<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 31, 1996
REGISTRATION NO. 333-18081
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
CONSECO, INC.
(Exact name of Registrant as specified in its charter)
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<S> <C> <C>
INDIANA 6719 35-1468632
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) No.)
</TABLE>
11825 N. PENNSYLVANIA ST., CARMEL, INDIANA 46032, (317) 817-6100
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
------------------------
LAWRENCE W. INLOW
Conseco, Inc.
11825 N. Pennsylvania St.
Carmel, Indiana 46032
(317) 817-6163
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
As soon as practicable after the Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
------------------------
CONSECO HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS
MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL CONSECO SHALL FILE A FURTHER
AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL
THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES
ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH
DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
NOTICE OF MERGER
OF
BANKERS LIFE HOLDING CORPORATION
WITH AND INTO
CIHC, INCORPORATED
(A WHOLLY OWNED SUBSIDIARY OF CONSECO, INC.)
To the Former Stockholders of Bankers Life Holding Corporation:
We are pleased to give you notice that, pursuant to Section 253 of the
General Corporation Law of the State of Delaware, the previously announced
merger (the "Merger") of Bankers Life Holding Corporation ("BLH" or "Bankers"),
a Delaware corporation, with and into CIHC, Incorporated ("CIHC"), a Delaware
corporation and a wholly owned subsidiary of Conseco, Inc. ("Conseco"), an
Indiana corporation, became effective on December 31, 1996 (the "Effective
Time"). Under applicable Delaware law, the Merger was approved by the board of
directors of CIHC, and no action was required by the BLH stockholders or the BLH
board of directors for the Merger to become effective.
Upon consummation of the Merger, CIHC, the surviving corporation, succeeded
to all of the assets and liabilities of BLH, and the corporate existence of BLH
ceased. Each outstanding share of BLH common stock, $.001 par value per share
("BLH Common Stock") (except for shares held by CIHC, which were cancelled, and
shares held by stockholders who perfect their statutory appraisal rights under
Delaware law), was converted in the Merger. Former BLH stockholders whose shares
were converted are entitled to receive 0.3983 of a share of Conseco common
stock, no par value per share ("Conseco Common Stock"), for each share of BLH
Common Stock owned at the time of the Merger.
To receive certificates representing shares of Conseco Common Stock issued
in the Merger, former BLH stockholders must complete and execute the enclosed
Letter of Transmittal and deliver their certificates representing BLH Common
Stock and the Letter of Transmittal to First Union National Bank of North
Carolina, the Exchange Agent, either in person or by mail, at the following
address:
First Union National Bank of North Carolina
Corporate Trust Operations
9th Floor
230 South Tryon Street
Charlotte, NC 28288-1153
Section 262 of the General Corporation Law of the State of Delaware, the
text of which is included as Annex A to the accompanying Prospectus, provides a
procedure by which holders of record at the Effective Time of BLH Common Stock
who do not wish to accept the shares of Conseco Common Stock to which they are
entitled under the terms of the Merger may seek a judicial appraisal of the fair
value of any or all of their BLH Common Stock, exclusive of any element of value
arising from the expectation or accomplishment of the Merger. See "The
Merger--Appraisal Rights" in the Prospectus and Annex A thereto for a
description of this procedure. The Prospectus describes the terms of the Merger,
certain background information and other information concerning BLH and Conseco.
We urge you to read the Prospectus carefully.
Very truly yours,
CIHC, INCORPORATED
<PAGE>
PROSPECTUS
[LOGO]
SHARES OF COMMON STOCK
Conseco, Inc. ("Conseco"), an Indiana corporation, is furnishing this
Prospectus to those persons who held common stock, $.001 par value per share
("BLH Common Stock"), of Bankers Life Holding Corporation ("BLH" or "Bankers"),
a Delaware corporation, immediately prior to the merger (the "Merger") of BLH
with and into CIHC, Incorporated ("CIHC"), a Delaware corporation and wholly
owned subsidiary of Conseco. The Merger was effected on December 31, 1996. Upon
consummation of the Merger, CIHC, the surviving corporation, succeeded to all of
the assets and liabilities of BLH, and the corporate existence of BLH ceased.
Each share of BLH Common Stock outstanding on consummation of the Merger (except
for shares held by CIHC, which were cancelled, and shares owned by stockholders
who perfected their statutory appraisal rights under Delaware law) was converted
in the Merger. Former BLH stockholders whose shares were converted are entitled
to receive 0.3983 of a share of Conseco common stock, no par value per share
("Conseco Common Stock"), for each share of BLH Common Stock owned at the time
of the Merger. Immediately prior to the Merger, CIHC held approximately 90.4
percent of the outstanding shares of BLH Common Stock. The Merger was effected
as a short form merger pursuant to the resolutions adopted by the boards of
directors of CIHC and Conseco. No vote, approval or authorization from the
stockholders of either BLH or Conseco or the board of directors of BLH was
required to consummate the Merger.
Persons who held BLH Common Stock of record immediately prior to the Merger
have certain statutory appraisal rights under Delaware law. Any holder who
desires to exercise appraisal rights must file with CIHC written demand for
appraisal after December 31, 1996 and prior to January 28, 1997. See "The
Merger--Appraisal Rights."
This Prospectus constitutes the prospectus of Conseco relating to the
Conseco Common Stock issued in the Merger. It also constitutes a notice from
CIHC of the effective date of the Merger and of appraisal rights available to
former BLH stockholders as a result of the Merger.
Conseco Common Stock is listed on the New York Stock Exchange ("NYSE"). On
August 23, 1996, the last trading day prior to the public announcement that
Conseco intended to effect the Merger the closing prices of Conseco Common Stock
and BLH Common Stock on the NYSE were $42.00 and $21.75, respectively. On
December 27, 1996, the closing prices of Conseco Common Stock and BLH Common
Stock on the NYSE were $64.50 and $24.875, respectively. See "The Merger--Stock
Exchange Listing."
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS DECEMBER 31, 1996.
<PAGE>
AVAILABLE INFORMATION
Conseco has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-4 under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the securities offered
hereby (the "Registration Statement"). This Prospectus does not contain all the
information set forth in the Registration Statement and the exhibits thereto, to
which reference is hereby made.
Conseco is, and prior to the Merger Bankers was, subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance therewith, Conseco files, and prior to
the Merger Bankers filed, reports, proxy statements and other information with
the Commission.
The Registration Statement and the reports, proxy statements and other
information filed by Conseco and Bankers with the Commission can be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and should be
available at the Commission's Regional Offices at Suite 1300, 7 World Trade
Center, New York, New York 10048, and Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material
also can be obtained at prescribed rates from the Public Reference Section of
the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549. In
addition, the Commission maintains a Web site at http://www.sec.gov that
contains reports, proxy and information statements and other information
regarding registrants, including Conseco and Bankers, that file electronically
with the Commission. The common stock of Conseco is listed on the NYSE and
certain reports, proxy materials and other information of Conseco and Bankers
may be available for inspection at the offices of the NYSE, 20 Broad Street, New
York, New York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
THIS STATEMENT INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. COPIES OF ANY SUCH DOCUMENTS, OTHER THAN EXHIBITS
TO SUCH DOCUMENTS WHICH ARE NOT SPECIFICALLY INCORPORATED BY REFERENCE THEREIN,
ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON, INCLUDING ANY BENEFICIAL OWNER, TO
WHOM THIS STATEMENT IS DELIVERED, UPON WRITTEN OR ORAL REQUEST. WRITTEN REQUESTS
FOR SUCH DOCUMENTS SHOULD BE DIRECTED TO JAMES W. ROSENSTEELE, VICE PRESIDENT,
INVESTOR RELATIONS, CONSECO, INC., 11825 NORTH PENNSYLVANIA STREET, CARMEL,
INDIANA 46032, AND TELEPHONE REQUESTS MAY BE DIRECTED TO MR. ROSENSTEELE AT
(317) 817-2893.
The following documents previously filed with the Commission pursuant to the
Exchange Act are incorporated herein by this reference:
1. Conseco's Annual Report on Form 10-K for the fiscal year ended December
31, 1995 (including those portions of Conseco's proxy statement for its 1996
annual meeting of shareholders incorporated by reference therein) ("Conseco's
Annual Report"); Conseco's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1996, June 30, 1996 and September 30, 1996; Conseco's Current Reports
on Form 8-K dated January 17, 1996, March 11, 1996, March 14, 1996, April 10,
1996, August 2, 1996, August 25, 1996, September 25, 1996, November 15, 1996,
November 19, 1996, November 27, 1996, December 15, 1996, December 17, 1996 and
December 23, 1996; and the description of Conseco Common Stock in Conseco's
Registration Statements filed pursuant to Section 12 of the Exchange Act, and
any amendment or report filed for the purpose of updating any such description.
2. BLH's Annual Report on Form 10-K for the fiscal year ended December 31,
1995 (including those portions of BLH's proxy statement for its 1996 annual
meeting of the stockholders incorporated by reference therein) ("BLH's Annual
Report"); BLH's Quarterly Reports on Form 10-Q for the quarters
ii
<PAGE>
ended March 31, 1996, June 30, 1996 and September 30, 1996; and the description
of BLH Common Stock in BLH's Registration Statement filed pursuant to Section 12
of the Exchange Act, and any amendment or report filed for the purpose of
updating such description.
3. THI's Annual Report on Form 10-K for the fiscal year ended December 31,
1995 (including those portions of THI's proxy statement for its 1996 annual
meeting of stockholders incorporated by reference therein) ("THI's Annual
Report"); THI's Quarterly Reports on Form 10-Q for the quarters ended March 31,
1996, June 30, 1996 and September 30, 1996; and THI's Current Report on Form 8-K
dated September 25, 1996.
4. Annual Report on Form 10-K of American Travellers Corporation ("ATC")
for the fiscal year ended December 31, 1995 (including those portions of ATC's
proxy statement for its annual meeting of shareholders incorporated by reference
therein) ("ATC's Annual Report"); ATC's Quarterly Reports on Form 10-Q for the
quarters ended March 31, 1996, June 30, 1996 and September 30, 1996; and ATC's
Current Reports on Form 8-K dated August 25, 1996 and December 17, 1996.
5. Annual Report on Form 10-K of Capitol American Financial Corporation
("CAF") for the fiscal year ended December 31, 1995 (including those portions of
CAF's 1995 Annual Report to Shareholders, including financial statement and
accompanying information and CAF's proxy statement for its 1996 annual meeting
of shareholders which are incorporated by reference therein) ("CAF's Annual
Report"); CAF's Quarterly Reports on Form 10-Q for the quarters ended March 31,
1996, June 30, 1996 and September 30, 1996; and CAF's Current Report on Form 8-K
dated August 25, 1996.
6. Annual Report on Form 10-K of Life Partners Group, Inc. ("LPG") for the
fiscal year ended December 31, 1995 ("LPG's Annual Report"); LPG's Quarterly
Reports on Form 10-Q for the quarters ended March 31, 1996 and June 30, 1996;
and LPG's Current Reports on Form 8-K dated March 11, 1996 and April 10, 1996.
All documents filed by Conseco, BLH, THI, ATC or CAF pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date hereof and
prior to January 28, 1997, the last day on which appraisal rights may be
perfected, shall be deemed to be incorporated by reference herein and to be a
part hereof from the date any such document is filed.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes hereof to the extent that a statement contained herein (or in any
other subsequently filed document that also is incorporated by reference herein)
modifies or supersedes such statement. Any statement so modified or superseded
shall be deemed, except as so modified or superseded, to constitute a part
hereof. All information appearing in this Statement is qualified in its entirety
by the information and financial statements (including notes thereto) appearing
in the documents incorporated herein by reference, except to the extent set
forth in the immediately preceding statement.
State insurance holding company laws and regulations applicable to Conseco
and BLH generally provide that no person may acquire control of Conseco or BLH,
and thus indirect control of their respective insurance subsidiaries, unless
such person has provided certain required information to, and such acquisition
is approved (or not disapproved) by, the appropriate insurance regulatory
authorities. Generally, any person acquiring beneficial ownership of ten percent
or more of the total outstanding shares of Conseco Common Stock or BLH Common
Stock, as the case may be, would be presumed to have acquired such control,
unless the appropriate insurance regulatory authorities upon advance application
determine otherwise.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS WITH RESPECT TO THE MATTERS DESCRIBED IN THIS PROSPECTUS OTHER
THAN THE INFORMATION CONTAINED IN THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS SHOULD NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED
iii
<PAGE>
BY CONSECO. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR ANY OFFER TO OR SOLICITATION OF ANY PERSON IN ANY
JURISDICTION WHERE IT IS UNLAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY ISSUANCE OF ANY SECURITIES
DESCRIBED HEREIN SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE CORPORATION SUBSEQUENT TO THE
RESPECTIVE DATES AS OF WHICH INFORMATION IS GIVEN HEREIN.
iv
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TABLE OF CONTENTS
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PAGE
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AVAILABLE INFORMATION..................................................... ii
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................... ii
TABLE OF CONTENTS......................................................... v
SUMMARY................................................................... 1
General................................................................. 1
The Companies........................................................... 1
The Merger.............................................................. 2
Selected Historical Financial Information of Conseco.................... 5
Selected Historical Financial Information of BLH........................ 8
Selected Historical Financial Information of THI........................ 12
Selected Historical Financial Information of CAF........................ 14
Selected Historical Financial Information of ATC........................ 16
Summary Unaudited Pro Forma Consolidated Financial Information of
Conseco............................................................... 18
Comparative Unaudited Per Share Data of Conseco and BLH................. 22
Market Price Information................................................ 23
INFORMATION CONCERNING CONSECO............................................ 24
Background.............................................................. 24
Insurance Operations.................................................... 24
Fee-Based Operations.................................................... 25
American Travellers Corporation......................................... 26
Transport Holdings Inc. ................................................ 26
Other Pending Acquisitions by Conseco................................... 26
General Information Concerning Conseco.................................. 27
INFORMATION CONCERNING BLH................................................ 28
THE MERGER................................................................ 29
Terms of the Merger..................................................... 29
Background of the Merger................................................ 30
Certain Relationships and Related Transactions between BLH and
Conseco............................................................... 31
Conseco's Reasons for the Merger........................................ 33
Certain Consequences of the Merger...................................... 33
Interests of Certain Persons in the Merger.............................. 34
Certain Litigation...................................................... 34
Accounting Treatment.................................................... 34
Certain Federal Income Tax Consequences................................. 34
Regulatory Approvals.................................................... 35
Stock Exchange Listing.................................................. 35
Appraisal Rights........................................................ 36
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS OF CONSECO.......... 39
COMPARISON OF SHAREHOLDERS' RIGHTS........................................ 49
Amendment of By-laws.................................................... 49
Certain Provisions Relating to Acquisitions............................. 49
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v
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Right to Bring Business Before a Special Meeting of Shareholders........ 51
Shareholder Action by Written Consent................................... 51
Removal of Directors.................................................... 51
Director Liability...................................................... 51
Indemnification......................................................... 51
Dividends and Repurchases............................................... 53
Dissenters' Rights...................................................... 53
Director and Officer Discretion......................................... 53
MANAGEMENT OF CIHC AND CONSECO UPON CONSUMMATION OF THE MERGER............ 54
LEGAL MATTERS............................................................. 54
EXPERTS................................................................... 54
Annex A--Section 262 of the Delaware General Corporation Law (relating to
statutory appraisal rights)............................................... A-1
Annex B--Plan of Merger................................................... B-1
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vi
<PAGE>
SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE IN
THIS PROSPECTUS. THIS SUMMARY IS NOT INTENDED TO BE COMPLETE AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO THE MORE DETAILED INFORMATION AND FINANCIAL
STATEMENTS, INCLUDING THE NOTES THERETO, CONTAINED ELSEWHERE, OR INCORPORATED BY
REFERENCE, IN THIS PROSPECTUS, THE ANNEXES HERETO AND THE LETTER OF TRANSMITTAL.
ALL SHARE AND PER SHARE INFORMATION IN THIS PROSPECTUS CONCERNING CONSECO HAS
BEEN ADJUSTED TO REFLECT A TWO-FOR-ONE STOCK SPLIT OF THE CONSECO COMMON STOCK
EFFECTED APRIL 1, 1996, UNLESS OTHERWISE STATED. EXCEPT AS OTHERWISE INDICATED,
ALL FINANCIAL INFORMATION IN THIS PROSPECTUS IS PRESENTED IN ACCORDANCE WITH
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ("GAAP"). STOCKHOLDERS ARE URGED TO
READ THIS PROSPECTUS, THE ANNEXES HERETO, THE LETTER OF TRANSMITTAL AND THE
DOCUMENTS INCORPORATED HEREIN BY REFERENCE IN THEIR ENTIRETY. UNLESS OTHERWISE
DEFINED HEREIN, CAPITALIZED TERMS USED IN THIS SUMMARY HAVE THE RESPECTIVE
MEANINGS ASCRIBED TO THEM ELSEWHERE IN THIS PROSPECTUS.
GENERAL
This Prospectus relates to the Merger of BLH with and into CIHC which was
effective December 31, 1996. See The Merger.
THE COMPANIES
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CONSECO, INC. AND CIHC, Conseco is a financial services holding company engaged primarily
INCORPORATED......... in the development, marketing and administration of annuity,
individual health insurance and individual life insurance products.
Conseco's earnings result primarily from operating life insurance
companies and providing investment management, administrative and
other fee-based services to affiliated and non-affiliated
businesses. Conseco's operating strategy is to consolidate and
streamline management and administrative functions, to realize
superior investment returns through active asset management, and to
focus resources on the development and expansion of profitable
products and strong distribution channels. CIHC is a wholly owned
subsidiary of Conseco.
On August 2, 1996, Conseco completed its acquisition of LPG.
Conseco and LPG collected an aggregate of approximately $3.6
billion of total premiums and annuity deposits in 1995 from a
diverse portfolio of products. On September 30, 1996, Conseco
acquired the shares of ALH (of which Conseco previously owned 37
percent) that Conseco or its affiliates did not previously own for
approximately $165 million in cash. On December 17, 1996, Conseco
completed its acquisition of ATC (the "ATC Merger"). On December
23, 1996, Conseco completed its acquisition of THI (the "THI
Merger").
On August 25, 1996, Conseco entered into an Agreement and Plan of
Merger (the "CAF Merger Agreement") with CAF pursuant to which CAF
will become a wholly-owned subsidiary of Conseco (the "CAF
Merger"), with each share of common stock of CAF to be converted
into the right to receive $30.25 in cash (subject to adjustment)
and a fraction of a share of Conseco Common Stock having a value of
$6.50. On December 15, 1996, Conseco entered into an Agreement and
Plan of Merger (the "PFS Merger Agreement") with Pioneer Financial
Services, Inc. ("PFS") pursuant to which PFS will become a wholly
owned subsidiary of Conseco (the "PFS Merger"), with each share of
common stock of PFS to be converted into the right to receive a
fraction of a share of Conseco Common Stock having a value between
$25.00 and $28.00 per share.
See "Incorporation of Certain Documents by Reference," "--Selected
Historical Financial Information of Conseco," "--Selected
Historical Financial Information of ATC," "--Selected Historical
Financial Information
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1
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of CAF," "--Selected Historical Financial Information of THI,"
"Information Concerning Conseco" and "Unaudited Pro Forma
Consolidated Financial Statements of Conseco" for additional
information concerning Conseco, LPG, THI, ATC and CAF. Conseco's
executive offices are located at 11825 North Pennsylvania Street,
Carmel, Indiana 46032 and the telephone number for Conseco is (317)
817-6100.
BANKERS LIFE HOLDING
CORPORATION.......... BLH is an insurance holding company and, through its insurance
subsidiaries, is one of the nation's largest writers of individual
health insurance products based on collected premiums. BLH became a
public company in March 1993 through an offering of 19,550,000
shares of BLH Common Stock at a price of $22.00 per share (the
"Public Offering"), from which Bankers received proceeds of $405.3
million after underwriting discount and issue costs. BLH's
principal executive offices are located at 222 Merchandise Mart
Plaza, Chicago, Illinois 60654, and its telephone number is (312)
396-6000. See "Information Concerning BLH" and "--Selected
Historical Financial Information of BLH" for additional information
concerning BLH.
THE MERGER
On December 31, 1996, BLH merged with and into CIHC, the surviving
corporation. At the time of consummation of the Merger on December
31, 1996 (the "Effective Time"), BLH ceased to exist, and CIHC
acquired and assumed all of the assets and liabilities of BLH. The
Merger was a short form merger pursuant to the laws of Delaware and
was therefore effected pursuant to resolutions of the board of
directors of CIHC and without any vote, approval or authorization
from the stockholders of Conseco or BLH or the board of directors
of BLH. Holders of BLH Common Stock immediately prior to the
Merger, other than CIHC, have certain statutory appraisal rights
under Delaware law. See "The Merger--Conseco's Reasons for the
Merger", "The Merger--Appraisal Rights" and "The Merger--Terms of
the Merger."
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EFFECT OF MERGER ON BLH
COMMON STOCK......... Upon consummation of the Merger: (1) BLH was merged with and into
CIHC, with CIHC being the surviving corporation; and (2) each
outstanding share of BLH Common Stock (other than shares of BLH
Common Stock held by CIHC, which were cancelled, and shares held by
stockholders who perfect their statutory appraisal rights under
Delaware law) were converted into the right to receive the Merger
Consideration (as defined below). Fractional shares of Conseco
Common Stock will not be issuable in connection with the Merger.
BLH stockholders otherwise entitled to fractional shares of Conseco
Common Stock will receive the value of such fractional shares in
cash, determined as described herein under "The Merger--Terms of
the Merger."
MERGER CONSIDERATION... Upon the consummation of the Merger, each share of BLH Common Stock
issued and outstanding immediately prior to the Effective Time
(other than shares of BLH Common Stock held by CIHC, which were
cancelled, and shares held by stockholders who perfect their
statutory appraisal rights under Delaware law) were converted into
the right to receive 0.3983 of a share of Conseco Common Stock (the
"Exchange Ratio"). The Exchange Ratio was determined by dividing
$25.00 by $62.7625, the average of the closing prices of the
Conseco Common Stock on the NYSE Composite Transactions Reporting
System, as reported in the THE WALL STREET JOURNAL, for the ten
trading days
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2
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immediately preceding the second trading day prior to the Effective
Time (the "Conseco Share Price").The Conseco Common Stock issuable
to holders of shares of BLH Common Stock pursuant to the Merger and
any cash to be paid in lieu of fractional shares of Conseco Common
Stock are referred to collectively as the "Merger Consideration."
No fractional shares of Conseco Common Stock will be issued
pursuant to the Merger. Each BLH stockholder who otherwise would
have been entitled to a fraction of a share of Conseco Common Stock
will receive in lieu thereof cash in accordance with the terms of
the Merger. Conseco has caused the additional shares of Conseco
Common Stock issuable pursuant to the Merger Agreement to be listed
on the NYSE. See "The Merger--Terms of the Merger."
A letter of transmittal from First Union National Bank of North
Carolina (the "Exchange Agent") (including instructions setting
forth the procedures for exchanging such holder's certificates
representing BLH Common Stock ("Certificates") for the Merger
Consideration payable to such holder pursuant to the Merger) has
accompanied this Prospectus sent to each holder of record, as of
the Effective Time, of shares of BLH Common Stock. Upon surrender
to the Exchange Agent of such Certificates, together with a duly
completed and executed letter of transmittal, such holder will
promptly receive the Merger Consideration for each share of BLH
Common Stock previously represented by the Certificates so
surrendered. See "The Merger-- Terms of the Merger."
TREATMENT OF BLH STOCK
OPTIONS.............. From and after the Effective Time, each outstanding unexpired
option to purchase shares of BLH Common Stock (a "BLH Stock
Option") which was granted pursuant to BLH's 1993 Stock Option
Plan, as amended (the "BLH Stock Option Plan"), shall be
exercisable, for the same aggregate consideration payable to
exercise such BLH Stock Option immediately prior to the Effective
Time, for the number of shares of Conseco Common Stock which the
holder would have been entitled to receive at the Effective Time if
such BLH Stock Option had been fully vested and exercised for BLH
Common Stock immediately prior to the Effective Time. See "The
Merger-- Terms of the Merger."
CERTAIN CONSEQUENCES OF
THE MERGER........... Upon issuance of the shares of Conseco Common Stock pursuant to the
Merger, holders of BLH Common Stock will become shareholders of
Conseco, and each share of BLH Common Stock issued and outstanding
immediately prior to the Merger was converted into the right to
receive the Merger Consideration. In addition, holders of BLH Stock
Options are entitled to receive, upon the exercise of their BLH
Stock Options, a number of shares of Conseco Common Stock
determined as described under "The Merger--Terms of the Merger."
After the issuance of the shares of Conseco Common Stock issuable
pursuant to the Merger and without giving effect to the proposed
acquisitions of CAF and PFS, the Conseco shareholders immediately
prior to the Effective Time now own approximately 98 percent of the
shares of Conseco Common Stock, and the former holders of BLH
Common Stock now own approximately two percent of such shares. See
"The Merger--Certain Consequences of the Merger."
</TABLE>
3
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REGULATORY APPROVALS... No federal or state regulatory approval was required in connection
with the Merger.
CONDUCT OF THE BUSINESS
OF CONSECO AFTER THE
MERGER............... The members of the respective boards of directors of CIHC and
Conseco and the officers of each of Conseco and CIHC immediately
prior to the consummation of the Merger are continuing as the
directors and officers of Conseco and CIHC, respectively, following
the Merger. See "Management of Conseco and CIHC Upon Consummation
of the Merger."
APPRAISAL RIGHTS....... Holders of BLH Common Stock are entitled to appraisal rights under
the Delaware General Corporation Law (the "DGCL"). Any stockholder
entitled to appraisal rights may, after December 31, 1996 and on or
prior to January 28, 1997, demand from CIHC the appraisal of any or
all of his or her shares of BLH Common Stock by delivering a
written demand for an appraisal to Corporate Secretary, CIHC,
Incorporated, Corporation Trust Center, 1209 Orange Street,
Wilmington, Delaware 19801 stating the identity of the stockholder
and that the stockholder intends by such notice to demand the
appraisal of his or her shares. Demand is necessary if the
stockholder is to perfect his or her appraisal rights. See "The
Merger--Appraisal Rights" and "Annex A--Section 262 of the Delaware
General Corporation Law (relating to statutory appraisal rights)."
