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Conseco Agrees To Reinsurance Deal

June 26, 2009 (FinancialWire) — Conseco, Inc. (NYSE: CNO) has reached an agreement under which two insurance companies in its insurance unit will coinsure, with an effective date of January 1, 2009, around 104,000 non-core life insurance policies with Wilton Reassurance Co.

In the transaction, Wilton Re will pay a ceding commission of around $57.5 million and 100% coinsure and administer these policies, according to Conseco.

The Conseco companies will transfer to Wilton Re around $409 million in cash and policy loans and $466 million of statutory policy and other reserves. The transaction is scheduled to be completed in the third quarter of 2009.

Conseco CEO Jim Prieur said, “Completing this step is expected to increase Conseco’s consolidated risk-based capital ratio by eight percentage points, along with increasing statutory capital.”

Most of the policies involved in the transaction were issued by companies that were later acquired by Conseco. Around 70% of the policies being coinsured are from Washington National Insurance, with the remainder coinsured from Conseco Insurance.

Conseco said it expects to record an increase to its deferred tax valuation allowance of around $18 million in the third quarter of 2009 as a result of the transaction. Conseco also expects to record a deferred gain of around $25 million.

The gain will be recognized over the remaining life of the block. In the first quarter of 2009, the block being coinsured generated GAAP after-tax earnings before overhead of around $2.5 million.

Carmel, Indiana-based Conseco’s insurance companies offer Medicare supplement, long-term care, cancer, heart/stroke and accident policies. They also offer annuities and life insurance products.

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