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Conseco Finance Reorganization Plan Takes Effect

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NU Online News Service, Sept. 16, 2003, 6:30 p.m. EDT – Conseco Inc., Carmel, Ind., says the reorganization plan for its former Conseco Finance consumer finance subsidiary took effect at 4 p.m. Monday.

The U.S. bankruptcy court in Chicago also has approved a reorganization plan for the parent company.

Conseco has been reorganizing itself as a company that will sell life insurance, annuities and supplemental health insurance products. The company is about to emerge from Chapter 11 reorganization proceedings with $3.9 billion in capital, including $1.3 billion in bank debt, $860 million in preferred stock and about $1.7 billion in equity.

Moody’s Investors Service, New York, has reacted by placing the B3 insurance financial strength ratings of most Conseco Inc. insurance subsidiaries on review for possible upgrade.

The parent company will have to “execute its strategy on a consistent basis” to meet its obligations and avoid violating bank covenants dealing with its financial condition, but the quality of its investment portfolio has improved and annuity surrender activity has declined, Moody’s says.

“Moody’s also recognizes the company’s significant cost-cutting efforts and management’s decision to concentrate on selling less capital-intensive insurance products, which should help to improve Conseco’s current capital position,” the rating agency says.

Standard & Poor’s Ratings Services, New York, says it will keep the B+ financial strength ratings of the six Conseco insurance subsidiaries that it rates on CreditWatch with positive implications.

Both Moody’s and S&P say the planned sale of Conseco’s share of the General Motors Building, a famous building in New York, could help improve the financial condition of Conseco and its subsidiaries.

Moody’s reaffirmed the B3 rating of the Conseco Senior Health Insurance Company unit with a developing outlook, rather than putting that unit on review for a possible upgrade, because of concerns that the unit could be especially vulnerable to problems with the sale of the GM Building. Conseco Senior Health is a Conseco unit that has a particularly large investment in the building, Moody’s says.