Edgar Filing: CONSECO INC

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 23, 2004

NO. 333-112312

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1

FORM S-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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CONSECO, INC.
(Exact name of registrant as specified in its charter)

DELAWARE 6321 75-3108137
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)

11825 N. PENNSYLVANIA STREET
CARMEL, INDIANA 46032
(317) 817-6100
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)

EUGENE M. BULLIS, EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
WILLIAM S. KIRSCH, EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
CONSECO, INC.
11825 N. PENNSYLVANIA STREET
CARMEL, INDIANA 46032
(317) 817-6100
(Name, address, including zip code, and telephone number, including area code,
of agent for service)

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COPIES OF ALL COMMUNICATIONS, INCLUDING COMMUNICATIONS SENT TO AGENT FOR
SERVICE, SHOULD BE SENT TO:

JAMES S. ROWE VINCENT J. PISANO WILLIAM J. WHELAN, III
KIRKLAND & ELLIS LLP KIRKLAND & ELLIS LLP ANDREW J. PITTS
200 EAST RANDOLPH DRIVE CITIGROUP CENTER CRAVATH, SWAINE & MOORE LLP
CHICAGO, ILLINOIS 60601 153 EAST 53RD STREET WORLDWIDE PLAZA
(312) 861-2000 NEW YORK, NEW YORK 10022 825 EIGHTH AVENUE
(212) 446-4800 NEW YORK, NEW YORK 10019
(212) 474-1000

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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EXPLANATORY NOTES

This Registration Statement contains alternate sections, paragraphs,
sentences or phrases which will be contained in two forms of prospectus covered
in this Registration Statement, one to be used in connection with an offering of
shares of our common stock and the other to be used in connection with a
concurrent offering of shares of our class B mandatorily convertible preferred
stock. Those sections, paragraphs, sentences or phrases that will appear only in
the common stock prospectus are marked at the beginning of such section,
paragraph, sentence or phrase by the symbol [C] and those that will appear only
in the class B mandatorily convertible preferred stock prospectus are designated
with the symbol [P]. Unless so indicated with a [C] or [P], the language therein
will appear in both forms of prospectus.

THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY
PROSPECTUS IS NOT AN OFFER TO SELL NOR DOES IT SEEK AN OFFER TO BUY THESE
SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.

[C] Subject to Completion, Dated March 23, 2004

(CONSECO LOGO)
Shares

CONSECO, INC.

Common Stock
----------------------

We are offering shares of our common stock. Concurrently with this
offering, we are offering shares of our % class B mandatorily convertible
preferred stock. The closing of this offering is not conditioned upon the
closing of the class B preferred stock offering.

Our common stock is listed on the New York Stock Exchange under the symbol
"CNO." The last reported sale price of our common stock on March 22, 2004 was
$22.32 per share.

INVESTING IN OUR SECURITIES INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 14 TO READ ABOUT FACTORS YOU SHOULD CONSIDER BEFORE BUYING OUR SECURITIES.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
----------------------

Per Share Total
--------- -----

Initial price to public..................................... $ $
Underwriting discount....................................... $ $
Proceeds, before expenses, to Conseco....................... $ $

To the extent that the underwriters sell more than shares of common
stock, the underwriters have the option to purchase up to an additional
shares from us at the initial price to public less the underwriting discount.
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The underwriters expect to deliver the shares of common stock to purchasers
on , 2004.
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GOLDMAN, SACHS & CO. MORGAN STANLEY

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BANC OF AMERICA SECURITIES LLC
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CREDIT SUISSE FIRST BOSTON

DEUTSCHE BANK SECURITIES

JPMORGAN

LAZARD

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Prospectus dated , 2004.

THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES NOR DOES IT SEEK AN OFFER TO
BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT
PERMITTED.

[P] Subject to Completion, Dated March 23, 2004

(CONSECO LOGO)
Shares

CONSECO, INC.

% Mandatorily Convertible Preferred Stock, Class B
(liquidation preference $ per share)
----------------------

We are offering shares of our % mandatorily convertible preferred
stock, class B. Concurrently with this offering, we are offering shares of
our common stock. The closing of this offering is conditioned upon the closing
of the common stock offering.

Dividends on the shares of class B preferred stock will be cumulative from
, 2004 and will be payable , , and
of each year, commencing on , 2004. Accumulated unpaid
dividends will cumulate dividends at the annual rate of %. The dividend
rate is $ per share per annum.

On the mandatory conversion date, each share of class B preferred stock
will automatically convert into shares of our common stock based on the
conversion rates described in this prospectus. Our common stock is listed on the
New York Stock Exchange under the symbol "CNO." The last reported sale price of
our common stock on March 22, 2004 was $22.32 per share.

Prior to this offering there has been no public market for the class B
preferred stock. We intend to list the class B preferred stock on the New York
Stock Exchange under the symbol "CNO PrB."

INVESTING IN OUR SECURITIES INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 14 TO READ ABOUT FACTORS YOU SHOULD CONSIDER BEFORE BUYING OUR SECURITIES.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
----------------------

Per Share Total
--------- -----

Initial price to public..................................... $ $
Underwriting discount....................................... $ $
Proceeds, before expenses, to Conseco....................... $ $

To the extent that the underwriters sell more than shares of class B
preferred stock, the underwriters have the option to purchase up to an
additional shares of class B preferred stock from us at the initial price
to public less the underwriting discount.

------------------

The underwriters expect to deliver the shares of class B preferred stock to
purchasers on , 2004.

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GOLDMAN, SACHS & CO. MORGAN STANLEY

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JPMORGAN
------------------

BANC OF AMERICA SECURITIES LLC

CREDIT SUISSE FIRST BOSTON

LAZARD

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Prospectus dated , 2004.

TABLE OF CONTENTS

PAGE
----

PROSPECTUS SUMMARY..................... 1
RISK FACTORS........................... 14
OUR RECENT EMERGENCE FROM BANKRUPTCY... 36
[P] RATIOS OF EARNINGS TO FIXED CHARGES
AND EARNINGS TO FIXED CHARGES,
PREFERRED STOCK DIVIDENDS, AND
DISTRIBUTIONS ON COMPANY-OBLIGATED
MANDATORILY REDEEMABLE PREFERRED
SECURITIES OF SUBSIDIARY TRUSTS...... 38
USE OF PROCEEDS........................ 40
PRICE RANGE OF OUR COMMON STOCK........ 40
DIVIDEND POLICY........................ 41
CAPITALIZATION......................... 42
SELECTED CONSOLIDATED FINANCIAL AND
OPERATING DATA....................... 43
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CONSOLIDATED FINANCIAL CONDITION AND
RESULTS OF OPERATIONS................ 45

PAGE
----

BUSINESS............................... 98
MANAGEMENT............................. 124
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS......................... 133
PRINCIPAL STOCKHOLDERS................. 134
[P] DESCRIPTION OF THE MANDATORILY
CONVERTIBLE PREFERRED STOCK.......... 135
[P] U.S. FEDERAL INCOME TAX
CONSIDERATIONS....................... 147
DESCRIPTION OF CAPITAL STOCK........... 153
SHARES ELIGIBLE FOR FUTURE SALE........ 161
[C] UNDERWRITING....................... 164
[P] UNDERWRITING....................... 167
LEGAL MATTERS.......................... 170
EXPERTS................................ 170
WHERE YOU CAN FIND MORE INFORMATION.... 170
INDEX TO FINANCIAL STATEMENTS.......... F-1

PROSPECTUS SUMMARY

OUR BUSINESS

We are a holding company for a group of insurance companies operating
throughout the United States that develop, market and administer supplemental
health insurance, annuity, individual life insurance and other insurance
products. We focus on serving the senior and middle-income markets, which we
believe are attractive, high growth markets. We sell our products through three
distribution channels: career agents, professional independent producers and
direct marketing. As of December 31, 2003, we had $2.8 billion of shareholders'
equity and $29.9 billion of assets. For the four months ended December 31, 2003,
we had $1,505.5 million of revenues and $96.3 million of net income.

We conduct our business operations through two primary operating segments,
based primarily on method of product distribution, and a third segment comprised
of businesses in run-off. Prior to September 30, 2003, we conducted our
insurance operations through one segment. In the fourth quarter of 2003, we
implemented changes contemplated in our restructuring plan to conduct our
business through the following segments:

- BANKERS LIFE, which consists of the businesses of Bankers Life & Casualty
Company and Colonial Penn Life Insurance Company. Bankers Life & Casualty
markets and distributes Medicare supplement insurance, life insurance,
long-term care insurance and fixed annuities to the senior market through
approximately 4,000 exclusive career agents and sales managers. Colonial
Penn markets graded benefit and simplified issue life insurance directly
to consumers through television advertising, direct mail, the internet
and telemarketing. Both Bankers Life & Casualty and Colonial Penn market
their products under their own brand names. See "Business -- Products --
Life -- Traditional Life" for an explanation of graded benefit and
simplified issue insurance.

- CONSECO INSURANCE GROUP, which markets and distributes specified disease
insurance, Medicare supplement insurance, and certain life and annuity
products to the senior and middle-income markets through over 500
independent marketing organizations that represent over 9,100 producing
independent agents. This segment markets its products under the "Conseco"
brand.

- OTHER BUSINESS IN RUN-OFF, which includes blocks of business that we no
longer market or underwrite and are managed separately from our other
businesses. This segment consists of long-term care insurance sold
through independent agents and major medical insurance.

We also have a corporate segment, which consists of holding company
activities and certain non-insurance company businesses that are not related to
our operating segments.

The following table sets forth information on our segments for the four
months ended December 31, 2003 (dollars in millions):

COLLECTED PREMIUMS
--------------------- INCOME BEFORE
$ PERCENTAGE INCOME TAXES
-------- ---------- -------------

Bankers Life................................... $ 720.3 54.8% $ 85.5
Conseco Insurance Group........................ 421.6 32.0 94.3
Other Business In Run-off...................... 173.9 13.2 12.8
Corporate...................................... -- -- (43.1)
-------- ----- ------
Total.......................................... $1,315.8 100.0% $149.5
======== ===== ======

OUR RESTRUCTURING

We are in the process of significantly restructuring our business through a
process which included the bankruptcy of our predecessor company and our
subsequent emergence from bankruptcy on September 10, 2003. None of our
insurance company subsidiaries were a part of the bankruptcy petitions, although
the bankruptcy did cause disruptions to our insurance operations.

We have achieved several critical financial goals as part of our
restructuring, including:

- reducing our debt and other obligations by $5.7 billion,

- disposing of the assets of our predecessor's finance business,

- selling non-core operating subsidiaries such as Conseco Variable
Insurance Company,

- improving the risk profile of our investment portfolio, and

- improving the financial strength of our insurance companies as measured
by risk-based capital.

We have also recruited and integrated new members into our management team,
and we have a new board of directors. Since our emergence from bankruptcy,
management has continued to take steps in an effort to improve our profitability
and further streamline our business. For example, in September 2003, we sold our
stake in the General Motors building in New York City, which increased the
statutory capital and surplus of our insurance subsidiaries by over $350
million.

We have also undertaken several strategic initiatives to streamline our
business lines, focusing on those businesses we believe are most profitable.
These initiatives include emphasizing the sales of Medicare supplement and
specified disease products and de-emphasizing sales of certain annuity and life
products, ceasing sales of long-term care products in Conseco Insurance Group
and attempting to re-price certain lines of business through significant rate
increases.

The next stage of our restructuring, which includes the offering of our
common stock and the offering of the class B preferred stock, is a
recapitalization of our current balance sheet. The completion of the offering of
our class B preferred stock is conditioned upon the completion of the offering
of our common stock. The completion of the offering of our common stock is not
conditioned upon the completion of the offering of our class B preferred stock.
Our current capitalization is presented below:

AS OF
DECEMBER 31, 2003
-----------------
(IN MILLIONS)

Notes payable............................................... $1,300.0
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Equity:
Preferred stock, par value $0.01 per share, 265,000,000
authorized; 34,386,740 shares of class A senior
cumulative convertible exchangeable preferred stock
issued and outstanding................................. 887.5
Common stock, par value $0.01 per share, 8,000,000,000
authorized; 100,115,772 issued and outstanding......... 1.0
Additional paid-in-capital................................ 1,641.9
Accumulated other comprehensive income.................... 218.7
Retained earnings......................................... 68.5
--------
Total equity........................................... 2,817.6
--------
Total capitalization................................. $4,117.6
========

Our recapitalization has two components:

- REDEMPTION OF OUR EXISTING PREFERRED STOCK. We plan to use a portion of
the proceeds of the offerings to redeem all of our outstanding class A
senior cumulative convertible exchangeable preferred stock.

- REDUCTION AND REPLACEMENT OR RENEGOTIATION OF OUR EXISTING BANK CREDIT
FACILITY. We intend to reduce our overall senior indebtedness, reduce
our borrowing costs and improve the terms and conditions of our existing
bank credit facility. We believe that we can achieve these goals by using
a portion of the proceeds of the offerings of our common stock and our
class B preferred stock to

retire a portion of our existing debt and/or by renegotiating the terms
of our existing bank credit facility.

By redeeming all the class A preferred stock and reducing our overall
indebtedness, our goals are to improve the financial flexibility of our top-tier
holding company and improve the financial strength ratings of our insurance
companies. The completion of the common stock offering is not conditioned upon
completion of the class B preferred stock offering, and if we complete the
common stock offering but not the class B preferred stock offering, we will have
fewer proceeds to apply in this regard.

COMPETITIVE STRENGTHS

We believe our competitive strengths have enabled and will continue to
enable us to capitalize on the opportunities in our target markets. These
strengths include:

- our position as a leading national provider of life and health insurance
products to the senior market,

- our broad-based distribution networks,

- our strong, nationally recognized brand names, and

- our experienced management with a proven track record.

LEADING NATIONAL PROVIDER OF LIFE AND HEALTH INSURANCE PRODUCTS TO THE
SENIOR MARKET. The Bankers Life segment is one of the leading national
providers of life and health insurance products focused primarily on the senior
market. The career agents and direct distribution channels within Bankers Life
provide a number of products that are important to the financial well-being of
seniors: supplemental health coverage, including Medicare supplement and
long-term care insurance, as well as selected life and annuity products.
According to the most recently published study on the Medicare supplement market
by the Life Insurance Marketing Research Association, we were ranked second in
sales of agent-distributed Medicare supplement insurance based on collected
premiums in 2002. Our approximately 4,000 career agents are trained to cater to
the needs of the senior market. Current demographic trends indicate that the
senior market will continue to grow, and we believe our focus on seniors will
provide us with a significant opportunity to increase our share of this market.

BROAD-BASED DISTRIBUTION NETWORKS. Our broad-based distribution networks
provide us with a number of ways to reach our target markets. Our career agents
and direct distribution channels focus on the senior market. We also have
independent agents who focus on senior market products such as Medicare
supplement insurance. Our independent agents also sell certain of our products
that are specifically designed for the under-age-65 middle-income market. These
products include our specified disease insurance coverage, such as cancer and
heart/stroke products, as well as equity-indexed life insurance and
equity-indexed annuities. Despite the bankruptcy, we have retained the majority
of our career agents, including 80 percent of our top 1,000 career agents. Our
top 1,000 career agents collectively accounted for over 50 percent of Bankers
Life & Casualty's sales during 2003. In 2003, 52 percent of our sales were
through career agents, 45 percent were through independent distributors, and 3
percent were through direct marketing by Colonial Penn.

STRONG, NATIONALLY RECOGNIZED BRAND NAMES. We believe our brands are
widely recognized by our customers and distributors. We believe we have
successfully developed product-focused consumer recognition in our chosen
markets through three distinct brands -- Conseco, Bankers Life & Casualty and
Colonial Penn. We believe our multiple-brand strategy has helped us maintain
sales of certain key products, such as Medicare supplement, and retain business
through our reorganization. We continue to raise the profile of our brands
through our "Step Up" campaign and several national and local community
sponsorship arrangements, including the Indy Racing League and the Conseco
Fieldhouse in Indianapolis, home to the Indiana Pacers NBA basketball team. In
addition, we continue to raise the profile of our Bankers Life brand through our
continued relationship with the Alzheimer's Association and International
Longevity Center as well as a renewed relationship with Paul Harvey, who for
many years was the spokesperson for Bankers Life & Casualty. We believe that our
brands give us a key competitive advantage, allowing us to continue to build and
maintain strong relationships with our customers and distributors.

EXPERIENCED MANAGEMENT WITH A PROVEN TRACK RECORD. Our strong, experienced
senior management team has led us through our restructuring to date. Our
management is led by our President and Chief Executive Officer, William J. Shea,
who has over 25 years of financial services experience and joined Conseco in
2001. Mr. Shea has served as Vice Chairman and Chief Financial Officer of
BankBoston Corporation and as Partner and Vice Chairman of
PricewaterhouseCoopers LLP, formerly Coopers & Lybrand LLP. In addition to our
experienced senior management team, our Non-Executive Chairman, R. Glenn
Hilliard, has over 35 years of insurance experience, having served most recently
as Chairman and CEO of ING Americas. Mr. Hilliard joined our board in September
2003. Our management's knowledge and experience have helped us maintain our
business operations through the restructuring and are expected to provide us
with opportunities to further enhance our business in the future.

SUMMARY RISK FACTORS

You should carefully consider the following important risks:

- Our recent bankruptcy and legal proceedings that arose in the context of
our bankruptcy may continue to disrupt our operations and hamper our
efforts to restore confidence in the "Conseco" brand, which may
negatively impact our financial results and liquidity.

- An important competitive factor for our insurance subsidiaries is the
financial strength ratings they receive from nationally recognized rating
organizations. Most of our competitors have higher financial strength
ratings than we do and we believe it is critical for us to improve our
ratings to be competitive. If we are not able to improve and maintain the
financial strength ratings of our insurance subsidiaries, we may
experience lower sales, increased agent attrition and increased
policyholder lapses and redemptions.

- Despite our recent emergence from bankruptcy, we continue to have a
substantial amount of indebtedness. If we fail to meet our repayment
obligations or to meet or maintain various covenants and financial ratios
under our senior credit facility, our lenders are entitled to accelerate
the repayment of these loans. If the loans are accelerated and we do not
have sufficient liquidity to repay them, we may be forced to seek
bankruptcy protection again. In addition, our senior credit facility may
restrict our ability to engage in activities that may be beneficial to
our future growth and profitability.

- We are an insurance holding company with no business operations of our
own. As a result, we depend on our subsidiaries for cash to meet our
obligations. The ability of our insurance subsidiaries to distribute cash
to us is subject to state insurance regulations. Accordingly, our ability
to meet our obligations [P], including our obligation to pay dividends on
the class B preferred stock, may be constrained by our subsidiaries'
ability under state insurance regulations to distribute cash to us.

- We set premium rates on our insurance policies based on facts and
circumstances at the time we issue the policies and on assumptions about
numerous variables. When we set premium rates, we cannot predict with
certainty what the actual claims on our policies will be. This is
particularly true in the context of setting rates on our long-term care
policies, for which we have relatively limited historical claims
experience. If our premium rates are not adequate or if we are unable to
obtain regulatory approval to increase our premium rates, our results of
operations will be negatively affected.

Please see "Risk Factors" for information on these and other risks related
to our business and this offering.

STRATEGY

Our objective is to generate attractive returns on equity while growing a
stable, well capitalized insurance business focused on serving the middle-income
and senior markets. We intend to achieve these objectives by executing the
following strategies:

- focus on the senior and middle-income markets,

- continue to improve our financial condition,

- use our distribution network to strengthen market access, and

- continue to improve our operational efficiency.

FOCUS ON THE SENIOR AND MIDDLE-INCOME MARKETS. We are committed to serving
the senior and middle-income markets in the United States. Our customer base
includes approximately 3.8 million policyholders. According to the January 2004
issue of "Journal of Financial Service Professionals," the population of the
United States age 50 or older is projected to increase by approximately 27
percent from 2004 to 2014. We have taken several steps in recent periods to
sharpen our focus on both markets by strengthening our distribution, reducing
our sales of non-core life and annuity products and introducing new and
innovative supplemental health and retirement savings products targeting senior
and middle-income customers.

CONTINUE TO IMPROVE OUR FINANCIAL CONDITION. We seek to continue to
improve our financial condition by reducing debt at the holding company,
maintaining adequate risk-based capital in our operating subsidiaries and
focusing on marketing profitable products. We took a series of actions in 2002
and 2003 to enhance our financial condition. In addition to reducing our debt
and other obligations at the holding company by $5.7 billion through the
bankruptcy, we improved the risk profile of our investment portfolio and the
financial strength of our insurance companies as measured by risk-based capital.
Our fixed maturity investment portfolio is primarily comprised of government,
investment-grade and structured securities. Below-investment grade securities
comprised 3.9 percent of our fixed maturity portfolio as of December 31, 2003,
down from 6.5 percent as of December 31, 2002. Our insurance companies'
consolidated company action level risk-based capital ratio improved from 166
percent at December 31, 2002 to 287 percent at December 31, 2003. The risk-based
capital ratio is one of the tools insurance regulators use to determine the
adequacy of an insurance company's capital. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Statutory
Information" for further information. We intend to continue to manage our
business with a view to improving our capitalization, financial strength and
ratings.

USE OUR DISTRIBUTION NETWORK TO STRENGTHEN MARKET ACCESS. We seek to use
our broad distribution channels to meet our customers' needs and enhance our
market presence. We believe we have created appropriate incentives focused on
persistent and profitable production, as well as improved monitoring and
tracking of production and persistency levels by distributor. We promote
cross-selling of life, supplemental health and retirement savings products in
certain markets to capture a greater share of our policyholders' coverage needs.
In addition, we utilize our independent producers and career agent network as
important sources of information regarding the evolving needs of our customer
base. As a result, our products are tailored to include the specific features
that we believe are most important to our customers. If we are successful in
raising our ratings, we expect to be able to add new agents to our career and
independent agency distribution channels, which we believe will result in
increased sales of our insurance products.

CONTINUE TO IMPROVE OUR OPERATIONAL EFFICIENCY. We have undertaken several
initiatives to improve our operational efficiency and lower costs. We have
simplified our organizational structure by divesting certain businesses and
consolidating several legal entities. We are in the process of integrating
policy administration and claims management systems from previous acquisitions
to lower our operational costs in our Conseco Insurance Group segment. We intend
to reduce the number of policy administration and related support systems by 50
percent, from 33 systems in April 2003 to 16 systems by the end of 2004. We have
also reduced our headcount over the past two years and have focused on improving
the productivity of our employees, career agents and independent distributors.
We intend to continue to work to improve our

operational efficiency by rationalizing expenses and systems in an effort to
enhance our service standards and profitability.

We also intend to consider from time to time, as we have in the past,
various strategic alternatives to enhance shareholder value, including but not
limited to acquisitions, dispositions, business combinations, joint ventures and
strategic alliances. We do not currently have any definitive plans to enter into
any such transactions.

CORPORATE INFORMATION

We are a corporation organized under the laws of the State of Delaware, and
the successor to Conseco, Inc., an Indiana corporation. We emerged from
bankruptcy on September 10, 2003. Our principal executive offices are located at
11825 N. Pennsylvania Street, Carmel, Indiana 46032, and our telephone number at
this location is (317) 817-6100. Our website is www.conseco.com. Information on
our website should not be construed to be part of this prospectus.

Our common stock is listed on the New York Stock Exchange under the symbol
"CNO," and our series A warrants are listed on the New York Stock Exchange under
the symbol "CNOWS." Our class A preferred stock currently trades on the
Over-the-Counter Bulletin Board under the symbol "CNSJP."

[C] THE OFFERING

Issuer........................ Conseco, Inc.

Common stock offered.......... shares

Common stock to be outstanding
after this offering........... shares if the underwriters do not
exercise the option to purchase additional
shares.

Over-allotment option......... shares

Initial price................. $ per share

Use of proceeds............... We intend to use the net proceeds of this
offering, together with the net proceeds of the
concurrent class B preferred stock offering, to
redeem all of our outstanding class A preferred
stock, to repay indebtedness under our existing
senior credit facility, to contribute capital
to our insurance subsidiaries and/or for
general corporate purposes. The completion of
the common stock offering is not conditioned
upon completion of the class B preferred stock
offering.

NYSE symbol................... CNO

The number of shares of our common stock shown above to be outstanding after
this offering is based on 100,115,772 shares, the number of shares of our common
stock outstanding as of March 9, 2004, and excludes:

- 6 million shares of common stock issuable upon the exercise of outstanding
series A warrants at an exercise price of $27.60 per share;

- 43.6 million shares of common stock issuable upon the conversion of
outstanding class A preferred stock at a conversion price of $20.35 per
share, which shares are not convertible into common stock until September
30, 2005, and which we intend to redeem with the proceeds of this offering
and the concurrent class B preferred stock offering;

- the shares of common stock issuable upon the conversion of the class B
preferred stock expected to be issued in the concurrent offering;

- 1 million shares of common stock issuable upon the exercise of outstanding
options at a weighted average exercise price per share of $18.01;

- an aggregate of approximately 2 million shares of unvested restricted stock
granted to our directors and officers;

- approximately 3 million shares of common stock issuable upon the exercise of
options to purchase common stock under our long-term equity incentive plan
that we currently intend to grant to our officers on or shortly after the
date of this prospectus at an exercise price equal to the fair market value
on the date of grant; and

- approximately 4 million shares of common stock available for other future
grants under our long-term equity incentive plan.

[P] THE OFFERING

Issuer........................ Conseco, Inc.

Securities offered............ shares of % class B
mandatorily convertible preferred stock, which
we call the class B preferred stock.

Initial price................. $ for each share of class B preferred
stock.

Option to purchase additional
class B preferred stock....... The underwriters have the option to purchase up
to additional shares of class B
preferred stock from us at the public offering
price, less underwriting discounts and
commissions, within 30 days from the date of
this prospectus. If the underwriters exercise
their option to purchase additional shares of
class B preferred stock in full, we will have
million shares of class B preferred
stock outstanding.

Dividends..................... $ per year for each share of class B
preferred stock. Dividends will be cumulative
from the date of issuance, and to the extent
that assets are legally available to pay
dividends and such payments will not violate
the agreement that governs our senior credit
facility, we will pay dividends in cash on each
dividend payment date. Accumulated unpaid
dividends will cumulate dividends at the annual
rate of %. The dividend payable on
the first dividend payment date is $ ,
and on each subsequent dividend payment date
will be $ .

Dividend payment dates........ , , and
of each year, commencing on
, 2004.

Redemption.................... The class B preferred stock will not be
redeemable.

Mandatory conversion date..... , , which we call the
mandatory conversion date.

Automatic conversion.......... On the mandatory conversion date, each share of
class B preferred stock will automatically
convert into shares of our common stock, based
on the conversion rate described below.

The holders of the class B preferred stock on
the mandatory conversion date will have the
right to receive the cash dividends due on such
date, including any accrued and unpaid
dividends on the shares of class B preferred
stock as of the mandatory conversion date,
whether or not declared prior to such date,
provided that we have legally available assets
for the payment of cash dividends at such time
and such payments will not violate the
agreement that governs our senior credit
facility. If we are unable to pay any or all
accumulated dividends in cash on the mandatory
conversion date, then we will deliver to the
holders of the class B preferred stock shares
of our common stock in respect of the dividends
which we are unable to pay in cash.

Conversion rate............... The conversion rate for each share of class B
preferred stock will be not more than
shares and not less than
shares of our common stock, depending on the
applicable market value of our common stock on
the mandatory conversion date.

The applicable market value of our common stock
is the arithmetic average of the closing price
per share of our common stock on each of the 20
consecutive trading days ending on the third
trading day immediately preceding the mandatory
conversion date.

The following table illustrates the conversion
rate per share of class B preferred stock:

APPLICABLE MARKET
VALUE ON
MANDATORY CONVERSION
CONVERSION DATE RATE
----------------- --------------

less than or equal to $
between $ and $ to
equal to or greater than
$

Optional conversion........... At any time prior to , and
on or after the day immediately following the
issue date of the class B preferred stock, you
may elect to convert each of your shares of
class B preferred stock at the minimum
conversion rate of shares of our
common stock for each share of class B
preferred stock.

Provisional conversion at our
option........................ If at any time prior to ,
and on or after the day immediately following
the issue date of the class B preferred stock,
the closing price per share of our common stock
exceeds $ , subject to anti-dilution
adjustments, for at least 20 trading days
within a period of 30 consecutive trading days,
we may elect to cause the conversion of all,
but not less than all, of the shares of class B
preferred stock then outstanding at the minimum
conversion rate of shares of our
common stock for each share of class B
preferred stock. We may elect to cause this
conversion only if, in addition to issuing you
such shares of common stock, we pay you in cash
the present value of all the remaining dividend
payments on the class B preferred stock through
and including , , computed
using a discount rate equal to the treasury
yield, as well as any accrued and unpaid
dividends on the shares of class B preferred
stock, whether or not declared, in each case,
out of legally available assets.

Early conversion upon cash
merger........................ If we are involved in a merger prior to the
mandatory conversion date in which at least 30%
of the consideration for our common stock
consists of cash or cash equivalents, which we
refer to as a cash merger, then on the date
specified in our notice to you each holder of
shares of class B preferred stock will have the
right to convert their shares of class B
preferred stock into shares of our common stock
at the conversion rate in effect immediately
prior to the cash merger.

Anti-dilution adjustments..... The formula for determining the conversion rate
on the mandatory conversion date and the number
of shares of our common stock to be delivered
upon an early conversion event may be adjusted
in some circumstances.

Liquidation preference........ $ per share of class B preferred stock,
plus an amount equal to the sum of all accrued
and unpaid dividends.

Voting rights................. Holders of shares of class B preferred stock
will only be entitled to voting rights in
limited circumstances.

Ranking....................... The class B preferred stock will rank:

- junior to all of our and our subsidiaries'
existing and future debt obligations;

- junior to any class or series of our capital
stock the terms of which provide that such
class or series will rank senior to the class
B preferred stock;

- senior to any class or series of our capital
Stock the terms of which provide that such
class or series will rank junior to the class
B preferred stock;

- senior in right of payment to all of our
class A preferred stock and common stock now
outstanding or to be issued in the future;
and

- on a parity with any other class or series of
our capital stock ranking pari passu with the
class B preferred stock as to the payment of
dividends or the distribution of assets upon
distribution, liquidation or winding up.

As of December 31, 2003, we had total
outstanding indebtedness of $1.3 billion, and
our subsidiaries had no outstanding
indebtedness, excluding intercompany balances
and guarantees.

We will not be entitled to issue any class or
series of our capital stock the terms of which
provide that such class or series will rank
senior to the class B preferred stock without
the consent of the holders of at least
two-thirds of the shares of the class B
preferred stock.

As of the date of this prospectus, we are
authorized to issue up to 8,000,000,000 shares
of common stock, $0.01 par value per share. As
of December 31, 2003, 100,115,772 shares of
common stock were issued and outstanding. In
addition, as of such date, there were:

- 6 million shares of common stock issuable
upon the exercise of our outstanding series A
warrants at an exercise price of $27.60 per
share;

- 43.6 million shares of common stock issuable
upon the conversion of our outstanding class
A preferred stock at a conversion price of
$20.35 per share, which shares are not
convertible into common stock until September
30, 2005, and which we intend to redeem with
the proceeds of this offering and the
concurrent common stock offering;

- 1 million shares of common stock issuable
upon the exercise of outstanding options at a
weighted average exercise price per share of
$18.01;

- an aggregate of approximately 2 million
shares of unvested restricted stock granted
to our officers and directors;

- approximately 3 million shares of common
stock issuable upon the exercise of options
to purchase common stock under our long-term
equity incentive plan that we currently
intend to grant to our officers on or shortly
after the date of this prospectus at an
exercise price equal to the fair market value
on the date of grant; and

- approximately 4 million shares of common
stock available for other future grants under
our long-term equity incentive plan.

Use of proceeds............... We intend to use the net proceeds of this
offering, together with the net proceeds of the
concurrent common stock offering, to redeem all
outstanding shares of our class A preferred
stock, to repay indebtedness under our existing
senior credit facility, to contribute capital
to our insurance subsidiaries and/or for
general corporate purposes. The completion of
this offering is conditioned upon completion of
the common stock offering.

NYSE symbol................... We intend to list the class B preferred stock
on the New York Stock Exchange under the symbol
"CNO PrB."

For further information regarding the class B preferred stock, including,
among other things, more complete descriptions of our dividend obligations, the
conversion of the class B preferred stock, and the anti-dilution adjustments and
voting rights applicable to the class B preferred stock, please see "Description
of the Mandatorily Convertible Preferred Stock" beginning on page 135 of this
prospectus.

SUMMARY FINANCIAL DATA

The following table sets forth summary financial data for Conseco, Inc. as
of and for the four months ended December 31, 2003, for the eight months ended
August 31, 2003, and for each of the two years ended December 31, 2002. The data
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and our consolidated financial
statements and related notes included in this prospectus.

Our predecessor and certain of its subsidiaries emerged from Chapter 11
bankruptcy proceedings on September 10, 2003. However, for accounting
convenience, the effective date of the plan was deemed to have occurred on
August 31, 2003. Fresh start accounting has been implemented as of August 31,
2003, and accordingly, we restated all of our assets and liabilities to their
current estimated value, reestablished shareholders' equity at the
reorganization value determined in connection with our Sixth Amended Joint Plan
of Reorganization, and recorded the portion of the reorganization value which
could not be attributed to specific tangible or identified intangible assets as
goodwill. As a result, our financial statements for periods following August 31,
2003 are not comparable with those prepared before that date.

For financial reporting purposes, we refer to Conseco and its subsidiaries
on or prior to August 31, 2003 as the predecessor company and after August 31,
2003 as the successor company.

As part of our chapter 11 reorganization, we sold the assets of our finance
business and exited this line of business effective March 31, 2003. In October
2002, we sold Conseco Variable Insurance Company, our primary writer of variable
annuity products. The results of operations of these former businesses have been
reported as discontinued operations in all periods prior to their sale presented
in the summary financial data. The predecessor's net income (loss) includes
amounts related to the discontinued operations of $16.0 million, $(2,216.8)
million and $(100.6) million for the eight months ended August 31, 2003, and for
the years ended December 31, 2002 and 2001, respectively. The sales of these
businesses further affect the comparability of the summary financial data.

We have derived the summary financial data as of and for the four months
ended December 31, 2003, for the eight months ended August 31, 2003, and for the
years ended December 31, 2002 and 2001 from our audited consolidated financial
statements included in this prospectus.

We have prepared the summary financial data, other than statutory data, in
conformity with generally accepted accounting principles. We have derived the
statutory data from the statements filed by our insurance subsidiaries with
regulatory authorities and have prepared the statutory data in accordance with
statutory accounting practices, which vary in certain respects from generally
accepted accounting principles.

The following is a summary, and in order to more fully understand our
historical consolidated financial data, you should read the following in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and our consolidated financial statements and notes
thereto included in this prospectus.

SUCCESSOR PREDECESSOR
------------ -------------------------------------
AS OF OR FOR
THE FOUR FOR THE EIGHT
MONTHS MONTHS YEAR ENDED
ENDED ENDED DECEMBER 31,
DECEMBER 31, AUGUST 31, ---------------------
2003 2003 2002 2001
------------ ------------- ---- ----
(AMOUNTS IN MILLIONS,
EXCEPT PER SHARE DATA)

STATEMENT OF OPERATIONS DATA(a)
Insurance policy income................................ $ 1,005.8 $ 2,204.3 $ 3,602.3 $3,992.7
Net investment income.................................. 474.6 969.0 1,334.3 1,550.0
Net realized investment gains (losses)................. 11.8 (5.4) (556.3) (340.0)
Total revenues......................................... 1,505.5 3,202.2 4,450.4 5,492.0
Interest expense on corporate notes payable and
investment borrowings (contractual interest: $268.5
for the eight months ended August 31, 2003; and
$345.3 for 2002)..................................... 36.8 202.5 341.9 400.0
Total benefits and expenses............................ 1,356.0 1,030.0 6,082.6 5,735.4
Income (loss) before income taxes, minority interest,
discontinued operations and cumulative effect of
accounting change.................................... 149.5 2,172.2 (1,632.2) (243.4)
Cumulative effect of accounting change, net of income
tax.................................................. -- -- (2,949.2) --
Net income (loss)...................................... 96.3 2,201.7 (7,835.7) (405.9)
Preferred stock dividends.............................. 27.8 -- 2.1 12.8
Net income (loss) applicable to common stock........... 68.5 2,201.7 (7,837.8) (418.7)
PER SHARE DATA
Net income, basic...................................... $ .68
Net income, diluted.................................... $ .67
Book value per common share outstanding................ $ 19.28
Weighted average shares outstanding for basic
earnings............................................. 100.1
Weighted average shares outstanding for diluted
earnings............................................. 143.5
Shares outstanding at period end....................... 100.1
BALANCE SHEET DATA -- AT PERIOD END
Total investments...................................... $22,796.7
Goodwill............................................... 952.2
Total assets........................................... 29,920.1
Corporate notes payable................................ 1,300.0
Total liabilities...................................... 27,102.5
Shareholders' equity................................... 2,817.6
STATUTORY DATA(B)
Statutory capital and surplus.......................... $ 1,514.1
Asset valuation reserve................................ 40.9
Total statutory capital and surplus and asset valuation
reserve.............................................. 1,555.0
OTHER FINANCIAL DATA
Ratio of earnings to fixed charges(c).................. 1.79x
Ratio of earnings to fixed charges and preferred stock
dividends............................................ 1.46x

---------------

(a) Our financial condition and results of operations have been significantly
affected during the periods presented by the discontinued finance
operations. Please refer to note 19 to the audited consolidated financial
statements included elsewhere in this prospectus.

(b) We have derived the statutory data from statements filed by our insurance
subsidiaries with regulatory authorities and have prepared the statutory
data in accordance with statutory accounting principles, which vary in
certain respects from generally accepted accounting principles.

(c) For the purpose of computing the "ratio of earnings to fixed charges",
earnings represent consolidated net income (loss) before income taxes,
minority interest, discontinued operations, extraordinary gain (loss),
cumulative effect of accounting change and the fixed charges described in
the following sentence. Fixed charges consist of: (1) interest expense on
corporate debt, including amortization; (2) interest expense on investment
borrowings; (3) interest added to policyholder account balances; and (4)
the portion of rental expense we deem representative of the interest
factor.

RISK FACTORS

An investment in our securities involves significant risks. You should
carefully consider the risks described below and the other information in this
prospectus, including our consolidated financial statements and related notes
contained in this prospectus, before you decide to buy our securities. If any of
the following risks actually occur, our business prospects, financial condition
and results of operations could be materially harmed, the market price of our
securities could decline and you could lose all or part of your investment.

RISKS RELATED TO OUR BUSINESS

OUR RECENT BANKRUPTCY MAY CONTINUE TO DISRUPT OUR OPERATIONS AND HAMPER OUR
EFFORTS TO RESTORE CONFIDENCE IN THE "CONSECO" BRAND, WHICH MAY CONTRIBUTE TO
LOWER SALES, INCREASED AGENT ATTRITION AND POLICYHOLDER LAPSES AND REDEMPTIONS.

The announcement of our intention to seek a restructuring of our capital in
August 2002 and our subsequent filing of bankruptcy petitions in December 2002
caused significant disruptions in our operations. We believe that adverse
publicity in national and local media concerning our distressed financial
condition and disputes with former members of our management caused sales of our
insurance products to decline and policyholder lapses and redemptions to
increase. For example, our total premium collections decreased 8.4 percent to
$4,180.9 million for the year ended December 31, 2003, compared to 2002. In
addition, withdrawals from annuities and other investment-type products exceeded
deposits received by $615.4 million during the year ended December 31, 2003.

We also experienced increased agent attrition, which in some cases led us
to increase agents' commissions or sales incentives in order to retain agents.
For example, the number of producing agents selling products through the Conseco
Insurance Group segment decreased by approximately 45 percent to 9,100 at
December 31, 2003 compared to a year earlier. The number of career agents
selling products through the Bankers Life segment remained at approximately
4,000 throughout 2003. We implemented agent sales incentive programs to retain
the career agency force during periods of negative media coverage, decreased
ratings and increased competitive activity from agents selling competitors'
products. The total cost for the agent incentive programs during 2003 was $17
million.

While we cannot quantify with specificity the portion of these adverse
changes that were caused by our distressed financial condition and the
associated negative publicity, we believe that these events contributed
significantly to these trends. Although we believe that the successful
completion of the bankruptcy and our continuing restructuring efforts will
reverse these trends and will enable us to restore confidence in the "Conseco"
brand among customers, agents, regulators and our other constituencies, we only
recently emerged from bankruptcy and there have not yet been any significant
improvements in these trends. It may take several quarters of operating results
following our emergence to determine the extent of our operational and
reputational recovery from these events.

LEGAL PROCEEDINGS THAT AROSE IN THE CONTEXT OF OUR BANKRUPTCY MAY CONTINUE TO
DISRUPT OUR OPERATIONS, SUBJECT US TO MATERIAL LIABILITY AND HAMPER OUR EFFORTS
TO RESTORE CONFIDENCE IN THE "CONSECO" BRAND, WHICH MAY NEGATIVELY IMPACT OUR
FINANCIAL RESULTS AND LIQUIDITY.

We continue to be involved in various legal proceedings that arose in the
context of our restructuring. For example, since our August 2002 announcement
that we would seek to restructure our capital, we and/or our predecessor and
several of our former, and in some instances current, officers and directors
have been named as defendants in lawsuits, including class action lawsuits,
alleging, among other things, securities fraud and breaches of fiduciary duty
under ERISA. While we were discharged from pre-petition obligations of our
predecessor in connection with the bankruptcy, we still owe indemnity
obligations to some of our current and former officers and directors for
expenses and losses they may incur in connection with these lawsuits. Our
ultimate financial exposure with respect to this indemnity may be limited by the
availability of insurance, but not all of the cases relating to periods prior to
our bankruptcy are so limited and we cannot predict with certainty what our
ultimate liability in these cases may be.

We are also involved in, and have been subject to subpoena with respect to,
federal investigations relating to the accounting for certain interest-only
securities by our predecessor's finance subsidiary, which was sold in connection
with our reorganization. We have also commenced litigation against certain of
our former officers and directors in connection with our efforts to collect
amounts outstanding under our predecessor's director and officer loan programs.

We believe that adverse publicity in national and local media concerning
the above proceedings may hamper our efforts to restore confidence in the
"Conseco" brand, and impose impediments to our customers' willingness to
continue to buy our products and our ability to attract new customers.
Similarly, the adverse publicity concerning these proceedings may make it more
difficult for us to attract and retain agents and independent marketing
organizations to market our products. While we believe that these events have
affected, and may continue to affect, our customers' and agents' willingness to
do business with us, we cannot quantify the extent of these effects with
specificity. Moreover, we may be subject to fines or other penalties, as well as
potential indemnity claims with respect to the activities of our former indirect
subsidiary, Conseco Variable Insurance Company, and we are presently unable to
quantify what our exposure, if any, may ultimately be. See "Business -- Legal
Proceedings."

A FAILURE TO IMPROVE AND MAINTAIN THE FINANCIAL STRENGTH RATINGS OF OUR
INSURANCE SUBSIDIARIES COULD CAUSE US TO EXPERIENCE LOWER SALES, INCREASED AGENT
ATTRITION AND INCREASED POLICYHOLDER LAPSES AND REDEMPTIONS.

An important competitive factor for our insurance subsidiaries is the
ratings they receive from nationally recognized rating organizations. Agents,
insurance brokers and marketing companies who market our products and
prospective purchasers of our products view ratings as an important factor in
determining which insurer's products to market or purchase. This is especially
true for annuity, interest-sensitive life insurance and long-term care products.
Our insurance companies' financial strength ratings were downgraded by all of
the major rating agencies beginning in July 2002 in connection with the
financial distress that ultimately led to our predecessor's bankruptcy. The
current financial strength ratings of our insurance subsidiaries from A.M. Best
Company, Standard & Poors Corporation and Moody's Investors Services, Inc. are
"B (Fair)," "BB-" and "Ba3," respectively, except that the current financial
strength ratings of Conseco Senior Health Insurance Company from A.M. Best,
Standard & Poor's and Moody's are "B (Fair)," "CCC" and "Caa1," respectively. A
"B" rating from A.M. Best is the seventh highest of sixteen possible ratings. A
"BB-" rating from S&P is the thirteenth highest of twenty-one possible ratings,
and a "CCC" rating from S&P is the eighteenth highest of twenty-one possible
ratings. A "Ba3" rating from Moody's is the thirteenth highest of twenty-one
possible ratings, and a "Caa1" rating from Moody's is the seventeenth highest of
twenty-one possible ratings. Most of our competitors have higher financial
strength ratings and we believe it is critical for us to improve our ratings to
be competitive. The lowered ratings assigned to our insurance subsidiaries were
one of the primary factors causing sales of our insurance products to decline
and policyholder redemptions and lapses to increase during 2002 and 2003. We
also experienced increased agent attrition, which in some cases led us to
increase commissions or sales incentives in an effort to retain them. These
events have had a negative effect on our ability to market our products and
attract and retain agents, which in turn negatively affected our financial
results.

Our plan of reorganization contemplated that our insurance subsidiaries
would achieve an "A" category rating from A.M. Best approximately by the end of
2004. In order to achieve this rating, we believe that we will have to
demonstrate to the rating agencies a sustained improvement in our financial
results, a lower debt to total capital ratio, and improved risk-based capital
ratios of our insurance subsidiaries. While we believe that the improved capital
position of our insurance subsidiaries, the lower debt to capital ratio that we
expect to have upon completion of these offerings and our plan for continued
improvements in our financial results will warrant an upgrade to an "A" category
rating from A.M. Best, the decision to upgrade is a subjective one that will be
made if and when A.M. Best believes it is warranted. If we fail to achieve and
maintain an "A" category rating from A.M. Best, sales of our insurance products
could fall further, we may face further defections among our independent and
career sales force, and existing policyholders may redeem or allow

their policies to lapse, adversely affecting our financial results, which in
turn could lead to further downgrades.

If our financial performance or business prospects deteriorate, and we
experience a downgrade in our current ratings, our product sales would likely
decline significantly, we would likely experience substantial defections among
our independent and career sales force, and our existing policyholders would
likely redeem or allow their policies to lapse at higher rates. In addition,
events that may cause the ratings agencies to downgrade our financial strength
ratings may also cause us to be in breach of covenants under our senior credit
facility, which would entitle our lenders to accelerate these borrowings. We
presently do not have sufficient liquidity to repay these borrowings if they
were to be accelerated, and we may not have such liquidity in the future or we
may not be able to borrow money from other lenders to enable us to refinance
these loans. If we are unable to repay or refinance these loans, we may be
forced to seek bankruptcy protection again.

OUR ABILITY TO MEET OUR OBLIGATIONS, INCLUDING OUR OBLIGATION TO PAY DIVIDENDS
ON THE CLASS B PREFERRED STOCK, MAY BE CONSTRAINED BY OUR SUBSIDIARIES' ABILITY
TO DISTRIBUTE CASH TO US.

Conseco, Inc. and CDOC, Inc., our wholly owned subsidiary and a guarantor
under the senior credit facility, are holding companies with no business
operations of their own. As a result, they depend on their operating
subsidiaries for cash to make principal and interest payments on debt, and to
pay administrative expenses and income taxes. The cash they receive from
insurance subsidiaries consists of dividends and distributions, principal and
interest payments on surplus debentures, fees for services, tax-sharing
payments, and from our non-insurance subsidiaries, loans and advances. A
deterioration in the financial condition, earnings or cash flow of the
significant subsidiaries of Conseco or CDOC for any reason could limit their
ability to pay cash dividends or other disbursements to Conseco and CDOC, which,
in turn, would limit the ability of Conseco and CDOC to meet debt service
requirements and satisfy other financial obligations, including payment of cash
dividends with respect to the class B preferred stock.

- statutory net gain from operations or statutory net income for the prior
year; or

- 10 percent of statutory capital and surplus as of the end of the
preceding year.

Any dividends in excess of these levels require the approval of the
director or commissioner of the applicable state insurance department. Prior to
their release on November 19, 2003, we were subject to consent orders with the
Commissioner of Insurance for the State of Texas that, among other things,
limited the ability of our insurance subsidiaries to pay dividends. The
following table sets forth the aggregate amount of dividends and other
distributions that our insurance subsidiaries would have been able to pay to us
in each of the last two fiscal years without obtaining specific approval from
state insurance regulators, assuming that the Texas consent order released in
November 2003 had not been in effect (dollars in millions):

2003 2002
---- ----

Dividends................................................... $340.6 $230.8
Surplus debenture interest.................................. 52.1 56.0
------ ------
Total that was available to be paid....................... $392.7 $286.8
====== ======

OUR BUSINESS MAY BE ADVERSELY IMPACTED AS A RESULT OF OUR SUBSTANTIAL
INDEBTEDNESS, WHICH REQUIRES THE USE OF A SUBSTANTIAL PORTION OF OUR EXCESS CASH
FLOW AND MAY LIMIT OUR ACCESS TO ADDITIONAL CAPITAL.

We continue to have significant indebtedness after our emergence from
bankruptcy. As of December 31, 2003, we had approximately $1.3 billion of
indebtedness under our senior credit facility. The following table sets forth
the aggregate amount of our debt payment obligations, including estimated
interest, for each of the next five years (dollars in millions):

5 YEAR
2004 2005 2006 2007 2008 TOTAL
---- ---- ---- ---- ---- ------

Scheduled principal payments...... $ 53.0 $ 53.0 $103.0 $153.0 $153.0 $515.0
Projected interest payments....... 107.2 101.3 97.1 88.1 76.2 469.9
------ ------ ------ ------ ------ ------
Total debt service................ $160.2 $154.3 $200.1 $241.1 $229.2 $984.9
====== ====== ====== ====== ====== ======

As of December 31, 2003, our debt to total capital ratio was 32 percent.
This ratio is higher than the ratio of most of our competitors. As adjusted to
give effect to the concurrent offerings of our common stock and class B
preferred stock and the use of proceeds thereof as described under "Use of
Proceeds," our debt to total capital ratio as of December 31, 2003 would have
been percent. In order to raise our financial strength ratings, we
will need to improve this ratio by either lowering our indebtedness or
increasing our equity capital or through a combination of both.

Our substantial indebtedness could have important consequences to you. For
example, it could:

- increase our vulnerability to adverse economic and industry conditions by
limiting our flexibility in planning for and reacting to changes in our
business and industry;

- require us to dedicate a substantial portion of our cash flow from
operations to payments on our indebtedness, therefore diverting funds
from other beneficial uses;

- limit our ability to make strategic acquisitions or take other
significant corporate actions;

- place us at a competitive disadvantage compared to our competitors that
have proportionately less debt; and

- limit our ability to borrow funds and increase the cost of funds that we
can borrow.

Moreover, if are unable to meet our repayment obligations, our lenders are
entitled to accelerate their loans, and we may be forced to seek bankruptcy
protection again.

S&P and Moody's have assigned ratings on our senior secured debt of "B-
(Weak)" and "Caa1 (Very Poor)", respectively. In S&P's view, an obligation rated
"B-" is vulnerable to nonpayment, but the obligor currently has the capacity to
meet its commitment on the obligation. S&P has a total of twenty-two separate
categories in which to rate senior debt, ranging from "AAA (Extremely Strong)"
to "D (Payment Default)". A "B-" rating is the seventeenth highest rating. In
Moody's view, an obligation rated "Caa" is of poor standing and may be in
default, or there may be present elements of danger with respect to the payment
of principal or interest. Moody's has a total of twenty-one separate categories
in which to rate senior debt, ranging from "Aaa (Exceptional)" to "C (Lowest
Rated)". A "Caa" rating is the seventeenth highest rating. Our current senior
debt ratings may restrict our access to capital, and therefore our ability to
refinance our senior credit facility.

IF WE FAIL TO MEET OR MAINTAIN VARIOUS COVENANTS AND FINANCIAL RATIOS UNDER OUR
SENIOR CREDIT FACILITY, OUR LENDERS ARE ENTITLED TO ACCELERATE THE REPAYMENT OF
THESE LOANS; IF THE LOANS ARE ACCELERATED AND WE DO NOT HAVE SUFFICIENT
LIQUIDITY TO REPAY THEM, WE MAY BE FORCED TO SEEK BANKRUPTCY PROTECTION AGAIN.

Our senior credit facility imposes a number of covenants and financial
ratios that we must meet or maintain. For example, we must:

- have earnings before interest, taxes, depreciation and amortization of
greater than or equal to $490 million for the two quarters ended March
31, 2004, and increasing over time to $1,296.0 million for the four
quarters ending March 31, 2010. This amount was approximately $290
million for the one quarter period ended December 31, 2003;

- have a debt to total capitalization (excluding unrealized gains (losses))
ratio of .356 to 1.0 or less at December 31, 2003, with such ratio
decreasing over time to .20 to 1.0 at June 30, 2008 and remaining level
thereafter. At December 31, 2003, our debt to total capitalization ratio
was .334 to 1.0;

- have an interest coverage ratio of greater than 1.0 to 1.0 for the
quarter ending December 31, 2003, and increasing over time to 4.50 to 1.0
for the four quarters ending December 31, 2009 and remaining level
thereafter. Our interest coverage ratio was greater than 1.25 to 1.0 for
the quarter ending December 31, 2003.

Although we believe we are on track to meet and/or maintain these covenants
and financial ratios, our ability to do so may be affected by events outside of
our control. If we default under these requirements, the lenders could declare
all outstanding borrowings immediately due and payable, the aggregate amount of
which was approximately $1.3 billion as of December 31, 2003. We presently do
not have sufficient liquidity to repay these borrowings if they were to be
accelerated, and we may not have sufficient liquidity in the future and may not
be able to borrow money from other lenders to enable us to refinance these
loans. Accordingly, if we default under these requirements and the loans are
accelerated, we may be forced to seek bankruptcy protection again.

OUR OPERATING FLEXIBILITY IS LIMITED IN SIGNIFICANT RESPECTS BY THE RESTRICTIVE
COVENANTS IN OUR SENIOR CREDIT FACILITY.

Our senior credit facility imposes restrictions on us that could increase
our vulnerability to adverse economic and industry conditions by limiting our
flexibility in planning for and reacting to changes in our business and
industry. Specifically, these restrictions limit our ability to:

- incur additional indebtedness;

- issue stock of subsidiaries;

- create liens;

- transfer or sell assets.

- enter into transactions with affiliates;

- fundamentally change the type of business in which we engage;

- enter into mergers or other types of business combination transactions;

- pay cash dividends and make cash distributions on certain classes of
equity securities;

- repurchase stock;

- make investments; and

- make capital expenditures.

Our ability to engage in these types of transactions is generally limited
by the terms of our senior credit facility, even if we believe that a specific
transaction would contribute to our future growth, operating results

or profitability. If we are able to enter into these types of transactions under
the terms of our senior credit facility, or if we obtain a waiver from our
lenders with respect to any specific transaction, that transaction may cause our
indebtedness to increase, may not result in the benefits we anticipate or may
cause us to incur greater costs or suffer greater disruptions in our business
than we anticipate, and could therefore negatively impact our business and
operating results.

THE RESULTS OF OPERATIONS OF OUR INSURANCE BUSINESS WILL DECLINE IF OUR PREMIUM
RATES ARE NOT ADEQUATE OR IF WE ARE UNABLE TO OBTAIN REGULATORY APPROVAL TO
INCREASE RATES.

Most of our supplemental health policies allow us to increase premium rates
when warranted by our actual claim experience. These rate increases must be
approved by the applicable state insurance departments, and we are required to
submit actuarial claims data to support the need for the rate increases. The
re-rate application and approval process on supplemental health products is a
normal recurring part of our business operations and reasonable rate increases
are typically approved by the state departments as long as they are supported by
actual claim experience and are not unusually large in either dollar amount or
percentage increase. For policy types on which rate increases are a normal
recurring event, our estimates of insurance liabilities assume we will be able
to raise rates if the blocks warrant such increases in the future.

The loss ratios for our long-term care products included in the other
business in run-off segment have increased in recent periods and exceeded 103
percent during the four months ended December 31, 2003. We will have to raise
rates or take other actions with respect to some of these policies or this
business will continue to be unprofitable and our financial results will be
adversely affected. During 2002 and 2003, we filed for and received approval on
rate increases totaling $44 million and $37 million, respectively, relating to
this long-term care business that had approximately $400 million of collected
premiums.

We review the adequacy of our premium rates regularly and file proposed
rate increases on our products when we believe existing premium rates are too
low. It is possible that we will not be able to obtain approval for premium rate
increases from currently pending requests or requests filed in the future. If we
are unable to raise our premium rates because we fail to obtain approval for a
rate increase in one or more states, our net income may decrease. Moreover, in
some instances our ability to exit unprofitable lines of business is limited by
the guaranteed renewal feature of the policy. In that situation we cannot exit
the business without regulatory approval, which may require that we continue to
service products at a loss for an extended period of time. For example, most of
our long-term care business is guaranteed renewable, meaning we cannot terminate
these policies without regulatory approval. Therefore, without approval of
necessary rate increases, we may have no other option but to operate this
business at a loss for an extended period of time.

If we are successful in obtaining regulatory approval to raise premium
rates, the increased premium rates may reduce the volume of our new sales and
cause existing policyholders to allow their policies to lapse. This could result
in significantly higher claim costs as a percentage of premiums if healthier
policyholders who can get coverage elsewhere allow their policies to lapse,
while policies related to less healthy policyholders continue in force. This
would reduce our premium income and profitability in future periods.

On home health care policies issued in some areas of Florida and other
states, payments for the benefit of policyholders have exceeded the premiums we
receive by a significant amount. We are currently aggressively seeking rate
increases and pursuing other actions on many of these long-term care policies.
Some of the states in which we have issued these policies have regulatory
provisions that may allow non-renewal of

guaranteed renewable policies in cases of extreme financial distress of the
insurer. To date, we have not received any regulatory relief under any of these
provisions relating to our troubled long-term care business.

THE LIMITED HISTORICAL CLAIMS EXPERIENCE ON OUR LONG-TERM CARE PRODUCTS COULD
NEGATIVELY IMPACT OUR OPERATIONS IF OUR ESTIMATES PROVE WRONG AND WE HAVE NOT
ADEQUATELY SET PREMIUM RATES.

In setting premium rates, we consider historical claims information and
other factors, but we cannot predict with certainty what the actual claims on
our products will be. This is particularly true in the context of setting
premium rates on our long-term care insurance products, for which we have
relatively limited historical claims experience. Long-term care products tend to
have lower frequency of claims than other health products such as Medicare
supplement or specified disease, but when claims are incurred on long-term care
policies they tend to be much higher in dollar amount. Also, long-term care
products have a much longer tail, meaning that claims are incurred much later in
the life of the policy than other supplemental health products. As a result of
these product traits, longer historical experience is necessary in order to
price products appropriately.

Our Bankers Life segment has offered long-term care insurance since 1985.
Bankers Life's experience on its long-term care blocks has generally been within
its pricing expectations. Our acquired blocks of long-term care insurance
included in the other business in run-off segment were acquired through
acquisitions completed in 1996 and 1997. The majority of the business was
written between 1990 and 1997. The experience on these acquired blocks has
generally been worse than the acquired companies' original pricing expectations.
We have requested and received approval for numerous premium rate increases in
recent years on these blocks. Even with the various rate increases, these blocks
experienced loss ratios of 103 percent in the four months ended December 31,
2003, 170 percent in the eight months ended August 31, 2003, 139 percent in 2002
and 96 percent in 2001. If future claims experience proves to be worse than
anticipated as our long-term care blocks continue to age, our financial results
could be adversely affected.

OUR RESERVES FOR FUTURE INSURANCE POLICY BENEFITS AND CLAIMS MAY PROVE TO BE
INADEQUATE, REQUIRING US TO INCREASE LIABILITIES AND RESULTING IN REDUCED NET
INCOME AND SHAREHOLDERS' EQUITY.

We calculate and maintain reserves for the estimated future payment of
claims to our policyholders based on assumptions made by our actuaries. For our
life insurance business, our limit of risk retention for each policy is
generally $.8 million or less because amounts above $.8 million are ceded to
reinsurers. For our health insurance business, we establish an active life
reserve plus a liability for due and unpaid claims, claims in the course of
settlement, and incurred but not reported claims, as well as a reserve for the
present value of amounts on claims not yet due. For our long-term care insurance
business, we establish reserves based on the same assumptions and estimates of
factors that we consider when we set premium rates. Many factors can affect
these reserves and liabilities, such as economic and social conditions,
inflation, hospital and pharmaceutical costs, regulatory actions, changes in
doctrines of legal liability and extra-contractual damage awards. Therefore, the
reserves and liabilities we establish are necessarily based on estimates,
assumptions and prior years' statistics. Establishing reserves is an uncertain
process, and it is possible that actual claims will materially exceed our
reserves and have a material adverse effect on our results of operations and
financial condition. We have recently incurred significant losses which have
exceeded our expectations as a result of actual claim costs and persistency of
our long-term care business included in the other business in run-off segment.
For example, we increased claim reserves by $130 million during 2002 and $85
million during the eight months ended August 31, 2003 as a result of adverse
developments and changes in our estimates of ultimate claims for these products.
Our financial performance depends significantly upon the extent to which our
actual claims experience is consistent with the assumptions we used in setting
our reserves. If our assumptions with respect to future claims are incorrect,
and our reserves are insufficient to cover our actual losses and expenses, we
would be required to increase our liabilities, and it could result in a default
under our senior credit facility.

OUR NET INCOME AND REVENUES WILL SUFFER IF POLICYHOLDER SURRENDER LEVELS DIFFER
SIGNIFICANTLY FROM OUR ASSUMPTIONS.

Surrenders of our annuities and life insurance products can result in
losses and decreased revenues if surrender levels differ significantly from
assumed levels. At December 31, 2003, approximately 18 percent of our total
insurance liabilities, or approximately $4.5 billion, could be surrendered by
the policyholder without penalty. The surrender charges that are imposed on our
fixed rate annuities typically decline during a penalty period which ranges from
five to twelve years after the date the policy is issued. Surrenders and
redemptions could require us to dispose of assets earlier than we had planned,
possibly at a loss. Moreover, surrenders and redemptions require faster
amortization of the acquisition costs or commissions associated with the
original sale of a product, thus reducing our net income. We believe
policyholders are generally more likely to surrender their policies if they
believe the issuer is having financial difficulties, or if they are able to
reinvest the policy's value at a higher rate of return in an alternative
insurance or investment product.

For example, policyholder redemptions of annuity and, to a lesser extent,
life products increased following the downgrade of our A.M. Best financial
strength rating to "B (Fair)" in August of 2002. When redemptions are greater
than our previous assumptions, we are required to accelerate the amortization of
insurance intangibles to write off the balance associated with the redeemed
policies. We recorded additional amortization related to higher redemptions and
changes to our lapse assumptions of $203.2 million in 2002. Such additional
amortization was not significant in 2003.

RECENTLY ENACTED AND PENDING OR FUTURE LEGISLATION COULD ADVERSELY AFFECT THE
FINANCIAL PERFORMANCE OF OUR INSURANCE OPERATIONS.

During recent years, the health insurance industry has experienced
substantial changes, including those caused by healthcare legislation. Recent
federal and state legislation and legislative proposals relating to healthcare
reform contain features that could severely limit or eliminate our ability to
vary our pricing terms or apply medical underwriting standards with respect to
individuals, which could have the effect of increasing our loss ratios and have
an adverse effect on our financial results. In particular, Medicare reform could
affect our ability to price or sell our products or profitably maintain our
blocks in force. For example, recent reforms provide some additional incentives
under the Medical Advantage program for health plans to offer managed care plans
to seniors. Any resulting growth of managed care plans over time could decrease
sales of the traditional Medicare supplement products we sell.

Proposals currently pending in Congress and some state legislatures may
also affect our financial results. These proposals include the implementation of
minimum consumer protection standards for inclusion in all long-term care
policies, including: guaranteed premium rates; protection against inflation;
limitations on waiting periods for pre-existing conditions; setting standards
for sales practices for long-term care insurance; and guaranteed consumer access
to information about insurers, including lapse and replacement rates for
policies and the percentage of claims denied. Enactment of any proposal that
would limit the amount we can charge for our products, such as guaranteed
premium rates, or increase in benefits we must pay, such as limitations on
waiting periods, or otherwise increase the costs associated with our business,
could adversely affect our financial results.

TAX LAW CHANGES COULD ADVERSELY AFFECT OUR INSURANCE PRODUCT SALES AND
PROFITABILITY.

We sell deferred annuities and some forms of life insurance products which
we believe are attractive to purchasers, in part, because policyholders
generally are not subject to United States Federal income tax on increases in
policy values until some form of distribution is made. Recently, Congress
enacted legislation to lower marginal tax rates, reduce the federal estate tax
gradually over a ten-year period, with total elimination of the federal estate
tax in 2010, and increase contributions which may be made to individual
retirement accounts and 401(k) accounts. While these tax law changes will expire
at the beginning of 2011 absent future congressional action, they could in the
interim diminish the appeal of our annuity and life insurance products since the
benefit of tax deferral is not as great if tax rates are lower and because fewer
people may purchase these products if they are able to contribute more money to
individual retirement accounts and 401(k)

accounts. Additionally, Congress has considered, from time to time, other
possible changes to the U.S. tax laws, including elimination of the tax deferral
on the accretion of value within certain annuities and life insurance products,
which would make these products less attractive to prospective purchasers and
therefore would be likely to reduce our sales of these products.

OUR RESULTS OF OPERATIONS MAY BE NEGATIVELY IMPACTED IF WE ARE UNABLE TO ACHIEVE
THE GOALS OF THE INITIATIVES WE HAVE UNDERTAKEN WITH RESPECT TO THE
RESTRUCTURING OF OUR PRINCIPAL INSURANCE BUSINESSES.

Our Conseco Insurance Group segment has experienced declining sales and
expense levels that exceed product pricing. We have adopted several initiatives
designed to improve these operations, including focusing sales efforts on higher
margin products, such as our specified disease products; reducing operating
expenses by eliminating or reducing the costs of marketing some of our products;
personnel reductions and streamlined administrative procedures; increasing
retention rates on our more profitable blocks of inforce business; stabilizing
the profitability of the long-term care block of business in run-off sold
through independent agents through premium rate increases, improved claim
adjudication procedures and other actions as necessary; and combining legal
insurance entities to improve the efficient use of capital and eliminate the
costs of separate financial reporting requirements. Conseco Insurance Group has
29 separate policy administration systems for its three main lines of business:
life, health and annuities. Many of our initiatives are intended to address
issues resulting from the substantial number of acquisitions undertaken by our
predecessor. Between 1982 and 1997, our predecessor completed 19 transactions
involving the acquisition of 44 separate insurance companies. Our future
performance depends, in part, on our ability to successfully integrate these
prior acquisitions. This process of integration may involve unforeseen expenses,
complications and delays, including, among other things, further difficulties in
integrating the systems and operations of the acquired companies, and our
current initiatives may be inadequate to address such issues. In addition, some
of our initiatives have only recently been adopted, and may not be successfully
implemented. Our initiatives include the elimination of duplicate processing
systems by converting all similar business currently accounted for on multiple
systems to a single system. We expect to spend over $35 million on capital
expenditures in 2004 (including amounts related to these initiatives). Even if
we are able to successfully implement these measures, these measures alone may
not be sufficient to improve our results of operations.

OUR INVESTMENT PORTFOLIO IS SUBJECT TO SEVERAL RISKS WHICH MAY DIMINISH THE
VALUE OF OUR INVESTED ASSETS AND NEGATIVELY IMPACT OUR PROFITABILITY.

The values of the assets in our investment portfolio are subject to
numerous factors, which are difficult to predict, and are in many instances
beyond our control. These factors include, but are not limited to, the
following:

- Changes in interest rates can reduce the value of our investments.
Actively managed fixed maturity investments comprised 87 percent of our
total investments as of December 31, 2003. The value of these investments
can be affected by changing levels of market interest rates. For example,
an increase in interest rates of 10 percent could reduce the value of our
actively managed fixed maturity investments and short-term investments,
net of corresponding changes in the value of insurance intangibles, by
approximately $625 million, in the absence of other factors.

- Our actively managed fixed maturity investments are subject to a
deterioration in the ability of the issuer to make timely repayment of
the securities. This risk is significantly greater with respect to
below-investment grade securities, which comprised 3.9 percent of our
actively managed fixed maturity investments as of December 31, 2003. We
have sustained substantial credit-related investment losses in recent
periods when a number of large, highly leveraged issuers experienced
significant financial difficulties resulting in our recognition of
other-than-temporary impairments. For example, we have recognized
other-than-temporary declines in value of several of our investments,
including K-Mart Corp., Amerco, Inc., Global Crossing, MCI
Communications, Mississippi Chemical, United Airlines and Worldcom, Inc.
We have recorded writedowns of fixed maturity investments, equity
securities and other invested assets as a result of conditions which
caused us to conclude a decline in the fair value of the investment was
other than temporary as follows:

$9.6 million in the four months ended December 31, 2003; $51.3 million in
the eight months ended August 31, 2003; $556.8 million in 2002; and
$361.7 million in 2001.

In order to reduce our exposure to similar credit losses, we have taken a
number of specific steps, including:

- reducing the percentage of below-investment grade fixed maturity
investments from 5.9 percent at December 31, 2001 to 3.9 percent at
December 31, 2003;

- implementing conservative portfolio compliance guidelines which generally
limit our exposure to single issuer risks; and

- expanding our portfolio reporting procedures to proactively identify
changes in value related to credit risk in a more timely manner.

Our structured security investments, which comprised 29 percent of our
actively managed fixed maturity investments at December 31, 2003, are subject to
risks relating to variable prepayment and default on the assets underlying such
securities, such as mortgage loans. To the extent that structured security
investments prepay faster than the expected rate of repayment, refinancing or
default on the assets underlying the securities, such investments, which have a
cost basis in excess of par, may be redeemed at par, thus resulting in a loss.
In order to mitigate this risk, we have adopted policies that generally direct
our investment in structured securities to securities with contractual or
structured protections against prepayment risk.

Our need for liquidity to fund substantial product surrenders or policy
claims may require that we maintain highly liquid, and therefore lower-yielding,
assets, or that we sell assets at a loss, thereby further eroding the
performance of our portfolio.

We have sustained substantial investment losses in the past and may again
in the future. Because a substantial portion of our net income is derived from
returns on our investment portfolio, significant losses in the portfolio may
have a direct and materially adverse impact on our results of operations. In
addition, losses on our investment portfolio could reduce the investment returns
which we are able to credit to our customers on certain of our products, thereby
impacting our sales and further eroding our financial performance.

CHANGING INTEREST RATES MAY ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.

Our profitability may be directly affected by the level of and fluctuations
in interest rates. While we monitor the interest rate environment and have
previously employed hedging strategies designed to mitigate the impact of
changes in interest rates, our financial results could be adversely affected by
changes in interest rates. Our spread-based insurance and annuity business is
subject to several inherent risks arising from movements in interest rates,
especially if we fail to anticipate or respond to such movements. First,
interest rate changes can cause compression of our net spread between interest
earned on investments and interest credited on customer deposits, thereby
adversely affecting our results. Our ability to adjust for such a compression is
limited by virtue of the guaranteed minimum rates that we must credit to
policyholders on certain of our products, as well as by the fact that we are
able to reduce the crediting rates on most of our products only at limited,
pre-established intervals. Approximately 40 percent of our insurance liabilities
were subject to interest rates that may be reset annually; 45 percent have a
fixed explicit interest rate for the duration of the contract; 10 percent have
credited rates which approximate the income we earn; and the remainder have no
explicit interest rates. Second, if interest rate changes produce an
unanticipated increase in surrenders of our spread-based products, we may be
forced to sell invested assets at a loss in order to fund such surrenders. The
profits from many non-spread-based insurance products, such as long-term care
policies, are adversely affected when interest rates decline because we may be
unable to reinvest the cash flows generated from premiums received and our
investment portfolio at the interest rates anticipated when we sold the
policies. Finally, changes in interest rates can have significant effects on the
performance of our structured securities portfolio, including collateralized
mortgage obligations, as a result of changes in the prepayment rate of the loans
underlying such securities. We follow asset/liability strategies that are
designed to mitigate the effect of interest rate changes on our profitability
but do not currently employ derivative instruments for

this purpose. We may not be successful in implementing these strategies and
achieving adequate investment spreads.

We use computer models to simulate the cash flows expected from our
existing insurance business under various interest rate scenarios. These
simulations help us measure the potential gain or loss in fair value of our
interest-sensitive financial instruments. With such estimates, we seek to manage
the relationship between the duration of our assets and the expected duration of
our liabilities. When the estimated durations of assets and liabilities are
similar, exposure to interest rate risk is minimized because a change in the
value of assets should be largely offset by a change in the value of
liabilities. At December 31, 2003, the duration of our fixed maturity securities
and short-term investments was approximately 6.7 years, and the duration of our
insurance liabilities was approximately 7.2 years. We estimate that our fixed
maturity securities and short-term investments, net of corresponding changes in
the value of insurance intangibles, would decline in fair value by approximately
$625 million if interest rates were to increase by 10 percent from their
December 31, 2003 levels. This compares to a decline in fair value of $595
million based on amounts and rates at December 31, 2002. The calculations
involved in our computer simulations incorporate numerous assumptions, require
significant estimates and assume an immediate change in interest rates without
any management of the investment portfolio in reaction to such change.
Consequently, potential changes in value of our financial instruments indicated
by the simulations will likely be different from the actual changes experienced
under given interest rate scenarios, and the differences may be material.
Because we actively manage our investments and liabilities, our net exposure to
interest rates can vary over time.

A DECLINE OR INCREASED VOLATILITY IN THE SECURITIES MARKETS, AND OTHER ECONOMIC
FACTORS, MAY ADVERSELY AFFECT OUR BUSINESS, PARTICULARLY OUR SALES OF CERTAIN OF
OUR LIFE INSURANCE PRODUCTS AND ANNUITIES.

Fluctuations in the securities markets and other economic factors may
adversely affect sales and/or policy surrenders of our annuities and life
insurance policies. For example, volatility in the equity markets may cause
potential new purchasers of equity-indexed annuities to refrain from purchasing
these products and may cause current policyholders to surrender their policies
for the cash value or reduce their investments. Our sales of these products
decreased significantly in 2001 and 2002 during periods of significant declines
in the equity markets. Sales of equity-indexed annuities totaled $220.1 million
in 2002 and $380.9 million in 2001, as compared to $643.5 million in 2000. In
addition, significant or unusual volatility in the general level of interest
rates could negatively impact sales and/or lapse rates on certain types of
insurance products.

WE ARE SUBJECT TO FURTHER RISK OF LOSS NOTWITHSTANDING OUR REINSURANCE
AGREEMENTS.

We transfer exposure to certain risks to others through reinsurance
arrangements. Under these arrangements, other insurers assume a portion of our
losses and expenses associated with reported and unreported claims in exchange
for a portion of policy premiums. The availability, amount and cost of
reinsurance depend on general market conditions and may vary significantly. As
of December 31, 2003, our reinsurance receivables totaled $930.5 million. Our
ceded life insurance in force totaled $23.4 billion. Our seven largest
reinsurers accounted for 80 percent of our ceded life insurance in force. We
face credit risk with respect to reinsurance. When we obtain reinsurance, we are
still liable for those transferred risks if the reinsurer cannot meet its
obligations. Therefore, the inability of our reinsurers to meet their financial
obligations may require us to increase liabilities, thereby reducing our net
income and shareholders' equity.

OUR GOODWILL AND OTHER INTANGIBLE ASSETS ARE SUBJECT TO IMPAIRMENT TESTS, WHICH
MAY REQUIRE US TO REDUCE SHAREHOLDERS' EQUITY.

Upon our emergence from bankruptcy, we revalued our assets and liabilities
to estimated fair value as of August 31, 2003 and established our capital
accounts at the reorganization value determined in conjunction with our
bankruptcy plan. We recorded the $1,141.6 million of reorganization value which
could not be attributed to specific tangible or identified intangible assets as
goodwill.

Under GAAP, we are required to evaluate our goodwill and other intangible
assets for impairment on an annual basis, or more frequently if there is an
indication that an impairment may exist. If certain criteria

are met, we are required to record an impairment charge. We obtained independent
appraisals to determine the value of the Company in conjunction with the
preparation of our bankruptcy plan which indicated no impairments of our
goodwill or other intangible assets existed. However, we cannot assure you that
we will not have to recognize an impairment charge in future periods.

The appraisals prepared to determine the value of our subsidiaries are
based on numerous estimates and assumptions which, though considered reasonable
by management, may not be realized, and are inherently subject to significant
business, economic and competitive uncertainties and contingencies, many of
which are beyond our control. These estimates and assumptions had a significant
effect on the determination of our reorganization value and the amount of
goodwill we recognized. Accordingly, if our actual experience differs from our
estimates and assumptions, it is possible we will have to recognize an
impairment charge in future periods.

OUR BUSINESS IS SUBJECT TO EXTENSIVE REGULATION, WHICH LIMITS OUR OPERATING
FLEXIBILITY AND COULD RESULT IN OUR INSURANCE SUBSIDIARIES BEING PLACED UNDER
REGULATORY CONTROL OR OTHERWISE NEGATIVELY IMPACT OUR FINANCIAL RESULTS.

Our insurance business is subject to extensive regulation and supervision
in the jurisdictions in which we operate. Our insurance subsidiaries are subject
to state insurance laws that establish supervisory agencies with broad
administrative powers relative to granting and revoking licenses to transact
business, regulating sales and other practices, approving premium rate
increases, licensing agents, approving policy forms, setting reserve and
solvency requirements, determining the form and content of required statutory
financial statements, limiting dividends and prescribing the type and amount of
investments we can make.

We have been operating under heightened scrutiny from state insurance
regulators. For example, our insurance subsidiaries domiciled in Texas, Bankers
National Life Insurance Company and Conseco Life Insurance Company of Texas, on
behalf of itself and its subsidiaries, entered into consent orders with the
Commissioner of Insurance for the State of Texas on October 30, 2002, which were
formally released on November 19, 2003. These consent orders applied to all of
our insurance subsidiaries and, among other things, restricted the ability of
our insurance subsidiaries to pay dividends and other amounts to the parent
company without regulatory consent. Notwithstanding the release of these consent
orders, we have agreed with the Texas Department of Insurance to provide prior
notice of certain transactions, including up to 30 days prior notice for the
payment of dividends by an insurance subsidiary to any non-insurance company
parent, and to provide information periodically concerning our financial
performance and condition. As noted above, state laws generally provide state
insurance regulatory agencies with broad authority to protect policyholders in
their jurisdictions. Accordingly, we cannot assure you that regulators will not
seek to assert greater supervision and control over our insurance subsidiaries'
businesses and financial affairs.

Our insurance subsidiaries are also subject to risk-based capital
requirements. These requirements were designed to evaluate the adequacy of
statutory capital and surplus in relation to investment and insurance risks
associated with asset quality, mortality and morbidity, asset and liability
matching and other business factors. The requirements are used by states as an
early warning tool to discover potential weakly-capitalized companies for the
purpose of initiating regulatory action. Generally, if an insurer's risk-based
capital falls below specified levels, the insurer would be subject to different
degrees of regulatory action depending upon the magnitude of the deficiency. The
2003 statutory annual statements filed with the state insurance regulators of
each of our insurance subsidiaries reflected total adjusted capital in excess of
the levels subjecting the subsidiaries to any regulatory action. However, as a
result of losses on the long-term care business within our other business in
run-off segment, the risk-based capital ratio of Conseco Senior Health Insurance
Company, which issued most of the long-term care business in our other business
in run-off segment, is near the level which would require it to submit a
comprehensive plan aimed at improving its capital position. Furthermore, we may
not be able to maintain the risk-based capital ratios of our subsidiaries above
levels that could give rise to regulatory action.

OUR INSURANCE SUBSIDIARIES MAY BE REQUIRED TO PAY ASSESSMENTS TO FUND
POLICYHOLDER LOSSES OR LIABILITIES AND THIS MAY NEGATIVELY IMPACT OUR FINANCIAL
RESULTS.

The solvency or guaranty laws of most states in which an insurance company
does business may require that company to pay assessments up to certain
prescribed limits to fund policyholder losses or liabilities of other insurance
companies that become insolvent. Insolvencies of insurance companies increase
the possibility that these assessments may be required. These assessments may be
deferred or forgiven under most guaranty laws if they would threaten an
insurer's financial strength and, in certain instances, may be offset against
future premium taxes. We cannot estimate the likelihood and amount of future
assessments. Although past assessments have not been material, if there were a
number of large insolvencies, future assessments could be material and could
have a material adverse effect on our financial results and financial position.

LITIGATION AND REGULATORY INVESTIGATIONS ARE INHERENT IN OUR BUSINESS AND MAY
HARM OUR FINANCIAL STRENGTH AND REDUCE OUR PROFITABILITY.

Insurance companies historically have been subject to substantial
litigation resulting from claims, disputes and other matters. In addition to the
traditional policy claims associated with their businesses, insurance companies
typically face policyholder suits and class action suits. The class action and
policyholder suits are often in connection with insurance sales practices,
policy and claims administration practices and other market conduct issues.
State insurance departments focus on sales practices and product issues in their
market conduct examinations. Negotiated settlements of class action and other
lawsuits have had a material adverse effect on the business, financial condition
and results of operations of insurance companies. We are, in the ordinary course
of our business, a plaintiff or defendant in actions arising out of our
insurance business, including class actions and reinsurance disputes, and, from
time to time, are also involved in various governmental and administrative
proceedings and investigations. Our subsidiary, Philadelphia Life Insurance
Company, which is now known as Conseco Life Insurance Company, is a defendant in
two purported nationwide class action lawsuits alleging fraudulent sales
practices and seeking unspecified damages in Florida federal court. Five
lawsuits were also filed in Mississippi state court against Conseco Life
Insurance Company alleging similar claims. Our former subsidiary, Manhattan
National Life Insurance Company, is a defendant in a purported nationwide class
action lawsuit alleging fraud by non-disclosure of additional charges for
policyholders wishing to pay premiums on other than an annual basis and seeking
unspecified damages in New Mexico state court. Four of our subsidiaries have
also been named in purported nationwide class action lawsuits seeking
unspecified damages in Colorado state court alleging claims similar to those
alleged in the New Mexico suit naming Manhattan National Life Insurance Company.
Conseco Life Insurance Company has been named as a defendant in nine recently
filed purported class actions and individual cases alleging, among other things,
breach of contract with regard to a change made in the way monthly deductions
are calculated for insurance coverage. The ultimate outcome of these lawsuits,
however, cannot be predicted with certainty, and although we do not presently
believe that any of these lawsuits, individually, are material, they could, in
the aggregate, have a material adverse effect on our financial condition.
Because our insurance subsidiaries were not part of our bankruptcy proceedings,
the bankruptcy proceedings did not result in the discharge of any claims,
including claims asserted in litigation, against our insurance subsidiaries. See
"Business -- Legal Proceedings" below.

COMPETITION FROM COMPANIES THAT HAVE GREATER MARKET SHARE, HIGHER RATINGS AND
GREATER FINANCIAL RESOURCES MAY IMPAIR OUR ABILITY TO RETAIN EXISTING CUSTOMERS
AND SALES REPRESENTATIVES, ATTRACT NEW CUSTOMERS AND SALES REPRESENTATIVES AND
MAINTAIN OR IMPROVE OUR FINANCIAL RESULTS.

The supplemental health insurance, annuity and individual life insurance
markets are highly competitive. Competitors include other life and accident and
health insurers, commercial banks, thrifts, mutual funds and broker-dealers.

Our principal competitors vary by product line. Our main competitors for
agent sold long-term care insurance products include GE Financial Assurance,
John Hancock Financial Services, Aegon USA, Lincoln Benefit Life, MetLife and
Unum Provident. Our main competitors for agent sold Medicare supplement

insurance products include Mutual of Omaha, Blue Cross and Blue Shield of
Florida, Physicians Mutual and Standard Life and Accident.

In some of our product lines, such as life insurance and fixed annuities,
we have a relatively small market share. Even in some of the lines in which we
are one of the top five writers, our market share is relatively small. For
example, while our Bankers Life segment ranked third in agent sold long-term
care insurance products in 2003 with a market share of approximately seven
percent, the top two writers of agent sold long-term care insurance products had
a combined market share of approximately 45 percent during the period. In
addition, while our Bankers Life segment was ranked third and our Conseco
Insurance Group segment was ranked fourth in agent sold Medicare supplement
insurance products in 2003 with a combined market share of approximately 17
percent, the top two writers of agent sold Medicare supplement insurance
products had a combined market share of approximately 63 percent during the
period.

Virtually all of our major competitors have higher financial strength
ratings than we do. Many of our competitors are larger companies that have
greater capital, technological and marketing resources, and have access to
capital at a lower cost. Recent industry consolidation, including business
combinations among insurance and other financial services companies, has
resulted in larger competitors with even greater financial resources.
Furthermore, recent changes in federal law have narrowed the historical
separation between banks and insurance companies, enabling traditional banking
institutions to enter the insurance and annuity markets and further increase
competition. This increasing competition may harm our ability to maintain or
increase our profitability.

In addition, because the actual cost of products is unknown when they are
sold, we are subject to competitors who may sell a product at a price that does
not cover its actual cost. Accordingly, if we do not also lower our prices for
similar products, we may lose market share to these competitors. If we lower our
prices to maintain market share, our profitability will decline.

We must attract and retain sales representatives to sell our insurance and
annuity products. Strong competition exists among insurance and financial
services companies for sales representatives. We compete with other insurance
and financial services companies for sales representatives primarily on the
basis of our financial position, financial strength ratings, support services
and compensation and product features. Our competitiveness for such agents also
depends upon the relationships we develop with these agents. If we are unable to
attract and retain sufficient numbers of sales representatives to sell our
products, our ability to compete and our revenues would suffer.

IF WE ARE UNABLE TO ATTRACT AND RETAIN INDEPENDENT AGENTS FOR THE DISTRIBUTION
OF PRODUCTS SOLD THROUGH THE CONSECO INSURANCE GROUP SEGMENT, SALES OF OUR
PRODUCTS WILL DECLINE.

Our Conseco Insurance Group segment markets and distributes its products,
including specified disease insurance, Medicare supplement insurance,
equity-indexed life insurance and equity-indexed annuities, exclusively through
independent agents. Premiums collected by our Conseco Insurance Group segment
through independent distributors totaled: $1,301.6 million, or 31 percent, of
our collected premiums in 2003; $1,680.2 million, or 37 percent, of collected
premiums in 2002; and $2,048.0 million, or 40 percent, of collected premiums in
2001. Given the significance of this distribution channel to our business, our
ability to maintain our relationships with these independent agents is critical
to our financial performance. This ability is dependent upon, among other
things, the compensation we offer independent distributors and the overall
attractiveness of our products to their customers. In addition, the distribution
of our life insurance and annuity products through this channel is particularly
sensitive to the financial strength ratings of our insurance subsidiaries. The
downgrades of our ratings in 2002, as well as our bankruptcy, caused significant
defections among our independent agents and increased our costs of retaining
them, which had a material adverse effect on our results of operations and these
independent parties. Following the downgrade of our A.M. Best rating to "B++" in
July 2002, the premiums we collected from business distributed by independent
agents decreased to $762.6 million in the last six months of 2002 and $668.7
million in the first six months of 2003, compared to $917.6 million in the first
six months of 2002, the period immediately preceding the downgrade. In the event
that we are unable to attract and retain qualified independent distributors of
our products, our operations and financial results may be materially adversely
affected.

WE MAY REQUIRE ADDITIONAL CAPITAL IN THE FUTURE, WHICH MAY NOT BE AVAILABLE OR
MAY ONLY BE AVAILABLE ON UNFAVORABLE TERMS.

Our future capital requirements depend on many factors, including our
ability to write new business successfully and to establish premium rates and
reserves at levels sufficient to cover losses. While we currently expect to fund
our capital needs for the next several years from our operations, if those prove
to be insufficient we may need to raise additional funds through future
financings and, if we are unable to raise additional funds, we may need to
curtail our growth and reduce our assets. Any equity or debt financing, if
available at all, may be on terms that are not favorable to us. In the case of
equity financings, dilution to our shareholders could result, and in any case
such securities may have rights, preferences and privileges that are senior to
those of the shares offered hereby. If we cannot obtain adequate capital on
favorable terms or at all, our business, operating results and financial
condition could be adversely affected.

OUR FINANCIAL RESULTS WOULD BE NEGATIVELY IMPACTED IF WE ARE REQUIRED TO
INDEMNIFY THE PURCHASERS OF BUSINESSES THAT WE HAVE RECENTLY SOLD.

We are subject to retained liabilities and indemnification obligations
related to businesses we have sold. For example, we retained liabilities for
certain purported class action litigation in connection with our sale of
Manhattan National Life Insurance Company in June 2002. In addition, the
agreement entered into in connection with our sale of Conseco Variable Insurance
Company imposes continuing indemnification obligations with respect to
liabilities relating to our period of ownership of Conseco Variable Insurance
Company, and the agreement entered into in connection with our sale of Conseco
Finance imposes continuing tax sharing obligations with respect to tax
liabilities relating to our period of ownership of Conseco Finance. We cannot
assure you that we will not be subject to claims with respect to these
continuing or residual obligations, or that any such claims would not be
material.

[C] RISKS RELATED TO THE OFFERING

THE PRICE OF OUR COMMON STOCK MAY FLUCTUATE SIGNIFICANTLY, AND YOU COULD LOSE
ALL OR PART OF YOUR INVESTMENT.

Volatility in the market price of our common stock may prevent you from
being able to sell your shares at or above the price you paid for your shares.
The market price of our common stock could fluctuate significantly for various
reasons which include:

- our quarterly or annual earnings or those of other companies in our
industry;

- the public's reaction to our press releases, our other public
announcements and our filings with the Securities and Exchange
Commission;

- changes in earnings estimates or recommendations by research analysts who
track our common stock or the stocks of other companies in our industry;

- new laws or regulations or new interpretations of laws or regulations
applicable to our business;

- changes in accounting standards, policies, guidance, interpretations or
principles;

- changes in general conditions in the U.S. and global economies or
financial markets, including those resulting from war, incidents of
terrorism or responses to such events; and

- sales of common stock by our directors and executive officers.

In addition, in recent years, the stock market has experienced extreme
price and volume fluctuations. This volatility has had a significant impact on
the market price of securities issued by many companies, including companies in
the insurance industry. The changes frequently appear to occur without regard to
the operating performance of these companies. The price of our common stock
could drop materially based upon factors that have little or nothing to do with
Conseco.

If our share price is volatile, we may be the target of additional
securities litigation, which is costly and time-consuming to defend. In the
past, following periods of market volatility in the price of a company's
securities, security holders have often instituted class action litigation. If
the market value of our common stock experiences adverse fluctuations and we
become involved in this type of litigation, regardless of the outcome, we could
incur substantial legal costs and our management's attention could be diverted
from the operation of our business, causing our business to suffer.

THERE IS A LIMITED TRADING HISTORY IN OUR COMMON STOCK AND AN ACTIVE MARKET MAY
NOT DEVELOP.

We emerged from bankruptcy, and our common stock was approved for listing
on the New York Stock Exchange, on September 10, 2003. Accordingly, there is a
limited trading history in our common stock and an active market may not
continue in shares of our common stock. The liquidity of the market for shares
of our common stock and the prices at which the stock trades will depend upon
the amount outstanding, the number of holders thereof, the interest of
securities dealers in maintaining a market in the securities and other factors
beyond our control. Consequently, you may not be able to sell shares of our
common stock at prices equal to or greater than the price you paid in this
offering.

ISSUANCE OF ADDITIONAL COMMON STOCK OR PREFERRED STOCK COULD ADVERSELY AFFECT
HOLDERS OF OUR COMMON STOCK.

We may issue additional shares of common stock in the future, either in
subsequent offerings, in connection with future acquisitions or business
combinations or upon exercise, conversion or exchange of other securities. Under
certain circumstances, we are authorized to issue, without stockholder approval,
over 7.0 billion additional shares of common stock. After the completion of this
offering, we will have million outstanding shares of common stock, or
shares if the underwriters exercise in full their option to purchase
additional shares. This number includes million shares that we are
selling in this offering, which may be resold immediately in the public market.
Holders of our outstanding series A warrants are entitled to purchase one share
of our common stock at a price of $27.60 per share for each such warrant. The
series A warrants are exercisable for an aggregate of up to 6,000,000 shares of
common stock and expire on September 10, 2008. Holders of our class B preferred
stock issued in the concurrent offering will be entitled at their option at any
time on or after the day immediately following the issue date of the class B
preferred stock to convert the shares of class B preferred stock into an
aggregate of shares of our common stock and, under specified circumstances,
such shares could be convertible into an aggregate of up to shares of our
common stock. In the event that we are unable to pay all accumulated dividends
on the class B preferred stock in cash on the mandatory conversion date pursuant
to the terms thereof, we are obligated to deliver additional shares of our
common stock in respect of such unpaid dividends.

In connection with our reorganization, we entered into registration rights
agreements with creditors of our predecessor with respect to our common stock
and class A preferred stock. Under these agreements, these stockholders have the
right, subject to limitations, to require us to effect the registration of their
shares upon written demand. In addition, subject to limitations, if we file a
registration statement covering our equity securities for our own account or for
the account of any holder of our equity securities (including the registration
statement of which this prospectus is a part), we must offer to holders of
registrable securities the opportunity to register such number of shares of
registrable securities as such holder may request.

In addition, our board of directors is authorized to issue additional
series of shares of preferred stock without any action on the part of our
stockholders. Our board of directors also has the power, without stockholder
approval, to set the terms of any such series of shares of preferred stock that
may be issued, including voting rights, conversion rights, dividend rights,
preferences over our common stock with respect to dividends or if we liquidate,
dissolve or wind up our business and other terms. If we issue preferred stock in
the future that has preference over our common stock with respect to the payment
of dividends or upon our liquidation, dissolution or winding up, or if we issue
preferred stock with voting rights that dilute the voting power of our common
stock, the rights of holders of our common stock or the market price of our
common stock could be adversely affected. We are also authorized to issue,
without stockholder approval, securities convertible into either common stock or
preferred stock.
29

We also consider from time to time various strategic alternatives that
could involve issuances of additional common stock, including but not limited to
acquisitions and business combinations, but do not currently have any definitive
plans to enter into any of these transactions.

The issuance of additional common stock or securities convertible into
common stock would result in dilution of existing stockholders' equity interest
in us. Issuances of substantial amounts of our common stock, or the perception
that such issuances could occur, may adversely affect prevailing market prices
for our common stock.

PROVISIONS IN OUR CERTIFICATE OF INCORPORATION AND OUR BYLAWS MAY MAKE IT MORE
DIFFICULT AND EXPENSIVE FOR INVESTORS TO REMOVE OUR CURRENT BOARD OF DIRECTORS
AND MANAGEMENT.

Provisions in our amended and restated certificate of incorporation and our
second amended and restated bylaws may make it more difficult and expensive for
investors to remove our current board of directors and management. These
provisions include:

- a classified board of directors, which could prevent a stockholder, or
group of stockholders, having majority voting power, from obtaining
control of our board of directors until the second annual meeting of
stockholders following September 10, 2003, the effective date of our
emergence from bankruptcy;

- advance notice requirements for stockholder proposals and director
nominations; and

- removal of directors only for cause prior to the second annual meeting of
stockholders following September 10, 2003, the effective date of our
emergence from bankruptcy.