Holders of BLH Common Stock who wish to exercise their appraisal
rights should not complete the accompanying letter of transmittal.
CERTAIN FEDERAL INCOME
TAX CONSEQUENCES..... The Merger is expected to qualify as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"). Assuming the Merger qualifies as a
reorganization within the meaning of Section 368(a) of the Code, no
gain or loss will be recognized by BLH stockholders upon their
exchange of BLH Common Stock for Conseco Common Stock, except that
any BLH stockholder who receives cash proceeds in lieu of a
fractional share interest in Conseco Common Stock will recognize
gain or loss equal to the difference between such cash proceeds and
the tax basis in the fractional share interest, and such gain or
loss will constitute capital gain or loss if such stockholder's BLH
Common Stock was held as a capital asset at the Effective Time. See
"The Merger--Certain Federal Income Tax Consequences."
ACCOUNTING TREATMENT... The Merger has been accounted for as a "purchase" in a "step
acquisition transaction" as such terms are used under GAAP. See
"The Merger-- Accounting Treatment."
COMPARISON OF
SHAREHOLDERS'
RIGHTS............... Pursuant to the Merger and upon surrender of their Certificates,
the holders of BLH Common Stock at the Effective Time will become
shareholders of Conseco. See "Comparison of Shareholders' Rights"
for a summary of the material differences between the rights of
holders of Conseco Common Stock and BLH Common Stock. These
differences arise from the distinctions between the laws of the
jurisdictions in which Conseco is, and BLH was, incorporated
(Indiana and Delaware, respectively) and the distinctions between
the respective charters and bylaws of Conseco and BLH prior to the
Merger.
</TABLE>
4
<PAGE>
SELECTED HISTORICAL FINANCIAL INFORMATION OF CONSECO
The selected historical financial information set forth below was derived
from the consolidated financial statements of Conseco. Conseco's consolidated
balance sheets at December 31, 1994 and 1995, and the consolidated statements of
operations, shareholders' equity and cash flows for the years ended December 31,
1993, 1994 and 1995 and notes thereto were audited by Coopers & Lybrand L.L.P.,
independent accountants, and are included in Conseco's Annual Report which is
incorporated by reference herein. The selected historical financial information
is qualified in its entirety by, and should be read in conjunction with,
Conseco's Annual Report. The selected historical financial information set forth
below for the nine months ended September 30, 1995 and 1996, is unaudited;
however, in the opinion of Conseco's management, such financial information
contains all adjustments, consisting only of normal recurring items, necessary
to present fairly the financial information for such periods. The results of
operations for the nine months ended September 30, 1996 may not be indicative of
the results of operations to be expected for a full year.
The comparison of consolidated financial information set forth below is
significantly affected by: (i) the acquisitions consummated by Conseco Capital
Partners, L.P. ("Partnership I") and Conseco Capital Partners II, L.P.
("Partnership II"); (ii) the sale of Western National Corporation ("WNC"); (iii)
the transactions affecting Conseco's ownership interest in BLH and CCP
Insurance, Inc. ("CCP"), which prior to its merger with and into Conseco owned
Great American Reserve Insurance Company ("Great American Reserve") and
Beneficial Standard Life Insurance Company ("Beneficial Standard"); and (iv) the
LPG Merger. For periods beginning with the date of their acquisitions by
Partnership I and ending June 30, 1992, Partnership I and its subsidiaries were
consolidated with the financial statements of Conseco. Following the completion
of the initial public offering by CCP in July 1992, Conseco did not have
unilateral control to direct all of CCP's activities and, therefore, did not
consolidate the financial statements of CCP with the financial statements of
Conseco. As a result of the purchase by Conseco of all the shares of common
stock of CCP it did not already own on August 31, 1995 (the "CCP Merger"), the
financial statements of CCP's subsidiaries are consolidated with the financial
statements of Conseco, effective January 1, 1995. Conseco has included BLH in
its financial statements since November 1, 1992. Through December 31, 1993, the
financial statements of WNC were consolidated with the financial statements of
Conseco. Following the completion of the initial public offering of WNC (and
subsequent disposition of Conseco's remaining equity interest in WNC), the
financial statements of WNC were no longer consolidated with the financial
statements of Conseco. As of September 29, 1994, Conseco began to include in its
financial statements the newly acquired Partnership II subsidiary, ALH. As of
July 1, 1996, Conseco began to include in its financial statements its newly
acquired subsidiary, LPG. A description of such business combinations are
described in the notes to the consolidated financial statements included
5
<PAGE>
in: (i) Conseco's Annual Report; and (ii) Conseco's Quarterly Report on Form
10-Q for the quarter ended September 30, 1996, both of which are incorporated by
reference herein.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------------------------- ---------------------
1991 1992 1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF OPERATIONS DATA
Insurance policy income............... $ 280.8 $ 378.7 $ 1,293.8 $ 1,285.6 $ 1,465.0 $ 1,103.3 $ 1,193.2
Investment activity:
Net investment income............... 921.4 888.6 896.2 385.7 1,142.6 850.5 926.7
Net trading income (losses)......... 50.7 35.9 93.1 (4.9) 2.5 2.8 (6.5)
Net realized gains (losses)......... 123.3 124.3 149.5 (25.6) 186.4 77.8 16.3
Total revenues........................ 1,391.8 1,523.9 2,636.0 1,862.0 2,855.3 2,066.1 2,198.6
Interest expense on notes payable..... 69.9 46.2 58.0 59.3 119.4 83.9 84.6
Total benefits and expenses........... 1,168.6 1,193.9 2,025.8 1,537.6 2,436.8 1,780.2 1,845.6
Income before income taxes, minority
interest and extraordinary charge... 223.2 330.0 610.2 324.4 418.5 285.9 353.0
Extraordinary charge on extinguishment
of debt, net of tax................. 5.0 5.3 11.9 4.0 2.1 -- 18.6
Net income............................ 116.0 169.5 297.0 150.4 220.4 167.8 174.5
Preferred dividends................... 6.8 5.5 20.6 18.6 18.4 13.8 22.7
Net income applicable to common
stock............................... 109.2 164.0 276.4 131.8 202.0 154.0 151.8
PER SHARE DATA(a)
Net income, primary................... $ 2.05 $ 2.71 $ 4.73 $ 2.50 $ 4.69 $ 3.58 $ 2.84
Net income, fully diluted............. 2.01 2.70 4.39 2.44 4.22 3.22 2.59
Dividends declared per common share... .035 .043 .150 .250 .093 .083 .103
Book value per common share
outstanding at period end........... 7.73 10.93 16.89 10.45 20.44 17.84 25.22
Shares outstanding at period end...... 49.4 49.8 50.6 44.4 40.5 40.5 67.0
Average fully diluted shares
outstanding......................... 50.8 59.2 67.0 61.7 52.2 52.1 67.4
BALANCE SHEET DATA--PERIOD END
Total assets.......................... $ 11,832.4 $ 11,772.7 $ 13,749.3 $ 10,811.9 $ 17,297.5 $17,009.1 $23,176.0
Notes payable for which Conseco is
directly liable..................... 177.6 163.2 413.0 191.8 871.4 920.8 1,169.0
Notes payable of BLH, not direct
obligations of Conseco.............. -- 392.0 290.3 280.0 301.5 272.6 418.1
Notes payable of ALH, not direct
obligations of Conseco.............. 319.3 -- -- 331.1 283.2 308.5 13.0
Total liabilities..................... 11,321.3 11,154.4 12,382.9 9,743.2 15,782.5 15,646.7 21,072.3
Minority interest..................... 79.5 24.0 223.8 321.7 403.3 356.7 147.8
Shareholders' equity.................. 431.6 594.3 1,142.6 747.0 1,111.7 1,005.7 1,955.9
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------------------------- ---------------------
1991 1992 1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
OTHER FINANCIAL DATA(b)
Premiums collected(c)................. $ 1,648.7 $ 1,464.9 $ 2,140.1 $ 1,879.1 $ 3,106.4 $ 2,390.2 $ 2,353.7
Operating earnings(d)................. 61.5 114.8 162.0 151.7 131.3 89.3 181.8
Operating earnings per fully diluted
common share(a),(d)................. 1.05 1.80 2.39 2.46 2.52 1.71 2.70
Shareholders' equity excluding
unrealized appreciation
(depreciation) of fixed maturity
securities(e)....................... 431.6 560.3 1,055.2 884.7 999.1 945.4 2,002.6
Book value per common share
outstanding, excluding unrealized
appreciation (depreciation) of fixed
maturity securities(a),(e).......... 7.73 10.24 15.16 13.55 17.66 16.35 25.92
Ratio of debt (including debt of CCP
guaranteed by Conseco until its
retirement in 1993) for which
Conseco is directly liable to total
capital of Conseco only(f):
As reported......................... .29X .22X .27X .20X .44X .48X .36X
Excluding unrealized appreciation
(depreciation)(e)................. .29X .23X .28X .18X .47X .49X .36X
Adjusted statutory capital (at period
end)(g)............................. $ 617.1 $ 603.1 $ 1,135.5 $ 509.0 $ 1,021.0 $ 928.2 $ 1,582.3
Adjusted statutory earnings(h)........ 90.0 153.4 273.8 248.6 321.7 223.6 283.6
Ratio of adjusted statutory earnings
to cash interest(i)................. 2.62X 5.75X 4.94X 5.06X 3.79X 3.86X 4.32X
</TABLE>
- ------------------------------
(a) All share and per share amounts have been restated to reflect the April 1,
1996 two-for-one stock split.
(b) Amounts under this heading are included to assist the reader in analyzing
Conseco's financial position and results of operations. Such amounts are not
intended to, and do not, represent insurance policy income, net income, net
income per share, shareholders' equity or book value per share prepared in
accordance with GAAP.
(c) Includes premiums received from annuities and universal life policies, which
are not reported as revenues under GAAP.
(d) Represents income before extraordinary charge, excluding net trading income
(losses) (net of income taxes), net realized gains (losses) (less that
portion of change in future policy benefits, amortization of cost of
policies purchased and cost of policies produced and income taxes relating
to such gains (losses)) and restructuring activities (net of income taxes).
(e) Excludes the effect of reporting fixed maturities at fair value and
recording the unrealized gain or loss on such securities as a component of
shareholders' equity, net of tax and other adjustments, which Conseco began
to do in 1992. Such adjustments are in accordance with Statement of
Financial Accounting Standards No. 115 "Accounting for Certain Investments
in Debt and Equity Securities" ("SFAS 115"), as described in the notes to
the consolidated financial statements included in Conseco's Annual Report.
(f) Represents the ratio of notes payable for which Conseco is directly liable
to the sum of shareholders' equity and notes payable for which Conseco is
directly liable.
(g) Includes: (1) statutory capital and surplus; (2) mandatory securities
valuation reserve ("MSVR") at periods ended prior to December 31, 1992; (3)
asset valuation reserve ("AVR") and interest maintenance reserve ("IMR") at
periods ended on or after December 31, 1992; and (4) the portion of surplus
debentures carried by the life companies as a liability to Conseco. Such
statutory data reflect the combined data derived from the annual statements
of Conseco's and BLH's wholly owned life insurance companies as filed with
insurance regulatory agencies and prepared in accordance with statutory
accounting practices.
(h) Represents gains from operations before interest expense (except interest on
annuities and financial products) and income taxes of Conseco's and BLH's
wholly owned life insurance companies as reported for statutory accounting
purposes plus income before interest expense and income taxes of all
non-life companies.
(i) Represents the ratio of adjusted statutory earnings to cash interest. Cash
interest includes interest, except interest on annuities and financial
products, of Conseco and BLH and their wholly owned subsidiaries that is
required to be paid in cash, which aggregated $34.3 million, $26.7 million,
$55.4 million, $49.2 million and $85.0 million for the years ended December
31, 1991, 1992, 1993, 1994 and 1995, respectively, and $57.9 million and
$65.7 million for the nine months ended September 30, 1995 and 1996,
respectively.
7
<PAGE>
SELECTED HISTORICAL FINANCIAL INFORMATION OF BLH
The selected historical financial information set forth below was derived
from the consolidated financial statements of BLH. The consolidated balance
sheets of BLH at December 31, 1994 and 1995, and the consolidated statements of
income, shareholders' equity and cash flows for the years ended December 31,
1993 and 1994, the six months ended June 30, 1995 and the six months ended
December 31, 1995 and notes thereto were audited by Coopers & Lybrand L.L.P.,
independent accountants, and are included in BLH's Annual Report which is
incorporated by reference herein. The selected historical financial information
is qualified in its entirety by, and should be read in conjunction with, BLH's
Annual Report. The consolidated financial information set forth for the three
months ended September 30, 1995 and the nine months ended September 30, 1996, is
unaudited; however, in the opinion of BLH's management, such financial
information contains all adjustments, consisting only of normal recurring items,
necessary to present fairly the financial information for such periods. The
results of operations for the nine months ended September 30, 1996 may not be
indicative of the results of operations to be expected for a full year.
Effective June 30, 1995, BLH adopted a new basis of accounting under the "push
down" method, concurrent with Conseco's ownership of BLH Common Stock exceeding
80 percent. Under this method, BLH's accounts were adjusted to equal the cost
basis of BLH stock acquired by Conseco. For the period from the date Partnership
I acquired Bankers Life and Casualty Company ("BLC") through BLH and its wholly
owned subsidiary Bankers Life Insurance Company of Illinois ("BLI") (effective
November 1, 1992) (the "Acquisition Date") through June 30, 1995, BLH financial
data reflect the "step acquisition" for leveraged buy out transactions (the
"prior basis"). Under this method, to the extent that shareholders of Bankers
Life and Casualty Company ("BLC", a wholly owned subsidiary of BLH) prior to the
acquisition by Partnership I continued to hold an interest in BLH after the
acquisition, such shareholders' bases in the net assets continued to be carried
forward. For periods prior to the Acquisition Date, financial data presented are
the historical financial data of BLC (the "predecessor basis"). Because of the
accounting
8
<PAGE>
adjustments made as a result of the changes in bases described above, the
financial data for periods reflecting different bases may not be comparable.
<TABLE>
<CAPTION>
BLC
-----------------------
PREDECESSOR BASIS
-----------------------
TEN MONTHS
YEAR ENDED ENDED
DECEMBER OCTOBER
31, 1991 31, 1992
---------- ----------
(AMOUNTS IN MILLIONS,
EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA
Insurance policy income............. $ 1,063.5 $ 944.1
Investment activity:
Net investment income............. 124.6 105.2
Net trading income (loss)......... -- --
Net realized gains (losses)....... (19.3) (33.6)
Total revenues...................... 1,185.0 1,013.8
Interest expense on notes payable... -- --
Total benefits and expenses......... 1,109.9 962.0
Income from continuing operations
before income tax, extraordinary
charge and cumulative effect of
accounting changes................ 75.1 51.8
Income from continuing operations
before extraordinary charge and
cumulative effect of accounting
changes........................... 45.4 45.9
Income before extraordinary charge
and cumulative effect of
accounting changes(a)............. 86.1 62.5
Extraordinary charge and cumulative
effect of accounting changes(b)... 5.7 --
Net income.......................... 80.4 62.5
Preferred dividends................. -- --
Net income applicable to common
stock............................. 80.4 62.5
<CAPTION>
BLH
---------------------------------------------------------------------------------
PRIOR BASIS
---------------------------------------------
SIX THREE SIX NINE
TWO MONTHS YEARS ENDED DECEMBER MONTHS MONTHS MONTHS MONTHS
ENDED 31, ENDED ENDED ENDED ENDED
DECEMBER ---------------------- JUNE 30, SEPTEMBER DECEMBER SEPTEMBER
31, 1992 1993 1994 1995 30, 1995 31, 1995 30, 1996
---------- ---------- ---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Insurance policy income............. $ 191.5 $ 1,200.6 $ 1,214.0 $ 620.9 $ 316.4 $ 626.3 $ 961.8
Investment activity:
Net investment income............. 21.1 175.0 222.1 126.3 62.0 127.2 191.0
Net trading income (loss)......... 2.4 32.8 (1.7) 2.5 (.3) (.1) (1.4)
Net realized gains (losses)....... 7.0 49.2 (5.1) 13.2 1.1 13.7 5.9
Total revenues...................... 222.5 1,456.3 1,437.9 766.9 376.0 760.3 1,176.2
Interest expense on notes payable... 7.4 36.2 31.6 16.1 7.5 14.9 18.1
Total benefits and expenses......... 185.3 1,242.3 1,229.5 673.0 327.8 653.1 1,009.6
Income from continuing operations
before income tax, extraordinary
charge and cumulative effect of
accounting changes................ 37.2 214.0 208.4 93.9 48.2 107.2 166.6
Income from continuing operations
before extraordinary charge and
cumulative effect of accounting
changes........................... 22.7 136.0 133.6 60.2 30.7 68.1 104.4
Income before extraordinary charge
and cumulative effect of
accounting changes(a)............. 22.7 136.0 133.6 60.2 30.7 68.1 104.4
Extraordinary charge and cumulative
effect of accounting changes(b)... 13.3 8.7 -- -- -- 1.6 10.1
Net income.......................... 9.4 127.3 133.6 60.2 30.7 66.5 94.3
Preferred dividends................. 2.9 4.5 -- -- -- -- --
Net income applicable to common
stock............................. 6.5 122.8 133.6 60.2 30.7 66.5 94.3
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
BLC
--------------------
PREDECESSOR BASIS
--------------------
TEN
YEAR MONTHS
ENDED ENDED
DECEMBER OCTOBER
31, 1991 31, 1992
--------- ---------
(AMOUNTS IN
MILLIONS, EXCEPT PER
SHARE AMOUNTS)
<S> <C> <C>
PER SHARE DATA
Net income, primary and fully diluted...
Dividends declared per common share.....
Book value per common share outstanding
at period end.........................
Shares outstanding at period end........
Average fully diluted shares
outstanding...........................
BALANCE SHEET DATA-- PERIOD END
Total assets............................ $2,238.6
Notes payable........................... --
Total liabilities....................... 1,674.0
Shareholders' equity.................... 564.6
OTHER FINANCIAL DATA(c)
Premiums collected(d)................... $1,267.0 $1,127.7
Operating earnings(e)...................
Operating earnings per fully diluted
common share(e).......................
Shareholders' equity excluding
unrealized appreciation (depreciation)
of fixed maturity securities(f).......
Book value per common share outstanding,
excluding unrealized appreciation
(depreciation) of fixed maturity
securities(f).........................
Adjusted statutory capital at period
end(g)................................
Adjusted statutory earnings(h)..........
<CAPTION>
BLH
-----------------------------------------------------------------------------
PRIOR BASIS
------------------------------------------
TWO SIX THREE SIX NINE
MONTHS YEARS ENDED DECEMBER MONTHS MONTHS MONTHS MONTHS
ENDED 31, ENDED ENDED ENDED ENDED
DECEMBER -------------------- JUNE 30, SEPTEMBER DECEMBER SEPTEMBER
31, 1992 1993 1994 1995 30, 1995 31, 1995 30, 1996
--------- --------- --------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net income, primary and fully diluted... $ .19 $ 2.46 $ 2.49 $ 1.14 $ .59 $ 1.29 $ 1.91
Dividends declared per common share..... -- .06 .60 .30 .15 .30 .45
Book value per common share outstanding
at period end......................... .29 9.92 9.06 18.25 19.10 20.39 20.51
Shares outstanding at period end........ 35.0 54.6 52.8 52.8 51.5 50.6 49.4
Average fully diluted shares
outstanding........................... 35.0 50.1 53.6 52.8 52.3 51.6 49.5
BALANCE SHEET DATA-- PERIOD END
Total assets............................ $3,367.5 $ 3,934.8 $ 3,928.8 $4,710.9 $4,785.2 $5,033.3
Notes payable........................... 399.2 279.5 269.9 272.6 301.5 418.1
Total liabilities....................... 3,196.5 3,393.9 3,450.6 3,727.6 3,753.3 4,019.6
Shareholders' equity.................... 171.0 540.9 478.2 983.3 1,031.9 1,013.7
OTHER FINANCIAL DATA(c)
Premiums collected(d)................... $ 241.2 $ 1,464.7 $ 1,534.5 $ 786.0 $ 357.7 $ 727.7 $1,136.5
Operating earnings(e)................... 16.5 105.1 135.9 54.6 30.3 66.4 94.7
Operating earnings per fully diluted
common share(e)....................... .47 2.10 2.53 1.03 .58 1.29 1.92
Shareholders' equity excluding
unrealized appreciation (depreciation)
of fixed maturity securities(f)....... 171.0 534.7 600.0 968.1 985.2 1,041.6
Book value per common share outstanding,
excluding unrealized appreciation
(depreciation) of fixed maturity
securities(f)......................... .29 9.79 11.36 18.79 19.47 21.07
Adjusted statutory capital at period
end(g)................................ 163.3 388.4 387.0 385.9 394.2 441.9 432.9
Adjusted statutory earnings(h).......... 48.8 165.6 180.7 74.6 48.1 101.8 133.2
</TABLE>
- ------------------------
(a) Income for the ten months October 31, 1992, and the year ended December 31,
1991, includes earnings from discontinued operations of $16.6 million and
$40.7 million, respectively. Such operations were transferred or sold to the
former owner in conjunction with the acquisition by Partnership I.
(b) Net income for the nine months ended September 30, 1996, the six months
ended December 31, 1995 and the year ended December 31, 1993 reflects
extraordinary charges on the early repayment of debt of $10.1 million, $1.6
million and $8.7 million, respectively.
Net income for the two months ended December 31, 1992, reflects the charge of
$13.3 million related to the cumulative effect of the change in method of
accounting for postretirement benefits other than pensions.
Net income for the year ended December 31, 1991, reflects the charge of $5.7
million related to the cumulative effect of the change in method of
accounting for income taxes.
10
<PAGE>
(c) Amounts under this heading are included to assist the reader in analyzing
BLH's financial position and results of operations. Such amounts are not
intended to, and do not, represent insurance policy income, net income, net
income per share, shareholders' equity or book value per common share
prepared in accordance with GAAP.
(d) Includes premiums received from annuities and universal life policies, which
are not reported as revenues under GAAP.
(e) Represents net income before extraordinary charge and cumulative effect of
accounting changes, excluding net trading income (losses) (net of income
taxes) and net realized gains (losses) (less that portion of amortization of
cost of policies purchased and the cost of policies produced and income
taxes relating to such gains (losses)).
(f) Excludes the effects of reporting fixed maturities at fair value and
recording the unrealized gain or loss on such securities as a component of
shareholders' equity, net of tax and other adjustments, which BLH began to
do in 1993. Such adjustments are in accordance with SFAS 115, as described
in the notes to the consolidated financial statements included in BLH's
Annual Report.
(g) Includes: (1) statutory capital and surplus; and (2)AVR and IMR. Such
statutory data reflect the combined data derived from the annual statements
of BLH's wholly owned life insurance companies as filed with insurance
regulatory agencies and prepared in accordance with statutory accounting
practices.
(h) Represents gains from operations before interest expense (except interest on
annuities and financial products) and income taxes of BLH's wholly owned
life insurance companies as reported for statutory accounting purposes plus
income before interest expense and income taxes of all non-life companies.
11
<PAGE>
SELECTED HISTORICAL FINANCIAL INFORMATION OF THI
The selected historical financial information set forth below reflects a
series of transactions which occurred on September 29, 1995, pursuant to which
previously separate companies (all of which were wholly owned subsidiaries of
Travelers Group Inc. ("Travelers")) were combined with THI and the outstanding
common stock of THI was distributed to the shareholders of Travelers. The
financial statements of THI for periods prior to the September 29, 1995
transactions reflect the results of operations and the financial position of the
previously separate companies as if such companies had been combined at the
beginning of the periods presented using the pooling of interests method. The
selected historical financial information was derived from the consolidated
financial statements of THI. In conjunction with the September 29, 1995
transactions, THI issued $50 million of its subordinated notes and borrowed $62
million from a syndicate of banks. The proceeds of the borrowings were used, in
part, to make a distribution of $96 million to the former parent of THI and to
pay expenses of $6.5 million associated with the September 29, 1995
transactions. During the fourth quarter of 1995, THI sold its long term care
business to ATC. These transactions significantly affect the comparability of
the results of operations in 1996 with prior periods. For a description of these
transactions, see THI's Annual Report, incorporated by reference herein.
