EX-99 15 0015.txt EXHIBIT 99.2 Exhibit 99.2 CONSECO LOGO Security Analysts Update COMPREHENSIVE DEBT RESTRUCTURING PROGRAM Restores responsible debt levels and stability to the balance sheet and in the operating Businesses. Forward-Looking Statement Conseco Logo Note on forward-looking statements: All statements, trend analyses and other information contained in this release and elsewhere (such as in filings by Conseco with the Securities and Exchange Commission, press releases, presentations by Conseco or its management or oral statements) relative to markets for Conseco's products and trends in Conseco's operations or financial results, as well as other statements including words such as "anticipate," "believe," "plan," "estimate," "expect," "intend," "will," "should," "could," "goal," "target," "on track," "comfortable with," "optimistic" and other similar expressions, constitute forward-looking statements under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors which may cause actual results to be materially different from those contemplated by the forward-looking statements. Such factors include, among other things: (1) general economic conditions and other factors, including prevailing interest rate levels, stock and credit market performance and health care inflation, which may affect (among other things) Conseco's ability to sell its products, its ability to make loans and access capital resources and the costs associated therewith, the market value of Conseco's investments, the lapse rate and profitability of policies, and the level of defaults and prepayments of loans made by Conseco; (2) Conseco's ability to achieve anticipated synergies and levels of operational efficiencies; (3) customer response to new products, distribution channels and marketing initiatives; (4) mortality, morbidity, usage of health care services and other factors which may affect the profitability of Conseco's insurance products; (5) performance of our investments; (6) changes in the Federal income tax laws and regulations which may affect the relative tax advantages of some of Conseco's products; (7) increasing competition in the sale of insurance and annuities and in the finance business; (8) regulatory changes or actions, including those relating to regulation of financial services affecting (among other things) bank sales and underwriting of insurance products, regulation of the sale, underwriting and pricing of products, and health care regulation affecting health insurance products; (9) the outcome of Conseco's efforts to sell assets and reduce, refinance or modify indebtedness and the availability and cost of capital in connection with this process; (10) actions by rating agencies and the effects of past or future actions by these agencies on Conseco's business; and (11) the risk factors or uncertainties listed from time to time in Conseco's filings with the Securities and Exchange Commission. 2 The Market's View of Conseco? Conseco Logo Image of a weight lifter with the word FINANCE written on his left arm and the word INSURANCE written on his right struggling to lift a dumbbell that has the word HOLDING on it 3 What is Conseco? Conseco Logo The appropriate depiction of Conseco, as we see it. Insurance Co's Finance Co -------------- ---------- Strengths Strengths --------- --------- o Valuable distribution o Disciplined credit risk and -#1 in agent-produced medial pricing philosophies supplement insurance o 30% market share in manufactured -#2 in long-term care insurance housing -#3 in equity-indexed annuities o Growing position in less o Solid RBC (2.58 at 6/30/00) competitive home equity market o Highly liquid investment-grade bond o Sophisticated target marketing portfolio and segmentation o Emerging Conseco Capital Mgt. Holding Co. ----------- o Bloated debt o "Corporate" expenses o Non-strategic equity inv. 4 Conseco Parent: Debt and Trust Preferred Securities (Accumulation Period) Conseco Logo (MM) Outstandings Bar Chart Graphic demonstrating levels of Public ------------ Debt, Bank Debt and Trust Preferreds. Total Debt + Preferreds