STATE INSURANCE LAWS MAY DELAY, DETER OR PREVENT A TAKEOVER ATTEMPT THAT MAY BE
IN THE BEST INTERESTS OF STOCKHOLDERS.

State insurance laws include provisions that may delay, deter or prevent a
takeover attempt that may be in the best interests of stockholders. For
instance, state insurance holding company laws and regulations applicable to us
generally provide that no person may acquire control of a company, and thus
indirect control of its insurance subsidiaries, unless the person has provided
required information to, and the acquisition is approved or not disapproved by,
the appropriate insurance regulatory authorities. Generally, any person
acquiring beneficial ownership of 10 percent or more of the voting power of our
capital stock would be presumed to have acquired control, unless the appropriate
insurance regulatory authorities, upon advance application, determine otherwise.
In addition, they may prevent stockholders from receiving the benefit from any
premium over the market price of our common stock offered by a bidder in a
potential takeover. Even in the absence of a takeover attempt, the existence of
these provisions may adversely affect the prevailing market price of our common
stock and class B preferred stock if they are viewed as discouraging takeover
attempts in the future.

[P] RISKS RELATED TO THE OFFERING

THE MARKET PRICE OF THE COMMON STOCK YOU RECEIVE ON THE MANDATORY CONVERSION
DATE MAY BE LESS THAN THE EFFECTIVE PRICE YOU PAID FOR THESE SHARES BY
PURCHASING SHARES OF CLASS B PREFERRED STOCK.

The number of shares of our common stock that you will receive upon the
conversion of your shares of class B preferred stock is not fixed but instead
will depend on the average of the closing price per share of our common stock on
each of the 20 consecutive trading days ending on the third trading day
immediately preceding the mandatory conversion date, which we refer to as the
applicable market value. The market value of common stock received by you on the
mandatory conversion date may be less than the effective price per share paid by
you for our common stock by buying the shares of class B preferred stock. If the
applicable market value of the common stock is less than the initial price of
$ , the market value of the common stock issued to you pursuant to each
share of class B preferred stock on the mandatory conversion date will be less
than the effective price per share paid by you for the common stock on the date
of issuance of the shares of class B preferred stock, assuming that the market
value on the mandatory conversion date is the same as the applicable market
value of the common stock. Accordingly, you assume the risk that the market
value of the common stock may decline, and the decline could be substantial.

WE COULD BE PREVENTED FROM PAYING DIVIDENDS ON SHARES OF THE CLASS B PREFERRED
STOCK, WHICH MAY NEGATIVELY IMPACT YOUR INVESTMENT.

You will only receive cash dividends on shares of the class B preferred
stock if we have funds legally available for the payment of dividends and such
payment will not result in a default under our senior credit facility or cause
the class B preferred stock not to come within the definition of "Permitted
Refinancing Preferred Stock" under the senior credit agreement. The definition
of "Permitted Refinancing Preferred Stock" in the senior credit agreement
requires, among other things, that the preferred stock not require the payment
of cash dividends in excess of the amount that we could have paid in compliance
with the coverage ratio under the senior credit agreement for the four most
recent fiscal quarters ending prior to the payment of any such dividend,
determined on a pro forma basis giving effect to such dividend. Such funds may
not be available to pay cash dividends to you, including upon mandatory
conversion. For the quarter ended December 31, 2003 on an as adjusted basis to
give effect to the concurrent offerings of our common stock and class B
preferred stock and the use of proceeds thereof as described under "Use of
Proceeds," we would have been entitled to pay dividends of up to $ in
compliance with our senior credit facility and in accordance with applicable
law. In addition, because we are a holding company, our ability to pay cash
dividends on shares of the class B preferred stock may be limited by
restrictions on our ability to obtain sufficient funds through dividends from
our subsidiaries. Accordingly, there is no guarantee that we will be able to pay
any cash dividends on shares of the class B preferred stock.

We have agreed to deliver shares of our common stock in respect of
accumulated and unpaid dividends on the mandatory conversion date in the event
that we are unable to pay such dividends in full in cash on such date under the
foregoing restrictions, but the value of any such shares of our common stock and
your ability to sell those shares at any particular price is uncertain.

OUR ISSUANCE OF ADDITIONAL COMMON STOCK OR PREFERRED STOCK MAY CAUSE OUR COMMON
STOCK PRICE TO DECLINE, WHICH MAY NEGATIVELY IMPACT YOUR INVESTMENT.

Issuances or sales of substantial numbers of additional shares of our
common or preferred stock, including in connection with future acquisitions, if
any, or the perception that such issuances or sales could occur, may cause
prevailing market prices for our common stock to decline. We may sell additional
shares of common stock in subsequent public offerings. As of the date of this
prospectus, our amended and restated certificate of incorporation provides that
we have authority to issue up to 8.0 billion shares of common stock. As of
December 31, 2003, 100,115,772 shares of common stock were outstanding. Also, as
of such date, there were 43.9 million shares of common stock authorized and
available for issuance, 7.8 billion shares of common stock authorized and
reserved for issuance upon conversion or exchange of our class A preferred
stock, 6.0 million shares of common stock authorized but reserved for issuance
upon exercise of our series A

warrants, and 10.0 million shares of common stock available for issuance under
our long-term equity incentive plan. If all of the class A preferred stock is
redeemed with the proceeds of the offerings, the shares of common stock reserved
for issuance upon conversion or exchange of the class A preferred stock will be
available for issuance for other purposes. to shares of
common stock will be issuable upon conversion of the shares of class B preferred
stock, assuming that all dividends on the class B preferred stock are paid in
cash. An additional to shares of common stock will be
issuable upon conversion of the class B preferred stock if the underwriters
exercise their option to purchase additional shares of class B preferred stock
in full. We will reserve for issuance the maximum number of shares of our common
stock issuable upon conversion of the shares of class B preferred stock at all
times that the class B preferred stock is convertible. Holders of our
outstanding series A warrants are also entitled to purchase one share of our
common stock at a price of $27.60 per share for each such warrant. The series A
warrants are exercisable for an aggregate of up to 6.0 million shares of common
stock and expire on September 10, 2008. Because the value of the class B
preferred stock is derived in large part from the value of the underlying common
stock into which it is convertible, such declines in the value of our common
stock could negatively impact the value of your investment in the class B
preferred stock.

In connection with our plan of reorganization, we entered into registration
rights agreements with creditors of our predecessor with respect to our common
stock and class A preferred stock. Under these agreements, these stockholders
have the right, subject to limitations, to require us to effect the registration
of their shares upon written demand. In addition, subject to limitations, if we
file a registration statement covering our equity securities for our own account
or for the account of any holder of our equity securities (including the
registration statement of which this prospectus is a part), we must offer to
holders of registrable securities the opportunity to register such number of
shares of registrable securities as such holder may request.

In addition, our board of directors is authorized to issue additional
series of shares of preferred stock without any action on the part of our
stockholders. Our board of directors also has the power, without stockholder
approval, to set the terms of any such series of shares of preferred stock that
may be issued, including voting rights, conversion rights, dividend rights,
preferences over our common stock with respect to dividends or if we liquidate,
dissolve or wind up our business and other terms. If we issue cumulative
preferred stock in the future that has preference over our common stock with
respect to the payment of dividends or upon our liquidation, dissolution or
winding up, or if we issue preferred stock with voting rights that dilute the
voting power of our common stock, the market price of our common stock could
decrease, adversely affecting the value of our class B preferred stock. We are
also authorized to issue, without stockholder approval, securities convertible
into either common stock or preferred stock and securities that rank on a parity
with the class B preferred stock as to the payment of dividends and
distributions of assets upon liquidation.

A DECLINE IN THE TRADING PRICE OF OUR COMMON STOCK MAY CAUSE THE TRADING PRICE
OF THE CLASS B PREFERRED STOCK TO SIMILARLY DECLINE.

The trading prices for the shares of class B preferred stock in the
secondary market will be directly affected by the trading prices of our common
stock, the general level of interest rates and our credit quality. It is
impossible to predict whether the price of the common stock or interest rates
will rise or fall. Trading prices of the common stock will be influenced by our
operating results and prospects and by economic, financial and other factors. In
addition, general market conditions, including the level of, and fluctuations
in, the trading prices of stocks generally, and sales of substantial amounts of
common stock by us in the market after the offering of the class B preferred
stock, or the perception that such sales could occur, could affect the price of
our common stock, and thus the price of our class B preferred stock.
Fluctuations in interest rates may give rise to arbitrage opportunities based
upon changes in the relative value of the common stock underlying the class B
preferred stock. Any such arbitrage could, in turn, affect the trading prices of
the shares of class B preferred stock and our common stock.

We emerged from bankruptcy, and our common stock was approved for listing
on the New York Stock Exchange, on September 10, 2003. Accordingly, there has
been a limited trading history in our common

stock and an active and liquid market may not continue in shares of our common
stock. The liquidity of the market for shares of our common stock and the prices
at which our stock trades will depend upon the amount outstanding, the number of
holders thereof, the interest of securities dealers in maintaining a market in
the securities and other factors beyond our control. Consequently, you bear the
risk that the value of your investment in the class B preferred stock will be
negatively impacted if shares of our common stock do not trade at prices equal
to or greater than the value of such common stock on the date you purchased the
class B preferred stock.

THE OPPORTUNITY FOR EQUITY APPRECIATION PROVIDED BY AN INVESTMENT IN OUR CLASS B
PREFERRED STOCK IS LESS THAN THAT PROVIDED BY A DIRECT INVESTMENT IN OUR COMMON
STOCK. ACCORDINGLY, THE RETURN ON AN INVESTMENT IN OUR CLASS B PREFERRED STOCK
MAY BE LESS THAN THE RETURN ON AN INVESTMENT IN OUR COMMON STOCK.

Your opportunity for equity appreciation afforded by investing in shares of
our class B preferred stock is less than your opportunity for equity
appreciation if you directly invested in our common stock. This opportunity is
less because the market value of the common stock to be received by you pursuant
to the shares of class B preferred stock on the mandatory conversion date,
assuming that the market value is the same as the applicable market value of the
common stock, will only exceed the effective price per share paid by you for our
common stock on the date of issuance of the class B preferred stock if the
applicable market value of the common stock exceeds the threshold appreciation
price of $ , which represents an appreciation of approximately % over the
initial price of $ . If the applicable market value of our common stock
exceeds the initial price but falls below the threshold appreciation price, you
realize no equity appreciation of the common stock for the period during which
you own the class B preferred stock. Furthermore, if the applicable market value
of our common stock equals or exceeds the threshold appreciation price, you
would receive on the mandatory conversion date only approximately % of the
value of the shares of common stock you could have purchased with $ at the last
reported sale price of our common stock on the date hereof.

HOLDERS OF THE SHARES OF CLASS B PREFERRED STOCK HAVE LIMITED VOTING RIGHTS, AND
WILL HAVE NO RIGHTS AS A COMMON STOCKHOLDER UNTIL THEY ACQUIRE OUR COMMON STOCK.

Until you acquire shares of our common stock upon conversion, you will have
no rights with respect to our common stock, including voting rights (except as
required by applicable state law or our amended and restated certificate of
incorporation), rights to respond to tender offers and rights to receive any
dividends or other distributions on our common stock. Upon conversion, you will
be entitled to exercise the rights of a holder of common stock only as to
matters for which the record date occurs after the conversion date. For example,
in the event that an amendment is proposed to our certificate of incorporation
or bylaws requiring stockholder approval and the record date for determining the
stockholders of record entitled to vote on the amendment occurs prior to
delivery of the common stock, you will not be entitled to vote on the amendment,
although you will nevertheless be subject to any changes in the powers,
preferences or special rights of our common stock.

OUR CLASS B PREFERRED STOCK HAS NEVER BEEN PUBLICLY TRADED AND AN ACTIVE TRADING
MARKET FOR SUCH STOCK MAY NOT DEVELOP.

Prior to this offering, there has been no public market for the shares of
class B preferred stock. Although we intend to apply to list the shares of class
B preferred stock on the New York Stock Exchange, an active trading market may
not develop, or, if developed, may not be maintained. Also, the underwriters
have advised us that they intend to facilitate secondary market trading by
making a market in the shares of class B preferred stock. However, the
underwriters are not obligated to make a market in the shares of class B
preferred stock and may discontinue market making activities at any time.

THE SHARES OF CLASS B PREFERRED STOCK WILL RANK JUNIOR TO ALL OF OUR AND OUR
SUBSIDIARIES' LIABILITIES IN THE EVENT OF A BANKRUPTCY, LIQUIDATION OR WINDING
UP OF OUR ASSETS.

In the event of bankruptcy, liquidation or winding up, our assets will be
available to pay obligations on the class B preferred stock only after all of
our liabilities have been paid and only on a pari passu basis with any pari
passu preferred stock we may issue hereafter. In addition, the class B preferred
stock will effectively rank junior to all existing and future liabilities of our
subsidiaries and any preferred stock of our subsidiaries held by third parties,
and thus rights of holders of the shares of class B preferred stock to
participate in the assets of our subsidiaries upon any liquidation or
reorganization of any subsidiary will be subject to the prior claims of that
subsidiary's creditors and preferred equity holders. As of December 31, 2003, we
had approximately $27.1 billion of total liabilities, excluding indebtedness to
our subsidiaries. In the event of bankruptcy, liquidation or winding up, there
may not be sufficient assets remaining, after paying our and our subsidiaries'
liabilities, to pay amounts due on the class B preferred stock then outstanding.
To the extent we have assets remaining after paying our and our subsidiaries'
liabilities, we are obligated to pay amounts due on any parity stock then
outstanding on a pari passu basis with amounts due on any or all the shares of
class B preferred stock then outstanding.

THE VALUE OF THE CLASS B PREFERRED STOCK MAY BE ADVERSELY AFFECTED BY
MODIFICATIONS TO OUR CAPITAL STRUCTURE FOR WHICH THE CONVERSION RATE WILL NOT BE
ADJUSTED.

The number of shares of common stock that you are entitled to receive on
the mandatory conversion date, or as a result of early conversion of a share of
class B preferred stock, is subject to adjustment for certain events arising
from stock splits and combinations, stock dividends, cash dividends and certain
other actions by us that modify our capital structure. However, we will not
adjust the conversion rate for other events, including offerings of common stock
for cash by us or in connection with acquisitions. As a result, an event that
adversely affects the value of the shares of class B preferred stock, but does
not result in an adjustment to the conversion rate, could occur. Further, we are
not restricted from issuing additional common stock while the class B preferred
stock is outstanding and have no obligation to consider your interests for any
reason. If we issue additional shares of common stock, it may materially and
adversely affect the price of our common stock and, because of the relationship
of the number of shares to be received on the mandatory conversion date to the
price of the common stock, such other events may adversely affect the trading
price of the shares of class B preferred stock.

YOU MAY HAVE TO PAY TAXES WITH RESPECT TO DISTRIBUTIONS ON OUR COMMON STOCK THAT
YOU DO NOT RECEIVE.

The number of shares of common stock that you are entitled to receive on
the mandatory conversion date, or as a result of early conversion of the shares
of class B preferred stock, is subject to adjustment for certain events arising
from stock splits and combinations, stock dividends, certain cash dividends and
certain other actions by us that modify our capital structure. If the conversion
rate is adjusted as a result of a distribution that is taxable to our common
stockholders, such as a cash dividend, you would be required to include an
amount in income for federal income tax purposes, notwithstanding the fact that
you do not actually receive such distribution. The amount that you will
generally have to include in income would be the fair market value of the
additional common stock to which you would be entitled by reason of the increase
in your proportionate equity interest in the company to the extent of our
current and accumulated earnings and profits. In addition, non-U.S. holders of
shares of class B preferred stock may, in certain circumstances, be deemed to
have received a distribution subject to U.S. federal withholding tax
requirements.

PROVISIONS IN OUR CERTIFICATE OF INCORPORATION AND OUR BYLAWS MAY MAKE IT MORE
DIFFICULT AND EXPENSIVE FOR INVESTORS TO REMOVE OUR CURRENT BOARD OF DIRECTORS
AND MANAGEMENT.

- advance notice requirements for stockholder proposals and director
nominations; and

- removal of directors only for cause prior to the second annual meeting of
stockholders following September 10, 2003, the effective date of our
emergence from bankruptcy.

STATE INSURANCE LAWS MAY DELAY, DETER OR PREVENT A TAKEOVER ATTEMPT THAT MAY BE
IN THE BEST INTERESTS OF STOCKHOLDERS.

OUR RECENT EMERGENCE FROM BANKRUPTCY

On December 17, 2002, our predecessor and certain of its non-insurance
company subsidiaries filed voluntary petitions for relief under chapter 11 of
the bankruptcy code in the United States Bankruptcy Court for the Northern
District of Illinois, Eastern Division. We emerged from bankruptcy protection
under the plan of reorganization, which was confirmed pursuant to an order of
the bankruptcy court on September 9, 2003, and became effective on September 10,
2003. Upon the confirmation of the plan of reorganization, we implemented fresh
start accounting in accordance with Statement of Position 90-7 "Financial
Reporting by Entities in Reorganization under the Bankruptcy Code". Our
accounting and actuarial systems and procedures are designed to produce
financial information as of the end of a month. Accordingly, for accounting
convenience purposes, we applied the effects of fresh start accounting on August
31, 2003. Our activities for the period from September 1, 2003 through September
10, 2003 are therefore included in the successor's statement of operations and
excluded from the predecessor's statement of operations. See "Selected
Consolidated Financial and Operating Data" and the notes entitled "Basis of
Presentation" and "Fresh Start Reporting" in our audited consolidated financial
statements included elsewhere in this prospectus for more information on fresh
start accounting.

The plan of reorganization generally provided for the full payment or
reinstatement of allowed administrative claims, priority claims, fully secured
claims and certain intercompany claims, and the distribution of new equity
securities and warrants to partially secured and unsecured creditors of our
predecessor. Holders of claims arising under our predecessor's $1.5 billion
senior bank credit facility also received a pro rata interest in our new senior
credit facility. Holders of our predecessor's common stock and preferred stock
did not receive any distribution under the plan of reorganization, and these
securities, together with all other prepetition securities and the $1.5 billion
senior bank credit facility of our predecessor, were cancelled on the effective
date.

On the effective date, under the terms of the plan of reorganization, we
emerged from the bankruptcy proceedings with a capital structure consisting of:

- our new $1.3 billion senior credit facility;

- approximately 34.4 million shares of class A preferred stock with an
initial aggregate liquidation preference of approximately $859.7 million;

- 100.0 million shares of common stock, excluding shares issued to our new
non-executive chairman upon his appointment and shares issued or to be
issued to directors, officers or employees under a new equity incentive
plan; and

- series A warrants to purchase 6.0 million shares of our common stock.

Under the terms of the plan of reorganization, we distributed the equity
securities to the creditors of our predecessor in the amounts outlined below:

- lenders under our predecessor's senior bank credit facility and director
and officer loan program received approximately 34.4 million shares of
our class A preferred stock, with an initial aggregate liquidation
preference of $859.7 million;

- holders of our predecessor's senior notes received approximately 32.3
million shares of our common stock;

- holders of our predecessor's guaranteed senior notes received
approximately 60.6 million shares of our common stock;

- holders of our predecessor's general unsecured claims received
approximately 3.8 million shares of our common stock; and

- holders of trust preferred securities issued by our predecessor's
subsidiary trusts received approximately 1.5 million shares of our common
stock and series A warrants to purchase 6.0 million shares of our common
stock at an exercise price of $27.60 per share.

The distribution of our common stock summarized above represents
approximately 98 percent of all of the shares of common stock to be distributed
under the plan of reorganization. As of December 31, 2003, approximately 1.8
million shares of outstanding common stock have been reserved for distribution
under the plan of reorganization in respect of disputed claims, the resolution
of which is still pending. If reserved shares remain after resolution of these
disputed claims, then the reserved shares will be reallocated to other general
unsecured creditors of our predecessor as provided for under the plan of
reorganization.

As part of our chapter 11 reorganization, we sold substantially all of the
assets of our predecessor's finance business and exited from this line of
business. Our finance business was conducted through our predecessor's indirect
wholly-owned subsidiary, Conseco Finance Corp. We accounted for our finance
business as a discontinued operation in 2002 once we formalized our plans to
sell it. On April 1, 2003, Conseco Finance Corp. and 22 of its direct and
indirect subsidiaries, which collectively comprised substantially all of the
finance business, filed liquidating plans of reorganization with the bankruptcy
court in order to facilitate the sale of this business. The sale of the finance
business was completed in the second quarter of 2003. We did not receive any
proceeds from this sale in respect of our interest in Conseco Finance Corp., nor
did any creditors of our predecessor. As of March 31, 2003, we ceased to include
the assets and liabilities of Conseco Finance Corp. on our predecessor's
consolidated balance sheet.

For a complete discussion of the distributions provided for under the plan
of reorganization, you should refer to the complete text of the plan of
reorganization confirmed by the bankruptcy court, which is filed as an exhibit
to the registration statement of which this prospectus forms a part.

[P] RATIOS OF EARNINGS TO FIXED CHARGES AND EARNINGS TO FIXED CHARGES,
PREFERRED STOCK DIVIDENDS, AND DISTRIBUTIONS ON COMPANY-OBLIGATED
MANDATORILY REDEEMABLE PREFERRED SECURITIES OF SUBSIDIARY TRUSTS

The following table sets forth our ratio of earnings to fixed charges and
our ratio of earnings to fixed charges, preferred stock dividends and
distributions on company-obligated mandatorily redeemable preferred securities
of subsidiary trusts for the periods indicated. For purposes of the table,
"earnings" represent consolidated net income (loss) before income taxes,
minority interest, discontinued operations, extraordinary gain (loss),
cumulative effect of accounting change and fixed charges, as defined below.

"Fixed charges" for the "ratio of earnings to fixed charges as reported"
consist of:

- interest expense on corporate debt, including amortization;

- interest expense on investment borrowings;

- interest added to policyholder account balances; and

- the portion of rental expense we deem representative of the interest
factor.

"Fixed charges" for the "ratio of earnings to fixed charges excluding
interest added to policyholder balances" consist of:

- interest expense on corporate debt, including amortization;

- interest expense on investment borrowings; and

- the portion of rental expense we deem representative of the interest
factor.

We calculate the "ratio of fixed charges excluding interest added to
policyholder account balances" as a measure of our historical ability to meet
our interest obligations related to corporate debt and investment borrowings,
without consideration of insurance policy benefits credited to policyholders in
the form of interest.

"Preferred stock dividends" and "distributions on company-obligated
mandatorily redeemable preferred securities of subsidiary trusts" consist of
income before taxes that is required to pay dividends or distributions on such
securities. For further information with respect to the following table, please
see Exhibit 12.1 to the registration statement of which this prospectus is a
part.

SUCCESSOR PREDECESSOR
------------- ----------------------------------------
FOUR MONTHS EIGHT MONTHS
ENDED ENDED YEAR ENDED DECEMBER 31
DECEMBER 31, AUGUST 31, -------------------------
2003 2003(A) 2002 2001 2000 1999
------------ ------------ ---- ---- ---- ----

Ratio of earnings to fixed charges:
As reported............................... 1.79x 4.96x (b) (d) (f) 2.10x
Excluding interest added to policyholder
account balances........................ 4.46x 10.04x (b) (d) (f) 4.24x
Ratio of earnings to fixed charges,
preferred stock dividends and
distributions on company-obligated
mandatorily redeemable preferred
securities of subsidiary trusts:
As reported............................. 1.46x 4.96x (c) (e) (g) 1.72x
Excluding interest added to policyholder
account balances...................... 2.23x 10.04x (c) (e) (g) 2.55x

---------------

(a) Earnings for the eight months ended August 31, 2003 included reorganization
items totaling $2,130.5 million. The reorganization items included: (1)
$3,151.4 million related to the gain on the discharge of prepetition
liabilities; (2) $(950.0) million related to fresh start adjustments; and
(3) $(70.9) million related to professional fees. The ratios for the eight
months ended August 31, 2003, excluding such reorganization items, would be
as follows: (1) ratio of

earnings to fixed charges -- 1.08x; and (2) ratio of earnings to fixed
charges excluding interest added to policyholder account balances -- 1.17x.
There were no preferred stock dividends or distributions on
company-obligated mandatorily redeemable preferred securities of subsidiary
trusts during the eight months ended August 31, 2003.

(b) For such ratios, earnings were $1,632.2 million less than fixed charges.
Earnings for the year ended December 31, 2002 included: (1) special and
reorganization charges of $110.9 million; (2) goodwill impairment charges
of $500 million; and (3) provision for losses related to loan guarantees of
$240.0 million, as described in greater detail in the notes to the
consolidated financial statements included in this prospectus.

(c) For such ratios, earnings were $1,808.6 million less than fixed charges.
Earnings for the year ended December 31, 2002 included: (1) special and
reorganization charges of $110.9 million; (2) goodwill impairment charges
of $500 million; and (3) provision for losses related to loan guarantees of
$240.0 million, as described in greater detail in the notes to the
consolidated financial statements included in this prospectus.

(d) For such ratios, earnings were $243.4 million less than fixed charges.
Earnings for the year ended December 31, 2001 included: (1) special charges
of $80.4 million; and (2) provision for losses related to loan guarantees
of $169.6 million, as described in greater detail in the notes to the
consolidated financial statements included in this prospectus.

(e) For such ratios, earnings were $447.1 million less than fixed charges.
Earnings for the year ended December 31, 2001 included: (1) special charges
of $80.4 million; and (2) provision for losses related to loan guarantees
of $169.6 million, as described in greater detail in the notes to the
consolidated financial statements included in this prospectus.

(f) For such ratios, earnings were $777.5 million less than fixed charges.
Earnings for the year ended December 31, 2000 included: (1) special charges
of $305.0 million; and (2) provision for losses related to loan guarantees
of $231.5 million, as described in greater detail in the notes to the
consolidated financial statements included in this prospectus.

(g) For such ratios, earnings were $1,018.0 million less than fixed charges.
Earnings for the year ended December 31, 2000 included: (1) special charges
of $305.0 million; and (2) provision for losses related to loan guarantees
of $231.5 million, as described in greater detail in the notes to the
consolidated financial statements included in this prospectus.

USE OF PROCEEDS

[C] Net proceeds from the offering of the common stock will be
approximately $ million, or $ million if the underwriters exercise in
full their option to purchase additional shares of common stock in the offering,
assuming a public offering price of $ per share, and after deducting
underwriting discounts and commissions and the estimated expenses of the
offering. Concurrently with the offering of the common stock, we are offering
shares of class B preferred stock. Net proceeds from the offering of
the class B preferred stock will be approximately $ million, or $
million if the underwriters exercise in full their option to purchase additional
shares of class B preferred stock in the offering, assuming a public offering
price of $ per share, and after deducting underwriting discounts and
commissions and the estimated expenses of the offering. The closing of the
common stock offering is not conditioned upon the closing of the class B
preferred stock offering.

[P] Net proceeds from the offering of the class B preferred stock will be
approximately $ million, or $ million if the underwriters exercise in
full their option to purchase additional shares of class B preferred stock in
the offering, assuming a public offering price of $ per share, and after
deducting underwriting discounts and commissions and the estimated expenses of
the offering. Concurrently with the offering of the class B preferred stock, we
are offering shares of common stock. Net proceeds from the offering of
the common stock will be approximately $ million, or $ million if the
underwriters exercise in full their option to purchase additional shares of
common stock in the offering, assuming a public offering price of $ per
share, and after deducting underwriting discounts and commissions and the
estimated expenses of the offering. The closing of the class B preferred stock
offering is conditioned upon the closing of the common stock offering and upon
having sufficient net proceeds from the offerings to redeem all of our
outstanding class A preferred stock.

We expect to use the net proceeds from the offering of the common stock and
the class B preferred stock as follows:

- approximately $ million to redeem all outstanding shares of our
class A preferred stock,

- approximately $ million to $ million to repay
indebtedness under our senior credit facility, which matures in 2009 and
currently has a weighted average interest rate of 7.8 percent,

- approximately $ million to $ million to contribute
capital to our insurance subsidiaries, and

- any remaining amount for general corporate purposes.

If we do not complete the class B preferred stock offering or for any other
reason do not raise sufficient proceeds to accomplish all of our intended
objectives, we intend to first redeem all of the outstanding shares of our class
A preferred stock.

PRICE RANGE OF OUR COMMON STOCK

All of our predecessor's common stock was cancelled pursuant to the plan of
reorganization, which became effective September 10, 2003. Our common stock has
traded on the New York Stock Exchange under the symbol "CNO" since September 12,
2003. The high and low sale prices of our common stock, as reported on the New
York Stock Exchange, for the quarterly periods beginning September 12, 2003 are
set forth below. On March 22, 2004, the last reported sale price of our common
stock on the New York Stock Exchange was $22.32. As of March 17, 2004, there
were 100,115,772 shares of our common stock outstanding, and there were
approximately 67,000 holders of our common stock.

CONSECO
COMMON STOCK
---------------
HIGH LOW
------ ------

2003
Third Quarter (beginning September 12).................... $22.50 $17.70
Fourth Quarter............................................ 22.18 18.05
2004
First Quarter (through March 22).......................... $23.89 $20.90

DIVIDEND POLICY

We have not declared or paid any cash dividends on our common stock since
our emergence from bankruptcy, nor do we expect to pay any cash dividends on our
common stock for the foreseeable future. We intend to pay cash dividends on our
class B preferred stock in accordance with its terms. We currently intend to
retain any additional future earnings to finance our operations and growth. Any
future determination to pay cash dividends on our common stock will be at the
discretion of our board of directors and will be dependent on our earnings,
financial condition, operating results, capital requirements, any contractual
restrictions, regulatory and other restrictions on the payment of dividends by
our subsidiaries to us, and other factors that our board of directors deems
relevant. In addition, our senior credit facility contains limitations on our
ability to declare and pay cash dividends. Moreover, the payment of dividends on
our common stock is subject to our prior satisfaction of our obligations under
any outstanding shares of preferred stock with preference as to the payment of
dividends, including our existing class A preferred stock and the class B
preferred stock.

As an insurance holding company, the assets of which consist primarily of
direct and indirect equity interests in our insurance company subsidiaries, our
ability to pay dividends to our stockholders and meet our other obligations,
including operating expenses and debt service, depends primarily on the receipt
of dividends and other payments from our insurance company subsidiaries. The
payment of dividends by our insurance subsidiaries is regulated under the
insurance laws of the states in which they are organized. These regulations
generally permit dividends to be paid from statutory earned surplus of the
relevant insurance company for any 12-month period in amounts equal to the
greater of, or in a few states, the lesser of:

- statutory net gain from operations or statutory net income for the prior
year; or

- 10 percent of statutory capital and surplus as of the end of the
preceding year.

Any dividends in excess of these levels require the approval of the director or
commissioner of the applicable state insurance department. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

CAPITALIZATION

The following table sets forth, as of December 31, 2003, our actual
consolidated capitalization and our capitalization as adjusted to give effect
to:

- the sale of shares of common stock at a public offering price
of $ per share; and

- the sale of shares of class B preferred stock at a public
offering price of $ per share; and

- the application of the estimated net proceeds from the offerings as set
forth under "Use of Proceeds" as if the offerings had occurred as of
December 31, 2003.

The table should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and our audited
consolidated financial statements and the related notes thereto appearing
elsewhere in this prospectus.

AS OF DECEMBER 31,
2003
------------------
ACTUAL AS ADJUSTED
------ -----------
(IN MILLIONS)

Notes payable............................................... $1,300.0 $
-------- --------
Equity:
Preferred stock, par value $0.01 per share, 265,000,000
authorized:
34,386,740 shares of class A preferred stock issued
and outstanding actual; shares of class A
preferred stock issued and outstanding as
adjusted............................................ 887.5
No shares of class B preferred stock issued and
outstanding actual; shares of class B
preferred stock issued and outstanding as
adjusted............................................ --
Common stock, par value $0.01 per share, 8,000,000,000
authorized 100,115,772 shares issued and outstanding
actual, shares issued and outstanding as
adjusted............................................... 1.0
Additional paid-in-capital................................ 1,641.9
Accumulated other comprehensive income.................... 218.7
Retained earnings......................................... 68.5
-------- --------
Total equity........................................... 2,817.6
-------- --------
Total capitalization.............................. $4,117.6 $
======== ========

SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA

The following table sets forth selected financial data for Conseco, Inc. as
of and for the four months ended December 31, 2003, as of and for the eight
months ended August 31, 2003, and as of and for each of the four years ended
December 31, 2002. The data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
our consolidated financial statements and related notes included in this
prospectus.

For financial reporting purposes, we refer to Conseco and its subsidiaries
on or prior to August 31, 2003 as the predecessor and after August 31, 2003 as
the successor.

Our predecessor and certain of its subsidiaries emerged from chapter 11
bankruptcy proceedings on September 10, 2003. However, for accounting
convenience, the effective date of the plan was deemed to have occurred on
August 31, 2003. Fresh start accounting has been implemented as of August 31,
2003, and accordingly, we restated all of our assets and liabilities to their
current estimated value, reestablished shareholders' equity at the
reorganization value determined in connection with our plan of reorganization,
and recorded the portion of the reorganization value which could not be
attributed to specific tangible or identified intangible assets as goodwill. As
a result, our financial statements for periods following August 31, 2003, are
not comparable with those prepared before that date.

As part of our chapter 11 reorganization, we sold the assets of our finance
business and exited this line of business effective March 31, 2003. In October
2002, we sold Conseco Variable Insurance Company, our primary writer of variable
annuity products. The results of operations of these former businesses have been
reported as discontinued operations in all periods presented in the selected
financial data prior to their sale. The predecessor's net income (loss) includes
amounts related to the discontinued operations of $16.0 million, $(2,216.8)
million, $(100.6) million, $(381.9) million and $117.3 million for the eight
months ended August 31, 2003 and the years ended December 31, 2002, 2001, 2000
and 1999, respectively. The sales of these businesses further affect the
comparability of the selected financial data.

We have derived the selected financial data for the four months ended
December 31, 2003, the eight months ended August 31, 2003, the years ended
December 31, 2002 and 2001 and as of December 31, 2003 and 2002 from our audited
consolidated financial statements included in this prospectus. We have derived
the selected financial data for the years ended December 31, 2000 and 1999 and
as of December 31, 2001, 2000 and 1999 from our audited consolidated financial
statements not included in this prospectus.

We have prepared the selected financial data, other than statutory data, in
conformity with generally accepted accounting principles. We have derived the
statutory data from the statements filed by our insurance subsidiaries with
regulatory authorities and have prepared the statutory data in accordance with
statutory accounting practices, which vary in certain respects from generally
accepted accounting principles.

SUCCESSOR PREDECESSOR
------------ ------------------------------------------------------------
AS OF OR FOR AS OF OR FOR
THE FOUR THE EIGHT
MONTHS MONTHS
ENDED ENDED YEARS ENDED DECEMBER 31,
DECEMBER 31, AUGUST 31, ---------------------------------------------
2003 2003 2002 2001 2000 1999
------------ ------------ ---- ---- ---- ----
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA)

STATEMENT OF OPERATIONS DATA(a)
Insurance policy income.................. $ 1,005.8 $ 2,204.3 $ 3,602.3 $ 3,992.7 $ 4,170.7 $ 3,990.4
Net investment income.................... 474.6 969.0 1,334.3 1,550.0 1,578.1 2,287.7
Net realized investment gains (losses)... 11.8 (5.4) (556.3) (340.0) (304.8) 80.0
Total revenues........................... 1,505.5 3,202.2 4,450.4 5,492.0 5,581.4 6,315.3
Interest expense on corporate notes
payable and investment borrowings
(contractual interest: $268.5 for the
eight months ended August 31, 2003; and
$345.3 for 2002)....................... 36.8 202.5 341.9 400.0 454.3 300.2
Total benefits and expenses.............. 1,356.0 1,030.0 6,082.6 5,735.4 6,358.9 5,301.2
Income (loss) before income taxes,
minority interest, discontinued
operations and cumulative effect of
accounting change...................... 149.5 2,172.2 (1,632.2) (243.4) (777.5) 1,014.1
Cumulative effect of accounting change,
net of income tax...................... -- -- (2,949.2) -- (55.3) --
Net income (loss)........................ 96.3 2,201.7 (7,835.7) (405.9) (1,191.2) 595.0
Preferred stock dividends................ 27.8 -- 2.1 12.8 11.0 1.5
Net income (loss) applicable to common
stock.................................. 68.5 2,201.7 (7,837.8) (418.7) (1,202.2) 593.5
PER SHARE DATA
Net income, basic........................ $ .68
Net income, diluted...................... $ .67
Book value per common share
outstanding............................ $ 19.28
Weighted average shares outstanding for
basic earnings......................... 100.1
Weighted average shares outstanding for
diluted earnings....................... 143.5
Shares outstanding at period-end......... 100.1
BALANCE SHEET DATA -- AT PERIOD END
Total investments........................ $22,796.7 $22,018.3 $21,783.7 $25,067.1 $25,017.6 $26,431.6
Goodwill................................. 952.2 99.4 100.0 3,695.4 3,800.8 3,927.8
Total assets............................. 29,920.1 28,318.1 46,509.0 61,432.2 58,589.2 52,185.9
Corporate notes payable and commercial
paper.................................. 1,300.0 -- -- 4,085.0 5,055.0 4,624.2
Liabilities subject to compromise........ -- 6,951.4 4,873.3 -- -- --
Total liabilities........................ 27,102.5 30,519.5 46,637.9 54,764.7 51,810.9 43,990.6
Company-obligated mandatorily redeemable
preferred securities of subsidiary
trusts................................. -- -- 1,921.5 1,914.5 2,403.9 2,639.1
Shareholders' equity (deficit)........... 2,817.6 (2,201.4) (2,050.4) 4,753.0 4,374.4 5,556.2
STATUTORY DATA(b)
Statutory capital and surplus............ $ 1,514.1 $ 1,064.4 $ 1,649.8 $ 1,881.8 $ 2,170.5
Asset valuation reserve.................. 40.9 11.6 105.1 266.8 362.8
Total statutory capital and surplus and
asset valuation reserve................ 1,555.0 1,076.0 1,754.9 2,148.6 2,533.3

---------------

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following analysis of the consolidated results of our operations and
financial condition should be read in conjunction with "Selected Consolidated
Financial and Operating Data," and the consolidated financial statements and the
related notes to the financial statements and the other financial information
included elsewhere in this prospectus.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements. Forward-looking
statements typically are identified by the use of terms such as "anticipate,"
"believe," "plan," "estimate," "expect," "project," "intend," "may," "will,"
"would," "contemplate," "possible," "attempts," "seeks," "should," "could,"
"goal," "target," "on track," "comfortable with," "optimistic" and similar
words, although some forward-looking statements are expressed differently. You
should consider statements that contain these words carefully because they
describe our expectations, plans, strategies and goals and our beliefs
concerning future business conditions, our results of operations, financial
position, and our business outlook or they state other "forward-looking"
information based on currently available information. The "Risk Factors" section
of this prospectus provides examples of risks, uncertainties and events that
could cause our actual results to differ materially from the expectations
expressed in our forward-looking statements. Assumptions and other important
factors that could cause our actual results to differ materially from those
anticipated in our forward-looking statements include, among other things:

- the potential adverse impact of our predecessor's chapter 11 petition on
our business operations, and relationships with our customers, employees,
regulators, distributors and agents;

- our ability to operate our business under the restrictions imposed by our
senior bank credit facility or future credit facilities;

- our ability to improve the financial strength ratings of our insurance
company subsidiaries and the impact of recent rating downgrades on our
business;

- our ability to obtain adequate and timely rate increases on our
supplemental health products including our long-term care business;

- general economic conditions and other factors, including prevailing
interest rate levels, stock and credit market performance and health care
inflation, which may affect our ability to sell products and access
capital on acceptable terms, the market value of our investments, and the
lapse rate and profitability of policies;

- our ability to achieve anticipated synergies and levels of operational
efficiencies;

- customer response to new products, distribution channels and marketing
initiatives;

- mortality, morbidity, usage of health care services, persistency and
other factors which may affect the profitability of our insurance
products;

- performance of our investments;

- changes in the Federal income tax laws and regulations which may reduce
or eliminate the relative tax advantages of some of our products;

- increasing competition in the sale of insurance and annuities;

- regulatory changes or actions, including those relating to regulation of
the financial affairs of our insurance companies, including the payment
of dividends to us, regulation of financial services affecting bank sales
and underwriting of insurance products, regulation of the sale,
underwriting and pricing of products, and health care regulation
affecting health insurance products;

- the ultimate outcome of lawsuits filed against us and other legal and
regulatory proceedings to which we are subject; and

- the risk factors or uncertainties listed from time to time in our other
filings with the Securities and Exchange Commission.

Other factors and assumptions not identified above are also relevant to the
forward-looking statements, and if they prove incorrect, could also cause actual
results to differ materially from those projected. The forward-looking
statements made in this prospectus relate only to events as of the date on which
the statements are made. We undertake no obligation to update any
forward-looking statements to reflect events or circumstances after the date on
which the statement is made or to reflect the occurrence of unanticipated
events.

OVERVIEW

We are a holding company for a group of insurance companies operating
throughout the United States that develop, market and administer supplemental
health insurance, annuity, individual life insurance and other insurance
products. We focus on serving the senior and middle-income markets, which we
believe are attractive, high growth markets. We sell our products through three
distribution channels: career agents, professional independent producers, some
of whom sell one or more of our product lines exclusively, and direct marketing.

- BANKERS LIFE, which consists of the businesses of Bankers Life and
Casualty and Colonial Penn. Bankers Life and Casualty markets and
distributes Medicare supplement insurance, life insurance, long-term care
insurance and fixed annuities to the senior market through approximately
4,000 exclusive career agents and sales managers. Colonial Penn markets
graded benefit and simplified issue life insurance directly to consumers
through television advertising, direct mail, the internet and
telemarketing. Both Bankers Life and Casualty and Colonial Penn market
their products under their own brand names.

We also have a corporate segment, which consists of holding company
activities and certain noninsurance company businesses that are not related to
our operating segments.

We have restated all historical periods presented in "Management's
Discussion and Analysis of Financial Condition and Results of Operations" to
reflect our new segments.

We emerged from bankruptcy protection under our plan of reorganization,
which was confirmed pursuant to an order of the bankruptcy court on September 9,
2003, and became effective on September 10, 2003. Upon the confirmation of the
plan of reorganization, we implemented fresh start accounting in accordance with
Statement of Position 90-7 "Financial Reporting by Entities in Reorganization
under the Bankruptcy Code." Our accounting and actuarial systems and procedures
are designed to produce financial information as of the end of a month.
Accordingly, for accounting convenience purposes, we applied the effects of
fresh start accounting on August 31, 2003. Our activities for the period
September 1, 2003 through

September 10, 2003 are therefore included in the successor's statement of
operations and excluded from the predecessor's statement of operations. We
believe the net income impact of the use of the convenience date is immaterial.

In accordance with Statement of Position 90-7, we restated all of our
assets and liabilities to their current estimated value, reestablished
shareholders' equity at the reorganization value determined in connection with
our plan of reorganization and recorded the portion of the reorganization value
which could not be attributed to specific tangible or identified intangible
assets as goodwill. As a result, our financial statements for periods following
August 31, 2003, are not comparable with those prepared before that date.

For the four months ended December 31, 2003, net income after dividends on
our convertible exchangeable preferred stock totaled $68.5 million, or 67 cents
per diluted share. Results for the four month period included net after-tax
gains of $3.4 million from realized investment gains and venture capital losses.

Despite low ratings and our decisions to discontinue or curtail sales of
some of our products in order to conserve capital coming out of bankruptcy,
collected premiums in our core products have been relatively stable since our
emergence from bankruptcy.

The past year was a year of transition for us. We continue to focus on the
factors that we believe are most important to achieving our key business
objective, improving the financial strength ratings of our insurance
subsidiaries:

- COMBINED STATUTORY EARNINGS (LOSS) (a non-GAAP measure) totaled $286.1
million and $(465.0) million in 2003 and 2002, respectively. Included in
such earnings (loss) are net realized capital gains (losses), net of
income taxes, of $32.8 million and $(516.1) million in 2003 and 2002,
respectively. The 2003 statutory results included several positive income
items resulting from the sale of the General Motors building in the third
quarter, as well as expense reductions and other operating improvements.

- COMBINED STATUTORY CAPITAL AND SURPLUS (a non-GAAP measure) at December
31, 2003, was $1.5 billion, up from $1.1 billion at year-end 2002.

- COMBINED RISK-BASED CAPITAL RATIO (a non-GAAP measure) was 287 percent at
December 31, 2003, up from 166 percent at year-end 2002.

Our other major goals for 2004 are to reduce our capital cost, strengthen
our balance sheet and improve our execution on the basics of our business by:

- further reducing operating expenses and improving the efficiency of our
operations across all business functions;

- continuing to address the problems in the acquired blocks of long-term
care business in the other business in run-off segment;

- consolidating and streamlining our back-office systems to reduce
complexity, lower our costs and improve customer service; and

- expanding the reach of the career agents in our Bankers Life segment into
new geographic markets.

CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Management has made estimates in the past that we believed to
be appropriate but were subsequently revised to reflect actual experience. If
our future experience differs materially from these estimates and assumptions,
our results of operations and financial condition could be affected.

We base our estimates on historical experience and other assumptions that
we believe are reasonable under the circumstances. We continually evaluate the
information used to make these estimates as our business and the economic
environment change. The use of estimates is pervasive throughout our financial
statements. The accounting policies and estimates we consider most critical are
summarized below. Additional information on our accounting policies is included
in the note to our consolidated financial statements included elsewhere in this
prospectus entitled "Summary of Significant Accounting Policies".

INVESTMENTS

At December 31, 2003, the carrying value of our investment portfolio was
$22.8 billion. The accounting risks associated with these assets relate to the
recognition of income, our determination of other-than-temporary impairments and
our estimation of fair values.

We defer any fees received or costs incurred when we originate investments.
We amortize fees, costs, discounts and premiums as yield adjustments over the
contractual lives of the investments. We consider anticipated prepayments on
structured securities in determining estimated yields on such securities.
Adjustments to yields as a result of actual prepayments being different than
anticipated are recognized as investment income (loss).

When we sell a security, other than trading securities or venture capital
investments, we report the difference between the sale proceeds and the
amortized cost, determined based on specific identification, as a realized
investment gain or loss.

We regularly evaluate all of our investments for possible impairment based
on current economic conditions, credit loss experience and other
investee-specific developments. If there is a decline in a security's net
realizable value that is other than temporary, the decline is recognized as a
realized loss and the cost basis of the security is reduced to its estimated
fair value. During the four months ended December 31, 2003, we recorded $9.6
million of writedowns of fixed maturities, equity securities and other invested
assets as a result of conditions that caused us to conclude a decline in the
fair value of the investments was other than temporary. During the eight months
ended August 31, 2003, we recorded writedowns of fixed maturity investments,
equity securities and other invested assets totaling $51.3 million.

If a decline in value is determined to be other than temporary and the cost
basis of the security is written down to fair value, we review the circumstances
which caused us to believe that the decline was other than temporary with
respect to other investments in our portfolio. If such circumstances exist with
respect to other investments, those investments are also written down to fair
value. Future events may occur, or additional or updated information may become
available, which may necessitate future realized losses of securities in our
portfolio. Significant losses in the carrying value of our investments could
have a material adverse effect on our earnings in future periods.

Our evaluation of investments for impairment requires significant judgments
to be made, including:

- the identification of potentially impaired securities;

- the determination of their estimated fair value; and

- assessment of whether any decline in estimated fair value is other than
temporary.

Our periodic assessment of whether unrealized losses are "other than temporary"
also requires significant judgment. Factors considered include:

- the extent to which market value is less than the cost basis;

- the length of time that the market value has been less than cost;

- whether the unrealized loss is event driven, credit-driven or a result
of changes in market interest rates;

- the near-term prospects for improvement in the issuer and/or its
industry;

- whether the investment is investment grade and our security analyst's
view of the investment's rating and whether the investment has been
downgraded since its purchase;

- whether the issuer is current on all payments in accordance with the
contractual terms of the investment and is expected to meet all of its
obligations under the terms of the investment;

- our ability and intent to hold the investment for a period of time
sufficient to allow for any anticipated recovery; and

- the underlying asset and enterprise values of the issuer.

If new information becomes available or the financial condition of the investee
changes, our judgments may change resulting in the recognition of a realized
investment loss at that time. At December 31, 2003, our net accumulated other
comprehensive income included gross unrealized losses on investments of $34.5
million. We consider all such declines in estimated fair value to be temporary.

Estimated fair values for our investments are determined based on estimates
from nationally recognized pricing services, broker-dealer market makers and
internally developed methods. Our internally developed methods require us to
make judgments about the security's credit quality, liquidity and market spread.

Below-investment grade securities have different characteristics than
investment grade corporate debt securities. Risk of loss upon default by the
borrower is significantly greater with respect to below-investment grade
securities than with other corporate debt securities. Below-investment grade
securities are generally unsecured and are often subordinated to other creditors
of the issuer. Also, issuers of below-investment grade securities usually have
higher levels of debt and are more sensitive to adverse economic conditions,
such as recession or increasing interest rates, than are investment grade
issuers. We attempt to reduce the overall risk in the below-investment grade
portfolio, as in all investments, through careful credit analysis, strict
investment policy guidelines, and diversification by issuer and/or guarantor and
by industry.

During the four months ended December 31, 2003, we sold $604.9 million of
fixed maturity investments which resulted in gross realized investment losses,
before income taxes, of $7.3 million. During the first eight months of 2003, we
sold $2.7 billion of fixed maturity investments which resulted in gross realized
investment losses, before income taxes, of $62.4 million. Securities sold at a
loss are sold for a number of reasons including but not limited to:

- changes in the investment environment;

- expectation that the market value could deteriorate further;

- desire to reduce our exposure to an issuer or an industry;

- changes in credit quality; and

- our analysis indicating there is a high probability that the security is
other-than-temporarily impaired.

We seek to manage the relationship between the estimated duration of our
invested assets and the expected duration of our insurance liabilities. When the
estimated durations of assets and liabilities are similar, exposure to interest
rate risk is minimized because a change in the value of assets should be largely
offset by a change in the value of liabilities. A mismatch of the durations of
invested assets and insurance liabilities could have a significant impact on our
results of operations and financial position. See "-- Quantitative and
Qualitative Disclosures About Market Risks" for additional discussion of the
duration of our invested assets and insurance liabilities.

For more information on our investment portfolio and our critical
accounting policies related to investments, see the note to our consolidated
financial statements included elsewhere in this prospectus entitled
"Investments".

VALUE OF POLICIES INFORCE AT THE EFFECTIVE DATE AND COST OF POLICIES PRODUCED

In conjunction with the implementation of fresh start accounting, we
eliminated the historical balances of our predecessor's cost of policies
purchased and cost of policies produced as of the effective date and replaced
them with the value of policies inforce.

The cost assigned to the right to receive future cash flows from contracts
existing at August 31, 2003 is referred to as the value of policies inforce. We
also defer renewal commissions paid in excess of ultimate commission levels
related to the existing policies in this account. The balance of this account is
amortized, evaluated for recovery, and adjusted for the impact of unrealized
gains (losses) in the same manner as the cost of policies produced described
below. We expect to amortize approximately 10 percent of the December 31, 2003
balance of value of policies inforce in 2004, 10 percent in 2005, 9 percent in
2006, 8 percent in 2007 and 8 percent in 2008.

The cost of policies produced are those costs that vary with, and are
primarily related to, producing new insurance business. These amounts are
amortized using the interest rate credited to the underlying policy:

- in relation to the estimated gross profits for investment and universal
life-type products; or

- in relation to future anticipated premium revenue for other products.

The amortization for investment and universal life-type products is adjusted
retrospectively when estimates of current or future gross profits and margins to
be realized from a group of products and contracts are revised.

When we realize a gain or loss on investments backing our universal life or
investment-type products, we adjust the amortization to reflect the change in
estimated gross profits from the products due to the gain or loss realized and
the effect of the event on future investment yields. We also adjust the cost of
policies produced for the change in amortization that would have been recorded
if actively managed fixed maturity securities had been sold at their stated
aggregate fair value and the proceeds reinvested at current yields. We include
the impact of this adjustment in accumulated other comprehensive income (loss)
within shareholders' equity.

At December 31, 2003, the combined balance of the value of policies inforce
and cost of policies produced was $3.1 billion. The recovery of these costs is
dependent on the future profitability of the related business.

Each year, we evaluate the recoverability of the unamortized balance of the
value of policies inforce and the cost of policies produced. We consider
estimated future gross profits or future premiums, expected mortality or
morbidity, interest earned and credited rates, persistency and expenses in
determining whether the balance is recoverable. If we determine a portion of the
unamortized balance is not recoverable, it is charged to amortization expense.

The assumptions we use to amortize and evaluate the recoverability of the
value of policies inforce and the cost of policies produced involve significant
judgment. A revision to these assumptions could have a significant adverse
effect on our results of operations and financial position.

GOODWILL

Upon our emergence from bankruptcy, we revalued our assets and liabilities
to current estimated fair value and established our capital accounts at the
reorganization value determined in connection with the plan of reorganization.
We recorded the $1,141.6 million of the reorganization value which could not be
attributed to specific tangible or identified intangible assets as goodwill.
Under current accounting rules, which became effective January 1, 2002, goodwill
is not amortized but is subject to an annual impairment test, or if there is an
indication that an impairment may exist, more frequent tests. We obtained an
independent appraisal of our business in connection with the preparation of the
plan of reorganization which indicated no impairment of our goodwill existed.
However, we may have to recognize impairment charges in the future if
circumstances change.

Although the goodwill balance will not be subject to amortization, it will
be reduced by future use of our net deferred income tax assets, including the
deferred tax assets associated with tax operating loss carryforwards, existing
at August 31, 2003. The goodwill balance was reduced by $189.4 million in the
four months ended December 31, 2003 as a result of our use of that amount of our
tax operating loss carryforward during that period. A valuation allowance has
been provided for the remaining balance of such net deferred income tax assets
due to the uncertainties regarding their realization. See "-- Income Taxes"
below for further discussion.

INCOME TAXES

Our income tax expense includes deferred income taxes arising from
temporary differences between the financial reporting and tax bases of assets
and liabilities, capital loss carryforwards and net operating loss
carryforwards. In assessing the realization of deferred income tax assets, we
consider whether it is more likely than not that the deferred income tax assets
will be realized. The ultimate realization of our deferred income tax assets
depends upon generating future taxable income during the periods in which our
temporary differences become deductible and before our net operating loss
carryforwards expire. In addition, the use of our net operating loss
carryforwards is dependent, in part, on whether the IRS ultimately agrees with
the tax position we plan to take in our current and future tax returns. With
respect to the deferred income tax assets, we assess the need for a valuation
allowance on a quarterly basis.

At the time of our emergence from bankruptcy, we established a valuation
allowance for the entire balance of net deferred income tax assets as we
believed that the realization of such net deferred income tax assets in future
periods was uncertain. As of December 31, 2003, we continue to believe that the
realization of our net deferred income tax asset is uncertain and continue to
maintain a valuation allowance for the entire balance of net deferred income tax
assets. We reached this conclusion after considering the losses we realized in
recent years, the uncertainties related to the tax treatment for the
worthlessness of our investment in Conseco Finance, which is more fully
discussed below, and the likelihood of future taxable income exclusive of
reversing temporary differences and carryforwards.

As of December 31, 2003, we had approximately $3.6 billion of net operating
loss carryforwards, after taking into account the reduction in tax attributes
described in the paragraph which follows and the loss resulting from the
worthlessness of our predecessor's investment in Conseco Finance discussed
below. These net operating loss carryforwards expire as follows: $11.2 million
in 2004; $4.6 million in 2005; $.2 million in 2006; $5.8 million in 2007; $6.6
million in 2008; $10.5 million in 2009; $4.2 million in 2010; $2.5 million in
2011; $16.0 million in 2012; $43.4 million in 2013; $6.9 million in 2014; $60.4
million in 2016; $41.5 million in 2017; $3,399.5 million in 2018; $.7 million in
2019; $5.5 million in 2020; and $1.0 million in 2022. The timing and manner in
which we will utilize the net operating loss carryforwards in any year or in
total may be limited by various provisions of the Internal Revenue Code, and
interpretation thereof, and our ability to generate sufficient future taxable
income in the relevant carryforward period.

The Code provides that any income realized as a result of the cancellation
of indebtedness in bankruptcy will reduce certain tax attributes, including net
operating loss carryforwards. We realized an estimated $2.5 billion of
cancellation of debt income when we emerged from bankruptcy. Accordingly, our
net operating loss carryforwards were reduced by $2.5 billion.

The following paragraphs summarize some of the various limitations and
contingencies which exist with respect to the future utilization of the net
operating loss carryforwards.

We realized an estimated $5.4 billion tax loss in 2003 as a result of our
investment in Conseco Finance. In consultation with our tax advisors and based
on relevant provisions of the Code, we intend to treat this loss as an ordinary
loss, thereby increasing our net operating loss carryforward. We have requested
a pre-filing examination by the IRS to confirm that this loss should be treated
as an ordinary loss. If the IRS were to disagree with our conclusion and such
determination ultimately prevailed, the loss would be treated as a capital loss,
which would only be available to reduce future capital gains for the next 5
years. The procedures related to the pre-filing examination are in process, but
are not expected to be completed before August 2004.

The Code limits the extent which losses realized by one or more a non-life
entities may offset income from one or more life insurance companies to the
lesser of:

- 35 percent of the income of the life insurance company; or

- 35 percent of the total loss.

There is no limitation with respect to the ability to utilize net operating
losses generated by a life insurance company. Subsequent to our emergence from
bankruptcy, we reorganized some of our subsidiaries to improve their capital
position and, as a result, the loss related to Conseco Finance was realized by a
life insurance company. Accordingly, we believe the loss should be treated as a
life insurance loss and should not be subject to the limitations described
above. However, if the IRS were to disagree with our conclusion and such
determination ultimately prevailed, the loss related to Conseco Finance would be
subject to the limitation described in the first sentence of this paragraph.

The timing and manner in which we will be able to utilize some or all of our net
operating loss carryforwards may be limited by section 382 of the Code. Section
382 imposes limitations on a corporation's ability to use its net operating
losses if the company undergoes an ownership change. Because we underwent an
ownership change pursuant to our reorganization, we have determined that this
limitation applies to us. In order to determine the amount of this limitation,
we must determine how much of our net operating loss carryforward relates to the
period prior to our emergence from bankruptcy (and, as a result is subject to
the section 382 limitation) and how much relates to the period after emergence
(and, as a result is not subject to the section 382 limitation). Pursuant to the
Code, we may:

- allocate the current year tax loss on a pro rata basis to determine
earnings (loss) post- and pre-emergence; or

- specifically identify transactions in each period and record them in the
period in which they actually occurred.

We intend to elect the latter, which we believe will result in a substantial
portion of the loss related to Conseco Finance being treated as post-emergence
and therefore not subject to the section 382 limitation. Any losses that are
subject to the section 382 limitation will only be utilized by us up to
approximately $140 million per year, with any unused amounts carried forward to
the following year.

The reduction of any portion of our deferred income tax valuation
allowance, including the deferred tax assets associated with net operating loss
carryforwards existing as of August 31, 2003, will be accounted for as a
reduction of goodwill when eliminated pursuant to Statement of Position 90-7. If
all goodwill is eliminated, any additional reduction of the valuation allowance
existing at August 31, 2003 will be accounted for as a reduction of other
intangible assets until exhausted and thereafter as an addition to
paid-in-capital. Goodwill was reduced by $189.4 million during the four months
ended December 31, 2003 due to a reduction in the valuation allowance for net
deferred income tax assets established at the effective date.

LIABILITIES FOR INSURANCE PRODUCTS

At December 31, 2003, the total balance of our liabilities for insurance
and asset accumulation products was $24.8 billion. These liabilities are often
payable over an extended period of time and the profitability of the related
products is dependent on the pricing of the products and other factors.
Differences between our expectations when we sold these products and our actual
experience could result in future losses.

materially exceed our reserves and have a material adverse effect on our results
of operations and financial condition. Our financial results depend
significantly upon the extent to which our actual claims experience is
consistent with the assumptions we used in determining our reserves and pricing
our products. If our assumptions with respect to future claims are incorrect,
and our reserves are insufficient to cover our actual losses and expenses, we
would be required to increase our liabilities, which would negatively affect our
operating results.

Liabilities for insurance products are calculated using management's best
judgments of mortality, morbidity, lapse rates, investment experience and
expense levels that are based on our past experience and standard actuarial
tables.

In accordance with Statement of Position 90-7, we established insurance
liabilities and an asset for the value of policies inforce at the effective date
using current assumptions. Adjustments to the predecessor's liabilities for
insurance and asset accumulation products as of August 31, 2003 are summarized
below (dollars in millions):

PREDECESSOR FRESH START SUCCESSOR
BALANCE SHEET ADJUSTMENTS BALANCE SHEET
------------- ----------- -------------

Liabilities for insurance and asset accumulation
products:
Traditional and limited payment products:
Traditional life insurance products.......... $ 1,885.3 $ 320.3 $ 2,205.6
Limited pay annuities........................ 880.0 140.0 1,020.0
Individual accident and health............... 5,245.8 1,887.9 7,133.7
Group life and health........................ 692.0 136.7 828.7
Unearned premiums............................ 3.3 -- 3.3
--------- -------- ---------
Total liabilities for traditional and
limited payment products................ 8,706.4 2,484.9 11,191.3
--------- -------- ---------
Interest-sensitive products:
Investment contracts......................... 8,489.8 132.9 8,622.7
Universal life-type products................. 3,994.6 (15.4) 3,979.2
--------- -------- ---------
Total liabilities for interest-sensitive
products................................ 12,484.4 117.5 12,601.9
--------- -------- ---------
Other liabilities for insurance and asset
accumulation products:
Separate accounts and investment trusts...... 87.7 -- 87.7
Claims payable and other policyholder
funds...................................... 897.1 (10.3) 886.8
--------- -------- ---------
Total other liabilities for insurance and
asset accumulation products............. 984.8 (10.3) 974.5
--------- -------- ---------
Total liabilities for insurance and asset
accumulation products........................... $22,175.6 $2,592.1 $24,767.7
========= ======== =========

The following provides explanations for the fresh-start adjustment to
insurance liabilities related to our insurance inforce at the effective date.

Traditional Insurance and Limited Pay Products

In accordance with Statement of Financial Accounting Standards No. 60,
"Accounting and Reporting by Insurance Enterprises" and Statement of Financial
Accounting Standards No. 97, "Accounting and Reporting by Insurance Enterprises
for certain Long-Duration Contracts and for Realized Gains and Losses from the
Sale of Investments", the predecessor used the original actuarial assumptions
determined when traditional long-duration and limited payment insurance
contracts were issued in determining liability calculations through the fresh
start date, provided the resulting liabilities were adequate to provide for
future benefits and expenses under the related contracts. This accounting
principle is referred to as the "lock in" principle and is only applicable to
traditional insurance and limited pay products. The use of assumptions that

are locked in at the time of issue means that absent loss recognition, the same
assumptions are used in accounting for a particular block of business unless the
block is subject to purchase or fresh start accounting.

At the effective date, the successor established insurance liabilities at
the present value of future benefits and expenses associated with the policies
by using current best-estimate assumptions with provisions for adverse
deviation. Such assumptions include estimates as to investment yields,
mortality, morbidity, withdrawals, lapses and maintenance expenses. The current
best-estimate assumptions for these blocks of business differ from the original
actuarial assumptions determined when the business was acquired or issued as
further described in the following paragraphs.

Due to the current interest rate environment and the requirement to mark
the value of the investment portfolio to market, we changed our assumptions
related to future investment earnings. The weighted average expected yield on
our investment portfolio decreased to approximately 5.6 percent at the effective
date from 6.7 percent at December 31, 2002. Approximately $.9 billion of the
fresh-start increase to insurance liabilities is the result of changes in future
expected investment earnings.

The performance of our long-term care business (especially the acquired
block originally sold through independent agents) has generally been unfavorable
relative to the predecessor's assumptions established when these blocks of
business were acquired. For example, variance in actual versus estimated
morbidity, lapses and expenses have been unfavorable to original assumptions.
Approximately $1.4 billion of the increase to insurance liabilities is the
result of changes in non-interest assumptions for our long-term care policies.
Our assumption changes for long-term care business included:

- changes in morbidity assumptions from estimates made when the business
was acquired to recent Company experience;

- changes in mortality assumptions related to certain blocks of this
business from the 1958 and 1980 Commissioners Standard Ordinary Mortality
table to the 1983 Group Annuity Mortality table; and

- changes in ultimate lapse ratios from a range of approximately 3 percent
to 5.5 percent prior to the adoption of fresh start accounting to a range
of 2 percent to 3.5 percent.

Interest-Sensitive Products Subject to Requirements of SFAS 97

The insurance liability for asset accumulation products such as deferred
annuities and universal life products is generally equal to current policyholder
account balances. These balances generally do not change as a result of the
adoption of fresh start accounting. The fresh-start adjustment to insurance
liabilities for interest-sensitive products primarily results from:

- the adoption of Statement of Position 03-01 as of the effective date; and

- certain predecessor insurance liabilities that were different from the
present value of estimated future benefits as of August 31, 2003.

The adoption of Statement of Position 03-01 as of the effective date
required a change in methodology regarding persistency bonuses provided to
policyholders who continue to keep their policies inforce for a stated period of
time. The predecessor recognized the cost of this benefit over the period prior
to the time the benefit is credited in proportion to estimated gross profits and
assumed a certain number of policies would terminate before the benefit was
credited. Under Statement of Position 03-01, the cost for such benefits is
recognized ratably over the period prior to the time the benefit is credited
without assuming policy terminations. Insurance liabilities increased by
approximately $.1 billion as a result of the adoption of Statement of Position
03-01.

In addition, the insurance liabilities for certain predecessor insurance
liabilities were different than the present value of estimated future benefits
as of the effective date.

The predecessor had previously established an insurance liability related
to some of its business to recognize the future loss expected to be recognized
for the former practice of reducing the cost of insurance charges to amounts
below the level permitted under the provisions of the policy. The predecessor
amortized

this liability into income in proportion to estimated gross profits on the
business, consistent with Statement of Financial Accounting Standards No. 97
requirements for unearned revenues. The predecessor had previously decided to
discontinue the practice of providing this nonguaranteed benefit. Accordingly,
the remaining insurance liability established for this benefit was no longer
required at August 31, 2003, resulting in a $.1 billion reduction to reserves in
conjunction with our adoption of fresh-start accounting.

The liabilities established for our equity-indexed annuity products,
including the value of options attributable to policyholders for the estimated
life of the annuity contract and accounted for as embedded derivatives, are
established pursuant to different accounting rules than other interest-sensitive
products. At the effective date, the present value of estimated future benefits
for our equity-indexed products exceeded the value of the predecessor's
liabilities by $.2 billion, resulting in a fresh-start adjustment.

LIABILITIES FOR LOSS CONTINGENCIES RELATED TO LAWSUITS AND OUR GUARANTEES OF
BANK LOANS AND RELATED INTEREST LOANS

We are involved on an ongoing basis in lawsuits relating to our operations,
including with respect to sales practices, and we and current and former
officers and directors are defendants in pending class action lawsuits asserting
claims under the securities laws and in derivative lawsuits. The ultimate
outcome of these lawsuits cannot be predicted with certainty. We recognize an
estimated loss from these loss contingencies when we believe it is probable that
a loss has been incurred and the amount of the loss can be reasonably estimated.
However, it is difficult to measure the actual loss that might be incurred
related to litigation. The ultimate outcome of these lawsuits could have a
significant impact on our results of operations and financial position.

In conjunction with the plan of reorganization, $481.3 million principal
amount of bank loans made to certain former directors and certain current and
former officers and key employees to enable them to purchase common stock of the
predecessor were transferred to the successor. These loans had been guaranteed
by the predecessor. We received all rights to collect the balances due pursuant
to the original terms of these loans. In addition, we hold loans to participants
for interest on the bank loans which total approximately $220 million. The
former bank loans and the interest loans are collectively referred to as the
"director and officer loans." We regularly evaluate the collectibility of these
loans in light of the collateral we hold and the creditworthiness of the
participants. At December 31, 2003, we have estimated that approximately $51.0
million of the director and officer loan balance, which is included in other
assets, is collectible, net of the cost of collection. An allowance has been
established to reduce the recorded balance of the director and officer loans to
this balance.

Pursuant to the settlement that was reached with the official committee of
the trust originated preferred securities holders and the official committee of
unsecured creditors in the plan of recognition, the former holders of the trust
originated preferred securities (issued by the predecessor's subsidiary trusts
and eliminated in our reorganization) who did not opt out of the bankruptcy
settlement, will be entitled to receive 45 percent of any proceeds from the
collection of certain director and officer loans in an aggregate amount not to
exceed $30 million. We have established a liability of $23.1 million, which is
included in other liabilities, representing our estimate of the amount which
will be paid to the former holders of the trust originated preferred securities
pursuant to the settlement.

RESULTS OF OPERATIONS

Due to the application of fresh start accounting, the reported historical
financial statements of our predecessor for periods prior to August 31, 2003
generally are not comparable to our financial statements prepared after that
date. Therefore, our results of operations have not been combined with those of
our predecessor. Please read this discussion in conjunction with the
accompanying consolidated financial statements and notes included elsewhere in
this prospectus.

After our emergence from bankruptcy, we began to manage our business
operations through two primary operating segments, based on method of product
distribution, and a third segment comprised of business in run-off. We refer to
these segments as: (1) Bankers Life; (2) Conseco Insurance Group; and (3) other
business in run-off. Prior to its disposition effective March 31, 2003, we also
had a finance segment. We also have a corporate segment, which consists of
holding company activities and certain noninsurance company businesses that are
not related to our other operating segments. The following tables and narratives
summarize the operating results of our segments for the periods presented as we
currently manage them (dollars in millions):

SUCCESSOR PREDECESSOR
------------ ----------------------------------
FOUR MONTHS EIGHT MONTHS YEARS ENDED
ENDED ENDED DECEMBER 31,
DECEMBER 31, AUGUST 31, -------------------
2003 2003 2002 2001
------------ ------------ ---- ----

Earnings (losses) before taxes:
Bankers Life................... $ 85.5 $ 159.6 $ 136.5 $ 289.3
Conseco Insurance Group........ 94.3 299.9 (211.5) 186.0
Other business in run-off...... 12.8 (171.3) (216.8) (106.0)
Corporate operations........... (43.1) 1,884.0 (1,340.4) (612.7)
------ -------- --------- -------
Income (loss) before income
taxes, minority interest,
discontinued operations and
cumulative effect of
accounting change........... $149.5 $2,172.2 $(1,632.2) $(243.4)
====== ======== ========= =======

GENERAL: Conseco, Inc. is the top tier holding company for a group of
insurance companies operating throughout the United States that develop, market
and administer supplemental health insurance, annuity, individual life insurance
and other insurance products. We distribute these products through a career
agency force and direct response marketing, which, together, represent our
Bankers Life segment, and through professional independent producers, which
represent our Conseco Insurance Group segment. Our other business in run-off
segment consists of:

- long-term care products written in prior years through independent
agents;

- small group and individual major medical business which we began to
nonrenew in 2001; and

- other group major medical business which we no longer actively market.

Most of the long-term care business in run-off relates to business written by
certain of our subsidiaries prior to their acquisitions by Conseco in 1996 and
1997.

BANKERS LIFE (DOLLARS IN MILLIONS)

Premiums and asset accumulation product
collections:
Annuities................................... $ 253.8 $ 698.4 $ 740.9 $ 513.1
Supplemental health......................... 407.9 759.6 1,159.4 1,097.4
Life........................................ 58.6 102.7 139.0 286.3
-------- -------- -------- --------
Total premium collections.............. $ 720.3 $1,560.7 $2,039.3 $1,896.8
======== ======== ======== ========

Average liabilities for insurance products:
Annuities:
Mortality based.......................... $ 325.7 $ 286.5 $ 271.7 $ 257.6
Equity-linked............................ 262.9 264.8 301.0 320.8
Deposit based............................ 3,156.2 2,847.7 2,248.4 1,864.3
Health................................... 2,620.8 1,916.3 1,712.0 1,497.6
Life:
Interest sensitive....................... 333.0 324.4 311.6 300.0
Non-interest sensitive................... 747.3 652.4 654.0 1,083.2
-------- -------- -------- --------
Total average liabilities for insurance
products, net of reinsurance
ceded............................... $7,445.9 $6,292.1 $5,498.7 $5,323.5
======== ======== ======== ========
Revenues:
Insurance policy income..................... $ 456.8 $ 892.7 $1,300.1 $1,400.1
Net investment income:
General account invested assets.......... 128.9 253.4 382.2 391.9
Equity-indexed products based on the
change in value of the S&P 500 call
options................................ 6.6 4.8 (14.8) (15.5)
Trading account income related to
policyholder and reinsurer accounts.... 5.2 -- -- --
Change in value of embedded derivatives
related to modified coinsurance
agreements............................. (5.2) -- -- --
Net realized investment gains (losses)... 3.4 5.5 (128.7) (43.5)
Fee revenue and other income................ .5 .2 1.3 1.2
-------- -------- -------- --------
Total revenues......................... 596.2 1,156.6 1,540.1 1,734.2
-------- -------- -------- --------
Expenses:
Insurance policy benefits................... 338.2 705.6 973.4 1,002.7
Amounts added to policyholder account
balances:
Annuity products and interest-sensitive
life products other than those listed
below.................................. 50.6 89.5 116.9 105.5
Equity-indexed products based on S&P 500
Index.................................. 7.0 -- .6 .6
Amortization related to operations.......... 62.3 113.4 171.9 198.4
Amortization related to net realized
investment gains (losses)................ -- .5 (3.2) (5.0)
Interest expense on investment borrowings... .8 3.4 4.6 6.1
Other operating costs and expenses.......... 51.8 84.6 94.4 130.6
Special charges............................. -- -- 45.0 6.0
-------- -------- -------- --------
Total benefits and expenses............ 510.7 997.0 1,403.6 1,444.9
-------- -------- -------- --------
Income before income taxes, minority interest,
discontinued operations and cumulative
effect of accounting change................. $ 85.5 $ 159.6 $ 136.5 $ 289.3
======== ======== ======== ========

Health loss ratios:
All health lines:
Insurance policy benefits................ $ 283.7 $ 578.5 $ 840.9 $ 770.8
Loss ratio(a)............................ 73.11% 75.30% 74.06% 70.23%
Medicare Supplement:
Insurance policy benefits................ $ 133.3 $ 283.3 $ 437.6 $ 443.1
Loss ratio(a)............................ 62.79% 66.39% 67.15% 66.87%
Long-Term Care:
Insurance policy benefits................ $ 148.0 $ 287.2 $ 394.3 $ 316.2
Loss ratio(a)............................ 86.06% 86.08% 83.69% 75.31%
Interest-adjusted loss ratio(b).......... 60.04% 69.26% 67.95% 60.91%
Other:
Insurance policy benefits................ $ 2.4 $ 8.0 $ 9.0 $ 11.5
Loss ratio(a)............................ 63.79% 101.05% 71.21% 76.45%

---------------

(a) We calculate loss ratios by taking the related product's (1) insurance
policy benefits divided by (2) insurance policy income.

(b) We calculate the interest-adjusted loss ratio for Bankers Life's long-term
care products by taking the product's (1) insurance policy benefits less
interest income on the accumulated assets which back the insurance
liabilities divided by (2) policy income. Interest income is an important
factor in measuring losses on this product. The net cash flows from
long-term care products generally result in the accumulation of amounts in
the early years of a policy (accounted for as reserve increases) which will
be paid out as benefits in later policy years (accounted for as reserve
decreases). Accordingly, as the policies age, the loss ratio will typically
increase, but the increase in the change in reserve will be partially
offset by investment income earned on the assets which have accumulated.
The interest-adjusted loss ratio reflects the effects of the investment
income offset.

TOTAL PREMIUM COLLECTIONS were $720.3 million in the four months ended
December 31, 2003; $1,560.7 million in the eight months ended August 31, 2003;
and $2,039.3 million and $1,896.8 million in 2002 and 2001, respectively.
Bankers Life's annuity premium collections in 2003 were positively impacted by
sales inducements provided to purchasers of our annuities and sales incentives
to our career agents. These programs ended at various times during the second
quarter of 2003. Premium collections on Bankers Life's other products have been
negatively impacted by the A.M. Best ratings downgrade to "B (Fair)." See
"-- Premium and Asset Accumulation Product Collections" for further analysis.

AVERAGE LIABILITIES FOR INSURANCE PRODUCTS, NET OF REINSURANCE CEDED, were
$7.4 billion in the four months ended December 31, 2003; $6.3 billion in the
eight months ended August 31, 2003; and $5.5 billion and $5.3 billion in 2002
and 2001, respectively. The increase in such liabilities through August 31, 2003
is primarily due to increases in annuity reserves. As discussed above under
"-- Total premium collections", annuity premium collections in our Bankers Life
segment were positively impacted during 2003 by sales inducements and
incentives. The increase in such liabilities for the four months ended December
31, 2003 reflects the adoption of fresh start accounting. Bankers Life's average
life reserves decreased by $417.6 million, or 30 percent in 2002 as compared to
2001, primarily due to a first quarter 2002 reinsurance transaction which ceded
approximately $400 million of liabilities to the assuming company. The
reinsurance transaction is discussed further in the note to the consolidated
financial statements included elsewhere in this prospectus entitled "Summary of
Significant Accounting Policies -- Reinsurance."

INSURANCE POLICY INCOME is comprised of (1) premiums earned on policies
which provide mortality or morbidity coverage and (2) fees and other charges
made against other policies. See "Premium and Asset Accumulation Product
Collections" for further analysis.

NET INVESTMENT INCOME ON GENERAL ACCOUNT INVESTED ASSETS, which excludes
income on policyholder and reinsurer accounts, was:

- $128.9 million in the four months ended December 31, 2003;

- $253.4 million in the eight months ended August 31, 2003;

- $382.2 million in 2002; and

- $391.9 million in 2001.

The average balance of general account invested assets was:

- $7.0 billion in the four months ended December 31, 2003;

- $6.6 billion in the eight months ended August 31, 2003;

- $6.1 billion in 2002; and

- $5.7 billion in 2001.

The yield on these assets was:

- 5.5 percent in the four months ended December 31, 2003;

- 5.7 percent in the eight months ended August 31, 2003;

- 6.3 percent in 2002; and

- 6.9 percent in 2001.

The decrease in yield for the four months ended December 31, 2003, reflects the
adoption of fresh start accounting which effectively reset the yields to market
rates at August 31, 2003. The decrease in yield in the other periods reflects
the lower interest rate environment prevailing during the periods presented and
the resulting lower rates earned on invested assets. In 2002, net investment
income and the average balance of general account invested assets both reflect
the transfer of a portion of our investment portfolio to the reinsurer pursuant
to the above-mentioned first quarter 2002 reinsurance transaction.

NET INVESTMENT INCOME RELATED TO EQUITY-INDEXED PRODUCTS BASED ON THE
CHANGE IN VALUE OF THE S&P 500 CALL OPTIONS represents the change in the
estimated fair value of Bankers Life's S&P 500 Index call options which are
purchased in an effort to cover certain benefits accruing to the policyholders
of our equity-indexed products. Our equity-indexed products are designed so that
the investment income spread earned on the related insurance liabilities should
be more than adequate to cover the cost of the S&P 500 call options and other
costs related to these policies. Option costs that are attributable to benefits
provided were:

- $2.9 million in the four months ended December 31, 2003;

- $7.7 million in the eight months ended August 31, 2003;

- $15.2 million in 2002; and

- $16.0 million in 2001.

These costs are reflected in the change in market value of the S&P 500 call
options included in the investment income amounts. Net investment income (loss)
related to equity-indexed products before this expense was:

- $9.5 million in the four months ended December 31, 2003;

- $12.5 million in the eight months ended August 31, 2003;

- $.4 million in 2002; and

- $.5 million in 2001.

These amounts were partially offset by the corresponding charge (credit) to
AMOUNTS ADDED TO POLICYHOLDER ACCOUNT BALANCES FOR EQUITY-INDEXED PRODUCTS BASED
ON S&P 500 INDEX of:

- $7.0 million in the four months ended December 31, 2003;

- nil in the eight months ended August 31, 2003;

- $.6 million in 2002; and

- $.6 million in 2001.

Such income and related charge fluctuate based on the value of options embedded
in the segment's equity-indexed annuity policyholder account balances subject to
this benefit and to the performance of the S&P 500 Index to which the returns on
these products are linked.

CHANGE IN VALUE OF EMBEDDED DERIVATIVES RELATED TO MODIFIED COINSURANCE
AGREEMENTS are described in the note to our consolidated financial statements
for the period ended December 31, 2003 included elsewhere in this prospectus
entitled "Summary of Significant Accounting Policies -- Accounting for
Derivatives." We have transferred the specific block of investments related to
these agreements to our trading securities account, which we carry at estimated
fair value with changes in such value recognized as trading account income. We
expect the change in the value of the embedded derivatives largely to be offset
by the change in value of the trading securities.

NET REALIZED INVESTMENT GAINS (LOSSES) fluctuate from period to period.
During the four months ended December 31, 2003, net realized investment gains in
our Bankers Life segment included:

- $8.6 million of net gains from the sales of investments (primarily fixed
maturities), net of

- $5.2 million of writedowns of fixed maturity investments, equity
securities and other invested assets as a result of conditions which
caused us to conclude a decline in fair value of the investment was other
than temporary.

During the first eight months of 2003, we recognized net investment gains of
$5.5 million. During the first eight months of 2003, the net realized investment
gains included:

- $20.5 million of net gains from the sales of investments (primarily fixed
maturities), net of

- $15.0 million of writedowns of fixed maturity investments, equity
securities and other invested assets as a result of conditions which
caused us to conclude a decline in fair value of the investment was other
than temporary.

During 2002 and 2001, Bankers Life recognized net realized investment losses of
$128.7 million and $43.5 million, respectively. The net realized investment
losses during 2002 included:

- $138.5 million to write down certain securities to fair value due to an
other-than-temporary decline in value (including issuers who have faced
significant problems: K-Mart Corp., Amerco, Inc., Global Crossing, MCI
Communications, Mississippi Chemical, United Airlines and Worldcom,
Inc.); and

- $9.8 million of net gains from the sales of investments (primarily fixed
maturities).

The net realized investment losses during 2001 included writedowns of $69.4
million related to:

- the impact of higher default rate assumptions on certain structured
investments;

- losses on investments held in our private equity portfolio; and

who have faced significant problems: Sunbeam Corp., Enron Corp., Crown Cork &
Seal Company Inc., Global Crossing Ltd. and K-Mart Corp.).

INSURANCE POLICY BENEFITS fluctuated as a result of the factors summarized
in the explanations for loss ratios related to specific products which follow.
Loss ratios are calculated by taking the related insurance product's (1)
insurance policy benefits divided by (2) policy income.

The loss ratios on Bankers Life's Medicare supplement products have
generally been in line with our expectations. Governmental regulations generally
require us to attain and maintain a ratio of total benefits incurred to total
premiums earned (as calculated based on amounts reported for statutory
accounting purposes) of not less than 65 percent on these products. The loss
ratio for the four months ended December 31, 2003, reflected the elimination of
$5.8 million of reserve redundancies based on the ultimate development of
reserves at August 31, 2003.

The loss ratios on Bankers Life's long-term care products have generally
been in line with expectations. The net cash flows from our long-term care
products generally result in the accumulation of amounts in the early years of a
policy (accounted for as reserve increases) which will be paid out as benefits
in later policy years (accounted for as reserve decreases). Accordingly, as the
policies age, the loss ratio will typically increase, but the increase in the
change in reserve will be partially offset by investment income earned on the
assets which have accumulated. The interest-adjusted loss ratio for long-term
care products is calculated by taking the insurance product's: (1) insurance
policy benefits less interest income on the accumulated assets which back the
insurance liabilities divided by (2) policy income. The loss ratio on Bankers
Life's long-term care products during 2001 reflected the elimination of reserve
redundancies based on the ultimate development of reserves at December 31, 2000.
The decrease in the interest-adjusted loss ratio for the four months ended
December 31, 2003, is primarily due to the adoption of fresh start accounting
which increased the reserves on this block of business.

The loss ratios on our other products fluctuate due to the smaller size of
these blocks of business. The loss ratios on this business have generally been
in line with our expectations.

AMOUNTS ADDED TO POLICYHOLDER ACCOUNT BALANCES FOR ANNUITY PRODUCTS AND
INTEREST-SENSITIVE LIFE PRODUCTS were:

- $50.6 million in the four months ended December 31, 2003;

- $89.5 million in the eight months ended August 31, 2003;

- $116.9 million in 2002; and

- $105.5 million in 2001.

The increases are primarily due to increases in annuity reserves. The weighted
average crediting rates for these products were:

- 4.4 percent for the four months ended December 31, 2003;

- 4.2 percent for the eight months ended August 31, 2003;

- 4.6 percent in 2002; and

- 4.9 percent in 2001.

AMOUNTS ADDED TO EQUITY-INDEXED PRODUCTS BASED ON S&P 500 INDEX correspond
to the related investment income accounts described above.

AMORTIZATION RELATED TO OPERATIONS includes amortization of the value of
policies inforce at the effective date, cost of policies produced and the cost
of policies purchased (such amortization is collectively referred to as
"amortization of insurance intangibles"). Insurance intangibles are amortized:

- in relation to the estimated gross profits for universal life-type and
investment-type products or

- in relation to future anticipated premium revenue for other products.

Bankers Life's amortization expense was in line with our expectations given the
related premium revenue and gross profits for the periods.

AMORTIZATION RELATED TO NET REALIZED INVESTMENT GAINS (LOSSES) represents
the increases or decreases in amortization which result from realized investment
gains or losses. When we sell securities at a gain (loss) and reinvest the
proceeds at a different yield, we increase (reduce) the amortization of
insurance intangibles in order to reflect the change in future expected yields.
Sales of fixed maturity investments resulted in an increase (decrease) in the
amortization of insurance intangibles of:

- nil in the four months ended December 31, 2003;

- $.5 million in the eight months ended August 31, 2003;

- $(3.2) million in 2002; and

- $(5.0) million in 2001.

INTEREST EXPENSE ON INVESTMENT BORROWINGS fluctuates along with our
investment borrowing activities and the interest rates thereon. Average
investment borrowings in our Bankers Life segment, excluding borrowings related
to the General Motors building, were:

- $173.6 million during the four months ended December 31, 2003;

- $263.7 million during the eight months ended August 31, 2003;

- $452.2 million in 2002; and

- $222.4 million in 2001.

The weighted average interest rates on such borrowings, excluding borrowings
related to the General Motors building, were:

- 1.4 percent during the four months ended December 31, 2003;

- 1.9 percent during the eight months ended August 31, 2003;

- 1.0 percent during 2002; and

- 2.7 percent during 2001.

OTHER OPERATING COSTS AND EXPENSES in our Bankers Life segment were:

- $51.8 million in the four months ended December 31, 2003;

- $84.6 million in the eight months ended August 31, 2003;

- $94.4 million in 2002; and

- $130.6 million in 2001.

Increases in these expenses in 2003 are primarily related to increased policy
acquisition costs which were non-deferrable. Such expenses decreased in 2002 by
$36.2 million, or 28 percent compared to 2001, reflecting cost cutting programs
implemented in the Bankers Life segment.

SPECIAL CHARGES in 2002 included: (1) a loss of $39.0 million on a
reinsurance transaction entered into as part of our cash raising initiatives;
and (2) other items totaling $6.0 million primarily related to severance
benefits and costs incurred with the transfer of certain customer service and
backroom operations to our former India subsidiary. Special charges in 2001 were
$6.0 million. Such charges primarily related to severance benefits and costs
incurred in conjunction with the transfer of certain customer service and
backroom operations to our former India subsidiary.

CONSECO INSURANCE GROUP (DOLLARS IN MILLIONS)

SUCCESSOR PREDECESSOR
------------ ------------------------------------
FOUR MONTHS EIGHT MONTHS YEARS ENDED
ENDED ENDED DECEMBER 31,
DECEMBER 31, AUGUST 31, ---------------------
2003 2003 2002 2001
------------ ------------ ---- ----

Premiums and asset accumulation product
collections:
Annuities.............................. $ 18.1 $ 74.0 $ 351.9 $ 710.6
Supplemental health.................... 272.0 525.3 830.3 784.1
Life................................... 131.5 280.7 498.0 553.3
--------- --------- --------- ---------
Collections on insurance products... $ 421.6 $ 880.0 $ 1,680.2 $ 2,048.0
========= ========= ========= =========
Average liabilities for insurance and
asset accumulation:
Annuities:
Mortality based..................... $ 243.5 $ 171.0 $ 175.0 $ 198.8
Equity-linked....................... 1,561.4 1,514.7 1,983.1 2,311.4
Deposit based....................... 4,027.8 4,245.4 5,352.1 5,993.4
Separate accounts and investment
trust liabilities................. 50.1 401.3 672.6 738.0
Health................................. 2,288.3 2,046.8 1,981.6 1,969.7
Life:
Interest sensitive.................. 3,349.8 3,407.8 3,798.7 3,733.2
Non-interest sensitive.............. 1,483.3 1,493.9 1,327.6 1,399.8
--------- --------- --------- ---------
Total average liabilities for
insurance and asset
accumulation products.......... $13,004.2 $13,280.9 $15,290.7 $16,344.3
========= ========= ========= =========
Revenues:
Insurance policy income.................. $ 398.5 $ 892.8 $ 1,454.9 $ 1,377.4
Net investment income:
General account invested assets........ 240.9 562.2 982.0 1,114.2
Equity-indexed products based on the
change in value of the S&P 500 call
options............................. 35.5 20.4 (85.7) (98.7)
Separate account assets................ -- -- -- (5.4)
Trading account income related to
policyholder and reinsurer
accounts............................ 13.2 -- -- --
Change in value of embedded derivatives
related to modified coinsurance
agreements.......................... (1.0) -- -- --
Net realized investment gains
(losses)............................ 9.5 (17.1) (368.1) (209.1)
Fee revenue and other income............. .5 17.0 25.4 31.4
--------- --------- --------- ---------
Total revenues.................... 697.1 1,475.3 2,008.5 2,209.8
--------- --------- --------- ---------

Expenses:
Insurance policy benefits................ 290.5 461.3 998.2 977.5
Amounts added to policyholder account
balances:
Annuity products and interest-sensitive
life products other than those
listed below........................ 94.9 218.4 379.7 417.8
Equity-indexed products based on S&P
500 Index........................... 35.8 66.6 (.9) .2
Separate account liabilities........... -- -- -- (5.4)
Amortization related to operations....... 63.3 202.7 566.0 356.9
Amortization related to net investment
gains (losses)......................... 1.1 (.9) (24.6) (32.3)
Interest expense on investment
borrowings............................. 1.6 4.7 10.2 19.7
Other operating costs and expenses....... 115.6 222.6 292.1 273.9
Special charges.......................... -- -- (.7) 15.5
--------- --------- --------- ---------
Total benefits and expenses....... 602.8 1,175.4 2,220.0 2,023.8
--------- --------- --------- ---------
Income (loss) before income taxes,
minority interest, discontinued
operations and cumulative effect of
accounting change...................... $ 94.3 $ 299.9 $ (211.5) $ 186.0
========= ========= ========= =========
Health loss ratios:
All health lines:
Insurance policy benefits........... $ 171.4 $ 381.3 $ 550.7 $ 533.1
Loss ratio(a)....................... 64.92% 70.95% 66.36% 66.97%
Medicare Supplement:
Insurance policy benefits........... $ 86.5 $ 167.2 $ 217.6 $ 192.8
Loss ratio(a)....................... 66.57% 65.49% 61.28% 61.81%
Specified Disease:
Insurance policy benefits........... $ 74.5 $ 184.7 $ 259.5 $ 250.9
Loss ratio(a)....................... 61.61% 75.77% 69.61% 67.35%
Interest-adjusted loss ratio(b)..... 30.64% 46.33% 42.10% 41.70%
Other:
Insurance policy benefits........... $ 10.4 $ 29.4 $ 73.6 $ 89.4
Loss ratio(a)....................... 79.11% 76.66% 72.22% 80.09%

---------------

(a) We calculate loss ratios by taking the related product's (1) insurance
policy benefits divided by (2) insurance policy income.

(b) We calculate the interest-adjusted loss ratio for Conseco Insurance Group's
specified disease products by taking the product's (1) insurance policy
benefits less interest income on the accumulated assets which back the
insurance liabilities divided by (2) policy income. Interest income is an
important factor in measuring losses on this product. The net cash flows
from specified disease products generally result in the accumulation of
amounts in the early years of a policy (accounted for as reserve increases)
which will be paid out as benefits in later policy years (accounted for as
reserve decreases). Accordingly, as the policies age, the loss ratio will
typically increase, but the increase in the change in reserve will be
partially offset by investment income earned on the assets which have
accumulated. The interest-adjusted loss ratio reflects the effects of the
investment income offset.

COLLECTIONS ON INSURANCE PRODUCTS were $421.6 million in the four months
ended December 31, 2003; $880.0 million in the eight months ended August 31,
2003; and $1.7 billion and $2.0 billion in 2002 and 2001, respectively. Premium
collections through the independent agents in our Conseco Insurance Group
segment have been negatively impacted by the A.M. Best ratings downgrade to "B
(Fair)"in August 2002 and our decision to de-emphasize the sale of certain
products. See "Premium and Asset Accumulation Product Collections" for further
analysis.

AVERAGE LIABILITIES FOR INSURANCE AND ASSET ACCUMULATION PRODUCTS were
$13.0 billion in the four months ended December 31, 2003; $13.3 billion in the
eight months ended August 31, 2003; and $15.3 billion and $16.3 billion in 2002
and 2001, respectively. The decrease in such liabilities is primarily due to the
increase in policyholder redemptions and lapses following the downgrade of our
A.M. Best financial strength rating to "B (Fair)" in August 2002. See
"-- Liquidity for insurance operations" for additional discussion of the A.M.
Best ratings downgrade.

INSURANCE POLICY INCOME is comprised of: (1) premiums earned on policies
which provide mortality or morbidity coverage; and (2) fees and other charges
made against other policies. See "-- Premium and Asset Accumulation Product
Collections" for further analysis.

NET INVESTMENT INCOME ON GENERAL ACCOUNT INVESTED ASSETS, which excludes
income on policyholder and reinsurer accounts, was:

- $240.9 million in the four months ended December 31, 2003;

- $562.2 million in the eight months ended August 31, 2003;

- $982.0 million in 2002; and

- $1,114.2 million in 2001.

The average balance of general account invested assets was:

- $12.7 billion in the four months ended December 31, 2003;

- $13.7 billion in the eight months ended August 31, 2003;

- $15.0 billion in 2002; and

- $16.0 billion in 2001.

The yield on these assets was:

- 5.7 percent in the four months ended December 31, 2003;

- 6.2 percent in the eight months ended August 31, 2003;

- 6.5 percent in 2002; and

- 7.0 percent in 2001.

The decrease in yield for the four months ended December 31, 2003 reflects the
adoption of fresh start accounting which effectively reset the yields to market
rates at August 31, 2003. The decrease in yield in 2002 reflected general
decreases in market interest rates between 2002 and 2001.