The consolidated balance sheets of THI at December 31, 1994 and 1995, and
the consolidated statements of income, shareholders' equity and cash flows for
the years ended December 31, 1993, 1994 and 1995 and notes thereto were audited
by KPMG Peat Marwick LLP, independent public accountants, and are included in
THI's Annual Report which is incorporated by reference herein. The consolidated
financial information set forth below is qualified in its entirety by, and
should be read in conjunction with, THI's Annual Report. The selected historical
financial information set forth below as of December 31, 1992, and as of and for
the year ended December 31, 1991, and the nine months ended September 30, 1995
and 1996, is unaudited; however, in the opinion of THI's management, such
financial information contains all adjustments, consisting only of normal
recurring items, necessary to present fairly the financial information for such
periods. The results of operations for the nine months ended September 30, 1996,
may not be indicative of the results of operations to be expected for a full
year.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------------------------- ---------------------
1991 1992 1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF OPERATIONS DATA
Insurance policy income............... $ 342.7 $ 289.0 $ 256.9 $ 227.7 $ 190.2 $ 160.1 $ 82.4
Investment activity:
Net investment income............... 42.1 43.7 44.0 46.6 49.7 39.7 29.6
Net realized gains (losses)......... 2.8 19.7 26.8 (3.4) 6.7 (.1) .3
Total revenues........................ 399.6 368.1 331.0 270.9 246.6 199.7 113.7
Interest expense...................... -- -- -- -- 2.3 -- 6.8
Expenses of spin-off and related
transactions........................ -- -- -- -- 2.2 2.2 --
Loss on sale of long term care
business............................ -- -- -- -- 68.5 -- --
Total benefits and expenses........... 356.5 305.3 281.0 234.9 287.7 171.4 91.5
Income (loss) before income taxes and
cumulative effect of change in
accounting principle................ 43.1 62.8 50.0 36.0 (41.1) 28.3 22.2
Cumulative effect of change in
accounting principle................ -- -- (.3) -- -- -- --
Net income (loss)..................... 30.3 42.7 32.6 23.0 (26.8) 18.2 14.4
PER SHARE DATA
Net income (loss), primary(a)......... $ (17.75) $ 11.42 $ 6.73
Net income (loss), fully diluted(a)... (17.75) 5.84 4.06
Book value per fully diluted common
share(b)............................ 66.59 77.50 62.03
Shares outstanding at period end...... 1.6 1.6 1.6
Average fully diluted shares
outstanding......................... 2.0 3.1 3.2
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------------------------- ---------------------
1991 1992 1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- ---------- --------- ---------
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA--PERIOD END
Total assets.......................... $ 740.0 $ 813.3 $ 890.7 $ 885.2 $ 950.5 $ 972.4 $ 941.9
Notes payable (including subordinated
convertible notes).................. -- -- -- -- 110.3 112.0 108.3
Total liabilities..................... 502.1 548.3 587.6 595.8 746.4 736.0 767.7
Shareholders' equity.................. 237.9 265.0 303.1 289.4 204.1 236.4 174.2
OTHER FINANCIAL DATA(c)
Operating earnings(d)................. $ 28.5 $ 29.7 $ 15.5 $ 25.2 $ 15.4 $ 20.3 $ 14.2
Operating earnings per fully diluted
common share(a),(d)................. 7.50 6.53 3.99
Shareholders' equity excluding
unrealized appreciation
(depreciation) of fixed maturity
securities(e)....................... 237.9 265.0 303.1 312.2 180.9 225.4 170.1
Book value per common share
outstanding excluding unrealized
appreciation of fixed maturity
securities(b),(e)................... 59.14 73.96 60.75
Adjusted statutory capital (at period
end)(f)............................. 96.9 122.2 132.0 130.7 163.5 127.6 154.2
Adjusted statutory earnings(g)........ 28.0 39.3 8.1 24.5 51.8 16.2 34.9
</TABLE>
- ------------------------
(a) Per share data for the nine months ended September 30, 1995 and the year
ended December 31, 1995, is presented as if the 1,590,461 shares outstanding
after the September 29, 1995 distribution were outstanding for the entire
periods. Operating earnings per fully diluted share data for the nine months
ended September 30, 1996 and the year ended December 31, 1995, also include
the dilutive effect of the issuance of the subordinated convertible notes
from the date of issuance, September 29, 1995. Such equivalent shares were
anti-dilutive for purposes of computing net loss per fully diluted share for
the year ended December 31, 1995.
(b) Book value per common share reflects the dilution which would occur if the
subordinated convertible notes were converted to common stock and
outstanding options were exercised.
(c) Amounts under this heading are included to assist the reader in analyzing
THI's financial position and results of operations. Such amounts are not
intended to, and do not, represent net income, net income per share,
shareholders' equity or book value per share prepared in accordance with
GAAP.
(d) Represents income before cumulative effect of change in accounting
principle, excluding: (i) net realized gains (losses), net of income taxes;
(ii) the loss on the sale of long term care business, net of income taxes;
and (iii) expenses related to THI's September 29, 1995 spin-off and related
transactions, net of income taxes.
(e) Excludes the effects of reporting fixed maturities at fair value and
recording the unrealized gain or loss on such securities as a component of
shareholders' equity, net of tax and other adjustments, which THI began to
do effective January 1, 1994. Such adjustments are in accordance with SFAS
115, as described in the notes to the consolidated financial statements
included in THI's Annual Report which is incorporated herein by reference.
(f) Includes: (i) statutory capital and surplus; (ii) MSVR at periods ended
prior to December 31, 1992; and (iii) AVR and IMR at periods ended on or
after December 31, 1992. Such statutory data reflect the combined data
derived from the annual statements of THI's consolidated insurance
subsidiaries as filed with insurance regulatory agencies and prepared in
accordance with statutory accounting practices.
(g) Represents gains from operations before interest expense and income taxes of
THI's consolidated insurance subsidiaries as reported for statutory
accounting purposes plus income before interest expense, expenses related to
THI's September 29, 1995 spin-off, and income taxes of all non-life
companies.
13
<PAGE>
SELECTED HISTORICAL FINANCIAL INFORMATION OF CAF
The selected historical financial information set forth below was derived
from the consolidated financial statements of CAF. The consolidated balance
sheets of CAF at December 31, 1994 and 1995, and the consolidated statements of
operations, shareholders' equity and cash flows for the years ended December 31,
1993, 1994 and 1995 and notes thereto were audited by KPMG Peat Marwick LLP,
independent accountants, and are included in CAF's Annual Report, which is
incorporated by reference herein. The selected historical financial information
is qualified in its entirety by, and should be read in conjunction with, CAF's
Annual Report. The consolidated financial information set forth below for the
nine months ended September 30, 1995 and 1996, is unaudited; however, in the
opinion of CAF's management, such financial information contains all
adjustments, consisting only of normal recurring items, necessary to present
fairly the financial information for such periods. The results of operations for
the nine months ended September 30, 1996 may not be indicative of the results of
operations to be expected for a full year.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------------------------- ---------------------
1991 1992 1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Insurance policy income............... $ 188.4 $ 219.5 $ 244.8 $ 263.3 $ 282.1 $ 209.6 $ 219.9
Investment activity:
Net investment income............... 17.5 22.8 33.5 41.0 48.6 35.8 41.7
Net realized gains.................. -- -- .6 -- -- -- .3
Total revenues........................ 206.4 242.8 279.4 304.4 330.8 245.4 261.9
Interest expense...................... 1.2 1.6 1.5 2.3 2.4 1.9 1.6
Total benefits and expenses........... 162.2 189.8 210.8 235.7 259.2 192.0 202.2
Income before income taxes and
cumulative effect of change in
accounting for income taxes.......... 44.2 53.0 68.6 68.7 71.6 53.4 59.7
Income from cumulative effect of
change in accounting for income
taxes................................ 3.7 -- -- -- -- -- --
Net income............................ 32.6 35.0 43.5 44.8 46.0 34.2 38.8
PER SHARE DATA
Income before cumulative effect of
change in accounting for income
taxes, primary and fully diluted..... $ 1.77 $ 2.19 $ 2.36 $ 2.50 $ 2.64 $ 1.96 $ 2.22
Net income, primary and fully
diluted.............................. 2.00 2.19 2.36 2.50 2.64 1.96 2.22
Dividends declared per common share... .050 .255 .280 .320 .360 .270 .300
Book value per common share
outstanding at period end............ 5.68 9.61 11.58 13.34 16.71 15.04 17.41
Shares outstanding at period end...... 16.0 18.5 18.2 17.5 17.5 17.5 17.5
Average fully diluted shares
outstanding.......................... 16.3 16.0 18.5 17.9 17.5 17.5 17.5
BALANCE SHEET DATA--PERIOD END
Total assets.......................... $ 397.7 $ 556.8 $ 668.5 $ 793.1 $ 948.3 $ 888.7 $ 1,017.9
Notes payable......................... 21.0 20.0 22.0 24.0 24.0 30.0 29.0
Total liabilities..................... 307.0 379.1 457.2 559.5 656.6 626.2 713.3
Shareholders' equity.................. 90.7 177.7 211.3 233.6 291.7 262.5 304.6
OTHER FINANCIAL DATA(a)
Operating earnings(b)................. $ 28.9 $ 35.0 $ 43.1 $ 44.8 $ 46.0 $ 34.2 $ 38.6
Operating earnings per primary and
fully diluted common share(b)........ 1.77 2.19 2.33 2.50 2.64 1.96 2.21
Shareholders' equity excluding
unrealized appreciation of fixed
maturity securities(c)............... 90.7 177.7 211.3 233.6 272.9 262.5 307.7
Book value per common share
outstanding, excluding unrealized
appreciation of fixed maturity
securities(c)........................ 5.68 9.61 11.58 13.34 15.63 15.04 17.59
Adjusted statutory capital (at period
end)(d).............................. 48.3 108.7 108.0 93.9 88.5 94.6 97.9
Adjusted statutory earnings(e)........ 20.1 25.6 33.5 29.4 30.9 21.9 29.9
</TABLE>
(SEE FOOTNOTES ON FOLLOWING PAGE)
14
<PAGE>
- ------------------------
(a) Amounts under this heading are included to assist the reader in analyzing
CAF's financial position and results of operations. Such amounts are not
intended to, and do not, represent net income, net income per share,
shareholders' equity or book value per share prepared in accordance with
GAAP.
(b) Represents net income before cumulative effect of change in accounting for
income taxes and net realized gains, net of income taxes.
(c) Excludes the effects of reporting available-for-sale fixed maturities at
fair value and recording the unrealized gain or loss on such securities as a
component of shareholders' equity, net of tax and other adjustments, which
CAF began to do with respect to a portion of its portfolio effective
December 31, 1995. Such adjustments are in accordance with SFAS 115, as
described in the notes to the consolidated financial statements included in
CAF's Annual Report, which is incorporated herein by reference.
(d) Includes: (1) statutory capital and surplus; (2) MSVR at periods ended prior
to December 31, 1992; and (3) AVR and IMR at periods ended on or after
December 31, 1992. Such statutory data reflect the combined data derived
from the annual statements of CAF's consolidated insurance subsidiaries as
filed with insurance regulatory agencies and prepared in accordance with
statutory accounting practices.
(e) Represents gains from operations before interest expense and income taxes of
CAF's consolidated insurance subsidiaries as reported for statutory
accounting purposes plus income before interest expense and income taxes of
all non-life companies.
15
<PAGE>
SELECTED HISTORICAL FINANCIAL INFORMATION OF ATC
The selected historical financial information set forth below was derived
from the consolidated financial statements of ATC. The consolidated balance
sheets of ATC at December 31, 1994 and 1995, and the consolidated statements of
income, shareholders' equity and cash flows for the years ended December 31,
1993, 1994 and 1995 and notes thereto were audited by Arthur Andersen LLP,
independent public accountants, and are included in ATC's Annual Report, which
is incorporated by reference herein. The selected historical financial
information is qualified in its entirety by, and should be read in conjunction
with, ATC's Annual Report. The consolidated financial information set forth for
the nine months ended September 30, 1995 and 1996, is unaudited; however, in the
opinion of ATC's management, such financial information contains all
adjustments, consisting only of normal recurring items, necessary to present
fairly the financial information for such periods. The results of operations for
the nine months ended September 30, 1996 may not be indicative of the results of
operations to be expected for a full year.
The comparison of the consolidated financial information set forth below is
significantly affected by the acquisition of the long term care business of the
J.C. Penney Insurance Companies in 1994 and THI in 1995. A description of the
acquisition of these blocks of business is contained in the notes to the
consolidated financial statements included in ATC's Annual Report incorporated
by reference herein.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------------------------- ---------------------
1991 1992 1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- ---------- --------- ---------
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Insurance policy income............... $ 117.0 $ 138.3 $ 166.4 $ 201.9 $ 274.0 $ 186.2 $ 283.3
Investment activity:
Net investment income............... 8.1 8.7 9.4 11.0 23.2 12.7 33.2
Net realized gains (losses)......... (.1) .4 .2 -- .1 .2 1.3
Total revenues........................ 125.0 147.4 176.0 212.9 297.3 199.1 317.8
Interest expense...................... .2 .2 -- 1.0 3.3 1.5 5.8
Total benefits and expenses........... 108.3 131.2 152.7 185.9 262.6 175.1 278.8
Income before income taxes............ 16.7 16.2 23.3 27.0 34.7 24.0 39.0
Net income............................ 11.0 10.7 14.6 18.4 23.7 16.5 26.0
PER SHARE DATA(a)
Net income, primary................... $ .71 $ .68 $ .92 $ 1.14 $ 1.45 $ 1.01 $ 1.55
Net income, fully diluted............. .71 .68 .92 1.14 1.36 1.01 1.24
Book value per common share
outstanding at period end............ 5.95 6.66 7.51 8.65 10.77 9.68 11.11
Shares outstanding at period end...... 15.2 15.2 15.5 15.8 15.9 15.9 16.3
Average fully diluted shares
outstanding.......................... 15.5 15.6 15.8 16.1 18.4 16.5 23.8
BALANCE SHEET DATA -- PERIOD END
Total assets.......................... $ 219.7 $ 240.9 $ 299.0 $ 400.8 $ 836.1 $ 538.3 $ 907.6
Notes payable (including convertible
subordinated debentures)............. 8.4 -- 12.0 20.0 103.5 103.5 102.9
Total liabilities..................... 129.3 139.7 182.8 264.5 665.3 384.8 726.3
Shareholders' equity.................. 90.4 101.2 116.2 136.3 170.8 153.5 181.3
OTHER FINANCIAL DATA(b)
Operating earnings(c)................. $ 11.1 $ 10.4 $ 14.5 $ 18.4 $ 23.6 $ 16.3 $ 25.2
Operating earnings per fully diluted
common share(a),(c).................. .71 .67 .91 1.14 1.35 1.00 1.20
Shareholders' equity excluding
unrealized appreciation
(depreciation) of fixed maturity
securities(d)........................ 90.4 101.2 116.2 136.3 160.6 153.5 191.7
Book value per common share
outstanding excluding unrealized
appreciation of fixed maturity
securities(a),(d).................... 5.95 6.66 7.51 8.65 10.13 9.68 11.74
Adjusted statutory capital (at period
end)(e).............................. 29.9 30.5 47.0 58.0 74.3 118.9 85.3
Adjusted statutory earnings
(loss)(f)............................ (3.3) (1.1) 4.3 11.3 (29.6) 11.2 9.2
</TABLE>
(SEE FOOTNOTES ON FOLLOWING PAGE)
16
<PAGE>
- ------------------------
(a) All share and per share amounts have been restated to reflect the April 10,
1996 three-for-two stock split.
(b) Amounts under this heading are included to assist the reader in analyzing
ATC's financial position and results of operations. Such amounts are not
intended to, and do not, represent net income, net income per share,
shareholders' equity or book value per share prepared in accordance with
GAAP.
(c) Represents net income excluding net realized gains (losses), net of income
taxes.
(d) Excludes the effects of reporting fixed maturities at fair value and
recording the unrealized gain or loss on such securities as a component of
shareholders' equity, net of tax and other adjustments, which ATC began to
do effective December 31, 1995. Such adjustments are in accordance with SFAS
115, as described in the notes to the consolidated financial statements
included in ATC's Annual Report, which is incorporated herein by reference.
(e) Includes: (1) statutory capital and surplus; (2) MSVR at periods ended prior
to December 31, 1992; and (3) AVR and IMR at periods ended on or after
December 31, 1992. Such statutory data reflect the combined data derived
from the annual statements of ATC's consolidated insurance subsidiaries as
filed with insurance regulatory agencies and prepared in accordance with
statutory accounting practices.
(f) Represents gains from operations before interest expense and income taxes of
ATC's consolidated insurance subsidiaries as reported for statutory
accounting purposes plus income before interest expense and income taxes of
all non-life companies.
17
<PAGE>
SUMMARY UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL INFORMATION OF CONSECO
The summary unaudited pro forma consolidated financial information of
Conseco set forth below was derived from the unaudited pro forma consolidated
financial statements of Conseco included elsewhere in this Prospectus. See
"Unaudited Pro Forma Consolidated Financial Statements of Conseco." The summary
unaudited pro forma consolidated financial information is based upon the
historical and pro forma consolidated financial statements and related notes
thereto of Conseco, LPG, THI, CAF and ATC incorporated by reference in this
Prospectus. The summary unaudited pro forma consolidated financial information
set forth below is qualified in its entirety by, and should be read in
conjunction with, such materials and the unaudited pro forma consolidated
financial statements appearing elsewhere in this Prospectus.
The summary unaudited pro forma consolidated statement of operations
information for the year ended December 31, 1995, and the nine months ended
September 30, 1996, in the columns headed "Pro forma Conseco before the Merger"
reflects the following transactions, all of which have already occurred, as if
such transactions had occurred on January 1, 1995: (1) the issuance of $275.0
million of Trust Originated Preferred Securities ("TOPrS") having a distribution
rate of 9.16 percent (the "TOPrS Offering"); (2) the issuance of $325.0 million
of Capital Trust Pass-through Securities ("TruPS") having a distribution rate of
8.70 percent (the "TruPS Offering"); (3) the THI Merger; (4) the ATC Merger; (5)
the call for redemption of Conseco's Series D Convertible Preferred Stock (the
"Series D Call") completed September 26, 1996; (6) the acquisition of all of the
outstanding common stock of ALH, not previously owned by Conseco or its
affiliates, and related transactions (the "ALH Transaction") completed September
30, 1996; (7) the acquisition and merger of LPG completed effective July 1, 1996
(the "LPG Merger"); (8) the acquisition of all of the outstanding common stock
of CCP not previously owned by Conseco and related transactions (including the
repayment of borrowings under Conseco's existing $250.0 million revolving credit
agreement); (9) the increase of Conseco's ownership in BLH to 90.4 percent, as a
result of purchases of common shares of BLH by Conseco and BLH during 1995 and
the first three months of 1996; (10) the issuance of 4.37 million shares of
Conseco PRIDES in January 1996; (11) the BLH tender offer for and repurchase of
its 13 percent senior subordinated notes due 2002 and related financing
transactions completed in March 1996 (the "BLH Tender Offer"); and (12) the debt
restructuring of ALH in the fourth quarter of 1995. The summary unaudited pro
forma consolidated statement of operations information for the year ended
December 31, 1995, and the nine months ended September 30, 1996, in the columns
headed "Pro forma for the Merger" reflects further adjustments to the
consolidated operating results of Conseco as if the Merger had occurred on
January 1, 1995. The summary unaudited pro forma consolidated statement of
operations information for the year ended December 31, 1995, and the nine months
ended September 30, 1996, in the columns headed "Pro forma for the Merger and
the CAF Merger" reflects further adjustments to the consolidated operating
results of Conseco as if the CAF Merger had occurred on January 1, 1995.
The summary unaudited pro forma consolidated balance sheet information at
September 30, 1996, in the column headed "Pro forma Conseco before the Merger"
reflects the application of certain pro forma adjustments for the following
transactions, which have already occurred, as if such transactions had occurred
on September 30, 1996: (1) the TOPrS Offering; (2) the TruPS Offering; (3) the
THI Merger; and (4) the ATC Merger. The summary unaudited pro forma consolidated
balance sheet information at September 30, 1996, in the columns headed "Pro
forma for the Merger" reflects further adjustments to the financial position of
Conseco as if the Merger had occurred on September 30, 1996. The summary
unaudited pro forma consolidated balance sheet information at September 30,
1996, in the columns headed "Pro forma for the Merger and the CAF Merger"
reflects further adjustments to the financial position of Conseco as if the CAF
Merger had occurred on September 30, 1996.
The summary unaudited pro forma consolidated financial information for the
year ended December 31, 1995, and as of and for the nine months ended September
30, 1996, is provided for informational
18
<PAGE>
purposes only and is not necessarily indicative of the results of operations or
financial condition that would have been achieved had the transactions set forth
above actually occurred as of the dates indicated or of future results of
operations or financial condition of Conseco. Conseco anticipates cost savings
and additional benefits as a result of completing the transactions set forth
above. Such benefits and any other changes that might have resulted from
management of the combined companies have not been included as adjustments to
the pro forma consolidated financial information. The Merger will be accounted
for using the step acquisition method of accounting. The THI Merger, the CAF
Merger and the ATC Merger will be accounted for under the purchase method of
accounting.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, 1995 SEPTEMBER 30, 1996
--------------------------------------- ---------------------------------------
PRO FORMA PRO FORMA
PRO FORMA FOR PRO FORMA FOR
CONSECO PRO FORMA THE MERGER CONSECO PRO FORMA THE MERGER
BEFORE THE FOR THE AND THE CAF BEFORE THE FOR THE AND THE CAF
MERGER MERGER MERGER MERGER MERGER MERGER
----------- ----------- ----------- ----------- ----------- -----------
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Insurance policy income............... $ 2,216.9 $ 2,216.6 $ 2,498.7 $ 1,714.7 $ 1,714.7 $ 1,934.6
Investment activity:
Net investment income............... 1,528.9 1,528.8 1,574.0 1,143.3 1,143.3 1,182.4
Net trading income (losses)......... 2.5 2.5 2.5 (6.5) (6.5) (6.5)
Net realized gains.................. 222.5 222.1 222.0 26.6 26.4 26.4
Total revenues........................ 4,032.5 4,031.6 4,358.9 2,951.0 2,950.8 3,209.8
Interest expense on notes payable..... 108.5 108.1 145.5 76.7 76.7 104.7
Total benefits and expenses........... 3,447.3 3,448.0 3,755.5 2,485.4 2,485.8 2,722.0
Income before income taxes, minority
interest and extraordinary charge.... 585.2 583.6 603.4 465.6 465.0 487.8
Income before extraordinary charge.... 302.5 314.1 324.4 241.1 254.5 267.8
PER SHARE DATA
Income before extraordinary charge,
primary.............................. $ 3.34 $ 3.39 $ 3.43 $ 2.62 $ 2.70 $ 2.79
Income before extraordinary charge,
fully diluted........................ 3.19 3.24 3.28 2.48 2.57 2.65
Book value per common share
outstanding at period end............ 30.92 31.64 32.29
Shares outstanding at period end...... 80.4 82.4 84.3 81.9 83.9 85.8
Average fully diluted shares
outstanding.......................... 94.9 96.9 98.8 97.6 99.6 101.5
BALANCE SHEET DATA -- PERIOD END
Total assets.......................... $ 25,310.6 $ 25,377.8 $ 26,901.5
Notes payable for which Conseco is
directly liable...................... 869.7 1,287.8 1,880.8
Notes payable of BLH, not direct
obligations of Conseco............... 418.1 -- --
Notes payable of ALH, not direct
obligations of Conseco............... 13.0 13.0 13.0
Total liabilities..................... 21,763.4 21,763.4 23,171.4
Minority interest in consolidated
subsidiaries:
Company-obligated mandatorily
redeemable preferred securities of
subsidiary trusts................. 600.0 600.0 600.0
Preferred stock..................... 92.5 92.5 92.5
Common stock........................ 55.3 -- --
Shareholders' equity.................. 2,799.4 2,921.9 3,037.6
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, 1995 SEPTEMBER 30, 1996
--------------------------------------- ---------------------------------------
PRO FORMA PRO FORMA
PRO FORMA FOR PRO FORMA FOR
CONSECO PRO FORMA THE MERGER CONSECO PRO FORMA THE MERGER
BEFORE THE FOR THE AND THE CAF BEFORE THE FOR THE AND THE CAF
MERGER MERGER MERGER MERGER MERGER MERGER
----------- ----------- ----------- ----------- ----------- -----------
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
OTHER FINANCIAL DATA(a)
Premiums collected(b)................. $ 4,136.0 $ 4,136.0 $ 4,418.1 $ 2,999.5 $ 2,999.5 $ 3,219.4
Operating earnings(c)................. 249.0 260.6 271.0 226.9 239.3 252.6
Operating earnings per fully diluted
common share(c)...................... 2.62 2.69 2.74 2.34 2.42 2.50
Shareholders' equity excluding
unrealized appreciation
(depreciation) of fixed maturity
securities(d)........................ 2,846.1 2,968.6 3,084.3
Book value per common share
outstanding, excluding unrealized
appreciation (depreciation) of fixed
maturity securities(d)............... 31.49 32.20 32.83
Ratio of debt for which Conseco is
directly liable to total capital of
Conseco only(e):
As reported......................... .20X .26X .34X
Excluding unrealized appreciation
(depreciation)(d)................. .20X .26X .33X
Excluding unrealized appreciation
(depreciation) and assuming
conversion of ATC's Convertible
Subordinated Debentures into
Conseco Common Stock(d), (f)...... .14X .21X .29X
Ratio of debt for which Conseco is
directly liable and Company-obligated
mandatorily redeemable preferred
securities of subsidiary trusts to
total capital of Conseco only(g):
As reported......................... .34X .39X .44X
Excluding unrealized appreciation
(depreciation)(d)................. .33X .38X .44X
Excluding unrealized appreciation
(depreciation) and assuming
conversion of ATC's Convertible
Subordinated Debentures into
Conseco Common Stock(d), (f)...... .28X .33X .40X
Adjusted statutory capital (at period
end)(h).............................. $ 1,746.4 $ 1,746.4 $ 1,834.9 $ 1,821.8 $ 1,821.8 $ 1,919.7
Adjusted statutory earnings(i)........ 502.9 502.9 533.8 453.5 453.5 483.4
Ratio of adjusted statutory earnings
to cash interest(j).................. 4.57X 4.57X 3.63X 5.52X 5.52X 4.39X
Ratio of adjusted statutory earnings
to cash interest and dividends on
Company-obligated mandatorily
redeemable preferred securities of
subsidiary trusts(k)................. 3.08X 3.08X 2.66X 3.71X 3.71X 3.22X
</TABLE>
- ------------------------
(a) Amounts under this heading are included to assist the reader in analyzing
Conseco's pro forma financial position and pro forma results of operations.
Such amounts are not intended to, and do not, represent pro forma insurance
policy income, pro forma net income, pro forma net income per share, pro
forma shareholders' equity or pro forma book value per share prepared in
accordance with GAAP.
(b) Includes premiums received from annuities and universal life policies, which
are not reported as revenues under GAAP.
20
<PAGE>
(c) Represents pro forma income before extraordinary charge, excluding net
trading income (net of income taxes), net realized gains (less that portion
of change in future policy benefits, amortization of cost of policies
purchased and cost of policies produced and income taxes relating to such
gains) and restructuring activities (net of income taxes).
(d) Excludes the effect of reporting fixed maturities at fair value and
recording the unrealized gain or loss on such securities as a component of
shareholders' equity, net of tax and other adjustments, which Conseco began
to do in 1992. Such adjustments are in accordance with SFAS 115, as
described in the notes to the consolidated financial statements included in
Conseco's Annual Report which is incorporated herein by reference.
(e) Represents the ratio of pro forma notes payable for which Conseco is
directly liable to the sum of pro forma shareholders' equity, pro forma
notes payable for which Conseco is directly liable, minority interest
related to preferred stock issued by a subsidiary of ALH and
Company-obligated mandatorily redeemable preferred securities of subsidiary
trusts.
(f) Assumes ATC's Convertible Subordinated Debentures, which will be convertible
into an assumed 4.0 million shares of Conseco Common Stock with a value of
$238.6 million, are converted. ATC's Convertible Subordinated Debentures are
callable on October 1, 1998.