1st 1/2 1996 1997 1998 1999 2000 ---------------------------------------------------------------------- CASH Inflow From Operating Activities -------------------------------- Insurance Companies $ 221.2 $ 326.0 $ 277.7 $ 361.8 $ 225.0 Finance Company - - (1,971.0) (1,246.0) (284.0)(1) Other 1.6 (19.9) 17.6 (23.3) 28.5 ---------------------------------------------------------------------- Total Operating Cash Flow $ 222.8 $ 306.1 $ (1,675.7) $ (907.5) $ (30.5) ====================================================================== CASH Outflow to Service H.C. Debt ---------------------------- Bank and Public Debt Interest $ 78.6 $ 143.9 $ 236.3 $ 345.5 $ 222.8 Preferred Dividends 2.9 65.7 132.6 193.7 115.6 ---------------------------------------------------------------------- Total Fixed Charges $ 81.5 $ 209.6 $ 368.9 $ 539.2 $ 338.4 ======================================================================
(1) Does not include proceeds to parent from whole loan sale in May 2000 Two Issues: 1. Total Debt 2. Finance Cash Flow 5 New Team Assembled In Early July Faced Conseco Logo Immediate Motivating "Total Debt" Issue June 29, 2000 July 10, 2000 July 10, 2000 ------------- ------------- ------------- 1)Gary Wendt employed 2)Street, Keenoy, Borom employed 3)Tom Hagerty employed as CEO as "Restoration Activists" as acting CFO July 2000 Debt Maturities 2000 and 2001 (excluding Officer & Director Guarantees) ----------------------------------------------------------------------- Bank Debt 9/22/00 $1,221.0 Public Debt 12/15/00 131.5 Subtotal 2000 $1,352.5 ============== Public Debt Due June, 2001 $668.9 Total $2,021.4 ============== Objective: Find a Solution that Looks Beyond "Sept 01" ------------------------------------------------------- 6 Responsive Actions Began Immediately Conseco Logo Objective: Reduce debt to responsible levels without disrupting income producing activities June 29, 2000 July 10, 2000 July 10, 2000 ------------- ------------- ------------- 1)Gary Wendt employed 2)Street, Keenoy, Borom employed 3)Tom Hagerty employed as CEO as "Restoration Activists" as acting CFO July 2000 New Management lifted the bar with two actions: Graphic of dumbbell the length of the page Nonstrategic assets Major restructuring of Conseco Finance underway "rounded up" and - 5 business activities to be sold/closed; sales underway - 15 branches in MH being closed; - 31 branches in home equity being closed; - 2000 total employees laid off; - $150 million expense reductions - Plus: Slow the Growth Actions would provide $2 billion for debt repayment over the next five quarters and stop the need to invest more in Finance without changing strategic position 7 Solved By Proposing a Comprehensive Program Conseco Logo For Debt Reduction: Years 2000 and 2001 ------------- -------------- ----------- Parent Co. Insurance Cos. Private Equity Finance Co. Investments ------------- -------------- ----------- | | | | | | | | | | | | | | Non-strategic | Non-strategic | | ------------------- | -------------- | assets | | | assets | | | | | \|/ \|/ \|/ | ------------------------------- | "The Box" |Cash from |reinsurance 1. Assets to be sold/run down ------------------- in non-fire sale mode proceeds, 2. All cash to be used to pay if necessary debt ------------------------------- /\ / \ / \ / \ / \ Pay public debt Reduce bank debt as required ($1.2 billion repaid by the ($800 million due end of 2001) 2000 and 2001) 8 Significant Non-Strategic Assets Were Identified That Conseco Logo Would Result in Significant Cash Proceeds and Elimination of Expenses Progress in Restoration Activities Taken Thus Far Is Very Positive:
