A.M. Best Takes Various Rating Actions on Conseco's Insurance Companies; Assigns Positive Outlook to Core Subsidiaries.

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating (FSR) of B++ (Very Good) and assigned issuer credit ratings (ICR) of "bbb+" to Conseco, Inc.'s (Conseco) (Carmel, IN) (NYSE: CNO) core insurance subsidiaries. Concurrently, A.M. Best has upgraded Conseco's ICR to "bb+" from "bb" and the rating of the company's mandatorily convertible preferred stock to "bb-" from "b+". The rating outlook for the group's core insurance entities as well as Conseco's ICR and preferred stock has been revised to positive from stable.

These rating actions reflect Conseco's strong GAAP balance sheet, significantly improved operating fundamentals, and the strides it has made in strengthening its executive management team and refining its strategic profile during the last year. These strengths are somewhat tempered by industry wide challenges impacting its Medicare supplement and long-term care (LTC) business lines, ongoing spread compression on fixed annuities and statutory capitalization levels which, while adequate on a consolidated basis, remain somewhat weak at selective operating entities.

The overall quality of the balance sheet is expected to continue to improve as the company embarks on a second capital refinance plan. Upon completion, Conseco's financial leverage is expected to remain essentially unchanged at approximately 23%--incorporating equity credit for hybrid securities--with improved interest coverage approaching eight times. Both measures are well within A.M. Best's guidelines for Conseco's current ratings. Additionally, A.M. Best notes that the deductibility of Conseco's $4.2 billion net operating loss (NOL) carryforward will aid in long-term capital appreciation. The NOL has added approximately $1 billion of tangible book value and is expected to offset tax liabilities for an extended period of time, although the timing and usage of the NOL remain subject to further interpretation.

Operating earnings, on both GAAP and statutory bases, have improved significantly due largely to strong claims adjudication management of Conseco's Florida home health run-off business and careful expense management, partially offset by spread compression on its annuity block and prudent investments to streamline the company's administrative infrastructure and expand distribution. A.M. Best expects the group's operating fundamentals to continue to improve due to realization of expense efficiencies, particularly within Conseco Insurance Group (CIG), significant expansion of the Bankers career agency force, increased IMO recruiting efforts and careful maintenance of annuity spreads.

However, A.M. Best believes the company's prospective top line and bottom line growth will be tempered by increased competition in the Medicare supplement arena and the overall decrease in consumer demand for LTC products experienced across the industry during the last several quarters. In addition, the performance of Bankers' LTC business will most likely be dependent upon rate increases, which would need to be carefully managed and monitored. Re-rates are part of an industry wide initiative to increase long-term care premiums to reflect lower lapse levels and lower investment income rates. Finally, Conseco continues to be challenged by its need to rebuild its independent distribution platform at CIG, which remains highly concentrated within a small but highly sustainable number of independent marketing organizations.

Concurrently, A.M. Best has affirmed the FSR of B (Fair) of Conseco Senior Health Insurance Company (CSH). The outlook is stable. The action recognizes the entity's weak capitalization and the need to assess the impact of future policyholder elections regarding CSH's Florida regulatory order on prospective operating performance.

In addition, A.M. Best has upgraded the FSR to B++ (Very Good) from B+ (Very Good) of Conseco Life Insurance Company of New York (CLNY). The outlook is positive. The action reflects CLNY's relative importance to the group as well as the recent decoupling from CSH and its revised organizational status as a subsidiary of Conseco's top-tier statutory insurance holding company, Conseco Life Insurance Company of Texas, effective in June 2005.

For a complete listing of Conseco, Inc.'s financial strength, debt and issuer credit ratings, please visit, http://www.ambest.com/press/080305conseco.pdf.

For Best's Debt Ratings, all other Best's Ratings, an overview of the rating process and rating methodologies, please visit http://www.ambest.com/ratings.

A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com.