(g) Represents the ratio of pro forma notes payable for which Conseco is
directly liable and the Company-obligated mandatorily redeemable preferred
securities of subsidiary trusts to the sum of pro forma shareholders'
equity, pro forma notes payable for which Conseco is directly liable,
minority interest related to preferred stock issued by a subsidiary of ALH
and the Company-obligated mandatorily redeemable preferred securities of
subsidiary trusts.
(h) Includes: (1) statutory capital and surplus; (2) AVR and IMR; and (3) the
portion of surplus debentures carried by the life companies as a liability
to Conseco. Such statutory data reflect the combined data derived from the
annual statements of Conseco's pro forma life insurance subsidiaries as
filed with insurance regulatory agencies and prepared in accordance with
statutory accounting practices.
(i) Represents gains from operations before interest expense (except interest on
annuities and financial products) and income taxes of Conseco's pro forma
life insurance subsidiaries as reported for statutory accounting purposes
plus income before interest expense and income taxes of Conseco's pro forma
non-life subsidiaries.
(j) Represents the pro forma ratio of adjusted statutory earnings to cash
interest. Cash interest includes interest, except interest on annuities and
financial products, of Conseco and its pro forma subsidiaries that is
required to be paid in cash.
(k) Represents the pro forma ratio of adjusted statutory earnings to the sum of
cash interest and dividends on the Company-obligated mandatorily redeemable
preferred securities of subsidiary trusts. Cash interest includes interest,
except interest on annuities and financial products, of Conseco and its pro
forma subsidiaries that is required to be paid in cash.
21
<PAGE>
COMPARATIVE UNAUDITED PER SHARE DATA OF CONSECO AND BLH
The following table sets forth selected historical per share data of
Conseco, BLH, ATC, THI and CAF and corresponding pro forma and pro forma
equivalent per share amounts for the year ended December 31, 1995, and as of and
for the nine months ended September 30, 1996, giving effect to the LPG Merger,
the Series D Call, the ALH Transaction, the TOPrS Offering, the TruPS Offering,
the ATC Merger, the THI Merger, the Merger and the CAF Merger. Pro forma
equivalent amounts are presented based on a Conseco Share Price of $62.7625, so
that each share of BLH Common Stock is exchanged for 0.3983 shares of Conseco
Common Stock in the Merger. The information presented is derived from the
consolidated financial statements and related notes thereto included in
Conseco's Annual Report, BLH's Annual Report, ATC's Annual Report, THI's Annual
Report, CAF's Annual Report (all of which are incorporated by reference herein)
and the unaudited pro forma consolidated financial statements of Conseco
included elsewhere in this Prospectus. The information is qualified in its
entirety by, and should be read in conjunction with, such materials. See
"Unaudited Pro Forma Consolidated Financial Statements of Conseco." The pro
forma financial information is provided for informational purposes only and is
not necessarily indicative of the actual results that would have been achieved
had the above transactions been consummated at the beginning of the periods
presented, or of future results.
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -----------------
<S> <C> <C>
NET INCOME (LOSS) BEFORE EXTRAORDINARY CHARGE PER FULLY DILUTED COMMON SHARE:
Historical:
Conseco...................................................................................... $ 4.26 $ 2.87
BLH.......................................................................................... (a) 2.11
ATC.......................................................................................... 1.36 1.24
THI.......................................................................................... (17.75)(b) 4.06
CAF.......................................................................................... 2.64 2.22
Pro forma:
Conseco before the Merger.................................................................... $ 3.19 $ 2.48
Adjusted for the Merger...................................................................... 3.24 2.57
Further adjusted for the CAF Merger.......................................................... 3.28 2.65
Equivalent for one share of BLH Common Stock................................................. 1.31 1.06
DIVIDENDS PER COMMON SHARE:
Historical:
Conseco...................................................................................... $ .093 $ .103
BLH.......................................................................................... .600 .450
ATC.......................................................................................... -- --
THI.......................................................................................... -- --
CAF.......................................................................................... .360 .300
Pro forma:
Conseco before the Merger.................................................................... $ .093 $ .103
Adjusted for the Merger...................................................................... .093 .103
Further adjusted for the CAF Merger.......................................................... .093 .103
Equivalent for one share of BLH Common Stock................................................. .037 .041
BOOK VALUE PER COMMON SHARE:
Historical:
Conseco...................................................................................... $25.22
BLH.......................................................................................... 20.51
ATC.......................................................................................... 11.11
THI.......................................................................................... 62.03(c)
CAF.......................................................................................... 17.41
Pro forma:
Conseco before the Merger.................................................................... $30.92
Adjusted for the Merger...................................................................... 31.64
Further adjusted for the CAF Merger.......................................................... 32.29
Equivalent for one share of BLH Common Stock................................................. 12.86
</TABLE>
- ------------------------------
(a) Net income before extraordinary charge per fully diluted common share was
$1.32 and $1.14 for the six months ended December 31, 1995, and the six
months ended June 30, 1995, respectively.
(b) Per share data for the year ended December 31, 1995 is presented as if the
1,590,461 shares outstanding after the September 29, 1995 distribution were
outstanding for the entire year.
(c) Book value per common share reflects the dilution which would occur if the
THI Subordinated Convertible Notes were converted into common stock and
outstanding options were exercised.
22
<PAGE>
MARKET PRICE INFORMATION
Market prices for the shares of Conseco Common Stock are, and shares of BLH
Common Stock prior to the Merger were, reported on the NYSE. The table below
sets forth for the periods indicated the high and low sale prices per share of
Conseco Common Stock and BLH Common Stock and the cash dividends paid per share
of Conseco Common Stock and the BLH Common Stock. For current price information
with respect to the Conseco Common Stock, stockholders are urged to consult
publicly available sources.
<TABLE>
<CAPTION>
CONSECO COMMON STOCK BLH COMMON STOCK
--------------------------------- ------------------------------
HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS
------- ---------- ---------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
1994
First Quarter....................... $ 32 1/8 $ 26 9/16 $ 0.0625 $ 24 7/8 $ 19 7/8 $ 0.02
Second Quarter...................... 29 1/16 23 3/16 0.0625 21 5/8 18 0.15
Third Quarter....................... 26 3/16 21 5/8 0.0625 25 3/4 18 3/4 0.15
Fourth Quarter...................... 23 1/8 17 15/16 0.0625 23 3/4 16 1/2 0.15
1995
First Quarter....................... 24 5/16 16 1/4 0.0625 21 5/8 17 1/2 0.15
Second Quarter...................... 23 5/16 19 9/16 0.0625 21 5/8 18 5/8 0.15
Third Quarter....................... 26 5/8 22 3/4 0.01 19 3/8 17 5/8 0.15
Fourth Quarter...................... 31 9/16 25 7/16 0.01 20 1/4 17 3/4 0.15
1996
First Quarter....................... 36 5/16 29 7/8 0.01 23 1/8 19 7/8 0.15
Second Quarter...................... 39 7/8 36 1/2 0.02 22 1/2 18 3/4 0.15
Third Quarter....................... 49 3/8 35 1/4 0.02 24 3/4 21 1/2 0.15
Fourth Quarter (through December 27,
1996)............................. 66 1/4 48 7/8 0.0625 24 7/8 24 3/8 0.15
</TABLE>
The information set forth in the table below presents: (1) the closing price
for shares of Conseco Common Stock and BLH Common Stock on August 23, 1996, the
last day on which trading occurred prior to the public announcement of the
intention to complete the Merger, and on December 27, 1996, the last full
trading day for which information was available prior to the date of this
Prospectus and (2) the Equivalent Per Share Price (as hereinafter defined) of
BLH Common Stock on August 23, 1996 and December 27, 1996. The "Equivalent Per
Share Price" of BLH Common Stock represents the closing price per share of
Conseco Common Stock reported on the NYSE, multiplied by $25.00 and divided by
the Conseco Share Price ($42.30 and $62.3375 assuming consummation of the Merger
had occurred on August 23, 1996 and December 27, 1996, respectively). The
Equivalent Per Share Price is not the same as the Merger Consideration. See "The
Merger--Terms of the Merger."
<TABLE>
<CAPTION>
BLH
COMMON STOCK
CONSECO EQUIVALENT
COMMON BLH COMMON PER SHARE
PER SHARE PRICE STOCK STOCK PRICE
- ---------------------------------------- ------ ---------- ------------
<S> <C> <C> <C>
August 23, 1996......................... $42.00 $21.75 $24.82
December 27, 1996....................... $64.50 $24.875 $25.87
</TABLE>
Conseco has caused the listing on the NYSE of the shares of Conseco Common
Stock issuable in connection with the Merger. See "The Merger--Stock Exchange
Listing."
HOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE CONSECO
COMMON STOCK. NO ASSURANCE CAN BE GIVEN AS TO THE FUTURE PRICES OF, OR MARKETS
FOR, CONSECO COMMON STOCK.
23
<PAGE>
INFORMATION CONCERNING CONSECO
BACKGROUND
Conseco is a financial services holding company engaged primarily in the
development, marketing and administration of annuity, individual health
insurance and individual life insurance products. Conseco's earnings result
primarily from operating life insurance companies and providing investment
management, administrative and other fee-based services to affiliated and
non-affiliated businesses. Conseco's operating strategy is to consolidate and
streamline management and administrative functions, to realize superior
investment returns through active asset management and to focus resources on the
development and expansion of profitable products and strong distribution
channels.
On August 2, 1996, Conseco completed the LPG Merger and LPG became a
wholly-owned subsidiary of Conseco. A total of 16.1 million shares of Conseco
Common Stock were issued in connection with the LPG Merger, and Conseco assumed
notes payable of LPG of $249.5 million. The subsidiaries of LPG sell a diverse
portfolio of universal life insurance and, to a lesser extent, annuity products
to individuals.
On September 30, 1996, Conseco completed the acquisition of the common
shares of ALH not already owned by Conseco or its affiliates for approximately
$165 million in cash. ALH is a provider of retirement savings annuities. ALH has
been included in Conseco's consolidated financial statements since September
1994, when it was acquired by Partnership II. Conseco now holds 59.2 percent of
the outstanding common shares of ALH and BLH holds the remaining 40.8 percent of
such shares.
Conseco currently holds ownership interests in the following life insurance
businesses: (1) BLH; (2) ALH, formerly The Statesman Group, Inc.; (3) Great
American Reserve and Beneficial Standard, in which Conseco has had an ownership
interest since their acquisition by Partnership I in 1990 and 1991,
respectively, and which became wholly-owned subsidiaries of Conseco in August
1995 pursuant to the CCP Merger; (4) the subsidiaries of LPG, which are now
wholly-owned subsidiaries of Conseco, including Philadelphia Life Insurance
Company ("Philadelphia Life"), Massachusetts General Life Insurance Company
("Massachusetts General Life") and Lamar Life Insurance Company ("Lamar Life");
and (5) Bankers National Life Insurance Company ("Bankers National"), National
Fidelity Life Insurance Company ("National Fidelity") and Lincoln American Life
Insurance Company ("Lincoln American"), all of which are wholly-owned by Conseco
and which have profitable blocks of in-force business, although new product
sales are currently not being pursued. BLH and its subsidiaries are collectively
referred to hereinafter as BLH.
INSURANCE OPERATIONS
Conseco's insurance operations are conducted through three segments: (1)
senior market operations, consisting of the activities of BLH; (2) annuity
operations, consisting of the activities of Great American Reserve, Beneficial
Standard and ALH; and (3) life insurance operations, consisting of the
activities of Philadelphia Life, Massachusetts General Life and Lamar Life, as
well as National Fidelity, Bankers National and Lincoln American.
SENIOR MARKET OPERATIONS. BLH, with total assets of approximately $5.0
billion at September 30, 1996, markets health and life insurance and annuity
products primarily to senior citizens through approximately 200 branch offices
and approximately 3,200 career agents. Most of BLH's agents sell only BLH
policies. Approximately 56 percent of the $1,513.8 million of total premiums and
annuity deposits collected by BLH in 1995 (and approximately 58 percent of the
$1,136.5 million of total premiums and annuity deposits collected in the first
nine months of 1996) was from the sale of individual health insurance products,
principally Medicare supplement and long-term care policies. BLH believes that
its success in the individual health insurance market is attributable in large
part to its career agency force, which permits one-on-one contacts with
potential policyholders and builds loyalty to BLH among existing policyholders.
Its efficient and highly automated claims processing system is designed to
complement its personalized marketing strategy by stressing prompt payment of
claims and rapid response to policyholder inquiries.
24
<PAGE>
ANNUITY OPERATIONS. The annuity companies (Great American Reserve and
Beneficial Standard), with total assets of approximately $5.6 billion at
September 30, 1996, market, issue and administer annuity, life and employee
benefit-related insurance products through two cost-effective distribution
channels: (1) approximately 3,000 educator market specialists, who sell
tax-qualified annuities and certain employee benefit-related insurance products
primarily to school teachers and administrators; and (2) approximately 9,000
professional independent producers, who sell various annuity and life insurance
products aimed primarily at the retirement market. Approximately 87 percent of
the $709.8 million of total premiums and annuity deposits collected by the
annuity companies in 1995 (and approximately 88 percent of the $490.8 million of
total premiums and annuity deposits collected in the first nine months of 1996)
was from the sale of annuity products. This segment will include ALH beginning
with its acquisition in the third quarter of 1996. ALH, with total assets of
approximately $6.2 billion at September 30, 1996, is engaged primarily in the
development, marketing, underwriting, issuance and administration of annuity and
life insurance products. ALH markets these products through a general agency and
insurance brokerage system comprised of approximately 25,000 independent
licensed agents. Approximately 91 percent of the $825.6 million of total
premiums and annuity deposits collected by ALH in 1995 (and approximately 92
percent of the $537.9 million of total premiums and annuity deposits collected
in the first nine months of 1996) was from the sale of deferred annuities.
LIFE INSURANCE OPERATIONS. Life insurance operations include the activities
of Philadelphia Life, Massachusetts General Life and Lamar Life, wholly-owned
subsidiaries of LPG, beginning with the acquisition of LPG in the third quarter
of 1996. These companies distribute universal life insurance products using two
primary marketing systems, the client company system and the regional director
system, comprising a total of approximately 25,000 professional independent
producers. Approximately 69 percent of the $533.6 million of total insurance
premiums and annuity deposits collected by LPG in 1995 (and approximately 66
percent of the $453.6 million of total insurance premiums and annuity deposits
collected in the first nine months of 1996) was from the sale of life insurance
products, primarily universal life insurance. Segment activities also include
Conseco's other wholly-owned life insurance subsidiaries-- Bankers National
Life, National Fidelity Life and Lincoln American Life--which have profitable
in-force blocks of annuity and life insurance products, but do not currently
market their products to new customers.
FEE-BASED OPERATIONS
Conseco's subsidiaries provide various services to affiliated and
unaffiliated clients. Conseco Capital Management, Inc. managed approximately $29
billion of invested assets at September 30, 1996 including $16.8 billion of
assets of affiliated companies. Marketing Distribution Systems Consulting Group,
Inc. provides marketing services to financial institutions related to the
distribution of insurance and investment products. Conseco Risk Management, Inc.
distributes property and casualty insurance products as an independent agency.
Conseco Mortgage Capital, Inc. originates and services mortgages. Total fees
from affiliated and nonaffiliated clients were $69.2 million and $86.8 million
for 1995 and the first nine months of 1996, respectively. To the extent that
these services are provided to entities that are included in the financial
statements on a consolidated basis, the intercompany fees are eliminated in
consolidation. Earnings in this segment increase when Conseco adds new clients
(either affiliated or unaffiliated) and when Conseco increases the fee-producing
activities conducted for clients. Effective January 1, 1996, Conseco's
subsidiaries entered into new service agreements with Conseco's service
subsidiaries. Such new agreements had the effect of increasing revenues from
fee-based operations by $34.4 million in the first nine months of 1996, but had
no effect on consolidated net income.
In addition to Conseco's fee-based operations, Conseco Private Capital
Group, Inc. makes direct strategic investments in growing companies, providing
these firms with the capital or financing they need to continue their growth,
make acquisitions or realize the potential of their businesses.
25
<PAGE>
AMERICAN TRAVELLERS CORPORATION
On December 17, 1996, Conseco completed its acquisition of ATC pursuant to
an Agreement and Plan of Merger dated August 25, 1996 (the "ATC Merger
Agreement"). Under the ATC Merger Agreement, each of the 18 million issued and
outstanding shares of ATC Common Stock was converted into the right to receive
.5836 of a share of Conseco Common Stock. For additional information concerning
ATC, see ATC's Annual Report and other documents filed with the Commission and
listed under "Incorporation of Certain Documents by Reference" and
"Summary--Selected Historical Financial Information of ATC."
TRANSPORT HOLDINGS INC.
On December 23, 1996, Conseco completed its acquisition of THI pursuant to
an Agreement and Plan of Merger dated September 25, 1996 (the "THI Merger
Agreement"). Under the THI Merger Agreement, each of the 1.6 million issued and
outstanding shares of THI Common Stock was converted into the right to receive
1.4 shares of Conseco Common Stock and the $50 million principal amount of
outstanding convertible notes of THI were exchanged for approximately 2.1
million shares of Conseco Common Stock and $10.2 million in cash (plus accrued
interest). For additional information concerning THI, see THI's Annual Report
and other filings listed under "Incorporation of Certain Documents by Reference"
and "Summary--Selected Historical Financial Information of THI."
OTHER PENDING ACQUISITIONS BY CONSECO
CAF. On August 25, 1996, Conseco and CAF entered into the CAF Merger
Agreement pursuant to which CAF will be merged with and become a wholly owned
subsidiary of Conseco. Under the CAF Merger Agreement, each of the approximately
17.8 million issued and outstanding shares of common stock of CAF would be
converted into the right to receive (1) $30.00 in cash plus the Time Factor (as
defined herein), if any, and (2) the fraction (rounded to the nearest
ten-thousandth) of a share of Conseco Common Stock determined by dividing $6.50
by the Trading Value (as defined herein). The "Trading Value" shall be equal to
the average of the closing prices of the Conseco Common Stock on the NYSE
Composite Transactions Reporting System for the 20 consecutive trading days
immediately preceding the second trading day prior to the date of the CAF
Merger. The "Time Factor" will be equal to $0.25 if the CAF Merger does not
occur by December 10, 1996, which amount will increase by an additional $0.25 on
the tenth day of each month thereafter until the CAF Merger is consummated. For
additional information concerning CAF, see CAF's Annual Report and other
documents filed with the Commission and listed under "Incorporation of Certain
Documents by Reference" and "Selected Historical Financial Information of CAF."
PFS. On December 15, 1996, Conseco and PFS entered into the PFS Merger
Agreement pursuant to which PFS will be merged with and become a wholly owned
subsidiary of Conseco. Under the PFS Merger Agreement, each of the approximately
16.7 million shares of common stock of PFS and common stock equivalents would be
converted into the right to receive a fraction of a share of Conseco Common
Stock having a value between $25.00 and $28.00, calculated as follows: (1) if
the Conseco/PFS Share Price (as defined below) is greater than or equal to
$56.00 per share and less than or equal to $62.72 per share, .4464 of a share of
Conseco Common Stock, (2) if the Conseco/PFS Share Price is less than $56.00 per
share, the fraction (rounded to the nearest ten-thousandth) of a share of
Conseco Common Stock determined by dividing $25.00 by the Conseco/PFS Share
Price or (3) if the Conseco/PFS Share Price is greater than $62.72 per share,
the fraction (rounded to the nearest ten-thousandth) of a share of Conseco
Common Stock determined by dividing $28.00 by the Conseco/PFS Share Price. The
"Conseco/PFS Share Price" shall be equal to the average of the closing prices of
the Conseco Common Stock on the NYSE Composite Transactions Reporting System for
the ten trading days immediately preceding the second trading day prior to the
date of the PFS Merger. PFS underwrites and markets health insurance, life
insurance and annuities. Shares of PFS common stock are listed on the NYSE under
the symbol "PFS."
26
<PAGE>
GENERAL INFORMATION CONCERNING CONSECO
Conseco's executive offices are located at 11825 North Pennsylvania Street,
Carmel, Indiana 46032 and the telephone number for Conseco is (317) 817-6100.
For additional information concerning Conseco, including information
concerning ALH and BLH, see Conseco's Annual Report and other documents filed
with the Commission and listed under "Incorporation of Certain Documents by
Reference" and "Summary--Selected Historical Financial Information of Conseco."
For additional information concerning LPG, see LPG's Annual Report and other
documents filed with the Commission and listed under "Incorporation of Certain
Documents by Reference."
27
<PAGE>
INFORMATION CONCERNING BLH
BLH is an insurance holding company and, through its insurance subsidiaries,
is one of the nation's largest writers of individual health insurance products
based on collected premiums. Its subsidiaries include BLC, Certified Life
Insurance Company ("Certified Life") and BLI. BLC, founded in 1880, has offered
individual health insurance policies for over 50 years and Medicare supplement
products since the creation of the federal Medicare program in 1966. BLC also
markets a variety of annuity, life and group insurance products throughout the
United States.
Conseco formed Partnership I in 1990 with several other companies, including
Southwestern Life Corporation, formerly I.C.H. Corporation ("ICH"), to acquire
insurance companies. In 1992, the Partnership formed BLH and its wholly owned
subsidiary, BLI, which then acquired BLC from ICH on November 9, 1992 (the
"Acquisition") for $600 million.
On March 25, 1993, BLH completed the Public Offering. In connection with the
Public Offering, Partnership I distributed to the partners all of its net
assets, including BLH Common Stock. At December 17, 1996, Conseco owned
approximately 90.4 percent of BLH's outstanding common stock. See "The
Merger--Background of the Merger."
For additional information concerning BLH, see BLH's Annual Report and other
documents filed with the Commission and listed under "Incorporation of Certain
Documents by Reference" and "Summary--Selected Historical Financial Information
of BLH."
28
<PAGE>
THE MERGER
TERMS OF THE MERGER
The following is a brief summary of certain terms of the Merger. This
summary is qualified in its entirety by reference to the Plan of Merger (the
"Plan of Merger") attached hereto as Annex B. All stockholders are urged to read
the Plan of Merger in its entirety.
The Merger occurred on December 31, 1996 with BLH merging with and into
CIHC, with CIHC being the surviving corporation.
CONVERSION OF SHARES; EXCHANGE OF STOCK CERTIFICATES; NO FRACTIONAL
AMOUNTS. At the Effective Time, pursuant to the Plan of Merger, each share of
BLH Common Stock issued and outstanding immediately prior to the Effective Time
(other than shares held by CIHC, which were cancelled, and shares owned by
stockholders who perfected their statutory appraisal rights under Delaware law)
were, by virtue of the Merger and without any action on the part of the holder
thereof, converted into the right to receive 0.3983 of a share of Conseco Common
Stock. Such amount was determined by dividing $25.00 by 62.7625, the average of
the closing prices of the Conseco Common Stock on the NYSE Composite
Transactions Reporting System, as reported in THE WALL STREET JOURNAL, for the
ten trading days immediately preceding the second trading day prior to the
Effective Time. Accordingly, as a result of Merger, holders of BLH Common Stock
will receive, upon surrender of their share certificates and a completed letter
of transmittal 0.3983 shares of Conseco Common Stock for each share of BLH
Common Stock held at the Effective Time.
No fractional shares of Conseco Common Stock will be issued in connection
with the Merger. Each BLH stockholder who otherwise would have been entitled to
receive a fraction of a share of Conseco Common Stock (after taking into account
all Certificates delivered by such holder) shall receive, in lieu thereof, cash
(without interest) in an amount equal to such fractional part of a share of
Conseco Common Stock multiplied by $62.7625.
Accompanying this Prospectus is a form of letter of transmittal and
instructions for use in surrendering Certificates and receiving the
consideration to which each record holder of Certificates is entitled pursuant
to the Plan of Merger. Each holder of Certificates should surrender such
Certificates to the Exchange Agent together with the letter of transmittal duly
executed and completed in accordance with the instructions thereto, and each
such holder will be entitled to receive in exchange therefor certificates for
shares of Conseco Common Stock and a check for any cash which may be payable in
lieu of a fractional share of Conseco Common Stock. Holders of Certificates who
wish to exercise their appraisal rights should not surrender such Certificates
to the Exchange Agent. See "--Appraisal Rights."
Each outstanding Certificate (other than Certificates evidencing shares of
BLH Common Stock held by CIHC, which were cancelled, or stockholders who perfect
their statutory appraisal rights under Delaware law), which prior to the Merger
represented BLH Common Stock, until so surrendered and exchanged, will be
deemed, for all purposes, to evidence only the right to receive the Merger
Consideration that the holder of such Certificate is entitled to receive
pursuant to the terms of the Plan of Merger.
TREATMENT OF BLH STOCK OPTIONS. From and after the Effective Time, each BLH
Stock Option shall vest upon the same schedule as provided pursuant to each such
option, but each BLH Stock Option, will be exercisable for the same aggregate
consideration payable to exercise such BLH Stock Option immediately prior to the
Effective Time, for the number of shares of Conseco Common Stock which the
holder would have been entitled to receive at the Effective Time if such BLH
Stock Option had been fully vested and exercised for shares of BLH Common Stock
immediately prior to the Effective Time, and otherwise on the same terms and
conditions as were applicable under the BLH Stock Option Plan and the underlying
stock option agreement.
29
<PAGE>
Conseco has reserved for issuance a sufficient number of shares of Conseco
Common Stock for delivery upon exercise of BLH Stock Options assumed in
accordance with the Plan of Merger and such shares of Conseco Common Stock will
be registered with the Commission pursuant to a Registration Statement on Form
S-8.
BACKGROUND OF THE MERGER
DEVELOPMENT OF BANKERS. Bankers and BLI, its wholly owned subsidiary, were
formed by Partnership I in 1992 to complete the acquisition of BLC (the
"Acquisition"). On November 9, 1992, Partnership I acquired BLC from ICH. The
Acquisition was completed through BLH.
The purchase price for BLC of $600.0 million was funded with the net
proceeds of the following securities issued by BLH: $175.0 million senior loan
from a group of lending banks; $200.0 million senior subordinated notes; $45.0
million payment-in-kind junior subordinated notes (including $8.3 million
provided by Conseco), all of which was retired with proceeds from the Public
Offering; $158.3 million of payment-in-kind preferred stock (of which $108.3
million was provided by Conseco), all of which was redeemed with proceeds from
the Public Offering; and $66.7 million of common stock of BLH, including $50.0
million provided by Partnership I (of which $25.5 million was provided by
Conseco).
Partnership I continued as BLH's majority shareholder until March 25, 1993,
when the closing of the Public Offering occurred.