NET INVESTMENT INCOME RELATED TO EQUITY-INDEXED PRODUCTS BASED ON THE
CHANGE IN VALUE OF THE S&P 500 CALL OPTIONS represents the change in the
estimated fair value of Conseco Insurance Group's S&P 500 Index call options
which are purchased in an effort to cover certain benefits accruing to the
policyholders of our equity-indexed products. Our equity-indexed products are
designed so that the investment income spread earned on the related insurance
liabilities should be more than adequate to cover the cost of the S&P 500 call
options and other costs related to these policies. Option costs that are
attributable to benefits provided were:

- $16.3 million in the four months ended December 31, 2003;

- $45.8 million in the eight months ended August 31, 2003;

- $82.3 million in 2002; and

- $103.0 million in 2001.

- $51.8 million in the four months ended December 31, 2003;

- $66.2 million in the eight months ended August 31, 2003;

- $(3.4) million in 2002; and

- $4.3 million in 2001.

These amounts were partially offset by the corresponding charge (credit) to
amounts added to policyholder account balances for equity-indexed products of:

- $35.8 million in the four months ended December 31, 2003;

- $66.6 million in the eight months ended August 31, 2003;

- $(.9) million in 2002; and

- $.2 million in 2001.

NET INVESTMENT INCOME (LOSS) FROM SEPARATE ACCOUNT ASSETS is offset by a
corresponding charge (credit) to amounts added to policyholder account balances
for separate account liabilities. Such income (loss) and related charge (credit)
fluctuated in relationship to total separate account assets and the return
earned on such assets.

TRADING ACCOUNT INCOME RELATED TO POLICYHOLDER AND REINSURER ACCOUNTS
represents the income on trading security accounts established on August 31,
2003, which are designed to act as a hedge for embedded derivatives related to:
(1) Conseco Insurance Group's equity-indexed products; and (2) certain modified
coinsurance agreements. In addition, such income includes the income on
investments backing the market strategies of certain annuity products which
provide for different rates of cash value growth based on the experience of a
particular market strategy. The income on our trading account securities is
designed to substantially offset: (1) the change in value of embedded
derivatives related to modified coinsurance agreements described below; and (2)
certain amounts included in insurance policy benefits.

CHANGE IN VALUE OF EMBEDDED DERIVATIVES RELATED TO MODIFIED COINSURANCE
AGREEMENTS are described in the note to our consolidated financial statements
included elsewhere in this prospectus entitled "Summary of Significant
Accounting Policies -- Accounting for Derivatives." We have transferred the
specific block of investments related to these agreements to our trading
securities account, which we carry at estimated fair value with changes in such
value recognized as trading account income. The change in the value of the
embedded derivatives has largely been offset by the change in value of the
trading securities.

NET REALIZED INVESTMENT GAINS (LOSSES) fluctuate from period to period.
During the four months ended December 31, 2003, we recognized net realized
investment gains in our Conseco Insurance Group segment which included:

- $13.4 million of net gains from the sales of investments (primarily fixed
maturities), net of

- $3.9 million of writedowns of fixed maturity investments, equity
securities and other invested assets as a result of conditions which
caused us to conclude a decline in fair value of the investment was other
than temporary.

During the first eight months of 2003, we recognized net realized investment
losses of $17.1 million. During the first eight months of 2003, the net realized
investment losses included:

- $16.8 million of net gains from the sales of investments (primarily fixed
maturities), net of

- $33.9 million of writedowns of fixed maturity investments, equity
securities and other invested assets as a result of conditions which
caused us to conclude a decline in fair value of the investment was other
than temporary.

During 2002 and 2001, we recognized net realized investment losses of $368.1
million and $209.1 million, respectively, in our Conseco Insurance Group
segment. The net realized investment losses during 2002 included:

- $365.2 million to write down certain securities to fair value due to an
other-than-temporary decline in value (including issuers who have faced
significant problems: K-Mart Corp., Amerco, Inc., Global Crossing, MCI
Communications, Mississippi Chemical, United Airlines and Worldcom,
Inc.); and

- $2.9 million of net losses from the sales of investments (primarily fixed
maturities).

The net realized investment losses during 2001 included writedowns of
$209.6 million related to:

- the impact of higher default rate assumptions on certain structured
investments;

- losses on investments held in our private equity portfolio; and

- the writedown of certain securities to fair value due to an
other-than-temporary decline in value, or our plan to sell the securities
in connection with investment restructuring activities (including issuers
who have faced significant problems: Sunbeam Corp., Enron Corp., Crown
Cork & Seal Company Inc., Global Crossing Ltd. and K-Mart Corp.).

FEE REVENUE AND OTHER INCOME primarily represents income earned by a
subsidiary sold in September 2003 which earned fees for marketing insurance
products of other companies.

INSURANCE POLICY BENEFITS fluctuated as a result of the factors summarized
in the explanations for loss ratios related to specific products which follow
and, in the eight months ended August 31, 2003, as a result of a change in
estimates of future losses on certain policies, as discussed below in further
detail. Loss ratios are calculated by taking the related insurance product's (1)
insurance policy benefits divided by (2) policy income.

The loss ratios on Conseco Insurance Group's Medicare supplement products
have generally been in line with our expectations. Governmental regulations
generally require us to attain and maintain a ratio of total benefits incurred
to total premiums earned (as calculated based on amounts reported for statutory
accounting purposes) of not less than 65 percent on these products. The loss
ratios in 2002 and 2001 reflected eliminations of reserve redundancies based on
the ultimate development of reserves at December 31, 2001 and December 31, 2000.

The loss ratio on Conseco Insurance Group's specified disease products
reflected higher than expected incurred claims on certain cancer insurance
policies during the first eight months of 2003. These policies generally provide
fixed or limited benefits. Payments under cancer insurance policies are
generally made directly to, or at the direction of, the policyholder following
diagnosis of, or treatment for, a covered type of cancer. We had favorable
claims experience in the four months ended December 31, 2003. Approximately 76
percent of our specified disease policies inforce (based on policy count) are
sold with return of premium or cash value riders. The return of premium rider
generally provides that after a policy has been inforce for a specified number
of years or upon the policyholder reaching a specified age, we will pay to the
policyholder, or a beneficiary under the policy, the aggregate amount of all
premiums paid under the policy, without interest, less the aggregate amount of
all claims incurred under the policy. Accordingly, the net cash flows from these
products generally result in the accumulation of amounts in the early years of a
policy (accounted for as reserve increases) which will be paid out as benefits
in later policy years (accounted for as reserve decreases). Accordingly, as the
policies age, the loss ratio will typically increase, but the increase in the

change in reserve will be partially offset by investment income earned on the
assets which have accumulated. The loss ratios on Conseco Insurance Group's
specified disease products in 2002 and 2001 were generally in line with our
expectations. The interest-adjusted loss ratio for specified disease products is
calculated by taking the insurance product's: (1) insurance policy benefits less
interest income on the accumulated assets which back the insurance liabilities;
divided by (2) policy income.

The loss ratios on Conseco Insurance Group's other products fluctuate due
to the smaller size of these blocks of business. The loss ratios on this
business have generally been in line with our expectations.

In August 2003, we decided to change a non-guaranteed element of certain
Conseco Insurance Group policies. This element was not required by the policy
and the change will eliminate the former practice of reducing the cost of
insurance charges to amounts below the level permitted under the provisions of
the policies. As a result of this decision, our estimates of future expected
gross profits on these products used as a basis for amortization of insurance
intangibles and the establishment of insurance liabilities has changed. We
adjusted the total amortization and reserve charge we had recorded since the
acquisition of these policies as a result of the change to our earlier estimates
in accordance with Statement of Financial Accounting Standards No. 97,
"Accounting and Reporting by Insurance Enterprises of Certain Long-Duration
Contracts and for Realized Gains and Losses from the Sale of Investments." The
effect of the change in estimate was a $220.2 million reduction to insurance
policy benefits and a $39.8 million reduction to amortization recorded in the
eight months ended August 31, 2003.

AMOUNTS ADDED TO POLICYHOLDER ACCOUNT BALANCES FOR ANNUITY PRODUCTS AND
INTEREST-SENSITIVE LIFE PRODUCTS were:

- $94.9 million in the four months ended December 31, 2003;

- $218.4 million in the eight months ended August 31, 2003;

- $379.7 million in 2002; and

- $417.8 million in 2001.

The decreases during the 2003 periods and 2002 are primarily due to a smaller
block of annuity business inforce and changes in the weighted average crediting
rates. The weighted average crediting rates for these products were:

- 4.0 percent for the four months ended December 31, 2003;

- 4.4 percent for the eight months ended August 31, 2003;

- 4.3 percent in 2002; and

- 4.4 percent in 2001.

AMOUNTS ADDED TO EQUITY-INDEXED PRODUCTS BASED ON S&P 500 INDEX correspond
to the related investment income accounts described above.

AMORTIZATION RELATED TO OPERATIONS includes amortization of insurance
intangibles. Conseco Insurance Group's amortization recorded in the eight months
ended August 31, 2003 was affected by the change in estimates of future losses
on certain policies described above under "insurance policy benefits."
Policyholder redemptions of annuity and, to a lesser extent, life products
increased following the downgrade of our A.M. Best financial strength rating to
"B (Fair)" in August of 2002. When redemptions are greater than our previous
assumptions, we are required to accelerate the amortization of insurance
intangibles to write off the balance associated with the redeemed policies.
Amortization in the periods presented has fluctuated as a result of the
acceleration of the amortization of insurance intangibles associated with policy
redemptions and changes in future lapse assumptions with respect to the policies
inforce. In 2002, we changed the lapse assumptions used to determine the
amortization of insurance intangibles related to certain universal life products
and our annuities to reflect our then current estimates of future lapses. For
certain universal life products, we changed the ultimate lapse assumption from:
(1) a range of 6 percent to 7 percent to; (2) a tiered assumption based on the
level of funding of the policy of a range of 2 percent to 10 percent. We

recorded additional amortization related to higher redemptions and changes to
our lapse assumptions of $203.2 million in 2002. Policyholder redemptions during
the 2003 periods have generally been consistent with our revised lapse
assumptions.

As a result of economic developments, actual experience of our products and
changes in our expectations, we changed our investment yield assumptions used in
calculating the estimated gross profits to be earned on our annuity products in
2001. Such changes resulted in additional amortization of insurance intangibles
of $27.8 million in 2001.

- $1.1 million in the four months ended December 31, 2003;

- $(.9) million in the eight months ended August 31, 2003;

- $(24.6) million in 2002; and

- $(32.3) million in 2001.

INTEREST EXPENSE ON INVESTMENT BORROWINGS fluctuates along with Conseco
Insurance Group's investment borrowing activities and the interest rates
thereon. Average investment borrowings (excluding borrowings related to the
General Motors building) were:

- $304.2 million during the four months ended December 31, 2003;

- $403.4 million during the eight months ended August 31, 2003;

- $639.1 million during 2002; and

- $618.1 million during 2001.

The weighted average interest rates on these borrowings (excluding borrowings
related to the General Motors building) were:

- 1.6 percent during the four months ended December 31, 2003;

- 1.7 percent during the eight months ended August 31, 2003;

- 1.6 percent during 2002; and

- 3.2 percent during 2001.

OTHER OPERATING COSTS AND EXPENSES were:

- $115.6 million in the four months ended December 31, 2003;

- $222.6 million in the eight months ended August 31, 2003;

- $292.1 million in 2002; and

- $273.9 million in 2001.

Increases in these expenses in 2003 and 2002 are primarily related to
increased policy acquisition costs which were non-deferrable.

SPECIAL CHARGES in 2002 included:

- a gain of $4.0 million on asset sale transactions entered into as part of
our cash raising initiatives; and

- other expenses totaling $3.3 million primarily related to severance
benefits and costs incurred with the transfer of certain customer service
and backroom operations to our former India subsidiary.

Special charges in 2001 were $15.5 million. The 2001 charges primarily related
to severance benefits and costs incurred in conjunction with the transfer of
certain customer service and backroom operations to our former India subsidiary.

OTHER BUSINESS IN RUN-OFF (DOLLARS IN MILLIONS)

Premiums and asset accumulation product
collections:
Long-term care........................... $ 134.6 $ 268.0 $ 434.5 $ 463.0
Major medical............................ 39.3 156.4 409.5 737.1
-------- -------- -------- --------
Total premium collections............. $ 173.9 $ 424.4 $ 844.0 $1,200.1
======== ======== ======== ========
Average liabilities for other business in
run-off:
Long-term care........................... $3,296.2 $1,977.9 $1,768.7 $1,639.0
Major medical............................ 103.8 120.0 225.2 407.1
-------- -------- -------- --------
Total average liabilities for other
business in run-off, net of
reinsurance ceded................... $3,400.0 $2,097.9 $1,993.9 $2,046.1
======== ======== ======== ========
Revenues:
Insurance policy income.................. $ 150.5 $ 418.8 $ 847.3 $1,215.2
Net investment income on general account
invested assets....................... 55.3 101.5 155.8 166.7
Net realized investment gains (losses)... (.7) 6.3 (58.2) (24.6)
Fee revenue and other income............. .9 -- .8 1.2
-------- -------- -------- --------
Total revenues........................ 206.0 526.6 945.7 1,358.5
-------- -------- -------- --------
Expenses:
Insurance policy benefits................ 150.7 597.3 864.6 1,089.6
Amortization related to operations....... 6.3 25.7 112.2 160.1
Interest expense on investment
borrowings............................ -- .2 .6 2.0
Other operating costs and expenses....... 36.2 74.7 185.1 212.8
-------- -------- -------- --------
Total benefits and expenses........... 193.2 697.9 1,162.5 1,464.5
-------- -------- -------- --------
Income (loss) before income taxes,
minority interest, discontinued
operations and cumulative effect of
accounting change................... $ 12.8 $ (171.3) $ (216.8) $ (106.0)
======== ======== ======== ========
Health loss ratios:
Long-Term Care:
Insurance policy benefits............. $ 136.9 $ 458.1 $ 595.9 $ 446.4
Loss ratio(a)......................... 103.32% 169.76% 139.11% 96.44%
Interest-adjusted loss ratio(b)....... 65.84% 134.58% 110.19% 73.13%

Major medical:
Insurance policy benefits............. $ 13.8 $ 139.2 $ 268.7 $ 643.2
Loss ratio(a)......................... 77.29% 93.43% 64.15% 85.61%

---------------

(a) We calculate loss ratios by taking the related product's: (1) insurance
policy benefits; divided by (2) insurance policy income.

(b) We calculate the interest-adjusted loss ratio for long-term care products
included in this segment by taking the product's: (1) insurance policy
benefits less interest income on the accumulated assets which back the
insurance liabilities; divided by (2) policy income. Interest income is an
important factor in measuring losses on this product. The net cash flows
from long-term care products generally result in the accumulation of
amounts in the early years of a policy (accounted for as reserve increases)
which will be paid out as benefits in later policy years (accounted for as
reserve decreases). Accordingly, as the policies age, the loss ratio will
typically increase, but the increase in the change in reserve will be
partially offset by investment income earned on the assets which have
accumulated. The interest-adjusted loss ratio reflects the effects of the
investment income offset.

TOTAL PREMIUM COLLECTIONS in this segment were $173.9 million in the four
months ended December 31, 2003; $424.4 million in the eight months ended August
31, 2003; and $844.0 million and $1,200.1 million in 2002 and 2001,
respectively. We have ceased marketing the long-term care business included in
this segment. Accordingly, collected premiums will decrease over time. Decreases
in long-term care premium collections are the result of policy lapses, partially
offset by premium rate increases. We have ceased marketing and have not renewed
our major medical business, which has resulted in the significant reduction in
major medical collected premiums. See "-- Premium and Asset Accumulation Product
Collections" for further analysis.

AVERAGE LIABILITIES FOR OTHER BUSINESS IN RUN-OFF, NET OF REINSURANCE CEDED
were $3.4 billion in the four months ended December 31, 2003; $2.1 billion in
the eight months ended August 31, 2003; and $2.0 billion in both 2002 and 2001.
The increase in 2003 reflects the adoption of fresh start accounting as further
discussed under "-- Critical Accounting Policies -- Liabilities for Insurance
Products."

INSURANCE POLICY INCOME is comprised of premiums earned on the segment's
long-term care and major medical policies. See "-- Premium and Asset
Accumulation Product Collections" for further analysis.

NET INVESTMENT INCOME ON GENERAL ACCOUNT INVESTED ASSETS was:

- $55.3 million in the four months ended December 31, 2003;

- $101.5 million in the eight months ended August 31, 2003;

- $155.8 million in 2002; and

- $166.7 million in 2001.

The average balance of general account invested assets was:

- $2.8 billion in the four months ended December 31, 2003;

- $2.5 billion in the eight months ended August 31, 2003;

- $2.4 billion in 2002; and

- $2.3 billion in 2001.

The yield on these assets was:

- 5.8 percent in the four months ended December 31, 2003;

- 6.1 percent in the eight months ended August 31, 2003;

- 6.6 percent in 202; and

- 7.2 percent in 2001.

The decrease in yield for the four months ended December 31, 2003 reflects the
adoption of fresh start accounting which effectively reset the yields to market
rates at August 31, 2003.

NET REALIZED INVESTMENT GAINS (LOSSES) fluctuate from period to period.
During the four months ended December 31, 2003, net realized investment losses
in our other business in run-off segment included:

- $.2 million of net losses from the sales of investments; and

- $.5 million of writedowns of investments as a result of conditions which
caused us to conclude a decline in fair value of the investment was other
than temporary.

During the first eight months of 2003, we recognized net realized investment
gains of $6.3 million. During the first eight months of 2003, the net realized
investment gains included:

- $8.7 million of net gains from the sales of investments (primarily fixed
maturities); net of

- $2.4 million of writedowns of fixed maturity investments, equity
securities and other invested assets as a result of conditions which
caused us to conclude a decline in fair value of the investment was other
than temporary.

During 2002 and 2001, we recognized net realized investment losses in the other
business in run-off segment of $58.2 million and $24.6 million, respectively.
The net realized investment losses during 2002 included:

- $51.8 million to writedown certain securities to fair value due to an
other-than-temporary decline in value, including issuers who have faced
significant problems: K-Mart Corp., Amerco, Inc., Global Crossing, MCI
Communications, Mississippi Chemical, United Airlines and Worldcom, Inc.;
and

- $6.4 million of net losses from the sales of investments, primarily fixed
maturities.

The net realized investment losses during 2001 included writedowns of $21.9
million related to:

- the impact of higher default rate assumptions on certain structured
investments;

- losses on investments held in our private equity portfolio; and

- the writedown of certain securities to fair value due to an
other-than-temporary decline in value or our plan to sell the securities
in connection with investment restructuring activities, including issuers
who have faced significant problems: Sunbeam Corp., Enron Corp., Crown
Cork & Seal Company Inc., Global Crossing Ltd. and K-Mart Corp.

INSURANCE POLICY BENEFITS fluctuated primarily as a result of the factors
summarized below related to loss ratios in the blocks of long-term care business
in this segment. Loss ratios are calculated by taking the product's: (1)
insurance policy benefits; divided by (2) policy income.

This segment includes long-term care insurance inforce, substantially all
of which was issued through independent agents by some of our subsidiaries prior
to their acquisitions by Conseco in 1996 and 1997. The loss experience on these
products has been worse than we expected. Although we anticipated a higher level
of benefits to be paid out on these products as the policies age, the paid
claims have exceeded our projections. We are experiencing adverse developments
on home health care policies issued in certain areas of Florida and other
states. This adverse experience is reflected in the higher loss ratios in the
eight months ended August 31, 2003. We are aggressively seeking rate increases
and pursuing other actions on certain of these long-term care policies. We hired
an actuarial consulting firm to help evaluate the adequacy of this segment's
long-term care reserves given our recent adverse experience and claim reserve
deficiencies. Based on the

results of their study and our internal evaluations, we modified our claim
continuance tables to reflect longer benefit payment periods consistent with our
current estimate of future loss experience. Accordingly, claim reserves
increased by approximately $85 million in the eight months ended August 31,
2003, most of which was due to the new continuance tables. Excluding the
increase in claim reserves, the loss ratio for the eight months ended August 31,
2003, would have been 138 percent and the interest-adjusted loss ratio for the
eight months ended August 31, 2003, would have been 103 percent. The decrease in
the long-term care loss ratio for the four months ended December 31, 2003
reflects the adoption of fresh start accounting.

During 2002, we conducted an extensive examination of the assumptions used
to estimate our claim reserves for long-term care products sold through our
independent agent distribution channel. The examination was prompted by the
continuing claim reserve deficiencies that we were experiencing based on the
assumptions and estimates made by our actuaries. We engaged an independent
actuarial firm to assist in the examination.

Our prior estimates for long-term care reserves were based on claim
continuance tables using experience for the period from January 1, 1990 through
September 30, 1999. These tables are used to estimate the length of time an
insured will receive covered long-term care for an incurred event. In 2002, we
completed studies which indicated that the average length of time an insured
will receive covered care had increased in recent periods. In addition, we have
experienced significant fluctuations in claim inventories for these products.
Accordingly, our actuaries and the independent actuarial firm concluded that
estimates of future claim payments for incurred claims using the more recent
data reflecting the longer covered care time periods were more appropriate than
estimates based on prior data. The changes in estimation in calculating the
reserves resulted in an increase to insurance policy benefits of $130.0 million
in 2002. Excluding this adjustment related to the change in estimate, insurance
policy benefits on long-term care policies would have been $465.9 million, the
loss ratio for the year ended December 31, 2002 would have been 109 percent, and
the interest-adjusted loss ratio for the year ended December 31, 2002 would have
been 80 percent.

The net cash flows from long-term care products generally result in the
accumulation of amounts in the early years of a policy (accounted for as reserve
increases) which will be paid out as benefits in later policy years (accounted
for as reserve decreases). Accordingly, as the policies age, the loss ratio will
typically increase, but the increase in the change in reserve will be partially
offset by investment income earned on the assets which have accumulated. The
interest-adjusted loss ratio for long-term care products is calculated by taking
the insurance product's: (1) insurance policy benefits less interest income on
the accumulated assets which back the insurance liabilities; divided by (2)
policy income.

The loss ratio on the major medical business increased in the eight months
ended August 31, 2003, primarily due to adverse claim experience. The loss ratio
on the major medical business decreased during 2002. This decrease resulted
primarily from lower than expected claims experience as the business began
running off following our decision, in 2001, to begin nonrenewing major medical
business.

AMORTIZATION RELATED TO OPERATIONS includes amortization of insurance
intangibles. The decrease in amortization expense for the four months ended
December 31, 2003 reflects the adoption of fresh start accounting, and also
reflects the relatively small amount of value of policies inforce associated
with the business comprising this segment. In 2001, we stopped renewing portions
of our major medical lines of business in several unprofitable states in
accordance with the contractual terms of the policies. As a result, we
determined that approximately $77.4 million of insurance intangibles would not
be recoverable. Such amount is recorded as amortization related to operations.

INTEREST EXPENSE ON INVESTMENT BORROWINGS fluctuates along with our
investment borrowing activities, which have not been significant in this
segment.

OTHER OPERATING COSTS AND EXPENSES were:

- $36.2 million in the four months ended December 31, 2003;

- $74.7 million in the eight months ended August 31, 2003;

- $185.1 million in 2002; and

- $212.8 million in 2001.

The decreases in expenses were due primarily to expense reductions in the major
medical operations. Since our decision in 2001 to nonrenew the small group and
individual major medical business, the total number of employees dedicated to
major medical has been reduced by approximately 550 during the period June 30,
2001 through December 31, 2003.

CORPORATE (DOLLARS IN MILLIONS)

SUCCESSOR PREDECESSOR
------------ ----------------------------------
FOUR MONTHS EIGHT MONTHS YEARS ENDED
ENDED ENDED DECEMBER 31,
DECEMBER 31, AUGUST 31, ------------
2003 2003 2002 2001
------------ ------------ ---- ----

Corporate operations:
Interest expense on corporate debt....... $(34.4) $ (194.2) $ (325.5) $(369.6)
Investment income........................ .7 16.2 14.0 39.7
Provision for losses related to stock
purchase plan......................... -- (55.6) (240.0) (169.6)
Venture capital income (loss) related to
investment in AT&T Wireless Service,
Inc., net of related expenses......... (5.5) 10.5 (99.3) (23.4)
Fee revenue and other income............. 11.4 17.1 59.2 68.5
Net realized investment losses........... (.4) (.1) (1.3) (62.8)
Other items.............................. (14.9) (40.4) (182.7) (137.8)
Goodwill amortization.................... -- -- -- (108.2)
Gain on sale of interest in riverboat.... -- -- -- 192.4
Special charges.......................... -- -- (52.2) (58.9)
Gain on extinguishment of debt........... -- -- 1.8 17.0
Goodwill impairment...................... -- -- (500.0) --
Reorganization items..................... -- 2,130.5 (14.4) --
------ -------- --------- -------
Income (loss) before income taxes and
minority interest................... $(43.1) $1,884.0 $(1,340.4) $(612.7)
====== ======== ========= =======

INTEREST EXPENSE ON CORPORATE DEBT in the four months ended December 31,
2003 includes interest expense on the senior credit facility. Interest expense
decreased in the eight months ended August 31, 2003 primarily as a result of our
ceasing to accrue interest on notes payable, excluding our predecessor's senior
credit facility, guaranteed senior notes and certain secured senior notes.
Interest expense decreased in 2002 as a result of the repayment of debt and
lower interest rates. The average debt outstanding was $4.1 billion in 2002 and
$4.5 billion in 2001. The average interest rate on such debt was 8.0 percent in
2002 and 8.2 percent in 2001.

INVESTMENT INCOME primarily included income earned on short-term
investments held by the Corporate segment and the income from our investment in
a riverboat casino, prior to its sale in the first quarter of 2001, and
miscellaneous other income.

PROVISION FOR LOSSES AND EXPENSE RELATED TO STOCK PURCHASE PLAN represents
the non-cash provision we established in connection with our guarantees of bank
loans to approximately 155 current and former directors, officers and key
employees and our related loans for interest. The funds from the bank loans were
used by the participants to purchase approximately 18.0 million shares of our
predecessor's common stock. In the first eight months of 2003 and in 2002 and
2001, we established provisions of $55.6 million, $240.0 million and $169.6
million, respectively, in connection with these guarantees and loans. We

determined the reserve based upon the value of the collateral held by the banks.
At December 31, 2002, the reserve for losses on the loan guarantees totaled
$660.0 million. The outstanding principal balance on the bank loans was $481.3
million. In addition, our predecessor provided loans to participants for
interest on the bank loans totaling $179.2 million. During 2002, our predecessor
purchased $55.5 million of loans from the banks utilizing cash held in a
segregated cash account as collateral for our guarantee of the bank loans,
including accrued interest, the balance on these loans was $56.7 million at
December 31, 2002.

In conjunction with the plan of reorganization, the $481.3 million
principal amount of bank loans was transferred to the Company. We received all
rights to collect the balances due pursuant to the original terms of these
loans. In addition, we hold loans to participants for interest on the bank loans
which total approximately $220 million. The former bank loans and the interest
loans are collectively referred to as the director and officer loans. We
regularly evaluate the collectibility of these loans in light of the collateral
we hold and the creditworthiness of the participants. At December 31, 2003, we
have estimated that approximately $51.0 million of the director and officer loan
balance, which is included in other assets, is collectible, net of the cost of
collection. An allowance has been established to reduce the recorded balance of
the director and officer loans to this balance.

VENTURE CAPITAL INCOME (LOSS) relates to our investment in AT&T Wireless, a
company in the wireless communication business. Our investment in AT&T Wireless
was carried at estimated fair value, with changes in fair value recognized as
investment income (loss). We sold all of our holdings in AT&T Wireless during
the fourth quarter of 2003.

FEE REVENUE AND OTHER INCOME includes: (1) revenues we receive for
managing investments for other companies; and (2) fees received for marketing
insurance products of other companies. This amount included $16.7 million in
2002 and $5.4 million in 2001 of affiliated fee revenue earned by our subsidiary
in India. This revenue is eliminated in consolidation. Excluding this affiliated
income, fee revenue and other income decreased primarily as a result of a
decrease in the market value of investments managed for others, upon which these
fees are based. We sold our India subsidiary in the fourth quarter of 2002 and
have substantially eliminated the customer service and other operations
conducted there. Fee revenue and other income in the four months ended December
31, 2003 includes $5.6 million of interest received on a Federal income tax
refund.

NET REALIZED INVESTMENT LOSSES often fluctuate from period to period. We
recorded writedowns in the corporate segment totaling $1.3 million in 2002 and
$60.7 million in 2001 on certain securities due to an other than temporary
decline in value.

OTHER ITEMS include general corporate expenses, net of amounts charged to
subsidiaries for services provided by the corporate operations. During the first
eight months of 2003, disputes with certain of our insurance carriers were
resolved and a previously established liability of $40 million, which was
established in 2002, was released which was substantially offset by increases to
various litigation reserves of $30 million. This amount includes expenses in
2002 and 2001 related to our subsidiary in India which was sold in the fourth
quarter of 2002.

GOODWILL AMORTIZATION in 2001 was $108.2 million. Pursuant to Statement of
Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets",
intangible assets with an indefinite life are no longer amortized in periods
subsequent to December 31, 2001, but are subject to annual impairment tests (or
more frequently under certain circumstances) effective January 1, 2002.

GAIN ON SALE OF INTEREST IN RIVERBOAT represents the gain recognized in the
first quarter of 2001 as a result of our sale of our 29 percent ownership
interest in the riverboat casino in Lawrenceberg, Indiana, for $260 million.

SPECIAL CHARGES in the corporate segment for 2002 included:

- a loss of $20.0 million associated with the sale of our India subsidiary;

- $17.7 million related to debt modification and refinancing transactions;

- other items totaling $22.0 million; partially offset by

- net gains of $7.5 million related to the sale of certain non-core assets.

Special charges in this segment for 2001 included:

- litigation accrual and expenses of $23.8 million;

- severance benefits of $2.9 million;

- losses related to office closings and the sale of artwork totaling $6.8
million;

- losses related to disputed reinsurance balances totaling $8.5 million;
and

- other losses totaling $16.9 million.

During 2002, we recognized a GAIN ON THE EXTINGUISHMENT OF DEBT as we
repurchased $77.4 million par value of our predecessor's notes payable resulting
in a gain of $1.8 million.

During 2001, we repurchased $893.8 million par value of our predecessor's
notes payable resulting in a gain of $17.0 million.

In 2002, we recognized a GOODWILL IMPAIRMENT of $500.0 million as discussed
in greater detail in the notes to the consolidated financial statements included
elsewhere in this prospectus.

REORGANIZATION ITEMS in the eight months ended August 31, 2003 included:

- $3,151.4 million related to the gain on the discharge of prepetition
liabilities;

- $(950.0) million related to fresh start adjustments; and

- $(70.9) million related to professional fees associated with our
bankruptcy proceedings which are expensed as incurred in accordance with
Statement of Position 90-7.

In 2002, we incurred reorganization items of $14.4 million related to
professional fees associated with our bankruptcy proceedings.

PREMIUM AND ASSET ACCUMULATION PRODUCT COLLECTIONS

In accordance with generally accepted accounting principles, insurance
policy income as shown in our consolidated statement of operations consists of
premiums earned for policies that have life contingencies or morbidity features.
For annuity and universal life contracts without such features, premiums
collected are not reported as revenues, but as deposits to insurance
liabilities. We recognize revenues for these products over time in the form of
investment income and surrender or other charges.

Agents, insurance brokers and marketing companies who market our products
and prospective purchasers of our products use the ratings of our insurance
subsidiaries as an important factor in determining which insurer's products to
market or purchase. Ratings have the most impact on our annuity and interest-
sensitive life insurance products. Our insurance companies' financial strength
ratings were downgraded by all of the major rating agencies beginning in July,
2002, in connection with the financial distress that ultimately led to our
predecessor's bankruptcy. The current financial strength ratings all of our
insurance subsidiaries other than Conseco Senior Health Insurance Company from
A.M. Best, S&P and Moody's are B (Fair), BB- and Ba3, respectively. The current
financial strength ratings of Conseco Senior Health Insurance Company from A.M.
Best, Standard & Poor's and Moody's are B (Fair), CCC and Caa1, respectively.
For a description of the ratings issued by these firms and additional
information on our ratings, see "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity for Insurance
Operations." Many of our competitors have higher financial strength ratings and
we believe it is critical for us to improve our ratings to be competitive. The
lowered ratings assigned to our insurance subsidiaries were one of the primary
factors causing sales of our insurance products to decline and policyholder
redemptions and lapses to increase during 2002 and 2003. We also experienced
increased agent attrition, which in some cases led us to increase commissions or
sales incentives in an effort to retain them.

We set the premium rates on our health insurance policies based on facts
and circumstances known at the time we issue the policies and on assumptions
about numerous variables, including the actuarial probability of a policyholder
incurring a claim, the probable size of the claim, and the interest rate earned
on our investment of premiums. In setting premium rates, we consider historical
claims information, industry statistics, the rates of our competitors and other
factors. If our actual claims experience proves to be less favorable than we
assumed and we are unable to raise our premium rates, our financial results may
be adversely affected. Our estimates of insurance liabilities assume we will be
able to raise rates if future experience results in blocks of our health
insurance business becoming unprofitable. We generally cannot raise our health
insurance premiums in any state unless we first obtain the approval of the
insurance regulator in that state. We review the adequacy of our premium rates
regularly and file rate increases on our products when we believe existing
premium rates are too low. It is possible that we will not be able to obtain
approval for premium rate increases from currently pending requests or requests
filed in the future. If we are unable to raise our premium rates because we fail
to obtain approval for a rate increase in one or more states, our net income may
decrease. If we are successful in obtaining regulatory approval to raise premium
rates due to unfavorable actual claims experience, the increased premium rates
may reduce the volume of our new sales and cause existing policyholders to allow
their policies to lapse. This could result in significantly higher claims cost
as a percentage of premiums if healthier policyholders allow their policies to
lapse. This would reduce our premium income and profitability in future periods.
Increased lapse rates also could require us to expense all or a portion of our
insurance intangibles relating to lapsed policies in the period in which those
policies lapse, adversely affecting our financial results in that period.

Our insurance segments sell insurance products through three primary
distribution channels -- career agents and direct marketing, our Bankers Life
segment, and independent producers, our Conseco Insurance Group segment. Our
career agency force in the Bankers Life segment sells primarily Medicare
supplement and long-term care insurance policies, senior life insurance and
annuities. These agents visit the customer's home, which permits one-on-one
contact with potential policyholders and promotes strong personal relationships
with existing policyholders. Bankers Life's direct marketing distribution
channel is engaged primarily in the sale of "graded benefit life" insurance
policies which are sold directly to the policyholder. Our independent producer
distribution channel in the Conseco Insurance Group segment consists of a
general agency and insurance brokerage distribution system comprised of
independent licensed agents doing business in all fifty states, the District of
Columbia, and certain protectorates of the United States. Independent producers
are a diverse network of independent agents, insurance brokers and marketing
organizations.

Total premiums and accumulation product collections were as follows:

BANKERS LIFE (DOLLARS IN MILLIONS):

Premiums collected:
Annuities:
Equity-indexed (first-year).............. $ 5.1 $ 10.0 $ 30.4 $ 41.4
------ -------- -------- --------
Other fixed (first-year)................. 247.7 685.4 707.1 469.1
Other fixed (renewal).................... 1.0 3.0 3.4 2.6
------ -------- -------- --------
Subtotal -- other fixed annuities..... 248.7 688.4 710.5 471.7
------ -------- -------- --------
Total annuities....................... 253.8 698.4 740.9 513.1
------ -------- -------- --------

Supplemental health:
Medicare supplement (first-year)......... 20.5 37.6 75.8 74.4
Medicare supplement (renewal)............ 205.1 381.5 588.1 582.3
------ -------- -------- --------
Subtotal -- Medicare supplement....... 225.6 419.1 663.9 656.7
------ -------- -------- --------
Long-term care (first-year).............. 24.6 48.7 87.7 87.8
Long-term care (renewal)................. 153.3 282.8 395.2 337.5
------ -------- -------- --------
Subtotal -- long-term care............ 177.9 331.5 482.9 425.3
------ -------- -------- --------
Other health (first-year)................ .3 .8 1.0 1.2
Other health (renewal)................... 4.1 8.2 11.6 14.2
------ -------- -------- --------
Subtotal -- other health.............. 4.4 9.0 12.6 15.4
------ -------- -------- --------
Total supplemental health............. 407.9 759.6 1,159.4 1,097.4
------ -------- -------- --------
Life insurance:
First-year............................... 15.3 25.1 37.5 50.2
Renewal.................................. 43.3 77.6 101.5 236.1
------ -------- -------- --------
Total life insurance.................. 58.6 102.7 139.0 286.3
------ -------- -------- --------
Collections on insurance products:
Total first-year premium collections on
insurance products.................... 313.5 807.6 939.5 724.1
Total renewal premium collections on
insurance products.................... 406.8 753.1 1,099.8 1,172.7
------ -------- -------- --------
Total collections on insurance
products............................ $720.3 $1,560.7 $2,039.3 $1,896.8
====== ======== ======== ========

ANNUITIES in the Bankers Life segment include equity-indexed and other
fixed annuities sold to the senior market through our career agents. In order to
maintain our career agency distribution force during the parent company's
chapter 11 reorganization process, we provided certain sales inducements to
purchasers of annuities and sales incentives to our career agents. These
programs ended at various times during the second quarter of 2003. Annuity
collections from career agents totaled $253.8 million in the four months ended
December 31, 2003; $698.4 million in the eight months ended August 31, 2003; and
$740.9 million in 2002 and $513.1 million in 2001. Annuity premium collections
in 2003 were favorably impacted by the sales inducements and incentives
discussed above. In addition, the minimum guaranteed crediting rates on certain
of our annuity products were very attractive. We recently introduced new annuity
products which have lower minimum guaranteed crediting rates. As a result of the
elimination of the sales inducements and incentives and the lower minimum
guaranteed crediting rates, sales of fixed rate annuity products have declined.

SUPPLEMENTAL HEALTH products in the Bankers Life segment include Medicare
supplement, long-term care and other insurance products distributed through our
career agency force. Our profits on supplemental health policies depend on the
overall level of sales, the length of time the business remains inforce,
investment yields, claim experience and expense management.

Collected premiums on Medicare supplement policies in the Bankers Life
segment were $225.6 million in the four months ended December 31, 2003; $419.1
million in the eight months ended August 31, 2003; and $663.9 million and $656.7
million in 2002 and 2001, respectively. Collected premiums have been affected by
new sales levels, which have declined in the Bankers Life segment since our
ratings downgrades.

Premiums collected on Bankers Life's long-term care policies totaled $177.9
million in the four months ended December 31, 2003; $331.5 million in the eight
months ended August 31, 2003; and $482.9 million

and $425.3 million in 2002 and 2001, respectively. New sales of long-term care
policies through our career agents have declined since our ratings downgrades,
as reflected in the declines in first-year collected premiums in 2003.

Other health products include various other health insurance products which
we have not been actively marketing. Premiums collected totaled $4.4 million in
the four months ended December 31, 2003; $9.0 million in the eight months ended
August 31, 2003; and $12.6 million and $15.4 million in 2002 and 2001,
respectively.

LIFE products in our Bankers Life segment are sold primarily to the senior
market through our career agents and our direct response distribution channel.
Life premiums collected in this segment totaled $58.6 million in the four months
ended December 31, 2003; $102.7 million in the eight months ended August 31,
2003; and $139.0 million in 2002 and $286.3 million in 2001. The decrease in
life premiums collected in 2002 and 2003 compared to 2001 is primarily due to a
first quarter 2002 reinsurance transaction. The reinsurance transaction is
discussed further in the note to the consolidated financial statements included
elsewhere in this prospectus entitled "Summary of Significant Accounting
Policies -- Reinsurance". The A.M. Best ratings downgrade to "B (Fair)" has not
had a significant impact on sales of life products through these channels.

CONSECO INSURANCE GROUP (DOLLARS IN MILLIONS)

Premiums collected:
Annuities:
Equity-indexed (first-year).............. $ 5.2 $ 32.8 $ 162.6 $ 306.2
Equity-indexed (renewal)................. 4.2 12.1 27.1 33.3
------ ------ -------- --------
Subtotal -- equity-indexed
annuities........................... 9.4 44.9 189.7 339.5
------ ------ -------- --------
Other fixed (first-year)................. 1.6 14.3 134.9 339.8
Other fixed (renewal).................... 7.1 14.8 27.3 31.3
------ ------ -------- --------
Subtotal -- other fixed annuities..... 8.7 29.1 162.2 371.1
------ ------ -------- --------
Total annuities....................... 18.1 74.0 351.9 710.6
------ ------ -------- --------
Supplemental health:
Medicare supplement (first-year)......... 16.0 36.5 90.8 47.0
Medicare supplement (renewal)............ 118.2 213.9 279.1 271.4
------ ------ -------- --------
Subtotal -- Medicare supplement....... 134.2 250.4 369.9 318.4
------ ------ -------- --------
Specified disease (first-year)........... 10.0 19.7 36.8 42.1
Specified disease (renewal).............. 108.7 216.7 331.8 329.7
------ ------ -------- --------
Subtotal -- specified disease......... 118.7 236.4 368.6 371.8
------ ------ -------- --------
Other health (first-year)................ 4.3 9.7 12.9 10.3
Other health (renewal)................... 14.8 28.8 78.9 83.6
------ ------ -------- --------
Subtotal -- other health.............. 19.1 38.5 91.8 93.9
------ ------ -------- --------
Total supplemental health............. 272.0 525.3 830.3 784.1
------ ------ -------- --------
Life insurance:
First-year............................... 9.0 20.6 59.2 69.9
Renewal.................................. 122.5 260.1 438.8 483.4
------ ------ -------- --------
Total life insurance.................. 131.5 280.7 498.0 553.3
------ ------ -------- --------

Collections on insurance products:
Total first-year premium collections on
insurance products.................... 46.1 133.6 497.2 815.3
Total renewal premium collections on
insurance products.................... 375.5 746.4 1,183.0 1,232.7
------ ------ -------- --------
Total collections on insurance
products............................ $421.6 $880.0 $1,680.2 $2,048.0
====== ====== ======== ========

ANNUITIES in our Conseco Insurance Group segment include equity-indexed
annuities and other fixed annuities sold through professional independent
producers. Many professional independent producers discontinued marketing our
annuity products after A.M. Best lowered our financial strength ratings.
Accordingly, we took actions to reduce our expenses related to marketing these
products through this distribution channel, and began to focus instead on the
sale of products that were less ratings sensitive. Total annuity collected
premiums in this segment were $18.1 million in the four months ended December
31, 2003; $74.0 million in the eight months ended August 31, 2003; and $351.9
million in 2002 and $710.6 million in 2001.

We introduced our first equity-indexed annuity product in 1996. The account
value, or "accumulation value," of these annuities is credited with interest at
an annual guaranteed minimum rate of 3 percent (or, including the effect of
applicable sales loads, a 1.7 percent compound average interest rate over the
term of the contracts). These annuities provide for potentially higher returns
based on a percentage of the change in the S&P 500 Index during each year of
their term. We purchase S&P 500 call options in an effort to hedge increases to
policyholder benefits resulting from increases in the S&P 500 Index. Total
collected premiums for this product were $9.4 million in the four months ended
December 31, 2003; $44.9 million in the eight months ended August 31, 2003; and
$189.7 million in 2002 and $339.5 million in 2001. The decreases can be
attributed to (1) the general stock market performance in recent years which has
made other investment products more attractive to certain customers and (2) the
effect of the A.M. Best ratings downgrade to "B (Fair)."

Other fixed rate annuity products include single-premium deferred
annuities, flexible-premium deferred annuities and single-premium immediate
annuities, which are credited with a declared rate. Single-premium deferred
annuity and flexible-premium deferred annuity policies typically have an
interest rate that is guaranteed for the first policy year, after which we have
the discretionary ability to change the crediting rate to any rate not below a
guaranteed minimum rate. The interest rate credited on single-premium immediate
annuities is based on market conditions existing when a policy is issued and
remains unchanged over the life of the single-premium immediate annuity. Annuity
premiums on these products were $8.7 million in the four months ended December
31, 2003; $29.1 million in the eight months ended August 31, 2003; and $162.2
million in 2002 and $371.1 million in 2001. The decreases can be attributed to
the effect of the A.M. Best ratings downgrade.

SUPPLEMENTAL HEALTH products in our Conseco Insurance Group segment include
Medicare supplement, specified disease and other insurance products distributed
through professional independent producers. Our profits on supplemental health
policies depend on the overall level of sales, the length of time the business
remains inforce, investment yields, claim experience and expense management.

Collected premiums on Medicare supplement policies in the Conseco Insurance
Group segment were $134.2 million in the four months ended December 31, 2003;
$250.4 million in the eight months ended August 31, 2003; and $369.9 million in
2002 and $318.4 million in 2001. Collected premiums have been affected by the
decrease in new Medicare supplement sales since our ratings downgrades.

Premiums collected on specified disease products totaled $118.7 million in
the four months ended December 31, 2003; $236.4 million in the eight months
ended August 31, 2003; and $368.6 million in 2002 and $371.8 million in 2001.
Collected premiums have been affected by decreases in new sales since our
ratings downgrades.

Other health products include disability income, dental and various other
health insurance products. We no longer actively market many of these products.
The disability income and dental products have been marketed to school systems
located in nearly all states. Premiums collected totaled $19.1 million in the
four months ended December 31, 2003; $38.5 million in the eight months ended
August 31, 2003; and $91.8 million in 2002 and $93.9 million in 2001.

LIFE products in the Conseco Insurance Group segment are sold through
professional independent producers. Life premiums collected totaled $131.5
million in the four months ended December 31, 2003; $280.7 million in the eight
months ended August 31, 2003; and $498.0 million in 2002 and $553.3 million in
2001. The A.M. Best ratings downgrade to "B (Fair)" has negatively affected our
sales of life products. We stopped actively marketing many of our life insurance
products sold through the professional independent producer channel in the
second quarter of 2003.

OTHER BUSINESS IN RUN-OFF (DOLLARS IN MILLIONS)

SUCCESSOR PREDECESSOR
------------ --------------------------------
FOUR MONTHS EIGHT MONTHS YEARS ENDED
ENDED ENDED DECEMBER 31,
DECEMBER 31, AUGUST 31, -----------------
2003 2003 2002 2001
------------ ------------ ---- ----

Premiums collected:
Long-term care:
First-year................................ $ .6 $ 3.2 $ 10.0 $ 17.4
Renewal................................... 134.0 264.8 424.5 445.6
------ ------ ------ --------
Subtotal -- long-term care............. 134.6 268.0 434.5 463.0
------ ------ ------ --------
Major medical:
Group (first-year)........................ -- -- .5 16.4
Group (renewal)........................... 36.7 152.4 315.1 354.5
------ ------ ------ --------
Subtotal -- group major medical........ 36.7 152.4 315.6 370.9
------ ------ ------ --------
Individual (first-year)................... -- -- 15.6 112.8
Individual (renewal)...................... 2.6 4.0 78.3 253.4
------ ------ ------ --------
Subtotal -- individual major medical... 2.6 4.0 93.9 366.2
------ ------ ------ --------
Total major medical.................... 39.3 156.4 409.5 737.1
------ ------ ------ --------
Collections on insurance products:
Total first-year premium collections on
insurance products..................... .6 3.2 26.1 146.6
Total renewal premium collections on
insurance products..................... 173.3 421.2 817.9 1,053.5
------ ------ ------ --------
Total collections on insurance
products............................. $173.9 $424.4 $844.0 $1,200.1
====== ====== ====== ========

As described elsewhere, the other business in run-off segment includes: (1)
long-term care products written in prior years through independent agents; and
(2) group and individual major medical business in run-off.

LONG-TERM CARE premiums collected in this segment totaled $134.6 million in
the four months ended December 31, 2003; $268.0 million in the eight months
ended August 31, 2003; and $434.5 million in 2002 and $463.0 million in 2001.
Most of the long-term care premiums in this segment relate to business written

by certain of our subsidiaries prior to their acquisitions by Conseco in 1996
and 1997. We ceased selling new long-term care policies through professional
independent producers in the second quarter of 2003. As a result, decreases in
this segment's long-term care collected premiums reflect policy lapses partially
offset by premium rate increases.

GROUP MAJOR MEDICAL premiums totaled $36.7 million in the four months ended
December 31, 2003; $152.4 million in the eight months ended August 31, 2003; and
$315.6 million in 2002 and $370.9 million in 2001. We no longer actively market
new sales of group products. In early 2002, we decided to stop renewing all
inforce small group business and discontinued new sales.

INDIVIDUAL MAJOR MEDICAL premiums collected were $2.6 million in the four
months ended December 31, 2003; $4.0 million in the eight months ended August
31, 2003; and $93.9 million in 2002 and $366.2 million in 2001. In the second
half of 2001, we stopped renewing a large portion of our major medical lines of
business. In early 2002, we decided to stop renewing all inforce individual
major medical business and discontinued new sales.

LIQUIDITY AND CAPITAL RESOURCES

Changes in our consolidated balance sheet between December 31, 2003 and
December 31, 2002, reflect: (1) the reorganization of our capital structure
pursuant to the plan of reorganization; and (2) the effect of the sale of
Conseco Finance.

In accordance with generally accepted accounting principles, we record our
actively managed fixed maturity investments, equity securities and certain other
invested assets at estimated fair value with any unrealized gain or loss
(excluding impairment losses which are recognized through earnings), net of tax
and related adjustments, recorded as a component of shareholders' equity. At
December 31, 2003, we increased the carrying value of such investments by $375.2
million as a result of this fair value adjustment.

Our capital structure was determined in accordance with the terms of the
plan of reorganization and consisted of: (1) our $1.3 billion senior credit
facility; (2) class A preferred stock with an aggregate liquidation preference
of $887.5 million as of December 31, 2003; (3) warrants to purchase six million
shares of common stock; and (4) 100 million shares of new common stock. Our
capital structure as of December 31, 2003, is as follows (dollars in millions):

Total capital:
Corporate notes payable................................... $1,300.0
Shareholders' equity:
Class A preferred stock................................ 887.5
Common stock........................................... 1.0
Additional paid-in capital............................. 1,641.9
Accumulated other comprehensive income................. 218.7
Retained earnings...................................... 68.5
--------
Total shareholders' equity........................... 2,817.6
--------
Total capital........................................ $4,117.6
========

The following table summarizes certain financial ratios as of and for the
four months ended December 31, 2003:

Book value per common share................................. $19.28
Ratio of earnings to fixed charges.......................... 1.79x
Ratio of earnings to fixed charges and preferred
dividends................................................. 1.46x
Debt to total capital ratios:
Corporate debt to total capital........................... 32%
Corporate debt and preferred stock to total capital....... 53%

CONTRACTUAL OBLIGATIONS

Our significant contractual obligations as of December 31, 2003, are set
forth below (dollars in millions):

PAYMENT DUE IN
------------------------------------------------------
TOTAL 2004 2005-2006 2007-2008 THEREAFTER
----- ---- --------- --------- ----------

Notes payable................ $1,300.0 $ 53.0 $156.0 $306.0 $ 785.0
Insurance liabilities(a)..... 792.4 91.0 134.3 85.4 481.7
Investment borrowings........ 387.3 387.3 -- -- --
Operating leases............. 117.0 23.0 40.2 29.7 24.1
-------- ------ ------ ------ --------
Total...................... $2,596.7 $554.3 $330.5 $421.1 $1,290.8
======== ====== ====== ====== ========

---------------

(a) These liabilities are comprised primarily of supplemental contracts without
life contingencies and structured settlements.

Refer to the notes to the consolidated financial statements included
elsewhere in this prospectus entitled "Notes Payable -- Direct Corporate
Obligations" and "Commitments and Contingencies" for additional information on
notes payable and operating leases.

LIQUIDITY FOR INSURANCE OPERATIONS

Our insurance operating companies generally receive adequate cash flow from
premium collections and investment income to meet their obligations. Life
insurance and annuity liabilities are generally long-term in nature.
Policyholders may, however, withdraw funds or surrender their policies, subject
to any applicable surrender and withdrawal penalty provisions. We seek to
balance the duration of our invested assets with the estimated duration of
benefit payments arising from contract liabilities.

In July 2002, A.M. Best downgraded the financial strength ratings of our
primary insurance subsidiaries from "A- (Excellent)" to "B++ (Very good)" and
placed the ratings "under review with negative implications." On August 14,
2002, A.M. Best again lowered the financial strength ratings of our primary
insurance subsidiaries from "B++ (Very Good)" to "B (Fair)". A.M. Best ratings
for the industry currently range from "A++ (Superior)" to "F (In Liquidation)"
and some companies are not rated. An "A++" rating indicates superior overall
performance and a superior ability to meet ongoing obligations to policyholders.
The "B" rating is assigned to companies which have, on balance, fair balance
sheet strength, operating performance and business profile, when compared to the
standards established by A.M. Best, and a fair ability in A.M. Best's opinion to
meet their current obligations to policyholders, but are financially vulnerable
to adverse changes in underwriting and economic conditions. The rating reflected
A.M. Best's view of the uncertainty surrounding our restructuring initiatives
and the potential adverse financial impact on our subsidiaries. On September 11,
2003, A.M. Best affirmed its financial strength ratings of our primary insurance
companies ("B (Fair)") and removed the ratings from under review, indicating
that the ratings outlook is positive. On October 3, 2003, A.M. Best assigned a
positive outlook to all of our ratings. According to a press release issued by
A.M. Best, the assignment of a positive outlook to Conseco's ratings reflects
their favorable view of our bankruptcy reorganization and a number of management
initiatives including the sale of the General Motors building, sale of Conseco
Finance, restructuring of our investment portfolios, expense reductions, merging
of certain subsidiaries, stabilization of surrenders and a commitment in the
near-to-medium term to focus on selling higher margin products with lower
capital requirements.

On August 2, 2002, S&P downgraded the financial strength rating of our
primary insurance companies from BB+ to B+. On November 19, 2003, S&P assigned a
"BB-" counterparty credit and financial strength rating to our primary insurance
companies, with the exception of Conseco Senior Health Insurance Company, which
was assigned a "CCC" rating. S&P financial strength ratings range from "AAA" to
"R" and some companies are not rated. Rating categories from "BB" to "CCC" are
classified as "vulnerable", and pluses and minuses show the relative standing
within a category. In S&P's view, an insurer rated "BB" has

marginal financial security characteristics and although positive attributes
exist, adverse business conditions could lead to an insufficient ability to meet
financial commitments. In S&P's view, an insurer rated "CCC" has very weak
financial security characteristics and is dependent on favorable business
conditions to meet financial commitments. On July 1, 2003, Moody's downgraded
the financial strength rating of our primary insurance companies from "Ba3" to
"B3". On December 4, 2003, Moody's assigned a "Ba3" rating to our primary
insurance companies with the exception of Conseco Senior Health Insurance
Company, which was assigned a "Caa1" rating. Moody's financial strength ratings
range from "Aaa" to "C". Rating categories from "Ba" to "C" are classified as
"vulnerable" by Moody's, and may be supplemented with numbers "1", "2", or "3"
to show relative standing within a category. In Moody's view, an insurer rated
"Ba" offers questionable financial security and the ability of the insurer to
meet policyholder obligations may be very moderate and thereby not well
safeguarded in the future. In Moody's view, an insurer rated "Caa" offers very
poor financial security and may default on its policyholder obligations or there
may be elements of danger with respect to punctual payment of policyholder
obligations and claims.

The lowered ratings assigned to our insurance subsidiaries caused sales of
our insurance products to decline and policyholder redemptions and lapses to
increase during 2002 and 2003. We also experienced increased agent attrition,
which in some cases led us to increase commissions or sales incentives we must
pay in order to retain them. These events have had a material adverse effect on
our financial results.

As more fully described under the caption "Statutory Information" within
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," our two insurance subsidiaries domiciled in Texas entered into
consent orders with the Texas Department of Insurance, which were formally
released on November 19, 2003. The consent orders applied to all of our
insurance subsidiaries and, among other things, restricted the ability of our
insurance subsidiaries to pay any dividends or other distributions to any non-
insurance company parent without prior approval. State laws generally provide
state insurance regulatory agencies with broad authority to protect
policyholders in their jurisdictions. Accordingly, we cannot assure you that the
regulators will not seek to assert greater supervision and control over our
insurance subsidiaries' businesses and financial affairs. We have agreed with
the Texas Department of Insurance to provide prior notice of certain
transactions, including up to 30 days prior notice for the payment of dividends
by an insurance subsidiary to any non-insurance company parent, and periodic
reporting of information concerning our financial performance and condition.

Our insurance subsidiaries experienced increased lapse rates on annuity
policies during 2002. Aggregate annuity surrenders have declined in 2003. We
believe that the diversity of the investment portfolios of our insurance
subsidiaries and the concentration of investments in high-quality, liquid
securities provide sufficient liquidity to meet foreseeable cash requirements of
our insurance subsidiaries. We believe our insurance subsidiaries could readily
liquidate sufficient portions of their investments if lapses were to increase to
the levels experienced in 2002.

LIQUIDITY OF THE HOLDING COMPANIES

Pursuant to the plan of reorganization, we entered into a new senior credit
facility. The senior credit facility consists of two tranches: Tranche A -- $1.0
billion; and Tranche B -- $0.3 billion. See the note to the consolidated
financial statements included elsewhere in this prospectus entitled "Notes
Payable -- Direct

Corporate Obligations" for further discussion related to the senior credit
facility. Principal repayments are due as follows (dollars in millions):

TRANCHE A TRANCHE B
--------- ---------

June 30, 2004.............................................. $ 50.0 $ 3.0
June 30, 2005.............................................. 50.0 3.0
June 30, 2006.............................................. 50.0 1.5
December 31, 2006.......................................... 50.0 1.5
June 30, 2007.............................................. 75.0 1.5
December 31, 2007.......................................... 75.0 1.5
June 30, 2008.............................................. 75.0 1.5
December 31, 2008.......................................... 75.0 1.5
June 30, 2009.............................................. -- 1.5
September 10, 2009......................................... 500.0 --
December 31, 2009.......................................... -- 1.5
September 10, 2010......................................... -- 282.0
-------- ------
$1,000.0 $300.0
======== ======

At December 31, 2003, Conseco, Inc. and CDOC held unrestricted cash of
$27.9 million and additional restricted cash of $17.3 million held in trust for
the payment of bankruptcy-related professional fees. In addition, our other
non-life insurance companies held unrestricted cash of approximately $61.0
million which could be upstreamed to the parent companies if needed.

Conseco, Inc. and CDOC are holding companies with no business operations of
their own; they depend on their operating subsidiaries for cash to make
principal and interest payments on debt, and to pay administrative expenses and
income taxes. The cash Conseco and CDOC receive from insurance subsidiaries
consists of dividends and distributions, principal and interest payments on
surplus debentures, fees for services, tax-sharing payments, and from our
non-insurance subsidiaries, loans and advances. A further deterioration in the
financial condition, earnings or cash flow of the material subsidiaries of
Conseco or CDOC for any reason could further limit such subsidiaries' ability to
pay cash dividends or other disbursements to Conseco and/or CDOC, which, in
turn, would limit Conseco's and/or CDOC's ability to meet debt service
requirements and satisfy other financial obligations.

The ability of our insurance subsidiaries to pay dividends is subject to
state insurance department regulations and is based on the financial statements
of our insurance subsidiaries prepared in accordance with statutory accounting
practices prescribed or permitted by regulatory authorities, which differ from
generally accepted accounting principles. These regulations generally permit
dividends to be paid from statutory earned surplus of the insurance company for
any 12-month period in amounts equal to the greater of (or in a few states, the
lesser of): (1) statutory net gain from operations or net income for the prior
year; and (2) 10 percent of statutory capital and surplus as of the end of the
preceding year. Any dividends in excess of these levels require the approval of
the director or commissioner of the applicable state insurance department. Also,
we have agreed with the Texas Department of Insurance to provide up to 30 days
prior notice of the payment of dividends by an insurance subsidiary to any
non-insurance company parent. As described under the caption "-- Statutory
Information", we recently were subject to consent orders with the Commissioner
of Insurance for the State of Texas that, among other things, restricted the
ability of our insurance subsidiaries to pay any dividends to any non-insurance
company parent without prior approval. If our financial condition were to
deteriorate, we may be required to enter into similar orders in the future. In
addition, we may need to contribute additional capital to improve the risk-based
capital ratios of our insurance subsidiaries and this could affect the ability
of our top tier insurance subsidiary to pay dividends.

Our cash flow may be affected by a variety of factors, many of which are
outside of our control, including insurance and banking regulatory issues,
competition, financial markets and other general business conditions. We cannot
assure you that we will possess sufficient income and liquidity to meet all of
our liquidity requirements and other obligations.

If an insurance company subsidiary were to be liquidated, that liquidation
would be conducted under the insurance law of its state of domicile by such
state's insurance regulator as the receiver with respect to such insurer's
property and business. In the event of a default on our debt or our insolvency,
liquidation or other reorganization, our creditors and stockholders will not
have the right to proceed against the assets of our insurance subsidiaries or to
cause their liquidation under federal and state bankruptcy laws.

We have adopted several initiatives designed to reduce the expense levels
that exceed product pricing at our Conseco Insurance Group segment. These
initiatives include the elimination of duplicate processing systems by
converting all similar systems to a single system. We expect to spend over $35
million on capital expenditures in 2004, including amounts related to the
aforementioned initiatives. We believe we have adequate cash flows from
operations to fund these initiatives.

Under our senior credit facility, we have agreed to a number of covenants
and other provisions that restrict our ability to engage in various financing
transactions and pursue certain operating activities without the prior consent
of the lenders under the senior credit facility. We have also agreed to meet or
maintain various financial ratios. Our ability to meet these financial covenants
may be affected by events beyond our control. These requirements represent
significant restrictions on the manner in which we may operate our business. If
we default under any of these requirements (subject to certain remedies), the
lenders could declare all outstanding borrowings, accrued interest and fees to
be immediately due and payable. If that were to occur, we cannot assure you that
we would have sufficient liquidity to repay or refinance this indebtedness or
any of our other debts. In January 2004, the senior credit facility was amended
to remove requirements that our insurance subsidiaries maintain minimum A.M.
Best financial strength ratings. In March 2004, the senior credit facility was
amended to change the definition of a financial ratio we are required to
maintain. The change was needed to clarify how the ratio is calculated. The
definition in the amended facility is consistent with calculations used to
determine the original covenant levels.

INVESTMENTS

Our investment strategy is to: (1) maintain a predominately
investment-grade fixed income portfolio; (2) provide adequate liquidity to meet
our cash obligations to policyholders and others; and (3) maximize current
investment income and total investment return through active investment
management. Consistent with this strategy, investments in fixed maturity
securities, mortgage loans and policy loans made up 94 percent of our $22.8
billion investment portfolio at December 31, 2003. The remainder of the invested
assets were equity securities, venture capital investments and other invested
assets.

The following table summarizes the composition of our investment portfolio
as of December 31, 2003 (dollars in millions):

CARRYING PERCENT OF TOTAL
VALUE INVESTMENTS
-------- ----------------

Actively managed fixed maturities..................... $19,840.1 87%
Equity securities..................................... 74.5 --
Mortgage loans........................................ 1,139.5 5
Policy loans.......................................... 503.4 2
Trading securities.................................... 915.1 4
Partnership investments............................... 192.6 1
Other invested assets................................. 131.5 1
--------- ---
Total investments................................... $22,796.7 100%
========= ===

Insurance statutes regulate the type of investments that our insurance
subsidiaries are permitted to make and limit the amount of funds that may be
used for any one type of investment. In light of these statutes and regulations
and our business and investment strategy, we generally seek to invest in United
States government and government-agency securities and corporate securities
rated investment grade by established nationally recognized rating organizations
or in securities of comparable investment quality, if not rated.

The following table summarizes the carrying values of our fixed maturity
securities by industry category as of December 31, 2003 (dollars in millions):

PERCENT OF
CARRYING FIXED
VALUE MATURITIES
-------- ----------

Mortgage-backed securities.................................. $ 5,851.0 29.5%
Bank & Finance.............................................. 2,713.5 13.7
Manufacturing............................................... 2,169.6 10.9
Utilities................................................... 1,322.1 6.7
Services.................................................... 1,142.6 5.8
Communications.............................................. 1,058.6 5.3
Asset-backed securities..................................... 761.6 3.8
Agri/Forestry/Mining........................................ 761.1 3.8
Government (US)............................................. 733.6 3.7
Transportation.............................................. 498.3 2.5
Retail/Wholesale............................................ 486.2 2.5
Other....................................................... 2,341.9 11.8
--------- -----
Total fixed maturity securities........................... $19,840.1 100.0%
========= =====

Our fixed maturity securities consist predominantly of publicly traded
securities. We classify securities issued in the Rule 144A market as publicly
traded. Our privately traded securities comprise less than 1 percent of our
total fixed maturity securities portfolio and consist almost entirely of
mortgage-backed securities.

The following table sets forth fixed maturity investments at December 31,
2003, classified by rating categories. The category assigned is the highest
rating by a nationally recognized statistical rating organization or, as to
$661.5 million fair value of fixed maturities not rated by such firms, the
rating assigned by the National Association of Insurance Commissioners. For
purposes of the table, National Association of Insurance Commissioners Class 1
is included in the "A" rating; Class 2, "BBB-"; Class 3, "BB-"; and Classes 4-6,
"B+ and below" (dollars in millions).

PERCENT OF
AMORTIZED CARRYING FIXED
INVESTMENT RATING COST VALUE MATURITIES
----------------- --------- -------- ----------

AAA............................................. $ 7,069.6 $ 7,131.8 36%
AA.............................................. 1,592.5 1,624.5 8
A............................................... 4,918.2 5,018.3 25
BBB+............................................ 1,959.1 2,013.8 10
BBB............................................. 2,401.9 2,450.4 13
BBB-............................................ 794.9 825.3 4
--------- --------- ---
Investment grade.............................. 18,736.2 19,064.1 96
--------- --------- ---
BB+............................................. 191.2 199.0 1
BB.............................................. 156.4 163.5 1
BB-............................................. 149.0 158.5 1
B+ and below.................................... 237.9 255.0 1
--------- --------- ---
Below investment grade........................ 734.5 776.0 4
--------- --------- ---
Total fixed maturity securities............ $19,470.7 $19,840.1 100%
========= ========= ===

The following table summarizes investment yields earned over the past three
years on the general account invested assets of our insurance subsidiaries.
General account investments exclude the invested assets

of our corporate segment, our venture capital investment in AT&T Wireless,
separate account assets, the value of S&P 500 call options and the investments
held by Conseco Finance (dollars in millions).

Weighted average general
account invested assets as
defined:
As reported............... $23,045.4 $23,311.5 $23,407.2 $23,716.2
Excluding unrealized
appreciation
(depreciation)(a)....... 22,499.5 22,777.3 23,481.0 23,992.3
Net investment income on
general account invested
assets....................... 425.1 917.1 1,520.0 1,672.8
Yields earned:
As reported.................. 5.5% 5.9% 6.5% 7.1%
Excluding unrealized
appreciation
(depreciation)(a)......... 5.7% 6.0% 6.5% 7.0%

---------------

(a) Excludes the effect of reporting fixed maturities at fair value as
described in the note to our consolidated financial statements included
elsewhere in this prospectus entitled "Investments".

Although investment income is a significant component of total revenues,
the profitability of certain of our insurance products is determined primarily
by the spreads between the interest rates we earn and the rates we credit or
accrue to our insurance liabilities. At December 31, 2003, the average yield,
computed on the cost basis of our actively managed fixed maturity portfolio, was
5.6 percent, and the average interest rate credited or accruing to our total
insurance liabilities (excluding interest rate bonuses for the first policy year
only and excluding the effect of credited rates attributable to variable or
equity-indexed products) was 4.7 percent.

ACTIVELY MANAGED FIXED MATURITIES

Our actively managed fixed maturity portfolio at December 31, 2003,
included primarily debt securities of the United States government, public
utilities and other corporations, and structured securities. Structured
securities included mortgage-backed securities, collateralized mortgage
obligations, asset-backed securities and commercial mortgage-backed securities.

At December 31, 2003, our fixed maturity portfolio had $403.8 million of
unrealized gains and $34.4 million of unrealized losses, for a net unrealized
gain of $369.4 million. Estimated fair values for fixed maturity investments
were determined based on estimates from: (1) nationally recognized pricing
services (92 percent of the portfolio); (2) broker-dealer market makers (5
percent of the portfolio); and (3) internally developed methods (3 percent of
the portfolio).

At December 31, 2003, approximately 3.4 percent of our invested assets (3.9
percent of fixed maturity investments) were fixed maturities rated
below-investment grade by nationally recognized statistical rating organizations
(or, if not rated by such firms, with ratings below Class 2 assigned by the
National Association of Insurance Commissioners). We plan to maintain
approximately the present level of investments in below-investment-grade fixed
maturities. These securities generally have greater risks than other corporate
debt investments, including risk of loss upon default by the borrower, and are
often unsecured and subordinated to other creditors. Below-investment-grade
issuers usually have higher levels of indebtedness and are more sensitive to
adverse economic conditions, such as recession or increasing interest rates,
than are investment-grade issuers. We are aware of these risks and monitor our
below-investment-grade securities closely. At

December 31, 2003, our below-investment-grade fixed maturity investments had an
amortized cost of $734.5 million and an estimated fair value of $776.0 million.

We continually evaluate the creditworthiness of each issuer whose
securities we hold. We pay special attention to those securities whose market
values have declined materially for reasons other than changes in interest rates
or other general market conditions. We evaluate the realizable value of the
investment, the specific condition of the issuer and the issuer's ability to
comply with the material terms of the security. Information reviewed may include
the recent operational results and financial position of the issuer, information
about its industry, information about the variety of factors affecting the
issuer's performance and other information. 40C86 Advisors employs a staff of
experienced securities analysts in a variety of specialty areas who compile and
review such data. If evidence does not exist to support a realizable value equal
to or greater than the carrying value of the investment, and such decline in
market value is determined to be other than temporary, we reduce the carrying
amount to its fair value, which becomes the new cost basis. We report the amount
of the reduction as a realized loss. We recognize any recovery of such
reductions in the cost basis of an investment as investment income over the
remaining life of the investment (but only to the extent our current valuations
indicate such amounts will ultimately be collected), upon the sale, repayment or
other disposition of the investment. We recorded writedowns of fixed maturity
investments, equity securities and other invested assets totaling $9.6 million
in the four months ended December 31, 2003 and $51.3 million in the eight months
ended August 31, 2003. Our investment portfolio is subject to the risks of
further declines in realizable value. However, we attempt to mitigate this risk
through the diversification and active management of our portfolio.

As of December 31, 2003, our fixed maturity investments in substantive
default (i.e., in default due to nonpayment of interest or principal) or
technical default (i.e., in default, but not as to the payment of interest or
principal) had an amortized cost of $15.1 million and a carrying value of $16.6
million. 40C86 Advisors employs a staff of experienced professionals to manage
non-performing and impaired investments. There were no other fixed maturity
investments about which we had serious doubts as to the ability of the issuer to
comply with the material terms of the instrument on a timely basis.

When a security defaults, our policy is to discontinue the accrual of
interest and eliminate all previous interest accruals, if we determine that such
amounts will not be ultimately realized in full. Investment income forgone due
to defaulted securities was $5.3 million in the four months ended December 31,
2003; $12.1 million in the eight months ended August 31, 2003; and $60.4 million
and $17.6 million for the years ended December 31, 2002 and 2001, respectively.

At December 31, 2003, fixed maturity investments included $5.9 billion of
structured securities (or 29 percent of all fixed maturity securities).
Collateralized mortgage obligations are backed by pools of mortgages that are
segregated into sections or "tranches" that provide for reprioritizing of
retirement of principal. Pass-through securities receive principal and interest
payments through their regular pro rata share of the payments on the underlying
mortgages backing the securities. The yield characteristics of structured
securities differ from those of traditional fixed-income securities. Interest
and principal payments for mortgage-backed securities occur more frequently,
often monthly. Mortgage-backed securities are subject to risks associated with
variable prepayments. Prepayment rates are influenced by a number of factors
that cannot be predicted with certainty, including: the relative sensitivity of
the underlying mortgages backing the assets to changes in interest rates; a
variety of economic, geographic and other factors; and the repayment priority of
the securities in the overall securitization structures.

In general, prepayments on the underlying mortgage loans and the securities
backed by these loans increase when prevailing interest rates decline
significantly relative to the interest rates on such loans. The yields on
mortgage-backed securities purchased at a discount to par will increase when the
underlying mortgages prepay faster than expected. The yields on mortgage-backed
securities purchased at a premium will decrease when the underlying mortgages
prepay faster than expected. When interest rates decline, the proceeds from the
prepayment of mortgage-backed securities may be reinvested at lower rates than
we were earning on the prepaid securities. When interest rates increase,
prepayments on mortgage-backed securities decrease, as fewer underlying
mortgages are refinanced. When this occurs, the average maturity and duration

of the mortgage-backed securities increase, which decreases the yield on
mortgage-backed securities purchased at a discount, because the discount is
realized as income at a slower rate, and increases the yield on those purchased
at a premium as a result of a decrease in the annual amortization of the
premium.

Pursuant to fresh start reporting, we were required to mark all of our
investments to market value. The current interest rate environment is much lower
than when most of our investments were purchased. Accordingly, the fresh start
values of our investments generally exceed the par values of such investments.
The amount of value exceeding par is referred to as a "purchase premium" which
is amortized against future income. If prepayments in any period are higher than
expected, purchase premium amortization is increased. In periods of unexpectedly
high prepayment activity, the increased amortization will reduce net investment
income.

The following table sets forth the par value, amortized cost and estimated
fair value of mortgage-backed securities, summarized by interest rates on the
underlying collateral at December 31, 2003 (dollars in millions):

PAR AMORTIZED ESTIMATED
VALUE COST FAIR VALUE
----- --------- ----------

Below 4 percent.................................. $ 60.4 $ 63.4 $ 63.8
4 percent - 5 percent............................ 1,193.1 1,138.2 1,145.8
5 percent - 6 percent............................ 998.6 990.5 1,005.8
6 percent - 7 percent............................ 2,816.2 2,916.6 2,932.2
7 percent - 8 percent............................ 579.5 613.4 618.6
8 percent and above.............................. 79.8 84.7 84.8
-------- -------- --------
Total structured securities(a)................. $5,727.6 $5,806.8 $5,851.0
======== ======== ========

---------------

(a) Includes below-investment grade structured securities with an amortized
cost and estimated fair value of $2.1 million.

The amortized cost and estimated fair value of structured securities at
December 31, 2003, summarized by type of security, were as follows (dollars in
millions):

ESTIMATED FAIR VALUE
---------------------
PERCENT OF
AMORTIZED FIXED
TYPE COST AMOUNT MATURITIES
---- --------- ------ ----------

Pass-throughs and sequential and targeted
amortization classes........................... $3,690.6 $3,718.1 19%
Planned amortization classes and
accretion-directed bonds....................... 714.0 713.6 3
Commercial mortgage-backed securities............ 1,215.8 1,234.7 6
Subordinated classes and mezzanine tranches...... 183.8 181.9 1
Other............................................ 2.6 2.7 --
-------- -------- --
Total structured securities(a)................. $5,806.8 $5,851.0 29%
======== ======== ==

---------------

(a) Includes below-investment grade structured securities with an amortized
cost and estimated fair value of $2.1 million.

Pass-throughs and sequential and targeted amortization classes have similar
prepayment variability. Pass-throughs historically provide the best liquidity in
the mortgage-backed securities market. Pass-throughs are also used frequently in
the dollar roll market and can be used as the collateral when creating
collateralized mortgage obligations. Sequential classes are a series of tranches
that return principal to the holders of the transaction's various tranches in
sequence. Targeted amortization classes offer slightly better structure in
return of principal than sequentials when prepayment speeds are close to the
speed at the time of creation.

Planned amortization classes and accretion-directed bonds are generally
some of the most stable and liquid instruments in the mortgage-backed securities
market. Planned amortization class bonds adhere to a fixed schedule of principal
payments as long as the underlying mortgage collateral experiences prepayments
within a certain range. Changes in prepayment rates are first absorbed by
support or companion classes. This insulates the planned amortization class from
the consequences of both faster prepayments (average life shortening) and slower
prepayments (average life extension).

Commercial mortgage-backed securities are bonds secured by commercial real
estate mortgages. Commercial real estate encompasses income producing properties
that are managed for economic profit. Property types include multi-family
dwellings including apartments, retail centers, hotels, restaurants, hospitals,
nursing homes, warehouses, and office buildings. The commercial mortgage-backed
securities market currently offers high yields, strong credits, and call
protection compared to similar-rated corporate bonds. Most commercial
mortgage-backed securities have strong call protection features where borrowers
are locked out from prepaying their mortgages for a stated period of time. If
the borrower does prepay any or all of the loan, they will be required to pay
prepayment penalties.

Subordinated and mezzanine tranches are classes that provide credit
enhancement to the senior tranches. The rating agencies require that this credit
enhancement not deteriorate due to prepayments for a period of time, usually
five years of complete lockout followed by another period of time where
prepayments are shared pro rata with senior tranches. Subordinated and mezzanine
tranches bear a majority of the risk of loss due to property owner defaults.
Subordinated bonds are generally rated "AA" or lower; we typically do not hold
securities rated lower than "BB".

During the four months ended December 31, 2003, we sold $604.9 million of
fixed maturity investments which resulted in gross investment losses, before
income taxes, of $7.3 million. During the first eight months of 2003, we sold
$2.7 billion of fixed maturity investments which resulted in gross investment
losses, before income taxes, of $62.4 million. Securities sold at a loss are
sold for a number of reasons including but not limited to:

- changes in the investment environment;

- expectation that the market value could deteriorate further;

- desire to reduce our exposure to an issuer or an industry;

- changes in credit quality; and

- our analysis indicating there is a high probability that the security is
other-than-temporarily impaired.

As discussed in the notes to our consolidated financial statements included
elsewhere in this prospectus, the realization of gains and losses affects the
timing of the amortization of the cost of policies produced and the cost of
policies purchased related to universal life and investment products.

VENTURE CAPITAL INVESTMENT IN AT&T WIRELESS SERVICES, INC.

Our venture capital investment in AT&T Wireless was made by our subsidiary
which engages in venture capital investment activity. AT&T Wireless is a company
in the wireless communication business. In December 2003, we sold the remaining
4.1 million shares of AT&T Wireless common stock. In 2002, we sold 10.3 million
shares of AT&T Wireless common stock which generated proceeds of $75.7 million.
At December 31, 2002, we held 4.1 million shares of AT&T Wireless common stock
with a value of $25.0 million. We recognized venture capital investment income
(losses) of $(5.5) million in the four months ended December 31, 2003; $10.5
million in the eight months ended August 31, 2003; and $(99.3) million and
$(42.9) million in 2002 and 2001, respectively, related to this investment.

OTHER INVESTMENTS

At December 31, 2003, we held mortgage loan investments with a carrying
value of $1,139.5 million (or 5.0 percent of total invested assets) and a fair
value of $1,174.1 million. Mortgage loans were

substantially comprised of commercial loans. Noncurrent mortgage loans were
insignificant at December 31, 2003. Realized losses on mortgage loans were not
significant in any of the past three years. At December 31, 2003, we had no
allowance for losses on mortgage loans (mortgage loans were recorded at market
values at August 31, 2003, in conjunction with our adoption of fresh start
accounting). Approximately 8 percent, 7 percent, 7 percent and 6 percent of the
mortgage loan balance were on properties located in New York, Massachusetts,
Florida and Pennsylvania, respectively. No other state accounted for more than 5
percent of the mortgage loan balance.

The following table shows the distribution of our mortgage loan portfolio
by property type as of December 31, 2003 (dollars in millions):

NUMBER OF CARRYING
LOANS VALUE
--------- --------

Retail...................................................... 415 $ 907.2
Office building............................................. 48 159.9
Industrial.................................................. 18 39.1
Multi-family................................................ 13 16.3
Other....................................................... 53 17.0
--- --------
Total mortgage loans...................................... 547 $1,139.5
=== ========

The following table shows our mortgage loan portfolio by loan size (dollars
in millions):

NUMBER PRINCIPAL
OF LOANS BALANCE
-------- ---------

Under $5 million............................................ 491 $ 719.7
$5 million but less than $10 million........................ 43 296.4
$10 million but less than $20 million....................... 13 149.7
--- --------
Total mortgage loans...................................... 547 $1,165.8
=== ========

The following table summarizes the distribution of maturities of our
mortgage loans (dollars in millions):

NUMBER PRINCIPAL
OF LOANS BALANCE
-------- ---------

2004........................................................ 13 $ 7.1
2005........................................................ 14 7.1
2006........................................................ 14 2.3
2007........................................................ 28 8.7
2008........................................................ 21 24.3
after 2008.................................................. 457 1,116.3
--- --------
Total mortgage loans...................................... 547 $1,165.8
=== ========

At December 31, 2003, we held $915.1 million of trading securities. We
carry trading securities at estimated fair value; changes in fair value are
reflected in the statement of operations. At August 31, 2003, we established
trading security accounts which are designed to act as a hedge for embedded
derivatives related to: (1) our equity-indexed annuity products; and (2) certain
modified coinsurance agreements. See the note to the consolidated financial
statements included elsewhere in this prospectus entitled "Summary of
Significant Accounting Policies -- Accounting for Derivatives" for further
discussion regarding the embedded derivatives and the trading accounts. In
addition, the trading account includes the investments backing the market
strategies of our multibucket annuity products.

Other invested assets also include: (1) S&P 500 call options; and (2)
certain nontraditional investments, including investments in limited
partnerships and promissory notes.

As part of our investment strategy, we enter into reverse repurchase
agreements and dollar-roll transactions to increase our return on investments
and improve our liquidity. Reverse repurchase agreements involve a sale of
securities and an agreement to repurchase the same securities at a later date at
an agreed-upon price. Dollar rolls are similar to reverse repurchase agreements
except that the repurchase involves securities that are only substantially the
same as the securities sold. We enhance our investment yield by investing the
proceeds from the sales in short-term securities pending the contractual
repurchase of the securities at discounted prices in the forward market. In many
cases, such transactions arise from the market demand for mortgage-backed
securities to form collateralized mortgage obligations. At December 31, 2003, we
had investment borrowings of $387.3 million. Such investment borrowings
(excluding borrowings related to the General Motors building) averaged
approximately $488.9 million during the four months ended December 31, 2003; and
$689.1 million during the eight months ended August 31, 2003 and were
collateralized by investment securities with fair values approximately equal to
the loan value. The weighted average interest rate on such borrowings (excluding
borrowings related to the General Motors building) was 1.5 percent during the
four months ended December 31, 2003; and 1.8 percent during the eight months
ended August 31, 2003. The primary risk associated with short-term
collateralized borrowings is that the counterparty might be unable to perform
under the terms of the contract. Our exposure is limited to the excess of the
net replacement cost of the securities over the value of the short-term
investments (which was not material at December 31, 2003). We believe that the
counterparties to our reverse repurchase and dollar-roll agreements are
financially responsible and that counterparty risk is minimal.

STATUTORY INFORMATION (BASED ON NON-GAAP MEASURES)

Statutory accounting practices prescribed or permitted by regulatory
authorities for our insurance subsidiaries differ from GAAP. Our insurance
subsidiaries reported the following amounts to regulatory agencies, after
appropriate elimination of intercompany accounts among such subsidiaries
(dollars in millions):

2003 2002
---- ----

Statutory capital and surplus............................... $1,514.1 $1,064.4
Asset valuation reserve..................................... 40.9 11.6
Interest maintenance reserve................................ 217.4 311.3
-------- --------
Total..................................................... $1,772.4 $1,387.3
======== ========

The statutory capital and surplus shown above included investments in
upstream affiliates, all of which were eliminated in the consolidated financial
statements prepared in accordance with GAAP, as follows (dollars in millions):

2003 2002
---- ----

Securitization debt issued by special purpose entities and
guaranteed by our finance subsidiary, all of which was
purchased by our insurance subsidiaries prior to the
acquisition of Conseco Finance............................ $ -- $ 2.0
Preferred and common stock of intermediate holding
company................................................... 159.0 146.4
Other....................................................... -- 2.5
------ ------
Total.................................................. $159.0 $150.9
====== ======

Statutory earnings build the capital adequacy required by ratings agencies
and regulators. Statutory earnings and fees and interest paid by the insurance
companies to the parent company create the "cash flow capacity" the parent
company needs to meet its obligations, including debt service. The combined
statutory net income (loss), a non-GAAP measure, of our life insurance
subsidiaries was $286.1 million, $(465.0) million and $(137.8) million in 2003,
2002 and 2001, respectively. Included in such net income (loss) are net realized
capital gains (losses), net of income taxes, of $32.8 million, $(516.1) million
and $(188.0) million in 2003, 2002 and 2001, respectively. In addition, the
insurance subsidiaries incur fees and

interest to Conseco or its non-life subsidiaries; such amounts totaled $85.8
million, $194.8 million and $279.2 million in 2003, 2002 and 2001, respectively.

The ability of our insurance subsidiaries to pay dividends is subject to
state insurance department regulations. These regulations generally permit
dividends to be paid from statutory earned surplus of the insurance company for
any 12-month period in amounts equal to the greater of (or in a few states, the
lesser of): (1) statutory net gain from operations or statutory net income for
the prior year; or (2) 10 percent of statutory capital and surplus as of the end
of the preceding year. Any dividends in excess of these levels require the
approval of the director or commissioner of the applicable state insurance
department. During 2002, our insurance subsidiaries paid dividends to Conseco
totaling $240.0 million. In 2003, a non-cash dividend of $4.5 million
representing affiliated common stock was paid to CDOC.

On October 30, 2002, Bankers National Life Insurance Company and Conseco
Life Insurance Company of Texas, on behalf of itself and all other Conseco
insurance subsidiaries, our insurance subsidiaries domiciled in Texas, each
entered into consent orders with the Commissioner of Insurance for the State of
Texas whereby they agreed:

- not to request any dividends or other distributions before January 1,
2003 and, thereafter, not to pay any dividends or other distributions to
parent companies outside of the insurance system without the prior
approval of the Texas Insurance Commissioner;

- to continue to maintain sufficient capitalization and reserves as
required by the Texas Insurance Code;

- to request approval from the Texas Insurance Commissioner before making
any disbursements not in the ordinary course of business;

- to complete any pending transactions previously reported to the proper
insurance regulatory officials prior to and during Conseco's
restructuring, unless not approved by the Texas Insurance Commissioner;

- to obtain a commitment from Conseco to maintain their infrastructure,
employees, systems and physical facilities prior to and during Conseco's
restructuring; and

- to continue to permit the Texas Insurance Commissioner to examine its
books, papers, accounts, records and affairs.

The consent orders were formally released on November 19, 2003. We have agreed
with the Texas Insurance Department to provide prior notice of certain
transactions, including up to 30 days prior notice of the payment of dividends
by an insurance subsidiary to any non-insurance company parent, and periodic
reporting of information concerning our financial performance and condition.

The National Association of Insurance Commissioners' Risk-Based Capital for
Life and/or Health Insurers Model Act provides a tool for insurance regulators
to determine the levels of statutory capital and surplus an insurer must
maintain in relation to its insurance and investment risks and whether there is
a need for possible regulatory attention. The Model Act provides four levels of
regulatory attention, varying with the ratio of the insurance company's total
adjusted capital (defined as the total of its statutory capital and surplus,
asset valuation reserve and certain other adjustments) to its company action
level risk based capital:

- if a company's total adjusted capital is less than 100 percent but
greater than or equal to 75 percent of its risk-based capital (the
"Company Action Level"), the company must submit a comprehensive plan to
the regulatory authority proposing corrective actions aimed at improving
its capital position;

- if a company's total adjusted capital is less than 75 percent but greater
than or equal to 50 percent of its risk-based capital (the "Regulatory
Action Level"), the regulatory authority will perform a special
examination of the company and issue an order specifying the corrective
actions that must be taken;

- if a company's total adjusted capital is less than 50 percent but greater
than or equal to 35 percent of its risk-based capital (the "Authorized
Control Level"), the regulatory authority may take any action it deems
necessary, including placing the company under regulatory control; and

- if a company's total adjusted capital is less than 35 percent of its
risk-based capital (the "Mandatory Control Level"), the regulatory
authority must place the company under its control.

In addition, the Model Act provides for an annual trend test if a company's
total adjusted capital is between 100 percent and 125 percent of its risk-based
capital at the end of the year. The trend test calculates the greater of the
decrease in the margin of total adjusted capital over risk-based capital: (1)
between the current year and the prior year; and (2) for the average of the last
3 years. It assumes that such decrease could occur again in the coming year. Any
company whose trended total adjusted capital is less than 95 percent of its
risk-based capital would trigger a requirement to submit a comprehensive plan as
described above for the Company Action Level.

The 2003 statutory annual statements filed with the state insurance
regulators of each of our insurance subsidiaries reflected total adjusted
capital in excess of the levels subjecting the subsidiaries to any regulatory
action. However, as a result of losses on the long-term care business within the
other business in run-off segment, the risk-based capital ratio of one of our
subsidiaries is near the level which would require it to submit a comprehensive
plan aimed at improving its capital position.

The consolidated risk-based capital ratio for our insurance subsidiaries
was approximately 287 percent at December 31, 2003. We calculate the
consolidated risk-based capital ratio by assuming all of the assets,
liabilities, capital and surplus and other aspects of the business of our
insurance subsidiaries are combined together in one insurance subsidiary, with
appropriate intercompany eliminations.

Our insurance subsidiaries hold principal protected senior notes of three
trusts which invest in fixed maturities, mortgages, preferred stock, common
stock and limited partnerships. We consolidate the trusts in our financial
statements prepared in accordance with GAAP and at December 31, 2003, the
estimated fair value of the trust investments slightly exceeded their GAAP book
value. During the fourth quarter of 2003, the trusts began liquidating their
portfolios, a process which is expected to be completed in the first quarter of
2004. Under statutory accounting practices, which differ from GAAP, realized
capital losses of $45.9 million were recorded on the fourth quarter 2003 partial
redemption of the senior notes issued by the trusts that are owned by the
insurance subsidiaries. Additional statutory realized capital losses of $94.9
million were recorded at December 31, 2003 since a decision had been made to
redeem the remaining senior notes at amounts less than their amortized cost. The
total statutory realized losses of $140.8 million on the senior notes were
included in the interest maintenance reserve.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

Our spread-based insurance business is subject to several inherent risks
arising from movements in interest rates, especially if we fail to anticipate or
respond to such movements. First, interest rate changes can cause compression of
our net spread between interest earned on investments and interest credited on
customer deposits, thereby adversely affecting our results. Second, if interest
rate changes produce an unanticipated increase in surrenders of our spread-based
products, we may be forced to sell investment assets at a loss in order to fund
such surrenders. At December 31, 2003, approximately 18 percent of our total
insurance liabilities (or approximately $4.5 billion) could be surrendered by
the policyholder without penalty. Finally, changes in interest rates can have
significant effects on the performance of our structured securities portfolio,
including collateralized mortgage obligations, as a result of changes in the
prepayment rate of the loans underlying such securities. We follow
asset/liability strategies that are designed to mitigate the effect of interest
rate changes on our profitability. However, there can be no assurance that
management will be successful in implementing such strategies and achieving
adequate investment spreads.

We seek to invest our available funds in a manner that will fund future
obligations to policyholders, subject to appropriate risk considerations. We
seek to meet this objective through investments that:

- have similar cash flow characteristics to the liabilities they support;

- are diversified among industries, issuers and geographic locations; and

- make up a predominantly investment-grade fixed maturity securities
portfolio.

Many of our products incorporate surrender charges, market interest rate
adjustments or other features to encourage persistency.

We seek to maximize the total return on our investments through active
investment management. Accordingly, we have determined that our entire portfolio
of fixed maturity securities is available to be sold in response to:

- changes in market interest rates;

- changes in relative values of individual securities and asset sectors;

- changes in prepayment risks;

- changes in credit quality outlook for certain securities;

- liquidity needs; and

- other factors.

From time to time, we invest in securities for trading purposes, although such
investments account for a relatively small portion of our total portfolio.

The profitability of many of our products depends on the spreads between
the interest yield we earn on investments and the rates we credit on our
insurance liabilities. In addition, changes in competition and other factors,
including the impact of the level of surrenders and withdrawals, may limit our
ability to adjust or to maintain crediting rates at levels necessary to avoid
narrowing of spreads under certain market conditions. Approximately 40 percent
of our insurance liabilities were subject to interest rates that may be reset
annually; 45 percent have a fixed explicit interest rate for the duration of the
contract; 10 percent have credited rates which approximate the income earned by
the Company; and the remainder have no explicit interest rates. As of December
31, 2003, the average yield, computed on the cost basis of our actively managed
fixed maturity portfolio, was 5.6 percent, and the average interest rate
credited or accruing to our total insurance liabilities (excluding interest rate
bonuses for the first policy year only and excluding the effect of credited
rates attributable to variable or equity-indexed products) was 4.7 percent.

We use computer models to simulate the cash flows expected from our
existing insurance business under various interest rate scenarios. These
simulations help us to measure the potential gain or loss in fair value of our
interest rate-sensitive financial instruments. With such estimates, we seek to
manage the relationship between the duration of our assets and the expected
duration of our liabilities. When the estimated durations of assets and
liabilities are similar, exposure to interest rate risk is minimized because a
change in the value of assets should be largely offset by a change in the value
of liabilities. At December 31, 2003, the adjusted modified duration of our
fixed maturity securities and short-term investments was approximately 6.7 years
and the duration of our insurance liabilities was approximately 7.2 years. We
estimate that our fixed maturity securities and short-term investments (net of
corresponding changes in the value of insurance intangibles) would decline in
fair value by approximately $625 million if interest rates were to increase by
10 percent from their December 31, 2003 levels. This compares to a decline in
fair value of $595 million based on amounts and rates at December 31, 2002. The
calculations involved in our computer simulations incorporate numerous
assumptions, require significant estimates and assume an immediate change in
interest rates without any management of the investment portfolio in reaction to
such change. Consequently, potential changes in value of our financial
instruments indicated by the simulations will likely be different from the
actual changes experienced under given interest rate scenarios, and the
differences may be material. Because we actively manage our investments and
liabilities, our net exposure to interest rates can vary over time.

We are subject to the risk that our investments will decline in value. This
has occurred in the past and may occur again. During the four months ended
December 31, 2003, we recognized net realized investment

gains of $11.8 million. The net realized investment gains during the four months
ended December 31, 2003, included:

- $21.4 million of net gains from the sales of investments (primarily fixed
maturities) which generated proceeds of $5.2 billion; net of

- $9.6 million of writedowns of fixed maturity investments, equity
securities and other invested assets as a result of conditions which
caused us to conclude a decline in fair value of the investment was other
than temporary.

During the first eight months of 2003, we recognized net realized investment
losses of $5.4 million. The net realized investment losses during the first
eight months of 2003 included:

- $45.9 million of net gains from the sales of investments (primarily fixed
maturities) which generated proceeds of $5.4 billion; net of

- $51.3 million of writedowns of fixed maturity investments, equity
securities and other invested assets as a result of conditions which
caused us to conclude a decline in fair value of the investment was other
than temporary.

During 2002, we recognized net realized investment losses of $556.3 million,
compared to net realized investment losses of $340.0 million during 2001. The
net realized investment losses during 2002 included:

- $556.8 million of writedowns of fixed maturity investments, equity
securities and other invested assets as a result of conditions which
caused us to conclude a decline in fair value of the investment was other
than temporary; net of

- $.5 million of net gains from the sales of investments (primarily fixed
maturities) which generated proceeds of $19.5 billion.

