A Midwestern insurer says it wants to place responsibility for a long term care insurance subsidiary in the hands of a trust.

Conseco Inc., Carmel, Ind., says it will be applying to Pennsylvania Insurance Department regulators for permission to transfer Conseco Senior Health Insurance Company, and about $2.9 billion in Conseco Senior Health assets, to a new entity, the Senior Health Care Oversight Trust.

The trust would be an independent trust that would run the Conseco Senior Health operations for the exclusive benefit of Conseco Senior Health’s long term care insurance policyholders, Conseco says.

Conseco hopes to complete the deal by Dec. 31.

In addition to transferring financial assets, liabilities and business assets to the trust, Conseco would contribute $175 million in additional capital to Conseco Senior Health and the independent trust, the company says, giving Conseco Senior Health access to a total of about $300 million in adjusted statutory capital.

Conseco Senior Health Insurance Company would become Senior Health Insurance Company of Pennsylvania.

John Wells, president of Conseco Senior Health, would be president of Senior Health Insurance, Conseco says.

Before Wells began working for Conseco in 2004, he was an executive at Mutual of Omaha Insurance Company, Omaha, Neb. He holds the Certified Public Accountant and Chartered Life Underwriter professional designations.

Conseco plans to record about $504 million in accounting charges related to the deal in the second quarter, and $654 million in additional charges by the time it completes the deal, the company says.

The deal should be good both for the 142,000 Conseco Senior Health policyholders and Conseco’s 4 million other policyholders, says Conseco Chief Executive James Prieur.

Conseco has contributed about $915 million in capital to Conseco Senior Health since it acquired the companies that make up that subsidiary 11 years ago, Prieuer says.

“Our efforts have produced significant improvements in performance and customer service over the past four quarters,” Prieur says.

that its board wants to stop making capital contributions to Conseco Senior Health, and Conseco shareholders are pressing it to improve its performance.

Moreover, weakness at Conseco Senior Health has contributed to Conseco having relatively weak financial strength ratings, and that limits the ability of Conseco and Conseco subsidiaries, other than Conseco Senior Health, to compete with higher-rated insurers, Conseco says.

If Conseco will be cutting ties to Conseco Senior Health by transferring it to a trust, “Conseco should be able to justify making the capital contribution to the domiciliary regulators of those [Conseco-owned] operating companies that may be called upon to fund the capital contribution,” Conseco says.

Once Conseco Senior Health splits from Conseco, Conseco Senior Health “will be solely focused on its LTC business and able to operate without regard to Conseco insurance holding company considerations,” Conseco says. “In addition, the separation better positions [Conseco Senior Health] to demonstrate its need for rate increases to relevant state insurance regulators, as [Conseco Senior Health] will not have returns to shareholders as part of its expectations.”

Conseco notes that the application it files in Pennsylvania will be subject to a comment period that could last until the end of September.

The Chicago office of Fitch Ratings says the proposed deal will have no immediate effect on the current ratings it has assigned to Conseco and its affiliates.

“Fitch believes that the proposed [Conseco Senior Health] spin-off will have a positive impact on Conseco’s risk profile,” Fitch says in a comment. “The impact on Conseco’s ratings and Outlook status will be based the company’s ability to complete the [Conseco Senior Health] spinoff, the final terms of the [Conseco Senior Health] spinoff, and progress towards improving operating performance in the company’s other business lines.”