INVESTMENT BORROWINGS

Three of the Company’s insurance subsidiaries (Conseco Life Insurance Company (“Conseco Life”), Washington National Insurance Company and Bankers Life and Casualty Company ("Bankers Life")) are members of the Federal Home Loan Bank (“FHLB”). As members of the FHLB, Conseco Life, Washington National Insurance Company and Bankers Life have the ability to borrow on a collateralized basis from the FHLB. Conseco Life, Washington National Insurance Company and Bankers Life are required to hold certain minimum amounts of FHLB common stock as a condition of membership in the FHLB, and additional amounts based on the amount of the borrowings. At June 30, 2012, the carrying value of the FHLB common stock was $82.5 million. As of June 30, 2012, collateralized borrowings from the FHLB totaled $1.7 billion and the proceeds were used to purchase fixed maturity securities. The borrowings are classified as investment borrowings in the accompanying consolidated balance sheet. The borrowings are collateralized by investments with an estimated fair value of $2.1 billion at June 30, 2012, which are maintained in a custodial account for the benefit of the FHLB. Such investments are classified as fixed maturities, available for sale, in our consolidated balance sheet. Interest expense of $14.4 million and $12.2 million in the first six months of 2012 and 2011, respectively, was recognized related to the borrowings.

The following summarizes the terms of the borrowings (dollars in millions):



Amount			Maturity	Interest rate at
borrowed			date	June 30, 2012
$	100.0		October 2013	Variable rate – 0.575%
100.0			November 2013	Variable rate – 0.547%
67.0			February 2014	Fixed rate – 1.830%
50.0			August 2014	Variable rate – 0.597%
100.0			September 2015	Variable rate – 0.766%
150.0			October 2015	Variable rate – 0.592%
100.0		(a)	November 2015	Fixed rate – 4.890%
146.0			November 2015	Fixed rate – 5.300%
100.0			December 2015	Fixed rate – 4.710%
100.0			June 2016	Variable rate – 0.685%
75.0			June 2016	Variable rate – 0.630%
75.0			August 2016	Variable rate – 0.677%
100.0			October 2016	Variable rate – 0.648%
50.0			November 2016	Variable rate – 0.738%
50.0			November 2016	Variable rate – 0.715%
100.0			June 2017	Variable rate – 0.760%
50.0			August 2017	Variable rate – 0.667%
100.0			October 2017	Variable rate – 0.897%
37.0			November 2017	Fixed rate – 3.750%
$	1,650.0

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(a) In July 2012, such borrowing was refinanced with a maturity date of July 2017 and a fixed interest rate of 3.90 percent.

The variable rate borrowings are pre-payable on each interest reset date without penalty. The fixed rate borrowings are pre-payable subject to payment of a yield maintenance fee based on current market interest rates. At June 30, 2012, the aggregate fee to prepay all fixed rate borrowings was $51.7 million.

As part of our investment strategy, we may enter into repurchase agreements to increase our investment return. We account for these transactions as collateralized borrowings, where the amount borrowed is equal to the sales price of the underlying securities. Repurchase agreements involve a sale of securities and an agreement to repurchase the same securities at a later date at an agreed-upon price. Such borrowings totaled $36.8 million at June 30, 2012. The borrowings mature as follows: $32.8 million - within 30 days; and $4.0 million - between 30 and 90 days. These borrowings were collateralized by investment securities (primarily collateralized mortgage obligations) with fair values approximately equal to the loan value. The primary risks associated with short-term collateralized borrowings are: (i) a substantial decline in the market value of the margined security; and (ii) that a counterparty may be unable to perform under the terms of the contract or be unwilling to extend such financing in future periods especially if the liquidity or value of the margined security has declined. Exposure is limited to any depreciation in value of the related securities.

At June 30, 2012, investment borrowings consisted of: (i) collateralized borrowings from the FHLB of $1.7 billion; (ii) repurchase agreements of $36.8 million; and (iii) other borrowings of $1.1 million.

At December 31, 2011, investment borrowings consisted of: (i) collateralized borrowings from the FHLB of $1.7 billion; (ii) repurchase agreements of $24.8 million; and (iii) other borrowings of $1.7 million.