During 2002, we recognized other-than-temporary declines in value of several of
our investments including K-Mart Corp., Amerco, Inc., Global Crossing, MCI
Communications, Mississippi Chemical, United Airlines and Worldcom, Inc.

The operations of the Company are subject to risk resulting from
fluctuations in market prices of our equity securities and venture-capital
investments. In general, these investments have more year-to-year price
variability than our fixed maturity investments. However, returns over longer
time frames have been consistently higher. We manage this risk by limiting our
equity securities and venture-capital investments to a relatively small portion
of our total investments.

Our investment in S&P 500 call options is closely matched with our
obligation to equity-indexed annuity holders. Market value changes associated
with that investment are substantially offset by an increase or decrease in the
amounts added to policyholder account balances for equity-indexed products.

INFLATION

Inflation rates may impact the financial statements and operating results
in several areas. Fluctuations in rates of inflation influence interest rates,
which in turn impact the market value of the investment portfolio and yields on
new investments. Inflation also impacts the portion of our insurance policy
benefits for certain medical coverages affected by increased costs. Operating
expenses, including payrolls, are impacted to a certain degree by the inflation
rate.

BUSINESS

We are the successor to Conseco, Inc., an Indiana corporation. On December
17, 2002, our predecessor and certain of its non-insurance company subsidiaries
filed voluntary petitions for relief under Chapter 11 of the United States
Bankruptcy Code. We became the successor to our predecessor in connection with
our emergence from bankruptcy on September 10, 2003. As part of our
reorganization, we sold substantially all of the assets of the predecessor's
finance business and exited this line of business in the second quarter of 2003.

- BANKERS LIFE, which consists of the businesses of Bankers Life & Casualty
and Colonial Penn. Bankers Life & Casualty markets and distributes
Medicare supplement insurance, life insurance, long-term care insurance
and fixed annuities to the senior market through approximately 4,000
exclusive career agents and sales managers. Colonial Penn markets graded
benefit and simplified issue life insurance directly to consumers through
television advertising, direct mail, the internet and telemarketing. Both
Bankers Life & Casualty and Colonial Penn market their products under
their own brand names.

We also have a corporate segment, which consists of holding company
activities and certain non-insurance company businesses that are not related to
our operating segments.

The following table sets forth information on our segments for the four
months ended December 31, 2003 (dollars in millions):

COLLECTED PREMIUMS
--------------------- INCOME BEFORE
$ PERCENTAGE INCOME TAXES
-------- ---------- -------------

OUR RESTRUCTURING

We have achieved several critical financial goals as part of our
restructuring, including:

- reducing our debt and other obligations by $5.7 billion,

- disposing of the assets of our predecessor's finance business,

- selling non-core operating subsidiaries such as Conseco Variable
Insurance Company,

- improving the risk profile of our investment portfolio, and

- improving the financial strength of our insurance companies as measured
by risk-based capital.

We have also recruited and integrated new members into our management team,
and we have a new board of directors. Since our emergence from bankruptcy,
management has continued to take steps in an effort to improve our profitability
and further streamline our business. For example, in September 2003, we sold our
stake in the General Motors building, which increased the statutory capital and
surplus of our insurance subsidiaries by over $350 million.

AS OF
DECEMBER 31, 2003
-----------------
(IN MILLIONS)

Our recapitalization has two components:

- REDEMPTION OF OUR EXISTING PREFERRED STOCK. We plan to use a portion of
the proceeds of the offerings to redeem all of our outstanding class A
preferred stock.

By redeeming the class A preferred stock and reducing our overall
indebtedness, our goals are to improve the financial flexibility of our top-tier
holding company and improve the financial strength ratings of our insurance
companies. The completion of the common stock offering is not conditioned upon
completion of the class B preferred stock offering, and if we complete the
common stock offering but not the class B preferred stock offering, we will have
fewer proceeds to apply in this regard.

COMPETITIVE STRENGTHS

We believe our competitive strengths have enabled and will continue to
enable us to capitalize on the opportunities in our target markets. These
strengths include:

- our position as a leading national provider of life and health insurance
products to the senior market,

- our broad-based distribution networks,

- our strong nationally recognized brand names, and

- our experienced management with a proven track record.

BROAD-BASED DISTRIBUTION NETWORKS. Our broad-based distribution networks
provide us with a number of ways to reach our target market. Our career agents
and direct distribution channels focus on the senior market. We also have
independent agents who focus on senior market products such as Medicare
supplement insurance. Our independent agents also sell certain of our products
that are specifically designed for the under-age-65 middle-income market. These
products include our specified disease insurance coverage, such as cancer and
heart/stroke products, as well as equity-indexed life insurance and
equity-indexed annuities. Despite the bankruptcy, we have retained the majority
of our career agents, including 80 percent of our top 1,000 career agents. Our
top 1,000 career agents collectively accounted for over 50 percent of Bankers
Life & Casualty's sales during 2003. In 2003, 52 percent of our sales were
through career agents, 45 percent were through independent distributors, and 3
percent were through direct marketing by Colonial Penn.

100

through our continued relationship with the Alzheimer's Association and
International Longevity Center as well as a renewed relationship with Paul
Harvey, who for many years was the spokesperson for Bankers Life & Casualty. We
believe that our brands give us a key competitive advantage, allowing us to
continue to build and maintain strong relationships with our customers and
distributors.

STRATEGY

- focus on the senior and middle-income markets,

- continue to improve our financial condition,

- use our distribution network to strengthen market access, and

- continue to improve our operational efficiency.

CONTINUE TO IMPROVE OUR FINANCIAL CONDITION. We seek to continue to
improve our financial condition by reducing debt at the holding company,
maintaining adequate risk-based capital in our operating subsidiaries and
focusing on marketing profitable products. We took a series of actions in 2002
and 2003 to enhance our financial condition. In addition to reducing our debt
and other obligations at the holding company by $5.7 billion through the
bankruptcy, we improved the risk profile of our investment portfolio and the
financial strength of our insurance companies as measured by risk-based capital.
Our fixed maturity investment portfolio is primarily comprised of government,
investment-grade and structured securities. Below-investment grade securities
comprised 3.9 percent of our fixed maturity portfolio as of December 31, 2003,
down from 6.5 percent as of December 31, 2002. Our insurance companies'
consolidated company action level risk-based capital improved from 166 percent
at December 31, 2002 to 287 percent at December 31, 2003. The risk-based capital
ratio is one of the tools insurance regulators use to determine the adequacy of
an insurance company's capital. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Statutory Information" for
further information. We intend to continue to manage our business with a view to
improving our capitalization, financial strength and ratings.

101

tracking of production and persistency levels by distributor. We promote
cross-selling of life, supplemental health and retirement savings products in
certain markets to capture a greater share of our policyholders' coverage needs.
In addition, we utilize our independent producers and career agent network as
important sources of information regarding the evolving needs of our customer
base. As a result, our products are tailored to include the specific features
that we believe are most important to our customers. If we are successful in
raising our ratings, we expect to be able to add new agents to our career and
independent agency distribution channels, which we believe will result in
increased sales of our insurance products.

CONTINUE TO IMPROVE OUR OPERATIONAL EFFICIENCY. We have undertaken several
initiatives to improve our operational efficiency and lower costs. We have
simplified our organizational structure by divesting certain businesses and
consolidating several legal entities. We are in the process of integrating
policy administration and claims management systems from previous acquisitions
to lower our operational costs in our Conseco Insurance Group Segment. We intend
to reduce the number of policy administration and related support systems by 50
percent, from 33 systems in April 2003 to 16 systems by the end of 2004. We have
also reduced our headcount over the past two years and have focused on improving
the productivity of our employees, career agents and independent distributors.
We intend to continue to work to improve our operational efficiency by
rationalizing expenses and systems in an effort to enhance our service standards
and profitability.

PRODUCTS

The premium collection tables presented on pages 101, 102, 104 and 106
combine the 2003 premium collections of the predecessor for the eight months
ended August 31, 2003 and premium collections of the successor for the four
months ended December 31, 2003. Combining premium collections for these periods
facilitates comparison of these amounts which were not affected by the adoption
of fresh start accounting. See "Management's Discussion and Analysis of
Consolidated Financial Condition and Results of Operations -- Premium and Asset
Accumulation Product Collections" for a summary of 2003 premium collections by
the predecessor and successor.

The following table summarizes premium collections by major category and
segment for the years ended December 31, 2003, 2002 and 2001 (dollars in
millions):

TOTAL PREMIUM COLLECTIONS

YEARS ENDED DECEMBER 31,
------------------------------
2003 2002 2001
---- ---- ----

Supplemental health:
Bankers Life....................................... $1,167.5 $1,159.4 $1,097.4
Conseco Insurance Group............................ 797.3 830.3 784.1
Other Business in Run-off.......................... 598.3 844.0 1,200.1
-------- -------- --------
Total supplemental health....................... 2,563.1 2,833.7 3,081.6
-------- -------- --------
Annuities:
Bankers Life....................................... 952.2 740.9 513.1
Conseco Insurance Group............................ 92.1 351.9 710.6
-------- -------- --------
Total annuities................................. 1,044.3 1,092.8 1,223.7
-------- -------- --------
Life:
Bankers Life....................................... 161.3 139.0 286.3
Conseco Insurance Group............................ 412.2 498.0 553.3
-------- -------- --------
Total life...................................... 573.5 637.0 839.6
-------- -------- --------
Total premium collections............................ $4,180.9 $4,563.5 $5,144.9
======== ======== ========

102

Our insurance companies offer the following products:

SUPPLEMENTAL HEALTH

SUPPLEMENTAL HEALTH PREMIUM COLLECTIONS (DOLLARS IN MILLIONS)

YEARS ENDED DECEMBER 31,
------------------------------
2003 2002 2001
---- ---- ----

Medicare Supplement:
Bankers Life.............................................. $ 644.7 $ 663.9 $ 656.7
Conseco Insurance Group................................... 384.6 369.9 318.4
-------- -------- --------
Total.................................................. 1,029.3 1,033.8 975.1
-------- -------- --------
Long-Term Care:
Bankers Life.............................................. 509.4 482.9 425.3
Conseco Insurance Group(1)................................ N/A N/A N/A
Other Business in Run-off................................. 402.6 434.5 463.0
-------- -------- --------
Total.................................................. 912.0 917.4 888.3
-------- -------- --------
Specified disease products from Conseco Insurance Group..... 355.1 368.6 371.8
-------- -------- --------
Major medical business included in the Other Business in
Run-off................................................... 195.7 409.5 737.1
-------- -------- --------
Other
Bankers Life.............................................. 13.4 12.6 15.4
Conseco Insurance Group................................... 57.6 91.8 93.9
-------- -------- --------
Total.................................................. 71.0 104.4 109.3
-------- -------- --------
Total -- Supplemental Health................................ $2,563.1 $2,833.7 $3,081.6
======== ======== ========

---------------

(1) We have ceased writing long-term care policies through Conseco Insurance
Group and all major medical insurance. Accordingly, we classify the
associated collected premiums as part of "other business in run-off."

Supplemental health products include Medicare supplement, long-term care
and specified disease insurance and major medical insurance business in run-off.
During 2003, we collected supplemental health premiums of $2,563.1 million, or
61 percent of our total premiums collected. During 2003, we collected Medicare
supplement premiums of $1,029.3 million, long-term care premiums of $912.0
million, specified disease premiums of $355.1 million, major medical premiums of
$195.7 million and other supplemental health premiums of $71.0 million. Medicare
supplement, long-term care, specified disease, major medical and other
supplemental health premiums represented 25 percent, 22 percent, 8 percent, 5
percent and 1 percent, respectively, of our total premiums collected in 2003.
Sales of supplemental health products are affected by the financial strength
ratings assigned to our insurance subsidiaries by independent rating agencies.
See "Competition" below.

The following describes our major supplemental health products:

MEDICARE SUPPLEMENT. Medicare supplement collected premiums were $1,029.3
million during 2003, or 25 percent of our total collected premiums. Medicare is
a two-part federal health insurance program for disabled persons and senior
citizens age 65 and older. Part A of the program provides protection against the
costs of hospitalization and related hospital and skilled nursing home care,
subject to an initial deductible, related coinsurance amounts and specified
maximum benefit levels. The deductible and coinsurance amounts are subject to
change each year by the federal government. Part B of Medicare covers doctor's
bills and a number of other medical costs not covered by Part A, subject to
deductible and coinsurance amounts for "approved" charges.

103

Medicare supplement policies provide coverage for many of the medical
expenses which the Medicare program does not cover, such as deductibles,
coinsurance costs and specified losses which exceed the federal program's
maximum benefits. Our Medicare supplement plans automatically adjust coverage to
reflect changes in Medicare benefits. In marketing these products, we
concentrate on individuals who have recently become eligible for Medicare by
reaching the age of 65. We offer a higher first-year commission to agents for
sales to these policyholders and competitive premium pricing for our
policyholders. Approximately 33 percent of new sales of Medicare supplement
policies in 2003 were to individuals who had recently reached the age of 65.

Both Bankers Life and Conseco Insurance Group sell Medicare supplement
insurance.

LONG-TERM CARE. Long-term care collected premiums were $912.0 million
during 2003, or 22 percent of our total collected premiums. Long-term care
products provide coverage, within prescribed limits, for nursing home, home
healthcare, or a combination of both nursing home and home healthcare expenses.
The long-term care plans are sold primarily to retirees and, to a lesser degree,
to older self-employed individuals and others in middle-income levels.

Current nursing home care policies cover incurred and daily fixed-dollar
benefits available with an elimination period, subject to a maximum benefit. The
elimination period is similar to a deductible, requiring the insured to pay for
a certain number of days of nursing home care before the insurance coverage
begins. Home healthcare policies cover the usual and customary charges after a
deductible or elimination period and are subject to a daily or weekly maximum
dollar amount and an overall benefit maximum. We monitor the loss experience on
our long-term care products and, when necessary, apply for rate increases in the
jurisdictions in which we sell such products. Regulatory approval is required to
increase our premiums on these products.

The long-term care insurance blocks of business sold through the
professional independent producer distribution channel were largely underwritten
by certain of our subsidiaries prior to their acquisition by Conseco in 1996 and
1997. The performance of these blocks of business has been significantly less
favorable than expectations when the blocks were acquired. As a result, we
ceased selling new long-term care policies through this distribution channel.

We continue to sell long-term care insurance through the career agent
distribution channel. The long-term care business sold through Bankers Life's
career agents was underwritten using stricter underwriting and pricing standards
than our acquired blocks of long-term care business included in the other
business in run-off segment. The performance of this block has been better and
more predictable than the acquired business.

SPECIFIED DISEASE PRODUCTS. Specified disease collected premiums were
$355.1 million during 2003, or 8 percent of our total collected premiums. These
policies generally provide fixed or limited benefits. Cancer insurance and
heart/stroke products are guaranteed renewable individual accident and health
insurance policies. Payments under cancer insurance policies are generally made
directly to, or at the direction of, the policyholder following diagnosis of, or
treatment for, a covered type of cancer. Heart/stroke policies provide for
payments directly to the policyholder for treatment of a covered heart disease,
heart attack or stroke. The benefits provided under the specified disease
policies do not necessarily reflect the actual cost incurred by the insured as a
result of the illness and benefits are not reduced by any other medical
insurance payments made to or on behalf of the insured.

Approximately 76 percent of our specified disease policies inforce, based
on a count of policies, are sold with return of premium or cash value riders.
The return of premium rider generally provides that after a policy has been in
force for a specified number of years or upon the policyholder reaching a
specified age, we will pay to the policyholder, or a beneficiary under the
policy, the aggregate amount of all premiums paid under the policy, without
interest, less the aggregate amount of all claims incurred under the policy. Our
specified disease products are sold through the independent distribution network
of Conseco Insurance Group.

MAJOR MEDICAL. Our major medical business is included in our other
business in run-off segment. Sales of our major medical health insurance
products were targeted to self-employed individuals, small business owners,
large employers and early retirees. Various deductible and coinsurance options
were

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available, and most policies require certain utilization review procedures. The
profitability of this business depends largely on the overall persistency of the
business inforce, claim experience and expense management. During 2001, we
decided to discontinue a large block of major medical business by not renewing
these policies because this business was not profitable. During 2003, we
collected major medical premiums of $195.7 million, or 5 percent of our total
collected premiums.

OTHER SUPPLEMENTAL HEALTH PRODUCTS. Other supplemental health product
collected premiums were $71.0 million, or 1 percent of our total collected
premiums. These products include various other products such as disability
income insurance. We no longer actively market these products.

ANNUITIES

ANNUITY PREMIUM COLLECTIONS (DOLLARS IN MILLIONS)

YEARS ENDED DECEMBER 31,
------------------------------
2003 2002 2001
---- ---- ----

Equity-indexed annuity
Bankers Life....................................... $ 15.1 $ 30.4 $ 41.4
Conseco Insurance Group............................ 54.3 189.7 339.5
-------- -------- --------
Total equity-indexed annuity premium
collections................................... 69.4 220.1 380.9
-------- -------- --------
Other fixed annuity
Bankers Life....................................... 937.1 710.5 471.7
Conseco Insurance Group............................ 37.8 162.2 371.1
-------- -------- --------
Total fixed annuity premium collections......... 974.9 872.7 842.8
-------- -------- --------
Total annuity collections.......................... $1,044.3 $1,092.8 $1,223.7
======== ======== ========

During 2003, we collected annuity premiums of $1,044.3 million, or 25
percent of our total premiums collected. Annuity products include equity-indexed
annuity, traditional fixed rate annuity and market value-adjusted annuity
products sold through both Bankers Life and Conseco Insurance Group. Annuities
offer a tax-deferred means of accumulating savings for retirement needs, and
provide a tax-efficient source of income in the payout period. Our major source
of income from annuities is the spread between the investment income earned on
the underlying general account assets and the interest credited to
contractholders' accounts.

More than our other products, annuities are affected by the financial
strength ratings assigned to our insurance subsidiaries by independent rating
agencies. Many of our professional independent agents discontinued marketing our
annuity products after A.M. Best lowered the financial strength ratings assigned
to our insurance subsidiaries. In addition, the annuity business we were selling
through this distribution channel required more statutory capital and surplus
than our other insurance products. Accordingly, we took actions in our Conseco
Insurance Group segment to de-emphasize new sales of annuity products sold
through professional independent producers. Instead, we focused on the sale of
products that are less ratings sensitive and capital intensive. Career agents
selling annuity products in the Bankers Life segment are less sensitive in the
near-term to A.M. Best ratings, since these agents only sell our products.
Accordingly, we continue to actively market annuities through Bankers Life. In
order to maintain Bankers Life's career agency distribution force during the
bankruptcy process, we provided certain sales inducements to purchasers of
annuities and sales incentives to our career agents.

The following describes the major annuity products:

EQUITY-INDEXED ANNUITIES. These products accounted for $69.4 million, or 2
percent, of our total premium collections during 2003. The accumulation value of
these annuities is credited with interest at an annual minimum guaranteed
average rate over the term of the contract of 3 percent or, including the effect
of applicable sales loads, a 1.7 percent compound average interest rate over the
term of the contracts, but the annuities provide for potentially higher returns
based on a percentage, which we refer to as the participation rate, of the
change in the Standard & Poor's 500 Index during each year of their term. We
have the

105

discretionary ability to annually change the participation rate, which currently
ranges from 50 percent to 100 percent, and may include a first-year "bonus"
participation rate, similar to the bonus interest described below for
traditional fixed rate annuity products, which generally ranges from an
additional 10 percent to 20 percent. The minimum guaranteed values are equal to:

- 90 percent of premiums collected for annuities for which premiums are
received in a single payment, commonly referred to as single-premium
deferred annuities, or 75 percent of first year and 87.5 percent of
renewal premiums collected for annuities which allow for more than one
payment, commonly referred to as flexible premium deferred annuities;
plus

- interest credited on such percentage of the premiums collected at an
annual rate of 3 percent.

The annuity provides for penalty-free withdrawals of up to 10 percent of
premiums in each year after the first year of the annuity's term. Other
withdrawals from single-premium deferred annuity products are generally subject
to a surrender charge of 9 percent over the eight year contract term at the end
of which the contract must be renewed or withdrawn. Other withdrawals from
flexible-premium deferred annuities products are subject to a surrender charge
of 12 percent to 20 percent in the first year, declining 1.2 percent to 1.3
percent each year, to zero over a 10 to 15 year period, depending on issue age.
We purchase S&P 500 Index call options in an effort to offset, or "hedge,"
potential increases to policyholder benefits resulting from increases in the S&P
500 Index to which the product's return is linked.

OTHER FIXED RATE ANNUITIES. These products include fixed rate
single-premium deferred annuities, flexible-premium deferred annuities and
single-premium immediate annuities. These products accounted for $974.9 million,
or 23 percent, of our total premium collections during 2003. Our fixed rate
single-premium deferred annuities and flexible-premium deferred annuities
typically have an interest rate, or crediting rate, that we guarantee for the
first policy year, after which we have the discretionary ability to change the
crediting rate to any rate not below a guaranteed minimum rate. The guaranteed
rate on annuities written recently ranges from 3 percent to 4 percent, and the
rate on all policies inforce ranges from 3 percent to 6 percent. The initial
crediting rate is largely a function of:

- the interest rate we can earn on invested assets acquired with the new
annuity fund deposits;

- the costs related to marketing and maintaining the annuity products; and

- the rates offered on similar products by our competitors.

For subsequent adjustments to crediting rates, we take into account current and
prospective yields on investments, annuity surrender assumptions, competitive
industry pricing and the crediting rate history for particular groups of annuity
policies with similar characteristics.

In 2003, approximately 85 percent of our new annuity sales were "bonus"
products. The initial crediting rate on these products specifies a bonus
crediting rate ranging from 1 percent to 6 percent of the annuity deposit for
the first policy year only. After the first year, the bonus interest portion of
the initial crediting rate is automatically discontinued, and the renewal
crediting rate is established. As of December 31, 2003, crediting rates on our
outstanding traditional annuities were at an average rate, excluding bonuses, of
4.1 percent.

The policyholder is typically permitted to withdraw all or part of the
premium paid plus the accumulated interest credited to his or her accumulation
value, subject in virtually all cases to the assessment of a surrender charge
for withdrawals in excess of specified limits. Most of our traditional annuities
provide for penalty-free withdrawals of up to 10 percent of the accumulation
value each year, subject to limitations. Withdrawals in excess of allowable
penalty-free amounts are assessed a surrender charge during a penalty period
which generally ranges from five to 12 years after the date a policy is issued.
The initial surrender charge is generally 6 percent to 12 percent of the
accumulation value and generally decreases by approximately 1 to 2 percentage
points per year during the penalty period. Surrender charges are set at levels
intended to protect us from loss on early terminations and to reduce the
likelihood of policyholders terminating their policies during periods of
increasing interest rates. This practice is intended to lengthen the effective
duration of policy liabilities and enable us to maintain profitability on such
policies.

106

Single-premium immediate annuities accounted for $29.5 million, or .7
percent, of our total premiums collected in 2003. Single-premium immediate
annuities are designed to provide a series of periodic payments for a fixed
period of time or for life, according to the policyholder's choice at the time
of issue. Once the payments begin, the amount, frequency and length of time for
which they are payable are fixed. Single-premium immediate annuities often are
purchased by persons at or near retirement age who desire a steady stream of
payments over a future period of years. The single premium is often the payout
from a terminated annuity contract. The implicit interest rate on single-premium
immediate annuities is based on market conditions when the policy is issued. The
implicit interest rate on our outstanding single-premium immediate annuities
averaged 6.7 percent at December 31, 2003.

We also offered a multibucket annuity product which provides for different
rates of cash value growth based on the experience of a particular market
strategy. Earnings are credited to this product based on the market activity of
a given strategy, less management fees, and funds may be moved between cash
value strategies. Portfolios available include high-yield bond, investment-grade
bond, convertible bond and guaranteed-rate portfolios. During 2003, this product
accounted for $3.5 million, or .1 percent, of our total premiums collected.
Sales of this product were discontinued in 2003.

In October 2002, we sold Conseco Variable Insurance Company, a company
engaged in the variable annuity business. In connection with that sale, we
agreed with the buyer not to engage in the variable annuity business for a
period of three years. We no longer offer variable annuity products.

LIFE

LIFE INSURANCE PREMIUM COLLECTIONS (DOLLARS IN MILLIONS)

YEARS ENDED DECEMBER 31,
------------------------
2003 2002 2001
---- ---- ----

Interest-sensitive life products
Bankers Life.......................................... $ 34.2 $ 34.2 $ 33.7
Conseco Insurance Group............................... 266.5 339.1 386.9
------ ------ ------
Total interest-sensitive life premium
collections...................................... 300.7 373.3 420.6
------ ------ ------
Traditional life
Bankers Life.......................................... 127.1 104.8 252.6
Conseco Insurance Group............................... 145.7 158.9 166.4
------ ------ ------
Total traditional life premium collections......... 272.8 263.7 419.0
------ ------ ------
Total life insurance premium collections................ $573.5 $637.0 $839.6
====== ====== ======

Life products include traditional, interest-sensitive and other life
insurance products. These products are currently sold through both Bankers Life
and Conseco Insurance Group. During 2003, we collected life insurance premiums
of $573.5 million, or 14 percent, of our total collected premiums. In April
2003, we took actions to de-emphasize new sales of several of our life insurance
products through Conseco Insurance Group's professional independent producers.
Sales of life products are affected by the financial strength ratings assigned
to our insurance subsidiaries by independent rating agencies. See "Competition"
below. The decrease in traditional life premiums collected in the Bankers Life
segment in 2002 and 2003, compared to 2001, is primarily due to a first quarter
2002 reinsurance transaction pursuant to which we ceded 80 percent of the
inforce traditional life insurance business of Bankers Life & Casualty to
Reassure America Life Insurance Company.

INTEREST-SENSITIVE LIFE PRODUCTS. These products include universal life
products that provide whole life insurance with adjustable rates of return
related to current interest rates. They accounted for $300.7 million, or 7.2
percent of our total collected premiums in 2003. These products are marketed
through professional independent producers and, to a lesser extent, career
agents. The principal differences between universal life products and other
interest-sensitive life insurance products are policy provisions affecting the
amount and

107

timing of premium payments. Universal life policyholders may vary the frequency
and size of their premium payments, and policy benefits may also fluctuate
according to such payments. Premium payments under other interest-sensitive
policies may not be varied by the policyholders.

TRADITIONAL LIFE. These products accounted for $272.8 million, or 6.5
percent, of our total collected premiums in 2003. Traditional life policies,
including whole life, graded benefit life, simplified issue and term life
products, are marketed through professional independent producers, career agents
and direct response marketing. Under whole life policies, the policyholder
generally pays a level premium over an agreed period or the policyholder's
lifetime. The annual premium in a whole life policy is generally higher than the
premium for comparable term insurance coverage in the early years of the
policy's life, but is generally lower than the premium for comparable term
insurance coverage in the later years of the policy's life. These policies,
which we continue to market on a limited basis, combine insurance protection
with a savings component that gradually increases in amount over the life of the
policy. The policyholder may borrow against the savings generally at a rate of
interest lower than that available from other lending sources. The policyholder
may also choose to surrender the policy and receive the accumulated cash value
rather than continuing the insurance protection. Term life products offer pure
insurance protection for a specified period of time -- typically five, 10 or 20
years. We stopped selling most term life products through the professional
independent producer distribution channel during the second quarter of 2003.

Traditional life products also include graded benefit life insurance
products. Graded benefit life products accounted for $79.4 million, or 1.9
percent, of our total collected premiums in 2003. Graded benefit life insurance
products are offered on an individual basis primarily to persons age 50 to 80,
principally in face amounts of $350 to $10,000, without medical examination or
evidence of insurability. Premiums are paid as frequently as monthly. Benefits
paid are less than the face amount of the policy during the first two years,
except in cases of accidental death. Simplified issue life products require only
limited underwriting. Generally, the application contains some medical history
questions, but they are not as extensive as a fully underwritten product.
Medical exams and attending physicians statements are generally not required for
simplified issue life insurance. Our Bankers Life segment markets graded benefit
and simplified issue life policies under the Colonial Penn brand name using
direct response marketing techniques. New policyholder leads are generated
primarily from television and print advertisements.

MARKETING AND DISTRIBUTION

Our insurance subsidiaries develop, market and administer supplemental
health insurance, annuity, individual life insurance and other insurance
products. We sell these products through three primary distribution channels:
career agents, professional independent producers and direct marketing. We had
over $1.3 billion of premium and asset accumulation product collections during
the four months ended December 31, 2003, $2.9 billion in the eight months ended
August 31, 2003, and $4.6 billion during 2002.

Our insurance subsidiaries collectively hold licenses to market our
insurance products in all fifty states, the District of Columbia, and certain
protectorates of the United States. Sales to residents of the following states
accounted for at least 5 percent of our 2003 collected premiums: Florida (8.1
percent), Illinois (6.8 percent), Texas (6.6 percent) and California (6.5
percent).

We believe that people purchase most types of life insurance, accident and
health insurance and annuity products only after being contacted and solicited
by an insurance agent. Accordingly, we believe the success of our distribution
system is largely dependent on our ability to attract and retain agents who are
experienced and highly motivated. A description of the primary distribution
channels is as follows:

CAREER AGENTS. This agency force of approximately 4,000 agents working
from 140 branch offices permits one-on-one contact with potential policyholders
and promotes strong personal relationships with existing policyholders. The
career agents sell primarily Medicare supplement and long-term care insurance
policies, senior life insurance and annuities. In 2003, this distribution
channel accounted for $2,177.0 million, or 52 percent, of our total collected
premiums. These agents sell only Bankers Life and Casualty policies and
typically visit the prospective policyholder's home to conduct personalized
"kitchen-table" sales

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presentations. After the sale of an insurance policy, the agent serves as a
contact person for policyholder questions, claims assistance and additional
insurance needs.

PROFESSIONAL INDEPENDENT PRODUCERS. This distribution channel consists of
a general agency and insurance brokerage distribution system comprised of
independent licensed agents doing business in all fifty states, the District of
Columbia, and certain protectorates of the United States. In 2003, this
distribution channel accounted for $1,301.6 million, or 31 percent, of our total
collected premiums, excluding the collected premiums in our other business in
run-off segment which were originally sold through professional independent
producers. During 2003, premiums collected attributed to that segment were
$598.3 million, or 14 percent, of total collected premiums.

Professional independent producers are a diverse network of independent
agents, insurance brokers and marketing organizations. Marketing organizations
typically recruit agents for the Conseco Insurance Group segment by advertising
our products and commission structure through direct mail advertising or through
seminars for insurance agents and brokers.

These organizations bear most of the costs incurred in marketing our
products. We compensate the marketing organizations by paying them a percentage
of the commissions earned on new sales generated by the agents recruited by such
organizations. Some of these marketing organizations are specialty organizations
that have a marketing expertise or a distribution system relating to a
particular product, such as flexible-premium annuities for educators. During
1999 and 2000, the Conseco Insurance Group segment purchased four organizations
that specialize in marketing and distributing supplemental health products. One
of these organizations was sold in September 2003. In 2003, these organizations
accounted for $234.4 million, or 5.6 percent, of our total collected premiums.

During the second quarter of 2003, we decided to emphasize the sale of
specified disease and Medicare supplement insurance policies through this
distribution channel. We also decided to de-emphasize annuity and life insurance
sales and eliminate long-term care insurance sales through this channel of
distribution.

DIRECT MARKETING. This distribution channel is engaged primarily in the
sale of graded benefit life insurance policies. In 2003, this channel accounted
for $104.0 million, or 3 percent, of our total collected premiums.

INSURANCE UNDERWRITING

Under regulations promulgated by the National Association of Insurance
Commissioners (an association of state regulators and their staffs) and adopted
as a result of the Omnibus Budget Reconciliation Act of 1990, we are prohibited
from underwriting our Medicare supplement policies for certain first-time
purchasers. If a person applies for insurance within six months after becoming
eligible by reason of age, or disability in certain limited circumstances, the
application may not be rejected due to medical conditions. Some states prohibit
underwriting of all Medicare supplement policies. For other prospective Medicare
supplement policyholders, such as senior citizens who are transferring to our
products, the underwriting procedures are relatively limited, except for
policies providing prescription drug coverage.

Before issuing long-term care or comprehensive major medical products to
individuals and groups, we generally apply detailed underwriting procedures
designed to assess and quantify the insurance risks. We require medical
examinations of applicants including blood and urine tests, where permitted for
certain health insurance products and for life insurance products which exceed
prescribed policy amounts. These requirements vary according to the applicant's
age and may vary by type of policy or product. We also rely on medical records
and the potential policyholder's written application. In recent years, there
have been significant regulatory changes with respect to underwriting certain
types of health insurance. An increasing number of states prohibit underwriting
and/or charging higher premiums for substandard risks. We monitor changes in
state regulation that affect our products, and consider these regulatory
developments in determining the products we market and where we market them.

Most of our life insurance policies are underwritten individually, although
standardized underwriting procedures have been adopted for certain low
face-amount life insurance coverages. After initial processing,

109

insurance underwriters review each file and obtain the information needed to
make an underwriting decision. This information typically includes medical
examinations, doctors' statements and special medical tests. After collecting
and reviewing the information, the underwriter either:

- approves the policy as applied for, or with an extra premium charge
because of unfavorable factors; or

- rejects the application.

We underwrite group insurance policies based on the characteristics of the group
and its past claim experience. Graded benefit life insurance policies are issued
without medical examination or evidence of insurability. There is minimal
underwriting on annuities.

LIABILITIES FOR INSURANCE AND ACCUMULATION PRODUCTS

We calculate and maintain reserves for the estimated future payment of
claims to our policyholders based on actuarial assumptions. For our supplemental
health insurance business, we establish an active life reserve plus a liability
for due and unpaid claims, claims in the course of settlement and incurred but
not reported claims, as well as a reserve for the present value of amounts not
yet due on claims. Many factors can affect these reserves and liabilities, such
as economic and social conditions, inflation, hospital and pharmaceutical costs,
changes in doctrines of legal liability and extra-contractual damage awards.
Therefore, the reserves and liabilities we establish are necessarily based on
extensive estimates, assumptions and historical experience. Establishing
reserves is an uncertain process, and it is possible that actual claims will
materially exceed our reserves and have a material adverse effect on our results
of operations and financial condition. Our financial results depend
significantly upon the extent to which our actual claims experience is
consistent with the assumptions we used in determining our reserves and pricing
our products. If our assumptions with respect to future claims are incorrect,
and our reserves are insufficient to cover our actual losses and expenses, we
would be required to increase our liabilities, which would negatively affect our
operating results.

REINSURANCE

Consistent with the general practice of the life insurance industry, our
subsidiaries enter into both facultative and treaty agreements of indemnity
reinsurance with other insurance companies in order to reinsure portions of the
coverage provided by our insurance products. Indemnity reinsurance agreements
are intended to limit a life insurer's maximum loss on a large or unusually
hazardous risk or to diversify its risk. Indemnity reinsurance does not
discharge the original insurer's primary liability to the insured. Our reinsured
business is ceded to numerous reinsurers. We believe the assuming companies are
able to honor all contractual commitments, based on our periodic review of their
financial statements, insurance industry reports and reports filed with state
insurance departments.

As of December 31, 2003, the policy risk retention limit was generally $.8
million or less on the policies of our subsidiaries. Reinsurance ceded by
Conseco represented 27 percent of gross combined life

110

insurance inforce and reinsurance assumed represented 2.7 percent of net
combined life insurance inforce. Our principal reinsurers at December 31, 2003
were as follows (dollars in millions):

CEDED LIFE A.M. BEST
NAME OF REINSURER INSURANCE INFORCE RATING
----------------- ----------------- ---------

Swiss Re Life and Health America Inc................. $ 5,627.8 A+
Security Life of Denver Life Insurance Company....... 5,110.5 A+
Reassure America Life Insurance Company.............. 3,491.4 A+
RGA Reinsurance Company.............................. 1,417.0 A+
Munich American Reassurance Company.................. 1,170.6 A+
Lincoln National Life Insurance Company.............. 1,079.6 A+
Revios Reinsurance U.S. Inc.......................... 924.8 A-
All others........................................... 4,609.5(1)
---------
$23,431.2
=========

---------------

(1) No other single reinsurer assumed greater than 3 percent of the total ceded
business inforce.

In the first quarter of 2002, we completed a reinsurance agreement pursuant
to which we ceded 80 percent of the inforce traditional life business of Bankers
Life and Casualty to Reassure America Life Insurance Company, who is rated A+ by
A.M. Best. The total insurance liabilities ceded pursuant to the contract were
approximately $400 million.

On June 28, 2002, we completed a reinsurance transaction pursuant to which
we ceded 100 percent of the traditional life and interest-sensitive life
insurance business of Conseco Variable Insurance Company to Protective Life
Insurance Company, who is rated A+ by A.M. Best. The total insurance liabilities
ceded pursuant to the contract were approximately $470 million.

During the second quarter of 2002, Colonial Penn ceded a block of graded
benefit life insurance policies to an unaffiliated company pursuant to a
modified coinsurance agreement.

INVESTMENTS

40Y86 Advisors, Inc., a registered investment adviser and wholly-owned
subsidiary of Conseco, Inc., manages the investment portfolios of our insurance
subsidiaries. 40Y86 Advisors had approximately $28.5 billion of assets under
management at fair value at December 31, 2003, of which $24.4 billion were
assets of our subsidiaries and $4.1 billion were assets managed by 40Y86
Advisors for third parties. Our general account investment philosophy is to
maintain a largely investment-grade diversified fixed-income portfolio, maximize
the spread between the investment income we earn and the yields we pay on
investment products within acceptable levels of risk, provide adequate
liquidity, construct our asset portfolio with attention to expected liability
durations and other requirements and maximize total return through active
investment management. In the four months ended December 31, 2003, we recognized
net realized investment gains of $11.8 million and in the eight months ended
August 31, 2003, we recognized net realized investment losses of $5.4 million.
During 2002, we recognized net realized investment losses of $556.3 million,
compared to net realized investment losses of $340.0 million during 2001. The
net realized investment losses during 2002 included:

- $.5 million of net gains from the sales of investments, primarily fixed
maturities, which generated proceeds of $19.5 billion.

111

During 2002, we recognized other-than-temporary declines in value of several of
our investments, including K-Mart Corp., Amerco, Inc., Global Crossing, MCI
Communications, Mississippi Chemical, United Airlines and Worldcom, Inc.

Investment activities are an integral part of our business as investment
income is a significant component of our total revenues. Profitability of many
of our insurance products is significantly affected by spreads between interest
yields on investments and rates credited on insurance liabilities. Although
substantially all credited rates on single-premium deferred annuities and
flexible-premium deferred annuities may be changed annually (subject to minimum
guaranteed rates), changes in crediting rates may not be sufficient to maintain
targeted investment spreads in all economic and market environments. In
addition, competition, minimum guaranteed rates and other factors, including the
impact of the level of surrenders and withdrawals, may limit our ability to
adjust or to maintain crediting rates at levels necessary to avoid narrowing of
spreads under certain market conditions. As of December 31, 2003, the average
yield, computed on the cost basis of our actively managed fixed maturity
portfolio, was 5.6 percent, and the average interest rate credited or accruing
to our total insurance liabilities was 4.7 percent. We manage the equity-based
risk component of our equity-indexed annuity products by:

- purchasing S&P 500 call options in an effort to hedge such risk; and

- adjusting the participation rate to reflect the change in the cost of
such options as the cost varies based on market conditions.

Accordingly, we are able to focus on managing the interest rate spread component
of these products.

We seek to balance the interest rate risk inherent in our invested assets
with the interest rate characteristics of our insurance liabilities. We attempt
to manage this exposure by measuring the duration of our fixed maturity
investments and insurance liabilities. Duration measures the expected change in
the fair value of assets and liabilities for a given change in interest rates.
For example, if interest rates increase by 1 percent, the fair value of a fixed
maturity security with a duration of 5 years is expected to decrease in value by
approximately 5 percent. When the estimated durations of assets and liabilities
are similar, exposure to interest rate risk is minimized because a change in the
value of assets should be largely offset by a change in the value of
liabilities.

We calculate duration using our estimates of future asset and liability
cash flows. These cash flows are discounted using appropriate interest rates
based on the current yield curve and investment type. Duration is determined by
calculating the present value of the cash flows using different interest rates,
and measuring the change in value. At December 31, 2003, the duration of our
fixed maturity investments as modified to reflect prepayments and potential
calls was approximately 6.7 years and the duration of our insurance liabilities
was approximately 7.2 years. The difference between these durations indicates
that our investment portfolio had a shorter duration and, consequently, was less
sensitive to interest rate fluctuations than that of our liabilities at that
date. We generally seek to minimize the gap between asset and liability
durations.

For information regarding the composition and diversification of the
investment portfolio of our subsidiaries, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Investments."

COMPETITION

Each of the markets in which we operate is highly competitive, and our
highly leveraged capitalization, our ratings downgrades and our recent
bankruptcy proceedings have had a material adverse impact on our ability to
compete in these markets. The financial services industry consists of a large
number of companies, many of which are larger and have greater capital,
technological and marketing resources, access to capital and other sources of
liquidity at a lower cost, broader and more diversified product lines and larger
staffs than those of Conseco. An expanding number of banks, securities brokerage
firms and other financial intermediaries also market insurance products or offer
competing products, such as mutual fund products, traditional bank investments
and other investment and retirement funding alternatives. We also compete with
many of these companies and others in providing services for fees. In most
areas, competition is based on a

112

number of factors, including pricing, service provided to distributors and
policyholders and ratings. Conseco's subsidiaries must also compete with their
competitors to attract and retain the allegiance of agents, insurance brokers
and marketing companies.

In the individual health insurance business, insurance companies compete
primarily on the basis of marketing, service and price. Pursuant to federal
regulations, the Medicare supplement products offered by all companies have
standardized policy features. This increases the comparability of such policies
and has intensified competition based on factors other than product features.
See "-- Insurance Underwriting" and "-- Governmental Regulation." In addition to
competing with the products of other insurance companies, commercial banks,
thrifts, mutual funds and broker dealers, our insurance products compete with
health maintenance organizations, preferred provider organizations and other
health care-related institutions which provide medical benefits based on
contractual agreements.

An important competitive factor for life insurance companies is the ratings
they receive from nationally recognized rating organizations. Agents, insurance
brokers and marketing companies who market our products and prospective
purchasers of our products use the ratings of our insurance subsidiaries as one
factor in determining which insurer's products to market or purchase. Ratings
have the most impact on our annuity and interest-sensitive life insurance
products. Insurance financial strength ratings are opinions regarding an
insurance company's financial capacity to meet the obligations of its insurance
policies in accordance with their terms. They are not directed toward the
protection of investors, and such ratings are not recommendations to buy, sell
or hold securities.

RATINGS

In July 2002, A.M. Best downgraded the financial strength ratings of our
primary insurance subsidiaries from "A- (Excellent)" to "B++ (Very good)" and
placed the ratings "under review with negative implications." On August 14,
2002, A.M. Best again lowered the financial strength ratings of our primary
insurance subsidiaries from "B++ (Very good)" to "B (Fair)". A.M. Best ratings
for the industry currently range from "A++ (Superior)" to "F (In Liquidation)"
and some companies are not rated. An "A++" rating indicates superior overall
performance and a superior ability to meet ongoing obligations to policyholders.
The "B" rating is assigned to companies which have, on balance, fair balance
sheet strength, operating performance and business profile, when compared to the
standards established by A.M. Best, and a fair ability in A.M. Best's opinion to
meet their current obligations to policyholders, but are financially vulnerable
to adverse changes in underwriting and economic conditions. We believe the "B"
ratings reflected A.M. Best's view of the uncertainty surrounding our
restructuring initiatives and the potential adverse financial impact on our
subsidiaries. On September 11, 2003, A.M. Best affirmed its financial strength
ratings of our primary insurance companies ("B (Fair)") and removed the ratings
from under review. On October 3, 2003, A.M. Best assigned a positive outlook to
all of our ratings. According to A.M. Best's press release, the assignment of a
positive outlook to our ratings reflects its favorable view of our bankruptcy
reorganization and a number of management initiatives, including the sale of the
General Motors building, sale of Conseco Finance, restructuring of our
investment portfolios, expense reductions, merging of certain subsidiaries,
stabilization of surrenders and a commitment in the near-to-medium-term to focus
on selling higher margin products with lower capital requirements.

On August 2, 2002, S&P downgraded the financial strength ratings of our
primary insurance companies from BB+ to B+. On November 19, 2003, S&P assigned a
"BB-" counterparty credit and financial strength rating to our primary insurance
companies, with the exception of Conseco Senior Health Insurance Company (the
issuer of most of our long-term care business in our other business in run-off
segment), which was assigned a "CCC" rating. S&P financial strength ratings
range from "AAA" to "R" and some companies are not rated. Rating categories from
"BB" to "CCC" are classified as "vulnerable", and pluses and minuses show the
relative standing within a category. In S&P's view, an insurer rated "BB" has
marginal financial security characteristics and although positive attributes
exist, adverse business conditions could lead to an insufficient ability to meet
financial commitments. In S&P's view, an insurer rated "CCC" has very weak
financial security characteristics and is dependent on favorable business
conditions to meet financial commitments.

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On July 1, 2003, Moody's downgraded the financial strength ratings of our
primary insurance companies from Ba3 to B3. On December 4, 2003, Moody's
assigned a "Ba3" rating to our primary insurance companies, with the exception
of Conseco Senior Health Insurance Company, which was assigned a "Caa1" rating.
Moody's financial strength ratings range from "Aaa" to "C". Rating categories
from "Ba" to "C" are classified as "vulnerable" by Moody's, and may be
supplemented with numbers "1", "2", or "3" to show relative standing within a
category. In Moody's view, an insurer rated "Ba" offers questionable financial
security and the ability of the insurer to meet policyholder obligations may be
very moderate and thereby not well-safeguarded in the future. In Moody's view,
an insurer rated "Caa" offers very poor financial security and may default on
its policyholder obligations, or there may be elements of danger with respect to
punctual payment of policyholder obligations and claims.

The ratings downgrades have generally caused sales of our insurance
products to decline and policyholder redemptions and lapses to increase. In some
cases, the downgrades have also caused defections among our independent agent
sales force and increases in the commissions we must pay in order to retain
them. These events have had a material adverse effect on our financial results.
Further downgrades by A.M. Best, S&P or Moody's would likely have further
material and adverse effects on our financial results and liquidity.

A.M. Best, S&P and Moody's each reviews its ratings from time to time. We
cannot provide any assurance that the ratings of our insurance subsidiaries will
remain at their current levels or predict the impact any downgrades could have
on our business.

EMPLOYEES

At December 31, 2003, we had approximately 4,350 employees, of which 4,200
were full time employees, including 1,900 employees supporting our Bankers Life
segment and 2,300 employees supporting both our Conseco Insurance Group segment
and our other business in run-off segment. None of our employees are covered by
a collective bargaining agreement. We believe that we have good relations with
our employees.

GOVERNMENTAL REGULATION

Our insurance businesses are subject to extensive regulation and
supervision by the insurance regulatory agencies of the jurisdictions in which
they operate. This regulation and supervision is primarily for the benefit and
protection of customers, and not for the benefit of investors or creditors.
State laws generally establish supervisory agencies with broad regulatory
authority, including the power to:

- grant and revoke business licenses;

- regulate and supervise trade practices and market conduct;

- establish guaranty associations;

- license agents;

- approve policy forms;

- approve premium rates for some lines of business;

- establish reserve requirements;

- prescribe the form and content of required financial statements and
reports;

- determine the reasonableness and adequacy of statutory capital and
surplus;

- perform financial, market conduct and other examinations;

- define acceptable accounting principles;

- regulate the type and amount of permitted investments; and

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- limit the amount of dividend and of surplus debenture principal and
interest payments that can be paid without obtaining regulatory approval.

In addition to the limitations imposed by the laws described above, most
states have also enacted laws or regulations with respect to the activities of
insurance holding company systems, including acquisitions, the payment of
ordinary and extraordinary dividends by insurance companies, the terms of
surplus debentures, the terms of transactions between insurance companies and
their affiliates and other related matters. Various notice and reporting
requirements generally apply to transactions between insurance companies and
their affiliates within an insurance holding company system, depending on the
size and nature of the transactions. These requirements may include prior
regulatory approval or prior notice for certain material transactions.
Currently, Conseco and its insurance subsidiaries have registered as holding
company systems pursuant to such laws and regulations in the domiciliary states
of the insurance subsidiaries, and they routinely report to other jurisdictions.

We recently were subject to consent orders with the Commissioner of
Insurance for the State of Texas that, among other things, restricted the
ability of our insurance subsidiaries to pay any dividends to any non-insurance
company parent without prior approval. The Texas Department of Insurance
formally released the consent orders on November 19, 2003. We have agreed with
the Department of Insurance for the State of Texas to provide prior notice of
certain transactions, including up to 30 days prior notice for the payment of
dividends to any non-insurance company parent, and periodic reporting of
information concerning our financial performance and condition.

Most states have also enacted legislation or adopted administrative
regulations that affect the acquisition or sale of control of insurance
companies. The nature and extent of such legislation and regulations vary from
state to state. Generally, these regulations require an acquirer of control to
file detailed information concerning such acquirer and the plan of acquisition,
and to obtain administrative approval prior to the acquisition of control.
"Control" is generally defined as the direct or indirect power to direct or
cause the direction of the management and policies of a person and is rebuttably
presumed to exist if a person or group of affiliated persons directly or
indirectly owns or controls 10 percent or more of the voting securities of
another person.

On the basis of statutory statements filed with state regulators annually,
the National Association of Insurance Commissioners calculates certain financial
ratios to assist state regulators in monitoring the financial condition of
insurance companies. A "usual range" of results for each ratio is used as a
benchmark. In the past, variances in certain ratios of our insurance
subsidiaries have resulted in inquiries from insurance departments, to which we
have responded. These inquiries have not led to any restrictions affecting our
operations.

In addition, the National Association of Insurance Commissioners issues
model laws and regulations, many of which have been adopted by state insurance
regulators, relating to:

- reserve requirements;

- Company action level risk-based capital ratio standards;

- codification of insurance accounting principles;

- investment restrictions;

- restrictions on an insurance company's ability to pay dividends; and

- product illustrations.

The Model Act provides a tool for insurance regulators to determine the
levels of statutory capital and surplus an insurer must maintain in relation to
its insurance and investment risks and whether there is a need for possible
regulatory attention. The Model Act provides four levels of regulatory
attention, varying with the

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ratio of the insurance company's total adjusted capital (defined as the total of
its statutory capital and surplus, asset valuation reserve and other
adjustments) to its risk-based capital:

- if a company's total adjusted capital is less than 35 percent of its
risk-based capital (the "Mandatory Control Level"), the regulatory
authority must place the company under its control.

- between the current year and the prior year; and

- for the average of the last 3 years.

It assumes that such decrease could occur again in the coming year. Any
company whose trended total adjusted capital is less than 95 percent of its
risk-based capital would trigger a requirement to submit a comprehensive plan as
described above for the Company Action Level.

Refer to the section entitled "Statutory Information" within "Management's
Discussion and Analysis of Financial Condition and Results of Operations" for
more information on our risk-based capital ratios.

The National Association of Insurance Commissioners has adopted model
long-term care policy language providing nonforfeiture benefits and has proposed
a rate stabilization standard for long-term care policies. Various bills are
proposed from time to time in the U.S. Congress which would provide for the
implementation of certain minimum consumer protection standards for inclusion in
all long-term care policies, including guaranteed renewability, protection
against inflation and limitations on waiting periods for pre-existing
conditions. Federal legislation permits premiums paid for qualified long-term
care insurance to be treated as tax-deductible medical expenses and for benefits
received on such policies to be excluded from taxable income.

Our insurance subsidiaries are required under guaranty fund laws of most
states in which we transact business to pay assessments up to prescribed limits
to fund policyholder losses or liabilities of insolvent insurance companies.
Assessments can be partially recovered through a reduction in future premium
taxes in some states.

Most states mandate minimum benefit standards and loss ratios for accident
and health insurance policies. We are generally required to maintain, with
respect to our individual long-term care policies, minimum anticipated loss
ratios over the entire period of coverage of not less than 60 percent. With
respect to our Medicare supplement policies, we are generally required to attain
and maintain an actual loss ratio of not less than 65 percent. We provide to the
insurance departments of all states in which we conduct business annual
calculations that demonstrate compliance with required minimum loss ratios for
both long-term care and Medicare supplement insurance. These calculations are
prepared utilizing statutory lapse and interest rate assumptions. In the event
that we fail to maintain minimum mandated loss ratios, our insurance
subsidiaries could be required to provide retrospective refunds and/or
prospective rate reductions. We believe that our insurance subsidiaries
currently comply with all applicable mandated minimum loss ratios.

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National Association of Insurance Commissioners model regulations, adopted
in substantially all states, created 10 standard Medicare supplement plans
(Plans A through J). Plan A provides the least extensive coverage, while Plan J
provides the most extensive coverage. Under National Association of Insurance
Commissioners regulations, Medicare insurers must offer Plan A, but may offer
any of the other plans at their option. Our insurance subsidiaries currently
offer nine of the model plans. We have declined to offer Plan J, due in part to
its high benefit levels and, consequently, high costs to the consumer.

The federal government does not directly regulate the insurance business.
However, federal legislation and administrative policies in several areas,
including pension regulation, age and sex discrimination, financial services
regulation, securities regulation, privacy laws and federal taxation, do affect
the insurance business. Legislation has been introduced from time to time in
Congress that could result in the federal government assuming some role.

Numerous proposals to reform the current health care system including
Medicare have been introduced in Congress and in various state legislatures.
Proposals have included, among other things, modifications to the existing
employer-based insurance system, a quasi-regulated system of "managed
competition" among health plans, and a single-payer, public program. Changes in
health care policy could significantly affect our business.

The United States Department of Health and Human Services has issued
regulations under the Health Insurance Portability and Accountability Act
relating to standardized electronic transaction formats, code sets and the
privacy of member health information. These regulations, and any corresponding
state legislation, will affect our administration of health insurance.

A number of states have passed or are considering legislation that would
limit the differentials in rates that insurers could charge for health care
coverages between new business and renewal business for similar demographic
groups. State legislation has also been adopted or is being considered that
would make health insurance available to all small groups by requiring coverage
of all employees and their dependents, by limiting the applicability of
pre-existing conditions exclusions, by requiring insurers to offer a basic plan
exempt from certain benefits as well as a standard plan, or by establishing a
mechanism to spread the risk of high risk employees to all small group insurers.
Congress and various state legislators have from time to time proposed changes
to the health care system that could affect the relationship between health
insurers and their customers, including external review. We cannot predict with
certainty the effect that any proposals, if adopted, or legislative developments
could have on our insurance businesses and operation.

The asset management activities of 40Y86 Advisors are subject to federal
and state securities, fiduciary and other laws and regulations including the
Employee Retirement Income Security Act of 1974, as amended. The Securities and
Exchange Commission, the National Association of Securities Dealers, state
securities commissions and the Department of Labor are the principal regulators
of our asset management operations.

FEDERAL INCOME TAXATION

The annuity and life insurance products marketed and issued by our
insurance subsidiaries generally provide the policyholder with an income tax
advantage, as compared to other savings investments such as certificates of
deposit and bonds, in that income taxation on the increase in value of the
product is deferred until it is received by the policyholder. With other savings
investments, the increase in value is generally taxed as earned. Annuity
benefits and life insurance benefits, which accrue prior to the death of the
policyholder, are generally not taxable until paid. Life insurance death
benefits are generally exempt from income tax. Also, benefits received on
immediate annuities, other than structured settlements, are recognized

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as taxable income ratably, as opposed to the methods used for some other
investments which tend to accelerate taxable income into earlier years. The tax
advantage for annuities and life insurance is provided in the Internal Revenue
Code, and is generally followed in all states and other United States taxing
jurisdictions.

Recently, Congress enacted legislation to lower marginal tax rates, reduce
the federal estate tax gradually over a ten-year period, with total elimination
of the federal estate tax in 2010, and increase contributions that may be made
to individual retirement accounts and 401(k) accounts. While these tax law
changes will sunset at the beginning of 2011 absent future congressional action,
they could in the interim diminish the appeal of our annuity and life insurance
products. Additionally, Congress has considered, from time to time, other
possible changes to the U.S. tax laws, including elimination of the tax deferral
on the accretion of value within certain annuities and life insurance products.
It is possible that further tax legislation will be enacted which would contain
provisions with possible adverse effects on our annuity and life insurance
products.

Our insurance company subsidiaries are taxed under the life insurance
company provisions of the Code. Provisions in the Code require a portion of the
expenses incurred in selling insurance products to be deducted over a period of
years, as opposed to immediate deduction in the year incurred. This provision
increases the tax for statutory accounting purposes, which reduces statutory
earnings and surplus and, accordingly, decreases the amount of cash dividends
that may be paid by the life insurance subsidiaries.

At December 31, 2003, Conseco had net federal income tax loss carryforwards
of $3.6 billion available (after taking into account the reduction in tax
attributes due to the cancellation of indebtedness in bankruptcy and the loss
resulting from the worthlessness of our investment in Conseco Finance, all of
which is subject to various statutory restrictions) for use on future tax
returns. These carryforwards will expire as follows: $11.2 million in 2004, $4.6
million in 2005; $.2 million in 2006; $5.8 million in 2007; $6.6 million in
2008; $10.5 million in 2009; $4.2 million in 2010; $2.5 million in 2011; $16.0
million in 2012; $43.4 million in 2013; $6.9 million in 2014; $60.4 million in
2016; $41.5 million in 2017; $3,399.5 million in 2018; $.7 million in 2019; $5.5
million in 2020; and $1.0 million in 2022.

Our income tax expense includes deferred income taxes arising from
temporary differences between the financial reporting and tax bases of assets
and liabilities, capital loss carryforwards and net operating loss
carryforwards. In assessing the realization of our deferred income tax assets,
we consider whether it is more likely than not that the deferred income tax
assets will be realized. The ultimate realization of our deferred income tax
assets depends upon generating future taxable income during the periods in which
our temporary differences become deductible and before our net operating loss
carryforwards expire. In addition, the use of our net operating loss
carryforwards is dependent, in part, on whether the IRS ultimately agrees with
the tax position we plan to take in our current and future tax returns. With
respect to the deferred tax asset, we assess the need for a valuation allowance
on a quarterly basis.

A valuation allowance of $2.4 billion has been provided for the entire
balance of net deferred income tax assets at December 31, 2003, as we believe
the realization of such assets in future periods is uncertain. We reached this
conclusion after considering the losses we have realized in recent years, the
uncertainties related to the tax treatment for the worthlessness of our
investment in Conseco Finance, and the likelihood of future taxable income
exclusive of reversing temporary differences and carryforwards.

PROPERTIES

Our headquarters and the administrative operations of our Conseco Insurance
Group segment are located on a Company-owned 146-acre corporate campus in
Carmel, Indiana, immediately north of Indianapolis. The ten buildings on the
campus contain approximately 854,500 square feet of space and house our
executive offices and certain administrative operations of our subsidiaries.
Management believes that our offices are adequate for our current needs.

Our Bankers Life segment is primarily administered from two facilities in
Chicago. Bankers Life has 177,000 square feet in downtown Chicago, Illinois,
leased under an agreement whereby 107,000 square feet are leased until 2018 and
70,000 square feet are leased until 2008. We also lease approximately

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130,000 square feet of space in a second Chicago facility. This lease expires in
October 2004, at which time the operations of this facility will be moved to a
new location in downtown Chicago under a lease for approximately 222,000 square
feet with a life of approximately 10 years. We own a 127,000 square foot office
building in Philadelphia, Pennsylvania, which serves as the administrative
center for the direct marketing operation of our Bankers Life segment. We occupy
approximately 60 percent of this space, with the remainder leased to tenants. We
also lease 206 sales offices in various states totaling approximately 507,000
square feet. These leases are short-term in length, with remaining lease terms
expiring between 2004 and 2009.

LEGAL PROCEEDINGS

We are involved on an ongoing basis in lawsuits, including purported class
actions, relating to our operations, including with respect to sales practices,
and we and current and former officers and former directors are defendants in a
pending class action lawsuit asserting claims under the securities laws. The
ultimate outcome of these lawsuits cannot be predicted with certainty and we
have estimated the potential exposure for each of the matters and have recorded
a liability if a loss is deemed probable.

SECURITIES LITIGATION

Since we announced our intention to restructure our capital on August 9,
2002, a total of eight purported securities fraud class action lawsuits have
been filed in the United States District Court for the Southern District of
Indiana. The complaints name us as a defendant, along with certain of our
current and former officers. These lawsuits were filed on behalf of persons or
entities who purchased our predecessor's common stock on various dates between
October 24, 2001 and August 9, 2002. In each case the plaintiffs allege claims
under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and allege
material omissions and dissemination of materially misleading statements
regarding, among other things, the liquidity of Conseco and alleged problems in
Conseco Finance's manufactured housing division, allegedly resulting in the
artificial inflation of our predecessor's stock price. On March 13, 2003, all of
these cases were consolidated into one case in the United States District Court
for the Southern District of Indiana, captioned Franz Schleicher, et al. v.
Conseco, Inc., Gary Wendt, William Shea, Charles Chokel and James Adams, et al.,
Case No. 02-CV-1332 DFH-TAB. The lawsuits were stayed as to all defendants by
order of the United States Bankruptcy Court for the Northern District of
Illinois. The stay was lifted on October 15, 2003. The plaintiffs have filed a
consolidated class action complaint with respect to the individual defendants.
We expect to be filing a motion to dismiss in March 2004. Our liability with
respect to these lawsuits was discharged in the plan of reorganization and our
obligation to indemnify individual defendants who were not serving as one of our
officers or directors on the effective date of the plan is limited to $3 million
in the aggregate under the plan of reorganization. Our liability to indemnify
individual defendants who were serving as an officer or director on the
effective date, of which there is one such defendant, is not limited by the plan
of reorganization. We believe these lawsuits are without merit and intend to
defend them vigorously. The ultimate outcome of these lawsuits cannot be
predicted with certainty.

OTHER LITIGATION

Collection efforts by Conseco and its wholly owned subsidiary, Conseco
Services, LLC, related to the 1996-1999 director and officer loan programs have
been commenced against various past board members and executives with
outstanding loan balances. In addition, certain former officers and directors
have sued the companies for declaratory relief concerning their liability for
the loans. Currently, we are involved in litigation with Stephen C. Hilbert,
James D. Massey, Dennis E. Murray, Sr., Rollin M. Dick, James S. Adams, Maxwell
E. Bublitz, Ngaire E. Cuneo, David R. Decatur, Donald F. Gongaware and Bruce A.
Crittenden. The specific lawsuits include: Hilbert v. Conseco, Case No. 03A
04283 (Bankr. Northern District, Illinois); Conseco Services v. Hilbert, Case
No. 29C01-0310 MF 1296 (Circuit Court, Hamilton County, Indiana); Murray and
Massey v. Conseco, Case No. 1:03-CV-1482 LJM-WTL (Southern District, Indiana);
Conseco Services v. Adams, et al, Case No. 29DO2-0312-CC-1035(Circuit Court,
Hamilton County, Indiana); Conseco v. Adams, et al, Case No. 03A 04545, (Bankr.
Northern District, Illinois) Dick v. Conseco Services,

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Case No. 29 D01-0207-PL-549 (Superior Court, Hamilton County, Indiana); Conseco
Services v. Dick, et al., Case No. 06C01-0311-CC-356 (Circuit Court, Boone
County, Indiana); Stephen C. Hilbert v. Conseco, Inc. and Kroll Inc., Case No.
29D02-0312-PL-1026 (Superior Court, Hamilton County, Indiana); Crittenden v.
Conseco, Case No. IP02-1823-C B/S (Southern District, Indiana); and Conseco V.
Dick, No. 04L 002811 (Cir. Ct. Cook County, Ill.). Conseco and Conseco Services,
LLC believe that all amounts due under the director and officer loan programs,
including all applicable interest, are valid obligations owed to the companies.
As part of the plan of reorganization, we have agreed to pay 45 percent of any
net proceeds recovered in connection with these lawsuits, in an aggregate amount
not to exceed $30 million, to former holders of our predecessor's trust
preferred securities that did not opt out of a settlement reached with the
committee representing holders of these securities. We are required to use the
balance of any net proceeds recovered in connection with these lawsuits to pay
down our senior credit facility. Any remaining proceeds will be used to
contribute capital to our insurance subsidiaries. We intend to prosecute these
claims to obtain the maximum recovery possible. Further, with regard to the
various claims brought against Conseco and Conseco Services, LLC by certain
former directors and officers, we believe that these claims are without merit
and intend to defend them vigorously. The ultimate outcome of the lawsuits
cannot be predicted with certainty.

In October 2002, Roderick Russell, on behalf of himself and a class of
persons similarly situated, and on behalf of the ConsecoSave Plan, filed an
action in the United States District Court for the Southern District of Indiana
against our predecessor, Conseco Services, LLC and certain of our current and
former officers (Roderick Russell, et al. v Conseco, Inc., et al., Case No.
1:02-CV-1639 LJM). The purported class action consists of all individuals whose
401(k) accounts held common stock of our predecessor at any time since April 28,
1999. The complaint alleges, among other things, breaches of fiduciary duties
under ERISA by continuing to permit employees to invest in our predecessor's
common stock without full disclosure of our true financial condition. We filed a
motion to dismiss the complaint in December 2002. This lawsuit was stayed as to
all defendants by order of the bankruptcy court. The stay was lifted on October
15, 2003. It is expected that the plaintiffs will be amending their complaint in
March or April of 2004. On February 13, 2004, our fiduciary insurance carrier,
RLI Insurance Company, filed a declaratory judgment action asking the court to
find no liability under its policy for the claims made in the Russell matter
(RLI Insurance Company v. Conseco, Inc., Stephen Hilbert, et al., Case No.
1:04-CV-0310DFH-TAB (Southern District, Indiana.)) We believe the lawsuits are
without merit and intend to defend them vigorously. The ultimate outcome of the
lawsuit cannot be predicted with certainty.

On June 24, 2002, the heirs of a former officer, Lawrence Inlow, commenced
an action against our predecessor, Conseco Services, LLC and two former officers
in the Circuit Court of Boone County, Indiana (Inlow et al. v. Conseco, Inc., et
al., Cause No. 06C01-0206-CT-244). The heirs assert that unvested options to
purchase 756,248 shares of our predecessor's common stock should have been
vested at Mr. Inlow's death. The heirs further claim that if such options had
been vested, they would have been exercised, and that the resulting shares of
common stock would have been sold for a gain of approximately $30 million based
upon a stock price of $58.125 per share, the highest stock price during the
alleged exercise period of the options. We believe the heirs' claims are without
merit and will defend the action vigorously. The maximum exposure to Conseco for
this lawsuit is estimated to be $33 million. The heirs did not file a proof of
claim with the bankruptcy court. Subject to dispositive motions which are yet to
be filed, the matter will continue to trial against Conseco Services, LLC and
the other co-defendants on September 13, 2004. The ultimate outcome cannot be
predicted with certainty.

On June 27, 2001, two suits against our subsidiary, Philadelphia Life
Insurance Company (now known as Conseco Life Insurance Company), both purported
nationwide class actions seeking unspecified damages, were consolidated in the
U.S. District Court, Middle District of Florida (In Re PLI Sales Litigation,
Cause No. 01-MDL-1404), alleging among other things, fraudulent sales and a
"vanishing premium" scheme. Philadelphia Life filed a motion for summary
judgment against both named plaintiffs, which motion was granted in June 2002.
Plaintiffs appealed to the 11th Circuit. The 11th Circuit, in July 2003,
affirmed in part and reversed in part, allowing two fraud counts with respect to
one plaintiff to survive. The plaintiffs' request for a rehearing with respect
to this decision has been denied. Philadelphia Life has filed a summary judgment

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motion with respect to the remaining claims. This summary judgment was denied in
February 2004. Philadelphia Life believes this lawsuit is without merit and
intends to defend it vigorously. The ultimate outcome of the lawsuit cannot be
predicted with certainty.

On December 1, 2000, our former subsidiary, Manhattan National Life
Insurance Company, was named in a purported nationwide class action seeking
unspecified damages in the First Judicial District Court of Santa Fe, New Mexico
(Robert Atencio and Theresa Atencio, for themselves and all other similarly
situated v. Manhattan National Life Insurance Company, an Ohio corporation,
Cause No. D-0101-CV-2000-2817), alleging among other things fraud by
non-disclosure of additional charges for those policyholders paying via premium
modes other than annual. We retained liability for this litigation in connection
with the sale of Manhattan National Life in June 2002. We believe this lawsuit
is without merit and intend to defend it vigorously. The ultimate outcome of the
lawsuit cannot be predicted with certainty.

On December 19, 2001, four of our subsidiaries were named in a purported
nationwide class action seeking unspecified damages in the District Court of
Adams County, Colorado (Jose Medina and others similarly situated v. Conseco
Annuity Assurance Company, Conseco Life Insurance Company, Bankers National Life
Insurance Company and Bankers Life and Casualty Company, Cause No. 01-CV-2465),
alleging among other things breach of contract regarding alleged non-disclosure
of additional charges for those policy holders paying via premium modes other
than annual. On July 14 and 15, 2003 the plaintiff's motion for class
certification was heard and the court took the matter under advisement. On
November 10, 2003, the court denied the motion for class certification. On
January 26, 2004, the plaintiff appealed the trial court's ruling denying class
certification. All further proceedings have been stayed pending the outcome of
the appeal. The defendants believe this lawsuit is without merit and intend to
defend it vigorously. The ultimate outcome of the lawsuit cannot be predicted
with certainty.

Our subsidiaries, Conseco Life Insurance Company and Bankers Life and
Casualty Company, have recently been named in multiple purported class actions
and individual lawsuits alleging, among other things, breach of contract with
regard to a change made in the way monthly deductions are calculated for
insurance coverage. This change was the adjustment of a non-guaranteed element,
which was not in the applicable policy form. The specific lawsuits include:
David Barton v. Conseco Life Insurance Company, Case No. 04-20048-CIV-MORENO
(Southern District, Florida); Stephen Hook, an individual, on behalf of himself
and all others similarly situated v. Conseco Life Insurance Company and Bankers
Life and Casualty Company and Does 1 through 10, Case No. CGC-04-428872
(Superior Court, San Francisco County, California); Donald King, as Trustee of
the Irrevocable Trust of Arnold L. King v. Conseco Life Insurance Company, Case
No. 1: 04CV0163 (Northern District, Ohio); Michael S. Kuhn, on behalf of himself
and all others similarly situated v. Conseco Life Insurance Company and Does 1
through 100, Case No. 03-416786 (Superior Court, San Francisco County,
California); Sidney H. Levine and Judith A. Levine v. Conseco Life Insurance
Company, Mark F. Peters Insurance Services, Inc. Hon. John Garamendi (in his
capacity as Insurance Commissioner for the State of California) and Does 1
through 10, Case No. 04 CV 125 LAB (BLM) (Southern District, California); Edwin
Jacob "Jake" Garn et al. v. Conseco Life Insurance Company, Case No.
29D02-0312-PL-1034 (Superior Court, Hamilton County, Indiana); Edward M.
Medvene, an Individual, and Sherwin Samuels and Miles Rubin, as Trustees of the
Edward Medvene 2984 Insurance Trust v. Conseco Life Insurance Company, Case No.
CV04-846-AHM (MCX) (Central District, California); Edwin Jacob "Jake" Garn, on
Behalf of Himself and All Others Similarly Situated v. Conseco Life Insurance
Company, Case No. 1:04-CV-0514SEB-VSS (Southern District, Indiana); Steven Rose,
on Behalf of Himself and All Others Similarly Situated, and on Behalf of the
General Public for the State of California vs. Conseco Life Insurance Company,
Case No. GIC 827178 (Superior Court, San Diego County, California); and Murray
Gomer, Murray Gomer Irrevocable Trust, individually, and on behalf of the class
of all others similarly situated, and on behalf of the General Public v. Conseco
Life Insurance Company, successor to Philadelphia Life Insurance Company and
formerly known as Massachusetts General Life Insurance Company, Case No.
CV04-1409-SJO (RNDX) (Central District, California). We believe these lawsuits
are without merit and intend to defend them vigorously. The ultimate outcome of
the lawsuits cannot be predicted with certainty.

On February 7, 2003, our subsidiary, Conseco Life Insurance Company, was
named in a purported Texas statewide class action seeking unspecified damages in
the County Court of Cameron County, Texas. On

121

February 12, 2004, the complaint was amended to allege a purported nationwide
class and to name Conseco Services, LLC as an additional defendant (Lawrence
Onderdonk and Yolanda Carrizales v. Conseco Life Insurance Company, Conseco
Services, LLC, and Pete Ramirez, III, Cause No. 2003-CCL-102-C). The purported
class consists of all former Massachusetts General Flexible Premium Adjustable
Life Insurance Policy policyholders who were converted to Conseco Life Flexible
Premium Adjustable Life Insurance Policies and whose accumulated values in the
Massachusetts General policies were applied to first year premiums on the
Conseco Life policies. The complaint alleges, among other things, civil
conspiracy to convert the accumulated cash values of the plaintiffs and the
class, and the violation of insurance laws nationwide. We believe this lawsuit
is without merit and intend to defend it vigorously. The ultimate outcome of the
lawsuit cannot be predicted with certainty.

On December 30, 2002 and December 31, 2002, five suits were filed in
various Mississippi counties against Conseco Life Insurance Company (Kathie
Allen, et al. v. Conseco Life Insurance Company, et al., Circuit Court of Jones
County, Mississippi, Cause No. 2002-448-CV12; Malcolm Bailey, et al. v. Conseco
Life Insurance Company, et al., Circuit Court of Claiborne County, Mississippi,
Cause No. CV-2002-371; Anthony Cascio, et al. v. Conseco Life Insurance Company,
et al, Circuit Court of LeFlore County, Mississippi, Cause No.
CV-2002-0242-CICI; William Garrard, et al. v. Conseco Life insurance Company, et
al., Circuit Court of Sunflower County, Mississippi, Cause No. CV-2002-0753-CRL;
and William Weaver, et al. v. Conseco Life Insurance Company, et al., Circuit
Court of LeFlore County, Mississippi, Cause No. CV-2002-0238-CICI) alleging,
among other things, a "vanishing premium" scheme. Conseco Life removed all of
the cases to the U.S. District Courts in Mississippi. In September 2003,
plaintiffs' motion to remand was denied in the Garrard and Weaver matters, but
granted in the Cascio matter. In November 2003, Conseco Life again removed the
Cascio matter to U.S. District Court. Conseco Life awaits the court's ruling on
plaintiff's motion to remand in the Allen matter. In Bailey the parties have
agreed to stay in Federal court and the plaintiffs amended their complaint on
January 15, 2004 to allege purported nationwide class action allegations
regarding alleged wrongful collection of charges under the policy. On January
30, 2004 we filed a motion to dismiss or in alternative, motion for summary
judgment. Conseco Life believes the lawsuits are without merit and intends to
defend them vigorously. The ultimate outcome of the lawsuits cannot be predicted
with certainty.

In addition, Conseco and its subsidiaries are involved on an ongoing basis
in other lawsuits and arbitrations, including purported class actions, related
to their operations. The ultimate outcome of all of these other legal matters
pending against Conseco or its subsidiaries cannot be predicted, and, although
such lawsuits are not expected individually to have a material adverse effect on
Conseco, such lawsuits could have, in the aggregate, a material adverse effect
on Conseco's consolidated financial condition, cash flows or results of
operations.

OTHER PROCEEDINGS

On September 18, 2003, we received a grand jury subpoena from the U.S.
District Court for the Southern District of Indiana in connection with a
Department of Justice investigation requiring production of documents relating
to the valuation of interest-only securities held by Conseco Finance, our
predecessor's former finance subsidiary, contemporaneous earnings estimates for
the predecessor, certain personnel records and other accounting and financial
disclosure records for the period June 1, 1998 to June 30, 2000. We have
subsequently received follow-up grand jury document subpoenas concerning other
matters. All of these follow-up requests have been limited to the time period
prior to the December 17, 2002 bankruptcy filing. We have been advised by the
Department of Justice that neither we nor any of our current directors or
employees are subjects or targets of this investigation. We are cooperating
fully with the Department of Justice investigation.

On March 10, 2004, we entered into a settlement with the SEC in connection
with the SEC's investigation of events in and before the spring of 2000,
including Conseco Finance's accounting for its interest-only securities and
servicing rights. These issues were among those addressed in our predecessor's
writedown and restatement in the spring of 2000, and were the subject of
shareholder class action litigation, which we settled in the second quarter of
2003. Without admitting or denying the SEC's findings, we

122

consented to the entry of a cease-and-desist order requiring future compliance
with periodic reporting, record keeping, internal control and other provisions
of the securities laws. The settlement did not impose any fine or monetary
penalty, or require us to restate any of our historical financial statements.

On October 29, 2003, the New York Attorney General served Conseco Life
Insurance Company of Texas with a document subpoena concerning customer
transfers between mutual fund subaccounts offered by Conseco Variable Insurance
Company, a former wholly-owned subsidiary of Conseco Life of Texas, that
occurred prior to the sale of Conseco Variable Insurance Company to an unrelated
third party in October 2002. The SEC served Conseco with a similar subpoena
shortly after we received the Attorney General's subpoena. Certain of our
employees have also received subpoenas regarding duties they previously
performed in respect of annuity sales by Conseco Variable Insurance Company. The
purchase agreement pursuant to which Conseco Variable Insurance Company was sold
contains indemnification provisions with respect to certain liabilities relating
to Conseco Life's period of ownership, including provisions concerning certain
business activities, including marketing activities, of Conseco Variable
Insurance Company. Conseco Life of Texas and Conseco have cooperated with the
Attorney General and the SEC in producing documents responsive to their
subpoenas. In January 2004, the company received telephonic notification of a
potential enforcement action by the Attorney General and a Wells notification
from the SEC regarding alleged market timing on the part of holders of variable
annuity policies issued by Conseco Variable Insurance Company. Neither we nor
our affiliates have issued any variable annuity policies since the sale of
Conseco Variable Insurance Company. We believe, based on the information
obtained and supplied to the investigators to date, that Conseco Variable
Insurance Company violated no federal or state law prior to the October 2002
sale. The investigations are in a preliminary stage and their outcome cannot be
predicted with certainty. We are cooperating fully with the Attorney General and
the SEC in these investigations.

The deadline to file administrative claims in the bankruptcy proceeding was
October 9, 2003. The plan of reorganization provides that all such claims must
be paid in full, in cash. We are reviewing all timely filed administrative
claims and may resolve disputes regarding allowance of such claims in the
bankruptcy court. The amount of known disputed administrative claims as of March
1, 2004, was approximately $2.0 million.

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MANAGEMENT

EXECUTIVE OFFICERS

Our executive officers are as follows:

NAME AGE POSITION WITH CONSECO
---- --- ---------------------

Eugene M. Bullis..................... 58 Executive Vice President and Chief Financial
Officer
Eric R. Johnson...................... 43 President, 4086 Advisors, Inc.
William S. Kirsch.................... 47 Executive Vice President, General Counsel and
Secretary
John R. Kline........................ 46 Senior Vice President and Chief Accounting
Officer
William J. Shea...................... 56 Director, President and Chief Executive
Officer

EUGENE M. BULLIS has been executive vice president and chief financial
officer since November 2002. From 2000 until 2002, Mr. Bullis served as chief
financial officer of Managed Ops.Com, Inc. From 1999 until 2000 he was executive
vice president and chief financial officer of Manufacturers Services, Ltd. and
from 1998 to 1999 he served as senior vice president and chief financial officer
of Physicians Quality Care.

ERIC R. JOHNSON has been president and chief executive officer of 4086
Advisors, Inc. (formerly Conseco Capital Management, Inc.), Conseco's
wholly-owned registered investment advisor, since September 2003 and has held
various positions since joining Conseco Capital Management, Inc. in 1997.

WILLIAM S. KIRSCH has been executive vice president, general counsel and
secretary since September 2003. His professional corporation, William S. Kirsch,
P.C., is a partner in the law firm Kirkland & Ellis LLP. Mr. Kirsch has been
with Kirkland & Ellis LLP since 1981.

JOHN R. KLINE has been senior vice president and chief accounting officer
since July 2002. Mr. Kline has served in various accounting and finance
capacities with Conseco since 1990.

WILLIAM J. SHEA has served as a director of Conseco and its predecessor
since September 2002. He has served as president and chief executive officer of
Conseco since October 2002 and was president and chief operating officer from
September 2001 until October 2002. Before joining Conseco, Mr. Shea served as
CEO of View Tech, Inc. (integrated video-conferencing solutions) from 1998 until
2000. From 1994 to 1998, he was vice chairman and from 1992 to 1998 chief
financial officer of Bank Boston Corporation.

Messrs. Shea, Bullis and Kline served as officers, and Mr. Shea served as a
director, of our predecessor company, which filed a bankruptcy petition on
December 17, 2002. Mr. Shea and Mr. Bullis also served as directors and/or
officers of several subsidiaries of our predecessor that also filed bankruptcy
petitions on December 17, 2002.

DIRECTORS

Our directors are as follows:

NAME AGE POSITION WITH CONSECO
---- --- ---------------------

R. Glenn Hilliard(2)(3)(5)................ 61 Non-Executive Chairman
Philip R. Roberts(1)(4)................... 62 Director
Neal Schneider(1)(4)...................... 59 Director
Michael S. Shannon(2)(3).................. 45 Director
William J. Shea(4)(5)..................... 56 Director, President and Chief Executive
Officer
Michael T. Tokarz(2)(3)................... 54 Director
John G. Turner(1)(4)(5)................... 64 Director

---------------

(1) Member of the Audit and Enterprise Risk Committee

(2) Member of the Governance and Strategy Committee

124

(3) Member of the Human Resources and Compensation Committee

(4) Member of the Investment Committee

(5) Member of the Executive Committee

R. GLENN HILLIARD became the non-executive chairman of our board of
directors in September 2003. Mr. Hilliard has been Chairman and CEO of Hilliard
Group, LLC, an investment and consulting firm, since June 2003. From 1999 until
his retirement in April 2003, Mr. Hilliard served as chairman and CEO of ING
Americas. From 1994 to 1999 he was chairman and CEO of ING North America.

PHILIP R. ROBERTS joined our board of directors in September 2003. Since
2000, Mr. Roberts has been principal of Roberts Ventures L.L.C., consultant for
mergers and acquisitions and product development for investment management
firms. From 1996 until 2000, Mr. Roberts served as chief investment officer of
trust business for Mellon Financial Corporation and headed its institutional
asset management businesses from 1990 to 1996.

NEAL SCHNEIDER joined our board of directors in September 2003. Since June
2002, Mr. Schneider has been a partner of Smart and Associates, LLP, a business
advisory and accounting firm. Between August 2000 and June 2002, he was an
independent consultant. Until his retirement in August 2000, Mr. Schneider spent
34 years with Arthur Andersen & Co., including service as partner in charge of
the Worldwide Insurance Industry Practice and the North American Financial
Service Practice. Mr. Schneider is Chairman of the Board of PMA Capital
Corporation.

MICHAEL S. SHANNON joined our board of directors in September 2003. Mr.
Shannon is co-founder and has been president and chief executive officer since
1992 of KSL Recreation Corporation (owner and operator of golf courses and
destination resorts in the U.S.). Mr. Shannon was lead director of ING Americas
before joining our board. Mr. Shannon is a director of Startek, Inc.

MICHAEL T. TOKARZ joined our board of directors in September 2003. Mr.
Tokarz has been a managing member of the Tokarz Group, LLC (venture capital
investments) since 2002. He was a general partner with Kohlberg Kravis Roberts &
Co. from 1985 until he retired in 2002. Mr. Tokarz is also a director of Walter
Industries, Inc, Idex Corp. and MEVC Draper Fisher Jurvetson Fund I Inc.

JOHN G. TURNER joined our board of directors in September 2003. Mr. Turner
has been chairman of Hillcrest Capital Partners, a private equity investment
firm, since 2002. Mr. Turner served as chairman and CEO of ReliaStar Financial
Corp. from 1991 until it was acquired by ING in 2000. After the acquisition he
became vice chairman and a member of the executive committee for ING Americas
until his retirement in 2002. Mr. Turner is a director of Hormel Foods
Corporation, Shopko Stores, Inc. and ING Funds.

BOARD OF DIRECTORS

Our board of directors is currently comprised of seven members, divided
into two classes as follows: Messrs. Shea, Roberts and Tokarz are Class I
directors, and Messrs. Hilliard, Schneider, Shannon and Turner are Class II
directors. The term of office of the Class I directors expires at our 2004
annual meeting of stockholders and the term of office of the initial Class II
directors expires at our 2005 annual meeting of stockholders. Other than the
term of office of the initial Class II directors, the term of office of each
Class of directors will expire at the next succeeding annual meeting of
stockholders. Accordingly, the term of office of the Class I directors expires
at the 2004 annual meeting of stockholders, at which time three new directors
will be elected for a one year term, and the term of office of the Class II
directors, as well as the Class I directors elected at the 2004 annual meeting
of stockholders, will expire at the 2005 annual meeting of stockholders, at
which time seven new directors will be elected.

The initial Class I and Class II directors are those directors elected in
connection with the adoption of our certificate of incorporation on September
10, 2003. At each annual meeting of stockholders, directors to replace those of
a class or classes whose terms expire at such annual meeting will be elected to
hold office until the next succeeding annual meeting and until their respective
successors have been duly elected and

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qualified. If the number of directors is changed, any newly created
directorships or decrease in directorships will be so apportioned among the
classes as to make all classes as nearly equal in number as practicable.

With the exception of Mr. Shea, our President and Chief Executive Officer,
our board of directors has determined that all of our directors meet the
independence requirements of the New York Stock Exchange.

BOARD COMMITTEES

AUDIT AND ENTERPRISE RISK COMMITTEE. The Audit and Enterprise Risk
Committee's functions, among others, are to recommend the appointment of
independent accountants; review the arrangements for and scope of the audit by
independent accountants; review the independence of the independent accountants;
consider the adequacy of the system of internal accounting controls and review
any proposed corrective actions; review and monitor our compliance with legal
and regulatory requirements; and discuss with management and the independent
accountants our draft annual and quarterly financial statements and key
accounting and/or reporting matters. The audit committee currently consists of
Messrs. Schneider, Roberts and Turner, with Mr. Schneider serving as chairman of
the committee and as "audit committee financial expert," as defined under SEC
rules promulgated under the Sarbanes-Oxley Act. All current members of the Audit
and Enterprise Risk Committee are "independent" within the meaning of the new
regulations adopted by the SEC and the listing requirements adopted by the New
York Stock Exchange regarding audit committee membership. A copy of the Audit
and Enterprise Risk Committee's charter is available on our website at
www.conseco.com.

GOVERNANCE AND STRATEGY COMMITTEE. The Governance and Strategy Committee
is responsible for, among other things, establishing criteria for board
membership; considering, recommending and recruiting candidates to fill new
positions on the board; reviewing candidates recommended by shareholders;
considering questions of possible conflicts of interest involving board members,
executive officers and key employees. It is also responsible for developing
principles of corporate governance and recommending them to the board for its
approval and adoption, reviewing periodically these principles of corporate
governance to insure that they remain relevant and are being complied with. The
Governance and Strategy Committee currently consists of Messrs. Hilliard, Tokarz
and Shannon, with Mr. Tokarz serving as chairman of the committee. All current
members of the Governance and Strategy Committee are "independent" within the
meaning of the new listing requirements adopted by the New York Stock Exchange
regarding nominating committee membership. A copy of the Governance and Strategy
Committee's charter is available on our website at www.conseco.com.

HUMAN RESOURCES AND COMPENSATION COMMITTEE. The Human Resources and
Compensation Committee is responsible for, among other things, approving overall
compensation policy; recommending to the board the compensation of the Chief
Executive Officer and other senior officers; and reviewing and administering our
incentive compensation and equity award plans. The Human Resources and
Compensation Committee currently consists of Messrs. Hilliard, Tokarz and
Shannon, with Mr. Shannon serving as chairman of the committee. All current
members of the Human Resources and Compensation Committee are "independent"
within the meaning of the new listing requirements adopted by the New York Stock
Exchange regarding compensation committee membership. A copy of the Human
Resources and Compensation Committee's charter is available on our website at
www.conseco.com.

INVESTMENT COMMITTEE. The Investment Committee is responsible for, among
other things, reviewing investment policies, strategies and programs; overseeing
the investment of funds in accordance with policies and limits approved by it;
and reviewing the quality and performance of our investment portfolios and the
alignment of asset duration to liabilities. The Investment Committee currently
consists of Messrs. Shea, Schneider, Roberts and Turner, with Mr. Roberts
serving as chairman of the committee. A copy of the Investment Committee's
charter is available on our website at www.conseco.com.

EXECUTIVE COMMITTEE. Subject to the requirements of applicable law,
including our certificate of incorporation and bylaws, the Executive Committee
is responsible for exercising, as necessary, the authority of the board of
directors in the management of our business affairs during intervals between
board meetings. The Executive Committee currently consists of Messrs. Hilliard,
Shea and Turner, with Mr. Turner serving as

126

chairman of the committee. A copy of the Executive Committee's charter is
available on our website at www.conseco.com.

COMPENSATION COMMITTEE INTERLOCKS

None of the members of the Human Resources and Compensation Committee is or
has been one of our officers or employees. None of our executive officers
serves, or served during 2003, as a member of the board of directors or
compensation committee of any entity that has one or more executive officers
serving on our board of directors or Human Resources and Compensation Committee.

DIRECTOR COMPENSATION

Our non-employee directors, other than our non-executive chairman, receive
an annual cash retainer of $70,000. The chairman of the Audit and Enterprise
Risk Committee receives an additional annual cash fee of $30,000, and directors
who serve as chairman of one of our other board committees receive an additional
annual cash fee of $20,000. Each member of the Audit and Enterprise Risk
Committee also receives an annual cash retainer of $30,000. Our non-employee
directors, other than our non-executive chairman, are also entitled to receive
$70,000 in annual equity awards under the Conseco, Inc. 2003 Long-Term Equity
Incentive Plan. Directors are reimbursed for out-of-pocket expenses incurred in
connection with the performance of their responsibilities as directors.

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following Summary Compensation Table sets forth the cash compensation
and certain other compensation paid to each person who served as chief executive
officer and the other five most highly compensated individuals who served as
executive officers of Conseco in 2003 for services rendered during 2003.

LONG-TERM
COMPENSATION AWARDS
----------------------------
NUMBER OF
SECURITIES
ANNUAL COMPENSATION RESTRICTED UNDERLYING
---------------------------------- STOCK OPTIONS/SARS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) OTHER(2) AWARDS(3) (IN SHARES)(4) COMPENSATION(5)
--------------------------- ---- ------ -------- -------- ---------- -------------- ---------------

William J. Shea............... 2003 $1,026,122 $2,000,000 $13,569,000 500,000 $ 68,379
President and 2002 774,038 1,100,000 $87,625 -- -- 3,677
Chief Executive Officer 2001 147,756 250,000 340,000 450,000 92
Edward M. Berube(6)........... 2003 660,000 660,000 -- -- 774
Former President, 2002 660,000 660,000 -- -- 5,500
Bankers Life and Casualty 2001 660,000 693,000 -- 100,000 269,778
Maxwell E. Bublitz(7)......... 2003 497,372 762,375 -- -- 703,031
Former Senior Vice
President, 2002 700,000 450,000 -- -- 6,790
Investments 2001 625,000 450,000 -- 25,000 6,750
Eugene M. Bullis(8)(9)........ 2003 609,135 2,400,000 5,467,500 -- 162,090
Executive Vice President and 2002 243,590 600,000 -- -- --
Chief Financial Officer
Eric R. Johnson(8)(10)........ 2003 505,961 1,600,000 1,640,250 -- 180
President, 40/86 Advisors,
Inc.
John R. Kline(8)(11).......... 2003 275,000 171,875 1,093,500 -- 270
Senior Vice President and 2002 214,571 1,052,500 -- -- 6,310
Chief Accounting Officer

---------------

(1) Bonus amounts shown for 2003 include payments approved by the bankruptcy
court.

(2) Includes for Mr. Shea $68,541 relating to his personal use of company
aircraft in 2002.

127

(3) The amounts shown in this column represent the value of the awards of
shares of restricted stock based on the closing price of the common stock
on the dates of grant.

(4) No stock appreciation rights have been granted.

(5) For 2003, the amounts reported in this column represent the following
amounts paid for the named executive officers: (i) severance payment (Mr.
Bublitz, $650,000); (ii) accrued vacation payment (Mr. Bublitz, $51,538);
(iii) amounts imputed as income for accommodation and business commuting
expenses (Mr. Shea, $65,170 and Mr. Bullis, $130,337); (iv) relocation
expenses (Mr. Bullis, $30,979); (v) individual life insurance premiums (Mr.
Shea, $2,435 and Mr. Bublitz, $1,290); and (vi) group life insurance
premiums (Mr. Shea, $774, Mr. Berube, $774, Mr. Bublitz, $203, Mr. Bullis,
$774, Mr. Johnson, $180 and Mr. Kline, $270).

(6) Mr. Berube's employment was terminated in February 2004.

(7) Mr. Bublitz' employment was terminated in September 2003.

(8) No compensation information is reported for years prior to the year in
which the named executive officer became an executive officer.

(9) Mr. Bullis' employment commenced in July 2002.

(10) Mr. Johnson became an executive officer in September 2003.

(11) Mr. Kline became an executive officer in July 2002.

STOCK OPTIONS

The following table sets forth information concerning the exercise in 2003
of options to purchase common stock by the executive officers named in the
summary compensation table and the unexercised options to purchase common stock
held by these individuals as of December 31, 2003.

AGGREGATED OPTION EXERCISES IN 2003 AND YEAR-END OPTION VALUES

NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS (IN SHARES) AT IN-THE-MONEY OPTIONS AT
NUMBER OF DECEMBER 31, 2003 DECEMBER 31, 2003(1)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- -------- ----------- ------------- ----------- -------------

William J. Shea....... -- -- -- 500,000 -- $2,700,000
Edward M. Berube...... -- -- -- -- -- --
Maxwell E. Bublitz.... -- -- -- -- -- --
Eugene M. Bullis...... -- -- -- -- -- --
Eric R. Johnson....... -- -- -- -- -- --
John R. Kline......... -- -- -- -- -- --

---------------

(1) The value is calculated based on the aggregate amount of the excess of
$21.80, the last sale price of the common stock as reported by the New York
Stock Exchange for the last business day of 2003, over the relevant exercise
prices.

128

The following table sets forth certain information concerning options to
purchase common stock granted in 2003 to the executive officers named in the
summary compensation table.

OPTION GRANTS IN 2003

INDIVIDUAL GRANTS
--------------------------------------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO PER SHARE FOR OPTIONS TERM
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION ------------------------
NAME GRANTED 2003 PRICE DATE 5% 10%
---- ---------- ------------ --------- ---------- -- ---

William J. Shea(1)....... 500,000 100% $16.40 9/29/13 $6,777,686 $15,649,462
Edward M. Berube......... -- -- -- -- -- --
Maxwell E. Bublitz....... -- -- -- -- -- --
Eugene M. Bullis......... -- -- -- -- -- --
Eric R. Johnson.......... -- -- -- -- -- --
John R. Kline............ -- -- -- -- -- --

---------------

(1) The options reported are non-qualified stock options which vest in four
equal annual installments beginning September 29, 2004.