TRANSACTIONS INVOLVING BLH COMMON STOCK. In the Public Offering, BLH sold
19,550,000 shares of BLH Common Stock, representing an approximate 36 percent
ownership interest, at a price of $22.00 per share of BLH Common Stock. The net
proceeds from the Public Offering, after the underwriting discount and issue
costs, totaled $405.3 million. Using the proceeds from the Public Offering, BLH
redeemed, retired and repaid $267.3 million of the financing provided in
connection with the Acquisition, contributed $114.0 million to BLI's capital and
retained $24.0 million for general corporate purposes. In connection with the
Public Offering, Partnership I distributed to the partners, including Conseco
and its affiliates, all of its net assets including the shares of BLH Common
Stock it held. Following the Public Offering and such Partnership I
distribution, Conseco had sole dispositive power over approximately 18.6 million
of the outstanding shares of outstanding BLH Common Stock (then representing
approximately 35 percent of the outstanding shares of BLH Common Stock).
In September 1993, subsequent to the Public Offering, Conseco acquired all
of the BLH Common Stock held by ICH, approximately 13.3 million shares, for
$287.6 million.
In April 1994, BLH announced a program to repurchase up to two million
shares of BLH Common Stock in open-market or negotiated transactions, with the
timing and terms of the purchases to be determined by management based on market
conditions. Such program was expanded to five million shares in August 1995.
During 1995 and 1994, 2,400,000 shares and 1,767,300 shares were repurchased for
$42.1 million and $35.7 million, respectively. During the first quarter of 1996,
Bankers repurchased 1.3 million shares of BLH Common Stock at a cost of $27.5
million.
On February 27, 1995, Conseco announced its proposal to acquire the shares
of BLH Common Stock not already owned by Conseco for $22.00 per share (the
"Proposal"). The Board of Directors of BLH appointed a special committee (the
"Special Committee") to review the Proposal and engage in negotiations with
Conseco. The Special Committee hired outside counsel and selected an investment
banker to represent BLH and the Special Committee in connection with analyzing
the Proposal. Conseco acquired approximately 1.5 million shares of BLH Common
Stock in open market transactions for approximately $31.4 million in February
1995 after Conseco announced the Proposal.
On May 26, 1995, BLH announced that after several meetings between Conseco
and its representatives and the Special Committee and its legal and financial
advisers, the Special Committee advised Conseco that there was a substantial
difference between a price the Special Committee would consider
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adequate and Conseco's $22.00 offer. Because the Special Committee could not
recommend the Proposal, Conseco decided to withdraw the Proposal. At that time,
Conseco also announced that its board of directors had approved an open-market
purchase program authorizing Conseco to purchase up to 10 million shares of BLH
Common Stock from time to time at prices and in quantities Conseco management
deemed reasonable.
On June 28, 1995, Conseco completed its program to acquire additional shares
of BLH Common Stock. A total of 12.8 million shares were purchased for $262.4
million in open-market and negotiated transactions during 1995. On August 31,
1995, Conseco completed the CCP Merger, and at the time of the CCP Merger, CCP
held 1,513,131 shares of BLH Common Stock.
At December 31, 1996, as a result of all of the foregoing transactions,
Conseco held 90.4 percent of the outstanding shares of BLH Common Stock.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS BETWEEN BLH AND CONSECO
Partnership II was a partnership formed by Conseco to invest in privately
negotiated acquisitions of specialized annuity, life and accident and health
insurance companies and related business. In connection with Partnership II's
September 29, 1994 acquisition of ALH, BLH: (i) indirectly acquired
approximately 362,000 shares of ALH common stock through a $1.8 million limited
partner capital contribution to Partnership II; (ii) directly acquired 1,027,872
shares of ALH's common stock for $5.1 million; and (iii) directly acquired
25,926 shares of ALH's 1994 Series Preferred Stock (stated value $1,000 per
share) for $20.8 million. Through 2006, the preferred stock pays annual
dividends at a rate of 13 percent in additional shares of like-kind stock.
Thereafter, dividends will be paid in cash at an annual rate of 15 percent. On
November 30, 1995, BLH indirectly acquired approximately 68,700 shares of ALH's
common stock through a $1.0 million limited partner capital contribution to
Partnership II and directly acquired 216,949 shares of ALH's common stock for
$3.0 million.
On September 30, 1996: (i) Conseco and its subsidiaries completed the
purchase of all of the shares of ALH common stock not previously owned by
Conseco and its subsidiaries (including the purchase of 6,086,957 shares of ALH
stock by BLH for $140.0 million); (ii) Partnership II distributed ALH shares to
Conseco and its subsidiaries, representing their ownership interest in ALH
through Partnership II (including the distribution of 376,021 shares to BLH);
and (iii) Conseco purchased additional newly issued shares of ALH common stock.
After the ALH Transaction, BLH owns 7,707,799 shares of ALH common stock,
representing 40.8 percent of all outstanding common stock of ALH. Conseco owns
the remaining 59.2 percent of the ALH common stock.
Conseco (through certain of its wholly owned subsidiaries) has entered into
agreements with BLH to provide certain investment advisory, data processing,
accounting, legal, mortgage loan servicing and origination and other services.
These contracts were not the result of arm's-length negotiations between
independent parties. These agreements may be modified in the future and
additional agreements or transactions may be entered into between Conseco
(including its subsidiaries) and subsidiaries of BLH.
The description of the agreements set forth below do not purport to be
complete and are qualified in their entirety by reference to such agreements,
copies of which are included as exhibits to BLH's Annual Report.
CONSULTING AGREEMENT. Bankers had an Executive Management Consulting
Agreement (the "Consulting Agreement") with Conseco, pursuant to which Conseco
provided senior executive management consulting services to Bankers on an
ongoing basis for a fee of $1.0 million per annum. The Consulting Agreement was
terminated on December 31, 1995. Bankers paid Conseco $1.0 million under the
Consulting Agreement for 1995.
SERVICE AGREEMENTS. Prior to January 1, 1996, Bankers had agreements
(collectively, the "Insurance Services Agreements") with Conseco pursuant to
which Conseco provided through its subsidiaries: (i) all data processing
services required by Bankers; and (ii) other services as required by Bankers,
including
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management consulting, accounting, actuarial, tax, legal, investor relations and
other administrative services, other than senior executive management services.
The Insurance Services Agreements were terminated in connection with the new
service agreements described below. During 1995, Bankers paid $9.2 million to
Conseco under the Insurance Services Agreements.
BLI and BLC entered into service agreements with Conseco effective January
1, 1996 (the "Service Agreements") pursuant to which Conseco provides through
its subsidiaries all services required by Bankers, for monthly fees equal to 110
percent of Conseco's direct and directly allocable expenses and costs. Under the
Service Agreements, Bankers paid Conseco $85.1 million during the nine months
ended September 30, 1996. The Service Agreement between Bankers and Conseco has
an initial term which expires December 31, 2005 and thereafter will be renewed
on each anniversary date for an additional one-year term unless either party
provides 90 days' written notice of termination to the other. Such Service
Agreement is non-terminable for an initial period of five years, and thereafter
will be terminable by the Company on any anniversary date (except with respect
to the agreement to provide data processing services which cannot be terminated
during the initial ten-year term), upon 90 days' prior notice, and upon payment
to Conseco of a lump-sum termination fee for a termination on the fifth through
ninth anniversaries equal to the following percentages of the annual fees paid
to Conseco under such Service Agreement for the year preceding the date of
termination: 200 percent on the fifth anniversary, 160 percent on the sixth
anniversary, 120 percent on the seventh anniversary, 80 percent on the eight
anniversary and 40 percent on the ninth anniversary. No termination fee is
payable after 10 years. Effective January 1, 1996, all employees of Bankers
(except those employees working in the branch offices of Bankers) became
employees of Conseco.
ADVISORY AGREEMENTS. Bankers has agreements with Conseco Capital
Management, Inc., a wholly owned subsidiary of Conseco ("CCM"), pursuant to
which, subject to any directions of the respective Boards of Directors or
officers, CCM supervises and directs the investment of their invested assets,
except direct investments in real estate and real estate mortgage loans
(collectively, the "Advisory Agreements"). For these services, CCM receives a
quarterly fee equal to .05 percent (.20 percent annually) of the invested assets
under its supervision. The Advisory Agreement between Bankers and CCM has an
initial term which expires April 1, 2000, and thereafter will be automatically
renewed on each anniversary date for an additional one-year term unless either
party provides 90 days' written notice of termination to the other. During the
nine months ended September 30, 1996, and the year ended December 31, 1995,
Bankers paid $5.1 million and $6.4 million, respectively, to CCM under the
Advisory Agreements.
LOAN ORIGINATION AND SERVICING AGREEMENT. Bankers has a loan origination
and servicing agreement (the "Loan Origination and Servicing Agreement")
pursuant to which a subsidiary of Conseco; (i) services the mortgage loan
portfolio of Bankers by collecting and remitting principal and interest,
processing payments for taxes, insurance and maintenance, inspecting properties
and giving certain notices; (ii) collects and remits rents and performs certain
management services during any foreclosure or bankruptcy proceedings relating to
subject properties, and thereafter so long as the property is owned; and (iii)
solicits and processes loan applications in accordance with underwriting and
other requirements specified by Bankers. The agreement provides for a fee of
approximately .20 percent per annum of the average monthly unpaid principal
balance of each mortgage and 5 percent of rents collected on properties in
foreclosure or acquired, as well as certain commissions on loan applications
accepted and funded and additional fees from borrowers of up to 1 percent of the
loan balance upon closing of loans. During the nine months ended September 30,
1996, and the year ended December 31, 1995, Bankers paid approximately $0.2
million and $0.5 million, respectively, to the Conseco subsidiary under the Loan
Origination and Servicing Agreement.
On November 27, 1996, BLH borrowed $390 million from Conseco under a $400
million Intercompany Note (the "Intercompany Note") the proceeds of which were
used to repay BLH's Senior Credit Facility. The Intercompany Note provides for
interest at 75 basis points in excess of the London interbank offered rate for a
one, two, three, six or twelve-month period (each, an "Interest Period"), as
published in THE WALL STREET JOURNAL and as selected by BLH. Such rate is the
same interest rate BLH was paying under
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its Senior Credit Facility; however, BLH no longer has to pay a facility fee as
was required under its Senior Credit Facility. The Intercompany Note is due and
payable in full on February 26, 2002 and interest is due and payable at the end
of each Interest Period.
CONSECO'S REASONS FOR THE MERGER
The Conseco Board of Directors approved the Merger by a unanimous vote at
its August 1996 meeting. In reaching its decision, the Conseco Board considered
information provided at the Board meeting, including, among other things, (1)
information concerning the financial performance and condition, business
operations and prospects of BLH, including an analysis of possible cost savings
and synergies, and a qualitative overview of the individual business segments,
(2) the potential long-term and short-term effect of the transaction on
Conseco's earnings per share, (3) the structure of the proposed transaction, (4)
the terms of the Merger, (5) Conseco's intent to enter into the ATC Merger
Agreement, the CAF Merger Agreement and complete the ALH Transaction and (6) the
presentation and recommendation made by the management of Conseco.
Conseco's purpose for the transaction is to acquire beneficial ownership of
100 percent of the equity of BLH. The transaction is structured as a merger
because it ensures that Conseco will acquire beneficial ownership of 100 percent
of the equity of BLH in a single transaction. Conseco's acquisition of the
shares of BLH Common Stock owned by the holders of BLH Common Stock other than
Conseco and its subsidiaries (the "Public Stockholders") will enable all of the
shareholders of Conseco, including the Public Stockholders after the Merger, to
realize the benefits and bear the risks of complete ownership of the insurance
subsidiaries of BLH. Acquiring the BLH Common Stock held by the Public
Stockholders will enable Conseco to realize cost savings by eliminating the
holding company structure of BLH and the attendant costs of its being a public
company. Conseco believes that the Public Stockholders will have a significantly
enhanced opportunity to realize future appreciation in the value of their equity
holding in BLH if that holding is exchanged for Conseco Common Stock in the
Merger. The Merger will also provide BLH and Conseco with additional operating
flexibility by eliminating conflicts between BLH and Conseco and increasing the
opportunity for cross-selling products among BLC and other Conseco insurance
companies.
CERTAIN CONSEQUENCES OF THE MERGER
As a result of the Merger, the holders of BLH Common Stock will become
shareholders of Conseco, and thereby will continue to have an interest in BLH
through Conseco. See "Comparison of Shareholders' Rights." Upon the consummation
of the Merger, each outstanding share of BLH Common Stock (except for shares of
BLH Common Stock held by CIHC, which were cancelled, and shares owned by
stockholders who perfected their statutory appraisal rights under Delaware law)
was converted into the right to receive the Merger Consideration. The additional
shares of Conseco Common Stock to be issued pursuant to the Merger have been
approved for listing on the NYSE. See "--Stock Exchange Listing." As a result of
the Merger and without giving effect to the proposed acquisitions of CAF and
PFS, the Conseco shareholders immediately prior to the Effective Time now own
approximately 98 percent of the shares of Conseco Common Stock outstanding, and
the previous holders of BLH Common Stock now own approximately two percent of
such shares.
As a result of the Merger, BLH no longer exists as a corporation and there
is no public market for the BLH Common Stock. The BLH Common Stock has ceased to
be quoted on the NYSE, the registration of the BLH Common Stock under the
Exchange Act has been terminated and such stock no longer constitutes "margin
securities" under the rules of the Board of Governors of the Federal Reserve
System.
The composition of Conseco's Board of Directors and management has not been
affected by the Merger.
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Conseco currently expects to continue to operate BLH's businesses as they
were operated prior to the Merger although Conseco intends to utilize products
and services of BLH in connection with the marketing of products of all of
Conseco's subsidiaries.
See "--Terms of the Merger" for a description of the treatment of BLH Stock
Options in the Merger. Conseco has agreed to take all corporate action necessary
to reserve for issuance a sufficient number of shares of Conseco Common Stock
for delivery upon exercise of BLH Stock Options assumed pursuant to the Merger.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Stephen C. Hilbert, Chairman of the Board of BLH, is also a director and the
Chief Executive Officer of Conseco. Rollin M. Dick is a director and an
executive officer of BLH and of Conseco. Ngaire E. Cuneo and Donald F. Gongaware
are directors of BLH and directors and executive officers of Conseco.
CERTAIN LITIGATION
Three putative class action lawsuits seeking unspecified money damages were
filed in the Delaware Court of Chancery in August 1996 by BLH stockholders
against BLH, Conseco, and certain directors and officers of BLH and Conseco.
These lawsuits allege breaches of fiduciary duties to the Public Stockholders
pertaining to the Merger. The companies believe their actions and the actions of
their directors and officers were in accordance with all applicable laws.
ACCOUNTING TREATMENT
Conseco accounted for the Merger as a "purchase" in a "step acquisition
transaction," as such terms are used under GAAP. Under this method of
accounting, the cost of acquiring shares of BLH Common Stock pursuant to the
Merger and the assumption of all outstanding BLH Stock Options has been
determined by the value at the Effective Time of the Merger Consideration and
the Conseco Common Stock (or cash) to be issued to holders of BLH Stock Options,
plus the direct costs associated with the Merger. Conseco will allocate such
cost in establishing new accounting and reporting bases for the underlying
acquired assets and liabilities based on their estimated fair values at the
Effective Time.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary description of the material United States federal
income tax consequences of the Merger to BLH and the BLH stockholders who
receive Conseco Common Stock pursuant to the Merger or perfect dissenters'
rights. This summary is not a complete description of all of the tax
consequences of the Merger and, in particular, does not address tax
considerations which may affect the treatment of certain special status
taxpayers such as financial institutions, broker-dealers, life insurance
companies, tax-exempt organizations, investment companies and foreign taxpayers
or of BLH stockholders who do not hold their BLH Common Stock as a capital asset
at the Effective Time. In addition, no information is provided herein with
respect to the tax consequences of the Merger either under applicable foreign,
state or local laws or to persons who acquire BLH Common Stock pursuant to
employee stock options or otherwise as compensation.
The following discussion is based on the Code, as in effect on the date of
this Prospectus, without consideration of the particular facts or circumstances
of any particular holder of BLH Common Stock. BLH and Conseco have not sought
and will not seek any rulings from the Internal Revenue Service with respect to
any of the matters discussed herein.
Sidley & Austin, special tax counsel to Conseco in connection with the
Merger, has rendered an opinion to Conseco substantially to the effect that the
United States federal income tax consequences of the Merger will be as follows:
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(i) The Merger will constitute a "reorganization" within the meaning of
Section 368(a) of the Code, and Conseco, CIHC and BLH will each be a party
to such reorganization within the meaning of Section 368(b) of the Code;
(ii) No gain or loss will be recognized by BLH as a result of the
Merger;
(iii) No gain or loss will be recognized by non-dissenting BLH
stockholders upon the conversion of their shares of BLH Common Stock for
Conseco Common Stock pursuant to the Merger (except with respect to cash
paid in lieu of a fractional share of Conseco Common Stock);
(iv) The aggregate tax basis of the shares of Conseco Common Stock
received by a non-dissenting BLH stockholder in exchange for shares of BLH
Common Stock pursuant to the Merger (including any fractional share of
Conseco Common Stock for which cash is paid) will be the same as the
aggregate tax basis of such shares of BLH Common Stock;
(v) The holding period for the shares of Conseco Common Stock received
by a non-dissenting BLH stockholder in exchange for shares of BLH Common
Stock pursuant to the Merger will include the period that such shares of BLH
Common Stock were held by the BLH stockholder, provided such shares of BLH
Common Stock were held as capital assets by such stockholder at the
Effective Time; and
(vi) A non-dissenting BLH stockholder who receives cash in lieu of a
fractional share of Conseco Common Stock will recognize gain or loss equal
to the difference, if any, between such stockholder's tax basis in such
fractional share (determined as provided in paragraph iv) and the amount of
cash received.
In rendering such opinion, Sidley & Austin has relied upon representations
contained in certificates of Conseco and BLH.
A BLH stockholder who perfects dissenters' rights with respect to his or her
shares of BLH Common Stock should, in general, treat the difference between the
tax basis of the shares of BLH Common Stock held by such person with respect to
which such dissenters' rights are perfected and the amount received in payment
therefor as capital gain or loss. However, depending on the BLH stockholder's
particular circumstances, such amount might be treated for federal income tax
purposes as dividend income. See "-- Appraisal Rights."
THE FOREGOING IS A GENERAL DISCUSSION OF CERTAIN MATERIAL FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER FOR BLH AND BLH STOCKHOLDERS AND IS INCLUDED FOR
GENERAL INFORMATION ONLY. THE FOREGOING DISCUSSION DOES NOT TAKE INTO ACCOUNT
THE PARTICULAR FACTS AND CIRCUMSTANCES OF EACH BLH STOCKHOLDER'S TAX STATUS AND
ATTRIBUTES. ACCORDINGLY, EACH BLH STOCKHOLDER SHOULD CONSULT HIS OWN TAX ADVISOR
REGARDING THE SPECIFIC TAX CONSEQUENCES OF THE MERGER, INCLUDING THE APPLICATION
AND EFFECT OF FEDERAL, STATE, LOCAL AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS
OF CHANGES IN SUCH TAX LAWS.
REGULATORY APPROVALS
No federal or state regulatory approval was required in connection with the
Merger.
STOCK EXCHANGE LISTING
The shares of Conseco Common Stock to be issued in connection with the
Merger have been approved for listing on the NYSE.
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APPRAISAL RIGHTS
Holders of BLH Common Stock are entitled to appraisal rights under Section
262 ("Section 262") of the DGCL in connection with the Merger, provided that
they comply with the conditions established by Section 262. Holders of Conseco
Common Stock are not entitled to appraisal rights under the Indiana Business
Corporation Law (the "IBCL") in connection with the Merger. See "Comparison of
Shareholders' Rights--Dissenters' Rights."
The following discussion of the provisions of Section 262 is not intended to
be a complete statement of such provisions and is qualified in its entirety by
reference to the text of Section 262, which is reproduced in full as Annex A to
this Prospectus.
Former stockholders who held BLH Common Stock on the Effective Time and who
follow the procedures specified in Section 262 will be entitled to have their
shares of BLH Common Stock appraised by the Delaware Court of Chancery (the
"Court") and to receive payment of the "fair value" of such shares, exclusive of
any element of value arising from the accomplishment or expectations of the
Merger, as determined by the Court. The procedures set forth in Section 262
should be strictly complied with. Failure to follow any of such procedures may
result in a termination or waiver of appraisal rights under Section 262.
Any stockholder entitled to appraisal rights may, after December 31, 1996
and on or prior to January 28, 1997, demand from CIHC the appraisal of any or
all of his or her shares of BLH Common Stock by delivering a written demand for
an appraisal to Corporate Secretary, CIHC, Incorporated, Corporation Trust
Center, 1209 Orange Street, Wilmington, Delaware 19801 stating the identity of
the stockholder and that the stockholder intends by such notice to demand the
appraisal of his or her shares. Demand is necessary if the stockholder is to
perfect his or her appraisal rights.
The written demand for appraisal must be made by or for the holder of record
of BLH Common Stock registered in his or her name. Accordingly, such demand
should be executed by or for such stockholder of record, fully and correctly, as
such stockholder's name appears on his or her stock certificates. If the
applicable shares of BLH Common Stock were owned of record in a fiduciary
capacity, such as by a trustee, guardian or custodian, execution of the demand
should be made in such capacity, and if the applicable shares of BLH Common
Stock were owned of record by more than one person, as in a joint tenancy or
tenancy in common, such demand should be executed by or for all joint owners. An
authorized agent, including one of two or more joint owners, may execute the
demand for appraisal for a stockholder of record. However, the agent must
identify the record owner(s) and expressly disclose the fact that, in executing
the demand, he or she is acting as agent for the record owner(s). If a
stockholder held shares of BLH Common Stock through a broker who in turn held
the shares through a central securities depository nominee such as Cede & Co., a
demand for appraisal of such shares must be made by or on behalf of the
depository nominee and must identify the depository nominee as the holder of
record.
A record owner may exercise appraisal rights with respect to all or less
than all of the shares held of record. If the record owner desires to exercise
appraisal rights as to a portion of his or her shares, the written demand should
set forth the number of shares covered by it. Where no number of shares is
expressly mentioned, the demand will be presumed to cover all shares of BLH
Common Stock standing in the name of such record owner.
Within 120 days after the Effective Time, CIHC or any stockholder of BLH who
has complied with the demand requirements and who is otherwise entitled to
appraisal rights, may file a petition in the Court demanding a determination of
the value of the BLH Common Stock of all former stockholders of BLH who have
complied with the demand requirements and who are otherwise entitled to
appraisal rights. Notwithstanding the foregoing, at any time within 60 days
after the Effective Date, any stockholder has the right to withdraw his or her
demand for appraisal and to accept the terms offered in the Merger. If no such
petition is filed, appraisal rights will be lost for all stockholders who had
previously demanded appraisal of their BLH Common Stock. Holders of BLH Common
Stock seeking to exercise appraisal rights should not assume that CIHC will file
a petition with respect to the appraisal of the value of their BLH Common
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Stock or that CIHC will initiate any negotiations with respect to the "fair
value" of such BLH Common Stock. Accordingly, such stockholders should regard it
as their obligation to take all steps necessary to perfect their appraisal
rights in the manner prescribed in Section 262.
Within 120 days after the Effective Time, any stockholder who is entitled to
and has perfected his or her appraisal rights will be entitled to receive upon
written request from CIHC a statement setting forth the aggregate number of
shares with respect to which demands for appraisal have been received and the
aggregate number of holders of such shares. This written statement must be
mailed to the requesting stockholder within 10 days after his or her written
request for such a statement is received by CIHC as the surviving corporation,
or within 10 days after the expiration of the period for delivery of demands for
appraisals, whichever is later.
Upon the filing of a petition by a stockholder, service of a copy of such
petition must be made upon CIHC as the surviving corporation. Within 20 days
after such service, CIHC must file in the Office of the Register in Chancery in
which the petition was filed a duly verified list containing the names and
addresses of all stockholders who have demanded payment for their shares and
with whom agreements as to the value of their shares have not been reached by
CIHC. If the petition is originally filed by CIHC, such petition must be
accompanied by such duly verified list. After the filing of a petition for
appraisal, the Register in Chancery, if ordered by the Court, must give notice
of the time and place fixed for hearing by registered or certified mail to both
CIHC and to the stockholders shown on the list at the addresses therein stated.
This notice must also be given by one or more publications at least one week
before the day of the hearing in a newspaper of general circulation published in
the City of Wilmington, Delaware or such publication as the Court deems
advisable. The forms of the notices by mail and by publication must be approved
by the Court, and the costs thereof will be borne by CIHC.
At the hearing on the petition, the Court will determine the stockholders
who have complied with Section 262 and who have thus become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares to submit to the Register in Chancery their
certificates that formerly represented CIHC Common Stock for notation thereon of
the pendency of the appraisal proceedings. If any stockholder fails to comply
with such direction, the Court may dismiss the proceedings as to the
stockholder.
If a petition for an appraisal is timely filed, after a hearing on such
petition the Court will determine the stockholders entitled to appraisal rights
and will appraise the value of the BLH Common Stock owned by such stockholders,
determining the "fair value" thereof exclusive of any element of value arising
from the accomplishment or expectation of the Merger. The Court will direct
payment of the fair value of such shares of BLH Common Stock with a fair rate of
interest, if any, on such fair value to stockholders entitled thereto upon
surrender to CIHC of stock certificates. Upon application of a stockholder, the
Court may, in its discretion, order that all or a portion of the expenses
incurred by any stockholder in connection with an appraisal proceeding,
including without limitation, reasonable attorneys' fees and the fees and
expenses of experts, be charged pro rata against the value of all the shares of
BLH Common Stock entitled to appraisal.
