehensive incomeThis non-GAAP financial measure differs from the debt-to-total capital ratio because accumulated other comprehensive income has been excluded from the value of capital used to determine this measure. Management believes this non-GAAP financial measure is useful because it removes the volatility that arises from changes in accumulated other comprehensive income. 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. A reconciliation of the debt-to-total capital ratio, excluding accumulated other comprehensive income, to the debt-to-total capital ratio is as follows (dollars in millions):

December 31,2005 2004

Total debt $851.5 $768.0

Shareholders' equity 4,519.8 3,902.2

Total capital 5,371.3 4,670.2

Accumulated other comprehensive income (71.7) (337.3)

Total capital excluding accumulated other comprehensive income $5,299.6 $4,332.9

Debt-to-total capital 16% 16%

Debt-to-total capital, excluding accumulated other comprehensive income 16% 18%


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, 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 achieve an upgrade of 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) our ability to continue to recruit and retain productive agents and distribution partners and 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 returns on and 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, 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.

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..

Presentation to Association of Insurance Financial Analysts...

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