EQUITY COMPENSATION PLAN INFORMATION

The following table sets forth information about our common stock that may
be issued under the Conseco Inc. 2003 Long-Term Equity Incentive Plan as of
December 31, 2003:

NUMBER OF SECURITIES
REMAINING AVAILABLE
FOR FUTURE ISSUANCE
NUMBER OF SECURITIES UNDER EQUITY
TO BE ISSUED WEIGHTED-AVERAGE COMPENSATION PLANS
UPON EXERCISE OF EXERCISE PRICE OF (EXCLUDING SECURITIES
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, REFLECTED
PLAN CATEGORY WARRANTS OR RIGHTS WARRANTS OR RIGHTS IN FIRST COLUMN)
------------- -------------------- -------------------- ---------------------

Equity compensation plans
approved by security
holders...................... 1,000,000 $18.01 7,982,370
Equity compensation plans not
approved by security
holders...................... -- -- --
--------- ------ ---------
Total........................ 1,000,000 $18.01 7,982,370
========= ====== =========

As described immediately below under "Non-Executive Chairman Agreement," we
granted Mr. Hilliard a signing bonus of 98,119 shares of common stock. These
shares were not issued under the Conseco, Inc. 2003 Long-Term Equity Incentive
Plan.

NON-EXECUTIVE CHAIRMAN AGREEMENT

On June 18, 2003, our predecessor entered into an agreement with R. Glenn
Hilliard pursuant to which Mr. Hilliard provided consulting services to our
predecessor during the pendency of the chapter 11 cases and agreed to serve as
our non-executive chairman for an initial term of four years following our
emergence from bankruptcy. This agreement, which became effective upon our
emergence from bankruptcy, was negotiated with our predecessor's creditors
committee and was approved by the bankruptcy court in connection with the
approval of the plan of reorganization. The agreement provides for an annual
director's fee of $1,000,000 for

129

the first two years of the term, and director's fees similar to those paid to
similarly situated non-executive chairmen for the latter two years of the term;
a signing bonus of 98,119 shares of common stock, which were issued shortly
after our emergence from bankruptcy; and a retention bonus of $1,500,000,
payable as soon as practicable following the first anniversary of our emergence
from bankruptcy, and a retention bonus of $750,000, payable as soon as
practicable following the second anniversary of our emergence from bankruptcy.
Under the agreement, we also issued Mr. Hilliard options to purchase 500,000
shares of common stock and 500,000 shares of restricted stock, all of which are
subject to vesting, pursuant to the Conseco, Inc. 2003 Long-Term Equity
Incentive Plan. The agreement also provides that Mr. Hilliard will receive a
grant of options to purchase 0.25% of our then-outstanding common stock and a
restricted stock grant of 0.25% of our then-outstanding common stock, all of
which will be subject to vesting, as soon as practicable following the first
anniversary of our emergence from bankruptcy. After the second anniversary of
our emergence from bankruptcy, the agreement provides that Mr. Hilliard will
receive the same equity-based compensation as other non-employee members of our
board of directors. Under the agreement, Mr. Hilliard is entitled to a gross-up
for excise tax payments under Section 280G of the Internal Revenue Code. Mr.
Hilliard also receives a monthly allowance of $3,000 per month for office space
and related expenses in connection with the maintenance of an office in Atlanta,
Georgia. If Mr. Hilliard's service as non-executive chairman ends as a result of
his death, disability, removal other than for cause or failure to be re-elected
(each a "qualifying termination") before the first anniversary of our emergence
from bankruptcy, he is entitled to receive the prorated portion of his
first-year retention bonus. If Mr. Hilliard's service as non-executive chairman
ends as a result of a qualifying termination after the first anniversary but
before the second anniversary of our emergence from bankruptcy, he is entitled
to receive the prorated portion of his second-year retention bonus. In addition,
upon a qualifying termination, vesting of previously granted options and
restricted stock will occur as if Mr. Hilliard continued to serve through the
next anniversary of our emergence from bankruptcy following his separation. Mr.
Hilliard has agreed not to commence full-time employment with any other company
during the 18-month period following our emergence from bankruptcy, and Mr.
Hilliard is subject to a non-competition clause under the agreement in the event
his service with us terminates prior to the end of the term. On December 30,
2003, Mr. Hilliard, who serves as one of our independent directors, agreed to
irrevocably waive his right to receive compensation with respect to services
rendered by him to our predecessor prior to our emergence from bankruptcy.

EMPLOYMENT AGREEMENTS

CHIEF EXECUTIVE OFFICER. On May 27, 2003, our predecessor entered into an
employment agreement with William J. Shea pursuant to which he would serve as
our President and Chief Executive Officer for an initial term of three years.
This agreement, which became effective upon our emergence from bankruptcy, was
negotiated with our predecessor's creditors committee and was approved by the
bankruptcy court in connection with the approval of the plan of reorganization.
The agreement provides for an annual base salary of $1,000,000, an annual
performance-based bonus with a target of 100% of base salary, and an emergence
bonus of $1,000,000, which was paid shortly after our emergence from bankruptcy.
Under the agreement, we issued Mr. Shea options to purchase 500,000 shares of
common stock and 500,000 shares of restricted stock, all of which are subject to
vesting, pursuant to the Conseco, Inc. 2003 Long-Term Equity Incentive Plan. The
agreement also provides that Mr. Shea will receive a retirement benefit of
$500,000 per year and term life insurance with a face amount of $1,500,000. Mr.
Shea's retirement benefit is guaranteed by our subsidiaries, Conseco Services
LLC and Conseco Life Insurance Company of Texas. Mr. Shea is also entitled to a
gross-up for excise tax payments under Section 280G of the Internal Revenue
Code. If Mr. Shea is terminated by Conseco without just cause or resigns for
good reason, he will be entitled to a payment of $6,250,000 and a pro rata
portion of the greater of his annual bonus for the year in which the separation
occurs or $500,000. In addition, vesting of previously granted options and
restricted stock will occur as if Mr. Shea were employed through the next
anniversary of our emergence from bankruptcy following his separation. Mr. Shea
is subject to a non-competition clause under the agreement in the event his
service with Conseco terminates prior to the end of the term.

CHIEF FINANCIAL OFFICER. We have entered into an employment agreement,
effective September 10, 2003, with Eugene M. Bullis pursuant to which he would
serve as our Executive Vice President and Chief

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Financial Officer for a term of three years. The agreement provides for an
annual base salary of $600,000, an annual performance-based bonus with a target
of 100% of base salary and an emergence bonus of $1,200,000, which was paid
shortly after our emergence from bankruptcy. Mr. Bullis is also entitled to a
future success bonus of $1,200,000 to be paid on the third anniversary of the
agreement, subject to acceleration triggers under which one-third of the
$1,200,000 future success bonus would be paid upon the occurrence of each of:
the first refinancing of our class A preferred stock and senior credit facility,
our obtaining a financial strength rating from A.M. Best of "A-" or higher, and
achievement of agreed upon expense reductions. Under the agreement, we will
provide Mr. Bullis with an initial equity award comprised of options to purchase
250,000 shares of common stock with an exercise price equal to fair market value
on the date of grant and 250,000 shares of restricted stock, all of which will
be subject to vesting, pursuant to the Conseco, Inc. 2003 Long-Term Equity
Incentive Plan. The agreement also provides that Mr. Bullis will receive a
supplemental retirement benefit of $250,000 per year, one-third of which will
vest each anniversary of the agreement. We will provide Mr. Bullis a life
insurance policy with a face value of $600,000 and cover the cost of certain
relocation expenses. If Mr. Bullis is terminated by Conseco without just cause,
the unpaid amount of his supplemental retirement benefit will vest and any
unpaid portion of the $1,200,000 future success bonus will become due and
payable. In addition, vesting of previously granted options and restricted stock
will occur as if Mr. Bullis were employed through the next anniversary of our
emergence from bankruptcy following his separation. In the event of a change of
control of Conseco, all previously granted options and restricted stock will
vest. In the event that Mr. Bullis' employment is terminated 6 months prior to
or within 2 years after a change of control, the unvested amount of his
supplemental retirement benefit will vest and any unpaid portion of the
$1,200,000 future success bonus will become due and payable. In addition, if Mr.
Bullis' employment is terminated 6 months prior to a change of control, all of
his unvested options and restricted stock will vest, retroactive to the date of
termination, upon the occurrence of the change of control. Mr. Bullis is subject
to a non-competition clause under the agreement in the event his service with
Conseco terminates prior to the end of the term.

CHIEF ACCOUNTING OFFICER. Effective July 15, 2002, our predecessor entered
into an employment agreement with John R. Kline pursuant to which he would serve
as our Senior Vice President and Chief Accounting Officer for an initial term of
two years. The agreement provides for an annual salary of at least $275,000,
bonuses at the discretion of Conseco, a signing bonus of $865,000 subject to
repayment to Conseco in a pro rata amount in the event Mr. Kline voluntarily
leaves Conseco during the two-year period, a severance allowance upon
termination of employment and other fringe benefits.

PRESIDENT, 40Y86 ADVISORS, INC. 40Y86 Advisors, Inc., a wholly-owned
investment management subsidiary of Conseco, Inc. that manages the investment
portfolios of our insurance subsidiaries, has entered into an employment
agreement, effective September 10, 2003, with Eric R. Johnson pursuant to which
he agreed to serve as 40Y86 Advisors' President for a term of three years. The
agreement provides for an annual base salary of $500,000, an annual
performance-based bonus with a target of 100% of base salary and a bonus of
$950,000 that was paid in January 2004. Mr. Johnson is also entitled to a future
success bonus of $950,000 to be paid on the third anniversary of the agreement,
subject to acceleration triggers under which one-third of the $950,000 future
success bonus would be paid upon the occurrence of each of: the first
refinancing of our class A preferred stock and senior credit facility, our
obtaining a financial strength rating from A.M. Best of "A-" or higher, and the
achievement of mutually agreed-upon improvements in investment return and
quality. Under the agreement, we will provide Mr. Johnson with an initial equity
award comprised of options to purchase 150,000 shares of common stock with an
exercise price equal to fair market value on the date of grant and 75,000 shares
of restricted stock, all of which will be subject to vesting, pursuant to the
Conseco, Inc. 2003 Long-Term Equity Incentive Plan. We will provide Mr. Johnson
a life insurance policy with a face value of $500,000. If Mr. Johnson is
terminated by 40Y86 Advisors without just cause, any unvested portion of the
$950,000 future success bonus will become due and payable. In the event of a
change of control of Conseco, all previously granted options and restricted
stock will vest. In the event that Mr. Johnson's employment is terminated 6
months prior to or within 2 years after a change of control, any unvested
portion of the $950,000 future success bonus will become due and payable. In
addition, if Mr. Johnson's employment is terminated 6 months prior to a change
of control, all of his unvested options and restricted stock will vest,
retroactive to the date of termination, upon the occurrence of the change of

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control. Mr. Johnson is subject to a non-competition clause under the agreement
in the event his service with 40Y86 Advisors terminates prior to the end of the
term.

CONSECO, INC. 2003 LONG-TERM EQUITY INCENTIVE PLAN

OVERVIEW. As of the effective date of the plan, the bankruptcy court,
pursuant to the confirmation order approving the plan of reorganization,
approved, and our board of directors adopted, the Conseco, Inc. 2003 Long-Term
Equity Incentive Plan. The purpose of the plan is to promote our long-term
growth and profitability by providing selected directors, officers and employees
of Conseco and its subsidiaries, as well as other persons who provide services
to us, with incentives to maximize stockholder value and otherwise contribute to
our success, and enable us to attract, retain and reward the best available
persons for positions of responsibility.

TYPES OF AWARDS. The plan provides for the grant of stock options and
restricted stock to eligible participants.

ELIGIBILITY. Directors, officers and employees of Conseco and its
subsidiaries, as well as other individuals performing significant services for
us, or to whom we have extended an offer of employment, will be eligible to
receive awards under the plan. In each case, the Human Resources and
Compensation Committee of the board of directors will select the actual
participants and determine the amounts and terms of their awards.

SHARE RESERVE/LIMITATIONS. 10,000,000 shares of our common stock are
available for issuance under the plan. Of these 10,000,000 shares, only
3,333,333 may be granted in the form of restricted stock.

ADMINISTRATION. The Human Resources and Compensation Committee of our
board of directors administers the plan. Our board of directors also has the
authority to administer the plan and to take all actions that the Human
Resources and Compensation Committee is otherwise authorized to take under the
plan.

TERMS OF AWARDS. The exercise price of an option issued under the plan may
not be less than 100% of the fair market value of our common stock on the date
the option is granted. The Human Resources and Compensation Committee
determines, in connection with each grant under the plan, when options become
exercisable and when they expire. The Human Resources and Compensation Committee
also determines the vesting periods of restricted stock granted under the plan.

CHANGE IN CONTROL. The Human Resources and Compensation Committee may
provide, in award agreements, for appropriate adjustments to option and
restricted stock awards, including the acceleration of vesting, if a change in
control of Conseco occurs.

AMENDMENT AND TERMINATION. The Human Resources and Compensation Committee
or our board of directors may amend or terminate the plan at any time, as long
as the amendment or termination does not negatively affect any options or
restricted stock that have been previously granted under the plan without the
consent of the holders, but cannot increase the number of shares available for
issuance under the plan, materially modify the requirements for eligibility
under the plan, or materially increase the benefits to participants under the
plan without the approval of stockholders. Unless earlier terminated, the plan
will terminate on September 10, 2013.

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Beginning in 1996, our predecessor adopted stock purchase plans to
encourage direct, long-term ownership of its common stock by directors,
executive officers and certain key employees. Purchases of common stock under
the purchase plans were financed by personal loans made to the participants from
banks. These loans were collateralized by the common stock purchased.
Approximately 170 directors, officers and key employees of our predecessor and
its subsidiaries participated in the purchase plans and purchased an aggregate
of approximately 19.0 million shares of our predecessor's common stock offered
under the purchase plans. Our predecessor guaranteed the loans but had recourse
to the participants if it incurred a loss under the guarantees. As a result of
the reorganization, Conseco acquired the right to collect these loans from the
participants. The only current director or executive officer that had an
outstanding purchase plan loan during 2003 was Mr. Johnson, who had borrowed
$205,903, relating to his purchase of 5,000 shares under the purchase plans. Mr.
Johnson repaid this loan in full in 2003.

In addition, our predecessor provided loans to the participants for the
interest payments payable on the guaranteed bank loans. The largest amount owed
during 2003 by Mr. Johnson on the loan to cover interest was $58,912. Mr.
Johnson repaid his interest payment loan in full in January 2004. The interest
payment loans bore interest at a variable annual rate equal to the lowest annual
rate our predecessor paid under its most recent senior credit facility.

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PRINCIPAL STOCKHOLDERS

The following table sets forth certain information concerning the
beneficial ownership of our common stock as of March 1, 2004 by each person
known to us who beneficially owns more than 5% of the outstanding shares of our
common stock, each of our directors, each of our named executive officers and
all of our directors and executive officers as a group.

SHARES SHARES
BENEFICIALLY OWNED BENEFICIALLY OWNED
PRIOR TO THE OFFERING AFTER THE OFFERING
---------------------- ----------------------
NAME AND ADDRESS NUMBER PERCENTAGE NUMBER PERCENTAGE
---------------- ------ ---------- ------ ----------

FMR Corp(1)................................... 7,040,780 7.0% 7,040,780
Angelo, Gordon & Co., L.P.(2)................. 5,716,487 5.7 5,716,487
R. Glenn Hilliard(3).......................... 598,119 * 598,119 *
William J. Shea............................... 700,000 * 700,000 *
Neal Schneider................................ 5,526 * 5,526 *
Philip R. Roberts............................. 5,526 * 5,526 *
John G. Turner................................ 5,526 * 5,526 *
Michael T. Tokarz............................. 5,526 * 5,526 *
Michael S. Shannon............................ 5,526 * 5,526 *
Eugene M. Bullis.............................. 250,000 * 250,000 *
Eric R. Johnson............................... 75,000 * 75,000 *
John R. Kline................................. 50,000 * 50,000 *
All directors and executive officers as a
group (11 persons)(4)....................... 1,700,749 1.7 1,700,749

---------------

* Less than 1%.

(1) Based solely on the Schedule 13G filed with the SEC on February 17, 2004 by
FMR Corp. The business address of FMR Corp. is 82 Devonshire Street, Boston,
Massachusetts 02019.

(2) Based solely on the Schedule 13G filed with the SEC on September 22, 2003 by
Angelo, Gordon & Co., L.P.; John M. Angelo, in his capacities as general
partner of AG Partners, L.P., the sole general partner of Angelo, Gordon,
and as the chief executive officer of Angelo, Gordon; and Michael L. Gordon,
in his capacities as the other general partner of AG Partners, L.P., the
sole general partner of Angelo, Gordon, and as the operating officer of
Angelo, Gordon. The business address of each of Angelo, Gordon, Mr. Angelo
and Mr. Gordon is 245 Park Avenue, New York, New York 10167.

(3) Includes 98,119 shares held by a charitable foundation, of which Mr.
Hilliard is a trustee. He disclaims beneficial ownership of such shares.

(4) Includes 1,585,000 shares of restricted stock held by directors and
executive officers which has not yet vested.

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[P] DESCRIPTION OF THE MANDATORILY CONVERTIBLE PREFERRED STOCK

The description in this prospectus of the terms of the class B mandatorily
convertible preferred stock is only a summary. The terms of the class B
preferred stock are contained in a certificate of designations that will amend
our amended and restated certificate of incorporation. We have previously filed
with the SEC copies of our amended and restated certificate of incorporation.
See "Where You Can Find More Information." The form of certificate of
designations is filed as an exhibit to the registration statement of which this
prospectus is a part.

GENERAL

Our amended and restated certificate of incorporation authorizes the
issuance of 265,000,000 shares of preferred stock, par value $.01 per share, of
which 34,386,740 shares of class A preferred stock were issued and outstanding
as of December 31, 2003. The class A preferred stock will be redeemed in full
with a portion of the combined net proceeds of this offering of class B
preferred stock and the concurrent offering of common stock. The class B
preferred stock constitutes a new series of our preferred stock. See
"Description of Capital Stock" in this prospectus for a description of our other
classes of capital stock, as well as the series A warrants referred to below.

The class B preferred stock is a single series consisting of
shares of class B preferred stock, or shares of class B preferred
stock if the underwriters exercise their option to purchase additional shares of
class B preferred stock in full in accordance with the procedures set forth in
"Underwriting". The holders of the shares of class B preferred stock will have
no preemptive rights. Upon issuance, all of the shares of class B preferred
stock will be fully paid and non-assessable.

The class B preferred stock will rank:

- junior to all of our and our subsidiaries existing and future debt
obligations;

- junior to any class or series of our capital stock the terms of which
provide that such class or series will rank senior to the class B
preferred stock, which we call senior stock;

- senior to any class or series of our capital stock the terms of which
provide that such class or series will rank junior to the class B
preferred stock;

- senior in right of payment to all of our class A preferred stock and
common stock now outstanding or to be issued in the future; and

- on a parity with any other class or series of our capital stock ranking
pari passu with the class B preferred stock as to the payment of
dividends or the distribution of assets upon dissolution, liquidation or
winding up, which we call parity stock.

We will not be entitled to issue any class or series of our capital stock
the terms of which provide that such class or series will rank senior to the
class B preferred stock without the consent of the holders of at least
two-thirds of the shares of the class B preferred stock. See "-- Voting Rights."

As of the date of this prospectus, we are authorized to issue up to
8,000,000,000 shares of common stock, $.01 par value per share. As of December
31, 2003, 100,115,772 shares of common stock were issued and outstanding. In
addition, as of such date, there were outstanding series A warrants exercisable
for an aggregate of 5,999,977 shares of our common stock at an exercise price of
$27.60 per share, subject to certain anti-dilution provisions. As of December
31, 2003, there were 34,386,740 shares of our class A preferred stock
outstanding, with an aggregate liquidation preference amount of approximately
$887.5 million.

Under Delaware law, we may declare or pay dividends on the class B
preferred stock solely out of legally available assets for the payment of
dividends. Under Delaware law, legally available assets means the amount of our
surplus. If there is no surplus, legally available assets also means, in the
case of a dividend,

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the amount of our net profits for the fiscal year in which the payment occurs
and/or the preceding fiscal year. Our surplus is the amount by which our total
assets exceeds the sum of

- our total liabilities, including our contingent liabilities, and

- the amount of our capital.

When the need to make a determination of legally available assets arises,
the amount of our total assets and total liabilities and the amount of our
capital will be determined by our board of directors in accordance with Delaware
law.

DIVIDENDS

GENERAL

Dividends on the shares of class B preferred stock will be payable
quarterly in cash on , , and of each
year, or the following business day if such day is not a business day, at the
annual rate of $ per share. The initial dividend on the class B preferred
stock, for the first dividend period, assuming the issue date is ,
2004, will be $ per share of class B preferred stock, and will be payable on
, 2004. Each subsequent quarterly dividend on the shares of class B
preferred stock will be $ per share of class B preferred stock.

The amount of dividends payable on each share of class B preferred stock
for each full quarterly period will be computed by dividing the annual dividend
rate by four. The amount of dividends payable for any other period that is
shorter or longer than a full quarterly dividend period will be computed on the
basis of a 360-day year consisting of twelve 30-day months.

A dividend period is the period ending on the day before a dividend payment
date and beginning on the preceding dividend payment date or, if none, the date
of issue. Dividends payable on a dividend payment date will be payable to
holders of record on the , , or , as
the case may be, immediately preceding the relevant dividend payment date, as
fixed for the purpose by our board of directors in advance of payment of the
relevant dividend. The shares of class B preferred stock are entitled to receive
payment of dividends on a parity with any class or series of our capital stock
the terms of which provide that such class or series will rank on a parity with
the class B preferred stock.

We will pay dividends in cash on the class B preferred stock on each
dividend payment date unless the board determines that we do not have legally
available assets for such payment or such dividend payment would result in a
default under our senior credit agreement or in the class B preferred stock
failing to qualify as "Permitted Refinancing Preferred Stock", as defined on the
issue date of the class B preferred stock, for purposes of the senior credit
agreement. "Senior credit agreement" means the credit agreement dated as of
September 10, 2003, among Conseco, Inc., Bank of America, N.A. and the other
financial institutions party thereto, as in effect on the issue date of the
class B preferred stock, as the same may be amended, modified or replaced
following the issue date. The definition of "Permitted Refinancing Preferred
Stock" in the senior credit agreement requires, among other things, that the
preferred stock not require the payment of cash dividends in excess of the
amount that we could have paid in compliance with the coverage ratio under the
senior credit agreement for the four most recent fiscal quarters ending prior to
the payment of any such dividend, determined on a pro forma basis giving effect
to such dividend. Notwithstanding the foregoing, the right of holders of the
class B preferred stock to receive payments of dividends on the class B
preferred stock is subject to the rights of any senior stock and parity stock
issued in accordance with the terms of the class B preferred stock. For the
quarter ended December 31, 2003, we would have been able to pay dividends of up
to $ in accordance with the terms of our senior credit agreement on an as
adjusted basis to give effect to the concurrent offerings of our common stock
and class B preferred stock and the use of proceeds thereof as described under
"Use of Proceeds."

Dividends on the class B preferred stock will be cumulative, whether or not
there are assets legally available for the payment of such dividends. This means
that, if our board of directors does not declare a dividend for any reason, the
dividend will accumulate until declared and paid. Accumulated unpaid dividends

136

will cumulate dividends at the annual rate of % and are payable in the manner
provided above. We will undertake to disclose in our quarterly and annual
reports filed with the SEC the amount of any accumulated and unpaid dividends on
the shares of the class B preferred stock as of the date of such reports,
including any dividends cumulated thereon.

We are not obligated to pay holders of class B preferred stock any dividend
in excess of the full dividends on the shares of class B preferred stock that
are payable as described above.

PAYMENT RESTRICTIONS

Unless all dividends on the class B preferred stock for all past quarterly
dividend periods shall have been paid in full, we will not:

- declare or pay any dividend or make any distribution of assets on any of
our capital stock now or hereafter authorized that ranks junior to the
class B preferred stock as to the payment of dividends or the
distribution of assets upon our liquidation, dissolution or winding up,
including our common stock, which we call junior stock, other than
dividends or distributions in the form of junior stock;

- redeem, purchase or otherwise acquire any junior stock other than class A
preferred stock, except upon conversion or exchange for other junior
stock, or

- redeem, purchase or otherwise acquire any of our capital stock now or
hereafter authorized that ranks equally with the class B preferred stock
as to payment of dividends or the distribution of assets upon our
liquidation, dissolution or winding up, except upon conversion or
exchange for junior stock.

REDEMPTION

The class B preferred stock will not be redeemable.

MANDATORY CONVERSION

Each of the shares of class B preferred stock, unless previously converted,
will automatically convert on , which we call the mandatory conversion
date, into a number of newly issued shares of our common stock equal to the
conversion rate described below.

Subject to the immediately following paragraph, the conversion rate, which
is the number of newly issued shares of our common stock issuable upon
conversion of each share of class B preferred stock on the applicable conversion
date, will, subject to adjustment under certain circumstances as described under
"-- Anti-Dilution Adjustments" below, be as follows:

- If the applicable market value of our common stock is equal to or greater
than $ , which we call the threshold appreciation price, then the
conversion rate will be shares of our common stock per share of
class B preferred stock (the "minimum conversion rate").

- If the applicable market value of our common stock is less than the
threshold appreciation price but greater than $ , which we call the
initial price, the conversion rate will be equal to $ divided by
the applicable market value of our common stock per share of class B
preferred stock.

- If the applicable market value of our common stock is less than or equal
to the initial price, the conversion rate will be shares of our
common stock per share of class B preferred stock (the "maximum
conversion rate").

We refer to the minimum conversion rate and the maximum conversion rate
collectively as the fixed conversion rates.

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Accordingly, assuming that the market price of our common stock on the
mandatory conversion date is the same as the applicable market value, the
aggregate market value of the shares you receive upon conversion will be

- greater than the liquidation preference of the shares of class B
preferred stock if the applicable market value is greater than the
threshold appreciation price,

- equal to the liquidation preference if the applicable market value is
less than or equal to the threshold appreciation price and greater than
or equal to the initial price, and

- less than the liquidation preference if the applicable market value is
less than the initial price.

In addition to the number of newly issued shares of our common stock
issuable upon conversion of each share of class B preferred stock on the
conversion date determined as provided above, holders will receive on the
mandatory conversion date an amount in cash equal to any accrued and unpaid
dividends on the shares of class B preferred stock due on the mandatory
conversion date, whether or not declared prior to that date, provided that we
have legally available assets at such time sufficient to pay such dividend and
paying such dividend in cash would not result in a default under our senior
credit agreement or in the class B preferred stock failing to qualify as
"Permitted Refinancing Preferred Stock", as defined on the issue date of the
class B preferred stock, for purposes of the senior credit agreement. If on the
mandatory conversion date we do not have adequate legally available assets to
pay in cash all or any portion of the accrued and unpaid dividends payable in
cash on such date as provided in this paragraph, or if such payment would result
in a default under our senior credit agreement or result in the class B
preferred stock failing to qualify as "Permitted Refinancing Preferred Stock"
for purposes of the senior credit agreement then, in either such case, with
respect to the portion of such dividends which we are unable to pay in cash, we
shall deliver to the holders a number of common shares per share of class B
preferred stock equal to

- the aggregate amount of such portion per share of class B preferred stock
divided by

- the greater of (A) the applicable market value of our common stock and
(B) $0.15.

We will use our reasonable best efforts to cause any such shares of common stock
delivered in respect of dividends on the mandatory conversion date to be freely
transferable by the recipients thereof, including, if necessary, the filing of a
registration statement in respect of such common shares.

"Applicable market value" means the average of the closing price per share
of our common stock on each of the twenty consecutive trading days ending on the
third trading day immediately preceding the mandatory conversion date. The
initial price is the closing price of our common stock on the New York Stock
Exchange on , 2004. The threshold appreciation price represents an
approximately % appreciation over the initial price.

The closing price of our common stock on any date of determination means
the closing sale price or, if no closing sale price is reported, the last
reported sale price of our common stock on the New York Stock Exchange on that
date. If our common stock is not listed on the New York Stock Exchange on any
date, the closing price of our common stock on any date of determination means
the closing sales price as reported in the composite transactions for the
principal U.S. securities exchange on which our common stock is so listed or
quoted, or, if our common stock is not so listed or quoted on a U.S. national or
regional securities exchange but is quoted on the Nasdaq National Market, as
reported by the Nasdaq National Market, or, if our common stock is not so
reported, the last quoted bid price for our common stock in the over-the-counter
market as reported by the National Quotation Bureau or similar organization, or,
if that bid price is not available, the market price of our common stock on that
date as determined by a nationally recognized independent investment banking
firm retained by us for this purpose.

A trading day is a day on which our common stock:

- is not suspended from trading on any national or regional securities
exchange or association or over-the-counter market at the close of
business; and

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- has traded at least once on the national or regional securities exchange
or association or over-the-counter market that is the primary market for
the trading of our common stock.

CONVERSION

Conversion into common stock will occur on the mandatory conversion date,
unless:

- we have caused the conversion of the shares of class B preferred stock
prior to the mandatory conversion date in the manner described in
"-- Provisional Conversion at Our Option";

- you have converted your shares of class B preferred stock prior to the
mandatory conversion date in the manner described in "-- Conversion at
the Option of the Holder"; or

- we are involved in a merger prior to the mandatory conversion date in
which at least 30% of the consideration for our common stock consists of
cash or cash equivalents, and you have converted your shares of class B
preferred stock through an exercise of the merger early conversion right
as described in "-- Early Conversion upon Cash Merger."

On the applicable conversion date, or as soon as practicable thereafter,
certificates representing our common stock will be issued and delivered to you
or your designee, or direct registered through the Direct Registration System of
the Depository Trust Company in your name or the name of your designee, upon
presentation and surrender of the certificate evidencing the shares of class B
preferred stock, if the shares of class B preferred stock are held in
certificated form.

Prior to the date on which shares of common stock are issued upon
conversion, our common stock underlying the shares of class B preferred stock
will not be deemed to be outstanding for any purpose and you will have no rights
with respect to our common stock, including voting rights, rights to respond to
tender offers and rights to receive any dividends or other distributions on our
common stock, by virtue of holding the class B preferred stock.

PROVISIONAL CONVERSION AT OUR OPTION

Prior to the mandatory conversion date and on or after the first day
immediately following the issue date of the class B preferred stock, we may at
our option cause the conversion of all, but not less than all, of the shares of
class B preferred stock then outstanding into shares of our common stock at the
minimum conversion rate of shares of our common stock for each share of class B
preferred stock, subject to adjustment under certain circumstances as described
under "-- Anti-Dilution Adjustments" below; provided that the closing price per
share of our common stock has exceeded 150% of the threshold appreciation price,
initially $ , subject to anti-dilution adjustments, for at least 20 trading
days within a period of 30 consecutive trading days ending on the trading day
prior to the date that we notify you of the optional conversion. We will provide
each holder of class B preferred stock notice of the option by mail and issue a
press release and publish such information on our website on the World Wide Web.
The date specified in such notice for the optional conversion shall be at least
30 days but no more than 60 days from the date of such notice. We will be able
to cause this conversion only if, in addition to issuing you shares of our
common stock as described above, we pay you in cash

- an amount equal to any accrued and unpaid dividends on your shares of
class B preferred stock, whether or not declared, and

- the present value of all remaining dividend payments on your shares of
class B preferred stock through and including , in each case,
out of legally available assets.

The present value of the remaining dividend payments will be computed using a
discount rate equal to the Treasury Yield. "Treasury Yield" means the yield to
maturity at the time of computation of United States Treasury securities with a
constant maturity, as compiled and published in the most recent Federal Reserve
Statistical Release H.15 (519) that has become publicly available at least two
business days prior to the date fixed for conversion or, if such Statistical
Release is no longer published, any publicly available source for similar market
data, most nearly equal to the then remaining term to , provided,
however, that if the

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then remaining term to is not equal to the constant maturity of a U.S.
Treasury security for which a weekly average yield is given, the Treasury Rate
shall be obtained by linear interpolation, calculated to the nearest one-twelfth
of a year, from the weekly average yields of U.S. Treasury securities for which
such yields are given, except that if the then remaining term to is
less than one year, the weekly average yield on actually traded U.S. Treasury
securities adjusted to a constant maturity of one year shall be used.

CONVERSION AT THE OPTION OF THE HOLDER

The holders of shares of class B preferred stock have the right to convert
them, in whole or in part, at any time prior to the mandatory conversion date
and on or after the first day immediately following the issue date of the class
B preferred stock, into shares of our common stock at the minimum conversion
rate of shares of our common stock for each share of class B preferred
stock, subject to adjustment under certain circumstances as described under
"-- Anti-Dilution Adjustments" below.

Assuming a dividend is declared, holders of shares of class B preferred
stock at the close of business on the record date for the payment of such
dividend will be entitled to receive such dividend on the corresponding dividend
payment date even if optional conversion of the shares of class B preferred
stock occurs between that record date and the corresponding dividend payment
date.

Except as described above, upon any optional conversion of shares of class
B preferred stock, we will make no payment or allowance for unpaid dividends,
whether or not in arrears, on the shares of class B preferred stock, or for
prior dividends or distributions on the shares of our common stock issued upon
conversion.

EARLY CONVERSION UPON CASH MERGER

Prior to the mandatory conversion date, if we are involved in a merger in
which at least 30% of the consideration for our common stock consists of cash or
cash equivalents, which we refer to as a cash merger, then on or after the date
of the cash merger, each holder of shares of class B preferred stock will have
the right to convert their shares of class B preferred stock at the conversion
rate determined as set forth under "-- Mandatory Conversion", calculated by
assuming that the trading day immediately before the cash merger is the
mandatory conversion date. We refer to this right as the "merger early
conversion right." We will provide each of the holders with a notice of the
completion of a cash merger within five business days thereof. The notice will
specify the conversion date, which shall be not less than 20 nor more than 35
days after the date of the notice, on which the merger early conversion will
occur and a date by which each holder's merger early conversion right must be
exercised. The notice will set forth, among other things, the applicable
conversion rate and the amount of the cash, securities and other consideration
receivable by the holder upon conversion. To exercise the merger early
conversion right, a holder must deliver to us, on or before the date specified
in the notice, the certificate evidencing such holder's shares of class B
preferred stock, if the shares of class B preferred stock are held in
certificated form. If a holder exercises the merger early conversion right, we
will deliver to such holder on the merger early conversion date the kind and
amount of securities, cash or other property that such holder would have been
entitled to receive if it had converted its shares of class B preferred stock
immediately before the cash merger at the conversion rate (determined as set
forth under "-- Mandatory Conversion") in effect at such time. If a holder does
not elect to exercise the merger early conversion right, such holder's shares of
class B preferred stock will remain outstanding and subject to mandatory
conversion on the mandatory conversion date.

ANTI-DILUTION ADJUSTMENTS

Each fixed conversion rate and the number of shares of common stock to be
delivered as a result of the conversion described under "-- Mandatory
Conversion", "-- Provisional Conversion at Our Option", "-- Conversion at the
Option of the Holder" and "-- Early Conversion upon Cash Merger" will be
adjusted if the following events occur:

(1) We pay dividends and other distributions on our common stock in
shares of our common stock.

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(2) We issue to all holders of our common stock rights or warrants
entitling them, for a period of up to 45 days, to subscribe for or purchase
our common stock at less than the "current market price," as defined below,
of our common stock.

(3) We subdivide, split or combine our common stock.

(4) We distribute to all holders of our common stock evidences of our
indebtedness, shares of capital stock, securities, cash or property
(excluding any dividend or distribution covered by clauses (1) or (2) above
and, with respect to any dividend or distribution paid exclusively in cash,
excluding any dividend or distribution in connection with our liquidation,
dissolution or termination), in which event each fixed conversion rate will
be multiplied by a fraction,

- the numerator of which is the current market price of our common
stock, and

- the denominator of which is the current market price of our common
stock minus the fair market value, as determined by our board of
directors, except as described in the following paragraph, of the
portion of the assets or evidences of indebtedness, shares,
securities, cash or property so distributed applicable to one share of
common stock.

In the event that we make a distribution to all holders of our common stock
consisting of capital stock of, or similar equity interests in, a
subsidiary or other business unit of ours, each fixed conversion rate will
be adjusted based on the market value of the securities being distributed
relative to the market value of our common stock, in each case based on the
average of the closing sale prices of those securities for the 10 trading
days commencing on and including the fifth trading day after the "ex-date"
for such distribution.

(5) We or any of our subsidiaries successfully completes a tender or
exchange offer for our common stock to the extent that the cash and the
value of any other consideration included in the payment per share of our
common stock exceeds the closing price of our common stock on the trading
day next succeeding the last date on which tenders or exchanges may be made
pursuant to such tender or exchange offer, in which event each fixed
conversion rate will be divided by a fraction,

- the numerator of which shall be equal to (A) the product of (I) the
closing price per share of our common stock on the first trading day
after the date of expiration of the tender or exchange offer
multiplied by (II) the number of shares of common stock outstanding,
including any purchased shares, at such time less (B) the amount of
cash plus the fair market value, as determined by our board of
directors, of the aggregate consideration payable for all the shares
of our common stock we purchased in such tender or exchange offer; and

- the denominator of which will be the product of the number of shares
of our common stock outstanding less any such purchased shares and the
closing price of our common stock on the first trading day after the
date of expiration of the tender or exchange offer.

(6) Someone other than us or one of our subsidiaries makes a payment in
respect of a tender offer or exchange offer in which, as of the closing
date of the offer, our board of directors is not recommending rejection of
the offer, in which event each fixed conversion rate will be multiplied by
a fraction,

- the numerator of which will be the sum of (x) the fair market value,
as determined by our board of directors, of the aggregate
consideration payable to our stockholders based on the acceptance, up
to any maximum specified in the terms of the tender or exchange offer,
of all shares validly tendered or exchanged and not withdrawn as of
the expiration of the offer and (y) the product of the number of
shares of our common stock outstanding less any such purchased shares
and the

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closing price of our common stock on the trading day next succeeding
the expiration of the tender or exchange offer; and

- the denominator of which will be the product of the number of shares
of our common stock outstanding, including any such purchased shares,
and the closing price of our common stock on the trading day next
succeeding the expiration of the tender or exchange offer.

The adjustment referred to in this clause (6) will only be made if:

- the tender offer or exchange offer is for an amount that increases the
offeror's ownership of common stock to more than 25% of the total
shares of common stock outstanding; and

- the cash and value of any other consideration included in the payment
per share of common stock exceeds the closing sale price per share of
common stock on the trading day next succeeding the last date on which
tenders or exchanges may be made pursuant to the tender or exchange
offer.

However, the adjustment referred to in this clause will generally not be
made if as of the closing of the offer, the offering documents disclose a
plan or an intention to cause us to engage in a consolidation or merger or
a sale of all or substantially all of our assets.

The "current market price" is the average of the daily closing prices for
the five consecutive trading days preceding the earlier of the day preceding the
day in question and the day before the "ex-date" with respect to the issuance or
distribution requiring such computation. For purposes of this paragraph, the
term "ex-date," when used with respect to any such issuance or distribution,
means the first date on which our common stock trades on the applicable exchange
or in the applicable market, regular way, without the right to receive such
issuance or distribution.

To the extent that we have a rights plan in effect with respect to our
common stock, upon conversion of any share of class B preferred stock, you will
receive, in addition to the common stock, the rights under the rights plan,
unless, prior to such conversion, the rights have separated from the common
stock, in which case each fixed conversion rate will be adjusted at the time of
separation as if we made a distribution to all holders of our common stock as
described in clause (4) above, subject to readjustment in the event of the
expiration, termination or redemption of such rights.

In the case of certain reclassifications, consolidations, mergers, sales or
transfers of assets or other transactions that cause our common stock to be
converted into the right to receive other securities, cash or property, each
share of class B preferred stock that thereafter remains outstanding would,
without the consent of the holders of the class B preferred stock, become
convertible into such other securities, cash or property instead of our common
stock. In such event, on the applicable conversion date, the conversion rate
then in effect will be applied to the value on the applicable conversion date of
the securities, cash or property a holder of one share of our common stock would
have received in such transaction. Holders have the right to convert their
shares of class B preferred stock early in the event of certain cash mergers as
described under "-- Early Conversion upon Cash Merger."

In addition, we may make such increases in each fixed conversion rate as we
deem advisable for any reason. We may only make such a discretionary adjustment
if we make the same proportionate adjustment to each fixed conversion rate.

In the event of a taxable distribution to holders of shares of our common
stock that results in an adjustment of each fixed conversion rate or an increase
in each fixed conversion rate in our discretion, holders of shares of class B
preferred stock may, in certain circumstances, be deemed to have received a
distribution subject to U.S. federal income tax as a dividend. In addition,
non-U.S. holders of class B preferred stock may, in certain circumstances, be
deemed to have received a distribution subject to U.S. federal withholding tax
requirements. See "U.S. Federal Income Tax Considerations -- Adjustment of
Conversion Rate" in this prospectus.

Adjustments to each fixed conversion rate will be calculated to the nearest
1/10,000th of a share. We will be required, as soon as practicable following the
occurrence of an event that requires or permits an

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adjustment in each fixed conversion rate, to provide written notice to the
holders of class B preferred stock of the occurrence of that event. We will also
be required to deliver a statement setting forth in reasonable detail the method
by which the adjustment to each fixed conversion rate was determined and setting
forth each revised fixed conversion rate.

If an adjustment is made to the fixed conversion rates, an adjustment also
will be made to the threshold appreciation price and the initial price.

FRACTIONAL SHARES

No fractional shares of our common stock will be issued to holders of class
B preferred stock. In lieu of any fractional share otherwise issuable in respect
of the aggregate number of shares of class B preferred stock of any holder that
are converted upon mandatory conversion or any optional conversion, that holder
will be entitled to receive an amount in cash equal to the same fraction of:

- in the case of mandatory conversion, an early conversion at our option or
a merger early conversion, the current market price of a share of common
stock; or

- in the case of an optional conversion by a holder, the closing price per
share of our common stock determined as of the trading day immediately
preceding the effective date of conversion.

COMMON STOCK RIGHTS

Reference is made to the "Description of Capital Stock" for a description
of the rights of holders of common stock to be delivered upon conversion of
class B preferred stock.

LIQUIDATION RIGHTS

In the event of our liquidation, dissolution or winding up, the holders of
class B preferred stock will be entitled to receive out of our assets available
for distribution to shareholders, before any distribution or payment is made on
any junior stock as to the distribution of assets upon our voluntary or
involuntary liquidation, our dissolution or the winding up of our affairs, a
liquidating distribution in the amount of $ per share, plus an amount equal
to the sum of all accrued and unpaid dividends, whether or not declared, for the
then-current dividend period and all prior dividend periods.

For the purposes of the class B preferred stock, none of the following will
constitute a voluntary or involuntary liquidation, dissolution or winding up of
our affairs:

- the sale, lease or conveyance of all or substantially all of our property
or business;

- the consolidation or merger of Conseco, Inc. with or into any other
corporation; or

- the consolidation or merger of any other corporation with or into
Conseco, Inc.

If, upon any voluntary or involuntary liquidation, dissolution or winding
up, the amounts payable with respect to the shares of class B preferred stock
then outstanding are not paid in full as provided above, no distribution may be
made on account of any parity stock unless a pro rata distribution is made on
the class B preferred stock. The holders of the class B preferred stock then
outstanding and the holders of any parity stock then outstanding will share
ratably in any distribution of assets upon such liquidation, dissolution or
winding up. The amount allocable to the class B preferred stock and each series
of parity stock then outstanding will be based on the proportion of their full
respective liquidation preference to the aggregate liquidation preference of the
outstanding shares of each such series.

After the payment to the holders of class B preferred stock of the full
preferential amounts provided above, the holders of class B preferred stock will
have no right or claim to any of our remaining assets.

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VOTING RIGHTS

The holders of the shares of class B preferred stock are not entitled to
any voting rights, except as required by applicable state law, our amended and
restated certificate of incorporation and as described below.

Unless the approval of a greater number of shares of class B preferred
stock is required by law, we will not, without the approval of the holders of at
least two-thirds of the shares of class B preferred stock then outstanding,
voting together as a single class:

- amend, alter or repeal any provisions of our amended and restated
certificate of incorporation or by-laws by way of merger, consolidation
or otherwise, that would affect adversely any right, preference,
privilege or voting power of the class B preferred stock;

- reclassify any of our authorized stock into any stock of any class, or
any obligation or security convertible into or evidencing a right to
purchase such stock, ranking senior to the class B preferred stock;

- issue, authorize or increase the authorized amount of, or issue or
authorize any obligation or security convertible into or evidencing a
right to purchase, stock ranking senior to the class B preferred stock;
provided, that we may issue, authorize or increase the authorized amount
of, or issue or authorize any obligation or security convertible into or
evidencing a right to purchase, stock ranking on a parity with or junior
to the class B preferred stock without the vote of the holders of the
class B preferred stock; or

- voluntarily liquidate, dissolve or wind up our affairs, or sell, lease or
convey, other than by mortgage, all or substantially all of our property
or business, or consolidate or merge with or into any other corporation,
except any such consolidation or merger wherein none of the rights,
preferences, privileges or voting powers of the class B preferred stock
or the holders thereof are adversely affected.

In addition, we will not, without the approval of each holder of shares of
class B preferred stock affected thereby, amend our amended and restated
certificate of incorporation in a manner that:

- adversely changes the dividends payable on the class B preferred stock;

- adversely changes the liquidation preference of the class B preferred
stock; or

- adversely affects the conversion provisions of the class B preferred
stock.

If and whenever six full quarterly dividends, whether or not consecutive,
payable on the class B preferred stock or any parity stock are not paid, the
number of directors constituting our board of directors will be increased by two
and the holders of the class B preferred stock and any parity stock, voting
together as a single class, with such vote being in proportion to the relative
liquidation values of the voting shares, will be entitled to elect those
additional directors. In the event of such a non-payment, any holder of such
preferred stock, including the class B preferred stock, may request that we call
a special meeting of the holders of such preferred stock for the purpose of
electing the additional directors and we must call such meeting within 30 days
of such request. If we fail to call such a meeting within 30 days of such
request, then holders of 10% of such outstanding preferred stock, determined by
liquidation value, including the class B preferred stock, taken as a single
class, can call a meeting. If all accumulated dividends on such preferred stock,
including the class B preferred stock, have been paid in full or set apart for
payment and dividends for the current quarterly dividend period shall have been
paid or set apart for payment, the holders of the class B preferred stock and
such other preferred stock will no longer have the right to vote on directors
and the term of office of each director so elected will terminate and the number
of our directors will, without further action, be reduced by two.

In addition to the requirements set forth above, under Delaware law any
amendment of our amended and restated certificate of incorporation, including
any amendment related solely to the terms of the class B preferred stock, must
be approved by a majority of all of our capital stock, including our common
stock.

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MISCELLANEOUS

We will at all times on and after the first business day immediately
following the issue date of the class B preferred stock reserve and keep
available out of our authorized and unissued common stock, solely for issuance
upon the conversion of the shares of class B preferred stock, that number of
shares of common stock as shall from time to time be issuable upon the
conversion of all the shares of class B preferred stock then outstanding. Any
shares of class B preferred stock converted into our common stock or otherwise
reacquired by us shall resume the status of authorized and unissued shares of
our preferred stock, undesignated as to series, and shall be available for
subsequent issuance.

TRANSFER AGENT, REGISTRAR AND PAYING AGENT

will act as transfer agent, registrar, and paying agent for the
payment of dividends for the class B preferred stock.

TITLE

We, the transfer agent, registrar and paying agent may treat the registered
holder of shares of class B preferred stock as the absolute owner of such shares
of class B preferred stock for the purpose of making payment and settling the
related conversions and for all other purposes.

BOOK-ENTRY, DELIVERY AND FORM

The Depository Trust Company, or DTC, will act as securities depositary for
the class B preferred stock. The shares of class B preferred stock will be
issued only as fully-registered securities registered in the name of Cede & Co.,
the depositary's nominee. One or more fully-registered global security
certificates, representing the total aggregate number of shares of class B
preferred stock, will be issued and deposited with the depositary and will bear
a legend regarding the restrictions on exchanges and registration of transfer
referred to below.

The laws of some jurisdictions require that some purchasers of securities
take physical delivery of securities in definitive form. Those laws may impair
the ability to transfer beneficial interests in shares of class B preferred
stock so long as shares of class B preferred stock are represented by global
security certificates.

The depositary is a limited-purpose trust company organized under the New
York Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Securities
Exchange Act of 1934.

The depositary holds securities that its participants deposit with the
depositary. The depositary also facilitates the settlement among participants of
securities transactions, including transfers and pledges, in deposited
securities through electronic computerized book-entry changes in participants'
accounts, thus eliminating the need for physical movement of securities
certificates. Direct participants include securities brokers and dealers, banks,
trust companies, clearing corporations and certain other organizations. The
depositary is owned by a number of its direct participants and by the New York
Stock Exchange, the American Stock Exchange, Inc. and the National Association
of Securities Dealers, Inc., collectively referred to as participants. Access to
the depositary system is also available to others, including securities brokers
and dealers, bank and trust companies that clear transactions through or
maintain a direct or indirect custodial relationship with a direct participant,
collectively referred to as indirect participants. The rules applicable to the
depositary and its participants are on file with the SEC.

Except as otherwise required by applicable law, no shares of class B
preferred stock represented by global security certificates may be exchanged in
whole or in part for shares of class B preferred stock registered, and no
transfer of global security certificates will be made in whole or in part for
shares of class B preferred stock registered, and no transfer of global security
certificates in whole or in part may be

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registered, in the name of any person other than the depositary or any nominee
of the depositary, unless, however, the depositary has notified us that it is
unwilling or unable to continue as depositary for the global security
certificates, has ceased to be qualified to act or we decide to discontinue the
use of book-entry transfer through the depositary. All of the shares of class B
preferred stock represented by one or more global security certificates or any
portion of them will be registered in those names as the depositary may direct.

As long as the depositary or its nominee is the registered owner of the
global security certificates, the depositary or that nominee will be considered
the sole owner and holder of the global security certificates and all of the
shares of class B preferred stock represented by those certificates for all
purposes under the class B preferred stock. Except in the limited circumstances
referred to above or as otherwise required by applicable law, owners of
beneficial interests in global security certificates will not be entitled to
have the global security certificates or the shares of class B preferred stock
represented by those certificates registered in their names, will not receive or
be entitled to receive physical delivery of certificates representing the shares
of class B preferred stock in exchange and will not be considered to be owners
or holders of the global security certificates or any of the shares of class B
preferred stock represented by those certificates for any purpose under the
class B preferred stock. All payments on the shares of class B preferred stock
represented by the global security certificates and all related transfers and
deliveries of common stock will be made to the depositary or its nominee as
their holder.

Ownership of beneficial interests in the global security certificates will
be limited to participants or persons that may hold beneficial interests through
institutions that have accounts with the depositary or its nominee. Ownership of
beneficial interests in global security certificates will be shown only on, and
the transfer of those ownership interests will be effected only through, records
maintained by the depositary or its nominee with respect to participants'
interests or by the participant with respect to interests of persons held by the
participants on their behalf.

Procedures for conversion on the conversion date or upon early conversion
will be governed by arrangements among the depositary, participants and persons
that may hold beneficial interests through participants designed to permit the
settlement without the physical movement of certificates. Payments, transfers,
deliveries, exchanges and other matters relating to beneficial interests in
global security certificates may be subject to various policies and procedures
adopted by the depositary from time to time.

Neither we nor any of our agents will have any responsibility or liability
for any aspect of the depositary's or any participant's records relating to, or
for payments made on account of, beneficial interests in global security
certificates, or for maintaining, supervising or reviewing any of the
depositary's records or any participant's records relating to those beneficial
ownership interests.

The information in this section concerning the depositary and its
book-entry system has been obtained from sources that we believe to be reliable,
but we do not take responsibility for its accuracy.

REPLACEMENT OF CLASS B PREFERRED STOCK CERTIFICATES

If physical certificates are issued, we will replace any mutilated
certificate at your expense upon surrender of that certificate to the transfer
agent. We will replace certificates that become destroyed or lost at your
expense upon delivery to us and the transfer agent of satisfactory evidence that
the certificate has been destroyed or lost, together with any indemnity that may
be required by the transfer agent and us.

We, however, are not required to issue any certificates representing shares
of class B preferred stock on or after the applicable conversion date. In place
of the delivery of a replacement certificate following the applicable conversion
date, the transfer agent, upon delivery of the evidence and indemnity described
above, will deliver the shares of our common stock issuable pursuant to the
terms of the class B preferred stock formerly evidenced by the certificate.

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[P] U.S. FEDERAL INCOME TAX CONSIDERATIONS

The following is a summary of U.S. federal income tax considerations
relating to the purchase, ownership and disposition of our class B preferred
stock and the common stock acquired upon the conversion thereof, but does not
purport to be a complete analysis of all the potential tax considerations. This
summary is based on the provisions of the Internal Revenue Code of 1986, as
amended, the Treasury regulations promulgated or proposed thereunder, judicial
authority, published administrative positions of the Internal Revenue Service
and other applicable authorities, all as in effect on the date of this
prospectus. These authorities may be changed, possibly on a retroactive basis,
so as to result in U.S. federal income tax consequences different from those set
forth below. We have not sought any ruling from the IRS with respect to the
statements made and the conclusions reached in the following summary. This
summary deals only with holders that will hold our class B preferred stock or
any of our common stock received upon conversion thereof as a "capital asset"
within the meaning of Section 1221 of the Code. This summary does not purport to
deal with all aspects of U.S. federal income taxation that might be relevant to
particular holders in light of their personal investment circumstances or
status, nor does it address tax considerations applicable to investors that may
be subject to special tax rules, such as banks, certain financial institutions,
tax-exempt organizations, S corporations, partnerships or other pass-through
entities, insurance companies, broker-dealers, dealers or traders in securities
or currencies, expatriates subject to Code Section 877 and taxpayers subject to
the alternative minimum tax. This summary also does not discuss our class B
preferred stock held as part of a hedge, straddle, synthetic security or
conversion transaction, or situations in which the "functional currency" of a
U.S. holder is not the U.S. dollar. Moreover, the effect of any applicable
estate, state, local or non-U.S. tax laws is not discussed.

THE FOLLOWING DISCUSSION IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT A
SUBSTITUTE FOR CAREFUL TAX PLANNING AND ADVICE. INVESTORS CONSIDERING THE
PURCHASE OF OUR CLASS B PREFERRED STOCK SHOULD CONSULT THEIR OWN TAX ADVISORS
WITH RESPECT TO THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR
PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER THE ESTATE
TAX LAWS OR THE LAWS OF ANY STATE, LOCAL OR NON-U.S. TAXING JURISDICTION OR
UNDER ANY APPLICABLE TAX TREATY.

The term "U.S. holder" means a holder of our class B preferred stock or
common stock received upon conversion thereof that is, for U.S. federal income
tax purposes:

(1) a citizen or resident of the United States;

(2) a corporation or other entity taxable as a corporation for U.S.
federal income tax purposes, created or organized under the laws of the
United States or of any political subdivision thereof;

(3) an estate, the income of which is subject to U.S. federal income
taxation regardless of source; or

(4) a trust, if (i) a court within the United States is able to
exercise primary jurisdiction over its administration and one or more U.S.
persons has the authority to control all of its substantial decisions, or
(ii) in the case of a trust that was treated as a domestic trust under the
law in effect before 1997, a valid election is in place under applicable
Treasury regulations to treat such trust as a domestic trust.

The term "non-U.S. holder" means a holder of our class B preferred stock or
common stock received upon conversion thereof that is neither a U.S. holder nor
a partnership for U.S. federal income tax purposes.

A holder of our class B preferred stock or common stock received upon
conversion thereof that is a partnership for U.S. federal income tax purposes is
not subject to income tax on income or gain derived from our class B preferred
stock or common stock received upon conversion thereof. A partner of the
partnership may be subject to tax on such income under rules similar to the
rules for U.S. holders or non-U.S. holders depending on whether (i) the partner
is a U.S. or a non-U.S. person, and (ii) the partnership is or is not engaged in
a U.S. trade or business to which the income or gain is effectively connected.
If you are a partner of a partnership holding our class B preferred stock, you
should consult your tax advisor regarding the tax

147

consequences of the ownership and disposition of our class B preferred stock or
common stock received upon conversion thereof.

U.S. HOLDERS

DISTRIBUTIONS. Distributions of cash on our class B preferred stock or
common stock received upon conversion thereof will be taxed as dividends to the
extent they are paid out of our current or accumulated earnings and profits as
calculated for U.S. federal income tax purposes. To the extent that the amount
of any distribution paid on our class B preferred stock or common stock received
upon conversion thereof exceeds our current and accumulated earnings and
profits, it will be treated first as a tax-free return of the U.S. holder's
adjusted tax basis in the class B preferred stock or common stock received upon
conversion thereof and thereafter as capital gain, which will be long-term
capital gain if the holder has held such stock for more than one year.

Dividends received by non-corporate U.S. holders on or before December 31,
2008 will be "qualified dividends," taxed at the rates applicable to long-term
capital gains if (i) the holder has held the stock for more than 60 days during
the 120-day period beginning 60 days before the ex-dividend date and ending 60
days after the ex-dividend date and (ii) the holder is not obligated to make
related payments with respect to those positions in substantially similar or
related property. Non-corporate U.S. holders should consult their own tax
advisors regarding their eligibility for such lower tax rates.

Corporate U.S. holders of our class B preferred stock or common stock
received upon conversion thereof generally should be eligible for the 70%
dividends received deduction with respect to the portion of any distribution
which is taxed as a dividend for U.S. federal income tax purposes. However,
corporate U.S. holders should consider the possible effect on them of:

- Section 1059 of the Code, which reduces a corporate shareholder's basis
in stock and may result in the recognition of gain by the nontaxed
portion of an "extraordinary dividend" where such holder has not held the
stock for more than two years before the dividend announcement date,

- Section 246A of the Code, which reduces the dividends received deduction
allowed to a corporate shareholder that has incurred indebtedness that is
"directly attributable" to an investment in "portfolio stock,"

- Section 246(b) of the Code, which limits the amount of the dividends
received deduction to a percentage of the shareholder's taxable income,
and

- Section 246(c) of the Code, which, among other things, disallows the
dividends received deduction in respect of any dividend on a share of
stock that has been held for 45 days or less during the 90-day period
beginning on the date which is 45 days before the ex-dividend date with
respect to such dividend, or held 90 days or less during a 180-day
period, in the case of certain preferred dividends attributable to
periods aggregating in excess of 366 days. For this purpose, any period
in which a holder of our class B preferred stock or common stock received
upon conversion thereof has an option to sell, is under a contractual
obligation to sell, has made and not closed a short sale of, or has
granted certain options to buy substantially identical stock or
securities, or holds one or more other positions with respect to
substantially similar or related property that diminish the risk of loss
of holding such stock, will not be counted toward the 45-day (or 90-day)
holding period.

Corporate U.S. holders should also consider the effect of the corporate
alternative minimum tax, which imposes a maximum tax rate of 20% on a
corporation's alternative minimum taxable income for the tax year and which is
calculated without regard to the dividends received deduction. Corporate U.S.
holders should consult their own tax advisors regarding the availability of, and
limitations on, the dividends received deduction.

SALE OR EXCHANGE. A U.S. holder generally will recognize gain or loss on
the sale or other taxable disposition of our class B preferred stock or common
stock received upon conversion thereof equal to the difference between the
amount of cash and the fair market value of property received and the U.S.
Holder's

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adjusted tax basis in the stock sold or exchanged. This gain or loss will be
capital gain or loss and will be long-term capital gain or loss if the stock was
held for a period exceeding one year. The deductibility of capital losses is
subject to limitations; U.S. holders should consult their tax advisors regarding
these limitations.

CONVERSION. A U.S. holder generally will not recognize gain or loss upon
the conversion of our class B preferred stock into shares of our common stock
except with respect to any cash the U.S. holder receives in lieu of fractional
shares of our common stock. However, a U.S. holder may recognize dividend income
to the extent that it receives cash or common stock in respect of dividends in
arrears on the class B preferred stock at the time of its conversion into common
stock.

A U.S. holder that receives cash in lieu of fractional shares will be
treated as receiving a "dividend" subject to tax in accordance with the
principles described above in "Distributions" if that receipt of cash has "the
effect of the distribution of a dividend" for U.S. federal income tax purposes.
In that case, the portion of the U.S. holder's tax basis, reduced for amounts,
if any, treated as a return of capital, in the class B preferred stock allocable
to the fractional share will be transferred to the common stock received upon
conversion, subject, in the case of a corporate holder, to reduction or possible
gain recognition under Section 1059 of the Code. If the receipt of cash in lieu
of fractional shares does not have "the effect of the distribution of a
dividend," a U.S. holder that receives cash in lieu of fractional shares will
recognize gain or loss in an amount equal to the difference between the portion
of that holder's tax basis in our class B preferred stock allocable to the
fractional share and the cash payment received in lieu thereof. That gain or
loss would be capital gain and would be long-term capital gain if the holding
period for that stock exceeded one year.

If there is a Provisional Conversion, the income tax consequences regarding
the receipt of the additional cash amount equal to the present value of all
remaining dividend payments are unclear. The additional cash amount could be
treated as a distribution, subject to tax as a dividend to the extent of our
current and accumulated earnings and profits, as described above under
"Distributions." Alternatively, the additional cash amount could be treated as
an additional payment received in connection with the conversion of our class B
preferred stock into common stock, in which case any gain realized by a holder
on that conversion, that is the excess, if any, of the amount of cash and the
fair market value of common stock received over the adjusted tax basis of class
B preferred stock relinquished, would be recognized to the extent of the
additional cash amount. This recognized gain would be subject to tax as a
dividend, to the extent of our current and accumulated earnings and profits, if
the receipt of the additional cash amount is treated as the distribution of a
dividend under section 302(a) of the Code. Gain recognized in excess of a
holder's ratable share of our current and accumulated earnings and profits would
be capital gain. If the receipt of the additional cash amount is not treated as
the distribution of a dividend under section 302(a) of the Code, the gain
recognized by a U.S. holder would be capital gain and would be long-term capital
gain if the holding period exceeded one year.

To determine if the receipt of the cash paid in lieu of fractional shares
or of the additional cash amount is treated as the distribution of a dividend
for U.S. federal income tax purposes, a U.S. holder would be treated as if it
received solely our common stock upon conversion of our class B preferred stock
and then exchanged the extra shares of common stock for the cash received. The
receipt of the additional cash will be treated as the distribution of a dividend
under section 302(a) of the Code unless the deemed redemption of the common
stock meets one of the tests set forth in section 302(b) of the Code. Under one
of these tests, the deemed purchase of the extra shares by us for cash will be
treated as "not essentially equivalent to a dividend" if the reduction in the
U.S. holder's proportionate interest in Conseco as a result of the purchase
constitutes a "meaningful reduction" given the U.S. holder's particular
circumstances. The IRS has indicated in a published revenue ruling that even a
small reduction in the percentage interest of a stockholder whose relative stock
interest in a publicly held corporation is minimal (for example, an interest of
less than 1%) and who exercises no control over corporate affairs should
constitute a "meaningful reduction." Prospective investors are advised to
consult their tax advisors to determine the tax treatment of the receipt of cash
paid in lieu of fractional shares or of the additional cash.

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The tax basis of the common stock received upon conversion of shares of our
class B preferred stock will generally be equal to the tax basis of the shares
of class B preferred stock so converted and the holding period of the common
stock will generally include the holding period of the shares of class B
preferred stock converted. The tax basis of any common stock received on
conversion and treated as a dividend will be equal to its fair market value on
the date of the distribution and the holding period of that common stock will
commence on the day after its receipt.

Holders of our class B preferred stock may not receive fewer shares of
common stock upon conversion than the number they would receive by application
of the minimum conversion rate nor more shares than the number they would
receive by application of the maximum conversion rate, depending on when the
shares are converted and, if converted on the mandatory conversion date, the
market value of our common stock on that date. A holder's right to receive a
greater number of shares of our common stock at the mandatory conversion date
than they would receive by application of the minimum conversion rate could be
viewed as a constructive distribution of stock to such holder under section 305
of the Code, which, if so treated, would be subject to tax as a dividend to the
extent of our current and accumulated earnings and profits. While the matter is
not free from doubt due to a lack of authority directly on point, such a right
on the part of a holder of our class B preferred stock should not result in a
constructive distribution of stock. Accordingly, absent a change of law or a
differing interpretation by the IRS after the date hereof, Conseco will
consistently treat the receipt of shares in a number greater than the number the
shareholder would receive using the minimum conversion rate as other than a
dividend. Prospective investors are urged to consult their tax advisors to
determine the tax treatment of the additional common stock.

ADJUSTMENT OF CONVERSION RATE. U.S. holders of our class B preferred stock
may be deemed to have received a constructive distribution of stock that is
subject to tax as a dividend when the conversion rate is adjusted as a result of
anti-dilution adjustments. An adjustment to the conversion rate made pursuant to
a bona fide reasonable adjustment formula that has the effect of preventing the
dilution of the interest of the U.S. holders generally will not be considered to
result in a constructive distribution of stock. Some of the possible adjustments
provided for in our class B preferred stock, such as to take account of
distributions of cash or property with respect to other classes of stock, will
not qualify as being pursuant to a bona fide reasonable adjustment formula. If
such a non-qualifying adjustment were made or if adjustments were not made in
some cases, U.S. holders of our class B preferred stock would be deemed to have
received a taxable stock distribution. In that case, the amount of the taxable
stock distribution to be included in income would be the fair market value of
the additional common stock to which U.S. holders of our class B preferred stock
would be entitled by reason of the increase in such holders' proportionate
equity interest in Conseco to the extent of our current and accumulated earnings
and profits. The taxable stock distribution would be taxable in the same manner
as a cash distribution of an equal amount would be taxed as explained above in
"Dividends". U.S. holders of our class B preferred stock would be required to
include their allocable share of that constructive dividend in gross income but
would not receive any cash related to it.

INFORMATION REPORTING AND BACKUP WITHHOLDING. In general, a payor must
report information to the IRS with respect to payments of dividends on, and
payments of the proceeds of the sale or redemption of, our class B preferred
stock to non-corporate U.S. holders. The payor, which may be us or an
intermediate payor, will be required to withhold backup withholding tax,
currently at a rate of 28%, if:

- the payee fails to furnish a taxpayer identification number to the payor
or establish an exemption from backup withholding,

- the IRS notifies the payor that the taxpayer identification number
furnished by the payee is incorrect,

- there has been a notified payee underreporting described in Section
3406(c) of the Code or

- the payee has not certified under penalties of perjury that it has
furnished a correct taxpayer identification number and that the IRS has
not notified the payee that it is subject to backup withholding under the
Code.

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Any amounts withheld under the backup withholding rules from a payment to a U.S.
holder will be allowed as a credit against that holder's U.S. federal income tax
liability and may entitle the holder to a refund, provided that the required
information is furnished to the IRS on a timely basis.

NON-U.S. HOLDERS

DIVIDENDS. In general, distributions treated as dividends, possibly
including certain constructive distributions described above in "Adjustment of
Conversion Rate" received by non-U.S. holders on our class B preferred stock or
common stock received upon conversion thereof will be subject to a 30% U.S.
federal withholding tax, subject to reduction if the holder is eligible for the
benefits of an applicable income tax treaty. Dividends that are effectively
connected with such non-U.S. holder's conduct of a trade or business within the
United States, or if a tax treaty applies, dividends that are attributable to a
U.S. permanent establishment of such holder are generally subject to U.S.
federal income tax on a net income basis and are exempt from the 30% withholding
tax, assuming compliance with the certification requirements described below).
Any such effectively connected dividends received by a non-U.S. holder that is a
corporation may also, in some cases, be subject to an additional "branch profits
tax" at a 30% rate or such lower rate as may be applicable under an income tax
treaty.

For purposes of obtaining a reduced rate of withholding under an income tax
treaty or to establish an exemption from withholding on effectively connected
dividends, a non-U.S. holder should provide a properly executed Form W-8BEN, if
the holder is claiming the benefits of an income tax treaty, or Form W-8ECI, if
the dividends are effectively connected with a trade or business in the United
States, or suitable substitute form to us or our paying agent.

SALE OR OTHER TAXABLE DISPOSITION. Non-U.S. holders will generally not be
subject to U.S. federal income taxes, including withholding taxes, on gain
recognized on a disposition of our class B preferred stock or common stock
received upon conversion thereof as long as:

- the gain is not effectively connected with the conduct by the non-U.S.
holder of a trade or business within the United States (or if a tax
treaty applies, attributable to a U.S. permanent establishment maintained
by such non-U.S. holder);

- in the case of a non-U.S. holder who is an individual, such non-U.S.
holder is not present in the United States for 183 days or more in the
taxable year of disposition and certain other requirements are met; and

- we are not and have not been a "United States real property holding
corporation," within the meaning of section 897 of the Code for U.S.
federal income tax purposes at any time within the shorter of the
five-year period preceding such disposition or such non-U.S. holder's
holding period. We do not believe that we are currently, nor do we
anticipate becoming, a United States real property holding corporation.

CONVERSION. Non-U.S. holders generally will not recognize any gain or loss
for United States federal income tax purposes upon the conversion of our class B
preferred stock into our common stock. However, a non-U.S. holder receiving cash
in lieu of fractional shares, receiving additional cash amounts pursuant to a
Provisional Conversion or receiving dividends in arrears in the form of cash or
additional common stock on conversion will be treated as described in the
discussion above pertaining to U.S. holders with respect to those distributions.
If any of those distributions are treated as dividends for U.S. federal income
tax purposes, we must withhold 30% of such distribution as described above in
"Non-U.S. Holders -- Dividends" unless we receive the forms and certifications
described in that section. If we withhold tax from any payment of such amounts
and such payment were determined not to be subject to tax in the United States,
a non-U.S. holder would be entitled to a refund of any tax withheld.

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BACKUP WITHHOLDING AND INFORMATION REPORTING. United States information
reporting requirements and backup withholding tax generally will not apply to
payments made on, and payments of the proceeds of the sale or redemption of, our
class B preferred stock or common stock received upon conversion thereof to a
non-U.S. holder if the statement described in "Non-U.S. holders -- Dividends" is
duly provided by that holder, provided that the payor does not have actual
knowledge or reason to know that the holder is a U.S. person. If a non-U.S.
holder holds our class B preferred stock through a financial institution or
other agent acting on the holder's behalf, the holder may be required to provide
appropriate certifications to the agent. The holder's agent will then generally
be required to provide appropriate certifications to us.

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DESCRIPTION OF CAPITAL STOCK

GENERAL

The following description of our capital stock is a summary. It summarizes
only those aspects of our capital stock that we believe will be most important
to your decision to invest in our capital stock. You should keep in mind,
however, that it is our certificate of incorporation, including any certificates
of designations that are a part of our certificate of incorporation, and our
bylaws and Delaware law, and not this summary, which define your rights as a
securityholder. There may be other provisions in these documents that are also
important to you. You should read these documents for a full description of the
terms of our capital stock. Our certificate of incorporation, including any
certificates of designations, and our bylaws are filed as exhibits to the
registration statement of which this prospectus forms a part.

Our certificate of incorporation authorizes us to issue 8,000,000,000
shares of common stock, par value $0.01 per share, and 265,000,000 shares of
preferred stock, par value $0.01 per share. As of December 31, 2003 there were
100,115,749 shares of our common stock outstanding and 34,386,740 shares of our
class A preferred stock outstanding. We have also issued series A warrants to
purchase shares of our common stock. The series A warrants are exercisable for
an aggregate of 6,000,000 shares of our common stock at an exercise price of
$27.60 per share, subject to certain anti-dilution provisions, and expire on
September 10, 2008.

CLASS A PREFERRED STOCK

In connection with our predecessor's plan of reorganization, we issued
34,386,740 shares of class A preferred stock to holders of our predecessor's
senior bank debt.

RANKING. The shares of class A preferred stock have preference over the
shares of common stock with respect to payment of dividends and the distribution
of assets in the event of our liquidation, winding up or dissolution.

LIQUIDATION. Upon our liquidation, dissolution or winding up, no
distribution shall be made:

- to the holders of stock ranking junior to the class A preferred stock
unless, prior thereto, the holders of class A preferred stock shall have
received a liquidation preference of $25.00 per share, plus an amount
equal to accrued but unpaid dividends thereon, whether or not declared,
through the date of such payment, or

- to the holders of stock ranking on a parity with the class A preferred
stock, except distributions made ratably on the class A preferred stock
and all other such parity stock in proportion to the total amounts to
which the holders of all such shares are entitled upon such liquidation,
dissolution or winding up.

DIVIDENDS. Holders of shares of class A preferred stock are initially
entitled to receive dividends at a rate per annum equal to 10.5% of the
liquidation preference per share. The dividend rate per annum increases to 11%
on September 10, 2005, the second anniversary of the issue date. These dividends
are cumulative and are payable semi-annually in additional shares of class A
preferred stock until the later of:

- September 10, 2005, the second anniversary of the issue date; and

- the next fiscal quarter after the date that our principal insurance
subsidiaries achieve at least an "A-" category financial strength rating
by A.M. Best.

Thereafter, such dividends are payable semi-annually in cash out of funds
legally available for the payment of dividends or, at our option, in additional
shares of class A preferred stock.

We may not declare, pay or set apart for payment any dividends or other
distributions on parity securities or junior securities or make any payment on
account of, or set apart for payment money for a sinking or other similar fund
for, the purchase, redemption or other retirement of any parity securities or
junior securities, and will not permit any corporation or other entity we
directly or indirectly control to
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purchase or redeem any parity securities or junior securities, unless full
cumulative dividends have been paid on the class A preferred stock.

VOTING. Holders of class A preferred stock vote as a class on each of the
following events or transactions, unless all of the class A preferred stock is
redeemed concurrently with such event or transaction:

- sale of all or substantially all of our assets;

- our merger or consolidation;

- our liquidation or dissolution;

- issuances of subsidiary preferred stock to a third party;

- issuances of debt, subject to exceptions, or senior equity securities
unless the proceeds are used to pay down debt under our senior credit
facility;

- issuances of pari passu securities unless the proceeds are used to pay
down debt under our senior credit facility or to redeem class A preferred
stock, subject to limitations;

- amendments to our certificate of incorporation or class A preferred stock
certificate of designations that adversely change the rights or
preferences of the class A preferred stock; and

- redemptions of and payment of cash dividends on pari passu and junior
securities, subject to an exception for any bona fide plan for the
benefit of our directors, officers or employees.

Following the occurrence of a "trigger event," the holders of class A
preferred stock will have the right to vote on an as-converted basis on all
corporate matters on which holders of common stock have the right to vote and
will have the right to call a shareholders meeting for the election of directors
and nominate directors to serve on the board of directors, subject to our right
to cure certain trigger events until September 10, 2004, the first anniversary
of the issue date. For purposes of the preceding sentence, a "trigger event" is
defined to include:

- reduction in certain A.M. Best ratings;

- any payment default under our senior credit facility;

- any material adverse regulatory event affecting any material insurance
subsidiary;

- conversion rights under the class A preferred stock becoming exercisable;

- failure to comply with the minimum EBITDA requirements as set forth on
Schedule A to the class A preferred stock certificate of designations;
and

- failure to maintain certain minimum risk-based capital ratios as set
forth on Schedules B and C to the class A preferred stock certificate of
designations.

REDEMPTION. Subject to the limitations contained in our senior credit
facility, the availability of cash, and the limitations under applicable
insurance laws, if any, we may, in our sole discretion, redeem any or all of the
shares of class A preferred stock, at a redemption price equal to the
liquidation preference, plus all accrued but unpaid dividends, whether or not
declared, for each share as of the redemption date. In the event of a redemption
of only a portion of the then outstanding shares of class A preferred stock, we
will effect such redemption on a pro rata basis according to the number of
shares held by each holder of class A preferred stock, provided that we may
redeem any or all such shares held by any holder of fewer than 100 shares or
shares held by any holder who would hold less than 100 shares as a result of
such redemption, as we may determine.

CONVERSION. Shares of class A preferred stock are convertible by holders
at any time on or after September 30, 2005 into shares of common stock at a
conversion price of $20.35 per share, subject to adjustment upon the occurrence
of certain events.

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EXCHANGE. On and after September 10, 2013, the tenth anniversary of the
effective date of our predecessor's plan of reorganization, shares of class A
preferred stock are exchangeable, at the holder's option, into shares of common
stock having a fair market value on the exchange date equal to the liquidation
preference, plus accrued and unpaid dividends, whether declared or not, subject
to a maximum number of shares of common stock issuable upon exchange. At our
option, we may pay cash in an amount equal to the liquidation preference, plus
accrued and unpaid dividends, whether declared or not, in lieu of delivering
shares of common stock upon exchange.

OTHER. Our class A preferred stock currently is quoted on the
Over-the-Counter Bulletin Board under the symbol "CNSJP." Wachovia Bank, N.A. is
the transfer agent and registrar for our class A preferred stock.

[C] CLASS B PREFERRED STOCK

Concurrently with this offering of common stock, we plan to issue
shares of class B preferred stock.

RANKING. The shares of class B preferred stock have preference over the
shares of common stock with respect to the payment of dividends and the
distribution of assets in the event of our liquidation, winding up or
dissolution.

LIQUIDATION. Upon our liquidation, dissolution or winding up, no
distribution shall be made:

- to the holders of stock ranking junior to the class B preferred stock
unless, prior thereto, the holders of class B preferred stock shall have
received a liquidation preference of $ per share, plus an amount
equal to accrued but unpaid dividends thereon, whether or not declared,
through the date of such payment, or

- to the holders of stock ranking on a parity with the class B preferred
stock, unless such distributions are made ratably on the class B
preferred stock in proportion to the total amounts to which the holders
of all such shares are entitled upon such liquidation, dissolution or
winding up.

DIVIDENDS. Holders of shares of class B preferred stock are entitled to
receive dividends in cash at a rate per annum equal to $ per share. The
initial dividend on the class B preferred stock, for the first dividend period,
assuming the issue date is , 2004, will be $ per share of class B
preferred stock. Each subsequent quarterly dividend on the shares of class B
preferred stock will be $ per share of class B preferred stock. Accumulated
unpaid dividends will cumulate dividends at the annual rate of %.

We are obligated to pay each dividend on the class B preferred stock in
cash unless prohibited by the terms of our senior credit facility or applicable
law. The shares of class B preferred stock are entitled to receive payment of
dividends pro rata with any other class or series of our capital stock the terms
of which provide that such class or series will rank on a parity with the class
B preferred stock.

PAYMENT RESTRICTIONS. Unless all dividends on the class B preferred stock
have been paid in cash, we may not declare or pay any dividend or make any
distribution of assets on any of our junior securities now or hereafter
authorized, including our common stock, which we call junior stock, other than
dividends or distributions in the form of junior stock. We may not redeem,
purchase or otherwise acquire any junior stock, other than the class A preferred
stock, except upon conversion or exchange for other junior stock, or redeem,
purchase or otherwise acquire any parity securities now or hereafter authorized,
except upon conversion or exchange for junior stock.

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VOTING. Unless the approval of a greater number of shares of class B
preferred stock is required by law, we will not, without the approval of the
holders of at least two-thirds of the shares of class B preferred stock then
outstanding, voting together as a single class:

- sell, lease or convey all or substantially all of our assets;

- merge or consolidate with or into any other corporation, except any such
consolidation or merger wherein none of the rights, preferences,
privileges or voting powers of the class B preferred stock or the holders
thereof are adversely affected;

- voluntarily liquidate, dissolve or wind up our affairs;

In addition, we will not, without the approval of each holder of shares of
class B preferred stock affected thereby, amend our amended and restated
certificate of incorporation in a manner that:

- adversely changes the dividends payable on the class B preferred stock;

- adversely changes the liquidation preference of the class B preferred
stock; or

- adversely affects the conversion provisions of the class B preferred
stock.

If and whenever six full quarterly dividends, whether or not consecutive,
payable on the class B preferred stock or any parity stock are not paid, the
number of directors constituting our board of directors will be increased by two
and the holders of our class B preferred stock and any parity stock, voting
together as a single class, will be entitled to elect those additional
directors. In the event of such a non-payment, any holder of such preferred
stock, including the class B preferred stock, may request that we call a special
meeting of the holders of such preferred stock for the purpose of electing the
additional directors and we must call such meeting within 30 days of such
request. If we fail to call such a meeting within 30 days of such request, then
holders of 10% of such outstanding preferred stock, including the class B
preferred stock, taken as a single class, can call a meeting. If all accumulated
dividends on such preferred stock, including the class B preferred stock, have
been paid in full or set apart for payment and dividends for the current
quarterly dividend period shall have been paid or set apart for payment, the
holders of the class B preferred stock and such other preferred stock will no
longer have the right to vote on directors and the term of office of each
director so elected will terminate and the number of our directors will, without
further action, be reduced by two.

REDEMPTION. The class B preferred stock is not redeemable.

MANDATORY CONVERSION. Each of the shares of class B preferred stock,
unless previously converted, will automatically convert on ,
, which we call the mandatory conversion date, into a number of newly
issued shares of our common stock at the conversion rate described below:

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In addition to the number of newly issued shares of our common stock
issuable upon conversion of each share of class B preferred stock on the
mandatory conversion date as provided above, holders will receive on the
mandatory conversion date a payment in cash equal to all accumulated and unpaid
dividends on the class B preferred stock, to the extent not prohibited by the
terms of our senior credit facility or applicable law. In the event that
applicable law or our senior credit facility prohibit us from paying such
accumulated and unpaid dividends in cash on the mandatory conversion date, we
are obligated to deliver shares of our common stock in respect of such unpaid
dividends.

PROVISIONAL CONVERSION. Prior to the mandatory conversion date and on or
after the day following the issue date of the class B preferred stock, we may at
our option cause the conversion of all, but not less than all, of the shares of
class B preferred stock then outstanding into shares of our common stock at the
minimum conversion rate of shares of our common stock for each share of
class B preferred stock; provided that the closing price per share of our common
stock has exceeded 150% of the threshold appreciation price, initially $ ,
for at least 20 trading days within a period of 30 consecutive trading days
ending on the trading day prior to the date that we give notice of the optional
conversion. We will be able to cause this conversion only if, in addition to
issuing holders shares of our common stock as described above, we pay in cash
(1) an amount equal to any accrued and unpaid dividends on the shares of class B
preferred stock, whether or not declared, and (2) the present value of all
remaining dividend payments on the shares of class B preferred stock through and
including , in each case, out of legally available assets.

CONVERSION AT THE OPTION OF THE HOLDER. The holders of shares of class B
preferred stock have the right to convert them, in whole or in part, at any time
prior to the mandatory conversion date and on or after the day following the
issue date of the class B preferred stock, into shares of our common stock at
the minimum conversion rate of shares of our common stock for each share of
class B preferred stock.

MANDATORY CONVERSION UPON CASH MERGER. Prior to the mandatory conversion
date, if we are involved in a merger in which at least 30% of the consideration
for our common stock consists of cash or cash equivalents, which we refer to as
a cash merger, then on or after the date of the cash merger, each holder of
shares of class B preferred stock will have the right to convert their shares of
class B preferred stock at the applicable mandatory conversion rate assuming
that the trading day immediately before the cash merger is the mandatory
conversion date.

ANTI-DILUTION ADJUSTMENTS. The formula for determining the conversion rate
on the mandatory conversion date and the number of shares of our common stock to
be delivered upon an early conversion event may be adjusted if certain events
occur, including if:

- we pay dividends and other distributions on our common stock in shares of
our common stock;

- we issue to all holders of our common stock rights or warrants entitling
them, for a period of up to 45 days, to subscribe for or purchase our
common stock at less than the current market price of our common stock;

- we subdivide, split or combine our common stock;

- we distribute to all holders of our common stock evidences of our
indebtedness, shares of capital stock, securities, cash or property;

- we or any of our subsidiaries successfully completes a tender or exchange
offer for our common stock to the extent that the cash and the value of
any other consideration included in the payment per share of our common
stock exceeds the closing price of our common stock on the trading day
next

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succeeding the last date on which tenders or exchanges may be made
pursuant to such tender or exchange offer; or

- someone other than us or one of our subsidiaries makes a payment in
respect of a tender offer or exchange offer in which, as of the closing
date of the offer, our board of directors is not recommending rejection
of the offer, the tender offer or exchange offer is for an amount that
increases the offeror's ownership of common stock to more than 25% of the
total shares of common stock outstanding, and the cash and value of any
other consideration included in the payment per share of common stock
exceeds the closing sale price per share of common stock on the trading
day next succeeding the last date on which tenders or exchanges may be
made pursuant to the tender or exchange offer.

OTHER. On or after the day immediately following the issue date of the
class B preferred stock, we will at all times reserve and keep available out of
our authorized and unissued common stock, solely for issuance upon the
conversion of the shares of class B preferred stock, that number of shares of
common stock as shall from time to time be issuable upon the conversion of all
the shares of class B preferred stock then outstanding.

COMMON STOCK

Our common stock is listed on the New York Stock Exchange under the symbol
"CNO." Wachovia Bank, N.A. is the transfer agent and registrar for our common
stock. All outstanding shares of common stock are, and the shares of common
stock issued under this prospectus will be, fully paid and non-assessable.

DIVIDENDS. Except as otherwise provided by Delaware law or our certificate
of incorporation, and subject to all rights and preferences of holders of any
outstanding shares of preferred stock, holders of common stock share ratably in
all dividends and distributions, whether upon liquidation or dissolution or
otherwise.

VOTING. Except as otherwise provided by Delaware law or our certificate of
incorporation and subject to the rights of holders of any outstanding shares of
preferred stock, all of the voting power of our stockholders is vested in the
holders of our common stock, and each holder of common stock has one vote for
each share held by such holder on all matters voted upon by our stockholders.

Notwithstanding the voting rights granted to holders of common stock and
preferred stock in our certificate of incorporation or in any certificate of
designations relating to any preferred stock, the voting rights of any common
stock or preferred stock held by any holder as of September 10, 2003, the
effective date of our predecessor's plan of reorganization, is automatically
reduced with respect to any particular stockholder vote or action by written
consent to the extent, if any, required to avoid a presumption of control
arising from the beneficial ownership of voting securities under the insurance
statutes or regulations applicable to any of our direct or indirect insurance
company subsidiaries, provided that no such reduction reduces such voting
rights, without such holder's written consent:

- by more than the minimum amount required to reduce such voting rights to
less than 10% of the aggregate voting rights of all stock entitled to
vote or consent with respect to such vote or action, or

- to the extent that such holder's acquisition of control or deemed
acquisition of control of our direct and indirect insurance company
subsidiaries has been approved under, or is exempt from the approval
requirements of, all insurance statutes and regulations applicable to our
direct and indirect insurance company subsidiaries.

BOARD OF DIRECTORS; CLASSIFICATION OF DIRECTORS. Except as otherwise
provided in our certificate of incorporation or any duly authorized certificate
of designations of any series of preferred stock, directors are elected by a
plurality of the votes of the shares present in person or represented by proxy
at the meeting of the stockholders at which directors are elected and entitled
to vote in the election of directors or pursuant to a valid written consent in
lieu of a meeting.

158

At each annual meeting of stockholders, directors are elected to hold
office until the expiration of the term for which they are elected, and until
their successors have been duly elected and qualified; except that if any such
election is not so held, such election will take place at a stockholders'
meeting called and held in accordance with Delaware law. Our directors are
initially divided into two classes as nearly equal in size as is practicable,
designated Class I and Class II. The term of office of the initial Class I
directors expires at the next succeeding annual meeting of stockholders and the
term of office of the initial Class II directors expires at the second
succeeding annual meeting of stockholders. Other than the term of office of the
initial Class II directors, the term of office of each Class of directors
expires at the next succeeding annual meeting of stockholders. The initial Class
I and Class II directors are those directors elected in connection with the
adoption of our certificate of incorporation on September 10, 2003. At each
annual meeting of stockholders, directors to replace those of a class or classes
whose terms expire at such annual meeting will be elected to hold office until
the next succeeding annual meeting and until their respective successors have
been duly elected and qualified. If the number of directors is changed, any
newly created directorships or decrease in directorships will be so apportioned
among the classes as to make all classes as nearly equal in number as
practicable.

OTHER. Our common stock is not convertible into, or exchangeable for, any
other class or series of our capital stock. Holders of common stock have no
preemptive or other rights to subscribe for or purchase additional securities of
Conseco. Shares of common stock are not subject to calls or assessments.

SERIES A WARRANTS

In connection with our predecessor's plan of reorganization, we issued
series A warrants to purchase shares of our common stock to holders of our
predecessor's trust preferred securities.

GENERAL. Each series A warrant entitles its holder to purchase one share
of common stock at a price of $27.60 per share. The series A warrants are
exercisable for an aggregate of 6,000,000 shares of common stock and expire on
September 10, 2008.

ANTIDILUTION PROVISIONS. If we:

- pay a dividend or make a distribution on our common stock in shares of
common stock,

- subdivide the outstanding shares of common stock into a greater number of
shares,

- combine the outstanding shares of our common stock into a smaller number
of shares, or

- issue by reclassification of our common stock any shares of our capital
stock,

then the exercise price of the series A warrants in effect immediately
prior to such action will be proportionately adjusted so that the holder of any
series A warrant thereafter exercised may receive the aggregate number and kind
of shares of our capital stock that such holder would have owned immediately
following such action if such series A warrant had been exercised immediately
prior to such action.

The exercise price of the series A warrants will be adjusted if we issue
any rights, options, warrants or other securities exercisable for, or
convertible into, shares of our common stock to all holders of our common stock
entitling them to purchase shares of common stock at a price per share less than
the market price per share on the record date applicable to such distribution.

No adjustment in the exercise price will be made unless the adjustment
would require an increase or decrease of at least 1% in the exercise price. Any
adjustments that are not made will be carried forward and taken into account in
any subsequent adjustment.

Upon each adjustment of the exercise price, each series A warrant
outstanding prior to the making of the adjustment in the exercise price will
thereafter evidence the right to receive upon payment of the adjusted exercise
price a number of shares of common stock proportionately adjusted to reflect the
adjustment in the exercise price.

159

REORGANIZATION, MERGER OR SALE. If we consolidate or merge with or into,
or transfer or lease all or substantially all our assets to, any person, upon
consummation of such transaction the series A warrants shall automatically
become exercisable for the kind and amount of securities, cash or other assets
which the holder of a series A warrant would have owned immediately after the
consolidation, merger, transfer or lease if the holder had exercised the series
A warrant immediately before the effective date of the transaction.

ANTI-TAKEOVER PROVISIONS OF OUR CERTIFICATE OF INCORPORATION AND BYLAWS

Our certificate of incorporation and bylaws contain certain provisions that
are intended to enhance the likelihood of continuity and stability in the
composition of our board of directors and which may have the effect of delaying,
deferring or preventing our future takeover or change of control unless the
takeover or change of control is approved by our board of directors. These
provisions may also render the removal of the current board of directors and of
management more difficult. These provisions include:

- advance notice requirements for stockholder proposals and nominations;

- removal of directors only for cause prior to the second annual meeting of
stockholders following September 10, 2003, the effective date of our
predecessor's plan of reorganization; and

- the authority of our board of directors to issue, without stockholder
approval, certain series of preferred stock with such terms as the board
of directors may determine.

ANTI-TAKEOVER EFFECTS OF CERTAIN INSURANCE LAWS

The insurance laws and regulations of the jurisdictions in which we or our
insurance subsidiaries do business may impede or delay a business combination
involving us. State insurance holding company laws and regulations applicable to
us generally provide that no person may acquire control of a company, and thus
indirect control of its insurance subsidiaries, unless the person has provided
required information to, and the acquisition is approved or not disapproved by,
the appropriate insurance regulatory authorities. Generally, any person
acquiring beneficial ownership of 10% or more of the voting power of our capital
stock would be presumed to have acquired control, unless the appropriate
insurance regulatory authorities upon advance application determine otherwise.

REGISTRATION RIGHTS AGREEMENTS

In connection with the plan of reorganization, we entered into registration
rights agreements with certain of our predecessor's creditors who, upon our
emergence from bankruptcy:

- would be holders of 5% or more of a class of our equity securities,

- notified us in writing that they are members of a "group", as defined
under the Exchange Act, owning 5% or more of a class of our equity
securities, or

- notified us in writing that they are "underwriters" within the meaning of
Section 1145 of the Bankruptcy Code.

The registration rights agreements cover our common stock and class A
preferred stock, and contain similar material terms and conditions. The
following summary of our registration rights agreements describes some of their
more important provisions. The complete agreements, which contain precise legal
terms and conditions and other information summarized here, are filed as
exhibits to the registration statement of which this prospectus forms a part.

SHELF REGISTRATION. As soon as practicable after our emergence from
bankruptcy, but in no event later than December 9, 2003, we were required to
file a shelf registration statement covering the resale of
160

registrable securities of the holders, and use reasonable best efforts to cause
the registration statement to be declared effective by the SEC as soon as
practicable. Subject to customary blackouts referred to below, we are required
to use reasonable best efforts to keep the shelf registration statement
continuously effective until the earliest of:

- the date the registrable securities could be sold free of any volume
limitations imposed by Rule 144,

- the date all holders of registrable securities have disposed of all
registrable securities, or

- three years from the date on which the shelf registration statement was
declared effective.

All parties to the registration rights agreements declined to be included
in any shelf registration statement. Accordingly, we did not file this shelf
registration statement.

DEMAND REGISTRATION. Any holder of registrable securities may make a
written request for registration under the Securities Act of all or part of its
registrable securities. We, however, are not obligated to effect:

- any demand registration, except for the first demand registration under
the agreement, unless the aggregate market value of the registrable
securities covered by the request is at least $50,000,000,

- more than one demand registration in any six-month period,

- more than three demand registrations requested by any holder of
registrable securities,

- any demand registration within three months of a previous registration in
which holders of registrable securities were given piggy-back rights and
in which there was no reduction in the number of registrable securities
included in such registration, or

- any demand registration by holders of common stock that would be
inconsistent with certain registration rights of holders of class A
preferred stock.

The registration rights agreements contain customary provisions limiting,
under certain circumstances, the number of registrable securities a holder may
offer in a demand registration.

PIGGY-BACK REGISTRATION. If we file a registration statement covering our
equity securities for our own account or for the account of any holder of our
equity securities, other than registration statements on Form S-4 or Form S-8,
we must offer to holders of registrable securities the opportunity to register
such number of shares of registrable securities as such holder may request. The
registration rights agreements contain customary provisions limiting, under
certain circumstances, the number of registrable securities a holder may offer
in a piggy-back registration.

EXPENSES. We have agreed to pay all customary costs and expenses
associated with each registration, including for each registration statement
prepared, the reasonable fees and expenses of one firm of attorneys for the
holders of registrable securities.

SHARES ELIGIBLE FOR FUTURE SALE

Based on the confirmation order we received from the bankruptcy court on
September 9, 2003, we relied on section 1145(a)(1) of the Bankruptcy Code to
exempt the offer and sale of our common stock, class A preferred stock and
series A warrants, which may have been deemed to have occurred through the
solicitation of acceptances of the plan of reorganization, from the registration
requirements of the Securities Act.

