William J. Shea has unexpectedly resigned as president and chief executive officer of Conseco Inc.[@@]

Shea assumed command of the company in November 2002 as it was about to declare bankruptcy.

Although little reason was given for Shea’s sudden departure, which was announced late yesterday, the company issued a statement praising him for leading the company to two straight profitable quarters this year.

During his tenure, Conseco, Mt. Carmel, Ind., reduced its debt from a reported $7 billion to a little over $2 billion and emerged from bankruptcy.

The company’s board of directors appointed William S. Kirsch to succeed Shea as president and CEO.

As a managing partner of Kirkland & Ellis, a law firm in Chicago,

Kirsch had been Conseco’s principal outside counsel throughout its Chapter 11 reorganization. He assumed the duties of executive vice president, general counsel and secretary for Conseco in September 2003.

The board also named R. Glenn Hilliard as executive chairman of the company. Hilliard, a former CEO of ING Americas, had served as non-executive chairman of Conseco since September 2003.

The company says Hilliard will work with Kirsch to develop and execute a strategic plan for Conseco.

“As Conseco looks forward to its next stage of growth, Bill Shea and the board agree that Bill Kirsch is ideally suited to successfully build a strong enterprise, drive long-term growth, achieve our goal of sustained operational excellence and create value for our shareholders,” Hilliard said in a statement. “Bill Kirsch has been a valued adviser to Conseco, and we are extremely pleased to have him take the helm.

“Bill Shea provided strong leadership for Conseco through a difficult transitional period, and the board greatly appreciates the contributions he made in positioning Conseco for future growth,” Hilliard continued. “His leadership was critical in restoring Conseco to profitability, completing our recapitalization and earning ratings upgrades.”

But industry analyst Andrew S. Kligerman, UBS Warburg LLC, New York, observed that Hilliard declined to say whether Shea had quit on his own or was fired.

In a statement, Shea said only that “this was a natural time for me to move on.”

The development came just weeks after the company announced Shea would stand for reelection to the company board at a meeting of shareholders set for Aug. 24. In its statement about his departure, it specifically said he had resigned from the board and would not stand as a candidate for reelection.

The company acknowledged that Shea’s severance package would have an impact on its net income.

It adjusted its financial guidance for the second half of this year to reflect Shea’s $10 million severance package. Conseco now forecasts its net income for the year in the range of $200 million to $210 million, rather than the $210 million to $220 million it had estimated in a report on Aug. 4.

Kligerman of UBS Warburg says he was “surprised and concerned” by Shea’s sudden departure.

“We thought Shea would lead Conseco for 2 more years or at least until it achieved its ?A’ A.M. Best ratings goal,” Kligerman says. “If not, we would have expected Conseco to have forewarned investors during its spring equity offering road show.”

The analyst also points out that the company did not state how long it had been looking for Shea’s replacement, although it mentioned that it had looked at 17 candidates before picking Kirsch. In a teleconference call with analysts, Hilliard declined to comment on whether Shea’s departure was voluntary, Kligerman notes.

Kligerman also said he was uneasy about Kirsch’s “relatively limited” experience with insurance. He noted, however, that Hilliard has over 30 years of insurance industry and executive experience.