No representation is made as to the outcome of the appraisal of fair value
as determined by the Court, and stockholders should recognize that such an
appraisal could result in a determination of a value higher or lower than, or
the same as, the value of the shares of Conseco Common Stock issued in the
Merger. Moreover, CIHC reserved the right to assert, in any appraisal
proceeding, that, for purposes of Section 262, the "fair value" of a share of
BLH Common Stock is less than the value of the 0.3983 of a share of Conseco
Common Stock issued in respect thereof in the Merger. In determining the "fair
value" of such shares of BLH Common Stock, the Court is required to take into
account all relevant factors. Therefore, such determination could be based upon
a number of considerations, including the market value of shares of BLH Common
Stock and the asset value and earning capacity of BLH. In WEINBERGER V. UOP,
INC., ET AL (decided February 1, 1983) the Delaware Supreme Court stated, among
other things, that "proof of value by any techniques or methods which are
generally considered acceptable in the financial community and otherwise
admissible in court", should be considered in an appraisal proceeding. Section
262 provides that
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"fair value" is to be "exclusive of any element of value arising from the
accomplishment or expectation of the merger". In WEINBERGER, the Delaware
Supreme Court held that "elements of future value, including the nature of the
enterprise, which are known or susceptible of proof as of the date of the merger
and not the product of speculation, may be considered".
From and after the Effective Time, no stockholder who has demanded his or
her appraisal rights will be entitled to vote Conseco Common Stock to which the
stockholder would have been entitled had he or she chosen not to exercise
appraisal rights, nor will he or she be entitled to payments of dividends or
other distributions on the stock (except dividends or other distributions
payable to BLH stockholders of record on a date that is prior to the Effective
Time); provided, however, that if no petition for an appraisal has been filed
within the time provided by Delaware law, or if such stockholder delivers to
CIHC a written withdrawal of his or her demand for an appraisal and an
acceptance of the Merger, either within 60 days after the Effective Time or
thereafter with written approval of CIHC (which CIHC reserves the right to give
or withhold in its discretion), then the right of such stockholder to an
appraisal will cease, and (upon surrender of certificates formerly representing
BLH Common Stock together with a properly completed Letter of Transmittal) such
stockholder will receive the shares of Conseco Common Stock into which such
shares of BLH Common Stock were converted in the Merger. Notwithstanding the
foregoing, no appraisal proceeding in the Court of Chancery will be dismissed as
to any stockholder without the approval of the Court, and such approval may be
conditioned upon whatever terms the Court deems just.
38
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS OF CONSECO
The unaudited pro forma consolidated statements of operations of Conseco for
the year ended December 31, 1995, and for the nine months ended September 30,
1996, present the consolidated operating results of Conseco as if the following
planned transactions had occurred on January 1, 1995: (1) the Merger; and (2)
the CAF Merger.
The pro forma consolidated statement of operations data for Conseco for the
year ended December 31, 1995, set forth in the unaudited pro forma consolidated
statement of operations under the column "Pro forma Conseco before the Merger"
reflect the prior application of certain pro forma adjustments for the following
transactions, all of which have already occurred, as if such transactions had
occurred on January 1, 1995: (1) the TOPrS Offering; (2) the TruPS Offering; (3)
the THI Merger; (4) the ATC Merger; (5) the Series D Call; (6) the ALH
Transaction; (7) the LPG Merger; (8) the acquisition of all of the outstanding
common stock of CCP not previously owned by Conseco and related transactions
(including the repayment of the borrowings under Conseco's existing $250.0
million revolving credit agreement); (9) the increase of Conseco's ownership in
BLH to 90.4 percent, as a result of purchases of common shares of BLH by Conseco
and BLH during 1995 and the first three months of 1996; (10) the issuance of
4.37 million shares of Conseco PRIDES in January 1996; (11) the BLH Tender
Offer; and (12) the debt restructuring of ALH in the fourth quarter of 1995.
Such pro forma adjustments are set forth in: (1) Conseco's Current Report on
Form 8-K dated December 23, 1996; (2) Conseco's Current Report on Form 8-K dated
December 17, 1996; (3) Exhibit 99.2 included in Conseco's Current Report on Form
8-K dated September 25, 1996; (4) Conseco's Current Report on Form 8-K dated
August 2, 1996; and (5) Exhibit 99.1 included in Conseco's Current Report on
Form 8-K dated April 10, 1996, each of which is incorporated herein by
reference. See "Incorporation of Certain Documents by Reference."
The pro forma consolidated statement of operations data for Conseco for the
nine months ended September 30, 1996, set forth in the unaudited pro forma
consolidated statement of operations under the column "Pro forma Conseco before
the Merger" reflect the prior application of certain pro forma adjustments for
the following transactions, all of which have already occurred, as if such
transactions had occurred on January 1, 1995: (1) the TOPrS Offering; (2) the
TruPS Offering; (3) the THI Merger; (4) the ATC Merger; (5) the Series D Call;
(6) the ALH Transaction; (7) the LPG Merger; (8) the issuance of 4.37 million
shares of Conseco PRIDES in January 1996; and (9) the BLH Tender Offer. Such pro
forma adjustments are set forth in: (1) Conseco's Current Report on Form 8-K
dated December 23, 1996; (2) Conseco's Current Report on Form 8-K dated December
17, 1996; and (3) Exhibit 99.1 included in Conseco's Form 10-Q for the quarterly
period ended September 30, 1996, each of which is incorporated herein by
reference. See "Incorporation of Certain Documents by Reference."
The unaudited pro forma consolidated balance sheet of Conseco as of
September 30, 1996, gives effect to the following transactions as if each had
occurred on September 30, 1996: (1) the Merger; and (2) the CAF Merger.
The unaudited pro forma consolidated balance sheet data as of September 30,
1996, set forth in the unaudited pro forma consolidated balance sheet under the
column "Pro forma Conseco before the Merger" reflect the prior application of
certain pro forma adjustments for the following transactions, all of which have
already occurred, as if such transactions had occurred on September 30, 1996:
(1) the TOPrS offering; (2) the TruPS offering; (3) the THI Merger; and (4) the
ATC Merger. Such pro forma adjustments are set forth in: (1) Conseco's Current
Report on Form 8-K dated December 23, 1996; and (2) Conseco's Current Report on
Form 8-K dated December 17, 1996, each of which is incorporated herein by
reference. See "Incorporation of Certain Documents by Reference."
The pro forma consolidated financial statements are based on the historical
financial statements of Conseco, LPG, THI, ATC and CAF and are qualified in
their entirety by and should be read in conjunction with, these financial
statements and the notes thereto. The pro forma data are not necessarily
indicative of the results of operations or financial condition of Conseco had
these transactions occurred on
39
<PAGE>
January 1, 1995, nor the results of future operations. Conseco anticipates cost
savings and additional benefits as a result of certain of the transactions
contemplated in the pro forma financial statements. Such benefits and any other
changes that might have resulted from management of the combined companies have
not been included as adjustments to the pro forma consolidated financial
statements. Certain amounts from the prior periods have been reclassified to
conform to the current presentation.
The unaudited pro forma consolidated financial statements reflect cost
allocations for the LPG Merger, the ALH Transaction, the Merger, the THI Merger,
the ATC Merger and the CAF Merger using estimated values of the assets and
liabilities of LPG, ALH, BLH, THI, ATC and CAF as of the assumed merger dates
based on appraisals and other studies, which are not yet complete. Accordingly,
the final allocations will be different than the amounts included in the
accompanying pro forma consolidated financial statements. Although the final
allocations will differ, the pro forma consolidated financial statements reflect
management's best estimate based on currently available information as if the
LPG Merger, the ALH Transaction, the Merger, the THI Merger, the ATC Merger and
the CAF Merger had occurred on the assumed merger dates.
40
<PAGE>
CONSECO
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA PRO FORMA FOR THE
CONSECO PRO FORMA ADJUSTMENTS MERGER
BEFORE ADJUSTMENTS RELATING AND THE
THE RELATING TO PRO FORMA FOR CAF TO THE CAF
MERGER THE MERGER THE MERGER HISTORICAL CAF MERGER MERGER
--------- ----------- ------------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Insurance policy income.......................... $1,714.7 $ -- $ 1,714.7 $219.9 $ -- $1,934.6
Investment activity:
Net investment income.......................... 1,143.3 1,143.3 41.7 (2.6)(7) 1,182.4
Net trading losses............................. (6.5) (6.5) (6.5)
Net realized gains............................. 26.6 (.2)(1) 26.4 0.3 (0.3)(7) 26.4
Fee revenue...................................... 29.7 29.7 29.7
Restructuring income............................. 30.4 30.4 30.4
Other income..................................... 12.8 12.8 12.8
--------- ----------- ------------- ---------- ----------- ---------
Total revenues............................... 2,951.0 (.2) 2,950.8 261.9 (2.9) 3,209.8
--------- ----------- ------------- ---------- ----------- ---------
Benefits and expenses:
Insurance policy benefits and change in future
policy benefits................................ 1,203.5 (1.5)(1) 1,202.0 124.4 (2.3)(8) 1,324.1
Interest expense on annuities and financial
products....................................... 549.5 549.5 549.5
Interest expense on notes payable................ 76.7 76.7 1.6 (1.6)(9) 104.7
28.0(10)
Interest expense on investment borrowings........ 17.2 17.2 17.2
Amortization related to operations............... 283.9 .4(1) 284.3 17.5 (17.5)(11) 311.7
23.0(11)
4.4(12)
Amortization related to realized gains........... 22.3 (.1)(1) 22.2 22.2
Other operating costs and expenses............... 332.3 1.6(1) 333.9 58.7 392.6
--------- ----------- ------------- ---------- ----------- ---------
Total benefits and expenses.................. 2,485.4 .4 2,485.8 202.2 34.0 2,722.0
--------- ----------- ------------- ---------- ----------- ---------
Income (loss) before income taxes, minority
interest and extraordinary charge.......... 465.6 (.6) 465.0 59.7 (36.9) 487.8
Income tax expense (benefit)....................... 178.1 (.1)(2) 178.0 20.9 (11.4)(13) 187.5
--------- ----------- ------------- ---------- ----------- ---------
Income (loss) before minority interest and
extraordinary charge....................... 287.5 (.5) 287.0 38.8 (25.5) 300.3
Minority interest in consolidated subsidiaries:
Dividends on Company- obligated mandatorily
redeemable preferred securities of subsidiary
trusts......................................... 26.1 26.1 26.1
Dividends on preferred stock..................... 6.4 6.4 6.4
Equity in earnings............................... 13.9 (13.9)(3) -- --
--------- ----------- ------------- ---------- ----------- ---------
Income (loss) before extraordinary charge.... $ 241.1 $ 13.4 $ 254.5 $ 38.8 $ (25.5) $ 267.8
--------- ----------- ------------- ---------- ----------- ---------
--------- ----------- ------------- ---------- ----------- ---------
Earnings per common share and common equivalent
share:
Primary:
Weighted average shares outstanding............ 92.1 2.0(4) 94.1 1.9(14) 96.0
--------- ----------- ------------- ----------- ---------
--------- ----------- ------------- ----------- ---------
Income before extraordinary charge............. $ 2.62 $ 2.70 $ 2.79
--------- ------------- ---------
--------- ------------- ---------
Fully diluted:
Weighted average shares outstanding............ 97.6 2.0(4) 99.6 1.9(14) 101.5
--------- ----------- ------------- ----------- ---------
--------- ----------- ------------- ----------- ---------
Income before extraordinary charge............. $ 2.48 $ 2.57 $ 2.65
--------- ------------- ---------
--------- ------------- ---------
</TABLE>
The accompanying notes are an integral part of the pro forma consolidated
financial statements.
41
<PAGE>
CONSECO
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA PRO FORMA PRO FORMA FOR THE
CONSECO ADJUSTMENTS ADJUSTMENTS MERGER
BEFORE RELATING PRO FORMA RELATING TO AND THE
THE TO THE FOR THE CAF THE CAF CAF
MERGER MERGER MERGER HISTORICAL MERGER MERGER
--------- ----------- --------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Insurance policy income.............................. $2,216.9 $ (.3)(1) $2,216.6 $282.1 $ -- $2,498.7
Investment activity:
Net investment income.............................. 1,528.9 (.1)(1) 1,528.8 48.6 (3.4)(7) 1,574.0
Net trading income................................. 2.5 2.5 2.5
Net realized gains................................. 222.5 (.4)(1) 222.1 (0.1)(7) 222.0
Fee revenue.......................................... 33.9 33.9 33.9
Restructuring income................................. 15.2 15.2 15.2
Other income......................................... 12.6 (.1)(1) 12.5 0.1 12.6
--------- ----------- --------- ---------- ----------- ---------
Total revenues................................... 4,032.5 (.9) 4,031.6 330.8 (3.5) 4,358.9
--------- ----------- --------- ---------- ----------- ---------
Benefits and expenses:
Insurance policy benefits and change in future policy
benefits........................................... 1,566.2 (1.7)(1) 1,564.5 155.3 (3.0)(8) 1,716.8
Interest expense on annuities and financial
products........................................... 758.5 .3(1) 758.8 758.8
Interest expense on notes payable.................... 108.5 (.4)(1) 108.1 2.4 (2.4)(9) 145.5
37.4(10)
Interest expense on investment borrowings............ 30.2 30.2 30.2
Amortization related to operations................... 361.1 (2.8)(1) 358.3 21.5 (21.5)(11) 396.1
32.0(11)
5.8(12)
Amortization related to realized gains............... 144.4 (.6)(1) 143.8 143.8
Other operating costs and expenses................... 478.4 5.9(1) 484.3 80.0 564.3
--------- ----------- --------- ---------- ----------- ---------
Total benefits and expenses........................ 3,447.3 .7 3,448.0 259.2 48.3 3,755.5
--------- ----------- --------- ---------- ----------- ---------
Income (loss) before income taxes, minority
interest and extraordinary charge................ 585.2 (1.6) 583.6 71.6 (51.8) 603.4
Income tax expense (benefit)....................... 226.6 (.6)(2) 226.0 25.6 (16.1)(13) 235.5
--------- ----------- --------- ---------- ----------- ---------
Income (loss) before minority interest and
extraordinary charge........................... 358.6 (1.0) 357.6 46.0 (35.7) 367.9
Minority interest in consolidated subsidiaries:
Dividends on Company-obligated mandatorily redeemable
preferred securities of subsidiary trusts.......... 34.8 34.8 34.8
Dividends on preferred stock......................... 8.7 8.7 8.7
Equity in earnings................................... 12.6 (12.6)(3) -- --
--------- ----------- --------- ---------- ----------- ---------
Income (loss) before extraordinary charge........ $ 302.5 $ 11.6 $ 314.1 $ 46.0 $ (35.7) $ 324.4
--------- ----------- --------- ---------- ----------- ---------
--------- ----------- --------- ---------- ----------- ---------
Earnings per common share and common equivalent share:
Primary:
Weighted average shares outstanding................ 90.6 2.0(4) 92.6 1.9(14) 94.5
--------- ----------- --------- ----------- ---------
--------- ----------- --------- ----------- ---------
Income before extraordinary charge................. $ 3.34 $ 3.39 $ 3.43
--------- --------- ---------
--------- --------- ---------
Fully diluted:
Weighted average shares outstanding................ 94.9 2.0(4) 96.9 1.9(14) 98.8
--------- ----------- --------- ----------- ---------
--------- ----------- --------- ----------- ---------
Income before extraordinary charge................. $ 3.19 $ 3.24 $ 3.28
--------- --------- ---------
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of the pro forma consolidated
financial statements.
42
<PAGE>
CONSECO
PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1996
(DOLLARS IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA PRO FORMA FOR THE
CONSECO PRO FORMA ADJUSTMENTS MERGER
BEFORE ADJUSTMENTS PRO FORMA RELATING TO AND THE
THE RELATING TO FOR THE CAF THE CAF CAF
MERGER THE MERGER MERGER HISTORICAL MERGER MERGER
--------- ----------- --------- ---------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Assets
Investments:
Actively managed fixed maturity securities at fair
value............................................ $17,048.6 $ -- $17,048.6 $ 308.5 $ 358.3(15) $17,809.6
94.2(16)
Held-to-maturity fixed maturity securities......... -- -- 358.3 (358.3)(15) --
Equity securities at fair value.................... 105.3 105.3 10.2 115.5
Mortgage loans..................................... 381.2 381.2 381.2
Credit-tenant loans................................ 393.8 393.8 393.8
Policy loans....................................... 542.9 542.9 542.9
Other invested assets.............................. 217.5 217.5 217.5
Short-term investments............................. 259.1 259.1 29.4 (538.0)(17) 288.5
(26.0)(17)
(29.0)(17)
593.0(18)
Assets held in separate accounts................... 300.4 300.4 300.4
--------- ----------- --------- ---------- ------------ ---------
Total investments................................ 19,248.8 -- 19,248.8 706.4 94.2 20,049.4
Accrued investment income............................ 290.1 290.1 6.9 297.0
Cost of policies purchased........................... 2,228.7 65.9(1) 2,294.6 492.2(19) 2,786.8
Cost of policies produced............................ 541.0 (50.7)(1) 490.3 271.3 (271.3)(20) 490.3
Reinsurance receivables.............................. 469.2 469.2 469.2
Income taxes......................................... 42.3 (5.3)(2) 37.0 (37.0)(21) --
Goodwill............................................. 2,087.5 57.3(1) 2,144.8 227.7(22) 2,372.5
Property and equipment............................... 110.5 110.5 4.4 114.9
Securities segregated for future redemption of
redeemable preferred stock of a subsidiary......... 45.0 45.0 45.0
Other assets......................................... 247.5 247.5 28.9 276.4
--------- ----------- --------- ---------- ------------ ---------
Total assets..................................... $25,310.6 $ 67.2 $25,377.8 $1,017.9 $ 505.8 $26,901.5
--------- ----------- --------- ---------- ------------ ---------
--------- ----------- --------- ---------- ------------ ---------
</TABLE>
The accompanying notes are an integral part of the pro forma consolidated
financial statements.
43
<PAGE>
CONSECO
PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1996
(DOLLARS IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
FOR
PRO FORMA PRO FORMA THE
CONSECO PRO FORMA ADJUSTMENTS MERGER
BEFORE ADJUSTMENTS PRO FORMA RELATING TO AND THE
THE RELATING TO FOR THE CAF THE CAF CAF
MERGER THE MERGER MERGER HISTORICAL MERGER MERGER
--------- ------------ --------- ---------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Liabilities:
Insurance liabilities................................ $19,100.4 $ -- $19,100.4 $ 611.4 $ 88.4(23) $19,800.2
Income tax liabilities............................... -- -- 52.2 79.3(21) 94.5
(37.0)(21)
Investment borrowings................................ 539.4 539.4 539.4
Other liabilities.................................... 522.7 522.7 20.7 543.4
Liabilities related to separate accounts............. 300.1 300.1 300.1
Notes payable of Conseco............................. 869.7 418.1(5) 1,287.8 29.0 (29.0)(24) 1,880.8
593.0(18)
Notes payable of Bankers Life Holding Corporation,
not direct obligations of Conseco.................. 418.1 (418.1)(5) -- --
Notes payable of American Life Holdings, Inc., not
direct obligations of Conseco...................... 13.0 13.0 13.0
--------- ------------ --------- ---------- ------------ ---------
Total liabilities................................ 21,763.4 -- 21,763.4 713.3 694.7 23,171.4
--------- ------------ --------- ---------- ------------ ---------
Minority interest in consolidated subsidiaries:
Company-obligated mandatorily redeemable preferred
securities of subsidiary trusts.................... 600.0 600.0 600.0
Preferred stock...................................... 92.5 92.5 92.5
Common stock......................................... 55.3 (55.3)(3) -- --
--------- ------------ --------- ---------- ------------ ---------
Shareholders' equity:
Preferred stock...................................... 267.1 267.1 267.1
Common stock and additional paid-in capital.......... 1,898.0 122.5(6) 2,020.5 35.5 (35.5)(25) 2,136.2
115.7(25)
Unrealized appreciation (depreciation) of
securities......................................... (47.0 ) (47.0 ) (1.8) 1.8(25) (47.0 )
Retained earnings.................................... 681.3 681.3 270.9 (270.9)(25) 681.3
--------- ------------ --------- ---------- ------------ ---------
Total shareholders' equity....................... 2,799.4 122.5 2,921.9 304.6 (188.9) 3,037.6
--------- ------------ --------- ---------- ------------ ---------
Total liabilities and shareholders' equity....... $25,310.6 $ 67.2 $25,377.8 $1,017.9 $ 505.8 $26,901.5
--------- ------------ --------- ---------- ------------ ---------
--------- ------------ --------- ---------- ------------ ---------
</TABLE>
The accompanying notes are an integral part of the pro forma consolidated
financial statements.
44
<PAGE>
CONSECO
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
PRO FORMA ADJUSTMENTS
TRANSACTIONS RELATING TO THE MERGER
In the Merger, each share of BLH Common Stock was converted into the right
to receive a fraction of a share of Conseco Common Stock determined based on the
average price of Conseco Common Stock prior to closing (such average price per
share of Conseco Common Stock was $62.7625, resulting in an exchange ratio of
0.3983 shares valued at $25.00). Conseco issued 2.0 million shares of Conseco
Common Stock with a value of approximately $122.5 million.
The pro forma adjustments are applied to the historical consolidated
financial statements of Conseco using the step acquisition method of accounting.
Under this method, the total purchase cost of the common stock of BLH, not
already owned by Conseco, is allocated to the assets and liabilities acquired
based on their relative fair values as of the date of acquisition, with any
excess of the total purchase cost over the fair value of the assets acquired
less the fair value of the liabilities assumed recorded as goodwill. The values
of the assets and liabilities of BLH included in Conseco's pro forma
consolidated financial statements represent the combination of the following
values: (i) the portion of BLH's net assets acquired by Conseco in the initial
acquisition made by Conseco Capital Partners, L.P. on October 31, 1992, is
valued as of that acquisition date; (ii) the portion of BLH's net assets
acquired by Conseco on September 30, 1993, is valued as of that acquisition
date; (iii) the portion of BLH's net assets acquired during 1995 and the first
quarter of 1996 is valued as of its assumed date of acquisition; and (iv) the
portion of BLH's net assets acquired in the Merger is valued at the assumed
dates of acquisition.
Adjustments to give effect to the Merger are summarized below:
(1) As described above, the Merger is accounted for as a step acquisition.
The accounts of BLH are adjusted to reflect the step basis method of
accounting as if the Merger was completed on the assumed dates of
acquisition.
(2) All pro forma adjustments are tax affected based on the appropriate rate
for the specific item.
(3) Minority interest is reduced to eliminate the ownership interest of the
former shareholders of BLH.
(4) Common shares outstanding are increased to reflect the shares of Conseco
Common Stock issued in the acquisition of additional shares of BLH Common
Stock.
(5) Notes payable of BLH are reclassified as notes payable of Conseco, since
BLH is now wholly owned by Conseco.
(6) Common stock and additional paid-in capital is increased by the value of
Conseco Common Stock issued in the acquisition of additional shares of
BLH Common Stock.
TRANSACTIONS RELATING TO THE CAF MERGER
The CAF Merger will be accounted for under the purchase method of
accounting. Under this method, the total cost to acquire CAF will be allocated
to the assets and liabilities acquired based on their fair values as of the date
of the CAF Merger, with any excess of the total purchase cost over the fair
value of the assets acquired less the fair value of the liabilities assumed
recorded as goodwill. In the CAF Merger, each outstanding share of CAF common
stock is assumed to be exchanged for $30.25 in cash and the right to receive a
fraction of a share of Conseco Common Stock to be determined based on the
average price of
45
<PAGE>
CONSECO
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Conseco Common Stock prior to its closing (it is assumed that such average price
per share of Conseco Common Stock will be $60.00, resulting in an exchange ratio
of .1083). Conseco will pay approximately $538 million in cash and issue an
assumed 1.9 million shares of Conseco Common Stock with a value of approximately
$115.7 million to acquire the CAF common stock. In addition, Conseco is expected
to assume a note payable of CAF of $29.0 million and estimates that it will
incur costs related to the CAF Merger (including contract termination,
relocation, legal, accounting and other costs) of approximately $26 million.
The cost to acquire CAF is allocated as follows (dollars in millions):
<TABLE>
<S> <C>
Book value of assets acquired based on the assumed date of the CAF
Merger (September 30, 1996)...................................... $ 304.6
Notes payable of CAF assumed by Conseco at the assumed date of the
CAF Merger....................................................... 29.0
Increased (decrease) in CAF's net asset value to reflect estimated
fair value and asset reclassifications at the assumed date of the
CAF Merger:
Actively managed fixed maturity securities..................... 452.5
Held-to-maturity fixed maturity securities..................... (358.3)
Cost of policies purchased (related to the CAF Merger)......... 492.2
Cost of policies produced...................................... (271.3)
Goodwill (related to the CAF Merger)........................... 227.7
Insurance liabilities.......................................... (88.4)
Income taxes................................................... (79.3)
---------
Total estimated fair value adjustments..................... 375.1
---------
Total cost to acquire CAF.................................. $ 708.7
---------
---------
</TABLE>
Adjustments to the pro forma consolidated statement of operations to give
effect to the CAF Merger as of January 1, 1995, are summarized below.
(7) Net investment income and net realized gains of CAF are adjusted to
include the effect of adjustments to restate the amoritized cost basis of
fixed maturity securities to their estimated fair value.
(8) Change in policy benefits is reduced to reflect the purchase accounting
adjustments made at the assumed date of the CAF Merger. Such adjustment
reflects the lower discount rate used to discount amounts of expected
future benefit payments to correspond to the adjustments to restate the
amortized cost of fixed maturity investments to their estimated fair
value.
(9) Interest expense is reduced to reflect the repayment of notes payable of
CAF by Conseco at the assumed date of the CAF Merger.
(10) Interest expense is increased to reflect the increase in borrowings
under Conseco's bank credit facilities used to complete the CAF Merger.
A change in interest rates of .5 percent on the additional borrowings
under Conseco's bank credit facilities used to complete the CAF Merger
would result in: (i) an increase (or decrease) in pro forma interest
expense of $3.0 million and $2.2 million for the year ended December 31,
1995,
46
<PAGE>
CONSECO
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
and the nine months ended September 30, 1996, respectively; and (ii) a
decrease (or increase) in pro forma net income of $1.9 million and $1.4
million for the same respective periods.
(11) Amortization of the cost of policies produced for policies sold by CAF
prior to January 1, 1995, is replaced with the amortization of the cost
of policies purchased (amortized in relation to estimated premiums on the
policies purchased with interest equal to the liability rate which
averages 5.5 percent.
(12) Amortization of goodwill acquired in the CAF Merger is recognized over
a 40-year period on a straight-line basis.
(13) Reflects the tax adjustment for the pro forma adjustments at the
appropriate rate for the specific item.
(14) Common shares outstanding are increased to reflect the shares issued in
the CAF Merger.