Section 1145(a)(1) exempts the offer or sale of securities pursuant to a
plan of reorganization from the registration requirements of the Securities Act
and from registration under state securities laws if the following conditions
are satisfied:

- the securities are issued by a company that is a "debtor" under the
Bankruptcy Code, or its affiliates or successors, under a plan of
reorganization;

161

- the recipients of the securities hold a claim against, an interest in, or
a claim for an administrative expense against the debtor; and

- the securities are issued in exchange for the recipients' claim against
or interest in the debtor, or principally in such exchange and partly for
cash or property.

In general, offers and sales of securities made in reliance on the exemption
afforded under section 1145(a)(1) of the Bankruptcy Code are deemed to be made
in a public offering, so that the recipients thereof, other than "underwriters,"
are free to resell such securities without registration under the Securities
Act. In addition, such securities generally may be resold without registration
under state securities laws pursuant to various exemptions provided by the
respective laws of the several states. However, recipients of common stock,
class A preferred stock and series A warrants issued under the plan of
reorganization were advised to consult with their own legal counsel as to the
availability of any such exemption from registration under state law in any
given instance and as to any applicable requirements or conditions to such
availability. It was a condition to consummation of the plan of reorganization
that the section 1145 exemption apply to the common stock, class A preferred
stock and series A warrants.

The exemption from the registration requirements of the Securities Act for
resales provided by section 1145(a) was not available to a recipient of common
stock, class A preferred stock or series A warrants if such individual or entity
was deemed to be an "underwriter" with respect to such securities, as that term
is defined in section 1145(b) of the Bankruptcy Code. Section 1145(b) of the
Bankruptcy Code defines the term "underwriter" as one who

- purchases a claim with a view toward distribution of any security to be
received in exchange for the claim,

- offers to sell securities issued under a plan for the holders of such
securities,

- offers to buy securities issued under a plan from persons receiving such
securities, if the offer to buy is made with a view toward distribution,
or

- is a control person of the issuer of the securities.

Notwithstanding the foregoing, statutory underwriters may be able to sell
securities without registration pursuant to Rule 144 under the Securities Act,
subject, however, to any resale limitations contained therein. In effect, this
permits the resale of securities, including those securities received by
statutory underwriters pursuant to a chapter 11 plan, subject to applicable
volume limitations, notice and manner of sale requirements and certain other
conditions. Recipients of common stock, class A preferred stock and series A
warrants under the plan of reorganization who believed they may have been
statutory underwriters as defined by section 1145 of the Bankruptcy Code were
advised to consult with their own counsel as to the availability of the
exemption provided by Rule 144. These holders also have rights to have their
shares registered for resale under the Securities Act. See "Description of
Capital Stock -- Registration Rights" above.

On September 16, 2003, we filed a registration statement on Form S-8 under
the Securities Act to register all of the shares of common stock issued and
available for future issuance under the Conseco, Inc. 2003 Long-Term Equity
Incentive Plan. The registration statement, which covers 10,000,000 shares,
became effective upon filing. Accordingly, shares of restricted stock and shares
issued upon the exercise of stock options granted under the Conseco, Inc. 2003
Long-Term Equity Incentive Plan are eligible for resale in the public market
from time to time, subject to vesting restrictions.

[C] After the completion of this offering, [P] After the completion of the
concurrent common stock offering, we will have shares of common stock
outstanding. This number includes million shares that we are selling
[C] in this offering [P] in the concurrent common stock offering, which may be
resold immediately in the public market. In addition, shares of our outstanding
class A preferred stock are convertible by holders at any time on or after
September 30, 2005 into shares of our common stock. The class A preferred stock
is convertible into an aggregate amount of approximately 43.6 million shares of
our common stock, determined as of December 31, 2003. This amount will increase
as the holders receive dividends, payable in additional shares of class A
preferred stock, at a rate per annum equal to 10.5% of the liquidation
preference per share, semi-annually until September 10, 2005, when the rate
increases to 11%, and may increase as a result of anti-dilution adjustments.
Holders of our outstanding series A warrants are entitled

162

to purchase one share of our common stock at a price of $27.60 per share for
each such warrant. The series A warrants are exercisable for an aggregate of up
to 6.0 million shares of common stock and expire on September 10, 2008. [C]
Holders of our class B preferred stock issued in the concurrent offering will be
entitled at their option at any time on or after the first day after issuance of
the class B preferred stock to convert the shares of class B preferred stock
into an aggregate of shares of our common stock and, under specified
circumstances, such shares could be convertible into an aggregate of up to
shares of our common stock. In the event that we are unable to pay all
accumulated dividends on the class B preferred stock in cash on the mandatory
conversion date pursuant to the terms thereof, we are obligated to deliver
additional shares of our common stock in respect of such unpaid dividends. [P]
Holders of our class B preferred stock issued in this offering will be entitled
at their option at any time on or after the first day after issuance of the
class B preferred stock to convert the shares of class B preferred stock into an
aggregate of shares of our common stock and, under specified
circumstances, such shares could be convertible into an aggregate of up to
shares of our common stock. In the event that we are unable to pay all
accumulated dividends on the class B preferred stock in cash on the mandatory
conversion date pursuant to the terms thereof, we are obligated to deliver
additional shares of our common stock in respect of such unpaid dividends. See
"Description of Capital Stock" [P] and "Description of the Mandatorily
Convertible Preferred Stock."

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[C] UNDERWRITING

We and Goldman, Sachs & Co., Morgan Stanley & Co. Incorporated and the
underwriters named below have entered into an underwriting agreement with
respect to the shares being offered. Subject to certain conditions, each
underwriter has severally agreed to purchase the number of shares indicated in
the following table. Goldman, Sachs & Co. and Morgan Stanley & Co. Incorporated
are the representatives of the underwriters.

Number of
Underwriters Shares
------------ ---------

Goldman, Sachs & Co. .......................................
Morgan Stanley & Co. Incorporated...........................
Banc of America Securities LLC..............................
Credit Suisse First Boston LLC..............................
Deutsche Bank Securities Inc. ..............................
J.P. Morgan Securities Inc. ................................
Lazard Freres & Co. LLC.....................................
Total.....................................................

The underwriters are committed to take and pay for all of the shares being
offered, if any are taken, other than the shares covered by the option described
below unless and until this option is exercised.

If the underwriters sell more shares than the total number set forth in the
table above, the underwriters have an option to buy up to an additional
shares from us to cover such sales. They may exercise that option for 30 days.
If any shares are purchased pursuant to this option, the underwriters will
severally purchase shares in approximately the same proportion as set forth in
the table above.

The following table shows the per share and total underwriting discounts
and commissions to be paid by us to the underwriters. Such amounts are shown
assuming both no exercise and full exercise of the underwriters' option to
purchase additional shares.

Paid by Conseco
---------------------------
No Exercise Full Exercise
----------- -------------

Per Share................................................ $ $
Total.................................................... $ $

Shares sold by the underwriters to the public will initially be offered at
the initial price to public set forth on the cover of this prospectus. Any
shares sold by the underwriters to securities dealers may be sold at a discount
of up to $ per share from the initial price to public. Any such securities
dealers may resell any shares purchased from the underwriters to other brokers
or dealers at a discount of up to $ per share from the initial price to
public. If all the shares are not sold at the initial price to public, the
underwriters may change the offering price and the other selling terms.

We and our executive officers and directors have agreed with the
underwriters not to dispose of or hedge any of our common stock or securities
convertible into or exchangeable for shares of common stock during the period
from the date of this prospectus continuing through the date days after the
date of this prospectus, except with the prior written consent of Goldman, Sachs
& Co. and Morgan Stanley & Co. Incorporated. This agreement does not apply to
any transfers (i) under our existing employee benefit plans or (ii) by gift or
for estate planning purposes, so long as in each case the transferee agrees to
be bound in writing by the restrictions for the remaining period, (iii) to any
trust for the direct or indirect benefit of the undersigned or the immediate
family of the undersigned or (iv) by us in the concurrent offering of our class
B preferred stock.

In connection with this offering, the underwriters may purchase and sell
shares of our common stock in the open market. These transactions may include
short sales, stabilizing transactions and purchases to cover positions created
by short sales. Short sales involve the sale by the underwriters of a greater
number of shares

164

than they are required to purchase in this offering. "Covered" short sales are
sales made in an amount not greater than the underwriters' option to purchase
additional shares from us in the offering. The underwriters may close out any
covered short position by either exercising their option to purchase additional
shares or purchasing shares in the open market. In determining the source of
shares to close out the covered short position, the underwriters will consider,
among other things, the price of shares available for purchase in the open
market as compared to the price at which they purchase additional shares
pursuant to the option granted to them. "Naked" short sales are any sales in
excess of such option. The underwriters must close out any naked short position
by purchasing shares in the open market. A naked short position is more likely
to be created if the underwriters are concerned that there may be downward
pressure on the price of our common stock in the open market after pricing that
could adversely affect investors who purchase in the offering. Stabilizing
transactions consist of various bids for or purchases of common stock made by
the underwriters in the open market prior to the completion of the offering.

The underwriters may also impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the underwriter effecting a stabilizing
transaction has repurchased shares sold by or for the account of such
underwriter in stabilizing or short covering transactions.

Purchases to cover a short position and stabilizing transactions may have
the effect of preventing or retarding a decline in the market price of our
stock, and together with the imposition of the penalty bid, may stabilize,
maintain or otherwise affect the market price of our common stock. As a result,
the price of our common stock may be higher than the price that otherwise might
exist in the open market. If these activities are commenced, they may be
discontinued at any time. These transactions may be effected on the New York
Stock Exchange, in the over-the-counter market or otherwise.

Each underwriter has represented, warranted and agreed that: (i) it will
have not offered or sold and, prior to the expiry of a period of six months from
the closing date, will not offer or sell any shares to persons in the United
Kingdom except to persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or agent) for the
purposes of their businesses or otherwise in circumstances which have not
resulted and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulations 1995; (ii) it
has only communicated or caused to be communicated and will only communicate or
cause to be communicated any invitation or inducement to engage in investment
activity (within the meaning of section 21 of the Financial Services and Markets
Act 2000) received by it in connection with the issue or sale of any shares in
circumstances in which section 21(1) of the FSMA does not apply to the issuer;
and (iii) it has complied and will comply with all applicable provisions of the
FSMA with respect to anything done by it in relation to the shares in, from or
otherwise involving the United Kingdom.

The shares may not be offered or sold, transferred or delivered, as part of
their initial distribution or at any time thereafter, directly or indirectly, to
any individual or legal entity in the Netherlands other than to individuals or
legal entities who or which trade or invest in securities in the conduct of
their profession or trade, which includes banks, securities intermediaries,
insurance companies, pension funds, other institutional investors and commercial
enterprises which, as an ancillary activity, regularly trade or invest in
securities.

The shares may not be offered or sold by means of any document other than
to persons whose ordinary business is to buy or sell shares or debentures,
whether as principal or agent, or in circumstances which do not constitute an
offer to the public within the meaning of the Companies Ordinance (Cap. 32) of
Hong Kong, and no advertisement, invitation or document relating to the shares
may be issued, whether in Hong Kong or elsewhere, which is directed at, or the
contents of which are likely to be accessed or read by, the public in Hong Kong
(except if permitted to do so under the securities laws of Hong Kong) other than
with respect to shares which are or are intended to be disposed of only to
persons outside Hong Kong or only to "professional investors" within the meaning
of the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules
made thereunder.

The prospectus has not been and will not be registered as a prospectus with
the Monetary Authority of Singapore. Accordingly, each underwriter acknowledges
that the shares may not be offered or sold, or be
165

made the subject of an invitation for subscription or purchase, nor may the
prospectus and any other document or material in connection with the offer or
sale, or invitation for subscription or purchase, of the shares be circulated or
distributed, whether directly or indirectly, to the public or any member of the
public in Singapore other than (i) to an institutional investor or other person
specified in Section 274 of the Securities and Futures Act, Chapter 289 of
Singapore (the "Securities and Futures Act") (ii) to a sophisticated investor,
and in accordance with the conditions, specified in Section 275 of the
Securities and Futures Act, or (iii) otherwise pursuant to, and in accordance
with the conditions of, any other applicable provision of the Securities and
Futures Act.

Each underwriter has acknowledged and agreed that the shares have not been
registered under the Securities and Exchange Law of Japan and are not being
offered or sold and may not be offered or sold, directly or indirectly, in Japan
or to or for the account of any resident of Japan, except (i) pursuant to an
exemption from the registration requirements of the Securities and Exchange Law
of Japan and (ii) in compliance with any other applicable requirements of
Japanese law.

We estimate that our total out-of-pocket expenses of the offering,
excluding underwriting discounts and commissions, will be approximately $ .

A prospectus in electronic format will be made available on the websites
maintained by one or more of the lead managers of this offering and may also be
made available on websites maintained by other underwriters. The underwriters
may agree to allocate a number of shares to underwriters for sale to their
online brokerage account holders. Internet distributions will be allocated by
the lead managers to underwriters that may make Internet distributions on the
same basis as other allocations.

We have agreed to indemnify the several underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.

Certain of the underwriters and their respective affiliates have, from time
to time, performed, and may in the future perform, various financial advisory
and investment banking services for us, for which they received or will receive
customary fees and expenses. Goldman, Sachs & Co., Morgan Stanley & Co.
Incorporated, Banc of America Securities LLC, Credit Suisse First Boston LLC,
J.P. Morgan Securities Inc. and Lazard Freres & Co. LLC are acting as
underwriters in the concurrent public offering of our class B preferred stock.
Furthermore, Banc of America Securities LLC and J.P. Morgan Securities Inc. are
joint lead arrangers and joint bookrunners under our existing credit facility.
Goldman, Sachs & Co. owns approximately 3.6 percent shares of our outstanding
common stock, approximately 2.0 percent of our outstanding class A preferred
stock and approximately 1.4 percent of our outstanding series A warrants.

166

[P] UNDERWRITING

We and Goldman, Sachs & Co., Morgan Stanley & Co. Incorporated and the
underwriters named below have entered into an underwriting agreement with
respect to the shares of class B preferred stock being offered. The closing of
the offering of the class B preferred stock is conditioned upon the closing of
the concurrent offering of common stock. Subject to certain conditions, each
underwriter has severally agreed to purchase the number of shares indicated in
the following table. Goldman, Sachs & Co. and Morgan Stanley & Co. Incorporated
are the representatives of the underwriters.

Number of
Underwriters Shares
------------ ---------

Goldman, Sachs & Co.........................................
Morgan Stanley & Co. Incorporated...........................
J.P. Morgan Securities Inc. ................................
Banc of America Securities LLC..............................
Credit Suisse First Boston LLC..............................
Lazard Freres & Co. LLC.....................................
Total.....................................................

If the underwriters sell more shares than the total number set forth in the
table above, the underwriters have an option to buy up to an additional
shares from us to cover such sales. They may exercise that option for
30 days. If any shares are purchased pursuant to this option, the underwriters
will severally purchase shares in approximately the same proportion as set forth
in the table above.

Paid by Conseco
---------------------------
No Exercise Full Exercise
----------- -------------

Per Share................................................ $ $
Total.................................................... $ $

In connection with this offering, the underwriters may purchase and sell
shares of our class B preferred stock in the open market. These transactions may
include short sales, stabilizing transactions and purchases to cover positions
created by short sales. Short sales involve the sale by the underwriters of a
greater number of

167

shares than they are required to purchase in this offering. "Covered" short
sales are sales made in an amount not greater than the underwriters' option to
purchase additional shares from us in the offering. The underwriters may close
out any covered short position by either their option to purchase additional
shares or purchasing shares in the open market. In determining the source of
shares to close out the covered short position, the underwriters will consider,
among other things, the price of shares available for purchase in the open
market as compared to the price at which they purchase additional shares
pursuant to the option granted to them. "Naked" short sales are any sales in
excess of such option. The underwriters must close out any naked short position
by purchasing shares in the open market. A naked short position is more likely
to be created if the underwriters are concerned that there may be downward
pressure on the price of our class B preferred stock in the open market after
pricing that could adversely affect investors who purchase in the offering.
Stabilizing transactions consist of various bids for or purchases of class B
preferred stock made by the underwriters in the open market prior to the
completion of the offering.

Purchases to cover a short position and stabilizing transactions may have
the effect of preventing or retarding a decline in the market price of our class
B preferred stock, and together with the imposition of the penalty bid, may
stabilize, maintain or otherwise affect the market price of our class B
preferred stock. As a result, the price of our class B preferred stock may be
higher than the price that otherwise might exist in the open market. If these
activities are commenced, they may be discontinued at any time. These
transactions may be effected on the New York Stock Exchange, in the
over-the-counter market or otherwise.

made the subject of an invitation for subscription or purchase, nor may the
prospectus and any other document or material in connection with the offer or
sale, or invitation for subscription or purchase, of the shares be circulated or
distributed, whether directly or indirectly, to the public or any member of the
public in Singapore other than (i) to an institutional investor or other person
specified in Section 274 of the Securities and Futures Act (ii) to a
sophisticated investor, and in accordance with the conditions, specified in
Section 275 of the Securities and Futures Act, or (iii) otherwise pursuant to,
and in accordance with the conditions of, any other applicable provision of the
Securities and Futures Act.

We estimate that our total out-of-pocket expenses of the offering,
excluding underwriting discounts and commissions, will be approximately $ .

We have agreed to indemnify the several underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.

Certain of the underwriters and their respective affiliates have, from time
to time, performed, and may in the future perform, various financial advisory
and investment banking services for us, for which they received or will receive
customary fees and expenses. Goldman, Sachs & Co., Morgan Stanley & Co.
Incorporated, J.P. Morgan Securities Inc., Banc of America Securities LLC,
Credit Suisse First Boston LLC and Lazard Freres & Co. LLC are acting as
underwriters in the concurrent public offering of our common stock. Furthermore,
J.P. Morgan Securities Inc. and Banc of America Securities LLC are joint lead
arrangers and joint bookrunners under our existing credit facility. Goldman,
Sachs & Co. owns approximately 3.6 percent shares of our outstanding common
stock, approximately 2.0 percent of our outstanding class A preferred stock and
approximately 1.4 percent of our outstanding series A warrants.

169

LEGAL MATTERS

[C] The validity of the shares of common stock offered hereby will be
passed upon by Kirkland & Ellis LLP, Chicago, Illinois. William S. Kirsch has
served as Executive Vice President, General Counsel and Corporate Secretary of
Conseco, Inc. since September 2003. Mr. Kirsch's professional corporation,
William S. Kirsch, P.C., is a partner of Kirkland & Ellis LLP. The underwriters
have been represented by Cravath, Swaine & Moore LLP, New York, New York.

[P] The validity of the shares of class B preferred stock offered hereby
will be passed upon by Kirkland & Ellis LLP, Chicago, Illinois. William S.
Kirsch has served as Executive Vice President, General Counsel and Corporate
Secretary of Conseco, Inc. since September 2003. Mr. Kirsch's professional
corporation, William S. Kirsch, P.C., is a partner of Kirkland & Ellis LLP. The
underwriters have been represented by Cravath, Swaine & Moore LLP, New York, New
York.

EXPERTS

The financial statements included in this prospectus as of December 31,
2003 and for the period from September 1, 2003 through December 31, 2003
(successor company) and as of December 31, 2002 and for the period January 1,
2003 through August 31, 2003 and for the two years in the period ended December
31, 2002 (predecessor company) have been so included in reliance on the reports,
which contain explanatory paragraphs related to the predecessor filing voluntary
petitions for reorganization under chapter 11 of the United States Bankruptcy
Code, of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 with respect to the securities offered in this prospectus.
This prospectus is a part of the registration statement and, as permitted by the
Securities and Exchange Commission's rules, does not contain all of the
information presented in the registration statement. Whenever one of our
contracts or other documents is described, summarized or referred to in this
prospectus, please be aware that this description, summary or reference is not
necessarily complete and that you should refer to the exhibits that are a part
of the registration statement for a copy of the contract or other document. You
may review a copy of the registration statement, including exhibits to the
registration statement, at the Securities and Exchange Commission's public
reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call
the Securities and Exchange Commission at 1-800-SEC-0330 for further information
on the operation of the public reference room. Our filings with the Securities
and Exchange Commission are also available to the public through the Securities
and Exchange Commission's website at http://www.sec.gov.

We are subject to the informational requirements of the Exchange Act, and
in accordance with the Exchange Act, we and our predecessor have filed annual,
quarterly and current reports and other information with the Securities and
Exchange Commission. You may read and copy any documents at the address set
forth above.

You may request copies of the filings, at no cost, by writing to the
following address or calling the following telephone number:

Investor Relations

Conseco, Inc.

11825 N. Pennsylvania Street

Carmel, Indiana 46032

(317) 817-2893.

You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with different information. We are not
offering these securities in any state where the offer is not permitted. You
should not assume that information contained in this prospectus is accurate as
of any date other than the date on the front cover of this prospectus.

170

CONSECO, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

PAGE
----

Report of Independent Auditors -- Successor period.......... F-2
Report of Independent Auditors -- Predecessor periods....... F-3
Consolidated Balance Sheet at December 31, 2003 (Successor)
and December 31, 2002 (Predecessor)....................... F-4
Consolidated Statement of Operations for the four months
ended December 31, 2003 (Successor), eight months ended
August 31, 2003, and the years ended December 31, 2002 and
2001 (Predecessor)........................................ F-5
Consolidated Statement of Shareholders' Equity for the four
months ended December 31, 2003 (Successor), eight months
ended August 31, 2003, and the years ended December 31,
2002 and 2001 (Predecessor)............................... F-6
Consolidated Statement of Cash Flows for the four months
ended December 31, 2003 (Successor), eight months ended
August 31, 2003, and the years ended December 31, 2002 and
2001 (Predecessor)........................................ F-7
Notes to Consolidated Financial Statements.................. F-8

F-1

REPORT OF INDEPENDENT AUDITORS

To the Shareholders and Board of Directors

Conseco, Inc.

In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, shareholders' equity (deficit) and cash
flows present fairly, in all material respects, the financial position of
Conseco, Inc. and subsidiaries (Successor Company) at December 31, 2003 and the
results of their operations and their cash flows for the period from September
1, 2003 through December 31, 2003 in conformity with accounting principles
generally accepted in the United States of America. These financial statements
are the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 1 to the consolidated financial statements, the United
States Bankruptcy Court for the Northern District of Illinois, Eastern Division
confirmed the Company's Sixth Amended Joint Plan of Reorganization (the "Plan")
on September 9, 2003. The provisions of the plan are described in detail in Note
1. The Plan was substantially consummated on September 10, 2003 and the Company
emerged from bankruptcy. In connection with its emergence from bankruptcy, the
Company adopted fresh start accounting as of August 31, 2003.

PRICEWATERHOUSECOOPERS LLP

Indianapolis, Indiana

March 10, 2004

F-2

REPORT OF INDEPENDENT AUDITORS

To the Shareholders and Board of Directors

Conseco, Inc.

In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, shareholders' equity (deficit) and cash
flows present fairly, in all material respects, the financial position of
Conseco, Inc. and subsidiaries (Predecessor Company) at December 31, 2002 and
the results of their operations and their cash flows for the period from January
1, 2003 through August 31, 2003, and for each of the two years in the period
ended December 31, 2002 in conformity with accounting principles generally
accepted in the United States of America. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States of America, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 1 to the consolidated financial statements, the
Company filed a petition on December 17, 2002 with the United States Bankruptcy
Court for the Northern District of Illinois, Eastern Division for reorganization
under the provisions of Chapter 11 of the Bankruptcy Code. The Company's Sixth
Amended Joint Plan of Reorganization (the "Plan") was substantially consummated
on September 10, 2003 and the Company emerged from bankruptcy. In connection
with its emergence from bankruptcy, the Company adopted fresh start accounting.

As discussed in Note 4 to the consolidated financial statements, the
Company adopted Statement of Financial Accounting Standards No. 142, "Goodwill
and Other Intangible Assets" in 2002.

PRICEWATERHOUSECOOPERS LLP

Indianapolis, Indiana

March 10, 2004

F-3

CONSECO, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(DOLLARS IN MILLIONS)

SUCCESSOR PREDECESSOR
DECEMBER 31, DECEMBER 31,
2003 2002
------------ ------------

ASSETS
Investments:
Actively managed fixed maturities at fair value (amortized
cost:
2003 -- $19,470.7; 2002 -- $18,989.8)................... $19,840.1 $19,417.4
Equity securities at fair value (cost: 2003 -- $71.8;
2002 -- $161.4)......................................... 74.5 156.0
Mortgage loans............................................ 1,139.5 1,308.3
Policy loans.............................................. 503.4 536.2
Trading securities........................................ 915.1 --
Venture capital investment in AT&T Wireless Services, Inc.
at fair value (cost: 2003 -- $--; 2002 -- $14.2)........ -- 25.0
Other invested assets..................................... 324.1 340.8
--------- ---------
Total investments..................................... 22,796.7 21,783.7
Cash and cash equivalents:
Unrestricted.............................................. 1,228.7 1,217.6
Restricted................................................ 31.9 51.3
Accrued investment income................................... 315.5 389.8
Value of policies in force at the Effective Date............ 2,949.5 --
Cost of policies purchased.................................. -- 1,170.0
Cost of policies produced................................... 101.8 2,014.4
Reinsurance receivables..................................... 930.5 934.2
Income tax assets........................................... 24.6 101.5
Goodwill.................................................... 952.2 100.0
Other intangible assets..................................... 155.2 --
Assets held in separate accounts and investment trust....... 37.7 447.0
Assets of discontinued operations........................... -- 17,624.3
Other assets................................................ 395.8 675.2
--------- ---------
Total assets.......................................... $29,920.1 $46,509.0
========= =========

LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Liabilities:
Liabilities for insurance and asset accumulation products:
Interest-sensitive products............................. $12,480.4 $13,122.7
Traditional products.................................... 11,431.8 8,318.2
Claims payable and other policyholder funds............. 892.3 909.2
Liabilities related to separate accounts and investment
trust.................................................. 37.7 447.0
Other liabilities......................................... 573.0 673.5
Liabilities of discontinued operations.................... -- 17,624.3
Investment borrowings..................................... 387.3 669.7
Notes payable -- direct corporate obligations............. 1,300.0 --
--------- ---------
Total liabilities not subject to compromise........... 27,102.5 41,764.6
--------- ---------
Liabilities subject to compromise......................... -- 4,873.3
--------- ---------
Total liabilities..................................... 27,102.5 46,637.9
--------- ---------
Commitments and Contingencies
Minority interest:
Company-obligated mandatorily redeemable preferred
securities of subsidiary trusts......................... -- 1,921.5
Shareholders' equity (deficit):
Preferred stock........................................... 887.5 501.7
Common stock ($0.01 par value, 8,000,000,000 shares
authorized, shares issued and outstanding at December
31, 2003 -- 100,115,772; no par value, 1,000,000,000
shares authorized; shares issued and outstanding at
December 31, 2002 -- 346,007,133)....................... 1.0 3,497.0
Additional paid-in-capital................................ 1,641.9 --
Accumulated other comprehensive income.................... 218.7 580.6
Retained earnings (deficit)............................... 68.5 (6,629.7)
--------- ---------
Total shareholders' equity (deficit).................. 2,817.6 (2,050.4)
--------- ---------
Total liabilities and shareholders' equity
(deficit)............................................ $29,920.1 $46,509.0
========= =========

The accompanying notes are an integral part of the consolidated financial
statements.

F-4

CONSECO, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS

(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)

SUCCESSOR PREDECESSOR
------------ -----------------------------------
FOUR MONTHS EIGHT MONTHS YEARS ENDED
ENDED ENDED DECEMBER 31,
DECEMBER 31, AUGUST 31, --------------------
2003 2003 2002 2001
------------ ------------ ---- ----

Revenues:
Insurance policy income.............................. $ 1,005.8 $ 2,204.3 $ 3,602.3 $3,992.7
Net investment income:
General account assets............................. 427.0 933.3 1,534.1 1,712.5
Policyholder and reinsurer accounts................ 53.1 25.2 (100.5) (119.6)
Venture capital income (loss) related to investment
in AT&T Wireless Services, Inc................... (5.5) 10.5 (99.3) (42.9)
Net realized investment gains (losses)............... 11.8 (5.4) (556.3) (340.0)
Gain on sale of interest in riverboat................ -- -- -- 192.4
Fee revenue and other income......................... 13.3 34.3 70.1 96.9
------------ --------- --------- --------
Total revenues................................... 1,505.5 3,202.2 4,450.4 5,492.0
------------ --------- --------- --------
Benefits and expenses:
Insurance policy benefits............................ 967.9 2,138.7 3,332.5 3,588.5
Provision for losses................................. -- 55.6 240.0 169.6
Interest expense (contractual interest: $268.5 for
the eight months ended August 31, 2003; and $345.3
for 2002).......................................... 36.8 202.5 341.9 400.0
Amortization......................................... 132.9 341.4 822.9 766.8
Other operating costs and expenses................... 218.4 422.3 736.2 747.1
Goodwill impairment.................................. -- -- 500.0 --
Special charges...................................... -- -- 96.5 80.4
Gain on extinguishment of debt....................... -- -- (1.8) (17.0)
Reorganization items................................. -- (2,130.5) 14.4 --
------------ --------- --------- --------
Total benefits and expenses...................... 1,356.0 1,030.0 6,082.6 5,735.4
------------ --------- --------- --------
Income (loss) before income taxes, minority
interest, discontinued operations and
cumulative effect of accounting change........ 149.5 2,172.2 (1,632.2) (243.4)
Income tax expense (benefit):
------------ --------- --------- --------
Tax expense (benefit) on period income (loss)........ 53.2 (13.5) 53.1 (57.6)
Valuation allowance for deferred tax assets.......... -- -- 811.2 --
------------ --------- --------- --------
Income (loss) before minority interest,
discontinued operations and cumulative effect
of accounting change.......................... 96.3 2,185.7 (2,496.5) (185.8)
Minority interest:
Distributions on Company-obligated mandatorily
redeemable preferred securities of subsidiary
trusts, net of income taxes........................ -- -- 173.2 119.5
------------ --------- --------- --------
Income (loss) before discontinued operations and
cumulative effect of accounting change........ 96.3 2,185.7 (2,669.7) (305.3)
Discontinued operations, net of income taxes........... -- 16.0 (2,216.8) (100.6)
Cumulative effect of accounting change, net of income
taxes................................................ -- -- (2,949.2) --
------------ --------- --------- --------
Net income (loss)................................ 96.3 2,201.7 (7,835.7) (405.9)
Preferred stock dividends (contractual distributions
for 2002 of $2.1).................................... 27.8 -- 2.1 12.8
------------ --------- --------- --------
Net income (loss) applicable to common stock..... $ 68.5 $ 2,201.7 $(7,837.8) $ (418.7)
============ ========= ========= ========
Earnings per common share:
Basic:
Weighted average shares outstanding................ 100,110,000
============
Net income.................................... $ .68
============
Diluted:
Weighted average shares outstanding.............. 143,486,000
============
Net income.................................... $ .67
============

The accompanying notes are an integral part of the consolidated financial
statements.

F-5

CONSECO, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)

(DOLLARS IN MILLIONS)

COMMON STOCK ACCUMULATED
AND ADDITIONAL OTHER
PREFERRED PAID-IN COMPREHENSIVE RETAINED
TOTAL STOCK CAPITAL INCOME (LOSS) EARNINGS
----- --------- -------------- ------------- --------

Predecessor balance, December 31, 2000............. $ 4,374.4 $ 486.8 $ 2,911.8 $(651.0) $ 1,626.8
Comprehensive loss, net of tax:
Net loss....................................... (405.9) -- -- -- (405.9)
Change in unrealized depreciation of
investments (net of applicable income tax
expense of $121.8)........................... 212.0 -- -- 212.0 --
---------
Total comprehensive loss................... (193.9)
Issuance of shares pursuant to stock purchase
contracts related to FELINE PRIDES............. 496.6 -- 496.6 -- --
Issuance of shares pursuant to acquisition of
ExlService.com, Inc............................ 52.1 -- 52.1 --
Issuance of shares for stock options and for
employee benefit plans......................... 23.8 -- 23.8 -- --
Payment-in-kind dividends on convertible
preferred stock................................ 12.8 12.8 -- -- --
Dividends on preferred stock..................... (12.8) -- -- -- (12.8)
--------- ------- --------- ------- ---------
Predecessor balance, December 31, 2001............. 4,753.0 499.6 3,484.3 (439.0) 1,208.1
Comprehensive loss, net of tax:
Net loss....................................... (7,835.7) -- -- -- (7,835.7)
Change in unrealized depreciation of
investments and other (net of applicable
income tax expense of nil)................... 1,019.6 -- -- 1,019.6 --
---------
Total comprehensive loss................... (6,816.1)
Issuance of shares for stock options and for
employee benefit plans......................... 12.7 -- 12.7 -- --
Payment-in-kind dividends on convertible
preferred stock................................ 2.1 2.1 -- -- --
Dividends on preferred stock..................... (2.1) -- -- -- (2.1)
--------- ------- --------- ------- ---------
Predecessor balance, December 31, 2002............. (2,050.4) 501.7 3,497.0 580.6 (6,629.7)
Comprehensive income, net of tax:
Net income..................................... 2,201.7 -- -- -- 2,201.7
Change in unrealized appreciation of
investments (net of applicable income tax
benefit of nil).............................. (151.6) -- -- (151.6) --
---------
Total comprehensive income................. 2,050.1
Change in shares for employee benefit plans...... .3 -- .3 -- --
--------- ------- --------- ------- ---------
Predecessor balance, August 31, 2003............... -- 501.7 3,497.3 429.0 (4,428.0)
Elimination of Predecessor's equity securities..... (3,999.0) (501.7) (3,497.3) -- --
Issuance of Successor's equity securities.......... 2,500.0 859.7 1,640.3 -- --
Fresh start adjustments............................ 3,999.0 -- -- (429.0) 4,428.0
--------- ------- --------- ------- ---------
Successor balance, August 31, 2003................. 2,500.0 859.7 1,640.3 -- --
Comprehensive income, net of tax:
Net income..................................... 96.3 -- -- -- 96.3
Change in unrealized appreciation of
investments (net of applicable income tax
expense of $123.0)........................... 218.7 -- -- 218.7 --
---------
Total comprehensive income................. 315.0
Issuance of shares for stock options and for
employee benefit plans......................... 2.6 -- 2.6 -- --
Payment-in-kind dividends on convertible
exchangeable preferred stock................... 27.8 27.8 -- -- --
Dividends on preferred stock..................... (27.8) -- -- -- (27.8)
--------- ------- --------- ------- ---------
Successor balance, December 31, 2003............... $ 2,817.6 $ 887.5 $ 1,642.9 $ 218.7 $ 68.5
========= ======= ========= ======= =========

The accompanying notes are an integral part of the consolidated financial
statements.

F-6

CONSECO, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

(DOLLARS IN MILLIONS)

SUCCESSOR PREDECESSOR
------------ --------------------------------------
FOUR MONTHS EIGHT MONTHS YEARS ENDED
ENDED ENDED DECEMBER 31,
DECEMBER 31, AUGUST 31, -----------------------
2003 2003 2002 2001
------------ ------------ ---- ----

Cash flows from operating activities:
Insurance policy income......................... $ 876.3 $ 1,876.2 $ 3,041.3 $ 3,518.8
Net investment income........................... 431.4 933.5 3,323.9 3,913.6
Fee revenue and other income.................... 13.3 34.3 307.1 389.1
Insurance policy benefits....................... (567.9) (1,466.1) (1,996.9) (2,792.8)
Interest expense................................ (25.5) -- (1,279.6) (1,570.5)
Policy acquisition costs........................ (111.6) (287.5) (509.2) (667.0)
Special charges................................. -- -- (47.2) (29.5)
Reorganization items............................ -- (26.5) (31.7) --
Other operating costs........................... (254.7) (360.8) (1,406.1) (1,466.8)
Taxes........................................... 77.8 44.2 (105.9) 29.8
--------- --------- ---------- ----------
Net cash provided by operating activities... 439.1 747.3 1,295.7 1,324.7
--------- --------- ---------- ----------
Cash flows from investing activities:
Sales of investments............................ 5,163.7 5,378.9 19,465.4 24,179.7
Maturities and redemptions of investments....... 1,003.2 1,854.7 1,623.9 1,381.4
Purchases of investments........................ (5,593.3) (7,385.9) (19,879.4) (25,509.5)
Cash received from the sale of finance
receivables, net of expenses.................. -- -- 2,372.9 867.2
Finance receivables originated.................. -- -- (7,877.9) (12,320.3)
Principal payments received on finance
receivables................................... -- -- 8,294.0 8,611.3
Cash held by Conseco Finance Corp. and
classified as assets held by discontinued
operations.................................... -- -- (562.3) --
Change in restricted cash....................... (6.8) 26.2 3.4 27.3
Other........................................... 1.4 (19.6) (27.6) (136.7)
--------- --------- ---------- ----------
Net cash provided (used) by investing
activities............................... 568.2 (145.7) 3,412.4 (2,899.6)
--------- --------- ---------- ----------
Cash flows from financing activities:
Amounts received for deposit products........... 479.6 1,272.7 4,584.8 4,204.8
Withdrawals from deposit products............... (583.5) (1,784.2) (5,682.8) (4,489.4)
Issuance of notes payable....................... -- -- 6,671.9 12,160.5
Payments on notes payable....................... -- -- (10,481.3) (10,480.5)
Ceding commission received on reinsurance
transaction................................... -- -- 83.0 --
Change in cash held in restricted accounts for
settlement of borrowings...................... -- -- (13.0) (241.8)
Investment borrowings........................... (837.1) (145.3) (1,573.0) 2,022.9
Issuance of common and convertible preferred
shares........................................ -- -- -- 4.1
Dividends on common and preferred shares and
distributions on Company-obligated mandatorily
redeemable preferred securities of subsidiary
trusts........................................ -- -- (86.2) (181.2)
--------- --------- ---------- ----------
Net cash provided (used) by financing
activities............................... (941.0) (656.8) (6,496.6) 2,999.4
--------- --------- ---------- ----------
Net increase (decrease) in cash and cash
equivalents.............................. 66.3 (55.2) (1,788.5) 1,424.5
Cash and cash equivalents, beginning of the
period.......................................... 1,162.4 1,217.6 3,006.1 1,581.6
--------- --------- ---------- ----------
Cash and cash equivalents, end of the period...... $ 1,228.7 $ 1,162.4 $ 1,217.6 $ 3,006.1
========= ========= ========== ==========

The accompanying notes are an integral part of the consolidated financial
statements.

F-7

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. OUR RECENT EMERGENCE FROM BANKRUPTCY

Conseco, Inc., a Delaware corporation ("CNO"), is a holding company for a
group of insurance companies operating throughout the United States that
develop, market and administer supplemental health insurance, annuity,
individual life insurance and other insurance products. CNO became the successor
to Conseco, Inc., an Indiana corporation ("Old Conseco"), in connection with our
bankruptcy reorganization. The terms "Conseco", the "Company", "we", "us", and
"our" as used in this report refer to CNO and its subsidiaries and, unless the
context requires otherwise, Old Conseco and its subsidiaries. We focus on
serving the senior and middle-income markets, which we believe are attractive,
high growth markets. We sell our products through three distribution channels:
career agents, professional independent producers (some of whom sell one or more
of our product lines exclusively) and direct marketing.

We conduct our business operations through two primary operating segments,
based on method of product distribution, and a third segment comprised of
businesses in run-off:

- BANKERS LIFE, which consists of the businesses of Bankers Life and
Casualty Company ("Bankers Life and Casualty") and Colonial Penn Life
Insurance Company ("Colonial Penn"). Bankers Life and Casualty markets
and distributes Medicare supplement insurance, life insurance, long-term
care insurance and fixed annuities to the senior market through
approximately 4,000 exclusive career agents and sales managers. Colonial
Penn markets graded benefit and simplified issue life insurance directly
to consumers through television advertising, direct mail, the internet
and telemarketing. Both Bankers Life and Casualty and Colonial Penn
market their products under their own brand names.

- CONSECO INSURANCE GROUP, which markets and distributes specified disease
insurance, Medicare supplement insurance, and certain life and annuity
products to the senior and middle-income markets through over 500
independent marketing organizations ("IMOs") that represent over 9,100
producing independent agents. This segment markets its products under the
"Conseco" brand.

We also have a corporate segment, which consists of holding company
activities and certain noninsurance company businesses that are not related to
our operating segments.

On December 17, 2002 (the "Petition Date"), Old Conseco and certain of its
non-insurance company subsidiaries filed voluntary petitions for relief under
Chapter 11 of Title 11 of the United States Bankruptcy Code (the "Bankruptcy
Code") in the United States Bankruptcy Court for the Northern District of
Illinois, Eastern Division (the "Bankruptcy Court"). We emerged from bankruptcy
protection under the Sixth Amended Joint Plan of Reorganization (the "Plan"),
which was confirmed pursuant to an order of the Bankruptcy Court on September 9,
2003 (the "Confirmation Date"), and became effective on September 10, 2003 (the
"Effective Date"). Upon the confirmation of the Plan, we implemented fresh start
accounting in accordance with Statement of Position 90-7 "Financial Reporting by
Entities in Reorganization under the Bankruptcy Code" ("SOP 90-7"). References
in these consolidated financial statements to "Predecessor" refer to Old Conseco
prior to August 31, 2003. References to "Successor" refer to the Company on and
after August 31, 2003, after giving effect to the implementation of fresh start
reporting. Our accounting and actuarial systems and procedures are designed to
produce financial information as of the end of a month. Accordingly, for
accounting convenience purposes, we applied the effects of fresh start
accounting on August 31, 2003. The activity of the Company for the period from
September 1, 2003 through September 10, 2003 is therefore included in the
Successor's statement of operations and excluded from the Predecessor's
statement of operations. We believe the net income impact of the use of a
convenience date is immaterial.

F-8

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Plan generally provided for the full payment or reinstatement of
allowed administrative claims, priority claims, fully secured claims and certain
intercompany claims, and the distribution of new equity securities (including
warrants) to partially secured and unsecured creditors of our Predecessor.
Holders of claims arising under our Predecessor's $1.5 billion senior bank
credit facility also received a pro rata interest in our Senior Credit Facility.
Holders of our Predecessor's common stock and preferred stock did not receive
any distribution under the Plan, and these securities, together with all other
prepetition securities and the $1.5 billion senior bank credit facility of our
Predecessor, were cancelled on the Effective Date.

On the Effective Date, under the terms of the Plan, we emerged from the
bankruptcy proceedings with a capital structure consisting of:

- our $1.3 billion Senior Credit Facility;

- approximately 34.4 million shares of Class A Preferred Stock with an
initial aggregate liquidation preference of approximately $859.7 million;

- warrants to purchase 6.0 million shares of our common stock (the "Series
A Warrants").

Under the terms of the Plan, we distributed the equity securities to the
creditors of our Predecessor in the amounts outlined below:

- lenders under our Predecessor's senior bank credit facility and director
and officer loan program received approximately 34.4 million shares of
our Class A Preferred Stock, with an initial aggregate liquidation
preference of $859.7 million;

- holders of our Predecessor's senior notes received approximately 32.3
million shares of our common stock;

- holders of our Predecessor's guaranteed senior notes received
approximately 60.6 million shares of our common stock;

- holders of our Predecessor's general unsecured claims received
approximately 3.8 million shares of our common stock; and

- holders of trust preferred securities issued by our Predecessor's
subsidiary trusts received approximately 1.5 million shares of our common
stock and Series A Warrants to purchase 6.0 million shares of our common
stock at an exercise price of $27.60 per share.

The distribution of our common stock summarized above represents
approximately 98 percent of all of the shares of common stock to be distributed
under the Plan. As of December 31, 2003, approximately 1.8 million of our
outstanding shares of common stock have been reserved for distribution under the
Plan in respect of disputed claims, the resolution of which is still pending. If
reserved shares remain after resolution of these disputed claims, then the
reserved shares will be reallocated to other general unsecured creditors of our
Predecessor as provided for under the Plan.

As part of our Chapter 11 reorganization, we sold substantially all of the
assets of our Predecessor's finance business and exited this line of business.
Our finance business was conducted through our Predecessor's indirect
wholly-owned subsidiary, Conseco Finance Corp. ("CFC"). We accounted for our
finance business as a discontinued operation in 2002 once we formalized our
plans to sell it. On April 1, 2003, CFC and 22 of its direct and indirect
subsidiaries, which collectively comprised substantially all of the finance
business, filed liquidating plans of reorganization with the Bankruptcy Court in
order to facilitate the sale of this business. The sale of the finance business
was completed in the second quarter of 2003. We did

F-9

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

not receive any proceeds from this sale in respect of our interest in CFC, nor
did any creditors of our Predecessor. As of March 31, 2003, we ceased to include
the assets and liabilities of CFC on our Predecessor's consolidated balance
sheet. See the note to the consolidated financial statements entitled "Financial
Information Regarding CFC" for information regarding this discontinued
operation.

2. BASIS OF PRESENTATION

The accompanying consolidated financial statements have been prepared in
accordance with SOP 90-7. Accordingly, all prepetition liabilities subject to
compromise as of December 31, 2002, have been segregated in the Predecessor's
consolidated balance sheet and classified as "liabilities subject to compromise"
at the estimated amount of allowable claims.

Pursuant to SOP 90-7, professional fees associated with the Chapter 11
cases are expensed as incurred and reported as reorganization items. Interest
expense was reported only to the extent that it was paid during the Chapter 11
cases. The Company recognized expenses associated with the Chapter 11 cases for
fees payable to professionals to assist with the Chapter 11 cases totaling $70.9
million in the eight months ended August 31, 2003, and $14.4 million in 2002.

Upon our emergence from bankruptcy, we implemented fresh start reporting in
accordance with SOP 90-7. These rules required the Company to revalue its assets
and liabilities to current estimated fair value, re-establish shareholders'
equity at the reorganization value determined in connection with the Plan, and
record any portion of the reorganization value which cannot be attributed to
specific tangible or identified intangible assets as goodwill. As a result, the
Company's financial statements for periods following August 31, 2003, will not
be comparable with those of Old Conseco prepared before that date.

During the third quarter of 2002, Old Conseco entered into an agreement to
sell Conseco Variable Insurance Company ("CVIC"), its wholly owned subsidiary
and the primary writer of its variable annuity products. The sale was completed
in October 2002. The operating results of CVIC have been reported as
discontinued operations in all periods presented in the accompanying
consolidated statement of operations. See the note to the consolidated financial
statements entitled "Financial Information Regarding CVIC."

During 2001, we stopped renewing a large portion of our major medical lines
of business. These lines of business are referred to herein as the "major
medical business in run-off". These actions had a significant effect on the
Predecessor's operating results during 2001. These lines had pre-tax losses of
$130.3 million in 2001 including a write off of $77.4 million of the cost of
policies produced and the cost of policies purchased related to this business
that is not recoverable.

On July 31, 2001, we completed the acquisition of ExlService.com, Inc.
("Ex1"), a firm that specializes in customer service and backroom outsourcing
with operations in India. Old Conseco issued 3.4 million shares of our common
stock in exchange for Ex1's common stock. The total value of the transaction was
$52.1 million. The Old Conseco Board of Directors (without Gary C. Wendt, the
Company's former Chief Executive Officer, voting) approved the transaction,
after receiving the recommendation of a special committee of outside directors.
Mr. Wendt was one of the founders of Exl. Mr. Wendt and his wife owned 20.3
percent of Exl and his other relatives owned an additional 9.4 percent. Mr.
Wendt and his wife received 692,567 shares of Old Conseco common stock in the
transaction (worth approximately $9.7 million at the time the agreement was
negotiated). However, these shares were restricted until Old Conseco recovered
its $52.1 million acquisition price through cost savings achieved by
transferring work to Exl and/or pre-tax profits from services provided to third
parties by Exl. The shares also become unrestricted upon a change of control of
51 percent of the outstanding shares of Old Conseco common stock. In November
2002, Old Conseco completed the sale of Exl and recognized a loss of $20.0
million on the transaction. Old Conseco had previously written off a significant
portion of the value of this investment in conjunction with the impairment
charge related to goodwill pursuant to the Company's adoption of Statement of
Financial

F-10

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Accounting Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS
142") described below under "Recently Issued Accounting Standards". Since Old
Conseco did not recover the acquisition price prior to its sale of Exl, the
shares held by Mr. Wendt and his wife remained restricted and were cancelled
pursuant to the Plan.

For certain other special purpose entities related to our investment
portfolio, we consider the requirements of Emerging Issues Task Force Issue
Topic D-14, "Transactions Involving Special-Purpose Entities" ("EITF D-14") in
determining whether to consolidate such entities. We consolidate such entities
if: (i) an independent third party has not made a substantial capital investment
in the entity; (ii) such independent third party does not control the activities
of the entity; and (iii) the independent party does not retain substantial risks
and rewards of the special purpose entity's assets. See the note to the
consolidated financial statements entitled "Investments in Variable Interest
Entities" for additional information.

The accompanying financial statements include the accounts of the Company
and all of its wholly owned insurance subsidiaries. Our consolidated financial
statements exclude the results of material transactions between us and our
consolidated affiliates, or among our consolidated affiliates. We reclassified
certain amounts in our 2002 and 2001 consolidated financial statements and notes
to conform with the 2003 presentation. These reclassifications have no effect on
net income (loss) or shareholders' equity (deficit).

3. FRESH START REPORTING

Upon the confirmation of the Plan on September 9, 2003, we implemented
fresh start reporting in accordance with SOP 90-7. However, in light of the
proximity of this date to the August month end, for accounting convenience
purposes, we have reported the effects of fresh start accounting as if they
occurred on August 31, 2003. We engaged an independent financial advisor to
assist in the determination of our reorganization value as defined in SOP 90-7.
We determined a reorganization value, together with our financial advisor, using
various valuation methods, including: (i) selected comparable companies
analysis; and (ii) actuarial valuation analysis. These analyses are necessarily
based on a variety of estimates and assumptions which, though considered
reasonable by management, may not be realized, and are inherently subject to
significant business, economic and competitive uncertainties and contingencies,
many of which are beyond our control. Changes in these estimates and assumptions
may have had a significant effect on the determination of our reorganization
value. The estimated reorganization value of the Company was calculated to be
approximately $3.7 billion to $3.9 billion. We selected the midpoint of the
range, $3.8 billion, as the reorganization value. Such value was confirmed by
the Bankruptcy Court on the Confirmation Date.

F-11

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Under fresh start reporting, a new reporting entity is considered to be
created and the Company is required to revalue its assets and liabilities to
current estimated fair value, re-establish shareholders' equity at the
reorganization value determined in connection with the Plan, and record any
portion of the reorganization value which can not be attributed to specific
tangible or identified intangible assets as goodwill. In addition, all
accounting standards that are required to be adopted in the financial statements
within twelve months following the adoption of fresh start accounting were
adopted as of August 31, 2003. Adjustments to the Predecessor's consolidated
balance sheet as of August 31, 2003, to reflect the discharge of debt, change in
capital structure and the fair value of our assets and liabilities are presented
in the following table (dollars in millions):

PREDECESSOR DEBT DISCHARGE
BALANCE AND FRESH START SUCCESSOR
SHEET(A) REORGANIZATION(B) ADJUSTMENTS BALANCE SHEET
----------- ----------------- ----------- -------------

Assets:
Investments............................... $22,018.3 $ -- $ 1,043.5(c) $23,101.3
39.5(d)
Cash and cash equivalents................. 1,187.5 -- 28.4(c) 1,215.9
Accrued investment income................. 304.6 -- -- 304.6
Value of policies in force at the
Effective Date.......................... -- -- 3,102.6(e) 3,102.6
Cost of policies purchased................ 1,099.2 -- (1,099.2)(e) --
Cost of policies produced................. 2,019.5 -- (2,019.5)(e) --
Reinsurance receivables................... 878.3 -- 44.3(f) 922.6
Goodwill.................................. 99.4 -- 1,042.2(f) 1,141.6
Other intangible assets................... -- -- 157.8(f) 157.8
Income tax assets......................... 88.0 -- -- 88.0
Assets held in separate accounts and
investment trust........................ 87.7 -- -- 87.7
Other assets.............................. 535.6 -- 10.1(f) 545.7
--------- --------- --------- ---------
Total assets.......................... $28,318.1 $ -- $ 2,349.7 $30,667.8
========= ========= ========= =========
Liabilities:
Liabilities for insurance and asset
accumulation products................... $22,175.6 $ -- $ 2,592.1(g) $24,767.7
Other liabilities......................... 868.1 -- (23.2)(f) 875.7
30.8(c)
Investment borrowings..................... 524.4 -- 700.0(c) 1,224.4
Notes payable -- direct corporate
obligations............................. -- 1,300.0 -- 1,300.0
--------- --------- --------- ---------
Total liabilities not subject to
compromise......................... 23,568.1 1,300.0 3,299.7 28,167.8
Liabilities subject to compromise......... 6,951.4 (6,951.4) -- --
--------- --------- --------- ---------
Total liabilities..................... 30,519.5 (5,651.4) 3,299.7 28,167.8
--------- --------- --------- ---------
Shareholders' equity (deficit):
Convertible preferred stock............... 501.7 -- (501.7) --
Convertible exchangeable preferred
stock................................... -- 859.7 -- 859.7
Common stock and additional paid-in
capital................................. 3,497.3 1,640.3 (3,497.3) 1,640.3
Retained earnings (accumulated deficit)... (6,629.4) 3,151.4 3,478.0 --
Accumulated other comprehensive income.... 429.0 -- (429.0) --
--------- --------- --------- ---------
Total shareholders' equity
(deficit).......................... (2,201.4) 5,651.4 (950.0) 2,500.0
--------- --------- --------- ---------
Total liabilities and shareholders'
equity (deficit)................... $28,318.1 $ -- $ 2,349.7 $30,667.8
========= ========= ========= =========

F-12

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

---------------

(a) Predecessor balance sheet as of August 31, 2003, prior to the recording of
the discharge of prepetition liabilities and the effects of the fresh start
adjustments.

(b) The fresh start balance sheet reflects the reorganization value for Conseco
of $3,800.0 million. After deducting from Conseco's reorganization value
the long-term indebtedness of Conseco at the Effective Date, consisting of
$1,300.0 million of indebtedness under the new senior secured bank credit
facility, the total equity of Conseco is $2,500.0 million. After deducting
from Conseco's total equity the value of the new Preferred Stock of $859.7
million, the value of the new common stock is $1,640.3 million. These
adjustments also reflect the gain on the discharge of prepetition
liabilities.

(c) In accordance with a new accounting pronouncement, the Company was required
to consolidate the assets and liabilities of the partnership which owned
the General Motors building into its balance sheet. As a result of the
consolidation and the adoption of fresh start accounting we increased our
investment in the General Motors building by $1,043.5 million and
recognized the following other assets and liabilities held by the
partnership which owns the General Motors building: (i) cash of $28.4
million; (ii) other liabilities of $30.8 million; and (iii) a note payable
of $700 million. We sold the General Motors building in September 2003 at a
value that was approximately equal to the fresh start value. The note
payable of the partnership was paid in full and the net proceeds from the
sale were distributed to the partners.

(d) The values of our mortgage loans, policy loans and other invested assets
were adjusted to market value at the Effective Date. In addition, the cost
basis of our actively managed fixed maturities was increased to recognize
all of the unrealized appreciation based on the Predecessor cost basis at
the Effective Date.

(e) The Company's historical cost of policies purchased and cost of policies
produced are eliminated and replaced with the value of policies in force at
the Effective Date. The value of policies in force reflects the estimated
fair value of the Company's business in force and represents the portion of
the estimated reorganization value allocated to the value of the right to
receive future cash flows from the policies in force on the Effective Date.

A discount rate of 12 percent was used to determine the value of policies in
force and is the rate of return which management of the Company (with
assistance from an independent actuarial firm) believes would be required by
a purchaser of the business based on conditions existing as of the Effective
Date. In determining such rate of return, the following factors, among
others, are considered.

- The magnitude of the risks associated with each of the actuarial
assumptions used in determining the expected cash flows.

- Market rates of interest that would be applicable to an acquisition of
the business.

- The perceived likelihood of changes in insurance regulations and tax
laws.

- The complexity of the business.

- Prices paid for similar blocks of business.

(f) Assets and liabilities are adjusted to reflect their estimated fair market
value. The portion of the reorganization value that could not be attributed
to specific tangible or identified intangible assets has been recorded as
goodwill.

(g) The Company establishes reserves for insurance policy benefits based on
assumptions as to investment yields, mortality, morbidity, withdrawals and
lapses. These reserves include amounts for estimated future payment of
claims based on actuarial assumptions. Many factors can affect these
reserves, such as economic conditions, inflation, hospital and
pharmaceutical costs, changes in doctrines of legal liability and extra
contractual damage awards. The balance is based on the Company's best
estimate (with assistance from an independent actuarial firm) of the future
performance of this business, given recent and expected future changes in
experience. Adjustments to the Predecessor's liabilities for insurance and
asset accumulation products are further discussed in the note to the
consolidated financial statements entitled "Liabilities for Insurance and
Asset Accumulation Products".

F-13

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The following summary explains the significant accounting policies we use
to prepare our financial statements. We prepare our financial statements in
accordance with generally accepted accounting principles ("GAAP"). We follow the
accounting standards established by the Financial Accounting Standards Board
("FASB"), the American Institute of Certified Public Accountants ("AICPA") and
the Securities and Exchange Commission (the "SEC").

INVESTMENTS

We classify our fixed maturity securities into three categories: (i)
"actively managed" (which we carry at estimated fair value with any unrealized
gain or loss, net of tax and related adjustments, recorded as a component of
shareholders' equity (deficit)); (ii) "trading" (which we carry at estimated
fair value with changes in such value recognized as trading income); and (iii)
"held to maturity" (which we carry at amortized cost). We had no fixed maturity
securities classified as held to maturity during the periods presented in these
financial statements.

At August 31, 2003, we established trading security accounts which are
designed to act as a hedge for embedded derivatives related to: (i) our
equity-indexed annuity products; and (ii) certain modified coinsurance
agreements. See the note entitled "Accounting for Derivatives" for further
discussion regarding the embedded derivatives and the trading accounts. In
addition, the trading account includes the investments backing the market
strategies of our multibucket annuity products. The change in market value of
these securities is substantially offset by the change in insurance policy
benefits for these products. Our trading securities totaled $915.1 million at
December 31, 2003. The change in the market value of these securities is
recognized currently in investment income (classified as income from
policyholder and reinsurer accounts).

EQUITY SECURITIES include investments in common stock and non-redeemable
preferred stock. We carry these investments at estimated fair value. We record
any unrealized gain or loss, net of tax and related adjustments, as a component
of shareholders' equity. When declines in value considered to be other than
temporary occur, we reduce the amortized cost to estimated fair value and
recognize a loss in the statement of operations.

MORTGAGE LOANS held in our investment portfolio are carried at amortized
unpaid balances, net of provisions for estimated losses.

POLICY LOANS are stated at their current unpaid principal balances.

VENTURE CAPITAL INVESTMENT IN AT&T WIRELESS SERVICES, INC. ("AWE") is
carried at fair value, with changes in such value recognized as investment
income (loss). In December 2003, we sold the remaining 4.1 million shares of AWE
common stock. In 2002, we sold 10.3 million shares of AWE common stock which
generated proceeds of $75.7 million. At December 31, 2002, we held 4.1 million
shares of AWE common stock with a value of $25.0 million. We recognized venture
capital investment income (losses) of $(5.5) million in the four months ended
December 31, 2003; $10.5 million in the eight months ended August 31, 2003; and
$(99.3) million and $(42.9) million in 2002 and 2001, respectively, related to
this investment.

OTHER INVESTED ASSETS INCLUDE: (i) Standard & Poor's 500 Index Call
Options ("S&P 500 Call Options"); and (ii) certain non-traditional investments.
We carry the S&P 500 Call Options at estimated fair value as further described
below under "Accounting for Derivatives". Non-traditional investments include
investments in certain limited partnerships and promissory notes; we account for
them using either the cost method, or for investments in partnerships, the
equity method.

F-14

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

anticipated prepayments on mortgage-backed securities in determining estimated
future yields on such securities.

When we sell a security (other than trading securities or venture capital
investments), we report the difference between the sale proceeds and amortized
cost (determined based on specific identification) as a realized investment gain
or loss.

We regularly evaluate all of our investments based on current economic
conditions, credit loss experience and other investee-specific developments. If
there is a decline in a security's fair value that is other than temporary, we
treat it as a realized investment loss and reduce the cost basis of the security
to its estimated fair value.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents include commercial paper, invested cash and other
investments purchased with original maturities of less than three months. We
carry them at amortized cost, which approximates estimated fair value.

PROVISION FOR LOSSES

During 2003, 2002 and 2001, we established additional provisions for losses
related to our guarantees of bank loans and the related interest loans to
approximately 155 current and former directors, officers and key employees for
the purchase of the common stock of Old Conseco (see the note to the
consolidated financial statements entitled "Commitments and Contingencies" for
additional information on this provision).

COST OF POLICIES PRODUCED

In conjunction with the implementation of fresh start accounting, we
eliminated the historical balance of Old Conseco's cost of policies produced as
of August 31, 2003 and replaced it with the value of policies in force at the
Effective Date.

The costs that vary with, and are primarily related to, producing new
insurance business in the period after August 31, 2003 are referred to as cost
of policies produced. We amortize these costs (using the interest rate credited
to the underlying policy for universal life or investment-type products and the
projected investment earnings rate for other products): (i) in relation to the
estimated gross profits for universal life-type and investment-type products; or
(ii) in relation to future anticipated premium revenue for other products.

When we replace an existing insurance contract with another insurance
contract with substantially different terms, all unamortized cost of policies
produced related to the replaced contract is immediately written off. When we
replace an existing insurance contract with another insurance contract with
substantially similar terms, we continue to defer the cost of policies produced
associated with the replaced contract. Such costs related to the replaced
contracts which continue to be deferred were nil in the four months ended
December 31, 2003; $2.9 million in the eight months ended August 31, 2003; and
$7.6 million and $10.0 million in 2002 and 2001, respectively.

F-15

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

We regularly evaluate the recoverability of the unamortized balance of the
cost of policies produced. We consider estimated future gross profits or future
premiums, expected mortality or morbidity, interest earned and credited rates,
persistency and expenses in determining whether the balance is recoverable. If
we determine a portion of the unamortized balance is not recoverable, it is
charged to amortization expense.

VALUE OF POLICIES INFORCE AT THE EFFECTIVE DATE

In conjunction with the implementation of fresh start accounting, we
eliminated the historical balances of Old Conseco's cost of policies purchased
and cost of policies produced as of the Effective Date and replaced them with
the value of policies inforce as of the Effective Date.

The cost assigned to the right to receive future cash flows from contracts
existing at August 31, 2003 is referred to as the cost of policies inforce as of
the Effective Date. We also defer renewal commissions paid in excess of ultimate
commission levels related to the existing policies in this account. The balance
of this account is amortized, evaluated for recovery, and adjusted for the
impact of unrealized gains (losses) in the same manner as the cost of policies
produced described above.

The discount rate we used to determine the value of the cost of policies
inforce as of the Effective Date is the rate of return which management of the
Company (with assistance from an independent actuarial firm) believes would be
required by a purchaser of the business based on conditions existing as of the
Effective Date. In determining this required rate of return, we considered many
factors including: (i) the magnitude of the risks associated with each of the
actuarial assumptions used in determining expected future cash flows; (ii)
market rates of interest that would be applicable to an acquisition of the
business; (iii) the likelihood of changes in projected future cash flows that
might occur if there are changes in insurance regulations and tax laws; (iv) the
compatibility of the business with our future business plans that may favorably
affect future cash flows; (v) the complexity of the business; and (vi) recent
prices (i.e., discount rates used in determining valuations) paid by others to
acquire similar blocks of business. The weighted average discount rate we used
to determine the value of business inforce as of the Effective Date was 12
percent.

The Company expects to amortize approximately 10 percent of the December
31, 2003 balance of the value of policies inforce at the Effective Date in 2004,
10 percent in 2005, 9 percent in 2006, 8 percent in 2007 and 8 percent in 2008.

GOODWILL

Upon our emergence from bankruptcy, we revalued our assets and liabilities
to current estimated fair value and established our capital accounts at the
reorganization value determined in connection with the Plan. We recorded the
$1,141.6 million of the reorganization value which could not be attributed to
specific tangible or identified intangible assets as goodwill. Under current
accounting rules (which became effective January 1, 2002) goodwill is not
amortized but is subject to an annual impairment test (or more frequent under
certain circumstances). We obtained an independent appraisal of our business in
connection with the preparation of the Plan and our implementation of fresh
start accounting.

Although the goodwill balance will not be subject to amortization, it will
be reduced by future use of the Company's net deferred income tax assets
(including the tax operating loss carryforwards) existing at August 31, 2003
(such balance was reduced by $189.4 million in the four months ended December
31, 2003). A valuation allowance has been provided for the remaining balance of
such net deferred income tax assets due to the uncertainties regarding their
realization. See the note entitled "Income Taxes" for further discussion.

F-16

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Changes in the carrying amount of goodwill are as follows (dollars in
millions):

SUCCESSOR
------------
FOUR MONTHS
ENDED
DECEMBER 31,
2003
------------

Goodwill balance, beginning of period....................... $1,141.6
Recognition of tax valuation reserve established at the
Effective Date............................................ (189.4)
--------
Goodwill balance, end of period............................. $ 952.2
========

REORGANIZATION ITEMS

Reorganization items represent amounts the Predecessor incurred as a result
of its Chapter 11 reorganization, and are presented separately in the
consolidated statement of operations. These items consist of the following
(dollars in millions):

EIGHT MONTHS
ENDED YEAR ENDED
AUGUST 31, DECEMBER 31,
2003 2002
------------ ------------

Gain on discharge of prepetition liabilities......... $3,151.4 $ --
Fresh start adjustments.............................. (950.0) --
Professional fees.................................... (70.9) (14.4)
-------- ------
Total reorganization items......................... $2,130.5 $(14.4)
======== ======

LIABILITIES SUBJECT TO COMPROMISE

Under the Bankruptcy Code, actions by creditors to collect indebtedness
owed prior to the Petition Date were stayed and certain other prepetition
contractual obligations could not be enforced against the Filing Entities. The
Filing Entities received approval from the Court to pay certain prepetition
liabilities including employee salaries and wages, benefits and other employee
obligations. All other prepetition liabilities were classified as "liabilities
subject to compromise" in the December 31, 2002 consolidated balance sheet.

F-17

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table summarizes the components of the liabilities included
in the line "liabilities subject to compromise" in our consolidated balance
sheet at December 31, 2002 (dollars in millions):

PREDECESSOR
-----------

Other liabilities:
Liability for guarantee of bank loans to former directors
and current and former officers and key employees of
Old Conseco to purchase common stock of Old Conseco.... $ 480.8
Interest payable.......................................... 171.6
Accrual for distributions on Company-obligated mandatorily
redeemable preferred securities of subsidiary trusts of
Old Conseco............................................ 90.1
Liability for retirement benefits pursuant to executive
employment agreements.................................. 22.6
Liability for deferred compensation....................... 2.3
Other liabilities......................................... 48.8
--------
Total other liabilities subject to compromise.......... 816.2
Notes payable -- direct corporate obligations............... 4,057.1
--------
Total liabilities subject to compromise................ $4,873.3
========

OTHER INTANGIBLE ASSETS

In conjunction with our adoption of fresh start accounting, we identified
certain intangible assets other than goodwill. We determined the value of these
assets with assistance from an independent valuation firm. In accordance with
SFAS 142, other intangible assets with indefinite lives are not amortized, but
are subject to impairment tests on an annual basis (or more frequent under
certain circumstances). SFAS 142 requires intangible assets with finite useful
lives to be amortized over their estimated useful lives and to be reviewed for
impairment in accordance with Statement of Financial Accounting Standards No.
144, "Accounting for Impairment or Disposal of Long-Lived Assets" ("SFAS 144").
We amortize the value of our career agency force and our independent agency
force over their estimated useful lives of 15 years using the straight line
method. We continually evaluate the reasonableness of the useful lives of these
assets.

The following summarizes other identifiable intangible assets as of
December 31, 2003 (dollars in millions):

SUCCESSOR
---------

Indefinite lived other intangible assets:
Trademarks and tradenames................................. $ 25.1
State licenses and charters............................... 17.0
------
Total indefinite lived other intangible assets......... 42.1
------
Finite lived other intangible assets:
Career agency force....................................... 64.7
Independent agency force.................................. 49.8
Other..................................................... 1.2
Less accumulated amortization............................. (2.6)
------
Total finite lived other intangible assets........... 113.1
------
Total other intangible assets............................... $155.2
======

F-18

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

ASSETS HELD IN SEPARATE ACCOUNTS AND INVESTMENT TRUST

Separate accounts are funds on which investment income and gains or losses
accrue directly to certain policyholders. The assets of these accounts are
legally segregated. They are not subject to the claims that may arise out of any
other business of Conseco. We report separate account assets at market value;
the underlying investment risks are assumed by the contractholders. We record
the related liabilities at amounts equal to the market value of the underlying
assets. We record the fees earned for administrative and contractholder services
performed for the separate accounts in insurance policy income.

In addition, prior to its liquidation in the third quarter of 2003, we held
investments in a trust for the benefit of the purchasers of certain products of
our asset management subsidiary. Because we held the residual interests in the
cash flows from the trust and actively managed its investments, we were required
to include the accounts of the trust in our consolidated financial statements.
We recorded the fees earned for investment management and other services
provided to the trust as fee revenue. See the caption "Brickyard Trust" in the
note to the consolidated financial statements entitled "Investments in Variable
Interest Entities" for further information on these investments.

RECOGNITION OF INSURANCE POLICY INCOME AND RELATED BENEFITS AND EXPENSES ON
INSURANCE CONTRACTS

Generally, we recognize insurance premiums for traditional life and
accident and health contracts as earned over the premium-paying periods. We
establish reserves for future benefits on a net-level premium method based upon
assumptions as to investment yields, mortality, morbidity, withdrawals and
dividends. We record premiums for universal life-type and investment-type
contracts that do not involve significant mortality or morbidity risk as
deposits to insurance liabilities. Revenues for these contracts consist of
mortality, morbidity, expense and surrender charges. We establish reserves for
the estimated present value of the remaining net costs of all reported and
unreported claims.

REINSURANCE

In the first quarter of 2002, we completed a reinsurance agreement pursuant
to which we ceded 80 percent of the inforce traditional life business of our
subsidiary, Bankers Life and Casualty Company, to Reassure America Life
Insurance Company (rated A+ by A.M. Best Company, or "A.M. Best"). The total
insurance liabilities ceded pursuant to the contract were approximately $400
million. The reinsurance agreement and the related dividends of $110.5 million
were approved by the appropriate state insurance departments and the dividends
were paid to Old Conseco. The ceding commission approximated the amount of the
cost of policies purchased and cost of policies produced related to the ceded
business.

On June 28, 2002, we completed a reinsurance transaction pursuant to which
we ceded 100 percent of the traditional life and interest-sensitive life
insurance business of our subsidiary, Conseco Variable Insurance Company, to
Protective Life Insurance Company (rated A+ by A.M. Best). The total insurance
liabilities ceded pursuant to the contract were approximately $470 million. Our
insurance subsidiary received a ceding commission of $49.5 million.

During the second quarter of 2002, one of our subsidiaries, Colonial Penn
Life Insurance Company (formerly known as Conseco Direct Life Insurance
Company), ceded a block of graded benefit life insurance policies to an
unaffiliated company pursuant to a modified coinsurance agreement. Our
subsidiary received a ceding commission of $83.0 million. The cost of policies
purchased and the cost of policies produced were reduced by $123.0 million and
we recognized a loss of $39.0 million related to the transaction.

In the normal course of business, we seek to limit our exposure to loss on
any single insured or to certain groups of policies by ceding reinsurance to
other insurance enterprises. We currently retain no more than $.8 million of
mortality risk on any one policy. We diversify the risk of reinsurance loss by
using a number of reinsurers that have strong claims-paying ratings. If any
reinsurer could not meet its obligations,

F-19

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the Company would assume the liability. The likelihood of a material loss being
incurred as a result of the failure of one of our reinsurers is considered
remote. The cost of reinsurance is recognized over the life of the reinsured
policies using assumptions consistent with those used to account for the
underlying policy. The cost of reinsurance ceded totaled $92.1 million in the
four months ended December 31, 2003; $196.4 million in the eight months ended
August 31, 2003; and $327.8 million and $249.4 million in 2002 and 2001,
respectively. We deduct this cost from insurance policy income. In each case,
the ceding Conseco subsidiary is contingently liable for claims reinsured if the
assuming company is unable to pay. Reinsurance recoveries netted against
insurance policy benefits totaled $94.3 million in the four months ended
December 31, 2003; $199.2 million in the eight months ended August 31, 2003; and
$323.6 million and $201.3 million in 2002 and 2001, respectively.

From time-to-time, we assume insurance from other companies. Any costs
associated with the assumption of insurance are amortized consistent with the
method used to amortize the cost of policies produced described above.
Reinsurance premiums assumed totaled $31.9 million in the four months ended
December 31, 2003; $57.3 million in the eight months ended August 31, 2003; and
$78.7 million and $146.0 million in 2002 and 2001, respectively.

See "Accounting for Derivatives" for a discussion of the derivative
embedded in the payable related to certain modified coinsurance agreements.

INCOME TAXES

Our income tax expense includes deferred income taxes arising from
temporary differences between the financial reporting and tax bases of assets
and liabilities, capital loss carryforwards and net operating loss
carryforwards. In assessing the realization of deferred income tax assets, we
consider whether it is more likely than not that the deferred income tax assets
will be realized. The ultimate realization of our deferred income tax assets
depends upon generating future taxable income during the periods in which our
temporary differences become deductible and before our net operating loss
carryforwards expire. In addition, the use of the Company's net ordinary loss
carryforwards is dependent, in part, on whether the IRS ultimately agrees with
the tax position we plan to take in our current and future tax returns. We
evaluate the realizability of our deferred income tax assets by assessing the
need for a valuation allowance on a quarterly basis. As of December 31, 2003, a
valuation allowance has been provided for the entire balance of the net deferred
tax asset as the realization of the net deferred tax asset is uncertain.

INVESTMENT BORROWINGS

As part of our investment strategy, we may enter into reverse repurchase
agreements and dollar-roll transactions to increase our investment return or to
improve our liquidity. We account for these transactions as collateral
borrowings, where the amount borrowed is equal to the sales price of the
underlying securities. Reverse repurchase agreements involve a sale of
securities and an agreement to repurchase the same securities at a later date at
an agreed-upon price. Dollar rolls are similar to reverse repurchase agreements
except that, with dollar rolls, the repurchase involves securities that are
substantially the same as the securities sold (rather than being the same
security). Such borrowings (excluding borrowings related to the GM building)
averaged $488.9 million during the four months ended December 31, 2003; $689.1
million during the eight months ended August 31, 2003; and $1,155.8 million
during 2002. These borrowings were collateralized by investment securities with
fair values approximately equal to the loan value. The weighted average interest
rates on such borrowings were 1.5 percent during the four months ended December
31, 2003; 1.8 percent during the eight months ended August 31, 2003; and 1.3
percent during 2002. The primary risk associated with short-term collateralized
borrowings is that a counterparty will be unable to perform under the terms of
the contract. Our exposure is limited to the excess of the net replacement cost
of the securities over the value of the short-term investments (such excess was
not material at December 31, 2003). We believe the

F-20

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

counterparties to our reverse repurchase and dollar-roll agreements are
financially responsible and that the counterparty risk is minimal.

USE OF ESTIMATES

When we prepare financial statements in conformity with GAAP, we are
required to make estimates and assumptions that significantly affect various
reported amounts of assets and liabilities, and the disclosure of contingent
assets and liabilities at the date of the financial statements and revenues and
expenses during the reporting periods. For example, we use significant estimates
and assumptions in calculating values for the cost of policies produced, the
cost of policies purchased, the value of policies inforce at the Effective Date,
certain investments, assets and liabilities related to income taxes, goodwill,
liabilities for insurance and asset accumulation products, liabilities related
to litigation, guaranty fund assessment accruals and liabilities related to
guarantees of bank loans and the related interest loans to certain former
directors and certain current and former officers and key employees. If our
future experience differs from these estimates and assumptions, our financial
statements would be materially affected.

ACCOUNTING FOR DERIVATIVES

Our equity-indexed annuity products provide a guaranteed base rate of
return and a higher potential return linked to the performance of the Standard &
Poor's 500 Index ("S&P 500 Index") based on a percentage (the "participation
rate") over an annual period. At the beginning of each policy year, a new index
period begins. We are able to change the participation rate at the beginning of
each index period, subject to contractual minimums. We buy S&P 500 Call Options
in an effort to hedge potential increases to policyholder benefits resulting
from increases in the S&P 500 Index to which the product's return is linked. We
include the cost of the S&P 500 Call Options in the pricing of these products.
Policyholder account balances for these annuities fluctuate in relation to
changes in the values of these options. We reflect changes in the estimated
market value of these options in net investment income. Option costs that are
attributable to benefits provided were $19.1 million during the four months
ended December 31, 2003; $53.5 million during the eight months ended August 31,
2003; and $97.5 million and $119.0 million during 2002 and 2001, respectively.
These costs are reflected in the change in market value of the S&P 500 Call
Options included in investment income. Net investment income (loss) related to
equity-indexed products before this expense was $61.3 million in the four months
ended December 31, 2003; $78.7 million in the eight months ended August 31,
2003; and $(3.0) million and $4.8 million in 2002 and 2001, respectively. These
amounts were substantially offset by the corresponding charge to insurance
policy benefits. The estimated fair value of the S&P 500 Call Options was $97.2
million and $32.8 million at December 31, 2003 and 2002, respectively. We
classify these instruments as other invested assets. The Company accounts for
the options attributed to the policyholder for the estimated life of the annuity
contract as embedded derivatives as defined by Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities", as amended by Statement of Financial Accounting Standards No. 137,
"Deferral of the Effective Date of FASB Statement No. 133" and Statement of
Financial Accounting Standards No. 138, "Accounting for Certain Derivative
Instruments and Certain Hedging Activities" (collectively referred to as "SFAS
138"). We record the changes in the fair values of the embedded derivatives in
current earnings as a component of policyholder benefits. The fair value of
these derivatives, which are classified as "liabilities for interest-sensitive
products" was $214.7 million and $301.9 million at December 31, 2003 and 2002,
respectively. We have transferred a specified block of investments which are
equal to the balance of these liabilities to our trading securities account,
which we carry at estimated fair value with changes in such value recognized as
investment income (classified as investment income from policyholder accounts).
The change in value of these trading securities should largely offset the
portion of the change in the value of the embedded derivative which is caused by
interest rate fluctuations.

F-21

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

On June 29, 2001, we entered into interest rate swap agreements to convert
the fixed rate on our senior notes (10.75 percent) to a variable rate based on
LIBOR plus 4.75 percent. In accordance with the requirements of SFAS 138, the
change in the fair value of the interest rate swap and the gain or loss on the
hedged senior notes attributable to the hedged interest rate risk were recorded
in current-period earnings. Because the terms of the interest rate swap
agreements substantially matched the terms of the senior notes, the gain or loss
on the swap and the senior notes was generally equal and offsetting (although
the effective interest rate on our debt was affected).

In early October 2001, we terminated these interest rate swap agreements
for cash proceeds of $19.0 million (the value of the terminated swap
agreements). No gain was recognized upon the termination of the interest rate
swap agreements. Instead, the change in the fair value of the senior notes
recorded while the interest rate swaps were outstanding was amortized as a
reduction to interest expense over the remaining life of our senior notes until
such notes were discharged in accordance with the Plan.

In October 2001, we also entered into new interest rate swap agreements to
replace the terminated agreements which converted the fixed rate on our 10.75%
senior notes to a variable rate based on LIBOR plus 5.7525 percent. Such
interest rate swap agreements were terminated in April 2002 generating cash
proceeds of $3.5 million. Such amount represented $11.9 million of cash due to
the Company pursuant to the terms of the swaps, net of $8.4 million which
represented the fair value of the interest rate swaps on the date of
termination. The $8.4 million was amortized as additional interest expense over
the remaining life of our senior notes until such notes were discharged in
accordance with the Plan.

The Company entered into a forward sale contract related to a portion of
its venture capital investment in AWE. Such contract was carried at market
value, with the change in such value being recognized as venture capital income
(loss). The value of the derivative fluctuated in relation to the AWE common
stock it related to. In the third quarter of 2002, we agreed with the
counterparties to unwind the forward sale contract. The net effect of unwinding
the forward purchase contract resulted in a small gain.

If the counterparties for the derivatives we hold fail to meet their
obligations, we may have to recognize a loss. We limit our exposure to such a
loss by diversifying among several counterparties believed to be strong and
creditworthy. At December 31, 2003, all of the counterparties were rated "A" or
higher by Standard & Poor's Corporation ("S&P").

The FASB's Derivative Implementation Group issued SFAS No. 133
Implementation Issue No. B36, "Embedded Derivatives: Modified Coinsurance
Arrangements and Debt Instruments that Incorporate Credit Risk Exposures that
are Unrelated or Only Partially Related to the Creditworthiness of the Obligor
of Those Instruments" ("DIG B36") in April 2003. DIG B36 addresses specific
circumstances under which bifurcation of an instrument into a host contract and
an embedded derivative is required. DIG B36 requires the bifurcation of a
derivative from the receivable or payable related to a modified coinsurance
agreement, where the yield on the receivable and payable is based on a return of
a specified block of assets rather than the creditworthiness of the ceding
company. We implemented this guidance on August 31, 2003, in conjunction with
our adoption of fresh start accounting. We have determined that certain of our
reinsurance payable balances contain embedded derivatives. Such derivatives had
an estimated fair value of $20.9 million and $27.2 million at August 31, 2003
and December 31, 2003, respectively. We record the change in the fair value of
these derivatives as a component of investment income (classified as investment
income from policyholder and reinsurer accounts). We have transferred the
specific block of investments related to these agreements to our trading
securities account, which we carry at estimated fair value with changes in such
value recognized as investment income (also classified as investment income from
reinsurer accounts). The change in value of these trading securities should
largely offset the change in value of the embedded derivatives.

F-22

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

MULTIBUCKET ANNUITY PRODUCT

The Company's multibucket annuity is a fixed annuity product that credits
interest based on the experience of a particular market strategy. Policyholders
allocate their annuity premium payments to several different market strategies
based on different asset classes within the Company's investment portfolio.
Interest is credited to this product based on the market return of the given
strategy, less management fees, and funds may be moved between different
strategies. The Company guarantees a minimum return of premium plus
approximately 3 percent per annum over the life of the contract. The investments
backing the market strategies of these products are designated by the Company as
trading securities. The change in the fair value of these securities is
recognized currently in investment income (classified as income from
policyholder and reinsurer accounts) which is substantially offset by the change
in insurance policy benefits for these products.

ACCOUNTING FOR STOCK OPTIONS

In December 2002, the FASB issued Statement of Financial Accounting
Standards No. 148, "Accounting for Stock-Based Compensation -- Transition and
Disclosure", an Amendment of FASB Statement No. 123 ("SFAS 148"), which provides
three alternative methods of transition to the fair value method of accounting
for stock options. SFAS 148 also amends the disclosure requirements of Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123").

We apply Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" and related interpretations in accounting for our stock
option plans. Had compensation cost been determined based on the fair value at
the grant dates for awards granted after January 1, 1995, consistent with the
method of SFAS 123, the Company's pro forma net income (loss) and pro forma
earnings (loss) per share would have been as follows (dollars in millions,
except per share amounts):

Net income (loss), as reported............. $96.3 $2,201.7 $(7,835.7) $(405.9)
Less stock-based employee compensation
expense determined under the fair value
based method for all awards, net of
income taxes............................. .4 7.2 12.4 28.2
----- -------- --------- -------
Pro forma net income (loss)................ $95.9 $2,194.5 $(7,848.1) $(434.1)
===== ======== ========= =======
Earnings per share:
Basic, as reported....................... $ .68
=====
Basic, pro forma......................... $ .68
=====
Diluted, as reported..................... $ .67
=====
Diluted, pro forma....................... $ .67
=====

Pro forma compensation expense in the eight months ended August 31, 2003,
has been reduced by $5.0 million due to the reversal of expense for options that
were not vested upon cancellation of the outstanding stock options of the
Predecessor.

F-23

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

FAIR VALUES OF FINANCIAL INSTRUMENTS

We use the following methods and assumptions to determine the estimated
fair values of financial instruments:

INVESTMENT SECURITIES. For fixed maturity securities (including
redeemable preferred stocks) and for equity and trading securities, we use
quotes from independent pricing services, where available. For investment
securities for which such quotes are not available, we use values obtained
from broker-dealer market makers or by discounting expected future cash
flows using a current market rate appropriate for the yield, credit
quality, and (for fixed maturity securities) the maturity of the investment
being priced.

VENTURE CAPITAL INVESTMENT IN AWE. We carry this investment at
estimated fair value based on quoted market prices.

CASH AND CASH EQUIVALENTS. The carrying amount for these instruments
approximates their estimated fair value.

MORTGAGE LOANS AND POLICY LOANS. We discount future expected cash
flows for loans included in our investment portfolio based on interest
rates currently being offered for similar loans to borrowers with similar
credit ratings. We aggregate loans with similar characteristics in our
calculations. The market value of policy loans approximates their carrying
value.

OTHER INVESTED ASSETS. We use quoted market prices, where available.
When quotes are not available, we estimate the fair value based on: (i)
discounted future expected cash flows; or (ii) independent transactions
which establish a value for our investment. When we are unable to estimate
a fair value, we assume a market value equal to carrying value.

INSURANCE LIABILITIES FOR INTEREST-SENSITIVE PRODUCTS. We discount
future expected cash flows based on interest rates currently being offered
for similar contracts with similar maturities.

INVESTMENT BORROWINGS AND NOTES PAYABLE. For publicly traded debt, we
use current market values. For other notes, we use discounted cash flow
analyses based on our current incremental borrowing rates for similar types
of borrowing arrangements.

F-24

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Here are the estimated fair values of our financial instruments (dollars in
millions):

SUCCESSOR PREDECESSOR
--------------------- ---------------------
DECEMBER 31, 2003 DECEMBER 31, 2002
--------------------- ---------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ----- -------- -----

Financial assets:
Actively managed fixed maturities.... $19,840.1 $19,840.1 $19,417.4 $19,417.4
Equity securities.................... 74.5 74.5 156.0 156.0
Mortgage loans....................... 1,139.5 1,174.1 1,308.3 1,335.7
Policy loans......................... 503.4 503.4 536.2 536.2
Trading securities................... 915.1 915.1 -- --
Venture capital investment in AT&T
Wireless Services, Inc............ -- -- 25.0 25.0
Other invested assets................ 324.1 324.1 340.8 340.8
Cash and cash equivalents............ 1,260.6 1,260.6 1,268.9 1,268.9
Financial liabilities:
Insurance liabilities for
interest-sensitive products(a).... 12,480.4 12,480.4 13,122.7 13,122.7
Investment borrowings................ 387.3 387.3 669.7 669.7
Notes payable:
Corporate(b)...................... 1,300.0 1,300.0 -- --
Company-obligated mandatorily
redeemable preferred securities of
subsidiary trusts................. -- -- 1,921.5 9.7

---------------

(a) The estimated fair value of the liabilities for interest-sensitive products
was approximately equal to its carrying value at December 31, 2003 and
2002. This was because interest rates credited on the vast majority of
account balances approximate current rates paid on similar products and
because these rates are not generally guaranteed beyond one year. We are
not required to disclose fair values for insurance liabilities, other than
those for interest-sensitive products. However, we take into consideration
the estimated fair values of all insurance liabilities in our overall
management of interest rate risk. We attempt to minimize exposure to
changing interest rates by matching investment maturities with amounts due
under insurance contracts.

(b) At December 31, 2002, corporate notes payable were classified as
liabilities subject to compromise.

CUMULATIVE EFFECT OF ACCOUNTING CHANGE AND GOODWILL IMPAIRMENT RELATED TO
PREDECESSOR

The FASB issued SFAS 142, in June 2001. Under the new rule, intangible
assets with an indefinite life are no longer amortized in periods subsequent to
December 31, 2001, but are subject to annual impairment tests (or more frequent
under certain circumstances), effective January 1, 2002. The Company determined
that all of its goodwill had an indefinite life and was therefore subject to the
new rules. The Company adopted SFAS 142 on January 1, 2002.

Pursuant to the transitional rules of SFAS 142, we completed the two-step
impairment test during 2002 and, as a result of that test, we recorded the
cumulative effect of the accounting change for the goodwill impairment charge of
$2,949.2 million. The impairment charge is reflected in the cumulative effect of
an accounting change in the accompanying consolidated statement of operations
for the year ended December 31, 2002. Subsequent impairment charges are
classified as an operating expense. As described below, the Company performed an
impairment test in 2002, as a result of circumstances which indicated a possible
impairment.

F-25

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The significant factors used to determine the amount of the initial
impairment included analyses of industry market valuations, historical and
projected performance of our insurance segment, discounted cash flow analyses
and the market value of our capital. The valuation utilized the best available
information, including assumptions and projections we considered reasonable and
supportable. The assumptions we used to determine the discounted cash flows
involve significant judgments regarding the best estimate of future premiums,
expected mortality and morbidity, interest earned and credited rates,
persistency and expenses. The discount rate used was based on an analysis of the
weighted average cost of capital for several insurance companies and considered
the specific risk factors related to Conseco. Pursuant to the guidance in SFAS
142, quoted market prices in active markets are the best evidence of fair value
and shall be used as the basis for measurement, if available.

On August 14, 2002, our insurance subsidiaries' financial strength ratings
were downgraded by A.M. Best to "B (fair)" and on September 8, 2002, the Company
defaulted on its public debt. These developments caused sales of our insurance
products to fall and policyholder redemptions and lapses to increase. The
adverse impact on our insurance subsidiaries resulting from the ratings
downgrade and parent company default required that an additional impairment test
be performed as of September 30, 2002, in accordance with SFAS 142.

In connection with the preparation of the Plan, we retained an outside
actuarial consulting firm to assist in valuing our insurance subsidiaries. That
valuation work and our internal evaluation were used in performing the
additional impairment tests that resulted in an impairment charge to goodwill of
$500.0 million. The charge is reflected in the line item entitled "Goodwill
impairment" in our consolidated statement of operations for the year ended
December 31, 2002. The most significant changes made to the January 1, 2002
valuation that resulted in the additional impairment charge were: (i) reduced
estimates of projected future sales of insurance products; (ii) increased
estimates of future policyholder redemptions and lapses; and (iii) a higher
discount rate to reflect the current rates used by the market to value life
insurance companies. Management believes that the assumptions and estimates used
were reasonable given all available facts and circumstances at the time made.

Prior to the adoption of SFAS 142, we determined whether goodwill was
recoverable from projected undiscounted net cash flows for the earnings of our
subsidiaries over the remaining amortization period. If we determined that
undiscounted projected cash flows were not sufficient to recover the goodwill
balance, we would reduce its carrying value with a corresponding charge to
expense or shorten the amortization period. Cash flows considered in such an
analysis were those of the business acquired, if separately identifiable, or the
product line that acquired the business, if such earnings were not separately
identifiable.

Changes in the carrying amount of Predecessor's goodwill for the eight
months ended August 31, 2003, and the year ended December 31, 2002, are as
follows (dollars in millions):

PREDECESSOR
---------------------------
EIGHT MONTHS
ENDED YEAR ENDED
AUGUST 31, DECEMBER 31,
2003 2002
------------ ------------

Goodwill balance, beginning of period................ $100.0 $ 3,695.4
Cumulative effect of accounting change............... -- (2,949.2)
Impairment charge.................................... -- (500.0)
Reduction of tax valuation contingencies established
at acquisition date for acquired companies......... (.6) (146.2)
------ ---------
Goodwill balance, end of period...................... $ 99.4 $ 100.0
====== =========

F-26

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In accordance with SFAS 142, we discontinued the amortization of goodwill
expense effective January 1, 2002. The following information summarizes the
impact of goodwill amortization on income before discontinued operations and
cumulative effect of accounting change; and net income for the periods presented
in our consolidated statement of operations for periods prior to January 1, 2002
(dollars in millions, except per share data):

PREDECESSOR
------------
YEAR ENDED
DECEMBER 31,
2001
------------

Reported loss before discontinued operations and cumulative
effect of accounting change............................... $(305.3)
Add back: goodwill amortization............................. 108.2
-------
Adjusted loss before discontinued operations and cumulative
effect of accounting change............................... $(197.1)
=======
Reported net loss applicable to common stock................ $(418.7)
Add back: goodwill amortization............................. 109.6
-------
Adjusted net loss applicable to common stock................ $(309.1)
=======

RECENTLY ISSUED ACCOUNTING STANDARDS

Pursuant to SOP 90-7, we have implemented the provisions of accounting
principles required to be adopted within twelve months of the adoption of fresh
start accounting. The following summarizes the new accounting pronouncements we
have recently adopted:

The FASB's Derivative Implementation Group issued DIG B36 in April 2003.
DIG B36 addresses specific circumstances under which bifurcation of an
instrument into a host contract and an embedded derivative is required. DIG B36
requires the bifurcation of a derivative from the receivable or payable related
to a modified coinsurance agreement, where the yield on the receivable and
payable is based on a return of a specified block of assets rather than the
creditworthiness of the ceding company. We implemented this guidance on August
31, 2003, in conjunction with our adoption of fresh start accounting. See the
note entitled "Accounting for Derivatives" for a discussion of the impact of
implementing this guidance.

The FASB issued Financial Accounting Standards No. 149 "Amendment of SFAS
No. 133 on Derivative Instruments and Hedging Activities" ("SFAS 149") in April
2003. SFAS 149 amends and clarifies accounting for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities under Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities." Except for
certain implementation guidance included in SFAS 149 which is already effective,
the new guidance is effective for: (i) contracts entered into or modified after
June 30, 2003; and (ii) hedging relationships designated after June 30, 2003.
The adoption of SFAS 149 did not have a material impact on the Company's
consolidated financial statements.

The FASB issued Financial Accounting Standards No. 150, "Accounting for
Certain Financial Instruments with Characteristics of Both Liabilities and
Equity" ("SFAS 150") in May 2003. SFAS 150 establishes standards for classifying
and measuring certain financial instruments that embody obligations of the
issuer and have characteristics of both liabilities and equity. For example,
mandatorily redeemable preferred stock is required to be classified as a
liability pursuant to SFAS 150. SFAS 150 is effective immediately for financial
instruments entered into or modified after May 31, 2003, and for all other
financial instruments beginning with the third quarter of 2003. Effective July
1, 2003, Old Conseco's Company-

F-27

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

obligated mandatorily redeemable preferred securities of subsidiary trusts, or
TOPrS, with an aggregate carrying value of $1,921.5 million, were reclassified
to liabilities pursuant to the provisions of SFAS 150. The adoption of SFAS 150
does not impact the financial statements of Conseco subsequent to the Effective
Date since the Company-obligated mandatorily redeemable preferred securities of
subsidiary trusts are no longer outstanding.

