Conseco Inc. says it will reinsure about 104,000 of life insurance policies issued by 2 of its Conseco Insurance Group units.

The policies will be 100% reinsured and administered by Wilton Reassurance Company, Plymouth, Minn., with an effective date of January 1, 2009, says Conseco, Carmel, Ind.

“Completing this step is expected to increase Conseco’s consolidated risk-based capital ratio by 8 percentage points, along with increasing statutory capital,” said Conseco CEO Jim Prieur. “In addition, this transaction will further simplify our administrative operations as we focus on our core insurance businesses.”

As a result of the transaction, Conseco expects to record an increase to its deferred tax valuation allowance of about $18 million in the third quarter of 2009. The company also expects to record a deferred gain of about $25 million. Under generally accepted accounting principles, this 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, Conseco states.

Under the deal, Wilton Re will pay a ceding commission of around $57.5 million and 100% coinsure and administer these policies, most of which were issued by companies that had been acquired by Conseco. About 70% of the policies being coinsured are from Washington National Insurance Company and the remainder are from Conseco Insurance Company.

Conseco says it will transfer to Wilton Re around $409 million in cash and policy loans and $466 million of statutory policy and other reserves as part of the deal.

It expects the transaction to be completed in the third quarter of 2009 if it is approved by insurance regulators in Illinois and Wisconsin.