Conseco Reaches Tentative Settlement on Tax Matter

August 1, 2006

Conseco, Inc. has reached a tentative settlement in the class action litigation case referred to as “In Re Conseco Life Insurance Company Cost of Insurance Litigation.” The settlement, which involved policies sold by insurance companies that were subsequently acquired by Conseco, is subject to a court fairness hearing and other conditions. As a result of the settlement, the Company expects to record additional expenses of approximately $100.3 million, after taxes, in the quarter ended June 30, 2006. Conseco is scheduled to announce its quarterly earnings results after the market closes on Aug. 2, 2006.

James Hohmann, Conseco’s interim CEO, said, “Implementation of this settlement will resolve a significant historical issue and will allow our current management team, our associates, our regulators and our rating agencies to focus more fully on Conseco’s progress toward becoming a leading provider of life insurance, supplemental health insurance and annuities for middle America.”

Conseco reports that its insurance subsidiaries continue to maintain a strong capital position despite the charge. The company estimates that its consolidated risk-based capital ratio (a non-GAAP measure) will exceed 330% as of June 30, 2006.

The Company also announced that its previously announced tentative settlement with the Internal Revenue Service has been finalized. As previously disclosed, the settlement, which involved the characterization of the company’s net operating loss pertaining to its investment in Conseco Finance, was awaiting approval of the related audit by the Joint Committee on Taxation. As a result of this resolution, Conseco expects to reduce the valuation allowance on its deferred income tax assets by approximately $260 million at June 30, 2006. The change in the valuation allowance will not affect the Company’s net income, but will be a direct increase to shareholders’ equity at June 30, 2006.

Collectively, the tentative litigation settlement charge and the deferred tax valuation allowance adjustment will increase shareholders’ equity by approximately $160 million at June 30, 2006.

Source: Conseco

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