The Accounting Standards Executive Committee of the American Institute of
Certified Public Accountants issued Statement of Position 03-01 "Accounting and
Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration
Contracts and for Separate Accounts" ("SOP 03-01") in July 2003. SOP 03-01
provides guidance on several insurance company disclosure and accounting matters
including the appropriate accounting for: (i) separate accounts; (ii) additional
interest (for example, persistency bonus) accruing to the investment contract
holder; (iii) the liability for contracts where the amounts assessed against the
contract holder each period are assessed in a manner that is expected to result
in profits in earlier years and losses in subsequent years; (iv) potential
benefits to annuity holders in addition to their account balance; (v) sales
inducements to contract holders; and (vi) other provisions. The Company recently
sold most of its separate account business. Accordingly, the new guidance
related to separate accounts will have no impact on the Company's consolidated
financial position, results of operations or cash flows. As a result of our
adoption of fresh start accounting, we were required to revalue our insurance
product liabilities and record them at their estimated fair market value. In
calculating the value of the liabilities for insurance and asset accumulation
products, we followed the guidance of SOP 03-01. We have changed the way we
classify the costs related to sales inducements in accordance with the new
guidance. However, such change was not material. Our reserve for sales
inducement persistency bonus benefits was $282.8 million at December 31, 2003,
and $278.6 million at August 31, 2003.

In January 2003, the FASB issued FIN 46, which requires expanded
disclosures for and, in some cases, consolidation of significant investments in
variable interest entities ("VIE"). A VIE is an entity in which the equity
investors do not have the characteristics of a controlling financial interest,
or do not have sufficient equity at risk for the entity to finance its
activities without additional subordinated financial support from other parties.
Under FIN 46, a company is required to consolidate a VIE if it is the primary
beneficiary of the VIE. FIN 46 defines primary beneficiary as the party which
will absorb a majority of the VIE's expected losses or receive a majority of the
VIE's expected residual returns, or both.

The Company has investments in various types of VIEs, some of which require
additional disclosure under FIN 46, and several of which require consolidation
under FIN 46. As further discussed in the note to the consolidated financial
statements entitled "Investments in Variable Interest Entities", we have
consolidated all of our investments in VIEs. The adoption of the consolidation
requirements of FIN 46 did not have a material impact on our financial condition
or results of operations. The note entitled "Investments in Variable Interest
Entities" includes the expanded disclosures required by FIN 46.

The FASB issued FASB Interpretation No. 45, "Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others" ("FIN 45") in November 2002. FIN 45 requires certain
guarantees to be recognized as liabilities at fair value. In addition, it
requires a guarantor to make new disclosures regarding its obligations. We
implemented the new disclosure requirements as of December 31, 2002. FIN 45's
liability recognition requirement is effective on a prospective basis for
guarantees issued or modified after December 31, 2002. The adoption of FIN 45
did not impact the Company's results of operations or financial condition.

The FASB issued Statement of Financial Accounting Standards No. 146,
"Accounting for Exit or Disposal Activities" ("SFAS 146") in June 2002. SFAS 146
addresses financial accounting and reporting for costs that are associated with
exit and disposal activities and supersedes Emerging Issues Task Force Issue No.
94-3, "Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)"
("EITF 94-3"). SFAS 146 is required to be

F-28

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

used to account for exit or disposal activities that are initiated after
December 31, 2002. The provisions of EITF 94-3 shall continue to apply for an
exit activity initiated prior to the adoption of SFAS 146. SFAS 146 requires
companies to recognize costs associated with exit or disposal activities when
they are incurred rather than at the date of commitment to an exit or disposal
plan. The Company adopted the provisions of SFAS 146 on January 1, 2003. The
initial adoption of SFAS 146 did not have an impact on the Company's
consolidated financial statements.

The FASB issued Statement of Financial Accounting Standards No. 145,
"Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No.
13, and Technical Corrections" ("SFAS 145") in April 2002. Under previous
guidance all gains and losses resulting from the extinguishment of debt were
required to be aggregated and, if material, classified as an extraordinary item,
net of related income tax effect. SFAS 145 rescinds that guidance and requires
that gains and losses from extinguishments of debt be classified as
extraordinary items only if they are both unusual and infrequent in occurrence.
SFAS 145 also amends previous guidance to require certain lease modifications
that have economic effects similar to sale-leaseback transactions to be
accounted for in the same manner as sale-leaseback transactions. The Company
adopted SFAS 145 on January 1, 2003. Prior period amounts related to
extraordinary gains on the extinguishment of debt have been reclassified in
accordance with the new guidance.

The FASB issued SFAS 144 in August 2001. This standard addresses the
measurement and reporting for impairment of all long-lived assets. It also
broadens the definition of what may be presented as a discontinued operation in
the consolidated statement of operations to include components of a company's
business segments. SFAS 144 requires that long-lived assets currently in use be
written down to fair value when considered impaired. Long-lived assets to be
disposed of are written down to the lower of cost or fair value less the
estimated cost to sell. The Company adopted this standard on January 1, 2002. We
followed this standard in determining when it was appropriate to recognize
impairments on assets we decided to sell as part of our efforts to raise cash.
We also followed this standard in determining that our variable annuity business
line and CFC should be presented as discontinued operations in our consolidated
financial statements (see the note to the consolidated financial statements
entitled "Discontinued Operations").

F-29

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5. INVESTMENTS

At December 31, 2003, the amortized cost and estimated fair value of
actively managed fixed maturities and equity securities were as follows (dollars
in millions):

SUCCESSOR
------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
--------- ---------- ---------- ----------

Investment grade:
Corporate securities............ $11,169.7 $279.8 $13.7 $11,435.8
United States Treasury
securities and obligations of
United States government
corporations and agencies.... 1,068.9 14.1 1.7 1,081.3
States and political
subdivisions................. 608.4 5.9 2.4 611.9
Debt securities issued by
foreign governments.......... 84.6 1.6 -- 86.2
Structured securities........... 5,804.6 59.2 14.9 5,848.9
Below-investment grade (primarily
corporate securities)........... 734.5 43.2 1.7 776.0
--------- ------ ----- ---------
Total actively managed fixed
maturities................. $19,470.7 $403.8 $34.4 $19,840.1
========= ====== ===== =========
Equity securities................. $ 71.8 $ 2.8 $ .1 $ 74.5
========= ====== ===== =========

At December 31, 2002, the amortized cost and estimated fair value of
actively managed fixed maturities and equity securities were as follows (dollars
in millions):

PREDECESSOR
-----------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- ---------

Investment grade:
Corporate securities............. $10,529.0 $517.5 $293.9 $10,752.6
United States Treasury securities
and obligations of United
States government corporations
and agencies.................. 442.4 25.2 9.0 458.6
States and political
subdivisions.................. 418.0 23.2 .9 440.3
Debt securities issued by foreign
governments................... 83.3 7.3 -- 90.6
Structured securities............ 6,082.0 336.3 4.2 6,414.1
Below-investment grade (primarily
corporate securities)............ 1,435.1 17.1 191.0 1,261.2
--------- ------ ------ ---------
Total actively managed fixed
maturities.................. $18,989.8 $926.6 $499.0 $19,417.4
========= ====== ====== =========
Equity securities.................. $ 161.4 $ 4.5 $ 9.9 $ 156.0
========= ====== ====== =========

F-30

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Accumulated other comprehensive income is primarily comprised of unrealized
gains on actively managed fixed maturity investments. These amounts, included in
shareholders' equity (deficit) as of December 31, 2003 and 2002, were as follows
(dollars in millions):

SUCCESSOR PREDECESSOR
------------ ------------
DECEMBER 31, DECEMBER 31,
2003 2002
------------ ------------

Net unrealized gains on investments.................. $ 375.2 $448.1
Adjustment to value of policies inforce at the
Effective Date..................................... (33.5) --
Adjustments to cost of policies purchased and cost of
policies produced.................................. -- (95.3)
Deferred income tax asset (liability)................ (123.0) 249.6
Other................................................ -- (21.8)
------- ------
Accumulated other comprehensive income............. $ 218.7 $580.6
======= ======

CONCENTRATION OF ACTIVELY MANAGED FIXED MATURITY SECURITIES

The following table summarizes the carrying values of our fixed maturity
securities by industry category as of December 31, 2003 (dollars in millions):

PERCENT OF
CARRYING FIXED
VALUE MATURITIES
-------- ----------

BELOW-INVESTMENT GRADE SECURITIES

At December 31, 2003, the amortized cost of the Company's fixed maturity
securities in below-investment grade securities was $734.5 million, or 3.8
percent of the Company's fixed maturity portfolio. The estimated fair value of
the below-investment grade portfolio was $776.0 million, or 106 percent of the
amortized cost. The value of these securities varies based on the economic terms
of the securities, structural considerations and the creditworthiness of the
issuer of the securities. Recently a number of large, highly leveraged issuers
have experienced significant financial difficulties, which resulted in our
recognition of other-than-temporary impairments.

F-31

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

grade securities than with other corporate debt securities. Below-investment
grade securities are generally unsecured and are often subordinated to other
creditors of the issuer. Also, issuers of below-investment grade securities
usually have higher levels of debt and are more sensitive to adverse economic
conditions, such as recession or increasing interest rates, than are investment
grade issuers. The Company attempts to reduce the overall risk in the
below-investment grade portfolio, as in all investments, through careful credit
analysis, strict investment policy guidelines, and diversification by issuer
and/or guarantor and by industry.

CONTRACTUAL MATURITY

The following table sets forth the amortized cost and estimated fair value
of actively managed fixed maturities at December 31, 2003, by contractual
maturity. Actual maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without call
or prepayment penalties. Most of the mortgage-backed securities shown below
provide for periodic payments throughout their lives (dollars in millions).

AMORTIZED ESTIMATED
COST FAIR VALUE
--------- ----------

Due in one year or less.................................... $ 103.9 $ 105.1
Due after one year through five years...................... 1,256.0 1,271.2
Due after five years through ten years..................... 5,229.6 5,318.3
Due after ten years........................................ 7,074.4 7,294.5
--------- ---------
Subtotal................................................. 13,663.9 13,989.1
Structured securities(a)................................... 5,806.8 5,851.0
--------- ---------
Total actively managed fixed maturities............... $19,470.7 $19,840.1
========= =========

---------------

(a) Includes below-investment grade mortgage-backed securities with both an
amortized cost and estimated fair value of $2.1 million.

F-32

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NET INVESTMENT INCOME

Net investment income consisted of the following (dollars in millions):

Fixed maturities................. $381.7 $812.8 $1,375.2 $1,510.7
Venture capital investment income
(loss)......................... (5.5) 10.5 (99.3) (42.9)
Trading income related to
policyholder and reinsurer
accounts....................... 10.9 -- -- --
Equity securities................ 1.8 8.9 13.2 17.8
Mortgage loans................... 31.5 66.9 99.0 90.2
Policy loans..................... 10.7 23.0 32.6 35.9
Change in value of S&P 500 Call
Options related to
equity-indexed products........ 42.2 25.2 (100.5) (114.2)
Other invested assets............ 7.9 28.4 15.7 24.6
Cash and cash equivalents........ 4.2 11.5 27.6 60.5
Separate accounts................ -- -- -- (5.4)
------ ------ -------- --------
Gross investment income........ 485.4 987.2 1,363.5 1,577.2
Less investment expenses......... 10.8 18.2 29.2 27.2
------ ------ -------- --------
Net investment income.......... $474.6 $969.0 $1,334.3 $1,550.0
====== ====== ======== ========

The carrying value of fixed maturity investments and mortgage loans not
accruing investment income totaled $50.7 million, $169.6 million and $140.2
million at December 31, 2003, 2002 and 2001, respectively.

F-33

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NET REALIZED INVESTMENT GAINS (LOSSES)

Net realized investment gains (losses) were included in revenue as follows
(dollars in millions):

Fixed maturities:
Gross gains...................... $27.6 $129.0 $ 260.8 $ 295.8
Gross losses..................... (7.3) (62.4) (251.8) (260.3)
Other-than-temporary decline in
fair value.................... (3.7) (44.7) (500.6) (293.2)
----- ------ ------- -------
Net realized investment gains
(losses) from fixed
maturities.................. 16.6 21.9 (491.6) (257.7)
Equity securities.................. -- (3.4) (7.5) (1.8)
Mortgages.......................... -- (15.6) (1.4) (1.9)
Other-than-temporary decline in
fair value of equity securities
and other invested assets........ (5.9) (6.6) (56.2) (68.5)
Other.............................. 1.1 (1.7) .4 (10.1)
----- ------ ------- -------
Net realized investment gains
(losses).................... $11.8 $ (5.4) $(556.3) $(340.0)
===== ====== ======= =======

During the four months ended December 31, 2003, we recognized net realized
investment gains of $11.8 million. Such net realized investment gains during the
four months ended December 31, 2003 included: (i) $21.4 million of net gains
from the sales of investments (primarily fixed maturities) which generated
proceeds of $5.2 billion; net of (ii) $9.6 million of writedowns of fixed
maturity investments, equity securities and other invested assets as a result of
conditions which caused us to conclude a decline in fair value of the investment
was other-than-temporary. During the first eight months of 2003, we recognized
net realized investment losses of $5.4 million. The net realized investment
losses during the first eight months of 2003 included: (i) $45.9 million of net
gains from the sales of investments (primarily fixed maturities) which generated
proceeds of $5.4 billion; net of (ii) $51.3 million of writedowns of fixed
maturity investments, equity securities and other invested assets as a result of
conditions which caused us to conclude a decline in fair value of the investment
was other than temporary. At December 31, 2003, fixed maturity securities in
default as to the payment of principal or interest had an aggregate amortized
cost of $15.1 million and a carrying value of $16.6 million. Net realized
investment losses during 2002 included: (i) $556.8 million of writedowns of
fixed maturity investments, equity securities and other invested assets as a
result of conditions which caused us to conclude a decline in fair value of the
investment was other than temporary; net of (ii) $.5 million of net gains from
the sales of investments (primarily fixed maturities). Net realized investment
losses during 2001 included: (i) $361.7 million of writedowns of fixed maturity
investments, equity securities and other invested assets as a result of
conditions which caused us to conclude a decline in fair value of the investment
was other than temporary; and (ii) $21.7 million of net gains from the sales of
investments (primarily fixed maturities).

During the four months ended December 31, 2003, we sold $604.9 million of
fixed maturity investments which resulted in gross investment losses (before
income taxes) of $7.3 million. During the first eight months of 2003, we sold
$2.7 billion of fixed maturity investments which resulted in gross investment

F-34

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

losses (before income taxes) of $62.4 million. Securities sold at a loss are
sold for a number of reasons including: (i) changes in the investment
environment; (ii) expectation that the market value could deteriorate further;
(iii) desire to reduce our exposure to an issuer or an industry; (iv) changes in
credit quality; and (v) our analysis indicating there is a high probability that
the security is other-than-temporarily impaired.

The following summarizes the investments sold at a loss during the first
eight months of 2003 which had been continuously in an unrealized loss position
exceeding 20 percent of the amortized cost basis prior to the sale for the
period indicated (there were no such investments sold at a loss during the four
months ended December 31, 2003)(dollars in millions):

AT DATE OF SALE
----------------------
NUMBER OF AMORTIZED ESTIMATED
PERIOD ISSUERS COST FAIR VALUE
------ --------- --------- ----------

Less than 6 months prior to sale.............. 16 $32.0 $24.0
Greater than or equal to 6 and less than or
equal to 12 months prior to sale............ 8 40.6 25.7
Greater than 12 months prior to sale.......... 20 39.8 23.7

INVESTMENTS WITH OTHER-THAN-TEMPORARY LOSSES

During the four months ended December 31, 2003, we recorded writedowns of
fixed maturity investments and equity securities totaling $9.6 million as
further described in the following paragraphs:

During the four months ended December 31, 2003, we recognized a loss of
$5.7 million related to our holdings in a holding company for small investment
management related firms. Alleged irregularities at one subsidiary of the
holding company regarding late trading and market timing activities on behalf of
clients have made it probable that the value of the subsidiary has been
substantially diminished, negatively affecting the value of investments in the
holding company. Accordingly, we concluded the decline in fair value was other
than temporary.

During the four months ended December 31, 2003, we recognized a loss of
$3.3 million related to our holdings in a utility plant in Brazil. This utility
has experienced reduced earnings and cash flow, local corporate law and
regulatory issues and has been impacted by economic difficulties in Brazil.
Accordingly, we concluded the decline in fair value was other than temporary.

In addition to the specific investments discussed above, we recorded $.6
million of writedowns related to various other fixed maturities.

During the eight months ended August 31, 2003, we recorded writedowns of
fixed maturity investments, equity securities and other invested assets totaling
$51.3 million as further described in the following paragraphs:

During the eight months ended August 31, 2003, we recognized a loss of
$11.1 million to record certain commercial loans at their estimated fair value
as we intended to liquidate them and use the proceeds to repay the senior
financing used to acquire the loans. No additional gain or loss was recognized
upon the ultimate disposition of the loans.

During the eight months ended August 31, 2003, we recorded writedowns of
$9.6 million related to holdings of a fixed income security in a trust which
leases airplanes and related equipment. We believe that the collateral
supporting these investments has eroded and, therefore, we concluded the decline
in fair value was other than temporary.

F-35

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

During the eight months ended August 31, 2003, we recorded writedowns of
$8.4 million related to our holdings of fixed maturity investments in a major
airline that has filed bankruptcy. Although our investments are backed by
collateral, our analysis of the value of the underlying collateral indicated
that the decline in fair value of the investment is other than temporary.

During the eight months ended August 31, 2003, we recorded writedowns of
$4.2 million related to our investment in a limited partnership organized for
the purpose of making, owning, managing and disposing of investments. Our
analysis of the financial condition of the partnership indicated that the
decline in fair value was other than temporary.

During the eight months ended August 31, 2003, we recorded writedowns of
$3.7 million related to our holdings of fixed maturity investments in a
fertilizer company that has filed for bankruptcy. A significant portion of its
production capacity was rendered unprofitable due to high raw material costs and
was temporarily idled. Accordingly, we concluded that the decline in fair value
was other than temporary.

During the eight months ended August 31, 2003, we recorded writedowns of
$1.8 million related to holdings in a health care company that has had financial
problems due to financial misstatements, substantial regulatory and litigation
exposure and its failure to meet debt service requirements. The adverse effect
on liquidity and access to capital may force this issuer to file for bankruptcy.
Accordingly, we concluded the decline in fair value was other than temporary.

During the eight months ended August 31, 2003, we recorded writedowns of
$1.5 million related to holdings of a fixed income security of a finance company
that has had significant financial and liquidity problems. Accordingly, we
concluded the decline in fair value was other than temporary.

In addition to the specific investments discussed above, we recorded $11.0
million of writedowns related to various other fixed maturity investments. No
other writedown of a single issuer exceeded $1.5 million.

RECOGNITION OF LOSSES

Our evaluation of investments for impairment requires significant judgments
to be made including: (i) the identification of potentially impaired securities;
(ii) the determination of their estimated fair value; and (iii) assessment of
whether any decline in estimated fair value is other than temporary. If new
information becomes available or the financial condition of the investee
changes, our judgments may change resulting in the recognition of an investment
loss at that time.

Our periodic assessment of whether unrealized losses are "other than
temporary" requires significant judgment. Factors considered include: (i) the
extent to which market value is less than the cost basis; (ii) the length of
time that the market value has been less than cost; (iii) whether the unrealized
loss is event driven, credit-driven or a result of changes in market interest
rates; (iv) the near-term prospects for improvement in the issuer and/or its
industry; (v) whether the investment is investment-grade and our view of the
investment's rating and whether the investment has been downgraded since its
purchase; (vi) whether the issuer is current on all payments in accordance with
the contractual terms of the investment and is expected to meet all of its
obligations under the terms of the investment; (vii) our ability and intent to
hold the investment for a period of time sufficient to allow for any anticipated
recovery; and (viii) the underlying current and prospective asset and enterprise
values of the issuer and the extent to which our investment may be affected by
changes in such values.

F-36

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table sets forth the amortized cost and estimated fair value
of those actively managed fixed maturities with unrealized losses at December
31, 2003, by contractual maturity. Actual maturities will differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties. Most of the structured
securities shown below provide for periodic payments throughout their lives
(dollars in millions).

AMORTIZED ESTIMATED
COST FAIR VALUE
--------- ----------

Due in one year or less.................................... $ 37.8 $ 37.7
Due after one year through five years...................... 86.8 84.7
Due after five years through ten years..................... 556.9 550.9
Due after ten years........................................ 457.0 445.8
-------- --------
Subtotal................................................. 1,138.5 1,119.1
Structured securities...................................... 1,691.0 1,676.0
-------- --------
Total.................................................... $2,829.5 $2,795.1
======== ========

The following summarizes the investments in our portfolio rated
below-investment grade or classified as equity-type securities which have been
continuously in an unrealized loss position exceeding 20 percent of the cost
basis for the period indicated as of December 31, 2003 (dollars in millions):

NUMBER COST UNREALIZED ESTIMATED
PERIOD OF ISSUERS BASIS LOSS FAIR VALUE
------ ---------- ----- ---------- ----------

Less than 6 months(1)................... 2 $.4 $.1 $.3

---------------

(1) No single issuer in this category had an unrealized loss exceeding $.5
million.

Our investment strategy is to maximize over a sustained period and within
acceptable parameters of risk, investment income and total investment return
through active investment management. Accordingly, we may sell securities at a
gain or a loss to enhance the total return of the portfolio as market
opportunities change. While we have both the ability and intent to hold
securities with unrealized losses until they mature or recover in value, we may
sell securities at a loss in the future because of actual or expected changes in
our view of the particular investment, its industry, its type or the general
investment environment.

Based on management's current assessment of these securities and other
investments with unrealized losses at December 31, 2003, the Company believes
the issuers of the securities will continue to meet their obligations (or with
respect to equity-type securities, the investment value will recover to its cost
basis). The Company has no current plans to sell these securities and has the
ability to hold them to maturity. The recognition of an other-than-temporary
impairment through a charge to earnings may be recognized in future periods if
management later concludes that the decline in market value below the cost basis
is other than temporary.

F-37

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

INVESTMENT IN GENERAL MOTORS BUILDING

During the summer of 2003, we successfully enforced our contractual right
to buy out our 50 percent equity partner in the GM building, a landmark 50-story
office tower in New York City. After obtaining an award in arbitration, and
confirming that award in the New York court system, we finally settled our
differences with our equity partner, thus permitting us to put the building up
for sale. On September 26, 2003, we sold our investment in the GM building. We
received cash of $636.8 million, which was approximately equal to the value
established upon the adoption of fresh start accounting.

Our investment in the GM building was made through a partnership which
acquired the building in 1998 for $878 million. The initial capital structure of
the partnership consisted of: (i) a $700 million senior mortgage; (ii) $200
million of subordinated debt with a stated fixed return of 12.7 percent
payable-in-kind, and the opportunity to earn an additional residual return; and
(iii) $30 million of partnership equity, owned 50 percent by Conseco and 50
percent by an affiliate of Donald Trump. A Trump affiliate also served as
general manager of the acquired building. We owned 100 percent of the
subordinated debt.

The $30 million of partnership equity represented less than 10 percent of
the total capital of the partnership. In addition, the subordinated debt was
intended to absorb virtually all expected losses and receive a significant
portion of expected residual returns. Based on our 100 percent ownership of the
subordinated debt, we were the primary beneficiary of the GM building. The
partnership was consolidated in our financial statements effective August 31,
2003 in accordance with the requirements of FIN 46, which was implemented in
conjunction with fresh start accounting. The August 31, 2003 fresh start balance
sheet reflected the following balances of the partnership: the GM building at
$1,336.3 million; cash of $28.4 million; and a non-recourse loan of $700 million
(classified as an investment borrowing). Net investment income for the four
months ended December 31, 2003, reflects $2.9 million related to this investment
(representing our equity interest in the income from the building for the 26
days prior to the sale).

STRUCTURED SECURITIES

At December 31, 2003, fixed maturity investments included $5.9 billion of
structured securities (or 29 percent of all fixed maturity securities).
Structured securities include mortgage-backed securities, collateralized
mortgage obligations, asset-backed securities and commercial mortgage-backed
securities. The yield characteristics of structured securities differ from those
of traditional fixed-income securities. Interest and principal payments for
mortgage-backed securities occur more frequently, often monthly. Mortgage-
backed securities are subject to risks associated with variable prepayments.
Prepayment rates are influenced by a number of factors that cannot be predicted
with certainty, including: the relative sensitivity of the underlying mortgages
backing the assets to changes in interest rates; a variety of economic,
geographic and other factors; and the repayment priority of the securities in
the overall securitization structures.

In general, prepayments on the underlying mortgage loans and the securities
backed by these loans increase when prevailing interest rates decline
significantly relative to the interest rates on such loans. The yields on
mortgage-backed securities purchased at a discount to par will increase when the
underlying mortgages prepay faster than expected. The yields on mortgage-backed
securities purchased at a premium will decrease when the underlying mortgages
prepay faster than expected. When interest rates decline, the proceeds from the
prepayment of mortgage-backed securities may be reinvested at lower rates than
we were earning on the prepaid securities. When interest rates increase,
prepayments on mortgage-backed securities decrease as fewer underlying mortgages
are refinanced. When this occurs, the average maturity and duration of the
mortgage-backed securities increase, which decreases the yield on
mortgage-backed securities purchased at a discount, because the discount is
realized as income at a slower rate, and increases the yield on those purchased
at a premium as a result of a decrease in the annual amortization of the
premium.

F-38

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table sets forth the par value, amortized cost and estimated
fair value of structured securities, summarized by interest rates on the
underlying collateral at December 31, 2003 (dollars in millions):

PAR AMORTIZED ESTIMATED
VALUE COST FAIR VALUE
----- --------- ----------

---------------

(a) Includes below-investment grade structured securities with both an
amortized cost and estimated fair value of $2.1 million.

The amortized cost and estimated fair value of structured securities at
December 31, 2003, summarized by type of security, were as follows (dollars in
millions):

ESTIMATED FAIR VALUE
---------------------
PERCENT OF
AMORTIZED FIXED
TYPE COST AMOUNT MATURITIES
---- --------- ------ ----------

---------------

(a) Includes below-investment grade structured securities with both an
amortized cost and estimated fair value of $2.1 million.

Pass-throughs and sequential and targeted amortization classes have similar
prepayment variability. Pass-throughs historically provide the best liquidity in
the mortgage-backed securities market. Pass-throughs are also used frequently in
the dollar roll market and can be used as the collateral when creating
collateralized mortgage obligations. Sequential classes are a series of tranches
that return principal to the holders in sequence. Targeted amortization classes
offer slightly better structure in return of principal than sequentials when
prepayment speeds are close to the speed at the time of creation.

F-39

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Planned amortization classes and accretion-directed bonds are some of the
most stable and liquid instruments in the mortgage-backed securities market.
Planned amortization class bonds adhere to a fixed schedule of principal
payments as long as the underlying mortgage collateral experiences prepayments
within a certain range. Changes in prepayment rates are first absorbed by
support or companion classes. This insulates the planned amortization class from
the consequences of both faster prepayments (average life shortening) and slower
prepayments (average life extension).

Commercial mortgage-backed securities ("CMBS") are bonds secured by
commercial real estate mortgages. Commercial real estate encompasses income
producing properties that are managed for economic profit. Property types
include multi-family dwellings including apartments, retail centers, hotels,
restaurants, hospitals, nursing homes, warehouses, and office buildings. The
CMBS market currently offers high yields, strong credits, and call protection
compared to similar-rated corporate bonds. Most CMBS have strong call protection
features where borrowers are locked out from prepaying their mortgages for a
stated period of time. If the borrower does prepay any or all of the loan, they
will be required to pay prepayment penalties.

Subordinated and mezzanine tranches are classes that provide credit
enhancement to the senior tranches. The rating agencies require that this credit
enhancement not deteriorate due to prepayments for a period of time, usually
five years of complete lockout, followed by another period of time where
prepayments are shared pro rata with senior tranches. Subordinated and mezzanine
tranches bear a majority of the risk of loss due to property owner defaults.
Subordinated bonds are generally rated "AA" or lower; we typically do not hold
securities rated lower than "BB".

MORTGAGE LOANS

At December 31, 2003, the mortgage loan balance was primarily comprised of
commercial loans. Approximately 8 percent, 7 percent, 7 percent and 6 percent of
the mortgage loan balance were on properties located in New York, Massachusetts,
Florida and Pennsylvania, respectively. No other state comprised greater than 5
percent of the mortgage loan balance. Less than one percent of the mortgage loan
balance was noncurrent at December 31, 2003. At December 31, 2003, we had no
allowance for losses on mortgage loans (mortgage loans were recorded at market
values at August 31, 2003, in conjunction with our adoption of fresh start
accounting). Our allowance for loss on mortgage loans was $3.5 million at
December 31, 2002.

INVESTMENT BORROWINGS

Our investment borrowings (excluding borrowings related to the GM building)
averaged approximately $488.9 million during the four months ended December 31,
2003; $689.1 million during the eight months ended August 31, 2003; and $1,155.8
million during the year ended December 31, 2002 and were collateralized by
investment securities with fair values approximately equal to the loan value.
The weighted average interest rates on such borrowings (excluding borrowings
related to the GM building) were 1.5 percent during the four months ended
December 31, 2003; 1.8 percent during the eight months ended August 31, 2003;
and 1.3 percent during the year ended December 31, 2002.

OTHER INVESTMENT DISCLOSURES

Life insurance companies are required to maintain certain investments on
deposit with state regulatory authorities. Such assets had an aggregate carrying
value of $127.3 million and $144.5 million at December 31, 2003 and 2002,
respectively.

Conseco had three investments in excess of 10 percent of shareholders'
equity at December 31, 2003 and two investments in excess of 10 percent of
shareholders' equity at December 31, 2002, (other than

F-40

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

investments issued or guaranteed by the United States government or a United
States government agency) which are summarized below (dollars in millions):

2003 2002
---------------------- ----------------------
AMORTIZED ESTIMATED AMORTIZED ESTIMATED
ISSUER COST FAIR VALUE COST FAIR VALUE
------ --------- ---------- --------- ----------

Federal Home Loan Mortgage
Corporation...................... $355.6 $364.5
Federal Home Loan Bank............. 312.3 314.9
Investors Guaranty Assurance....... 283.7 283.7 $305.0 $283.7
Carmel Fifth, LLC.................. 212.7 212.5

6. LIABILITIES FOR INSURANCE AND ASSET ACCUMULATION PRODUCTS

These liabilities consisted of the following (dollars in millions):

SUCCESSOR SUCCESSOR PREDECESSOR
---------- ------------ ------------
INTEREST
WITHDRAWAL MORTALITY RATE DECEMBER 31, DECEMBER 31,
ASSUMPTION ASSUMPTION ASSUMPTION 2003 2002
---------- ---------- ---------- ------------ ------------

Future policy benefits:
Interest-sensitive
products:
Investment contracts... N/A N/A (c) $ 8,552.0 $ 8,856.8
Universal life-type
contracts............ N/A N/A N/A 3,928.4 4,265.9
--------- ---------
Total
interest-sensitive
products.......... 12,480.4 13,122.7
--------- ---------
Traditional products:
Traditional life
insurance
contracts............ Company (a) 5% 2,312.4 1,891.3
experience
Limited-payment
annuities............ Company (b) 6% 1,003.7 846.5
experience,
if applicable
Individual and group
accident and
health............... Company Company 6% 8,115.7 5,580.4
experience experience
--------- ---------
Total traditional
products.......... 11,431.8 8,318.2
--------- ---------
Claims payable and other
policyholder funds........ N/A N/A N/A 892.3 909.2
Liabilities related to
separate accounts and
investment trust.......... N/A N/A N/A 37.7 447.0
--------- ---------
Total....................... $24,842.2 $22,797.1
========= =========

---------------

(a) Principally, modifications of the 1965 -- 70 and 1975 -- 80 Basic, Select
and Ultimate Tables.

(b) Principally, the 1984 United States Population Table and the NAIC 1983
Individual Annuitant Mortality Table.

F-41

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(c) In 2003, all of this liability represented account balances where future
benefits are not guaranteed. In 2002: (i) approximately 96 percent of this
liability represented account balances where future benefits are not
guaranteed; and (ii) approximately 4 percent represented the present value
of guaranteed future benefits determined using an average interest rate of
approximately 6 percent.

The Company establishes reserves for insurance policy benefits based on
assumptions as to investment yields, mortality, morbidity, withdrawals, lapses
and maintenance expenses. These reserves include amounts for estimated future
payment of claims based on actuarial assumptions. The balance is based on the
Company's best estimate (with assistance from an independent actuarial firm) of
the future policyholder benefits to be incurred on this business, given recent
and expected future changes in experience.

In accordance with SOP 90-7, the Successor established insurance
liabilities and an asset for the value of policies inforce at the effective date
using current assumptions. Adjustments to the Predecessor's liabilities for
insurance and asset accumulation products as of August 31, 2003 are summarized
below (dollars in millions):

PREDECESSOR FRESH START SUCCESSOR
BALANCE SHEET ADJUSTMENTS BALANCE SHEET
------------- ----------- -------------

Liabilities for insurance and asset
accumulation products:
Traditional and limited payment
products:
Traditional life insurance
products......................... $ 1,885.3 $ 320.3 $ 2,205.6
Limited pay annuities.............. 880.0 140.0 1,020.0
Individual accident and health..... 5,245.8 1,887.9 7,133.7
Group life and health.............. 692.0 136.7 828.7
Unearned premiums.................. 3.3 -- 3.3
--------- -------- ---------
Total liabilities for traditional
and limited payment
products...................... 8,706.4 2,484.9 11,191.3
--------- -------- ---------
Interest-sensitive products:
Investment contracts............... 8,489.8 132.9 8,622.7
Universal life-type products....... 3,994.6 (15.4) 3,979.2
--------- -------- ---------
Total liabilities for
interest-sensitive products... 12,484.4 117.5 12,601.9
--------- -------- ---------
Other liabilities for insurance and
asset accumulation products:
Separate accounts and investment
trusts........................... 87.7 -- 87.7
Claims payable and other
policyholder funds............... 897.1 (10.3) 886.8
--------- -------- ---------
Total other liabilities for
insurance and asset
accumulation products......... 984.8 (10.3) 974.5
--------- -------- ---------
Total liabilities for insurance and
asset accumulation products........... $22,175.6 $2,592.1 $24,767.7
========= ======== =========

The following provides explanations for the fresh-start adjustment to
insurance liabilities related to our insurance inforce at the effective date.

F-42

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

TRADITIONAL INSURANCE AND LIMITED PAY PRODUCTS

In accordance with Statement of Financial Accounting Standards No. 60,
"Accounting and Reporting by Insurance Enterprises" and Statement of Financial
Accounting Standards No. 97, "Accounting and Reporting by Insurance Enterprises
for certain Long-Duration Contracts and for Realized Gains and Losses from the
Sale of Investments" ("SFAS 97"), the Predecessor used the original actuarial
assumptions determined when traditional long-duration and limited payment
insurance contracts were issued in determining liability calculations through
the fresh start date, provided the resulting liabilities were adequate to
provide for future benefits and expenses under the related contracts. This
accounting principle is referred to as the "lock in" principle and is only
applicable to traditional insurance and limited pay products. The use of
assumptions that are locked in at the time of issue means that absent loss
recognition, the same assumptions are used in accounting for a particular block
of business unless the block is subject to purchase or fresh start accounting.

At the Effective Date, the Successor established insurance liabilities at
the present value of future benefits and expenses associated with the policies,
by using current best-estimate assumptions with provisions for adverse
deviation. Such assumptions include estimates as to investment yields,
mortality, morbidity, withdrawals, lapses and maintenance expenses. The current
best-estimate assumptions for these blocks of business differ from the original
actuarial assumptions determined when the business was acquired or issued as
further described in the following paragraphs.

Due to the current interest rate environment and the requirement to mark
the value of the investment portfolio to market, we changed our assumptions
related to future investment earnings. The weighted average expected yield on
our investment portfolio decreased to approximately 5.6 percent at the Effective
Date from 6.7 percent at December 31, 2002. Approximately $.9 billion of the
fresh-start increase to insurance liabilities is the result of changes in future
expected investment earnings.

The performance of our long-term care business (especially the acquired
block originally sold through independent agents) has generally been unfavorable
relative to the Predecessor's assumptions established when these blocks of
business were acquired. For example, variance in actual versus estimated
morbidity, lapses and expenses have been unfavorable to original assumptions.
Approximately $1.4 billion of the increase to insurance liabilities is the
result of changes in non-interest assumptions for our long-term care policies.
Our assumption changes for long-term care business included: (i) changes in
morbidity assumptions from estimates made when the business was acquired to
recent Company experience; (ii) changes in mortality assumptions related to
certain blocks of this business from the 1958 and 1980 Commissioners Standard
Ordinary Mortality table to the 1983 Group Annuity Mortality table; and (iii)
changes in ultimate lapse ratios from a range of approximately 3 percent to 5.5
percent prior to the adoption of fresh start accounting to a range of 2 percent
to 3.5 percent.

INTEREST-SENSITIVE PRODUCTS SUBJECT TO REQUIREMENTS OF SFAS 97

The insurance liability for asset accumulation products (such as deferred
annuities and universal life products) is generally equal to current
policyholder account balances. These balances generally do not change as a
result of the adoption of fresh start accounting. The fresh-start adjustment to
insurance liabilities for interest-sensitive products primarily results from:
(i) the adoption of SOP 03-01 as of the Effective Date; and (ii) certain
Predecessor insurance liabilities that were different from the present value of
estimated future benefits as of August 31, 2003.

The adoption of SOP 03-01 as of the effective date required a change in
methodology regarding persistency bonuses provided to policyholders who continue
to keep their policies inforce for a stated period of time. The Predecessor
recognized the cost of this benefit over the period prior to the time the
benefit is credited in proportion to estimated gross profits and assumed a
certain number of policies would terminate before the benefit was credited.
Under SOP 03-01, the cost for such benefits is recognized ratably over the

F-43

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

period prior to the time the benefit is credited without assuming policy
terminations. Insurance liabilities increased by approximately $.1 billion as a
result of the adoption of SOP 03-01.

In addition, the insurance liabilities for certain Predecessor insurance
liabilities were different than the present value of estimated future benefits
as of the Effective Date.

The Predecessor had previously established an insurance liability related
to certain business, to recognize the future loss expected to be recognized for
the former practice of reducing the cost of insurance charges to amounts below
the level permitted under the provisions of the policy. The Predecessor
amortized this liability into income in proportion to estimated gross profits on
the business, consistent with SFAS 97 requirements for unearned revenues. The
Predecessor had previously decided to discontinue the practice of providing this
nonguaranteed benefit. Accordingly, the remaining insurance liability
established for this benefit was no longer required at August 31, 2003,
resulting in a $.1 billion reduction to reserves in conjunction with our
adoption of fresh-start accounting.

The liabilities established for our equity-indexed annuity products
(including the value of options attributable to policyholders for the estimated
life of the annuity contract and accounted for as embedded derivatives) are
established pursuant to different accounting rules than other interest-sensitive
products. At the Effective Date, the present value of estimated future benefits
for our equity-indexed products exceeded the value of the Predecessor's
liabilities by $.2 billion, resulting in a fresh-start adjustment.

Changes in the unpaid claims reserve and liabilities related to accident
and health insurance were as follows (dollars in millions):

DECEMBER 31,
------------------------------
2003 2002 2001
---- ---- ----

Balance, beginning of the period..................... $1,461.3 $1,360.4 $1,368.4
Less reinsurance ceded............................. (52.8) (104.1) (29.8)
-------- -------- --------
1,408.5 1,256.3 1,338.6
-------- -------- --------
Incurred claims related to:
Current year....................................... 1,718.5 1,945.1 1,957.2
Prior year(a)...................................... 22.4 13.7 (80.0)
-------- -------- --------
Total incurred.................................. 1,740.9 1,958.8 1,877.2
-------- -------- --------
Interest on claim reserves........................... 68.7 71.5 72.4
-------- -------- --------
Paid claims related to:
Current year....................................... 978.2 1,171.2 1,239.8
Prior year......................................... 743.2 706.9 792.1
-------- -------- --------
Total paid...................................... 1,721.4 1,878.1 2,031.9
-------- -------- --------
Balance, end of the period........................... 1,496.7 1,408.5 1,256.3
Reinsurance ceded.................................. 31.8 52.8 104.1
-------- -------- --------
$1,528.5 $1,461.3 $1,360.4
======== ======== ========

---------------

(a) Such amounts will fluctuate based upon the estimation procedures used to
determine the amount of unpaid losses. Such estimates are the result of
ongoing analysis related to recent loss development trends.

F-44

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7. INCOME TAXES

The components of income tax expense (benefit) were as follows (dollars in
millions):

SUCCESSOR PREDECESSOR
------------ -------------------------------
FOUR MONTHS EIGHT MONTHS YEARS ENDED
ENDED ENDED DECEMBER 31,
DECEMBER 31, AUGUST 31, ----------------
2003 2003 2002 2001
------------ ------------ ---- ----

Current tax provision (benefit)..... $(14.4) $(13.5) $ 53.1 $ 132.2
Deferred tax provision (benefit).... 67.6 -- -- (189.8)
------ ------ ------ -------
Income tax expense (benefit) on
period income.................. 53.2 (13.5) 53.1 (57.6)
Valuation allowance................. -- -- 811.2 --
------ ------ ------ -------
Total income tax expense
(benefit)...................... $ 53.2 $(13.5) $864.3 $ (57.6)
====== ====== ====== =======

The income tax expense (benefit) recorded in 2002 has been allocated
entirely to continuing operations before the following items: minority interest,
discontinued operations, cumulative effect of accounting change and other
comprehensive income. This accounting treatment is required because the
calculation of income tax expense is the same, both "with and without" the items
other than continuing operations discussed above.

A reconciliation of the U.S. statutory corporate tax rate to the effective
rate reflected in the consolidated statement of operations is as follows:

SUCCESSOR PREDECESSOR
------------ ----------------------------
FOUR MONTHS EIGHT MONTHS YEARS ENDED
ENDED ENDED DECEMBER 31,
DECEMBER 31, AUGUST 31, -------------
2003 2003 2002 2001
------------ ------------ ---- ----

U.S. statutory corporate rate......... 35.0% 35.0% (35.0)% (35.0)%
Valuation allowance................... -- 25.8 49.6 --
Gain on debt restructuring............ -- (39.7) -- --
Subsidiary stock basis adjustment..... -- (21.8) -- --
Net deferred benefits not recognized
in the current period............... -- -- 27.7 --
Nondeductible goodwill amortization
and impairment...................... -- -- 10.9 15.9
Other nondeductible expenses.......... .8 (.1) (.1) (.9)
State taxes........................... .7 .2 (.2) 3.0
Provision for tax issues and other.... (.9) -- -- (6.7)
---- ----- ----- -----
Effective tax rate.................. 35.6% (.6)% 52.9% (23.7)%
==== ===== ===== =====

Conseco and its affiliates are currently under examination by the Internal
Revenue Service for tax years ending December 31, 1999 through December 31,
2001. The outcome of these examinations is not expected to result in material
adverse deficiencies, but may result in utilization or adjustment to the income
tax loss carryforwards reported below.

F-45

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The components of the Company's income tax assets and liabilities were as
follows (dollars in millions):

SUCCESSOR PREDECESSOR
------------ ------------
DECEMBER 31, DECEMBER 31,
2003 2002
------------ ------------

Deferred tax assets:
Net operating loss carryforwards:
Portion attributable to CFC worthless
investment.................................... $ 1,183.0 $ --
Other........................................... 84.2 615.0
Deductible temporary differences:
Actively managed fixed maturities............... -- 196.0
Capital loss carryforwards...................... 411.2 112.8
Interest-only securities........................ -- 536.3
Insurance liabilities........................... 1,591.3 750.4
Allowance for loan losses....................... -- 252.2
Reserve for loss on loan guarantees............. 217.2 229.2
Debt obligations................................ -- 39.4
Other........................................... -- 14.0
--------- ---------
Gross deferred tax assets..................... 3,486.9 2,745.3
--------- ---------
Deferred tax liabilities:
Actively managed fixed maturities.................. (33.4) --
Cost of policies purchased and cost of policies
produced........................................ (716.3) (773.8)
Unrealized appreciation............................ (123.0) (126.2)
Other.............................................. (252.1) (125.7)
--------- ---------
Gross deferred tax liabilities................ (1,124.8) (1,025.7)
--------- ---------
Valuation allowance................................ (2,362.1) (1,719.6)
--------- ---------
Net deferred tax assets....................... -- --
--------- ---------
Current income taxes prepaid......................... 24.6 66.9
Income tax liabilities classified as liabilities of
discontinued operations............................ -- 34.6
--------- ---------
Net income tax assets................................ $ 24.6 $ 101.5
========= =========

Our income tax expense includes deferred income taxes arising from
temporary differences between the financial reporting and tax bases of assets
and liabilities, capital loss carryforwards and net operating loss
carryforwards. The net deferred tax assets totaled $2,362.1 million at December
31, 2003. In assessing the realization of our deferred income tax assets, we
consider whether it is more likely than not that the deferred income tax assets
will be realized. The ultimate realization of our deferred income tax assets
depends upon generating future taxable income during the periods in which our
temporary differences become deductible and before our net operating loss
carryforwards expire. We evaluate the realizability of our deferred income tax
assets by assessing the need for a valuation allowance on a quarterly basis.
Based upon information existing at the time of our emergence from bankruptcy, we
established a valuation allowance against our entire balance of net deferred
income tax assets as we believed that the realization of such net deferred
income tax assets in future periods was uncertain. As of December 31, 2003, we
continue to believe that the realization of our net deferred income tax asset is
uncertain and that a valuation allowance is required for our entire balance of
net deferred income tax assets. We reached this conclusion after considering the
losses realized by the Company in recent years, the uncertainties related to the
tax treatment for the worthlessness of

F-46

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

our investment in CFC, (which is more fully discussed below), and the likelihood
of future taxable income exclusive of reversing temporary differences and
carryforwards.

As of December 31, 2003, we had about $3.6 billion of net operating loss
carryforwards (after taking into account the reduction in tax attributes
described in the paragraph which follows and the loss resulting from the
worthlessness of CFC discussed below), which expire as follows: $11.2 million in
2004; $4.6 million in 2005; $.2 million in 2006; $5.8 million in 2007; $6.6
million in 2008; $10.5 million in 2009; $4.2 million in 2010; $2.5 million in
2011; $16.0 million in 2012; $43.4 million in 2013; $6.9 million in 2014; $60.4
million in 2016; $41.5 million in 2017; $3,399.5 million in 2018; $.7 million in
2019; $5.5 million in 2020; and $1.0 million in 2022. The timing and manner in
which we will utilize the net operating loss carryforwards in any year or in
total may be limited by various provisions of the Internal Revenue Code (the
"Code") (and interpretation thereof) and our ability to generate sufficient
future taxable income in the relevant carryforward period.

The Code provides that any income realized as a result of the cancellation
of indebtedness (cancellation of debt income or "CODI") in bankruptcy, will
reduce certain tax attributes including net operating loss carryforwards. We
realized an estimated $2.5 billion of CODI when we emerged from bankruptcy.
Accordingly, our net operating loss carryforwards were reduced by $2.5 billion.

The following paragraphs summarize some of the various limitations and
contingencies which exist with respect to the future utilization of the net
operating loss carryforwards.

The Company realized an estimated $5.4 billion tax loss in 2003 as a result
of its investment in CFC. In consultation with our tax advisors and based on
relevant provisions of the Code, the Company intends to treat this loss as an
ordinary loss, thereby increasing the Company's net operating loss carryforward.
The Company has requested a pre-filing examination by the IRS to confirm that
this loss should be treated as an ordinary loss. If the IRS were to disagree
with our conclusion and such determination ultimately prevailed, the loss would
be treated as a capital loss, which would only be available to reduce future
capital gains for the next 5 years. The procedures related to the pre-filing
examination are in process, but are not expected to be completed before August
2004.

The Code limits the extent to which losses realized by a non-life entity
(or entities) may offset income from a life insurance company (or companies) to
the lesser of: (i) 35 percent of the income of the life insurance company; or
(ii) 35 percent of the total loss. There is no limitation with respect to the
ability to utilize net operating losses generated by a life insurance company.
Subsequent to our emergence from bankruptcy, we reorganized certain of our
subsidiaries to improve their capital position. As a result of the
reorganization, the loss related to CFC was realized by a life insurance
company. Accordingly, we believe the loss should be treated as a life insurance
loss and would not be subject to the limitations described above. However, if
the IRS were to disagree with our conclusion and such determination ultimately
prevailed, the loss related to CFC would be subject to the limitation described
in the first sentence of this paragraph.

The timing and manner in which the Company will be able to utilize some or
all of its net operating loss carryforward may be limited by Section 382 of the
Code. Section 382 imposes limitations on a corporation's ability to use its net
operating losses if the company undergoes an ownership change. Because the
Company underwent an ownership change pursuant to its reorganization, we have
determined that this limitation applies to the Company. In order to determine
the amount of this limitation we must determine how much of our net operating
loss carryforward relates to the period prior to our emergence from bankruptcy
(such amount will be subject to the 382 limitation) and how much relates to the
period after emergence (such amount will not be subject to the 382 limitation).
Pursuant to the Code, we may: (i) allocate the current year tax loss on a pro
rata basis to determine earnings (loss) post- and pre-emergence; or (ii)
specifically identify transactions in each period and record it in the period it
actually occurred. We intend to elect the latter, which we believe will result
in a substantial portion of the loss related to CFC being

F-47

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

treated as post emergence and therefore not subject to the Section 382
limitation. Any losses that are subject to the Section 382 limitation will only
be utilized by the Company up to approximately $140 million per year with any
unused amounts carried forward to the following year.

The reduction of any portion of our deferred income tax valuation allowance
(including the net operating loss carryforwards) existing as of August 31, 2003,
will be accounted for as a reduction of goodwill when utilized pursuant to SOP
90-7. If all goodwill is eliminated, any additional reduction of the valuation
allowance existing at August 31, 2003 will be accounted for as a reduction of
other intangible assets until exhausted and thereafter as an addition to
paid-in-capital. Goodwill was reduced by $189.4 million during the four months
ended December 31, 2003, due to a reduction in the valuation allowance for net
deferred income tax assets established at the Effective Date.

At December 31, 2003, Conseco had $1.2 billion of capital loss
carryforwards. These carryforwards will expire as follows: $2.7 million in 2005;
and $5.5 million in 2006; $484.4 million in 2007; and $682.2 million in 2008.

8. NOTES PAYABLE -- DIRECT CORPORATE OBLIGATIONS

This note contains information regarding the following notes payable that
were direct corporate obligations of the Company as of December 31, 2003 and
2002 (dollars in millions).

SUCCESSOR PREDECESSOR
------------ ------------
DECEMBER 31, DECEMBER 31,
2003 2002
------------ ------------

$1.3 billion credit agreement.......................... $1,300.0 $ --
$1.5 billion senior credit facility.................... -- 1,531.4
8.5% senior notes due 2002............................. -- 224.9
8.5% guaranteed senior notes due 2003.................. -- 1.0
8.125% senior notes due 2003........................... -- 63.5
6.4% senior notes due 2003............................. -- 234.1
6.4% guaranteed senior notes due 2004.................. -- 14.9
10.5% senior notes due 2004............................ -- 24.5
8.75% senior notes due 2004............................ -- 423.7
8.75% guaranteed senior notes due 2006................. -- 364.3
6.8% senior notes due 2005............................. -- 99.2
6.8% guaranteed senior notes due 2007.................. -- 150.8
9.0% senior notes due 2006............................. -- 150.8
9.0% guaranteed senior notes due 2008.................. -- 399.2
10.75% senior notes due 2008........................... -- 37.6
10.75% guaranteed senior notes due 2009................ -- 362.4
-------- ---------
Total principal amount............................... 1,300.0 4,082.3
Unamortized net discount related to issuance of notes
payable.............................................. -- (34.0)
Unamortized fair market value of terminated interest
rate swap agreements (as described in the note
entitled "Summary of Significant Accounting
Policies")........................................... -- 8.8
-------- ---------
Less amounts subject to compromise..................... -- (4,057.1)
-------- ---------
Direct corporate obligations......................... $1,300.0 $ --
======== =========

F-48

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Pursuant to the Plan, we entered into a senior secured bank credit facility
with a principal balance of $1.3 billion (the "New Credit Facility"). The New
Credit Facility consists of two tranches: Tranche A -- $1.0 billion; and Tranche
B -- $.3 billion. Principal repayments are due as follows (dollars in millions):

TRANCHE A TRANCHE B
--------- ---------

Tranche A and Tranche B borrowings bear interest, payable monthly, based on
either an offshore rate or a base rate. Offshore rates are equal to LIBOR plus
an applicable margin based on the rating of the Company's senior secured
long-term debt securities by Moody's Investors Service, Inc. ("Moody's") or S&P.
Base rates are equal to: (i) the greater of: (a) the Federal funds rate plus .50
percent; or (b) Bank of America's prime rate; plus (ii) an applicable margin
based on the rating of the Company's senior secured long-term debt securities by
Moody's or S&P. With respect to Tranche A, the LIBOR rate may not be less than
2.00 percent through September 30, 2004, or less than 2.50 percent thereafter.
With respect to Tranche B, the LIBOR rate may not be less than 2.25 percent
through September 30, 2004, or less than 2.75 percent thereafter. The range of
applicable margins are summarized in the following table:

OFFSHORE BASE RATE
RATE MARGIN MARGIN
----------- ---------

Tranche A........................................... 3.75% - 5.25% 1.75% - 3.25%
Tranche B........................................... 5.75% - 7.25% 3.75% - 5.25%

On December 31, 2003, the interest rates on our Tranche A and Tranche B
borrowings were 7.25 percent and 9.50 percent, respectively.

Pursuant to the New Credit Facility, the Company is required to make
mandatory prepayments with all or a portion of the proceeds from the following
transactions or events including: (i) the issuance of certain indebtedness; (ii)
equity issuances; (iii) certain asset sales or casualty events; (iv) a certain
percentage of amounts received or recovered with respect to the D&O loans; and
(v) excess cash flow as defined in the credit agreement. Proceeds not used to
prepay indebtedness must generally be: (i) used to redeem a portion of our
Preferred Stock; or (ii) contributed to the capital of our insurance
subsidiaries.

The New Credit Facility requires the Company to maintain various financial
ratios and balances, as defined in the agreement including: (i) a debt-to-total
capitalization ratio of less than .356:1.0 or less at December 31, 2003, and
decreasing over time to .200:1.0 at June 30, 2008 (such ratio was .334:1.0 at
December 31, 2003); (ii) an interest coverage ratio greater than or equal to
1.00:1.0 for the quarter ending December 31, 2003, and increasing over time to
4.50:1.0 for the year ending December 31, 2009 (such ratio was greater than
1.25:1.0 for the quarter ending December 31, 2003); (iii) EBITDA, as defined in
the credit

F-49

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

agreement, greater than or equal to $490.0 million for the two quarters ended
March 31, 2004, and increasing over time to $1,296.0 million for the four
quarters ending March 31, 2010; (iv) an aggregate risk-based capital ratio, as
defined in the credit agreement, greater than or equal to 158 percent at
December 31, 2003, and increasing over time to 225 percent at March 31, 2006
(such ratio was 287 percent at December 31, 2003); (v) minimum individual
risk-based capital ratios for certain insurance companies as of the end of each
fiscal year (such minimum ratios were exceeded at December 31, 2003); (vi)
minimum levels of statutory capital and surplus, as defined in the credit
agreement (statutory capital and surplus at December 31, 2003 exceeded such
requirements); and (vii) minimum investment portfolio requirements (such minimum
investment portfolio requirements were met at December 31, 2003).

The New Credit Facility prohibits or restricts, among other things: (i) the
payment of cash dividends on the Company's common or preferred stock; (ii) the
repurchase of our common stock; (iii) the issuance of additional debt or capital
stock; (iv) liens; (v) asset dispositions; (vi) affiliate transactions; (vii)
certain investment activities; (viii) change in business; and (ix) prepayment of
indebtedness (other than the New Credit Facility). The obligations under our New
Credit Facility are guaranteed by Conseco's current and future domestic
subsidiaries, other than: (i) its insurance companies; (ii) subsidiaries of the
insurance companies; or (iii) certain immaterial subsidiaries as defined in the
credit agreement. This guarantee was secured by granting liens on substantially
all the assets of the guarantors including the capital stock of our top tier
insurance company, Conseco Life Insurance Company of Texas.

Pursuant to the New Credit Facility, the Company is required to pay a fee
of $6.5 million on June 30, 2004, unless all borrowings under the credit
agreement have been repaid.

The outstanding notes payable that were direct corporate obligations of Old
Conseco prior to our emergence from bankruptcy and the $1.5 billion senior
credit facility were discharged in accordance with the Plan.

In April 2002, Old Conseco completed an exchange of approximately $1.3
billion aggregate principal amount of newly issued guaranteed notes for its
senior unsecured notes held by "qualified institutional buyers," institutional
"accredited investors", or non-U.S. persons in transactions outside the United
States. The bonds which were exchanged had identical principal and interest
components, but the new bonds had extended maturities in exchange for an
enhanced ranking in Old Conseco's capital structure. The purpose of the exchange
offer was to extend the maturity profile of the existing notes in an effort to
improve Old Conseco's financial flexibility and to enhance its future ability to
refinance public debt. The new notes were guaranteed on a senior subordinated
basis by CIHC. As a result, the new notes were structurally senior to the
existing notes. The new notes were not registered under the Securities Act of
1933, as amended, and could not be offered or sold in the United States absent
registration or an exemption from registration. Old Conseco entered into a
registration rights agreement for the benefit of each exchange participant in
which we agreed to file, and did file, an exchange offer registration statement
with the SEC with respect to the new notes. However, as a result of the decision
to restructure Old Conseco's capital, Old Conseco did not make the registered
exchange offer. Accordingly, the affected notes accrued additional interest as
liquidated damages under the registration rights agreement.

In connection with the exchange offer Old Conseco issued: (i) $991,000 of
8.5% senior notes due October 15, 2003, in exchange for an equal amount of 8.5%
Original Notes due October 15, 2002 (the "8.5% Exchange Notes"); (ii)
$14,936,000 of 6.4% senior notes due February 10, 2004 in exchange for an equal
amount of 6.4% Original Notes due February 10, 2003 (the "6.4% Exchange Notes");
(iii) $364,294,000 of 8.75% senior notes due August 9, 2006 in exchange for an
equal amount of 8.75% Original Notes due February 9, 2004 (the "8.75% Exchange
Notes"); (iv) $150,783,000 of 6.8% senior notes due June 15, 2007 in exchange
for an equal amount of 6.8% Original Notes due June 15, 2005 (the "6.8% Exchange
Notes"); (v) $399,200,000 of 9.0% senior notes due April 15, 2008 in exchange
for an equal amount of 9.0% Original Notes due October 15, 2006 (the "9.0%
Exchange Notes"); and (vi) $362,433,000 of 10.75% senior notes due

F-50

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

June 15, 2009 in exchange for an equal amount of 10.75% Original Notes due June
15, 2008 (the "10.75% Exchange Notes").

During 2002, we repurchased $77.4 million par value of our Predecessor's
notes payable resulting in a gain on the extinguishment of debt of $1.8 million.

During 2001, we repurchased $893.8 million par value of our Predecessor's
notes payable resulting in a gain on the extinguishment of debt of $17.0
million.

9. COMMITMENTS AND CONTINGENCIES

LITIGATION

We are involved on an ongoing basis in lawsuits (including purported class
actions) relating to our operations, including with respect to sales practices,
and we and current and former officers and former directors are defendants in a
pending class action lawsuit asserting claims under the securities laws. The
ultimate outcome of these lawsuits cannot be predicted with certainty and we
have estimated the potential exposure for each of the matters and have recorded
a liability if a loss is deemed probable.

SECURITIES LITIGATION

Since we announced our intention to restructure our capital on August 9,
2002, a total of eight purported securities fraud class action lawsuits have
been filed in the United States District Court for the Southern District of
Indiana. The complaints name us as a defendant, along with certain of our
current and former officers. These lawsuits were filed on behalf of persons or
entities who purchased our Predecessor's common stock on various dates between
October 24, 2001 and August 9, 2002. In each case the plaintiffs allege claims
under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and allege material omissions and dissemination of
materially misleading statements regarding, among other things, the liquidity of
Conseco and alleged problems in CFC's manufactured housing division, allegedly
resulting in the artificial inflation of our Predecessor's stock price. On March
13, 2003, all of these cases were consolidated into one case in the United
States District Court for the Southern District of Indiana, captioned Franz
Schleicher, et al. v. Conseco, Inc., Gary Wendt, William Shea, Charles Chokel
and James Adams, et al., Case No. 02-CV-1332 DFH-TAB. The lawsuits were stayed
as to all defendants by order of the United States Bankruptcy Court for the
Northern District of Illinois. The stay was lifted on October 15, 2003. The
plaintiffs have filed a consolidated class action complaint with respect to the
individual defendants. We expect to be filing a motion to dismiss in March 2004.
Our liability with respect to these lawsuits was discharged in the Plan and our
obligation to indemnify individual defendants who were not serving as one of our
officers or directors on the Effective Date is limited to $3 million in the
aggregate under the Plan. Our liability to indemnify individual defendants who
were serving as an officer or director on the Effective Date, of which there is
one such defendant, is not limited by the Plan. We believe these lawsuits are
without merit and intend to defend them vigorously. The ultimate outcome of
these lawsuits cannot be predicted with certainty.

OTHER LITIGATION

Collection efforts by the Company and its wholly owned subsidiary, Conseco
Services, LLC, related to the 1996-1999 director and officer loan programs have
been commenced against various past board members and executives with
outstanding loan balances. In addition, certain former officers and directors
have sued the companies for declaratory relief concerning their liability for
the loans. Currently, we are involved in litigation with Stephen C. Hilbert,
James D. Massey, Dennis E. Murray, Sr., Rollin M. Dick, James S. Adams, Maxwell
E. Bublitz, Ngaire E. Cuneo, David R. Decatur, Donald F. Gongaware and Bruce A.
Crittenden. The specific lawsuits include: Hilbert v. Conseco, Case No. 03A
04283 (Bankr. Northern District,

F-51

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Illinois); Conseco Services v. Hilbert, Case No. 29C01-0310 MF 1296 (Circuit
Court, Hamilton County, Indiana); Murray and Massey v. Conseco, Case No.
1:03-CV-1482 LJM-WTL (Southern District, Indiana); Conseco Services v. Adams, et
al, Case No. 29DO2-0312-CC-1035(Circuit Court, Hamilton County, Indiana);
Conseco v. Adams, et al, Case No. 03A 04545, (Bankr. Northern District,
Illinois) Dick v. Conseco Services, Case No. 29 D01-0207-PL-549 (Superior Court,
Hamilton County, Indiana); Conseco Services v. Dick, et al., Case No.
06C01-0311-CC-356 (Circuit Court, Boone County, Indiana); Stephen C. Hilbert v.
Conseco, Inc. and Kroll Inc., Case No. 29D02-0312-PL-1026 (Superior Court,
Hamilton County, Indiana) and Crittenden v. Conseco, Case No. IP02-1823-C B/S
(Southern District, Indiana). The Company and Conseco Services, LLC believe that
all amounts due under the director and officer loan programs, including all
applicable interest, are valid obligations owed to the companies. As part of the
Plan, we have agreed to pay 45 percent of any net proceeds recovered in
connection with these lawsuits, in an aggregate amount not to exceed $30
million, to former holders of our Predecessor's trust preferred securities that
did not opt out of a settlement reached with the committee representing holders
of these securities. We are required to use the balance of any net proceeds
recovered in connection with these lawsuits to pay down our Senior Credit
Facility. Any remaining proceeds will be used to contribute capital to our
insurance subsidiaries. We intend to prosecute these claims to obtain the
maximum recovery possible. Further, with regard to the various claims brought
against the Company and Conseco Services, LLC by certain former directors and
officers, we believe that these claims are without merit and intend to defend
them vigorously. The ultimate outcome of the lawsuits cannot be predicted with
certainty.

In October 2002, Roderick Russell, on behalf of himself and a class of
persons similarly situated, and on behalf of the ConsecoSave Plan, filed an
action in the United States District Court for the Southern District of Indiana
against our Predecessor, Conseco Services, LLC and certain of our current and
former officers (Roderick Russell, et al. v Conseco, Inc., et al., Case No.
1:02-CV-1639 LJM). The purported class action consists of all individuals whose
401(k) accounts held common stock of our Predecessor at any time since April 28,
1999. The complaint alleges, among other things, breaches of fiduciary duties
under ERISA by continuing to permit employees to invest in our Predecessor's
common stock without full disclosure of the Company's true financial condition.
We filed a motion to dismiss the complaint in December 2002. This lawsuit was
stayed as to all defendants by order of the Bankruptcy Court. The stay was
lifted on October 15, 2003. It is expected that the plaintiffs will be amending
their complaint in March or April of 2004. On February 13, 2004, the Company's
fiduciary insurance carrier, RLI Insurance Company filed a declaratory judgment
action asking the court to find no liability under its policy for the claims
made in the Russell matter (RLI Insurance Company v. Conseco, Inc., Stephen
Hilbert, et al., Case No. 1:04-CV-0310DFH-TAB (Southern District, Indiana.)) We
believe the lawsuits are without merit and intend to defend them vigorously. The
ultimate outcome of the lawsuit cannot be predicted with certainty.

On June 24, 2002, the heirs of a former officer, Lawrence Inlow, commenced
an action against our Predecessor, Conseco Services, LLC and two former officers
in the Circuit Court of Boone County, Indiana (Inlow et al. v. Conseco, Inc., et
al., Cause No. 06C01-0206-CT-244). The heirs assert that unvested options to
purchase 756,248 shares of our Predecessor's common stock should have been
vested at Mr. Inlow's death. The heirs further claim that if such options had
been vested, they would have been exercised, and that the resulting shares of
common stock would have been sold for a gain of approximately $30 million based
upon a stock price of $58.125 per share, the highest stock price during the
alleged exercise period of the options. We believe the heirs' claims are without
merit and will defend the action vigorously. The maximum exposure to the Company
for this lawsuit is estimated to be $33 million. The heirs did not file a proof
of claim with the Bankruptcy Court. Subject to dispositive motions which are yet
to be filed, the matter will continue to trial against Conseco Services, LLC and
the other co-defendants on September 13, 2004. The ultimate outcome cannot be
predicted with certainty.

On June 27, 2001, two suits against the Company's subsidiary, Philadelphia
Life Insurance Company (now known as Conseco Life Insurance Company), both
purported nationwide class actions seeking

F-52

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

unspecified damages, were consolidated in the U.S. District Court, Middle
District of Florida (In Re PLI Sales Litigation, Cause No. 01-MDL-1404),
alleging among other things, fraudulent sales and a "vanishing premium" scheme.
Philadelphia Life filed a motion for summary judgment against both named
plaintiffs, which motion was granted in June 2002. Plaintiffs appealed to the
11th Circuit. The 11th Circuit, in July 2003, affirmed in part and reversed in
part, allowing two fraud counts with respect to one plaintiff to survive. The
plaintiffs' request for a rehearing with respect to this decision has been
denied. Philadelphia Life has filed a summary judgment motion with respect to
the remaining claims. This summary judgment was denied in February 2004.
Philadelphia Life believes this lawsuit is without merit and intends to defend
it vigorously. The ultimate outcome of the lawsuit cannot be predicted with
certainty.

On December 1, 2000, the Company's former subsidiary, Manhattan National
Life Insurance Company, was named in a purported nationwide class action seeking
unspecified damages in the First Judicial District Court of Santa Fe, New Mexico
(Robert Atencio and Theresa Atencio, for themselves and all other similarly
situated v. Manhattan National Life Insurance Company, an Ohio corporation,
Cause No. D-0101-CV-2000-2817), alleging among other things fraud by
non-disclosure of additional charges for those policyholders paying via premium
modes other than annual. We retained liability for this litigation in connection
with the sale of Manhattan National Life in June 2002. We believe this lawsuit
is without merit and intend to defend it vigorously. The ultimate outcome of the
lawsuit cannot be predicted with certainty.

On December 19, 2001, four of the Company's subsidiaries were named in a
purported nationwide class action seeking unspecified damages in the District
Court of Adams County, Colorado (Jose Medina and others similarly situated v.
Conseco Annuity Assurance Company, Conseco Life Insurance Company, Bankers
National Life Insurance Company and Bankers Life and Casualty Company, Cause No.
01-CV-2465), alleging among other things breach of contract regarding alleged
non-disclosure of additional charges for those policy holders paying via premium
modes other than annual. On July 14 and 15, 2003 the plaintiff's motion for
class certification was heard and the Court took the matter under advisement. On
November 10, 2003, the Court denied the motion for class certification. On
January 26, 2004, the plaintiff appealed the trial court's ruling denying class
certification. All further proceedings have been stayed pending the outcome of
the appeal. The defendants believe this lawsuit is without merit and intend to
defend it vigorously. The ultimate outcome of the lawsuit cannot be predicted
with certainty.

The Company's subsidiaries, Conseco Life Insurance Company and Bankers Life
and Casualty Company, have recently been named in multiple purported class
actions and individual lawsuits alleging, among other things, breach of contract
with regard to a change made in the way monthly deductions are calculated for
insurance coverage. This change was the adjustment of a non-guaranteed element,
which was not in the applicable policy form. The specific lawsuits include:
David Barton v. Conseco Life Insurance Company, Case No. 04-20048-CIV-MORENO
(Southern District, Florida); Stephen Hook, an individual, on behalf of himself
and all others similarly situated v. Conseco Life Insurance Company and Bankers
Life and Casualty Company and Does 1 through 10, Case No. CGC-04-428872
(Superior Court, San Francisco County, California); Donald King, as Trustee of
the Irrevocable Trust of Arnold L. King v. Conseco Life Insurance Company, Case
No. 1: 04CV0163 (Northern District, Ohio); Michael S. Kuhn, on behalf of himself
and all others similarly situated v. Conseco Life Insurance Company and Does 1
through 100, Case No. 03-416786 (Superior Court, San Francisco County,
California); Sidney H. Levine and Judith A. Levine v. Conseco Life Insurance
Company, Mark F. Peters Insurance Services, Inc. Hon. John Garamendi (in his
capacity as Insurance Commissioner for the State of California) and Does 1
through 10, Case No. 04 CV 125 LAB (BLM) (Southern District, California); Alene
P. Mangelson, as Trustee for the Ned L. Mangelson Life Insurance Trust, Marie M.
Berg and Michelle M. Wilcox on behalf of themselves and all others similarly
situated v. Conseco Life Insurance Company, Case No. 29D02-0312-PL-1034
(Superior Court, Hamilton County, Indiana); Edward M. Medvene, an Individual,
and Sherwin Samuels and Miles Rubin, as Trustees of the Edward Medvene 2984
Insurance Trust v. Conseco Life Insurance Company, Case No. CV04-846-AHM

F-53

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(MCX) (Central District, California). We believe these lawsuits are without
merit and intend to defend them vigorously. The ultimate outcome of the lawsuits
cannot be predicted with certainty.

On February 7, 2003, the Company's subsidiary, Conseco Life Insurance
Company, was named in a purported Texas statewide class action seeking
unspecified damages in the County Court of Cameron County, Texas. On February
12, 2004, the complaint was amended to allege a purported nationwide class and
to name Conseco Services, LLC as an additional defendant (Lawrence Onderdonk and
Yolanda Carrizales v. Conseco Life Insurance Company, Conseco Services, LLC, and
Pete Ramirez, III, Cause No. 2003-CCL-102-C). The purported class consists of
all former Massachusetts General Flexible Premium Adjustable Life Insurance
Policy policyholders who were converted to Conseco Life Flexible Premium
Adjustable Life Insurance Policies and whose accumulated values in the
Massachusetts General policies were applied to first year premiums on the
Conseco Life policies. The complaint alleges, among other things, civil
conspiracy to convert the accumulated cash values of the plaintiffs and the
class, and the violation of insurance laws nationwide. We believe this lawsuit
is without merit and intend to defend it vigorously. The ultimate outcome of the
lawsuit cannot be predicted with certainty.

On December 30, 2002 and December 31, 2002, five suits were filed in
various Mississippi counties against Conseco Life Insurance Company (Kathie
Allen, et al. v. Conseco Life Insurance Company, et al., Circuit Court of Jones
County, Mississippi, Cause No. 2002-448-CV12; Malcolm Bailey, et al. v. Conseco
Life Insurance Company, et al., Circuit Court of Claiborne County, Mississippi,
Cause No. CV-2002-371; Anthony Cascio, et al. v. Conseco Life Insurance Company,
et al, Circuit Court of LeFlore County, Mississippi, Cause No.
CV-2002-0242-CICI; William Garrard, et al. v. Conseco Life insurance Company, et
al., Circuit Court of Sunflower County, Mississippi, Cause No. CV-2002-0753-CRL;
and William Weaver, et al. v. Conseco Life Insurance Company, et al., Circuit
Court of LeFlore County, Mississippi, Cause No. CV-2002-0238-CICI) alleging,
among other things, a "vanishing premium" scheme. Conseco Life removed all of
the cases to the U.S. District Courts in Mississippi. In September 2003,
plaintiffs' motion to remand was denied in the Garrard and Weaver matters, but
granted in the Cascio matter. In November 2003, Conseco Life again removed the
Cascio matter to U.S. District Court. Conseco Life awaits the court's ruling on
Plaintiff's motion to remand in the Allen matter. In Bailey the parties have
agreed to stay in Federal court and the plaintiffs amended their complaint on
January 15, 2004 to allege purported nationwide class action allegations
regarding alleged wrongful collection of charges under the policy. On January
30, 2004 we filed a motion to dismiss or in alternative, motion for summary
judgment. Conseco Life believes the lawsuits are without merit and intends to
defend them vigorously. The ultimate outcome of the lawsuits cannot be predicted
with certainty.

In addition, the Company and its subsidiaries are involved on an ongoing
basis in other lawsuits and arbitrations (including purported class actions)
related to their operations. The ultimate outcome of all of these other legal
matters pending against the Company or its subsidiaries cannot be predicted,
and, although such lawsuits are not expected individually to have a material
adverse effect on the Company, such lawsuits could have, in the aggregate, a
material adverse effect on the Company's consolidated financial condition, cash
flows or results of operations.

OTHER PROCEEDINGS

On September 18, 2003, the Company received a grand jury subpoena from the
U.S. District Court for the Southern District of Indiana in connection with a
Department of Justice investigation requiring production of documents relating
to the valuation of interest-only securities held by CFC, our Predecessor's
former finance subsidiary, contemporaneous earnings estimates for the
Predecessor, certain personnel records and other accounting and financial
disclosure records for the period June 1, 1998 to June 30, 2000. The Company has
subsequently received follow-up grand jury document subpoenas concerning other
matters. All of these follow-up requests have been limited to the time period
prior to the December 17, 2002 bankruptcy filing.

F-54

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company has been advised by the Department of Justice that neither it nor
any of its current directors or employees are subjects or targets of this
investigation. The Company is cooperating fully with the Department of Justice
investigation.

On March 10, 2004, we entered into a settlement with the SEC in connection
with the SEC's investigation of events in and before the spring of 2000,
including CFC's accounting for its interest-only securities and servicing
rights. These issues were among those addressed in our Predecessor's writedown
and restatement in the spring of 2000, and were the subject of shareholder class
action litigation, which we settled in the second quarter of 2003. Without
admitting or denying the SEC's findings, we consented to the entry of a
cease-and-desist order requiring future compliance with periodic reporting,
record keeping, internal control and other provisions of the securities laws.
The settlement did not impose any fine or monetary penalty, or require us to
restate any of our historical financial statements.

On October 29, 2003, the New York Attorney General served Conseco Life
Insurance Company of Texas ("Conseco Life") with a document subpoena concerning
customer transfers between mutual fund subaccounts offered by CVIC, a former
wholly-owned subsidiary of Conseco Life, that occurred prior to the sale of CVIC
to an unrelated third party in October 2002. The SEC served the Company with a
similar subpoena shortly after we received the Attorney General's subpoena.
Certain of our employees have also received subpoenas regarding duties they
previously performed in respect of annuity sales by CVIC. The purchase agreement
pursuant to which CVIC was sold contains indemnification provisions with respect
to certain liabilities relating to Conseco Life's period of ownership, including
provisions concerning certain business activities (including marketing
activities) of CVIC. Conseco Life and the Company have cooperated with the
Attorney General and the SEC in producing documents responsive to their
subpoenas. In January 2004, the Company received telephonic notification of a
potential enforcement action by the Attorney General and a Wells notification
from the SEC regarding alleged market timing on the part of holders of variable
annuity policies issued by CVIC. The Company and its affiliates have not issued
any variable annuity policies since the sale of CVIC. The Company and Conseco
Life believe, based on the information obtained and supplied to the
investigators to date, that CVIC violated no federal or state law prior to the
October 2002 sale. The investigations are in a preliminary stage and their
outcome cannot be predicted with certainty. The Company and Conseco Life are
cooperating fully with the Attorney General and the SEC in these investigations.

The deadline to file administrative claims in the bankruptcy proceeding was
October 9, 2003. The Plan provides that all such claims must be paid in full, in
cash. We are reviewing all timely filed administrative claims and may resolve
disputes regarding allowance of such claims in the Bankruptcy Court. The amount
of known disputed administrative claims as of March 1, 2004 was approximately
$2.0 million.

GUARANTY FUND ASSESSMENTS

The balance sheet at December 31, 2003, includes: (i) accruals of $11.5
million, representing our estimate of all known assessments that will be levied
against the Company's insurance subsidiaries by various state guaranty
associations based on premiums written through December 31, 2003; and (ii)
receivables of $5.8 million that we estimate will be recovered through a
reduction in future premium taxes as a result of such assessments. At December
31, 2002, such guaranty fund assessment related accruals were $11.5 million and
such receivables were $7.5 million. These estimates are subject to change when
the associations determine more precisely the losses that have occurred and how
such losses will be allocated among the insurance companies. We recognized
expense (benefit) for such assessments of $1.2 million in the four months ended
December 31, 2003; $4.1 million in the eight months ended August 31, 2003; and
$(1.7) million and $6.5 million in 2002 and 2001, respectively.

F-55

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

GUARANTEES

In conjunction with the Plan, $481.3 million principal amount of bank loans
made to certain former directors and certain current and former officers and key
employees to enable them to purchase common stock of Old Conseco were
transferred to the Company. These loans had been guaranteed by Old Conseco. We
received all rights to collect the balances due pursuant to the original terms
of these loans. In addition, we hold loans to participants for interest on the
bank loans which total approximately $220 million. The former bank loans and the
interest loans are collectively referred to as the "D&O loans." We regularly
evaluate the collectibility of these loans in light of the collateral we hold
and the credit worthiness of the participants. At December 31, 2003, we have
estimated that approximately $51.0 million of the D&O balance (which is included
in other assets) is collectible (net of the cost of collection). An allowance
has been established to reduce the recorded balance of the D&O loans to this
balance.

Pursuant to the settlement that was reached with the Official Committee of
the Trust Originated Preferred Securities ("TOPrS") Holders and the Official
Committee of Unsecured Creditors in the Plan, the former holders of TOPrS
(issued by Old Conseco's subsidiary trusts and eliminated in our reorganization)
who did not opt out of the bankruptcy settlement, will be entitled to receive 45
percent of any proceeds from the collection of certain D&O loans in an aggregate
amount not to exceed $30 million. We have established a liability of $23.1
million (which is included in other liabilities), representing our estimate of
the amount which will be paid to the former holders of TOPrS pursuant to the
settlement.

In accordance with the terms of the Company's former Chief Executive
Officer's employment agreement, Bankers Life and Casualty Company, a
wholly-owned subsidiary of the Company, is the guarantor of the former
executive's nonqualified supplemental retirement benefit. The liability for such
benefit at December 31, 2003 and 2002 was $15.6 million and $14.8 million,
respectively, and is included in the caption "Other liabilities" in the
liability section of the consolidated balance sheet.

LEASES

The Company rents office space, equipment and computer software under
noncancellable operating leases. Rental expense was $19.1 million in the four
months ended December 31, 2003; $26.7 million in the eight months ended August
31, 2003; and $41.5 million and $45.3 million in 2002 and 2001, respectively.
Future required minimum rental payments as of December 31, 2003, were as follows
(dollars in millions):

2004........................................................ $ 23.0
2005........................................................ 21.5
2006........................................................ 18.7
2007........................................................ 15.6
2008........................................................ 14.1
Thereafter.................................................. 24.1
------
Total.................................................... $117.0
======

10. OTHER DISCLOSURES

POSTRETIREMENT PLANS

One of our insurance subsidiaries has a noncontributory, unfunded deferred
compensation plan for qualifying members of its career agency force. Benefits
are based on years of service and career earnings. The liability recognized in
the consolidated balance sheet for the agents' deferred compensation plan was
$64.7 million and $54.2 million at December 31, 2003 and 2002, respectively.
Included as an adjustment to accumulated other comprehensive income (loss) as of
December 31, 2002, was a $9.1 million adjustment representing the additional
minimum liability associated with this plan. Substantially all of this liability

F-56

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

represents vested benefits. Costs incurred on this plan, primarily representing
interest on unfunded benefit costs were $1.5 million in the four months ended
December 31, 2003; $4.0 million in the eight months ended August 31, 2003; and
$5.1 million and $4.9 million during 2002 and 2001, respectively.

The Company provides certain health care and life insurance benefits for
certain eligible retired employees under partially funded and unfunded plans in
existence at the date on which certain subsidiaries were acquired. Certain
postretirement benefit plans are contributory, with participants' contributions
adjusted annually. Actuarial measurement dates of September 30 and December 31
are used for our postretirement benefit plans. Amounts related to the
postretirement benefit plans were as follows (dollars in millions):

POSTRETIREMENT BENEFITS
----------------------------
SUCCESSOR PREDECESSOR
------------ ------------
DECEMBER 31, DECEMBER 31,
2003 2002
------------ ------------

Benefit obligation, beginning of year................. $ 24.6 $ 24.5
Interest cost....................................... 1.4 1.6
Plan participants' contributions.................... .4 1.1
Actuarial loss (gain)............................... (1.1) .4
Benefits paid....................................... (2.7) (3.0)
------ ------
Benefit obligation, end of year....................... $ 22.6 $ 24.6
====== ======
Fair value of plan assets, beginning of year.......... $ 1.1 $ 2.0
Actual return on plan assets........................ -- --
Employer contributions.............................. 1.6 2.1
Benefits paid....................................... (2.7) (3.0)
------ ------
Fair value of plan assets, end of year................ $ -- $ 1.1
====== ======
Funded status......................................... $(22.6) $(23.5)
Unrecognized net actuarial loss (gain)................ -- (7.1)
Unrecognized prior service cost....................... -- (1.4)
------ ------
Prepaid (accrued) benefit cost................... $(22.6) $(32.0)
====== ======

Plan assets as of December 31, 2002, consisted of an investment in the
Conseco Fixed Income Fund offered by Conseco Fund Group. The Conseco Fixed
Income Fund invested primarily in investment-grade debt securities.

We used the following weighted average assumptions to calculate:

2003 2002
---- ----

Benefit obligations:
Discount rate............................................. 6.2% 6.5%
Net periodic cost:
Discount rate............................................. 6.5% 7.0%
Expected return on plan assets............................ 4.6% 4.6%

F-57

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following assumed health care cost trend rates were used to determine
our postretirement benefit obligation:

2003 2002
---- ----

Initial healthcare cost trend rate.......................... 10.0% 11.5%
Ultimate health care cost trend rate........................ 6.0% 5.0%
Year the rate reaches the ultimate trend rate............... 2014 2015

A one percentage point change in the assumed health care cost trend rate
would have the following effects (dollars in millions):

ONE PERCENTAGE POINT
--------------------
INCREASE DECREASE
-------- --------

Effect on the postretirement benefit obligation............. $1.5 $(1.4)
Effect on the net periodic post retirement benefit cost..... .1 (.1)

Components of the cost we recognized related to postretirement plans were
as follows (dollars in millions):

POSTRETIREMENT BENEFITS
--------------------------------------------
SUCCESSOR PREDECESSOR
------------ ----------------------------
YEARS
FOUR MONTHS EIGHT MONTHS ENDED
ENDED ENDED DECEMBER 31,
DECEMBER 31, AUGUST 31, -------------
2003 2003 2002 2001
------------ ------------ ---- ----

Interest cost.......................... $ .5 $ .9 $1.6 $ 1.5
Expected return of plan assets......... -- -- (.1) (.1)
Amortization of prior service cost..... -- (.1) (.2) (1.0)
Recognized net actuarial loss.......... (.3) (.5) (.5) (.1)
---- ---- ---- -----
Net periodic cost (benefit).......... $ .2 $ .3 $ .8 $ .3
==== ==== ==== =====

The Company has qualified defined contribution plans for which
substantially all employees are eligible. Company contributions, which match
certain voluntary employee contributions to the plan, totaled $6.6 million in
2002 and $4.7 million in 2001. No employer contributions were made during the
2003 periods. Prior to 2002, employer matching contributions were made in Old
Conseco common stock. For the first nine months of 2002, employer matching
contributions were made in cash. In September 2002, the plans were amended to
make future employer matching contributions discretionary. Effective January 1,
2004, the Company resumed making matching contributions in cash.

TRUST PREFERRED SECURITIES

Prior to 2003, certain wholly-owned subsidiary trusts had issued preferred
securities in public offerings. The trusts used the proceeds from these
offerings to purchase subordinated debentures from Conseco. The terms of the
preferred securities were parallel to the terms of the debentures, which
accounted for substantially all trust assets. The preferred securities were to
be redeemed on a pro rata basis, to the same extent as the debentures were
repaid. Under certain circumstances involving a change in law or legal
interpretation, the debentures could be distributed to the holders of the
preferred securities. Our obligations under the debentures and related
agreements, taken together, provided a full and unconditional guarantee of
payments due on the preferred securities. The debentures issued to the
subsidiary trusts and the common securities purchased by Conseco from the
subsidiary trusts were eliminated in the consolidated financial

F-58

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

statements. The Trust Preferred Securities guaranteed by Old Conseco prior to
our emergence from bankruptcy were discharged in accordance with the Plan.

On February 16, 2001, the trust preferred securities component of the
FELINE PRIDES were retained by the Company (and subsequently retired) as payment
under the stock purchase contract in accordance with their terms and, as a
result, we issued 11.4 million shares of Old Conseco common stock to the holders
of the FELINE PRIDES. The $496.6 million carrying value of the FELINE PRIDES
that were retired (and used for payment pursuant to the stock purchase
contracts) was transferred from minority interest to common stock and additional
paid-in capital.

Trust Preferred Securities at December 31, 2002, were as follows:

YEAR PAR CARRYING DISTRIBUTION EARLIEST/MANDATORY
ISSUED VALUE VALUE RATE REDEMPTION DATES
------ ----- -------- ------------ ------------------
(DOLLARS IN MILLIONS)

Trust Originated Preferred
Securities...................... 1999 $ 300.0 $ 296.5 9.44% 2004/2029
Trust Originated Preferred
Securities...................... 1998 500.0 496.9 8.70 2003/2028
Trust Originated Preferred
Securities...................... 1998 230.0 228.1 9.00 2003/2028
Capital Securities................ 1997 300.0 300.0 8.80 2027
Trust Originated Preferred
Securities...................... 1996 275.0 275.0 9.16 2001/2026
Capital Trust Pass-through
Securities...................... 1996 325.0 325.0 8.70 2026
-------- --------
$1,930.0 $1,921.5
======== ========

RECLASSIFICATION ADJUSTMENTS INCLUDED IN COMPREHENSIVE INCOME

The changes in unrealized appreciation (depreciation) included in
comprehensive income are net of reclassification adjustments for after-tax net
gains (losses) from the sale of investments included in net income (loss) of
approximately $545 million and $240 million for the years ended December 31,
2002 and 2001, respectively. Such changes for the 2003 periods were not
significant.

SALE OF INTEREST IN RIVERBOAT

In the first quarter of 2001, the Company sold its 29 percent ownership
interest in the riverboat casino in Lawrenceberg, Indiana, for $260 million. We
recognized a net gain on the sale of $192.4 million.

11. SPECIAL CHARGES

2002

The following table summarizes the special charges incurred by the Company
during 2002, which are further described in the paragraphs which follow (dollars
in millions):

Loss related to reinsurance transactions and businesses sold
to raise cash............................................. $47.5
Costs related to debt modification and refinancing
transactions.............................................. 17.7
Expenses related to the termination of the former chief
financial officer......................................... 6.5
Other items................................................. 24.8
-----
Special charges before income tax benefit................. $96.5
=====

LOSS RELATED TO DEBT MODIFICATION AND REINSURANCE TRANSACTIONS AND BUSINESSES
SOLD TO RAISE CASH

We completed various asset sales and reinsurance transactions to raise cash
which resulted in net losses of $47.5 million in 2002. These amounts included:
(i) a loss of $39.0 million related to the reinsurance of a

F-59

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

portion of our life insurance business; (ii) a loss of $20.0 million associated
with the sale of our subsidiary in India; partially offset by (iii) asset sales
resulting in a net gain of $11.5 million.

COSTS RELATED TO DEBT MODIFICATION AND REFINANCING TRANSACTIONS

In conjunction with the various modifications to borrowing arrangements
(including the debt exchange offer completed in April 2002), entered into in
2002 we incurred costs of $17.7 million which are not permitted to be deferred
pursuant to GAAP.

EXPENSES RELATED TO TERMINATION OF THE FORMER CHIEF FINANCIAL OFFICER

The employment of Old Conseco's chief financial officer was terminated in
the first quarter of 2002. As a result, the vesting provisions associated with
the restricted stock issued to the chief financial officer pursuant to his
employment agreement were accelerated. We recognized a charge of $5.1 million
related to the immediate vesting of such restricted stock in the first quarter
of 2002. In addition, we recognized severance benefits of $1.4 million
associated with the termination.

OTHER ITEMS

Other items include expenses incurred: (i) in conjunction with the transfer
of certain customer service and backroom operations to our India subsidiary;
(ii) for severance benefits related to the transfer of such operations; and
(iii) for other items which are not individually significant. The Company sold
its India subsidiary in the fourth quarter of 2002 and has significantly reduced
the customer service and backroom operations conducted there.

2001

The following table summarizes the special charges incurred by the Company
during 2001, which are further described in the paragraphs which follow (dollars
in millions):

Organizational restructuring:
Severance benefits........................................ $12.4
Office closings and sale of artwork....................... 7.9
Transfer of certain customer service and backroom
operations to our India subsidiary..................... 10.6
Amounts related to disputed reinsurance balances............ 8.5
Litigation expenses......................................... 23.8
Other items................................................. 17.2
-----
Special charges before income tax benefit................. $80.4
=====

SEVERANCE BENEFITS

During 2001, Conseco undertook several restructuring actions in an effort
to improve the Company's operations and profitability. The planned changes
included moving a significant number of jobs to India. Pursuant to GAAP, the
Company is required to recognize the costs associated with most restructuring
activities as the costs are incurred. However, costs associated with severance
benefits are required to be recognized when the costs are: (i) attributable to
employees' services that have already been rendered; (ii) relate to obligations
that accumulate; and (iii) are probable and can be reasonably estimated. Since
the severance costs associated with our planned activities met these
requirements, we recognized a charge of $12.4 million in 2001.

F-60

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

OFFICE CLOSINGS AND SALE OF ARTWORK

In conjunction with our restructuring activities, we closed certain
offices, which resulted in the abandonment of certain leasehold improvements.
Further, certain antiques and artwork, formerly displayed in the Company's
executive offices were sold. We recognized losses of $7.9 million related to
these actions in 2001.

AMOUNTS RELATED TO DISPUTED REINSURANCE BALANCES

During 2001, we discontinued marketing certain medical insurance products.
Several reinsurers who assumed most of the risks associated with these products
disputed the reinsurance receivables due to us. We established an allowance of
$8.5 million for disputed balances that were ultimately written off due to their
uncollectibility.

LITIGATION EXPENSES

Litigation expenses primarily include the cost and proposed settlement
related to our securities litigation class action lawsuit which was subsequently
settled in the second quarter of 2003.

OTHER ITEMS

Other items include expenses incurred: (i) for consulting fees with respect
to services provided related to various debt and organizational restructuring
transactions; (ii) pursuant to the terms of the employment agreement for our
chief executive officer; and (iii) for other items which are not individually
significant.

12. SHAREHOLDERS' EQUITY

Pursuant to the Plan, CNO issued 34.4 million shares of Preferred Stock
with an aggregate liquidation preference of approximately $859.7 million. The
Preferred Stock has a par value of $.01 per share and a liquidation preference
of $25 per share. Dividends are payable at a rate equal to 10.5 percent of the
liquidation preference per share, payable semi-annually on March 1 and September
1. This rate will increase to 11 percent beginning September 11, 2005. These
dividends are payable in additional shares of Preferred Stock until the later
of: (i) September 10, 2005; or (ii) the beginning of the first fiscal quarter
after which our primary insurance companies have received a financial strength
rating of at least "A-" by A.M. Best. Thereafter, dividends are payable, at our
option, in cash or additional shares of Preferred Stock. The Preferred Stock may
be redeemed by CNO, in whole or in part, at any time in cash equal to the
liquidation preference plus cumulative unpaid dividends thereon.

The Preferred Stock is convertible, at the option of the holder, into
common stock of CNO at any time on or after September 30, 2005. The conversion
rate is equal to the total liquidation preference plus cumulative unpaid
dividends thereon divided by $20.35 which was the average price of CNO's common
stock, as defined, for each of the trading days in the 60 calendar day period
immediately preceding January 8, 2004.

The Preferred Stock is exchangeable, at the option of the holder, into
common stock of CNO at any time on or after September 10, 2013. The exchange
rate is equal to the total liquidation preference plus cumulative unpaid
dividends thereon divided by the average market price of CNO's common stock, as
defined, for the ten trading days ending on the date of exchange. The maximum
number of common shares that can be issued shall not exceed the greater of: (i)
7.84 billion shares of common stock; or (ii) the number of authorized but
unissued shares of CNO's common stock. In addition, CNO, at its option, may pay
cash in an amount equal to the liquidation preference in lieu of delivering the
exchanged common stock.

F-61

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The holders of the Preferred Stock will be entitled to voting rights
beginning September 30, 2005 or earlier if there is: (i) a reduction in the
financial strength rating assigned to any of our active material insurance
subsidiaries (as defined) by A.M. Best; (ii) an event of default under our
credit agreement; (iii) the occurrence of a material adverse regulatory event,
as defined, with respect to any of our material insurance subsidiaries (as
defined); or (iv) a failure to maintain various financial ratios and balances.

Pursuant to the Plan, we issued 6.0 million Series A Warrants (the
"Warrants") entitling the holders to purchase shares of CNO common stock at a
price of $27.60 per share. The Warrants expire on September 10, 2008. The
exercise price and number of common shares issuable are subject to adjustment
based on the occurrence of certain events, including: (i) stock dividends; (ii)
stock splits; and (iii) the issuance of instruments or securities which are
exercisable for or convertible into shares of common stock entitling the holders
to purchase shares of common stock at a price per share that is less than the
market price on the date of issuance.

On the Effective Date, the Successor adopted a new long-term incentive
plan, which permits the grant of CNO incentive or non-qualified stock options
and restricted stock awards to certain directors, officers and employees of CNO
and certain other individuals who perform services for the Company. A maximum of
10 million shares may be issued under the plan. Restricted share grants are
limited to 3.3 million shares. During September 2003, the Company granted
options to purchase 500,000 shares of CNO common stock at $16.40 per share and
500,000 restricted shares of CNO common stock to the Chief Executive Officer in
accordance with his employment agreement. These options and restricted stock
vest over the next four years. In addition, the Company granted options to
purchase 500,000 shares of CNO common stock at $19.61 per share and 500,000
restricted shares of CNO common stock to the non-executive Chairman of the Board
of Directors in accordance with his agreement. These options and restricted
shares vest over the next three years.