Adjustments to the pro forma consolidated balance sheet to give effect to
the CAF Merger as of September 30, 1996, are summarized below.
(15) After the CAF Merger, all held-to-maturity securities are classified as
actively managed fixed maturity securities consistent with the intention
of the new management.
(16) CAF's fixed maturity securities are restated to estimated fair value.
(17) Cash is reduced for payments made to complete the CAF Merger.
(18) Short-term investments and notes payable of Conseco are increased for
additional borrowings by Conseco to complete the CAF Merger.
(19) Cost of policies purchased reflects the estimated fair value of CAF's
business in force and represents the portion of the cost to acquire CAF
that is allocated to the value of the right to receive future cash flows
from the acquired policies.
The 18 percent discount rate used to determine such value is the rate of
return required by Conseco to invest in the business being acquired. In
determining such rate of return, the following factors are considered:
-- The magnitude of the risks associated with each of the actuarial
assumptions used in determining the expected cash flows.
-- Cost of capital available to fund the acquisition.
-- The perceived likelihood of changes in insurance regulations and tax
laws.
-- Complexity of the acquired company.
-- Prices paid (i.e., discount rates used in determining valuations) on
similar blocks of business sold recently.
The value allocated to the cost of policies purchased is based on a
preliminary valuation; accordingly, this allocation may be adjusted upon
final determination of such value. Expected gross amortization of such
value using current assumptions and accretion of interest based on an
47
<PAGE>
CONSECO
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
interest rate equal to the liability rate (such rate averages 5.5
percent) for each of the years in the five-year period ending September
30, 2001, are as follows (dollars in millions):
<TABLE>
<CAPTION>
BEGINNING GROSS ACCRETION NET ENDING
YEAR ENDING SEPTEMBER 30, BALANCE AMORTIZATION OF INTEREST AMORTIZATION BALANCE
- ----------------------------------------------------- ----------- ------------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C>
1997......................................... $ 492.2 $ 60.4 $ 27.1 $ 33.3 $ 458.9
1998......................................... 458.9 55.2 25.2 30.0 428.9
1999......................................... 428.9 52.2 23.6 28.6 400.3
2000......................................... 400.3 49.5 22.1 27.4 372.9
2001......................................... 372.9 46.9 20.5 26.4 346.5
</TABLE>
(20) CAF's cost of policies produced is eliminated since such amounts are
reflected in the determination of the cost of policies purchased.
(21) All of the applicable pro forma balance sheet adjustments are tax
affected at the appropriate rate. In addition, deferred tax liabilities
of CAF are netted against deferred tax assets of Conseco.
(22) Goodwill acquired in the CAF Merger is recognized.
(23) Additional insurance liabilities are recognized to reflect the lower
discount rates used to determine the present value of future obligations,
consistent with the lower yields to be earned on invested assets as a
result of recognizing the fair value of fixed maturity securities.
(24) Notes payable are reduced to reflect the repayment of notes payable of
CAF by Conseco at the assumed date of the CAF Merger.
(25) The prior shareholders' equity of CAF is eliminated in conjunction with
the CAF Merger. Common stock and additional paid-in capital is increased
by the value of Conseco Common Stock issued in the CAF Merger.
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COMPARISON OF SHAREHOLDERS' RIGHTS
The rights of Conseco shareholders are governed by Conseco's Amended and
Restated Articles of Incorporation (the "Conseco Articles of Incorporation"),
its Amended and Restated Code of By-laws (the "Conseco By-laws") and the IBCL.
The rights of BLH stockholders were governed by its Certificate of Incorporation
(the "BLH Certificate of Incorporation"), its By-Laws (the "BLH By-laws") and
the DGCL. After the Effective Time, the rights of BLH stockholders who become
Conseco shareholders will be governed by the Conseco Articles of Incorporation,
the Conseco By-laws and the IBCL. The following is a summary of the material
differences between the rights of Conseco shareholders and the rights of BLH
stockholders.
AMENDMENT OF BY-LAWS
The Conseco By-laws may be amended by majority vote of its respective boards
of directors. The BLH By-laws contained a similar provision. The stockholders of
BLH were authorized to amend the By-laws of BLH by majority vote, and the
stockholders were authorized to prescribe that any By-law made by them may not
be altered, amended or repealed by the BLH Board of Directors.
CERTAIN PROVISIONS RELATING TO ACQUISITIONS
The IBCL and the DGCL contain certain provisions, including the ones
described below, which purport to apply to certain types of share acquisitions
or corporate transactions.
BUSINESS COMBINATIONS. The Conseco Articles of Incorporation provide that
Conseco may not enter into a "Special Business Combination Transaction" (defined
as a merger or other business combination transaction with or involving a
beneficial owner of more than ten percent of Conseco Common Stock (a "Related
Person")) unless (1) the consideration to be received per share by holders of
Conseco Common Stock in such transaction is at least equal to the highest per
share price paid in order to acquire any shares of Conseco Common Stock
beneficially owned by the Related Person or (2) the transaction shall have been
approved by two-thirds of the Continuing Directors (defined to include the
directors of Conseco in office prior to the date on which a Related Person
became such).
BLH was governed by Section 203 of the DGCL. Section 203 of the DGCL
provides that a corporation shall not engage in any "business combination" with
any "interested stockholder" for a period of three years following the time that
such stockholder became an interested stockholder, unless (i) prior to such
time, the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder, (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85 percent of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned (a) by persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer,
or (iii) at or subsequent to such time, the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
two-thirds (2/3) of the outstanding voting stock which is not owned by the
interested stockholder. A "business combination" under the DGCL is generally
defined as any of the following transactions involving the corporation and an
interested stockholder thereof: (i) a merger or consolidation, (ii) a sale,
lease, exchange, mortgage, pledge, transfer or other disposition of ten percent
or more of the corporation's assets, (iii) an issuance or transfer of the
corporation's stock, (iv) a transaction having the effect of directly or
indirectly increasing the proportionate share of the corporation's stock held by
such interested stockholder or (v) any receipt by such interested stockholder of
the benefit of any loans, guarantees, pledges or other financial benefits. An
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"interested stockholder" under the DGCL is generally defined as any person
owning 15 percent or more of the corporation's outstanding voting stock.
Section 23-1-43-18 of the IBCL provides that a corporation may not engage in
any "business combination" with any "interested shareholder" for a period of
five years following the interested shareholder's share acquisition date unless
the business combination or the purchase of shares made by the interested
shareholder is approved by the board of directors of the corporation before the
interested shareholder's share acquisition date. A "business combination" under
the IBCL is generally defined as any of the following transactions involving the
corporation and an interested stockholder thereof: (i) a merger or
consolidation, (ii) a sale, lease, exchange, mortgage, pledge, transfer, or
other disposition of ten percent or more of corporation's assets or representing
10% or more of the earning power or net income of the corporation, (iii) an
issuance or transfer of shares of the corporation's stock representing 5% or
more of the aggregate market value of all of such corporation's outstanding
stock, (iv) the adoption of a plan of liquidation or dissolution proposed by or
under agreement with such interested shareholder, (v) a transaction having the
effect of directly or indirectly increasing the proportionate share of the
corporation's stock held by such interested stockholder, or (vi) any receipt by
such interested stockholder of the benefit of any loans, advances, guarantees,
pledges, or other financial assistance or any tax credits or other tax
advantages. An "interested shareholder" under the IBCL is generally defined as
any person owning 10 percent or more of the voting power of the outstanding
voting shares of the corporation.
CONTROL SHARE ACQUISITIONS. Chapter 23-1-42 of the IBCL requires that,
unless the articles or by-laws of a corporation exempt the corporation therefrom
(which Conseco's Articles of Incorporation and By-laws do not), any person who
proposes to acquire or has acquired (a "control share acquisition") ownership of
(or the power to direct the voting of) shares representing one-fifth, one-third,
or a majority of the voting power of an issuing public corporation in the
election of directors must provide the corporation with a statement describing
such acquisition (an "acquiring person statement"). If the acquiring person so
requests at the time of delivery of such statement (and undertakes to pay the
expenses relating thereto), the corporation shall cause a special meeting of its
shareholders to be called for the purpose of considering the voting rights to be
accorded the shares acquired in the control share acquisition. The shares so
acquired shall be accorded the same voting rights as were accorded such shares
before the control share acquisition only to the extent granted by resolution of
the shareholders of such corporation. Shares acquired in a control share
acquisition as to which no acquiring person statement has been filed may be
redeemed by the corporation at the fair value thereof under certain
circumstances. In the event that shares acquired in a control share acquisition
are accorded full voting rights and the acquiring person has acquired shares
representing a majority or more of all voting power, the other shareholders will
be entitled to appraisal rights. The DGCL does not contain a comparable
provision.
TAKEOVER OFFERS. Chapter 23-2-3.1 of the IBCL provides that a person shall
not make a takeover offer unless the following conditions are satisfied: (1) a
statement which consists of each document required to be filed with the
Commission is filed with the Indiana securities commissioner and delivered to
the president of the target company before making the takeover offer; (2) a
consent to service of process and the requisite filing fee accompanies the
statement filed with the Indiana securities commissioner; (3) the takeover offer
is made to all offerees holding the same class of equity securities on
substantially equivalent terms; (4) a hearing is held within 20 business days
after the statement described in clause (1) above is filed; and (5) the Indiana
securities commissioner shall have approved the takeover offer. In addition,
such section provides that no offeror may acquire any equity security of any
class of a target company within two years following the conclusion of a
takeover offer with respect to that class, unless the holder of such equity
security is afforded, at the time of that acquisition, a reasonable opportunity
to dispose of such securities to the offeror upon substantially equivalent
terms. A "takeover offer" means an offer to acquire or an acquisition of any
equity security of a target company pursuant to a tender offer or request or
invitation for tenders if, after the acquisition, the offeror is directly or
indirectly a record or beneficial owner of more than ten percent of any class of
the outstanding equity securities of the target company. A "target
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company" means an issuer of securities which is organized under the laws of
Indiana, has its principal place of business in Indiana and has substantial
assets in Indiana. The DGCL does not contain a comparable provision.
RIGHT TO BRING BUSINESS BEFORE A SPECIAL MEETING OF SHAREHOLDERS
The Conseco Articles of Incorporation and the Conseco By-laws do not contain
any restriction on the ability of shareholders to bring business before a
special meeting of shareholders.
Holders of the BLH Common Stock representing a majority of the voting power
of all issued and outstanding shares of BLH Common Stock were authorized to call
a special meeting of stockholders upon not less than 10 nor more than 60 days
prior notice.
SHAREHOLDER ACTION BY WRITTEN CONSENT
The Conseco By-laws do, and the BLH By-laws did, specifically authorize
stockholder action by written consent of all the stockholders entitled to vote
on such action.
REMOVAL OF DIRECTORS
The Conseco Articles of Incorporation provides for the board of directors to
be divided into three classes. Under the Conseco By-laws, a director may be
removed, either for or without cause, at any special meeting of shareholders
called for that purpose, by the affirmative vote of a majority in number of
shares of the shareholders present in person or by proxy and entitled to vote
for the election of such director. The BLH Certificate of Incorporation also
provided for the board of directors to be divided into three classes. Under the
BLH By-laws, a director could be removed, with cause only, by the affirmative
vote of a majority of the outstanding shares of each class of capital stock
entitled to vote at an election of such director.
DIRECTOR LIABILITY
The Conseco Articles of Incorporation and the Conseco By-laws do not contain
a specific exculpatory provision regarding director liability. The IBCL,
however, provides that a director is not liable for any action taken as a
director, or any failure to take any action, unless (1) the director has
breached or failed to perform the duties of the director's office in compliance
with Section 23-1-35-1 of the IBCL (which requires, among other things, that a
director discharge his or her duties as a director in good faith, with the care
an ordinarily prudent person in a like position would exercise under similar
circumstances and in a manner the director reasonably believes to be in the best
interests of the corporation), and (2) the breach or failure to perform
constitutes willful misconduct or recklessness.
The BLH Certificate of Incorporation provided that a director of BLH shall
not be personally liable to BLH or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability (i) for any breach
of the director's duty of loyalty to BLH or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or knowing
violation of law, (iii) under Section 174 of the DGCL (unlawful payment of
dividends), or (iv) for any transaction from which the director derived an
improper personal benefit.
INDEMNIFICATION
The IBCL grants authorization to Indiana corporations to indemnify officers
and directors made a party to a proceeding against liability incurred in the
proceeding if: (A) the individual's conduct was in good faith; (B) the
individual reasonably believed: (i) in the case of conduct in the individual's
official capacity with the corporation, that the individual's conduct was in the
corporation's best interests; and (ii) in all other cases, that the individual's
conduct was at least not opposed to the corporation's best interests; and (C) in
the case of any criminal proceeding, the individual either: (i) had reasonable
cause to
51
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believe that the individual's conduct was lawful; or (ii) had no reasonable
cause to believe that the individual's conduct was unlawful.
The Conseco By-laws provide for the indemnification of any person made a
party to any action, suit or proceeding by reason of the fact that he or she is
a director, officer or employee of Conseco, unless it is adjudged in such
action, suit or proceeding that such person is liable for negligence or
misconduct in the performance of his or her duties. Such indemnification shall
be against the reasonable expenses, including attorneys' fees, incurred by such
person in connection with the defense of such action, suit or proceeding. In
some circumstances, Conseco may reimburse any such person for the reasonable
costs of settlement of any such action, suit or proceeding if a majority of the
members of the Board of Directors not involved in the controversy shall
determine that it was in the interests of Conseco that such settlement be made
and that such person was not guilty of negligence or misconduct.
The BLH Certificate of Incorporation provided that BLH shall indemnify any
person who was, is, or is threatened to be made a party to a proceeding by
reason of the fact that he or she (i) is or was a director or officer of BLH or
(ii) while a director or officer of BLH, is or was serving at the request of BLH
as a director, officer, partner, venturer, proprietor, trustee, employee, agent,
or similar functionary of another foreign or domestic corporation, partnership,
joint venture, sole proprietorship, trust, employee benefit plan, or other
enterprise, to the fullest extent permitted under the DGCL. Such right included
the right to be paid by BLH expenses incurred in defending any such proceeding
in advance of its final disposition to the maximum extent permitted under the
DGCL. If a claim for indemnification or advancement of expenses was not paid in
full by BLH within 60 days after a written claim has been received by BLH, the
claimant may at any time thereafter bring suit against BLH to recover the unpaid
amount of the claim, and if successful in whole or in part, the claimant shall
also be entitled to be paid the expenses of prosecuting such claim. It shall be
a defense to any such action that such indemnification or advancement of costs
of defense are not permitted under the DGCL, but the burden of proving such
defense shall be on BLH. Neither the failure of BLH (including its board of
directors or any committee thereof, independent legal counsel, or stockholders)
to have made its determination prior to the commencement of such action that
indemnification of, or advancement of costs of defense to, the claimant is
permissible in the circumstances nor an actual determination by BLH (including
its board of directors or any committee thereof, independent legal counsel, or
stockholders) that such indemnification or advancement is not permissible shall
be a defense to the action or create a presumption that such indemnification or
advancement is not permissible. In the event of the death of any person having a
right of indemnification, such right shall inure to the benefit of his or her
heirs, executors, administrators, and personal representatives. The rights
conferred above shall not be exclusive of any other right which any person may
have or hereafter acquire under any statute, by-law, resolution of stockholders
or directors, agreement, or otherwise.
The Conseco Articles of Incorporation and Conseco By-laws do not provide for
the advancement of expenses. However, under the IBCL a corporation may advance
expenses if (1) the director furnishes the corporation a written affirmation of
the director's good faith belief that the director has met the standard of
conduct called for by Section 23-1-37-8 of the IBCL (which states that a
corporation may indemnify an individual made a party to a proceeding against
liability incurred in the proceeding if: (A) the individual's conduct was in
good faith; and (B) the individual reasonably believed: (i) in the case of
conduct in the individual's official capacity with the corporation, that the
individual's conduct was in its best interests; and (ii) in all other cases,
that the individual's conduct was at least not opposed to its best interests;
and (C) in the case of any criminal proceeding, the individual either: (i) had
reasonable cause to believe the individual's conduct was lawful; or (ii) had no
reasonable cause to believe the individual's conduct was unlawful), (2) the
director furnishes a written undertaking to repay the advance if it is
ultimately determined that he or she did not meet such standard of conduct and
(3) a determination is made that the facts then known would not preclude
indemnification under Indiana laws.
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DIVIDENDS AND REPURCHASES
Under the IBCL, a corporation may make distributions to its shareholders as
long as the corporation's debts may be paid as they come due, the corporation's
total assets exceed the sum of its liabilities plus the amount that would be
needed if the corporation were to be dissolved and the payment of these
distributions is consistent with the corporation's articles of incorporation.
Under the DGCL, a corporation may pay dividends and repurchase stock out of
surplus or, if there is no surplus, out of any net profits for the fiscal year
in which the dividend was declared and/or for the preceding fiscal year as long
as no payment reduces capital below the amount of capital represented by all
classes of shares having a preference upon the distribution of assets.
DISSENTERS' RIGHTS
The DGCL provides that a stockholder is entitled, under certain
circumstances, to receive payment of the fair value of the stockholder's common
stock if the stockholder dissents from a merger or consolidation. The DGCL also
permits a corporation to grant (by inclusion of a provision in its certificate
of incorporation) appraisal rights in connection with certain other corporate
transactions. BLH's Certificate of Incorporation contained no such provision.
Under the DGCL, dissenters' rights are not available if the shares of the
Delaware corporation are (i) listed on a national securities exchange (such as
the NYSE) or designated as a national market system security on an interdealer
quotation system by the National Association of Securities Dealers, Inc. (e. g.,
quoted on the Nasdaq National Market) or (ii) held of record by more than 2,000
holders. Notwithstanding the foregoing, dissenters' rights under the DGCL are
available if the stockholders of the Delaware corporation are to receive in the
merger or consolidation anything other than (i) shares of stock of the surviving
or resulting corporation, (ii) shares of stock of any other corporation which
are listed on a national securities exchange or are designated as a national
market system security on an interdealer quotation system (as described above)
or held of record by more than 2,000 holders, and/or (iii) cash in lieu of
fractional shares. However, appraisal rights are available if a merger is
completed pursuant to Section 253 of the DGCL.
The IBCL provides that a shareholder is entitled, under certain
circumstances, to receive payment of the fair value of the shareholder's common
stock if the shareholder dissents from a merger, share exchange, sale or
exchange of all or substantially all of the corporation's property and certain
control share acquisitions (as described under "--Certain Provisions Relating to
Acquisitions--Control Share Acquisitions"). The IBCL also permits a corporation
to grant (by inclusion of a provision in its articles of incorporation, bylaws
or resolution of the board of directors) appraisal rights in connection with
other corporate actions. Conseco's Articles of Incorporation, By-laws and
resolutions currently contain no such provision.
Under the IBCL, dissenters' rights are not available if the shares of the
Indiana corporation are (i) registered on a United States securities exchange
registered under the Exchange Act (such as the NYSE) or (ii) traded on the
National Association of Securities Dealers, Inc. Automated Quotations System
Over-the-Counter Markets--National Market Issues (such as the Nasdaq National
Market) or a similar market.
DIRECTOR AND OFFICER DISCRETION
Under Sections 23-1-35-1(d), (f), and (g) of the IBCL, in discharging his or
her duties to the corporation and in determining what he or she believes to be
in the best interests of the corporation, a director or officer may, in addition
to considering the effects of any action on shareholders, consider the effects
of the action on employees, suppliers, customers, the communities in which the
corporation operates and any other factors that the director or officer
considers pertinent. The DGCL does not contain
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a comparable provision, and, under Delaware law, the consideration that a board
may give to nonstockholder constituencies is less clear. In considering the best
interests of a corporation, under Delaware law, directors and officers can
generally take into consideration the interest of nonstockholders. However, the
Delaware Supreme Court has held that the consideration of nonstockholder
constituencies is inappropriate when an active auction is in process to sell a
company.
The foregoing discussion of certain similarities and material differences
between the rights of Conseco shareholders and the former rights of BLH
stockholders is only a summary of certain provisions and does not purport to be
a complete description of such similarities and differences, and is qualified in
its entirety by reference to the IBCL and the common law thereunder, the DGCL
and the common law thereunder, and the full text of the Conseco Articles of
Incorporation, the Conseco By-laws, the BLH Certificate of Incorporation and the
BLH By-laws.
MANAGEMENT OF CIHC AND CONSECO
UPON CONSUMMATION OF THE MERGER
The directors and executive officers of CIHC and Conseco have continued as
the directors and executive officers of CIHC and Conseco, respectively, after
the Merger. For information with respect to the directors and executive officers
of Conseco, see Items 10 - 13 of Conseco's Annual Report (which incorporates
portions of Conseco's proxy statement dated April 24, 1996), which is
incorporated herein by reference.
LEGAL MATTERS
The validity of the Conseco Common Stock to be issued in connection with the
Merger has been passed upon for Conseco by Lawrence W. Inlow, Executive Vice
President, General Counsel and Secretary of Conseco. Mr. Inlow is a full-time
employee and officer of Conseco and owns 808,174 shares of Conseco Common Stock
and holds options to purchase 1,406,900 shares of Conseco Common Stock.
EXPERTS
The consolidated financial statements of Conseco at December 31, 1995 and
1994, and for each of the three years in the period ended December 31, 1995,
incorporated by reference in this Prospectus, have been audited by Coopers &
Lybrand L.L.P., independent auditors, as set forth in their report thereon
incorporated by reference herein, and are incorporated by reference in reliance
upon such report given upon the authority of such firm as experts in accounting
and auditing.
The consolidated financial statements of BLH at December 31, 1995 and 1994,
and for the six months ended December 31, 1995, the six months ended June 30,
1995, and for the years ended December 31, 1994 and 1993, incorporated by
reference in this Prospectus, have been audited by Coopers & Lybrand L.L.P.,
independent auditors, as set forth in their report thereon incorporated by
reference herein, and are incorporated by reference in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
The consolidated financial statements of THI at December 31, 1995 and 1994,
and for each of the three years in the period ended December 31, 1995,
incorporated by reference in this Prospectus, have been audited by KPMG Peat
Marwick LLP, independent auditors, as set forth in their report thereon
incorporated by reference herein, and are incorporated by reference in reliance
upon such report given upon the authority of such firm as experts in accounting
and auditing.
The consolidated financial statements of ATC at December 31, 1995 and 1994,
and for each of the three years in the period ended December 31, 1995,
incorporated by reference in this Prospectus, have been audited by Arthur
Andersen LLP, independent public accountants, as set forth in their report with
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respect thereto and are incorporated by reference in reliance upon the authority
of such firm as experts in accounting and auditing.
The consolidated financial statements of CAF at December 31, 1995 and 1994,
and for each of the three years in the period ended December 31, 1995,
incorporated by reference in this Prospectus, have been audited by KPMG Peat
Marwick LLP, independent auditors, as set forth in their report thereon
incorporated by reference herein, and are incorporated by reference in reliance
upon such report given upon the authority of such firm as experts in accounting
and auditing.
The consolidated financial statements of LPG at December 31, 1995 and 1994,
and for each of the three years in the period ended December 31, 1995,
incorporated by reference in this Prospectus, have been audited by Coopers &
Lybrand L.L.P., independent auditors, as set forth in their report thereon
incorporated by reference herein, and are incorporated by reference in reliance
upon such report, given upon authority of such firm as experts in accounting and
auditing.
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ANNEX A
DELAWARE GENERAL CORPORATION LAW
SECTION 262. APPRAISAL RIGHTS
(a) Any stockholder of a corporation of this State who holds shares of stock
on the date of the making of a demand pursuant to subsection (d) of this section
with respect to such shares, who continuously holds such shares through the
effective date of the merger or consolidation, who has otherwise complied with
subsection (d) of this section and who has neither voted in favor of the merger
or consolidation nor consented thereto in writing pursuant to Section 228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of his shares of stock under the circumstances described in
subsections (b) and (c) of this section. As used in this section, the word
"stockholder" means a holder of record of stock in a stock corporation and also
a member of record of a nonstock corporation; the words "stock" and "share" mean
and include what is ordinarily meant by those words and also membership or
membership interest of a member of a nonstock corporation; and the words
"depository receipt" mean a receipt or other instrument issued by a depository
representing an interest in one or more shares, or fractions thereof, solely of
stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to SectionSection 251, 252, 254, 257, 258, 263 or 264 of this
title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no appraisal
rights shall be available for any shares of stock of the constituent
corporation surviving a merger if the merger did not require for its
approval the vote of the holders of the surviving corporation as provided in
subsection (f) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required by
the terms of an agreement of merger or consolidation pursuant to
SectionSection 251, 252, 254, 257, 258, 263 and 264 of this title to accept
for such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock or depository receipts at the
effective date of the merger or consolidation will be either listed on a
national securities exchange or designated as a national market system
security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this paragraph.
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(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this title is not owned by
the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are available
pursuant to subsections (b) or (c) hereof, that appraisal rights are
available for any or all of the shares of the constituent corporations, and
shall include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of his shares shall deliver to the
corporation, before the taking of the vote on the merger or consolidation, a
written demand for appraisal of his shares. Such demand will be sufficient
if it reasonably informs the corporation of the identity of the stockholder
and that the stockholder intends thereby to demand the appraisal of his
shares. A proxy or vote against the merger or consolidation shall not
constitute such a demand. A stockholder electing to take such action must do
so by a separate written demand as herein provided. Within 10 days after the
effective date of such merger or consolidation, the surviving or resulting
corporation shall notify each stockholder of each constituent corporation
who has complied with this subsection and has not voted in favor of or
consented to the merger or consolidation of the date that the merger or
consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to Section 228
or 253 of this title, the surviving or resulting corporation, either before
the effective date of the merger or consolidation or within 10 days
thereafter, shall notify each of the stockholders entitled to appraisal
rights of the effective date of the merger or consolidation and that
appraisal rights are available for any or all of the shares of the
constituent corporation, and shall include in such notice a copy of this
section. The notice shall be sent by certified or registered mail, return
receipt requested, addressed to the stockholder at his address as it appears
on the records of the corporation. Any stockholder entitled to appraisal
rights may, within 20 days after the date of mailing of the notice, demand
in writing from the surviving or resulting corporation the appraisal of his
shares. Such demand will be sufficient if it reasonably informs the
corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of his shares.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw his demand for
appraisal and to accept the terms offered upon the merger or consolidation.
