A.M. Best Affirms Ratings of Conseco and Revises Its Outlook to Stable; Downgrades Ratings of Conseco Senior Health.

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating (FSR) of B++ (Good) and the issuer credit ratings (ICR) of "bbb+" of Conseco, Inc.'s (Conseco) (Carmel, IN) [NYSE: CNO] core insurance subsidiaries. Concurrently, A.M. Best has affirmed the ICR of "bb+" and the debt ratings of Conseco. The outlook for these ratings has been revised to stable from positive.

Additionally, A.M. Best has downgraded the FSR to B- (Fair) from B (Fair) and the ICR to "bb-" from "bb+" of Conseco Senior Health Insurance Company (CSH) (Pennsylvania). The outlook for both ratings is stable. (See below for a detailed listing of the companies.)

CSH houses the majority of Conseco's run-off long-term care (LTC) block and continues to exhibit volatile operating results, exemplified by fourth quarter 2006 claim reserve strengthening of $54 million. CSH's ratings recognize that it is capitalized at regulatory minimums.

The revised outlook reflects that Conseco's recently reported results failed to satisfy the metrics outlined in A.M. Best's press release of October 2, 2006. Specifically, the loss ratio for Conseco's run-off LTC business increased substantially in fourth quarter 2006. Given the significance of the most recent reserve strengthening, A.M. Best is cautious regarding the future performance of the run-off LTC block.

In addition to declining earnings trends at Conseco Insurance Group (CIG), the lack of noteworthy premium growth year over year in CIG's supplemental health lines was inconsistent with expectations. Moreover, the performance of Bankers' LTC business has weakened, reflecting higher initial claims and higher persistency relative to pricing. A.M. Best believes ongoing business risk remains within LTC products given their long-tailed nature as meaningful claims experience typically takes many years to develop.

The rating affirmations reflect Conseco's sound GAAP balance sheet, conservative financial leverage, solid interest coverage, good quality investment portfolio and stable statutory capitalization levels for its core insurance entities on both a stand-alone and consolidated basis. Additionally, A.M. Best notes Conseco's progress with respect to distribution, product development and expense initiatives, with further efficiencies to be realized. A.M. Best views favorably the steady earnings provided by the Bankers and Colonial Penn segments, recognizing the potential for these trends to continue upon full implementation of Bankers' LTC re-rates.

The recent identification of a material weakness in Conseco's internal controls across several of its actuarial reporting processes causes A.M. Best some concern. Although the reserve adjustments made in fourth quarter 2006 did not have a material financial impact on Conseco's financial statements, either individually or in the aggregate, A.M. Best will closely monitor the efficacy of the remediation process over the next several quarters.

The FSR of B++ (Good) and ICRs of "bbb+" have been affirmed for the following subsidiaries of Conseco, Inc.:

* Bankers Life and Casualty Company

* Colonial Penn Life Insurance Company

* Conseco Health Insurance Company

* Conseco Insurance Company

* Bankers Conseco Life Insurance Company

* Conseco Life Insurance Company

* Washington National Insurance Company

The following debt ratings have been affirmed:

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Founded in 1899, A.M. Best Company is a full-service credit rating organization dedicated to serving the financial services industries, including the banking and insurance sectors. For more information, visit www.ambest.com.