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DCR Assigns Conseco Financing Trust II $325 Million Capital Trust Preferred Stock Rated 'BBB-'

CHICAGO, Nov. 22 /PRNewswire/ -- Duff & Phelps Credit Rating Co. (DCR) has assigned a 'BBB-' rating to $325 million Capital Trust Preferred Stock (TruPS) to be issued by Conseco Financing Trust II (Trust) as part of the financing for acquisitions announced earlier this year. Payments on the TruPS are unconditionally guaranteed by the Trust's parent, Conseco, Inc. (Conseco), on a subordinated basis.

On Aug. 26, 1996, Conseco announced four separate transactions including agreements to acquire American Travellers Corp. (American Travellers) and Capitol American Financial Corp. (Capitol American) and the acquisition of the minority interests of Bankers Life Holding Corporation (Bankers Life) and American Life Holding Corporation (American Life). On Sept. 27, 1996, Conseco announced it had entered into a definitive agreement to acquire Transport Holdings Inc. (Transport).

The cost of these acquisitions will total $2 billion and financing will consist of a mix of bank debt, preferred stock and common stock. At yearend 1996, Conseco is expected to have a capital structure consisting of debt at 30 percent, preferred equity at 11 percent and common equity at 59 percent. These equity ratios assume the conversion to common stock of $267 million of existing mandatorily convertible preferred stock. The company's targeted capitalization is a debt ratio and a preferred equity ratio not to exceed 35 percent and 11 percent, respectively. Projected pro forma GAAP interest coverage is 7.9 times in 1997 and coverage including preferred dividends is 4.6 times. Statutory coverage ratios are 4.7 times and 3.5 times, respectively. These ratios are improvements over previously projected levels. Conseco's access to subsidiary cash flow is expected to improve as a result of removing the minority interest ownership of Bankers Life and American Life.

Conseco is a publicly traded holding company based in Carmel, Ind. with total assets of $17.4 billion and shareholders' equity of $1.3 billion (excluding FAS 115) at June 30, 1996. Conseco's earnings and cash flow are generated from three activities: operating life insurance and financial services companies, receiving fee income for management services provided to affiliated and unaffiliated businesses, and acquiring life insurance companies. Conseco's wholly owned insurance subsidiaries write primarily individual annuities through independent insurance agents and educator market specialists. Earlier this year, Conseco acquired Life Partners for $840 million. Life Partners' insurance subsidiaries are focused primarily on the sale of universal life products through a unique marketing approach that allows the producers to share in the profits of the business placed. The acquisition of American Travellers, Capitol American and Transport will significantly increase Conseco's market position in long-term care and supplemental health insurance.

The Trust is a special purpose subsidiary of Conseco. The Trust will issue preferred securities and purchase subordinated debentures from Conseco. This financing will permit Conseco to deduct interest expense on the subordinated debentures for federal income tax purposes. The subordinated debentures are non-redeemable and mature in 2026. The preferred securities mature at the same time as the subordinated debentures. Conseco has the right to defer payments of interest on the subordinated debentures by extending the interest payments from time to time for a period not exceeding 10 consecutive semi-annual interest periods and, therefore, distributions on the preferred securities will not be made by the Trust during such an extension period. The preferred securities will be accounted for as a minority interest in a consolidated subsidiary.

SOURCE Duff & Phelps Credit Rating Co.
 -0- 11/22/96


/CONTACT: Julie A. Burke, CPA, CFA, 312-368-3158, burke@dcrco.com or Daniel B. Belcore, CFA, 312-368-2093, belcore@dcrco.com, both of Duff & Phelps Credit Rating Co./

(CNC)

CO: Conseco Financing Trust II; Conseco, Inc. ST: Indiana IN: INS SU: RTG

HD -- NYF073 -- 5985 11/22/96 16:44 EST http://www.prnewswire.com
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Date:Nov 22, 1996
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