Net Cash Potential When Item: Proceeds Change Expected Comments on Potential Upside --------------------------------------------------------------------------------- Sub Prime Auto Receivables $ 150 mm DONE VISA/MC Portfolio 150 + 32 DONE Projected collections on delinquent A/R not sold as part of transaction Identify Ineligible Inventory 25 DONE Move Credit Card to CNC Bank 245 + 33 DONE Incremental PLCC available to be Refinancing of B-2's 80 + 20 AGREED transferred Part of Lehman agreement ABL Portfolio 40 + 3 DONE Completed LOC for Servicer Advances 30 Champion Home 30 Fleetwood/Palm Harbor 100 + 10 Incremental overconcentration from Renegotiate Repo Lines with Merrill Lynch 45 + 7 WORK Patriot Homes Merrill proposal to Financing/Sale of Insurance Receivables 90 UNDER increase advance rates Argosy Riverboat 225 + 65 WAY Appraisals support higher valuation Vendor Services 110 + 10 Fifteen oral indications of interest. Tritel 500 Major Medical Line 150 Truck Portfolio 50 + 30 New strategy to sell truck lease ------------ ---------- portfolio; run-off loans SUBTOTAL -Sales/Restructurings $ 2,020 mm $ 210 Apply Cash Available 155 ------------ TOTAL $ 2,175 mm ============
-------------------------------- No fire sales! Strategy works! -------------------------------- 9 Operating "The Box" - 2000 / 2001 Conseco Logo Cash at Closing Status --------------- ------ MC Visa Cash $150 mm - Done $700mm [$650 TO BANKS] Subprime Auto Cash $150 - Done -------> Private Label Credit Card $245 - Done [$50 TO BANKS Cash on Hand $155 FOR D&O ---- COLLATERAL] $700 -------------------------------------------------------------------------------- Expected 2000 Asset Sales Status ------------------------- ------ ABL Portfolio $ 40 - Done Ineligible Inventory $ 25 - Done B-2's $ 80 - Agreement from Lehman Palm Harbor/Fleetwood $100 - Oral Agreement to Repay $800mm [$100 TO CNC] Servicer Advances $ 30 - Discussions Commenced -------> [$100 TO BANKS] Renegotiate Repo lines $ 45 - Oral Agreement with ML [$600 FOR PUBLIC DEBT] Monetize Insurance Rec. $ 90 - Process Underway Champion Homes $ 30 - Company In Agreement to Repay Argosy $225 - Appraisals Received Vendor Services $110 - Preliminary Bids Due 9/15 Truck Leasing $ 25 ----- $800 -------------------------------------------------------------------------------- Expected 2001 Asset Sales Status ------------------------- ------ Monetize Tritel $500 - Discussions Underway $675mm [$200 FOR PUBLIC DEBT] Insurance Lines $150 - Offering Memo Complete -------> [$475 TO BANKS] Truck Leasing $ 25 - Run-off ---- $675
10 Why Conseco Finance Now Cash Positive Conseco Logo O DRAMATIC REDUCTION IN GROWTH o $20 billion managed receivable growth mid 1998-2000 o Restructured business plan assumes managed receivables growth thru 2004 grows less than $5 billion O OVER $1 BILLION IN B-2 PIECE MID 1998-2000 o Prior strategy was to retain assets which yielded above cost of borrowing o Now selling of B-2's as part of plan - - consistent with past practices O EXPENSE IMPLICATIONS OF RESTRUCTURED BUSINESS PLAN o Significantly downsized expense structure results in $150 million ongoing expense savings o Elimination of sub-scale/unprofitable business lines (e.g. Truck and ABL) O RECENT FINANCING TRANSACTIONS O CORPORATE TAX STATUS UPDATE o Recent securitizations require o Completion of 1999 returns 5% cash vs. 7% cash in business indicates ongoing NOL's. model. o Warehouse efficiencies and line o Intercompany tax sharing reduction will free up working payments are well in capital. excess of corporate tax obligations. O COMPETITIVE ENVIRONEMNT o Decreased competition will allow for whole loan sales. o Better spreads available for retained business. 11 Progress in Restructuring The Finance Company Conseco Logo - 5 BUSINESS ACTIVITIES TO BE - 31 BRANCHES IN HOME EQUITY - $150 MILLION EXPENSE SOLD/CLOSED; BEING CLOSED; REDUCTIONS ; - 15 BRANCHES IN MH BEING CLOSED; - 2000 TOTAL EMPLOYEES LAID OFF; - SLOW THE GROWTH