Within 120 days after the effective date of the merger or consolidation, any
stockholder who has complied with the requirements of subsections (a) and (d)
hereof, upon written request, shall be entitled to receive from the corporation
surviving the merger or resulting from the consolidation a statement setting
forth the aggregate number of shares not voted in favor of the merger or
consolidation and with respect to which demands for appraisal have been received
and the aggregate number of holders of such shares. Such
A-2
<PAGE>
written statement shall be mailed to the stockholder within 10 days after his
written request for such a statement is received by the surviving or resulting
corporation or within 10 days after expiration of the period for delivery of
demands for appraisal under subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in Chancery
in which the petition was filed a duly verified list containing the names and
addresses of all stockholders who have demanded payment for their shares and
with whom agreements as to the value of their shares have not been reached by
the surviving or resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be accompanied by such a
duly verified list. The Register in Chancery, if so ordered by the Court, shall
give notice of the time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting corporation and to
the stockholders shown on the list at the addresses therein stated. Such notice
shall also be given by one or more publications at least one week before the day
of the hearing, in a newspaper of general circulation published in the City of
Wilmington, Delaware or such publication as the Court deems advisable. The forms
of the notices by mail and by publication shall be approved by the Court, and
the costs thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
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(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.
A-4
<PAGE>
ANNEX B
PLAN OF MERGER
THIS PLAN OF MERGER (the "Plan") is adopted as of August 26, 1996 by
CONSECO, INC., an Indiana corporation ("Conseco"), and CIHC, Incorporated, a
Delaware corporation ("CIHC"), with respect to the merger of Bankers Life
Holding Corporation, a Delaware corporation (the "Company"), into CIHC.
PREAMBLE
WHEREAS, the respective Boards of Directors of Conseco and CIHC have
approved the merger of the Company with and into CIHC, upon the terms and
subject to the conditions set forth herein; and
WHEREAS, the Merger is to be effected pursuant to Section 253 of the General
Corporation Law of the State of Delaware.
THE MERGER
1. THE MERGER. Subject to the terms and conditions of this Agreement, at
the Effective Time (as such term is defined in Section 2 hereof), the Company
shall be merged with and into CIHC (the "Merger"), in a transaction intended to
qualify as a tax-free reorganization under Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), in accordance with the Delaware
General Corporation Law (the "DGCL"), and the separate corporate existence of
the Company shall cease and CIHC shall continue as the surviving corporation
under the laws of the State of Delaware (the "Surviving Corporation") with all
the rights, privileges, immunities and powers, and subject to all the duties and
liabilities, of a corporation organized under the DGCL.
2. EFFECTIVE TIME. CIHC will file with the Secretary of State of the State
of Delaware (the "Delaware Secretary of State") on the date a Registration
Statement on Form S-4 of Conseco which is to be filed with the Securities and
Exchange Commission (the "Commission") in connection with the Merger is declared
effective by the Commission or as soon thereafter as is practicable a
certificate of merger executed in accordance with the relevant provisions of the
DGCL, and make all other filings or recordings required under the DGCL in
connection with the Merger. The Merger shall become effective upon the filing of
the certificate of merger with the Delaware Secretary of State, or at such later
time as is specified in the certificate of merger (the "Effective Time").
3. CERTIFICATE OF INCORPORATION. The Certificate of Incorporation of CIHC,
as in effect immediately prior to the Effective Time, shall be the Certificate
of Incorporation of the Surviving Corporation until thereafter amended as
provided by law.
4. BY-LAWS. The By-Laws of CIHC, as in effect immediately prior to the
Effective Time, shall be the By-Laws of the Surviving Corporation until
thereafter amended as provided by law.
5. DIRECTORS. The directors of CIHC at the Effective Time shall be the
directors of the Surviving Corporation.
6. OFFICERS. The officers of CIHC at the Effective Time shall be the
officers of the Surviving Corporation.
7. CONVERSION OF SHARES.
(a) OUTSTANDING SHARES. Each of the shares of common stock, $.001 par
value, of the Company (the "Shares") issued and outstanding immediately
prior to the Effective Time (other than Shares held as treasury shares by
the Company) shall, by virtue of the Merger and without any action on the
part of the holder thereof, be converted into a right to receive the
fraction (rounded to the nearest
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<PAGE>
ten-thousandth) of a validly issued, fully paid and nonassessable share of
common stock, without par value, of Conseco ("Conseco Common Stock"),
determined by dividing $25.00 by the Conseco Share Price. The "Conseco Share
Price" shall be equal to the Trading Average (as defined below). The
"Trading Average" shall be equal to the average of the closing prices of the
Conseco Common Stock on the New York Stock Exchange ("NYSE") Composite
Transactions Reporting System, as reported in THE WALL STREET JOURNAL, for
the ten trading days immediately preceding the second trading day prior to
the Effective Time. The Conseco Common Stock to be issued to holders of
Shares in accordance with this Section and any cash to be paid in accordance
with Section 8(f) in lieu of fractional shares of Conseco Common Stock are
referred to collectively as the "Merger Consideration."
(b) TREASURY SHARES. Each Share issued and outstanding immediately
prior to the Effective Time which is then held as a treasury share by the
Company immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the Company, be canceled and
retired and cease to exist, without any conversion thereof.
(c) CIHC SHARES. Each Share issued and outstanding immediately prior
to the Effective Time which is then owned by CIHC immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on the
part of CIHC or the Company, be cancelled and retired and cease to exist,
without any conversion thereof.
(d) IMPACT OF STOCK SPLITS, ETC. In the event of any change in Conseco
Common Stock between the date of this Plan and the Effective Time of the
Merger by reason of any stock split, stock dividend, subdivision,
reclassification, recapitalization, combination, exchange of shares or the
like, the number and class of shares of Conseco Common Stock to be issued
and delivered in the Merger in exchange for each outstanding Share as
provided in this Plan and the calculation of all share prices provided for
in this Agreement shall be proportionately adjusted.
(e) TREATMENT OF COMPANY STOCK OPTIONS.
(i) From and after the Effective Time, each outstanding unexpired stock
option ("Company Stock Option") to purchase Shares which has been granted
pursuant to the Company's 1993 Stock Option Plan, as amended to the date
hereof (the "Company Stock Option Plan"), shall be exerciseable, for the
same aggregate consideration payable to exercise such Company Stock Option,
for the number of shares of Conseco Common Stock which the holder would have
been entitled to receive at the Effective Time if such Company Stock Option
had been fully vested and exercised for Shares prior to the Effective Time,
and otherwise on the same terms and conditions as were applicable under the
Company Stock Option Plan and the underlying stock option agreement.
(ii) Each Company Stock Option will continue to vest in accordance with
the grant thereof under the Company Stock Option Plan.
8. EXCHANGE OF CERTIFICATES.
(a) EXCHANGE AGENT. As of the Effective Time, Conseco shall deposit
with its transfer agent and registrar (the "Exchange Agent"), for the
benefit of the holders of Shares, certificates representing the shares of
Conseco Common Stock to be issued to holders of Shares pursuant to Section
7(a) (such certificates, together with any dividends or distributions with
respect to such certificates, being hereinafter referred to as the "Payment
Fund").
(b) EXCHANGE PROCEDURES. As soon as practicable after the Effective
Time, each holder of an outstanding certificate or certificates which prior
thereto represented Shares shall, upon surrender to the Exchange Agent of
such certificate or certificates and acceptance thereof by the Exchange
Agent, be entitled to a certificate representing that number of whole shares
of Conseco Common Stock (and cash in lieu of fractional shares of Conseco
Common Stock as contemplated by this Section 8) which the aggregate number
of Shares previously represented by such certificate or certificates
surrendered
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<PAGE>
shall have been converted into the right to receive pursuant to Section 7(a)
of this Plan. The Exchange Agent shall accept such certificates upon
compliance with such reasonable terms and conditions as the Exchange Agent
may impose to effect an orderly exchange thereof in accordance with normal
exchange practices. If the consideration to be paid in the Merger (or any
portion thereof) is to be delivered to any person other than the person in
whose name the certificate representing Shares surrendered in exchange
therefor is registered, it shall be a condition to such exchange that the
certificate so surrendered shall be properly endorsed or otherwise be in
proper form for transfer and that the person requesting such exchange shall
pay to the Exchange Agent any transfer or other taxes required by reason of
the payment of such consideration to a person other than the registered
holder of the certificate surrendered, or shall establish to the
satisfaction of the Exchange Agent that such tax has been paid or is not
applicable. After the Effective Time, there shall be no further transfer on
the records of the Company or its transfer agent of certificates
representing Shares and if such certificates are presented to the Company
for transfer, they shall be canceled against delivery of the Merger
Consideration as hereinabove provided. Until surrendered as contemplated by
this Section 8(b), each certificate representing Shares (other than
certificates representing Shares to be canceled in accordance with Section
7(b)), shall be deemed at any time after the Effective Time to represent
only the right to receive upon such surrender the Merger Consideration
payable with respect to such Shares, without any interest thereon, as
contemplated by Section 7. No interest will be paid or will accrue on any
cash payable as Merger Consideration.
(c) LETTER OF TRANSMITTAL. Promptly after the Effective Time (but in
no event more than 10 days thereafter), the Surviving Corporation shall
require the Exchange Agent to mail to each record holder of certificates
that immediately prior to the Effective Time represented Shares which have
been converted pursuant to Section 7, a form of letter of transmittal and
instructions for use in surrendering such certificates and receiving the
consideration to which such holder shall be entitled therefor pursuant to
Section 7.
(d) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends or
other distributions with respect to Conseco Common Stock with a record date
after the Effective Time shall be paid to the holder of any certificate that
immediately prior to the Effective Time represented Shares which have been
converted pursuant to Section 7, until the surrender for exchange of such
certificate in accordance herewith. Following surrender for exchange of any
such certificate, there shall be paid to the holder of such certificate,
without interest, (i) at the time of such surrender, the amount of dividends
or other distributions with a record date after the Effective Time
theretofore paid with respect to the number of whole shares of Conseco
Common Stock into which the Shares represented by such certificate
immediately prior to the Effective Time were converted pursuant to Section
7, and (ii) at the appropriate payment date, the amount of dividends or
other distributions with a record date after the Effective Time, but prior
to such surrender, and with a payment date subsequent to such surrender,
payable with respect to such whole shares of Conseco Common Stock.
(e) NO FURTHER OWNERSHIP RIGHTS IN SHARES. The Merger Consideration
paid upon the surrender for exchange of certificates representing Shares in
accordance with the terms of this Plan shall be deemed to have been issued
and paid in full satisfaction of all rights pertaining to the Shares
theretofore represented by such certificates, subject, however, to the
Surviving Corporation's obligation (if any) to pay any dividends or make any
other distributions with a record date prior to the Effective Time which may
have been declared by the Company on such Shares which remain unpaid at the
Effective Time.
(f) NO FRACTIONAL SHARES.
(i) No certificates or scrip representing fractional shares of Conseco
Common Stock shall be issued upon the surrender for exchange of certificates
that immediately prior to the Effective Time
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<PAGE>
represented Shares which have been converted pursuant to Section 7, and such
fractional share interests will not entitle the owner thereof to vote or to
any rights of a shareholder of Conseco.
(ii) Notwithstanding any other provisions of this Plan, each holder of
Shares who would otherwise have been entitled to receive a fraction of a
share of Conseco Common Stock (after taking into account all certificates
delivered by such holder) shall receive, in lieu thereof, cash (without
interest) in an amount equal to such fractional part of a share of Conseco
Common Stock multiplied by the Conseco Share Price.
(g) TERMINATION OF PAYMENT FUND. Any portion of the Payment Fund which
remains undistributed to the holders of the certificates representing Shares
for 120 days after the Effective Time shall be delivered to Conseco, upon
demand, and any holders of Shares who have not theretofore complied with
this Plan shall thereafter look only to Conseco and only as general
creditors thereof for payment of their claim for the cash portion of any
Merger Consideration and any dividends or distributions with respect to
Conseco Common Stock.
(h) NO LIABILITY. Neither Conseco nor the Exchange Agent shall be
liable to any person in respect of any cash, shares, dividends or
distributions payable from the Payment Fund delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law. If
any certificates representing Shares shall not have been surrendered prior
to five years after the Effective Time (or immediately prior to such earlier
date on which any Merger Consideration in respect of such certificate would
otherwise escheat to or become the property of any governmental entity), any
such cash, shares, dividends or distributions payable in respect of such
certificate shall, to the extent permitted by applicable law, become the
property of the Surviving Corporation, free and clear of all claims or
interest of any person previously entitled thereto.
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<PAGE>
PART II.
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Indiana Corporation Law grants authorization to Indiana corporations to
indemnify officers and directors for their conduct if such conduct was in good
faith and was in the corporation's best interests or, in the case of directors,
was not opposed to such best interests, and permits the purchase of insurance in
this regard. In addition, the shareholders of a corporation may approve the
inclusion of other or additional indemnification provisions in the articles of
incorporation and by-laws.
The By-laws of Conseco provides for the indemnification of any person made a
party to any action, suit or proceeding by reason of the fact that he is a
director, officer or employee of Conseco, unless it is adjudged in such action,
suit or proceeding that such person is liable for negligence or misconduct in
the performance of his duties. Such indemnification shall be against the
reasonable expenses, including attorneys' fees, incurred by such person in
connection with the defense of such action, suit or proceeding. In some
circumstances, Conseco may reimburse any such person for the reasonable costs of
settlement of any such action, suit or proceeding if a majority of the members
of the Board of Directors not involved in the controversy shall determine that
it was in the interests of Conseco that such settlement be made and that such
person was not guilty of negligence or misconduct.
The above discussion of Conseco's By-laws and the Indiana Corporation Law is
not intended to be exhaustive and is qualified in its entirety by such By-laws
and the Indiana Corporation Law.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Securities Act
and is therefore unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person thereof in the
successful defense of any action, suit or proceeding) is asserted by a director,
officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<C> <C> <S>
2(a) -- Plan of Merger of Bankers Life Holding Corporation and CIHC, Incorporated
(included as Annex B to the Prospectus).
5 -- Opinion of Lawrence W. Inlow, General Counsel to Conseco, Inc., as to the
validity of the issuance of the securities registered hereby.**
8 -- Opinion of Sidley & Austin as to certain tax matters.*
23(a) -- Consent of Lawrence W. Inlow, General Counsel to Conseco, Inc. (included in
the opinion filed as Exhibit 5 to the Registration Statement).**
23(b) -- Consent of Coopers & Lybrand L.L.P. with respect to the financial statements
of the Registrant.*
23(c) -- Consent of Coopers & Lybrand L.L.P. with respect to the financial statements
of Bankers Life Holding Corporation.*
23(d) -- Consent of KPMG Peat Marwick LLP with respect to the financial statements of
Transport Holdings Inc.*
</TABLE>
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<PAGE>
<TABLE>
<C> <C> <S>
23(e) -- Consent of Arthur Andersen LLP with respect to the financial statements of
American Travellers Corporation.*
23(f) -- Consent of KPMG Peat Marwick LLP with respect to the financial statements of
Capitol American Financial Corporation.*
23(g) -- Consent of Coopers & Lybrand L.L.P. with respect to the financial statements
of Life Partners Group, Inc.*
23(h) -- Consent of Sidley & Austin (included in the opinion filed as Exhibit 8 to the
Registration Statement).*
24 -- Powers of Attorney for Stephen C. Hilbert, Rollin M. Dick, Ngaire E. Cuneo,
David R. Decatur, M. Phil Hathaway, Louis P. Ferrero, Donald F. Gongaware,
James D. Massey and Dennis E. Murray, Sr.**
</TABLE>
- ------------------------
*Filed herewith.
**Previously filed.
(b) Financial Statement Schedules--Inapplicable.
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(b) The undersigned registrant hereby undertakes as follows:
(1) that prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items
of the applicable form.
(2) That every prospectus: (i) that is filed pursuant to paragraph (1)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment, shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
(d) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
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<PAGE>
(e) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the Registration Statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(f) The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
(g) See Part II--Item 20.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Carmel
and the State of Indiana, on the 30th day of December, 1996.
<TABLE>
<S> <C> <C>
CONSECO, INC.
By: /s/ ROLLIN M. DICK
-----------------------------------------
Rollin M. Dick,
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
Director, Chairman of the
Board, President and
* Chief Executive Officer
- ------------------------------ (Principal Executive December 30, 1996
Stephen C. Hilbert Officer of the
Registrant)
Director, Executive Vice
President and Chief
* Financial Officer
- ------------------------------ (Principal Financial and December 30, 1996
Rollin M. Dick Accounting Officer of
the Registrant)
*
- ------------------------------ Director December 30, 1996
Ngaire E. Cuneo
*
- ------------------------------ Director December 30, 1996
David R. Decatur
*
- ------------------------------ Director December 30, 1996
M. Phil Hathaway
*
- ------------------------------ Director December 30, 1996
Louis P. Ferrero
*
- ------------------------------ Director December 30, 1996
Donald F. Gongaware
*
- ------------------------------ Director December 30, 1996
James D. Massey
*
- ------------------------------ Director December 30, 1996
Dennis E. Murray, Sr.
*By: /s/ KARL W. KINDIG
-------------------------
Karl W. Kindig
ATTORNEY-IN-FACT
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<PAGE>
EXHIBIT 8
SIDLEY & AUSTIN
875 Third Avenue
New York, New York 10022
December 30, 1996
Conseco, Inc.
11825 North Pennsylvania Street
Carmel, Indiana 46032
Ladies and Gentlemen:
We refer to the Plan of Merger adopted as of August 26, 1996 (the "Merger
Agreement") by and between Conseco, Inc., an Indiana corporation ("Conseco"),
and CIHC, Incorporated, a Delaware corporation ("CIHC"), which provides for the
merger (the "Merger") of Bankers Life Holding Corporation, a Delaware
corporation (the "Company"), with and into CIHC on the terms and subject to the
conditions therein set forth. Capitalized terms not defined herein have the
meanings specified in the Merger Agreement.
As provided in the Merger Agreement, at the Effective Time, by reason of the
Merger: (i) each share of common stock, $.001 par value, of the Company (the
"Shares") issued and outstanding immediately prior to the Effective Time (other
than Shares held as treasury shares by the Company, Shares owned by CIHC and
Shares in respect of which dissenters' rights are properly executed) shall, by
virtue of the Merger and without any action on the part of the holder thereof,
be converted into a right to receive a fraction of a validly issued, fully paid
and nonassessable share of common stock, without par value, of Conseco ("Conseco
Common Stock"), with cash paid in lieu of fractional shares of Conseco Common
Stock; (ii) each Share issued and outstanding immediately prior to the Effective
Time which is then held as a treasury share by the Company immediately prior to
the Effective Time shall, by virtue of the Merger and without any action on the
part of the Company, be canceled and retired and cease to exist, without any
conversion thereof; and (iii) each Share issued and outstanding immediately
prior to the Effective Time which is then owned by CIHC immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on the part
of CIHC or the Company, be canceled and retired and cease to exist, without any
conversion thereof. Accordingly, immediately following the Merger, the former
non-dissenting holders of Shares, other than CIHC, will hold Conseco Common
Stock issued in the Merger (and cash in lieu of any fractional shares of Conseco
Common Stock) and CIHC, as the surviving corporation, will remain a wholly owned
subsidiary of Conseco. The Merger and the Merger Agreement are more fully
described in Conseco's Registration Statement on Form S-4 (the "Registration
Statement") relating to the registration of shares of Conseco Common Stock,
which was filed by Conseco on December 17, 1996 with the Securities and Exchange
Commission pursuant to the Securities Act of 1933, as amended. The Registration
Statement includes the Prospectus (the "Prospectus") of Conseco.
In rendering the opinions expressed below, we have relied upon the accuracy
of the facts, information and representations and the completeness of the
covenants contained in the Merger Agreement, the Prospectus and such other
documents as we have deemed relevant and necessary. Such opinions are
conditioned, among other things, not only upon such accuracy and completeness as
of the date hereof, but also the continuing accuracy and completeness thereof as
of the Effective Time. Moreover, we have assumed the absence of any change to
any of such documents between the date hereof and the Effective Time.
We have assumed the authenticity of all documents submitted to us as
originals, the genuineness of all signatures, the legal capacity of all natural
persons and the conformity with original documents of all
<PAGE>
copies submitted to us for our examination. We have also assumed: (i) that the
transactions related to the Merger or contemplated by the Merger Agreement will
be consummated (a) in accordance with the Merger Agreement and (b) as described
in the Prospectus; (ii) that the Merger will qualify as a statutory merger under
the laws of the State of Delaware; and (iii) the accuracy as of the date hereof,
and the continuing accuracy as of the Effective Time, of the written statements
made by executives of Conseco and the Company contained in the Conseco Tax
Certificate and the Company Tax Certificate, respectively.
In rendering the opinions expressed below, we have considered the applicable
provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
regulations promulgated thereunder by the United States Treasury Department (the
"Regulations"), pertinent judicial authorities, rulings of the Internal Revenue
Service and such other authorities as we have considered relevant. It should be
noted that the Code, the Regulations and such judicial decisions, administrative
interpretations and other authorities are subject to change any time and, in
some circumstances, with retroactive effect, and any such change could affect
the opinions stated herein.
Based upon and subject to the foregoing, it is our opinion, as counsel for
Conseco, that:
(1) The Merger will constitute a "reorganization" within the meaning of
Section 368(a) of the Code, and Conseco, CIHC and the Company will each be a
party to such reorganization within the meaning of Section 368(b) of the
Code.
(2) No gain or loss will be recognized by the Company as a result of the
Merger.
(3) No gain or loss will be recognized by the non-dissenting
stockholders of the Company upon the conversion of their Shares into shares
of Conseco Common Stock pursuant to the Merger (except with respect to cash
paid in lieu of a fractional share of Conseco Common Stock).
(4) The aggregate tax basis of the shares of Conseco Common Stock
received upon the conversion of Shares pursuant to the Merger (including any
fractional share of Conseco Common Stock for which cash is paid) will be the
same as the aggregate tax basis of such Shares.
(5) The holding period for the shares of Conseco Common Stock received
upon the conversion of Shares pursuant to the Merger will include the
holding period for such Shares, provided such Shares were held as capital
assets by the holder thereof at the Effective Time.
(6) Any holder of Shares who receives cash in lieu of a fractional share
of Conseco Common Stock will recognize gain or loss equal to the difference,
if any, between such holder's basis in such fractional share (determined as
provided in paragraph 4) and the amount of cash so received.
Except as expressly set forth in paragraphs 1 through 6, inclusive, you have
not requested, and we do not herein express, any opinion concerning the tax
consequences of, or any other matters related to, the Merger.
We assume no obligation to update or supplement this letter to reflect any
facts or circumstances which may hereafter come to our attention with respect to
the opinions expressed above, including any changes in applicable law which may
hereafter occur.
We hereby consent to the filing of this letter as an Exhibit to the
Registration Statement and to all references to our Firm included in or made a
part of the Registration Statement.
Very truly yours,
/s/ SIDLEY & AUSTIN
--------------------------------------
Sidley & Austin
<PAGE>
EXHIBIT 23(B)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement
of Conseco, Inc. on Form S-4 (File No. 333-18081), of our reports dated March
20, 1996 on our audits of the consolidated financial statements and financial
statement schedules of Conseco, Inc. and subsidiaries as of December 31, 1995
and 1994, and for the years ended December 31, 1995, 1994 and 1993, included in
the Annual Report on Form 10-K. We also consent to the reference to our firm
under the caption "Experts."
/s/ COOPERS & LYBRAND L.L.P.
--------------------------------------
COOPERS & LYBRAND L.L.P.
Indianapolis, Indiana
December 30, 1996
<PAGE>
EXHIBIT 23(C)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement
of Conseco, Inc. on Form S-4 (File No. 333-18081), of our reports dated March
20, 1996 on our audits of the consolidated financial statements and financial
statement schedules of Bankers Life Holding Corporation and subsidiaries as of
December 31, 1995 and 1994, and for the six months ended December 31, 1995, the
six months ended June 30, 1995 and the years ended December 31, 1994 and 1993,
included in the Annual Report on Form 10-K. We also consent to the reference to
our firm under the caption "Experts."
/s/ COOPERS & LYBRAND L.L.P.
--------------------------------------
COOPERS & LYBRAND L.L.P.
Indianapolis, Indiana
December 30, 1996
<PAGE>
EXHIBIT 23(D)
ACCOUNTANTS' CONSENT
The Board of Directors
Transport Holdings Inc.:
We consent to the incorporation by reference herein of our report dated
February 22, 1996, related to the consolidated financial statements of Transport
Holdings Inc. and subsidiaries, and to the reference to our firm under the
headings "Selected Historical Financial Information of THI" and "Experts" in the
Statement.
/s/ KPMG PEAT MARWICK LLP
--------------------------------------
KPMG PEAT MARWICK LLP
Dallas, Texas
December 30, 1996
<PAGE>
EXHIBIT 23(E)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement of our report dated March 4, 1996
included in American Travellers Corporation Form 10-K for the year ended
December 31, 1995 and to all references to our Firm included in this
Registration Statement.
/s/ ARTHUR ANDERSEN LLP
--------------------------------------
ARTHUR ANDERSEN LLP
Philadelphia, PA
December 30, 1996
<PAGE>
EXHIBIT 23(F)
ACCOUNTANTS' CONSENT
The Shareholders and Board of Directors
Capitol American Financial Corporation:
We consent to the incorporation by reference herein of our reports dated
January 31, 1996, related to the consolidated financial statements and related
financial statement schedules of Capitol American Financial Corporation and
subsidiaries, and to the reference to our firm under the headings "Selected
Historical Financial Information of CAF" and "Experts" in the Prospectus.
/s/ KPMG PEAT MARWICK LLP
--------------------------------------
KPMG PEAT MARWICK LLP
Columbus, Ohio
December 27, 1996
<PAGE>
EXHIBIT 23(G)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement
of Conseco, Inc. on Form S-4 (File No. 333-18081), of our reports dated March
27, 1996 on our audits of the consolidated financial statements and financial
statement schedules of Life Partners Group, Inc. and subsidiaries as of December
31, 1995 and 1994, and for the years ended December 31, 1995, 1994 and 1993,
included in the Annual Report on Form 10-K. We also consent to the reference to
our firm under the caption "Experts."
/s/ COOPERS & LYBRAND L.L.P.
--------------------------------------
COOPERS & LYBRAND L.L.P.
Denver, Colorado
December 30, 1996
