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UPDATE: Conseco shares jump after report

August 11, 2008

Stock in Conseco Inc. moved up more than 8 percent today after the Carmel-based insurer announced that it would take a $1.2 billion hit to split off its troubled long-term care business as an independent entity owned by policyholders.

The shares traded near $8.32 per share.

Conseco Senior Health Insurance Co. will be transferred to an independent trust based in Pennsylvania. The deal, which requires approval by Pennsylvania insurance regulators, is expected to take place in the fourth quarter.

The company will shift all Conseco Senior stock and its $2.9 billion in assets to the trust. Conseco also will give the new entity $175 million in capital. Following the transfer, Conseco Senior will be re-named Senior Health Insurance Co. of Pennsylvania and be run by John Wells, Conseco's point man on long-term care insurance.

Conseco said this morning it expects to record accounting charges totaling $1.2 billion, which would include Conseco Senior's equity, deferred tax assets and Conseco's capital contribution. About $500 million of that charge will be recorded in Conseco's second-quarter results, which it expects to release tomorrow before markets open.

Conseco's profits have been hammered the last 18 months by losses in long-term care policies it no longer sells. Those policies were mostly written by other insurers acquired by Conseco during its 1990s acquisition spree.

"This unique structure aligns the interests of the independent trust, management and regulators with the policyholders," Conseco CEO Jim Prieur said in a statement. "It is a balanced solution for all of Conseco's constituents, including [Conseco Senior's] approximately 142,000 long-term care policyholders, and provides Conseco greater flexibility in serving its 4 million other policyholders."

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