2000 2001 2002 2003 2004 ------------- ------------- ------------- ------------- ------------- ORIGINATION POTENTIAL ($16.6B IN 1999) $15.0 BILLION $15.0 BILLION $15.0 BILLION $15.0 BILLION $15.0 BILLION ORIGINATIONS SOUGHT $10.0 BILLION $10.0 BILLION $11.0 BILLION $12.0 BILLION $12.0 BILLION USED TO REPLACE/BUILD $9.9 BILLION $7.5 BILLION $7.5 BILLION $7.5 BILLION $8.0 BILLION ------------- ------------- ------------- ------------- ------------- Available for outplacement $.1 Billion $2.5 Billion $3.5 Billion $4.5 Billion $4.0 Billion Operating cash flows $ 404 $ 507 $ 544 $ 653 $ 713 ===================================================================================== REQUIRED FOR DEBT REPAYMENT @ CORP. NA $ 250 $ 335 $ 385 $ 450 ============= ============= ============= ============= =============
12 Insurance Operating Results - GAAP Basis Conseco Logo
1999 2000 2001 2002 2003 2004 ----------- ----------- ------------ ---------- ---------- ----------- Revenue Insurance policy income $ 3,149.3 $ 3,291.8 $ 3,446.6 $ 3,672.8 $ 3,866.8 $ 4,164.5 Net investment income 1,819.5 1,809.3 1,818.5 1,863.1 1,940.1 2,091.5 Other income - 1.2 - - ----------- ----------- ------------ ---------- ---------- ----------- Total revenue $ 4,968.8 $ 5,102.3 $ 5,265.1 $ 5,535.9 $ 5,806.9 $ 6,256.0 =========== =========== ============ ========== ========== =========== Cash to Parent $ 361.8 $ 450.0 $ 450.0 $ 475.0 $ 510.0 $ 510.0 =========== =========== ============ ========== ========== ===========
o Aggressive expense management and staff reductions o Review of operating process to improve productivity o Focus on most profitable products - add to product offerings where appropriate o Target revenue growth of 5 - 6% per year Note: Projections exclude major medical. 13 Comprehensive Debt Restructuring Debt Repayment 2000-2003; 2005 Conseco Logo
------------------------------------------------------------------------------------------------------------------------------ Sept.-Dec. Sept.-Dec. 2000 2001 2002 2003 -------------- --------------- -------------- -------------- Cash Sources: Cash on Hand $ 280 $ 330 $ 420 $ 263 Operating Cash: Insurance 160 450 475 510 Finance 73 250 335 385 -------------- --------------- -------------- -------------- Subtotal Operating Cash 233 700 810 895 CNC "Box" Participation 130 - 90 - -------------- --------------- -------------- -------------- Total Cash Sources 643 1,030 1,320 1,158 ------------- SEE THE "BOX" Prepay $90 ------> ------------- Cash Uses: Principal Payments: Banks 60 150 Public 450 310 Interest 163 430 375 315 Dividends 95 180 172 172 Fees 55 - - - -------------- --------------- -------------- -------------- Total Cash Uses 313 610 1,057 947 -------------- --------------- -------------- -------------- Ending Cash $ 330 $ 420 $ 263 $ 211 ============== =============== ============== ============== ------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- '03 OPTION GRANTED BY BANKS TO COMPANY EXTEND 12/31/03 MATURITY TO 3/31/05 - Libor plus 250 - 3.5% fee (added to loan amount) -------------------------------------------------------------------------------- 14 Liquidity Overview at Closing Conseco Logo
HOLDING FINANCE ($'S IN MILLIONS) COMPANY COMPANY TOTAL ------------- ------------- -------------- CASH/LIQUIDITY-PRE CLOSE $ 1,165 $ 100 $ 1,265 REPAYMENTS OF DEBT (650) - (650) D&O COLLATERAL (50) - (50) ------------- ------------- -------------- TOTAL LIQUIDITY AFTER CLOSING $ 465 $ 100 $ 565 ============= ============= ==============
-------------------------------------------------------------------------------- ALREADY HAVE CASH TO PAY DEC. '00 DEBT OF $131 MILLION AND $175 MILLION TOWARDS JUNE '01 MATURITY, WHILE MAINTAINING IN EXCESS OF $200 MILLION OF OVERALL LIQUIDITY. -------------------------------------------------------------------------------- 15 Restoration Program Outcome Conseco Logo - Debt and preferred paydown exceed $3.5 billion under plan - Lowest debt/equity ratio since 1996 by end of 2003