Changes in the number of shares of common stock outstanding during the four
months ended December 31, 2003, the eight months ended August 31, 2003 and the
years ended December 31, 2002 and 2001 were as follows (shares in thousands):

Balance, beginning of period...... -- 346,007 344,743 325,318
Issuance of shares pursuant to
Plan......................... 100,000 -- -- --
Stock options exercised......... -- -- 6 432
Stock warrants exercised........ -- -- -- 3,327
Shares issued in conjunction
with the acquisition of
Exl.......................... -- -- -- 3,411
Shares issued pursuant to stock
purchase contracts related to
the FELINE PRIDES............ -- -- -- 11,351
Shares issued under employee
benefit compensation plans... 116 -- 1,258 904
Cancelled pursuant to the
Plan......................... -- (346,007) -- --
------- -------- ------- -------
Balance, end of period............ 100,116 -- 346,007 344,743
======= ======== ======= =======

F-62

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In February 2001, the Company issued 11.4 million shares of Old Conseco
common stock pursuant to stock purchase contracts related to the FELINE PRIDES.
This transaction is discussed in further detail in the note to the consolidated
financial statements entitled "Other Disclosures".

The Predecessor's 1994 Stock and Incentive Plan authorized the granting of
options to employees and directors of the Company to purchase up to 24 million
shares of Old Conseco common stock at a price not less than its market value on
the date the option was granted. In 1997, the Company adopted the 1997 Non-
qualified Stock Option Plan, which authorized the granting of non-qualified
options to employees of the Company to purchase shares of Old Conseco common
stock.

A summary of the Company's stock option activity and related information
for the four months ended December 31, 2003, the eight months ended August 31,
2003 and the years ended December 31, 2002 and 2001, is presented below (shares
in thousands):

SUCCESSOR PREDECESSOR
----------------- -----------------------------------------------------------
FOUR MONTHS
ENDED EIGHT MONTHS YEARS ENDED DECEMBER 31,
DECEMBER 31, ENDED AUGUST 31, --------------------------------------
2003 2003 2002 2001
----------------- ------------------ ------------------ -----------------
WEIGHTED WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE SHARES PRICE
------ -------- ------ -------- ------ -------- ------ --------

Outstanding at the beginning of
the period................... -- $ -- 23,520 $15.95 40,292 $15.01 36,107 $18.38
Options granted................ 1,000 18.01 -- -- 2,572 3.57 8,609 6.32
Exercised...................... -- -- -- -- (6) 1.51 (432) 9.88
Cancelled pursuant to the
Plan......................... -- -- (17,438) 18.29 -- -- -- --
Forfeited or terminated........ -- -- (6,082) 9.26 (19,338) 12.35 (3,992) 27.27
----- ------- ------- ------
Outstanding at the end of the
year......................... 1,000 18.01 -- 23,520 15.95 40,292 15.01
===== ======= ======= ======
Options exercisable at the end
of the period................ -- -- 13,593 13,591
===== ======= ======= ======
Available for future grant..... 7,982 -- 52,668 34,903
===== ======= ======= ======

All outstanding stock options of the Predecessor were cancelled pursuant to
the Plan.

The following table summarizes information about stock options outstanding
at December 31, 2003 (shares in thousands):

OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------- ----------------------
NUMBER REMAINING LIFE EXERCISE NUMBER EXERCISE
EXERCISE PRICES OUTSTANDING (IN YEARS) PRICE EXERCISABLE PRICE
--------------- ----------- -------------- -------- ----------- --------

$16.40............... 500 9.75 $16.40 -- --
19.61............... 500 9.75 19.61 -- --
----- --
1,000 --
===== ==

We estimated the fair value of each option grant used to determine the pro
forma amounts summarized above using the Black-Scholes option valuation model
with the following weighted average assumptions for

F-63

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the four months ended December 31, 2003, the eight months ended August 31, 2003
and the years ended December 31, 2002 and 2001:

SUCCESSOR PREDECESSOR
------------ ----------------------------------------
FOUR MONTHS EIGHT MONTHS
ENDED ENDED YEARS ENDED DECEMBER 31,
DECEMBER 31, AUGUST 31, -------------------------
2003 GRANTS 2003 GRANTS 2002 GRANTS 2001 GRANTS
------------ ------------ ----------- -----------

Weighted average risk-free
interest rates.......... 3.7% -- 4.7% 4.8%
Weighted average dividend
yields.................. 0.0% -- 0.0% 0.0%
Volatility factors........ 35% -- 40% 40%
Weighted average expected
life.................... 6.1 years -- 6.4 years 6.4 years
Weighted average fair
value per share......... $ 7.71 -- $ 1.73 $ 3.04

F-64

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

A reconciliation of net income (loss) and shares used to calculate basic
and diluted earnings per share is as follows (dollars in millions and shares in
thousands):

Net income (loss):
Net income (loss).............. $ 96.3 $2,201.7 $(7,835.7) $(405.9)
Preferred stock dividends...... (27.8) -- (2.1) (12.8)
-------- -------- --------- -------
Income (loss) applicable to
common ownership for basic
earnings per share........ 68.5 2,201.7 (7,837.8) (418.7)
Effect of dilutive
securities.................. 27.8 -- -- --
-------- -------- --------- -------
Income (loss) applicable to
common ownership and assumed
conversions for diluted
earnings per share.......... $ 96.3 $2,201.7 $(7,837.8) $(418.7)
======== ======== ========= =======
Shares:
Weighted average shares
outstanding for basic
earnings per share.......... 100,110
--------
Effect of dilutive securities on
weighted average shares:
Preferred stock................ 43,257
Stock options, warrants and
employee benefit plans(a)... 119
--------
Dilutive potential common
shares...................... 43,376
--------
Weighted average shares
outstanding for diluted
earnings per share............. 143,486
========

---------------

(a) The dilutive effect is determined under the treasury stock method using the
average market price during the period.

Basic earnings per common share ("EPS") is computed by dividing income
applicable to common stock by the weighted average number of common shares
outstanding for the period. Restricted shares are not included in basic EPS
until vested. Diluted EPS reflects the potential dilution that could occur if
the Preferred Stock were converted into common stock, the options were exercised
and the restricted stock was vested. The dilution from options and restricted
shares are calculated using the treasury stock method.

F-65

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

13. OTHER OPERATING STATEMENT DATA

Insurance policy income consisted of the following (dollars in millions):

Traditional products:
Direct premiums collected..... $1,477.9 $3,264.3 $ 5,100.2 $ 5,426.3
Reinsurance assumed........... 31.9 57.3 78.7 146.0
Reinsurance ceded............. (92.1) (196.4) (327.8) (249.4)
-------- -------- --------- ---------
Premiums collected, net of
reinsurance.............. 1,417.7 3,125.2 4,851.1 5,322.9
Change in unearned premiums... (15.4) 13.5 (19.7) 1.9
Less premiums on universal
life and products without
mortality and morbidity
risk which are recorded as
additions to insurance
liabilities................ (528.2) (1,266.4) (1,792.7) (1,828.2)
-------- -------- --------- ---------
Premiums on traditional
products with mortality
or morbidity risk,
recorded as insurance
policy income............ 874.1 1,872.3 3,038.7 3,496.6
Fees and surrender charges on
interest-sensitive products... 131.7 332.0 563.6 496.1
-------- -------- --------- ---------
Insurance policy income.... $1,005.8 $2,204.3 $ 3,602.3 $ 3,992.7
======== ======== ========= =========

The four states with the largest shares of 2003 collected premiums were
Florida (8.1 percent), Illinois (6.8 percent), Texas (6.6 percent), and
California (6.5 percent). No other state accounted for more than 5 percent of
total collected premiums.

Other operating costs and expenses were as follows (dollars in millions):

SUCCESSOR PREDECESSOR
------------ ------------------------------
FOUR MONTHS EIGHT MONTHS YEARS ENDED
ENDED ENDED DECEMBER 31,
DECEMBER 31, AUGUST 31, ---------------
2003 2003 2002 2001
------------ ------------ ---- ----

Commission expense.................. $ 66.4 $117.9 $195.1 $218.6
Salaries and wages.................. 70.5 136.3 215.1 206.0
Other............................... 81.5 168.1 326.0 322.5
------ ------ ------ ------
Total other operating costs and
expenses....................... $218.4 $422.3 $736.2 $747.1
====== ====== ====== ======

F-66

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Changes in the value of policies inforce at the Effective Date were as
follows (dollars in millions):

SUCCESSOR
------------
FOUR MONTHS
ENDED
DECEMBER 31,
2003
------------

Successor balance, beginning of the period.................. $3,102.6
Additional acquisition expense............................ 2.4
Amortization.............................................. (122.0)
Amounts related to fair value adjustment of actively
managed fixed maturities............................... (33.5)
--------
Successor balance, end of the period........................ $2,949.5
========

Based on current conditions and assumptions as to future events on all
policies inforce, the Company expects to amortize approximately 10 percent of
the December 31, 2003 balance of the value of policies inforce at the Effective
Date in 2004, 10 percent in 2005, 9 percent in 2006, 8 percent in 2007 and 8
percent in 2008. The discount rate used to determine the amortization of the
value of policies inforce at the Effective Date averaged 5 percent in the four
months ended December 31, 2003.

Changes in the cost of policies purchased were as follows (dollars in
millions):

PREDECESSOR
----------------------------------
TWELVE MONTHS
EIGHT MONTHS ENDED
ENDED DECEMBER 31,
AUGUST 31, -------------------
2003 2002 2001
------------ ---- ----

Balance, beginning of the period................ $ 1,170.0 $1,657.8 $1,954.8
Additional acquisition expense on acquired
policies................................... 7.4 11.3 12.5
Amortization.................................. (74.1) (215.5) (242.0)
Amounts related to fair value adjustment of
actively managed fixed maturities.......... 4.7 (81.9) (49.0)
Reinsurance transactions...................... -- (73.4) --
Net amounts related to discontinued
operations................................. -- (66.6) (13.9)
Amounts related to sales of subsidiaries...... -- (60.0) --
Other......................................... (8.8) (1.7) (4.6)
Elimination of Predecessor balance............ (1,099.2) -- --
--------- -------- --------
Balance, end of the period...................... $ -- $1,170.0 $1,657.8
========= ======== ========

The discount rates used to determine the amortization of the cost of
policies purchased averaged 7 percent in the eight months ended August 31, 2003,
7 percent in 2002 and 6 percent in 2001.

F-67

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Changes in the cost of policies produced were as follows (dollars in
millions):

Balance, beginning of the
period......................... $ -- $ 2,014.4 $2,570.2 $2,480.5
Additions...................... 110.1 280.1 486.0 612.8
Amortization................... (8.3) (252.8) (544.3) (396.3)
Amounts related to fair value
adjustment of actively
managed fixed maturities.... -- (20.5) (121.0) (28.2)
Reinsurance transactions....... -- -- (134.6) --
Net amounts related to
discontinued operations..... -- -- (103.3) 15.0
Amounts related to sales of
subsidiaries................ -- -- (140.8) --
Other.......................... -- (1.7) 2.2 (113.6)
Elimination of Predecessor
balance..................... -- (2,019.5) -- --
------ --------- -------- --------
Balance, end of the period....... $101.8 $ -- $2,014.4 $2,570.2
====== ========= ======== ========

In 2001, the Company stopped renewing portions of our major medical lines
of business in several unprofitable states in accordance with the contractual
terms of the policies. As a result, we determined that approximately $77.4
million of the cost of policies produced and the cost of policies purchased
would not be recoverable. Such amount is recorded as amortization in the
accompanying statement of operations.

Policyholder redemptions of annuity and, to a lesser extent, life products
have increased in recent periods. We experienced additional redemptions
following the downgrade of our A.M. Best financial strength rating to "B (fair)"
in August of 2002. When redemptions are greater than our previous assumptions,
we are required to accelerate the amortization of our cost of policies produced
and cost of policies purchased to write off the balance associated with the
redeemed policies. Accordingly, amortization expense has increased. In 2002, we
changed the lapse assumptions used to determine the amortization of the cost of
policies produced and the cost of policies purchased related to certain
universal life products and our annuities to reflect our then current estimates
of future lapses. For certain universal life products, we changed the ultimate
lapse assumption from: (i) a range of 6 percent to 7 percent; to (ii) a tiered
assumption based on the level of funding of the policy of a range of 2 percent
to 10 percent. We recorded additional amortization of the cost of policies
produced and the cost of policies purchased related to higher redemptions and
changes to our lapse assumptions of $203.2 million in 2002.

The cost of policies produced and the cost of policies purchased are
amortized in relation to the estimated gross profits to be earned over the life
of our annuity products. As a result of economic developments, actual experience
of our products and changes in our expectations, we changed our investment yield
assumptions used in calculating the estimated gross profits to be earned on our
annuity products. Such changes resulted in additional amortization of the cost
of policies produced and the cost of policies purchased of $35.0 million (of
which $7.2 million related to discontinued operations) in 2001.

F-68

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

14. CONSOLIDATED STATEMENT OF CASH FLOWS

The following disclosures supplement our consolidated statement of cash
flows (dollars in millions):

Non-cash items not reflected in
the investing and financing
activities section of the
consolidated statement of cash
flows:
Issuance of common stock under
stock option and employee
benefit plans.............. $ 2.6 $ -- $ 12.7 $ 19.7
Issuance of convertible
preferred shares........... 27.8 5.3 2.1 12.8
Value of FELINE PRIDES retired
and transferred from
minority interest to common
stock and additional
paid-in capital............ -- -- -- 496.6
Issuance of common stock in
connection with the
acquisition of Exl......... -- -- -- 52.1
Decrease in notes
payable-direct corporate
obligations and increase in
other liabilities
reflecting the estimated
fair value of interest rate
swap agreements............ -- -- -- 13.5

The effect on our consolidated balance sheet of implementing fresh start
accounting is discussed in the note to the consolidated financial statements
entitled "Fresh Start Reporting". Such non-cash adjustments are not reflected in
our consolidated statement of cash flows.

F-69

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following reconciles net income (loss) to net cash provided by
operating activities (dollars in millions):

Cash flows from operating
activities:
Net income (loss).............. $ 96.3 $ 2,201.7 $(7,835.7) $ (405.9)
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities:
Interest-only securities
investment income......... -- -- (10.6) (51.5)
Cash received from
interest-only securities,
net....................... -- -- (73.3) 14.3
Servicing income............ -- -- (83.9) (115.3)
Cash received from servicing
activities................ -- -- 46.9 71.7
Provision for losses........ -- 55.6 1,160.8 707.2
(Gain) loss on sale of
finance receivables....... -- -- 49.5 (26.9)
Amortization and
depreciation.............. 144.7 369.8 1,017.8 848.0
Income taxes................ 131.0 31.4 758.3 (140.7)
Insurance liabilities....... 207.2 265.8 509.5 334.4
Accrual and amortization of
investment income......... 20.1 43.2 227.9 97.2
Deferral of cost of policies
produced and purchased.... (111.6) (287.5) (509.2) (667.0)
Gain on sale of interest in
riverboat................. -- -- -- (192.4)
Impairment charges.......... -- -- 1,514.4 386.9
Goodwill impairment......... -- -- 500.0 --
Special charges............. -- -- 171.2 72.4
Reorganization items........ -- (2,157.0) -- --
Cumulative effect of
accounting change......... -- -- 2,949.2 --
Minority interest........... -- -- 173.2 183.9
Net realized investment
(gains) losses............ (11.8) 5.4 673.7 413.7
Discontinued operations..... -- (16.7) 93.1 --
Gain on extinguishment of
debt...................... -- -- (8.1) (26.9)
Other....................... (36.8) 235.6 (29.0) (178.4)
------- --------- --------- --------
Net cash provided by
operating activities... $ 439.1 $ 747.3 $ 1,295.7 $1,324.7
======= ========= ========= ========

At December 31, 2003, restricted cash consisted of: (i) $17.3 million held
in trust for the payment of bankruptcy-related professional fees; and (ii) $14.6
million of cash held by three investment trusts (which are

F-70

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

further described in the note to the consolidated financial statements entitled
"Investments in Variable Interest Entities").

15. STATUTORY INFORMATION (BASED ON NON-GAAP MEASURES)

Statutory accounting practices prescribed or permitted by regulatory
authorities for the Company's insurance subsidiaries differ from GAAP. The
Company's insurance subsidiaries reported the following amounts to regulatory
agencies, after appropriate elimination of intercompany accounts among such
subsidiaries (dollars in millions):

2003 2002
---- ----

Securitization debt issued by special purpose entities and
guaranteed by our finance subsidiary, all of which was
purchased by our insurance subsidiaries prior to the
acquisition of CFC........................................ $ -- $ 2.0
Preferred and common stock of intermediate holding
company................................................... 159.0 146.4
Other....................................................... -- 2.5
------ ------
Total..................................................... $159.0 $150.9
====== ======

Statutory earnings build the capital adequacy required by rating agencies
and regulators. Statutory earnings and fees and interest paid by the insurance
companies to the parent company create the "cash flow capacity" the parent
company needs to meet its obligations, including debt service. The combined
statutory net income (loss) (a non-GAAP measure) of our life insurance
subsidiaries was $286.1 million, $(465.0) million and $(137.8) million in 2003,
2002 and 2001, respectively. Included in such net income (loss) are net realized
capital gains (losses), net of income taxes, of $32.8 million, $(516.1) million
and $(188.0) million in 2003, 2002 and 2001, respectively. In addition, the
insurance subsidiaries incur fees and interest to Conseco or its non-life
subsidiaries; such amounts totaled $85.8 million, $194.8 million and $279.2
million in 2003, 2002 and 2001, respectively.

The ability of our insurance subsidiaries to pay dividends is subject to
state insurance department regulations. These regulations generally permit
dividends to be paid from statutory earned surplus of the insurance company for
any 12-month period in amounts equal to the greater of (or in a few states, the
lesser of): (i) statutory net gain from operations or statutory net income for
the prior year; or (ii) 10 percent of statutory capital and surplus as of the
end of the preceding year. Any dividends in excess of these levels require the
approval of the director or commissioner of the applicable state insurance
department. During 2002, our insurance subsidiaries paid dividends to Conseco
totaling $240.0 million. In 2003, a non-cash dividend of $4.5 million
representing affiliated common stock was paid to CDOC.

On October 30, 2002, Bankers National Life Insurance Company and Conseco
Life Insurance Company of Texas (on behalf of itself and all other Conseco
insurance subsidiaries), our insurance subsidiaries domiciled in Texas, each
entered into consent orders with the Commissioner of Insurance for the State of

F-71

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Texas whereby they agreed: (i) not to request any dividends or other
distributions before January 1, 2003 and, thereafter, not to pay any dividends
or other distributions to parent companies outside of the insurance system
without the prior approval of the Texas Insurance Commissioner; (ii) to continue
to maintain sufficient capitalization and reserves as required by the Texas
Insurance Code; (iii) to request approval from the Texas Insurance Commissioner
before making any disbursements not in the ordinary course of business; (iv) to
complete any pending transactions previously reported to the proper insurance
regulatory officials prior to and during Conseco's restructuring, unless not
approved by the Texas Insurance Commissioner; (v) to obtain a commitment from
Conseco to maintain their infrastructure, employees, systems and physical
facilities prior to and during Conseco's restructuring; and (vi) to continue to
permit the Texas Insurance Commissioner to examine its books, papers, accounts,
records and affairs. The consent orders were formally released on November 19,
2003. We have agreed with the Texas Insurance Department to provide prior notice
of certain transactions, including up to 30 days prior notice of the payment of
dividends by an insurance subsidiary to any non-insurance company parent, and
periodic reporting of information concerning our financial performance and
condition.

The National Association of Insurance Commissioners' Risk-Based Capital for
Life and/or Health Insurers Model Act (the "Model Act") provides a tool for
insurance regulators to determine the levels of statutory capital and surplus an
insurer must maintain in relation to its insurance and investment risks and
whether there is a need for possible regulatory attention. The Model Act
provides four levels of regulatory attention, varying with the ratio of the
insurance company's total adjusted capital (defined as the total of its
statutory capital and surplus, AVR and certain other adjustments) to its company
action level risk based capital ("RBC"): (i) if a company's total adjusted
capital is less than 100 percent but greater than or equal to 75 percent of its
RBC (the "Company Action Level"), the company must submit a comprehensive plan
to the regulatory authority proposing corrective actions aimed at improving its
capital position; (ii) if a company's total adjusted capital is less than 75
percent but greater than or equal to 50 percent of its RBC (the "Regulatory
Action Level"), the regulatory authority will perform a special examination of
the company and issue an order specifying the corrective actions that must be
taken; (iii) if a company's total adjusted capital is less than 50 percent but
greater than or equal to 35 percent of its RBC (the "Authorized Control Level"),
the regulatory authority may take any action it deems necessary, including
placing the company under regulatory control; and (iv) if a company's total
adjusted capital is less than 35 percent of its RBC (the "Mandatory Control
Level"), the regulatory authority must place the company under its control. In
addition, the Model Act provides for an annual trend test if a company's total
adjusted capital is between 100 percent and 125 percent of its RBC at the end of
the year. The trend test calculates the greater of the decrease in the margin of
total adjusted capital over RBC: (i) between the current year and the prior
year; and (ii) for the average of the last 3 years. It assumes that such
decrease could occur again in the coming year. Any company whose trended total
adjusted capital is less than 95 percent of its RBC would trigger a requirement
to submit a comprehensive plan as described above for the Company Action Level.

The 2003 statutory annual statements filed with the state insurance
regulators of each of our insurance subsidiaries reflected total adjusted
capital in excess of the levels subjecting the subsidiaries to any regulatory
action. However, as a result of losses on the long-term care business within the
Other Business in Run-off segment, the RBC ratio of one of our subsidiaries is
near the level which would require it to submit a comprehensive plan aimed at
improving its capital position.

The consolidated RBC ratio for our insurance subsidiaries was approximately
287 percent at December 31, 2003. We calculate the consolidated RBC ratio by
assuming all of the assets, liabilities, capital and surplus and other aspects
of the business of our insurance subsidiaries are combined together in one
insurance subsidiary, with appropriate intercompany eliminations.

F-72

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

our financial statements prepared in accordance with GAAP and at December 31,
2003, the estimated fair value of the trust investments slightly exceeded their
GAAP book value. During the fourth quarter of 2003, the trusts began liquidating
their portfolios, a process which is expected to be completed in the first
quarter of 2004. Under statutory accounting practices, which differ from GAAP,
realized capital losses of $45.9 million were recorded on the fourth quarter
2003 partial redemption of the senior notes issued by the trusts that are owned
by the insurance subsidiaries. Additional statutory realized capital losses of
$94.9 million were recorded at December 31, 2003 since a decision had been made
to redeem the remaining senior notes at amounts less than their amortized cost.
The total statutory realized losses of $140.8 million on the senior notes were
included in the interest maintenance reserve.

16. BUSINESS SEGMENTS

After our emergence from bankruptcy, we began to manage our business
operations through two primary operating segments, based on method of product
distribution, and a third segment comprised of business in run-off. We refer to
these segments as: (i) Bankers Life; (ii) Conseco Insurance Group; and (iii)
Other Business in Run-Off. Prior to its disposition effective March 31, 2003, we
also had a finance segment (which is reflected in our discontinued operations in
the consolidated statement of operations). We also have a corporate segment,
which consists of holding company activities and certain noninsurance company
businesses that are not related to our other operating segments. Prior period
segment data has been reclassified to conform to the current period
presentation.

Operating information regarding our segments was as follows (dollars in
millions):

Revenues:
Bankers Life:
Insurance policy income:
Annuities.......................... $ 17.3 $ 32.9 $ 39.6 $ 31.4
Supplemental health................ 384.2 760.4 1,122.8 1,082.5
Life............................... 51.5 91.5 125.1 271.2
Other.............................. 3.8 7.9 12.6 15.0
Net investment income(a)............. 135.5 258.2 367.4 376.4
Fee revenue and other income(a)...... .5 .2 1.3 1.2
Net realized investment gains
(losses)(a)........................ 3.4 5.5 (128.7) (43.5)
-------- -------- --------- --------
Total Bankers Life segment
revenues...................... 596.2 1,156.6 1,540.1 1,734.2
-------- -------- --------- --------

F-73

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Conseco Insurance Group:
Insurance policy income:
Annuities.......................... 8.8 51.6 121.3 56.8
Supplemental health................ 250.9 499.0 727.9 684.4
Life............................... 125.7 303.9 503.8 524.5
Other.............................. 13.1 38.3 101.9 111.7
Net investment income(a)............. 288.6 582.6 896.3 1,010.1
Fee revenue and other income(a)...... .5 17.0 25.4 31.4
Net realized investment gains
(losses)(a)........................ 9.5 (17.1) (368.1) (209.1)
-------- -------- --------- --------
Total Conseco Insurance Group
segment revenues.............. 697.1 1,475.3 2,008.5 2,209.8
-------- -------- --------- --------
Other Business in Run-Off:
Insurance policy
income -- supplemental health...... 150.5 418.8 847.3 1,215.2
Net investment income(a)............. 55.3 101.5 155.8 166.7
Fee revenue and other income(a)...... .9 -- .8 1.2
Net realized investment gains
(losses)(a)........................ (.7) 6.3 (58.2) (24.6)
-------- -------- --------- --------
Total Other Business in Run-Off
segment revenues.............. 206.0 526.6 945.7 1,358.5
-------- -------- --------- --------
Corporate:
Net investment income(a)............. .7 16.2 14.0 39.7
Venture capital gain (loss) related
to investment in AWE............... (5.5) 10.5 (99.3) (23.4)
Gain on sale of interest in
riverboat.......................... -- -- -- 192.4
Net realized investment gains
(losses)(a)........................ (.4) (.1) (1.3) (62.8)
Fee and other income................. 11.4 17.1 59.2 68.5
-------- -------- --------- --------
Total corporate segment
revenues...................... 6.2 43.7 (27.4) 214.4
-------- -------- --------- --------
Eliminations.............................. -- -- (16.5) (24.9)
-------- -------- --------- --------
Total revenues.................. 1,505.5 3,202.2 4,450.4 5,492.0
-------- -------- --------- --------
Expenses:
Bankers Life:
Insurance policy benefits............ 395.8 795.1 1,090.9 1,108.8
Amortization......................... 62.3 113.9 168.7 193.4
Interest expense on investment
borrowings......................... .8 3.4 4.6 6.1
Other operating costs and expenses... 51.8 84.6 94.4 130.6
Special charges...................... -- -- 45.0 6.0
-------- -------- --------- --------
Total Bankers Life segment
expenses...................... 510.7 997.0 1,403.6 1,444.9
-------- -------- --------- --------

F-74

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Conseco Insurance Group:
Insurance policy benefits............ 421.2 746.3 1,377.0 1,390.1
Amortization......................... 64.4 201.8 541.4 324.6
Interest expense on investment
borrowings......................... 1.6 4.7 10.2 19.7
Other operating costs and expenses... 115.6 222.6 292.1 273.9
Special charges...................... -- -- (.7) 15.5
-------- -------- --------- --------
Total Conseco Insurance Group
segment expenses.............. 602.8 1,175.4 2,220.0 2,023.8
-------- -------- --------- --------
Other Business in Run-Off:
Insurance policy benefits............ 150.7 597.3 864.6 1,089.6
Amortization......................... 6.3 25.7 112.2 160.1
Interest expense on investment
borrowings......................... -- .2 .6 2.0
Other operating costs and expenses... 36.2 74.7 185.1 212.8
-------- -------- --------- --------
Total Other Business in Run-Off
segment expenses.............. 193.2 697.9 1,162.5 1,464.5
-------- -------- --------- --------
Corporate:
Interest expense on corporate debt... 34.4 194.2 325.5 369.6
Provision for losses and interest
expense related to stock purchase
plan............................... -- 55.6 240.0 169.6
Amortization related to operations... -- -- .6 108.2
Interest expense on investment
borrowings......................... -- -- 1.0 2.6
Other operating costs and expenses... 14.9 40.4 181.1 135.2
Goodwill impairment.................. -- -- 500.0 --
Gain on extinguishment of debt....... -- -- (1.8) (17.0)
Reorganization items................. -- (2,130.5) 14.4 --
Special charges...................... -- -- 52.2 58.9
-------- -------- --------- --------
Total corporate segment
expenses...................... 49.3 (1,840.3) 1,313.0 827.1
-------- -------- --------- --------
Eliminations............................ -- -- (16.5) (24.9)
-------- -------- --------- --------
Total expenses.................. 1,356.0 1,030.0 6,082.6 5,735.4
-------- -------- --------- --------

F-75

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Income (loss) before income taxes,
minority interest, discontinued
operations and cumulative effect of
accounting change:
Bankers Life......................... 85.5 159.6 136.5 289.3
Conseco Insurance Group.............. 94.3 299.9 (211.5) 186.0
Other Business in Run-Off............ 12.8 (171.3) (216.8) (106.0)
Corporate operations................. (43.1) 1,884.0 (1,340.4) (612.7)
-------- -------- --------- --------
Income (loss) before income
taxes, minority interest,
discontinued operations and
cumulative effect of
accounting change............. $ 149.5 $2,172.2 $(1,632.2) $ (243.4)
======== ======== ========= ========

---------------

(a) It is not practicable to provide additional components of revenue by
product or services.

Segment balance sheet information was as follows (dollars in millions):

SUCCESSOR PREDECESSOR
------------ ------------
DECEMBER 31, DECEMBER 31,
2003 2002
------------ ------------

Assets:
Bankers Life....................................... $ 9,826.2 $ 8,306.8
Conseco Insurance Group............................ 16,343.0 17,121.6
Other Business in Run-Off.......................... 3,511.2 2,831.7
Corporate.......................................... 239.7 624.6
Assets of discontinued operations.................. -- 17,624.3
--------- ---------
Total assets.................................... $29,920.1 $46,509.0
========= =========
Liabilities:
Bankers Life....................................... $ 8,338.1 $ 6,774.3
Conseco Insurance Group............................ 13,774.9 14,924.7
Other Business in Run-Off.......................... 3,511.2 2,138.8
Corporate.......................................... 1,478.3 5,175.8
Liabilities of discontinued operations............. -- 17,624.3
--------- ---------
Total liabilities............................... $27,102.5 $46,637.9
========= =========

F-76

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following tables present selected financial information of our segments
(dollars in millions):

VALUE OF COST OF
POLICIES POLICIES
INFORCE PRODUCED
AT THE AND COST
EFFECTIVE OF POLICIES INSURANCE
SEGMENT DATE PURCHASED LIABILITIES GOODWILL
------- --------- ----------- ----------- --------

2003
Bankers Life........................... $1,328.5 $ 83.3 $ 8,092.5 $172.5
Conseco Insurance Group................ 1,394.0 18.5 13,251.1 779.7
Other Business in Run-off.............. 227.0 -- 3,498.6 --
-------- -------- --------- ------
Total................................ $2,949.5 $ 101.8 $24,842.2 $952.2
======== ======== ========= ======
2002
Bankers Life........................... $ -- $1,165.5 $ 6,323.6 $100.0
Conseco Insurance Group................ -- 1,760.8 14,350.4 --
Other Business in Run-off.............. -- 258.1 2,123.1 --
-------- -------- --------- ------
Total................................ $ -- $3,184.4 $22,797.1 $100.0
======== ======== ========= ======

17. QUARTERLY FINANCIAL DATA (UNAUDITED)

We compute earnings per common share for each quarter independently of
earnings per share for the year. The sum of the quarterly earnings per share may
not equal the earnings per share for the year because of: (i) transactions
affecting the weighted average number of shares outstanding in each quarter; and
(ii) the uneven distribution of earnings during the year. Quarterly financial
data (unaudited) was as follows (dollars in millions, except per share data).

PREDECESSOR SUCCESSOR
-------------------------------- -----------------------
TWO MONTHS ONE MONTH
ENDED ENDED
1ST QTR. 2ND QTR. AUGUST 31 SEPTEMBER 30 4TH QTR.
-------- -------- ---------- ------------ --------

2003
Revenues.............. $1,237.2 $1,230.1 $ 734.9 $366.3 $1,139.2
Income (loss) before
income taxes,
minority interest
and discontinued
operations......... (47.5) (39.3) 2,259.0 37.8 111.7
Net income (loss)..... (19.0) (20.6) 2,241.3 24.2 72.1
Income (loss) per
common share:
Basic:
Net income....... $ .19 $ .50
Diluted:
Net income....... $ .17 $ .49

F-77

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

PREDECESSOR
-----------------------------------------
1ST QTR. 2ND QTR. 3RD QTR. 4TH QTR.
-------- -------- -------- --------

2002
Revenues............................... $1,258.5 $ 990.4 $ 990.8 $1,210.7
Loss before income taxes, minority
interest, discontinued operations,
and cumulative effect of accounting
change.............................. (85.7) (386.9) (952.9) (206.7)
Net loss............................... (3,045.1) (1,333.1) (1,769.0) (1,688.5)

18. INVESTMENTS IN VARIABLE INTEREST ENTITIES

The Company has investments in various types of special purpose entities
and other entities, some of which are VIEs under FIN 46, as described in the
note to the consolidated financial statements entitled "Summary of Significant
Accounting Policies". The following are descriptions of our significant
investments in VIEs:

BRICKYARD TRUST

Brickyard Loan Trust ("Brickyard") was a collateralized debt obligation
trust which participated in an underlying pool of commercial loans. The trust
was formed by the Predecessor and was fully liquidated in the third quarter of
2003. The initial capital structure of Brickyard consisted of $575 million of
senior financing provided by unrelated third party investors and $127 million of
notes and subordinated certificates owned by the Company and others. As a result
of our 85 percent ownership interest in the subordinated certificates, we were
the primary beneficiary of Brickyard. In accordance with ARB 51 "Consolidated
Financial Statements", Brickyard was consolidated in our financial statements
because: (i) our investment management subsidiary, 40C86 Advisors, Inc. was the
investment manager; and (ii) we owned a significant interest in the subordinated
certificates.

In the fourth quarter of 2002, the trust decided to begin the process of
liquidating its portfolio of commercial loans. The trust planned to use the
proceeds to: (i) repay the senior debt; and (ii) distribute residual proceeds to
the subordinated certificate holders. As a result of the trust's intent to sell
the commercial loans in the near future, we determined the decline in value of
certain commercial loans was other than temporary. Accordingly, we recognized
the decline in value of $45.5 million in 2002 as a realized loss and the cost
basis of the commercial loans was reduced to estimated fair value. We included
the $410.2 million carrying value of the commercial loans which served as
collateral for Brickyard's obligations in "assets held in separate accounts and
investment trust" at December 31, 2002. Such carrying value approximated the
estimated fair value of the trust's assets. The liabilities and minority
interest of the trust totaled $392 million at December 31, 2002 and included:
(i) $384 million of amounts due to the holders of the senior note obligations
(including principal amount due plus accrued interest less $92 million in a cash
reserve account held for the benefit of the senior note holders); and (ii) $8
million representing the interests of the minority holders of the subordinated
certificates. These amounts were included in "liabilities related to separate
accounts and investment trust". The senior note obligations of the trust had no
recourse to the general credit of the Company.

The trust sold all of the commercial loans, repaid the senior notes and
distributed its remaining assets to the subordinated certificate holders during
the third quarter of 2003. We recognized an impairment loss of $11.1 million
during the second quarter of 2003 to record an other than temporary decline in
the value of certain of the trust's commercial loans. No additional gain or loss
was recognized upon the ultimate disposition of Brickyard.

F-78

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

OTHER INVESTMENT TRUSTS

In December 1998, Old Conseco formed three investment trusts which invest
in various fixed maturity, limited partnership and other types of investments.
The initial capital structure of each of the trusts consisted of: (i)
principal-protected senior notes; (ii) subordinated junior notes; and (iii)
equity. The senior principal-protected notes are collateralized by zero coupon
treasury notes with par values and maturities matching the par values and
maturities of the principal-protected senior notes. Conseco's life insurance
subsidiaries own 100 percent of the senior principal-protected notes. Certain of
Conseco's non-life insurance subsidiaries own all of the subordinated junior
notes, which have a preferred return equal to the total return on the trusts'
assets in excess of principal and interest on the senior notes. The equity of
the trusts is owned by unrelated third parties.

The three investment trusts are VIEs under FIN 46 because the trusts'
equity represents significantly less than 10 percent of total capital and the
subordinated junior notes were intended to absorb expected losses and receive
virtually all expected residual returns. Based on our 100 percent ownership of
the subordinated junior notes, we are the primary beneficiary of the investment
trusts. All three trusts are consolidated in our financial statements. The
carrying value of the total invested assets in the three trusts was
approximately $228 million and $382 million at December 31, 2003 and 2002,
respectively, which also represents Conseco's maximum exposure to loss as a
result of our ownership interests in the trusts. The trusts have no obligations
or debt to outside parties. During the fourth quarter of 2003, the trusts began
liquidating their portfolios, a process which is expected to be completed in the
first quarter of 2004. The investments held by the trusts are reflected in our
investments in the consolidated balance sheet.

INVESTMENT IN GENERAL MOTORS BUILDING

See the note to the consolidated financial statements entitled
"Investments" for a discussion of this investment.

19. FINANCIAL INFORMATION REGARDING CFC

As part of our Chapter 11 reorganization, we sold substantially all of the
assets of our Predecessor's finance business and exited from this line of
business. Our finance business was conducted through our Predecessor's indirect
wholly-owned subsidiary, CFC. We accounted for our finance business as a
discontinued operation in 2002 once we formalized our plans to sell it. On April
1, 2003, CFC and 22 of its direct and indirect subsidiaries, which collectively
comprised substantially all of the finance business, filed liquidating plans of
reorganization with the Bankruptcy Court in order to facilitate the sale of this
business. The sale of the finance business was completed in the second quarter
of 2003. We did not receive any proceeds from this sale in respect of our
interest in CFC, nor did any creditors of our Predecessor. As of March 31, 2003,
we ceased to include the assets and liabilities of CFC on our Predecessor's
consolidated balance sheet. The consolidated statement of operations reflects
the operations of the discontinued finance business in the caption "Discontinued
operations" for all periods. Our December 31, 2002 consolidated balance sheet
includes the total assets of the finance segment in the caption "Assets of
discontinued operations" and the total liabilities of the finance segment in the
caption "Liabilities of discontinued operations".

F-79

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following summarizes selected balance sheet information of CFC as of
December 31, 2002:

CFC

CONSOLIDATED BALANCE SHEET INFORMATION

DECEMBER 31, 2002

(DOLLARS IN MILLIONS)

2002
----

ASSETS
Retained interests in securitization trusts at fair value
(amortized cost:
2002 -- $189.1)........................................ $ 252.6
Cash and cash equivalents................................... 562.3
Cash held in segregated accounts for investors in
securitizations........................................... 394.7
Cash held in segregated accounts related to servicing
agreements and securitization transactions................ 998.4
Finance receivables......................................... 2,023.1
Finance receivables -- securitized.......................... 12,460.0
Receivables due from Conseco, Inc.(a)....................... 276.1
Other assets................................................ 997.7
---------
Total assets......................................... $17,964.9
=========

LIABILITIES AND SHAREHOLDER'S DEFICIT
Liabilities:
Investor payables......................................... $ 394.7
Guarantee liability related to interests in securitization
trusts held by others.................................. 326.7
Liabilities related to certificates of deposit............ 2,326.0
Servicing liability....................................... 333.4
Income tax liability...................................... 34.6
Other liabilities......................................... 279.1
Notes payable:
Related to securitized finance receivables structured
as collateralized borrowings.......................... 13,069.7
Debtor in possession facilities........................ 82.0
---------
Total liabilities not subject to compromise.......... 16,846.2
---------
Liabilities subject to compromise........................... 1,204.9
---------
Total liabilities.................................... 18,051.1
---------
Shareholder's deficit:
Preferred stock(a)........................................ 750.0
Common stock and additional paid-in capital(a)............ 1,209.4
Accumulated other comprehensive income (net of applicable
deferred income tax benefit: 2002 -- $(63.8))(a)....... 110.6
Retained deficit(a)....................................... (2,156.2)
---------
Total shareholder's deficit.......................... (86.2)
---------
Total liabilities and shareholder's deficit.......... $17,964.9
=========

---------------

(a) Intercompany accounts were eliminated when consolidated with Conseco and
its other wholly-owned subsidiaries.

F-80

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following summarizes selected statement of operations information of
CFC for the years ended December 31, 2002 and 2001:

CFC

CONSOLIDATED STATEMENT OF OPERATIONS INFORMATION (A)

FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001

(DOLLARS IN MILLIONS)

2002 2001
---- ----

Revenues:
Net investment income:
Finance receivables and other.......................... $ 2,062.4 $2,150.1
Retained interests..................................... 75.0 125.3
Affiliated(b).......................................... 11.8 19.6
Gain (loss) on sale of finance receivables................ (49.5) 26.9
Servicing income.......................................... 83.9 115.3
Impairment charges........................................ (1,449.9) (386.9)
Fee revenue and other income.............................. 189.9 220.5
--------- --------
Total revenues....................................... 923.6 2,270.8
--------- --------
Expenses:
Provision for losses...................................... 950.0 537.7
Interest expense -- affiliated(b)......................... 10.3 28.5
Interest expense.......................................... 1,119.7 1,205.9
Other operating costs and expenses........................ 608.0 639.4
Other operating costs and expenses -- affiliated(b)....... 8.0 3.0
Gain on extinguishment of debt............................ (6.3) (9.9)
Special charges........................................... 121.9 21.5
Reorganization items...................................... 17.3 --
--------- --------
Total expenses....................................... 2,828.9 2,426.1
--------- --------
Loss before income taxes............................. (1,905.3) (155.3)
Income tax expense (benefit):
Tax (benefit) expense on period income.................... 36.8 (52.6)
Valuation allowance for deferred tax assets............... 245.3 --
--------- --------
Net loss............................................. (2,187.4) (102.7)
Preferred stock dividends payable to Conseco(b)............. 67.5 67.5
--------- --------
Net loss applicable to common stock.................. $(2,254.9) $ (170.2)
========= ========

---------------

(a) CFC's statement of operations information has been presented as a
discontinued operation in Conseco's consolidated financial statements for
the periods summarized.

(b) Intercompany accounts were eliminated when consolidated with Conseco and
its other wholly-owned subsidiaries.

F-81

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table reconciles CFC's loss before cumulative effect of
accounting change as presented on the previous page to the amount included in
discontinued operations in the accompanying consolidated statement of operations
(dollars in millions):

2002 2001
---- ----

Net loss.................................................... $(2,187.4) $(102.7)
Income taxes(a)............................................. 282.1 --
Net expenses eliminated in consolidation, net of income
tax....................................................... 6.5 7.7
Impairment charge related to investment in CFC.............. (64.5) --
--------- -------
Loss recognized as discontinued operations.................. $(1,963.3) $ (95.0)
========= =======

---------------

(a) Amount is considered in determining the income tax expense in the
consolidated statement of operations.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Significant accounting policies, not described in the note to the
consolidated financial statements entitled "Summary of Significant Accounting
Policies," which are more relevant to CFC are discussed below:

RETAINED INTEREST IN SECURITIZATION TRUSTS

Retained interests in securitization trusts represent the right to receive
certain future cash flows from securitization transactions structured prior to
CFC's September 8, 1999 announcement (see "Revenue Recognition for Sales of
Finance Receivables and Amortization of Servicing Rights" below). Such cash
flows generally are equal to the value of the principal and interest to be
collected on the underlying financial contracts of each securitization in excess
of the sum of the principal and interest to be paid on the securities sold and
contractual servicing fees. CFC carried retained interests at estimated fair
value. We determined fair value by discounting the projected cash flows over the
expected life of the receivables sold using current prepayment, default, loss
and interest rate assumptions. CFC determined the appropriate discount rate to
value these securities based on it's estimates of current market rates of
interest for securities with similar yield, credit quality and maturity
characteristics. The discount rate was 16 percent at December 31, 2002. CFC
recorded any unrealized gain or loss determined to be temporary, net of tax, as
a component of shareholder's equity. Declines in value are considered to be
other than temporary when: (i) the fair value of the security is less than its
carrying value; and (ii) the timing and/or amount of cash expected to be
received from the security has changed adversely from the previous valuation
which determined the carrying value of the security. When declines in value
considered to be other than temporary occurred, CFC reduced the amortized cost
to estimated fair value and recognize a loss in the statement of operations. The
assumptions used to determine new values were based on CFC's internal
evaluations.

FINANCE RECEIVABLES

Finance receivables included manufactured housing, home equity, home
improvement, retail credit and floor plan loans. CFC carried finance receivables
at amortized cost, net of an allowance for credit losses.

CFC deferred fees received and costs incurred when it originated finance
receivables. CFC amortized deferred fees, costs, discounts and premiums over the
estimated lives of the receivables. CFC included such deferred fees or costs in
the amortized cost of finance receivables.

CFC generally stopped accruing investment income on finance receivables
after three consecutive months of contractual delinquency.

F-82

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Finance receivables transferred to securitization trusts in transactions
structured as securitized borrowings are classified as finance
receivables -- securitized. These receivables were held as collateral for the
notes issued to investors in the securitization trusts. Finance receivables held
by CFC that had not been securitized are classified as finance receivables.

PROVISION FOR LOSSES

The provision for credit losses was based upon an assessment of current and
historical loss experience, loan portfolio trends, prevailing economic and
business conditions, and other relevant factors. In management's opinion, the
provision was sufficient to maintain the allowance for credit losses at a level
that adequately provided for losses inherent in the portfolio.

CFC reduced the carrying value of finance receivables to net realizable
value at the earlier of: (i) six months of contractual delinquency; or (ii) when
it took possession of the property securing the finance receivable.

LIABILITIES RELATED TO CERTIFICATES OF DEPOSIT

These liabilities related to the certificates of deposits issued by CFC's
bank subsidiaries. The liability and interest expense account were also
increased for the interest which accrued on the deposits. At December 31, 2002,
the weighted average interest crediting rate on these deposits was 3.5 percent.

REVENUE RECOGNITION FOR SALES OF FINANCE RECEIVABLES AND AMORTIZATION OF
SERVICING RIGHTS

Subsequent to September 8, 1999, CFC generally structured its
securitizations in a manner that required them to be accounted for under the
portfolio method, whereby the loans and securitization debt remain on CFC's
balance sheet pursuant to Financial Accounting Standards Board Statement No.
140, "Accounting for the Transfer and Servicing of Financial Assets and
Extinguishments of Liabilities" ("SFAS 140"). The ratings downgrades and other
events that followed the Company's August 9, 2002, announcement, eliminated
CFC's access to the securitization markets.

For securitizations structured prior to September 8, 1999, CFC accounted
for the transfer of finance receivables as sales. In accordance with GAAP, CFC
recognized a gain, representing the difference between the proceeds from the
sale (net of related sale costs) and the carrying value of the component of the
finance receivable sold. CFC determined such carrying value by allocating the
carrying value of the finance receivables between the portion sold and the
interests retained (generally interest-only securities, servicing rights and, in
some instances, other subordinated securities), based on each portion's relative
fair values on the date of the sale.

CFC amortized the servicing rights it retained after the sale of finance
receivables in proportion to, and over the estimated period of, net servicing
income.

CFC evaluated servicing rights for impairment on an ongoing basis,
stratified by product type and securitization period. To the extent that the
recorded amount exceeded the fair value for any strata, CFC established a
valuation allowance through a charge to earnings. If CFC determined, upon
subsequent measurement of the fair value of these servicing rights, that the
fair value equaled or exceeded the amortized cost, any previously recorded
valuation allowance would be deemed unnecessary and restored to earnings.

LIABILITIES SUBJECT TO COMPROMISE

Under the Bankruptcy Code, actions by creditors to collect indebtedness CFC
owed prior to the Petition Date were stayed and certain other prepetition
contractual obligations were not enforced against the Finance Company Debtors.
CFC received approval from the Bankruptcy Court to pay certain prepetition
liabilities

F-83

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

including employee salaries and wages, benefits, and other employee obligations.
All other prepetition liabilities were classified as "liabilities subject to
compromise" in CFC's December 31, 2002 consolidated balance sheet.

The following table summarizes the components of the liabilities included
in the line "liabilities subject to compromise" in CFC's consolidated balance
sheet as of December, 2002 (dollars in millions):

Other liabilities:
Liability for litigation.................................. $ 38.8
Accounts payable and accrued expenses..................... 65.8
--------
Total other liabilities subject to compromise.......... 104.6
--------
Preferred stock dividends payable to Conseco, Inc........... 153.6
--------
Notes payable:
Master repurchase agreements(a)........................... 174.4
Credit facility collateralized by retained interests in
securitizations(a)..................................... 497.7
Due to Conseco, Inc....................................... 273.2
Other borrowings.......................................... 1.4
--------
Total notes payable subject to compromise.............. 946.7
--------
Total liabilities subject to compromise................ $1,204.9
========

---------------

(a) The Finance Company Debtors have guaranteed these facilities.

FINANCE RECEIVABLES AND RETAINED INTERESTS IN SECURITIZATION TRUSTS

During 2002, CFC completed six securitization transactions, securitizing
$2.7 billion of finance receivables. These securitizations were structured in a
manner that required them to be accounted for as secured borrowings, whereby the
loans and securitization debt remained on CFC's balance sheet, rather than as
sales, pursuant to SFAS 140. Such accounting method is referred to as the
"portfolio method".

CFC classified the finance receivables transferred to the securitization
trusts and held as collateral for the notes issued to investors as "finance
receivables-securitized". The average interest rate on these receivables was
approximately 12.4 percent at December 31, 2002. CFC classified the notes issued
to investors in the securitization trusts as "notes payable related to
securitized finance receivables structured as collateralized borrowings".

Conseco's leveraged condition and liquidity difficulties eliminated CFC's
ability to access the securitization markets. This required CFC to pursue whole
loan sales to maintain availability under its warehouse facilities for new
originations. Accordingly, CFC classified its unsecuritized finance receivables
as held for sale which required the assets to be carried at the lower of cost or
market. At December 31, 2002, CFC had an allowance of $47.1 million for certain
finance receivables with current estimated market values below cost.

During 2002, CFC completed various loan sale transactions. CFC sold $2.1
billion of finance receivables which generated net losses of $49.5 million. CFC
also recognized a loss of $96.0 million related to the sale of $.5 billion of
certain finance receivables sold as part of its cash raising initiatives in
order to meet its debt obligations. See "Special Charges" elsewhere in the notes
to the consolidated financial statements.

F-84

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table summarizes CFC's finance receivables -- securitized by
business line (dollars in millions):

DECEMBER 31,
2002
------------

Primary lines:
Manufactured housing...................................... $ 6,965.3
Mortgage services......................................... 5,005.9
Retail credit............................................. 641.5
Consumer finance -- closed-end............................ 407.7
---------
13,020.4
Less allowance for credit losses.......................... 560.4
---------
Total finance receivables -- securitized............... $12,460.0
=========

The following table summarizes CFC's other finance receivables by business
line and categorized as either a part of CFC's primary lines or a part of other
lines (discontinued in previous periods) (dollars in millions):

DECEMBER 31,
2002
------------

Primary lines:
Manufactured housing...................................... $ 159.5
Mortgage services......................................... 260.7
Retail credit............................................. 1,599.1
Consumer finance closed-end............................... 35.8
--------
2,055.1
Less allowance for credit losses....................... 86.5
--------
Net other finance receivables for primary lines........ 1,968.6
--------
Other lines (discontinued in previous periods).............. 71.4
Less allowance for credit losses.......................... 16.9
--------
Net other finance receivables for other lines.......... 54.5
--------
Total other finance receivables........................ $2,023.1
========

The changes in CFC's allowance for credit losses included in finance
receivables (both securitized and other portfolios) were as follows (dollars in
millions):

2002 2001
---- ----

Allowance for credit losses, beginning of year.............. $421.3 $306.8
Additions to the allowance:
Provision for losses...................................... 950.0 537.7
Change in allowance due to purchases and sales of certain
finance receivables.................................... (21.3) (.1)
Credit losses............................................... (686.2) (423.1)
------ ------
Allowance for credit losses, end of year.................... $663.8 $421.3
====== ======

The securitizations structured prior to September 8, 1999, met the
applicable criteria to be accounted for as sales. At the time the loans were
securitized and sold, CFC recognized a gain and recorded its retained

F-85

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

interest represented by the interest-only security and servicing rights. The
interest-only security represented the right to receive, over the life of the
pool of receivables: (i) the excess of the principal and interest received on
the receivables transferred to the special purpose entity over the principal and
interest paid to the holders of other interests in the securitization; and (ii)
contractual servicing fees. In some of those securitizations, CFC also retained
B-2 securities. CFC's net retained interests in securitization trusts at
December 31, 2002 are summarized below (dollars in millions):

DECEMBER 31, 2002
----------------------
ESTIMATED
AMORTIZED FAIR
COST VALUE
--------- ---------

Retained interests in securitization trusts:
Interests securitized in the form of B-2 securities....... $ 548.0 $611.5
Interest-only securities.................................. (358.9) (358.9)
------- ------
Total retained interests, excluding guarantee
liabilities.......................................... 189.1 252.6
Guarantee liability related to interests in securitization
trusts held by others..................................... (326.7) (326.7)
------- ------
Total retained interests, net of guarantee
liabilities.......................................... $(137.6) $(74.1)
======= ======

During 2002, CFC recognized no gain on sale related to securitized
transactions.

The retained interests in securitization trusts on CFC's balance sheet
represented an allocated portion of the cost basis of the finance receivables in
the securitization transactions accounted for as sales. CFC's retained interests
in those securitization transactions were subordinate to the interests of other
investors. Their values were subject to credit, prepayment, and interest rate
risk on the securitized finance receivables. Management of CFC determined the
discount rate to value these securities based on CFC's estimates of current
market rates of interest for securities with similar yield, credit quality and
maturity characteristics. CFC included the difference between estimated fair
value and the amortized cost of the retained interests (after adjustments for
impairments required to be recognized in earnings) in "accumulated other
comprehensive income (loss), net of taxes."

The determination of the value of CFC's retained interests in
securitization trusts required significant judgment. CFC recognized significant
charges when the interest-only securities did not perform as well as anticipated
based on its assumptions and expectations. In securitizations to which these
retained interests related, CFC retained certain contingent risks in the form of
guarantees of certain lower-rated securities issued by the securitization
trusts. As of December 31, 2002, the total nominal amount of these guarantees
was approximately $1.4 billion. CFC considered any potential payments related to
these guarantees in the projected cash flows used to determine the value of its
retained interests. The discounted present value of the expected future payments
related to the guarantees were classified as the "Guarantee liability related to
interests in securitization trusts held by others" in CFC's balance sheet. The
$1.4 billion nominal amount of these guarantees represented the par value of the
guaranteed lower-rated securities. During 2002 and 2001, interest and principal
payments related to such guarantees totaled $45.5 million and $32.7 million,
respectively. CFC suspended guarantee payments in the fourth quarter of 2002.

Together, the interest-only securities and the B-2 securities, represented
CFC's retained interests in these securitization trusts.

During 2002, CFC's ability to access the securitization markets was
eliminated. The securitization markets were CFC's main source of funding for
loans made to purchasers of repossessed manufactured homes. CFC believed that
its loss severity rates were positively impacted when it used retail channels to

F-86

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

dispose of repossessed inventory (where the repossessed units are sold through
company-owned sales lots or its dealer network). Since CFC was no longer able to
fund the loans made on repossessed homes sold through these channels, sales
through these channels decreased and CFC had to use the wholesale channel to
dispose of repossessed manufactured housing units, through which recovery rates
are significantly lower. Accordingly, CFC changed the loss severity assumptions
used to value its retained interests to reflect the higher loss severity
expected to be experienced in the future. In addition, CFC's previous
assumptions reflected its belief that the adverse manufactured housing default
experience in recent periods would continue through the first half of 2002 and
then improve over time. Accordingly, CFC increased the default assumptions it
used to value its retained interests to reflect its future expectations. CFC's
home equity/home improvement assumptions were adjusted to reflect recent default
experience as well as CFC's future expectations.

The Company adopted the requirements of EITF 99-20 effective July 1, 2000.
Under EITF 99-20, declines in the value of CFC's retained interests in
securitization trusts are recognized when: (i) the fair value of the retained
beneficial interests are less than their carrying value; and (ii) the timing
and/or amount of cash expected to be received from the retained beneficial
interests have changed adversely from the previous valuation which determined
the carrying value of the retained beneficial interests. When both occur, the
retained beneficial interests are written down to fair value as an
other-than-temporary impairment.

As a result of the requirements of EITF 99-20 and the assumption changes
described above, CFC recognized an impairment charge of $1,077.2 million in 2002
for the retained beneficial interests. CFC also recognized a $336.5 million
increase in the valuation allowance as a result of changes to the expected
future cost of servicing the finance receivables. The levels of delinquent and
defaulting loans caused servicing costs to increase.

CFC recognized an impairment charge of $386.9 million in 2001, for the
interest-only securities that were not performing as well as expected based on
its previous valuation estimates.

The following table summarizes certain cash flows received from and paid to
the securitization trusts during 2002 (dollars in millions):

Servicing fees received..................................... $ 46.9
Cash flows from retained interests, net of guarantee
payments.................................................. 22.3
Servicing advances paid..................................... (275.9)
Repayment of servicing advances............................. 257.1

During the third quarter and again in the fourth quarter of 2002, CFC
changed the assumptions used to estimate the value of its retained interests to:
(i) project higher severity losses related to the defaults, reflecting CFC's
inability to finance the sale of repossessed manufactured homes resulting in
reliance on the wholesale disposition channel for repossessed manufactured
homes; and (ii) project higher rates of default in the future, based on its then
current expectations.

Effective September 30, 2001, CFC transferred substantially all of its
interest-only securities into a securitization trust. The transaction provided a
means to finance a portion of the value of its interest-only securities by
selling some of the cash flows to Lehman. The transfer was accounted for as a
sale in accordance with SFAS 140. However, no gain or loss was recognized
because the aggregate fair value of the interest retained by CFC and the cash
received from the sale were equal to the carrying value of the interest-only
securities prior to their transfer to the trust. The trust is a qualifying
special purpose entity and is not consolidated pursuant to SFAS 140. CFC
received a trust security representing an interest in the trust equal to 85
percent of the estimated future cash flows of the interest-only securities held
in the trust. Lehman purchased the remaining 15 percent interest. The value of
the interest purchased by Lehman was $20.4 million at December 31, 2002. CFC
continued to be the servicer of the finance receivables underlying the
interest-only securities transferred to the trust. Lehman had the ability to
accelerate the principal payments related to their interest after a stated
period. Until such time, Lehman was required to maintain a 15 percent

F-87

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

interest in the estimated future cash flows of the trust. By aggregating the
interest-only securities into one structure, the impairment tests for these
securities are conducted on a single set of cash flows representing CFC's 85
percent interest in the trust. Accordingly, adverse changes in cash flows from
one interest-only security are offset by positive changes in another. The new
structure did not avoid an impairment charge if sufficient positive cash flows
in the aggregate were not available (such as was the case at December 31, 2002).

On December 2, 2002, CFC elected not to make approximately $4.7 million in
guarantee payments of which $.6 million was owed to outside third parties.

At December 31, 2002, key economic assumptions used to determine the
estimated fair value of CFC's retained interests in securitizations and the
sensitivity of the current fair value of residual cash flows to immediate 10
percent and 20 percent changes in those assumptions were as follows (dollars in
millions):

HOME EQUITY/ INTERESTS INTERESTS
MANUFACTURED HOME CONSUMER/ HELD BY HELD BY
HOUSING IMPROVEMENT EQUIPMENT TOTAL OTHERS CONSECO
------------ ------------ --------- ----- --------- ---------

Carrying amount/fair value of
retained interests:
Retained interests.............. $ 24.6 $ 234.4 $ 14.0 $ 273.0 $(20.4) $ 252.6
Guarantee liability............. (299.7) (5.8) (21.2) (326.7) -- (326.7)
Servicing liabilities........... (320.1) (5.9) (7.4) (333.4) -- (333.4)
--------- -------- ------ --------- ------ -------
Total retained interests...... $ (595.2) $ 222.7 $(14.6) $ (387.1) $(20.4) $(407.5)
========= ======== ====== ========= ====== =======
Cumulative principal balance of
sold finance receivables at
December 31, 2002............... $15,429.6 $3,723.2 $787.2 $19,940.0
Weighted average life in years.... 6.9 3.6 2.5 6.1
Weighted average stated customer
interest rate on sold finance
receivables..................... 9.7% 11.9% 10.5% 10.2%
Assumptions to determine estimated
fair value of retained interests
at December 31, 2002:
Expected prepayment speed as a
percentage of principal balance
of sold finance
receivables(a).................. 7.1% 18.9% 18.0% 9.8%
Impact on fair value of 10
percent decrease.............. $ (6.7) $ 2.0 $ (.6) $ (5.3)
Impact on fair value of 20
percent decrease.............. (18.1) 5.9 (1.1) (13.3)
Impact on fair value of 10
percent increase.............. 8.0 (1.3) .4 7.1
Impact on fair value of 20
percent increase.............. 15.8 (1.9) .9 14.8

F-88

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

HOME EQUITY/ INTERESTS INTERESTS
MANUFACTURED HOME CONSUMER/ HELD BY HELD BY
HOUSING IMPROVEMENT EQUIPMENT TOTAL OTHERS CONSECO
------------ ------------ --------- ----- --------- ---------

Expected nondiscounted credit
losses as a percentage of
principal balance of related
finance receivables(a).......... 20.3% 9.0% 11.7% 17.9%
Impact on fair value of 10
percent decrease.............. $ 26.8 $ 17.4 $ 2.2 $ 46.4
Impact on fair value of 20
percent decrease.............. 115.3 37.6 5.2 158.1
Impact on fair value of 10
percent increase.............. (6.3) (15.8) (2.0) (24.1)
Impact on fair value of 20
percent increase.............. (30.3) (30.3) (3.5) (64.1)
Weighted average discount rate.... 16.0% 16.0% 16.0% 16.0%
Impact on fair value of 10
percent decrease.............. $ (11.8) $ 20.3 $ .9 $ 9.4
Impact on fair value of 20
percent decrease.............. (24.4) 43.6 2.0 21.2
Impact on fair value of 10
percent increase.............. 11.2 (17.8) (1.0) (7.6)
Impact on fair value of 20
percent increase.............. 21.6 (33.5) (1.8) (13.7)

---------------

(a) The valuation of retained interests in securitization trusts is affected
not only by the projected level of prepayments of principal and net credit
losses, but also by the projected timing of such prepayments and net credit
losses. Should such timing differ materially from CFC's projections, it
could have a material effect on the valuation of its retained interests.
Additionally, such valuation is determined by discounting cash flows over
the entire expected life of the receivables sold.

These sensitivities are hypothetical and should be used with caution. As
the figures indicate, changes in fair value based on a 10 percent variation in
assumptions generally cannot be extrapolated because the relationship of the
change in assumption to the change in fair value may not be linear. Also, in
this table, the effect of a variation in a particular assumption on the fair
value of the retained interest is calculated without changing any other
assumption; in reality, changes in one factor may result in changes in another
(for example, increases in market interest rates may result in lower prepayments
and increased credit losses), which might magnify or counteract the
sensitivities.

F-89

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table summarizes quantitative information about
delinquencies, net credit losses, and components of managed finance receivables
(dollars in millions):

PRINCIPAL BALANCE NET CREDIT
60 DAYS OR MORE LOSSES
PRINCIPAL BALANCE PAST DUE ------------------
----------------- ----------------- FOR THE YEAR ENDED
AT DECEMBER 31, DECEMBER 31,
------------------------------------- ------------------
2002 2002 2002
---- ---- ----

TYPE OF FINANCE
RECEIVABLES
Manufactured housing...... $23,022.4 $ 803.3 $ 756.3
Home equity/home
improvement............. 8,842.8 122.6 282.7
Consumer.................. 3,334.6 83.8 219.3
Commercial................ 82.7 6.5 17.7
--------- -------- --------
Total managed
receivables............. 35,282.5 1,016.2 1,276.0
Less finance receivables
securitized and
repossessed assets...... 19,908.8 528.5 589.8
--------- -------- --------
Finance receivables held
on balance sheet before
allowance for credit
losses and deferred
points and other, net... 15,373.7 $ 487.7 $ 686.2
======== ========
Less allowance for credit
losses.................. 663.8
Less deferred points and
other, net.............. 226.8
---------
Finance receivables held
on balance sheet........ $14,483.1
=========

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following schedule reconciles CFC's retained interests, net of
guarantee liabilities, from the beginning to the end of the years presented
(dollars in millions):

2002 2001
---- ----

Balance, beginning of year.................................. $ 670.2 $ 927.5
Investment income......................................... 75.0 125.3
Cash paid (received):
Gross cash received.................................... (67.8) (132.6)
Guarantee payments related to clean-up calls(a)........ -- 45.3
Guarantee payments related to interests held by
others............................................... 45.5 32.7
Impairment charge to reduce carrying value................ (1,077.2) (264.8)
Sale of securities related to a discontinued line and
other.................................................. 15.9 (12.4)
Change in interest purchased by Lehman in conjunction with
securitization transaction............................. 34.8 (55.2)
Transfer to servicing rights in conjunction with
securitization transaction............................. -- (50.0)
Change in unrealized appreciation (depreciation) recorded
in shareholders' equity (deficit)...................... 229.5 54.4
--------- -------
Balance, end of year........................................ $ (74.1) $ 670.2
========= =======

---------------

(a) During 2001, clean-up calls were exercised for certain securitizations that
were previously recognized as sales. The interest-only securities related
to these securitizations had previously been separately securitized with
other interest-only securities in transactions recognized as sales. CFC
holds the residual interests issued by the securitization trusts. The terms
of the residual interests require the holder to make payments to the
securitization trust when a clean-up call related to an underlying trust (a
trust which issued interest-only securities held by the securitization
trust) occurs. These payments are used to accelerate principal payments to
the holders of the other securities issued by the securitization trusts.
During 2001, CFC was required to make payments to the securitization
trusts. These payments increased CFC's basis in the retained interests, as
the related liability assumed by CFC (and reflected in the value of the
retained interest) was extinguished.

INCOME TAXES

CFC's income tax expense included deferred income taxes arising from
temporary differences between the financial reporting and tax bases of assets
and liabilities. These amounts were reflected in the balance of deferred income
tax assets which totaled $925.7 million at December 31, 2002. In assessing the
realization of deferred income tax assets, CFC considered whether it was more
likely than not that the deferred income tax assets would be realized. The
ultimate realization of deferred income tax assets depended upon generating
future taxable income during the periods in which temporary differences became
deductible. CFC evaluated the realizability of its deferred income tax assets by
assessing the need for a valuation allowance on a quarterly basis. A valuation
allowance of $925.7 million had been provided for the entire net deferred tax
asset balance as of December 31, 2002, as CFC believed that the realization of
such assets in future periods

F-91

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

was uncertain. The components of CFC's income tax assets and liabilities were as
follows (dollars in millions):

2002
----

Deferred tax assets (liabilities):
Net operating loss carryforwards.......................... $ 193.3
Deductible timing differences:
Interest-only securities............................... 536.3
Unrealized appreciation................................ (22.4)
Allowance for loan losses.............................. 252.2
Other.................................................. (33.7)
-------
Total deferred tax assets............................ 925.7
Valuation allowance.................................. (925.7)
-------
Net deferred tax liability........................... --
Current income taxes payable................................ (34.6)
-------
Net income tax liabilities........................... $ (34.6)
=======

Income tax expense (benefit) was as follows (dollars in millions):

2002 2001
---- ----

Current tax provision....................................... $ 36.8 $ 59.5
Deferred tax benefit........................................ -- (112.1)
------ -------
Income tax expense (benefit).............................. 36.8 (52.6)
Valuation allowance......................................... 245.3 --
------ -------
Net income tax expense (benefit).......................... $282.1 $ (52.6)
====== =======

The income tax benefit differed from that computed at the applicable
federal statutory rate (35 percent) for the following reasons (dollars in
millions):

2002 2001
---- ----

Tax benefit on loss before income taxes at statutory rate... $(666.8) $(54.0)
Valuation allowance......................................... 245.3 .2
Net deferred benefits not recognized in the current
period.................................................... 761.0 --
State taxes, net............................................ (57.4) 1.2
------- ------
Income tax expense (benefit).............................. $ 282.1 $(52.6)
======= ======

At December 31, 2002, CFC had $552.4 million of net operating loss
carryforwards. The carryforwards were to expire as follows: $54.7 in 2018;
$273.6 in 2020; and $224.1 in 2022.

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CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

PENSION PLAN OF CFC

CFC provided certain pension benefits for certain eligible retired
employees under a partially funded plan. Amounts related to the pension plan
were as follows (dollars in millions):

PENSION
BENEFITS
--------
2002
----

Benefit obligation, beginning of year....................... $14.8
Interest cost............................................. .9
Actuarial loss............................................ 7.1
Benefits paid............................................. (4.6)
-----
Benefit obligation, end of year............................. $18.2
=====
Fair value of plan assets, beginning of year................ $14.2
Actual return on plan assets.............................. (1.1)
Employer contributions.................................... .4
Benefits paid............................................. (4.6)
-----
Fair value of plan assets, end of year...................... $ 8.9
=====
Funded status............................................... $(9.3)
Unrecognized net actuarial loss............................. 12.9
-----
Prepaid benefit cost................................... $ 3.6
=====

CFC used the following weighted average assumptions to calculate benefit
obligations for its 2002 valuations: postretirement discount rate of
approximately 5.0 percent; preretirement discount rate of approximately 6.0
percent; and an expected return on plan assets of approximately 9.0 percent.
Beginning in 2000, as a result of plan amendments, no assumption for
compensation increases was required. Included as an adjustment to accumulated
other comprehensive income (loss) is a $12.7 million adjustment representing the
additional minimum liability associated with this plan.

Components of the cost CFC recognized related to its pension plan were as
follows (dollars in millions):

PENSION
BENEFITS
------------
2002 2001
---- ----

Interest cost............................................... $ .9 $1.1
Expected return of plan assets.............................. (1.1) (1.5)
Settlement loss............................................. 2.2 1.3
Recognized net actuarial loss............................... .6 .3
----- ----
Net periodic cost......................................... $ 2.6 $1.2
===== ====

F-93

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTES PAYABLE, REPRESENTING DIRECT FINANCE OBLIGATIONS (EXCLUDING NOTES PAYABLE
RELATED TO SECURITIZED FINANCE RECEIVABLES STRUCTURED AS COLLATERALIZED
BORROWINGS)

Notes payable (excluding notes payable related to securitized finance
receivables structured as collateralized borrowings) of CFC at December 31,
2002, were as follows (interest rates as of December 31, 2002) (dollars in
millions):

2002
----

Master repurchase agreements ("Warehouse Facilities") due on
various dates in 2003 (3.10%)............................. $ 176.3
Residual facility collateralized by retained interests in
securitizations due 2004 ("Residual Facility") (3.88%).... 497.7
Debtor in possession facility due May 2003 (10.0%).......... 82.0
Note payable to Conseco (2.91%)............................. 273.2
Other....................................................... 1.4
--------
Total principal amount................................. 1,030.6
Unamortized net discount and deferred fees.................. (1.9)
--------
Direct finance obligations............................. $1,028.7
========

As of the Petition Date, CFC's remaining liquidity sources were a warehouse
facility (the "Warehouse Facility") and a residual facility ("Residual
Facility") with Lehman and a bank credit facility with U.S. Bank and together
with the Warehouse Facility and Residual Facility, the "CFC Facilities". The
direct borrower under (i) the Warehouse Facility was CFC's non-debtor subsidiary
Green Tree Finance Corp. -- Five ("GTFC"), and (ii) the Residual Facility was
CFC's non-debtor subsidiary Green Tree Residual Finance Corp. I ("GTRFC"). The
Warehouse Facility and the Residual Facility were fully guaranteed by CFC and,
up to an aggregate of $125 million, by CIHC. CFC was the direct borrower under
the U.S. Bank Facility, which was also guaranteed by CIHC up to an aggregate of
$125 million.

Prior to the Petition Date, CFC was in default under the CFC Facilities as
a result of (i) cross-defaults triggered by Old Conseco's defaulting on its debt
obligations, (ii) cross-defaults among the U.S. Bank Facility, the Warehouse
Facility and the Residual Facility, (iii) failure to make payments required by
CFC's guarantees of payments on B-2 securities, which were issued to investors
in certain finance receivable securitization transactions; and (iv) breaches of
several financial covenants under the CFC Facilities. CFC entered into
forbearance agreements with Lehman with respect to the Warehouse Facility and
Residual Facility and with U.S. Bank with respect to U.S. Bank Facility,
pursuant to which Lehman and U.S. Bank agreed to temporarily refrain from
exercising any rights arising from events of default that occurred under each
CFC Facility prior to the Petition Date.

The Warehouse Facility was a repurchase facility under which primarily
newly originated manufactured housing, home equity, home improvement and
recreational vehicle loans originated by CFC or affiliates of CFC and
transferred to GTFC were sold by GTFC to Lehman with an agreement to repurchase
those loans at a later date and at a higher price. The price differential
reflected the cost of financing. The Warehouse Facility provided funding to CFC
for new loan originations. The Warehouse Facility and the Residual Facility were
cross-collateralized.

The Residual Facility was collateralized by retained interests in
securitizations. CFC was required to maintain collateral based on current
estimated fair values in accordance with the terms of such facility. Due to the
decrease in the estimated fair value of its retained interests, CFC's collateral
was deficient at December 31, 2002 (as calculated in accordance with the
relevant transaction documents, which provide that Lehman calculates the value
of CFC's collateral within its sole discretion). Pursuant to the forbearance
agreement entered into with Lehman on December 20, 2002, Lehman agreed not to
accelerate the repayment

F-94

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

of the Residual Facility based on the collateral deficiency. Under the terms of
this forbearance agreement, Lehman retained the cash flows from CFC's retained
interests pledged under this facility and applied those cash flows to the margin
deficit. The filing by Old Conseco, CIHC and CFC of a Chapter 11 petition
triggered additional defaults under the CFC Facilities.

On December 19, 2002, shortly after the filing of the Chapter 11 Cases, CFC
obtained the FPS DIP provided by U.S. Bank and FPS DIP LLC, an affiliate of
Fortress Investment Group LLC ("Fortress"), J.C. Flowers & Co. LLC. ("Flowers")
and Cerberus Capital Management, L.P. ("Cerberus"). The DIP financing is for up
to $125,000,000. The DIP financing motion was granted by the Bankruptcy Court on
January 14, 2003.

From time to time, CFC failed to comply with certain covenants regarding
the maximum permissible variance of the budgets provided to the FPS DIP lenders
in connection with the FPS DIP. In each instance, CFC obtained appropriate
waivers.

On December 20, 2002, CFC, GTFC, and GTRFC, entered into several agreements
with Lehman: (the "Lehman December 20 Agreements") (i) providing that Lehman
temporarily refrain from exercising any rights arising from events of default
that occurred under each relevant CFC Facility (including, but not limited to,
those arising out of Old Conseco, CIHC and CFC filing for Chapter 11 relief);
(ii) indirectly providing CFC with up to $25,000,000 in postpetition financing
by allowing GTFC to provide intercompany loans to CFC with cash flows obtained
from the Warehouse Facility; (iii) decreasing the capacity of the Warehouse
Facility to a maximum of $250,000,000; and (iv) otherwise amending the Warehouse
Facility and the Residual Facility. These agreements were subject to a number of
conditions.

As a result of CFC's defaults and the Lehman December 20 Agreements, CFC
could not draw funds from the Residual Facility.

During 2002, CFC repurchased $46.9 million par value of its senior
subordinated notes and medium term notes resulting in a gain on the
extinguishment of debt of $6.3 million. In March 2002, CFC completed a tender
offer pursuant to which it purchased $75.8 million par value of its senior
subordinated notes due June 2002. The purchase price was equal to 100 percent of
the principal amount of the notes plus accrued interest. The remaining principal
amount outstanding of $58.5 million (including $23.7 million held by Conseco) of
the senior subordinated notes was retired at maturity on June 3, 2002.

In April 2002, CFC completed a tender offer pursuant to which it purchased
$158.5 million par value of its medium term notes due September 2002 and $3.7
million par value of its medium term notes due April 2003. The purchase price
was equal to 100 percent of the principal amount of the notes plus accrued
interest. In June 2002, CFC tendered for the remaining $8.2 million par value of
its medium term notes due September 2002. Pursuant to the tender offer $5.5
million par value of the notes was tendered in July. The purchase price was
equal to 101 percent of the principal amount of the notes plus accrued interest.
The remaining principal amount outstanding of the medium term notes after giving
effect to both tender offers and other debt repurchases completed prior to the
tender offers of $2.7 million was retired at maturity on September 26, 2002.

During 2001, CFC repurchased: $55.4 million par value of its 10.25% senior
subordinated notes due June 2002 for $51.9 million, resulting in a gain on the
extinguishment of debt of $3.4 million; and $34.0 million par value of its 6.5%
medium term notes due September 2002 for $27.5 million, resulting in a gain on
the extinguishment of debt of $6.5 million.

NOTES PAYABLE RELATED TO SECURITIZED FINANCE RECEIVABLES STRUCTURED AS
COLLATERALIZED BORROWINGS

Notes payable related to securitized finance receivables structured as
collateralized borrowings were $13,069.7 million at December 31, 2002. The
principal and interest on these notes were paid using the cash

F-95

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

flows from the underlying finance receivables which served as collateral for the
notes. Accordingly, the timing of the principal payments on these notes was
dependent on the payments received on the underlying finance receivables which
back the notes. In some instances, CFC was required to advance principal and
interest payments even though the payments on the underlying finance receivables
which back the notes had not yet been received. The average interest rate on
these notes was 6.7 percent at December 31, 2002. The notes payable balance also
included amounts related to financing transactions securitized by: (i)
capitalized expenses related to the refurbishment of repossessed assets; and
(ii) principal and interest advances. The outstanding liability on these
facilities at December 31, 2002 was $85 million.

SPECIAL CHARGES

2002

The following table summarizes the special charges incurred by CFC during
2002, which are further described in the paragraphs which follow (dollars in
millions):

Loss related to assets sold to raise cash................... $ 97.6
Costs related to debt modification and refinancing
transactions.............................................. 39.4
Reduction in value of Lehman warrant........................ (38.1)
Abandonment of computer processing system................... 16.3
Other items................................................. 6.7
------
Special charges before income tax benefit................. $121.9
======

LOSS RELATED TO ASSETS SOLD TO RAISE CASH

CFC completed various asset sales which resulted in net losses of $97.6
million in 2002. Such amounts included the loss of $96.0 million related to the
sales of $463 million of certain finance receivables and $1.6 million of
additional loss related to receivables required to be repurchased from the
purchaser of the vendor services receivables pursuant to the repurchase clauses
in the agreements.

COSTS RELATED TO DEBT MODIFICATION AND REFINANCING TRANSACTIONS

In conjunction with the various modifications to borrowing arrangements and
refinancing transactions and the recognition of deferred expenses for terminated
financing arrangements, CFC incurred costs of $39.4 million in 2002 which were
not permitted to be deferred pursuant to GAAP.

REDUCTION IN VALUE OF LEHMAN WARRANT

As partial consideration for a financing transaction, Conseco Finance
issued a warrant to Lehman which permitted the holder to purchase 5 percent of
Conseco Finance at a nominal price. The holder of the warrant or Conseco Finance
may cause the warrant and any stock issued upon its exercise to be purchased for
cash at an appraised value in May 2003. Since the warrant permitted cash
settlement at fair value at the option of the holder of the warrant, it was
included in other liabilities and was measured at fair value, with changes in
its value reported in earnings. The estimated fair value of the warrant at
December 31, 2002 was nil based on current valuations of Conseco Finance.
Accordingly, CFC recorded a $38.1 million reduction in the value of the warrant
during 2002.

ABANDONMENT OF COMPUTER PROCESSING SYSTEMS

In 2002, CFC incurred a $16.3 million charge for the abandonment of certain
computer processing systems. CFC is abandoning such systems given the recent
changes to its business and its decision to no longer originate certain types of
loans.

F-96

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2001

The following table summarizes the special charges incurred by CFC during
2001, which are further described in the paragraphs which follow (dollars in
millions):

Severance benefits, litigation reserves and other
restructuring charges..................................... $20.3
Loss related to sale of certain finance receivables......... 11.2
Change in value of warrant.................................. (10.0)
-----
Special charges before income tax benefit................. $21.5
=====

SEVERANCE BENEFITS, LITIGATION RESERVES AND OTHER RESTRUCTURING CHARGES

During 2001, Conseco developed plans to change the way it operates. Such
changes were undertaken in an effort to improve CFC's operations and
profitability. The planned changes included moving a significant number of jobs
to India, where a highly-educated, low-cost, English-speaking labor force was
available. Pursuant to GAAP, CFC was required to recognize the costs associated
with most restructuring activities as the costs were incurred. However, costs
associated with severance benefits are required to be recognized when the costs
are: (i) attributable to employees' services that have already been rendered;
(ii) relate to obligations that accumulate; and (iii) are probable and can be
reasonably estimated. Since the severance costs associated with their planned
activities met these requirements, CFC recognized a charge of $6.2 million in
2001 related to severance benefits and other restructuring charges. CFC also
recognized charges of: (i) $7.5 million related to its decision to discontinue
the sale of certain types of life insurance in conjunction with lending
transactions; and (ii) $6.6 million related to certain litigation matters.

LOSS RELATED TO THE SALE OF CERTAIN FINANCE RECEIVABLES

During 2001, CFC recognized a loss of $2.2 million on the sale of $11.2
million of finance receivables. Also, during 2001, the purchaser of certain
credit card receivables returned certain receivables pursuant to a return of
accounts provision included in the sales agreement. Such returns and the
associated losses exceeded the amounts CFC initially anticipated when the
receivables were sold. CFC recognized a loss of $9.0 million related to the
returned receivables.

CHANGE IN VALUE OF WARRANT

As partial consideration for a financing transaction, CFC issued a warrant
which permits the holder to purchase 5 percent of Conseco Finance at a nominal
price. The holder of the warrant or CFC may cause the warrant and any stock
issued upon its exercise to be purchased for cash at an appraised value in May
2003. Since the warrant permitted cash settlement at fair value at the option of
the holder of the warrant, it was included in other liabilities and was measured
at fair value, with changes in its value reported in earnings. The estimated
fair value of the warrant at December 31, 2001 was $38.1 million. The estimated
value was determined based on discounted cash flow and market multiple valuation
techniques. During 2001, CFC recognized a $10.0 million benefit as a result of
the decreased value of the warrant (which was classified as a reduction to
special charges).

20. FINANCIAL INFORMATION REGARDING CVIC

In October 2002, Conseco Life Insurance Company of Texas (a wholly-owned
subsidiary of the Company) completed the sale of CVIC to Inviva, Inc.
("Inviva"). CVIC marketed tax qualified annuities and certain employee
benefit-related insurance products through professional independent agents.
Pursuant to SFAS 144, CVIC is accounted for as a discontinued operation. Our
consolidated statement of operations reflects the operations of CVIC in the
caption "Discontinued operations" for all periods. The consideration

F-97

CONSECO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

received from Inviva at closing (subject to adjustment based upon the adjusted
statutory balance sheet of CVIC at September 30, 2002) totaled $83.7 million, of
which $35.0 million was in the form of Series D Preferred Shares (the "Preferred
Shares") issued by Inviva and the remainder was in cash. The purchase price was
finalized in July 2003, which reduced the amount of Preferred Shares received by
$10.5 million. In addition, Conseco Life Insurance Company of Texas received a
dividend of approximately $75 million from CVIC immediately prior to the
closing. We recognized a loss on the sale of $93.1 million. There was no income
tax benefit recognized on the transaction. As part of the CVIC sale, Conseco
agreed that it would not engage in the variable annuity or variable insurance
business for a period of three years after the closing.

The Preferred Shares accrued dividends (in-kind) at an annual rate of 19
percent through October 15, 2003, but no dividends accrued after that date. In
October 2003, $10.0 million of the Preferred Shares were redeemed by Inviva. Our
insurance subsidiary that holds these shares may elect to exchange the Preferred
Shares for non-voting common stock of JNF Holding Company, Inc., a wholly-owned
subsidiary of Inviva, ("JNF") that now owns all of the stock of CVIC. After the
exchange has occurred, such JNF common stock may be repurchased by JNF at any
time at 115 percent of the stated value of the Preferred Shares plus accrued and
unpaid dividends thereon immediately prior to the exchange.

The following summarizes selected financial information of CVIC (dollars in
millions):

YEARS ENDED
DECEMBER 31,
-----------------
2002 2001
---- ----

Insurance policy income..................................... $ 30.5 $73.0
Net investment income....................................... (217.3) (61.7)
Net realized investment losses.............................. (76.7) (34.3)
Total revenues.............................................. (263.3) (23.0)
Insurance policy benefits................................... (234.7) (81.7)
Amortization................................................ 117.4 33.7
Total expenses.............................................. (102.9) (17.4)
Pre-tax loss................................................ (160.4) (5.6)
Net loss.................................................... $ (101.6) $(5.6)
Income taxes................................................ (58.8)(a) --
Loss on sale of CVIC........................................ (93.1) --
--------- -----
Amount classified as discontinued operations.............. $ (253.5) $(5.6)
========= =====

---------------

(a) Amount is considered in determining the income tax expense in the
consolidated statement of operations.

F-98

[C]

--------------------------------------------------------------------------------

(CONSECO LOGO)

Common Stock

----------------------

GOLDMAN, SACHS & CO.

MORGAN STANLEY

----------------------

BANC OF AMERICA SECURITIES LLC

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

[P]

--------------------------------------------------------------------------------

(CONSECO LOGO)

% Mandatorily Convertible Preferred Stock, Class B

----------------------

GOLDMAN, SACHS & CO.

MORGAN STANLEY

----------------------

JPMORGAN

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

Set forth below is an estimate (except in the case of the registration fee)
of the amount of fees and expenses to be paid by Conseco in connection in
connection with the issuance and distribution of the offered securities,
excluding underwriting discounts and commissions.

Securities and Exchange Commission registration fee......... $145,705
NASD filing fee............................................. 30,500
New York Stock Exchange listing fee......................... *
Blue Sky fees and expenses (including attorneys' fees and
expenses)................................................. *
Printing expenses........................................... *
Accounting fees and expenses................................ *
Transfer agent's fees and expenses.......................... *
Legal fees and expenses..................................... *
Miscellaneous fees and expenses............................. *
--------
Total..................................................... $ *
========

---------------

* To be provided by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

We are incorporated under the laws of the State of Delaware. Our Amended
and Restated Certificate of Incorporation provides, as authorized by Section
102(b)(7) of the Delaware General Corporation Law, that our directors will not
be personally liable to us or our stockholders for monetary damages for breach
of fiduciary duty as a director, except for liability: (i) for any transaction
from which the director derives an improper personal benefit; (ii) for any act
or omission not in good faith or that involves intentional misconduct or a
knowing violation of law; (iii) for any improper payment of dividends or
redemption of shares; or (iv) for any breach of the director's duty of loyalty
to us or our stockholders.

Our Amended and Restated Certificate of Incorporation and Second Amended
and Restated Bylaws further provide, as permitted by Section 145 of the Delaware
General Corporation Law, that each person who was, is or is threatened to be
made a party to or is otherwise involved with any action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that he or she is or was a director or officer or, while a director or officer,
is or was serving at the request of Conseco as a director, officer, employee or
agent of another company or enterprise (an "indemnitee"), will be indemnified
and held harmless by us to the fullest extent authorized by the Delaware General
Corporation Law, against all expense, liability and loss (including attorneys'
fees), reasonably incurred or suffered by such indemnitee in connection
therewith. This right of indemnification includes our obligation to provide an
advance of expenses, although the indemnitee may be required to repay such an
advance if there is a judicial determination that the indemnitee was not
entitled to the indemnification.

The foregoing statements are subject to the detailed provisions of the
Delaware General Corporation Law and our Amended and Restated Certificate of
Incorporation and our Second Amended and Restated Bylaws.

Our directors and officers are covered under directors' and officers'
liability insurance policies maintained by us.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

(1) On September 10, 2003, the effective date of our plan of
reorganization, we issued 100,000,000 shares of our common stock, 34,386,740
shares of our class A preferred stock and 6,000,000 series A warrants to our
predecessor's pre-bankruptcy creditors pursuant to the plan of reorganization.
Based upon the exemption from the registration requirements under the Securities
Act provided by section 1145 of the Bankruptcy Code, which we relied on pursuant
to an order from the bankruptcy court, we believe that none of these securities
were required to be registered under the Securities

II-1

Act or under any state or local law requiring registration for offer or sale of
a security or registration of licensing of an issuer of, underwriter of, or
broker or dealer in, such securities, in connection with their issuance and
distribution pursuant to the plan of reorganization.

(2) On September 29, 2003, we issued R. Glenn Hilliard, our non-executive
chairman, 98,119 shares of our common stock in reliance on the exemption from
registration provided by Section 4(2) of the Securities Act. Mr. Hilliard
received these shares in connection with a bankruptcy court-approved agreement
whereby Mr. Hilliard agreed to serve as our non-executive chairman upon our
emergence from bankruptcy.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits.

Reference is made to the attached Exhibit Index.

(b) Financial Statement Schedules.

The following financial statement schedules are listed as part of this
Registration Statement immediately following the signature pages.

Schedule II -- Condensed Financial Information of Registrant (Parent
Company)

Schedule IV -- Reinsurance

ITEM 17. UNDERTAKINGS.

The undersigned registrant hereby undertakes:

1. For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

2. For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions or otherwise, the registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of their counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.

II-2

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, Conseco, Inc.
has duly caused this Amendment No. 1 to Registration Statement on Form S-1 to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Carmel and State of Indiana on March 23, 2004.

CONSECO, INC.

By: /s/ EUGENE M. BULLIS

------------------------------------

Eugene M. Bullis

Executive Vice President and

Chief Financial Officer

Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement on Form S-1 has been signed by the following
persons in the capacities and on the dates indicated:

SIGNATURES CAPACITY DATE
---------- -------- ----

* President, Chief Executive Officer March 23, 2004
-------------------------------------- and Director (Principal Executive
William J. Shea Officer)

/s/ EUGENE M. BULLIS Executive Vice President and Chief March 23, 2004
-------------------------------------- Financial Officer (Principal
Eugene M. Bullis Financial Officer)

* Senior Vice President and Chief March 23, 2004
-------------------------------------- Accounting Officer (Principal
John R. Kline Accounting Officer)

* Chairman of the Board March 23, 2004
--------------------------------------
R. Glenn Hilliard

* Director March 23, 2004
--------------------------------------
Neal Schneider

* Director March 23, 2004
--------------------------------------
Philip R. Roberts

* Director March 23, 2004
--------------------------------------
John G. Turner

* Director March 23, 2004
--------------------------------------
Michael T. Tokarz

II-3

SIGNATURES CAPACITY DATE
---------- -------- ----

* Director March 23, 2004
--------------------------------------
Michael S. Shannon

*By: /s/ EUGENE M. BULLIS
------------------------------
Eugene M. Bullis
Attorney-in-Fact

II-4

EXHIBIT INDEX

EXHIBIT
NO. DESCRIPTION
------- -----------

1.1* Form of Underwriting Agreement.
2.1 Sixth Amended Joint Plan of Reorganization of Conseco, Inc.
and affiliated Debtors, incorporated by reference to Exhibit
2.2 of our Current Report on Form 8-K filed September 15,
2003.
2.2 Order Confirming Reorganizing Debtors' Sixth Amended Joint
Plan of Reorganization, incorporated by reference to Exhibit
2.3 of our Current Report on Form 8-K filed September 15,
2003.
3.1 Amended and Restated Certificate of Incorporation of
Conseco, Inc., incorporated by reference to Exhibit 3.1 of
our Current Report on Form 8-K filed September 15, 2003.
3.2** Second Amended and Restated Bylaws of Conseco, Inc.
4.1 Certificate of Designations relating to Class A Senior
Cumulative Convertible Exchangeable Preferred Stock of
Conseco, Inc., incorporated by reference to Exhibit 4.1 of
our Current Report on Form 8-K filed September 15, 2003.
4.2 Series A Warrant Agreement between Conseco, Inc. and
Wachovia Bank, N.A., as Warrant Agent, incorporated by
reference to Exhibit 4.2 of our Current Report on Form 8-K
filed September 15, 2003.
4.3* Certificate of Designations relating to Class B Mandatorily
Convertible Preferred Stock.
5.1* Opinion of Kirkland & Ellis LLP.
10.1 Credit Agreement dated as of September 10, 2003 among
Conseco, Inc., Bank of America, N.A., as Agent, and other
financial institutions, incorporated by reference to Exhibit
10.1 of our Current Report on Form 8-K filed September 15,
2003.
10.2** Amendment No. 1 to Credit Agreement dated as of January 15,
2004 among Conseco, Inc., Bank of America, N.A., as Agent,
and other financial institutions.
10.3 Amendment No. 2 to Credit Agreement dated as of March 5,
2004 among Conseco, Inc., Bank of America, N.A., as Agent,
and other financial institutions, incorporated by reference
to Exhibit 10.3 of our Annual Report on Form 10-K for the
year ended December 31, 2003.
10.4 Guarantee and Security Agreement dated as of September 10,
2003 among Conseco, Inc., the Subsidiary Guarantors Party
Thereto and Bank of America, N.A., as Agent, incorporated by
reference to Exhibit 10.4 of our Quarterly Report on Form
10-Q for the quarter ended September 30, 2003.
10.5 Common Stock Registration Rights Agreement dated as of
September 10, 2003, incorporated by reference to Exhibit
10.2 of our Current Report on Form 8-K filed September 15,
2003.
10.6 Preferred Stock Registration Rights Agreement dated as of
September 10, 2003, incorporated by reference to Exhibit
10.3 of our Current Report on Form 8-K filed September 15,
2003.
10.7 Employment Agreement dated as of May 27, 2003 between
Conseco, Inc. and William J. Shea, incorporated by reference
to Exhibit 10.5 of our Quarterly Report on Form 10-Q for the
quarter ended September 30, 2003.
10.8 Agreement dated as of June 18, 2003 between Conseco, Inc.
and R. Glenn Hilliard, incorporated by reference to Exhibit
10.6 of our Quarterly Report on Form 10-Q for the quarter
ended September 30, 2003.
10.9** Amendment dated as of December 30, 2003 to Agreement dated
as of June 18, 2003 between Conseco, Inc. and R. Glenn
Hilliard.
10.10** Employment Agreement dated as of September 10, 2003 between
Conseco, Inc. and Eugene M. Bullis.
10.11** Employment Agreement dated as of July 15, 2002 between
Conseco, Inc. and John R. Kline.

EXHIBIT
NO. DESCRIPTION
------- -----------

10.12** Employment Agreement dated as of September 10, 2003 between
40Y86 Advisors, Inc. and Eric R. Johnson.
10.13 Conseco, Inc. 2003 Long-Term Equity Incentive Plan,
incorporated by reference to Exhibit 4 of our Registration
Statement on Form S-8 (No. 333-108835).
12.1 Computation of Ratio of Earnings to Fixed Charges, Preferred
Stock Dividends and Distributions on Company-obligated
Mandatorily Redeemable Preferred Securities of Subsidiary
Trusts.
21.1** Subsidiaries of Conseco, Inc.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2* Consent of Kirkland & Ellis LLP (included in Exhibit 5.1).
24.1** Powers of Attorney.

---------------

* To be filed by amendment.

** Previously filed.