---------------- DEBT ($'s in millions) 12/31/97 12/31/98 12/31/99 6/30/00 12/31/00 12/31/01 12/31/02 12/31/03 PAID DOWN --------------------------------------------- --------------------------------------------- ---------------- Bank debt $ 1,850 $ 2,280 $ 2,180 $ 2,720 $ 1,970 $ 1,500 $ 1,350 $ 1,200 $ 1,520 Public debt 500 1,540 2,660 3,180 3,040 2,380 1,930 1,620 1,560 --------------------------------------------- --------------------------------------------- ---------------- Total debt 2,350 3,820 4,840 5,900 5,010 3,880 3,280 2,820 $ 3,080 ================ Trust preferreds 1,400 2,130 2,680 2,430 2,430 1,930 1,930 1,930 $ 500 ---------------- Common equity 5,220 5,300 6,330 5,890 5,890 6,900 7,420 7,950 $3,580 --------------------------------------------- --------------------------------------------- Total capital $ 8,970 $ 11,250 $ 13,850 $ 14,220 $ 13,330 $ 12,710 $ 12,630 $ 12,700 = TOTAL PAYDOWNS ============================================= ============================================= ---------------- ---------------- Debt to total capital 26.2% 34.0% 34.9% 41.5% 37.6% 30.5% 26.0% 22.2%
------------------------------------- At Close, Net Debt = $4,941 mm Debt Service = $500 mm Running Rate '01 Cash from Operations = $700 mm Coverage on Bank & Public Debt = 1.4X Total Coverage = 1.1X ------------------------------------- 16 Strong Operating Businesses Will Cover Fixed Charges Conseco Logo During '01 (first time since '97) Debt and Trust Preferred Paydown Plan Bar Chart Graphic demonstrating levels of Public Debt, Bank Debt and Trust Preferreds.
First Half CASH INFLOWS 1996 1997 1998 1999 2000 --------------------------------------------------------------------------------- Insurance Companies $221.2 $326.0 $ 277.7 $ 361.8 $225.0 Finance Company - - (1,971.0) (1,246.0) (284.0) Other 1.6 (19.9) 17.6 (23.3) 28.5 --------------------------------------------------------------------------------- Total Operating Cash Flow $222.8 $306.1 $(1,675.7) $ (907.5) $(30.5) ================================================================================= Second Half CASH INFLOWS 2000 2001 2002 2003 --------------------------------------------------------------------- Insurance Companies $ 225.0 $450.0 $475.0 $510.0 Finance Company 50.0 250.0 335.0 385.0 Other - - - - --------------------------------------------------------------------- Total Operating Cash Flow $ 275.0 $700.0 $810.0 $895.0 =====================================================================
17 Conclusion Conseco Logo o The Company Has Achieved the First Major Stride in Its "Restoration Plan" o Restructuring: o Manage Holding Company Debt -- Agreements in Place o Disposing of or Closing Non-Strategic Assets --Well Underway o Realignment o Cost Reductions --Executed at Finance --Begun Process at Insurance Operations o Setting Responsible - but Stretch Goals --Done o Pay for Performance --In Process o Reinvigoration o Quality o Productivity o Growth 18 How to View the New Conseco! Conseco Logo Image of a weight lifter with the word FINANCE written on his left arm and the word INSURANCE written on his right easily lifting a dumbbell that has the word HOLDING on it. Left side of weight lifter image: "Middle Market" - with arrow pointing to right arm. Sales Focus - several strong positions - non-insurance company efficiencies Positive Cash - with arrow pointing to dumbbell Minimum expenses - with arrow pointing to dumbbell Right side of weight lifter image: Market Leaders in - M.H. financing - with arrow pointing to left arm - Home improvement financing - with arrow pointing to left arm Positive Cash - with arrow pointing to dumbbell Responsible Debt - with arrow pointing to dumbbell 19