SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: December 31, 1996
CONSECO, INC.
State of Incorporation:
Indiana
Commission File Number IRS Employer Id. Number
No. 1-9250 No. 35-1468632
Address of Principal Executive Offices:
11825 North Pennsylvania Street
Carmel, Indiana 46032
Telephone No.
(317) 817-6100
<PAGE>
CONSECO, INC. AND SUBSIDIARIES
ITEM 5. OTHER EVENTS.
On December 31, 1996, Conseco, Inc. ("Conseco") completed its merger with
Bankers Life Holding Corporation ("BLH"), in a transaction pursuant to which BLH
was merged with and into CIHC, Incorporated ("CIHC"), a wholly owned subsidiary
of Conseco, with CIHC being the surviving corporation (the "Merger"). The Merger
was consummated pursuant to a Plan of Merger dated as of August 26, 1996. In the
Merger, each outstanding share of BLH common stock, not already owned by
Conseco, was exchanged for 0.3983 shares of Conseco common stock. Conseco
issued approximately 2.0 million shares of Conseco common stock or common stock
equivalents with a value of approximately $122.5 million to acquire BLH's common
stock not already owned by Conseco.
The acquisition of BLH will be accounted for under 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
consolidated financial statements will 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 the dates of their purchase; and (iv) the
portion of BLH's net assets acquired in the Merger is valued as of December 31,
1996.
2
<PAGE>
CONSECO, INC. AND SUBSIDIARIES
ITEM 7 (c). EXHIBIT.
99.1 Pro Forma Consolidated Financial Statements of Conseco, Inc.
and Subsidiaries
3
<PAGE>
CONSECO, INC. AND SUBSIDIARIES
_________________
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: December 31, 1996
CONSECO, INC.
By: /s/ ROLLIN M. DICK
-----------------------------
Rollin M. Dick
Executive Vice President
and Chief Financial Officer
4
CONSECO, INC. AND SUBSIDIARIES PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The unaudited pro forma consolidated statement of operations of Conseco,
Inc. ("Conseco") for the nine months ended September 30, 1996, and for the year
ended December 31, 1995, presents the consolidated operating results for Conseco
as if the merger (the "Merger") of Bankers Life Holding Corporation ("BLH") with
and into a wholly owned subsidiary of Conseco, had occurred on January 1, 1995.
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: (i) the issuance of $275.0 million of Trust
Originated Preferred Securities ("TOPrS") having a distribution rate of 9.16
percent (the "TOPrS Offering") completed November 19, 1996; (ii) the issuance of
$325.0 million of Capital Trust Pass-through Securities ("TruPS") having a
distribution rate of 8.70 percent (the "TruPS Offering") completed November 27,
1996; (iii) the merger (the "THI Merger") of Transport Holdings Inc. ("THI")
with and into Conseco completed December 23, 1996; (iv) the merger (the "ATC
Merger") of American Travellers Corporation ("ATC") with and into Conseco
completed December 17, 1996; (v) the call for redemption of Conseco's Series D
Convertible Preferred Stock (the "Series D Call") completed on September 26,
1996; (vi) the acquisition of all of the outstanding common stock of American
Life Holdings, Inc. ("ALH"), not previously owned by Conseco, and related
transactions (the "ALH Transaction") completed on September 30, 1996; (vii) the
acquisition (the "LPG Merger") of Life Partners Group, Inc.("LPG") completed
effective June 30, 1996; (viii) the acquisition of all of the outstanding common
stock of CCP Insurance, Inc. ("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) completed August 31, 1995; (ix) the
increase of Conseco's ownership in Bankers Life Holding Corporation ("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; (x) the issuance of 4.37
million shares of Preferred Redeemable Increased Dividend Equity Securities
Convertible Preferred Stock ("PRIDES") of Conseco in January 1996; (xi) 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 (xii) the debt restructuring of ALH in the fourth quarter of 1995.
Such pro forma adjustments are set forth in: (i) Conseco's Current Report on
Form 8-K dated December 23, 1996; (ii) Conseco's Current Report on Form 8-K
dated December 17, 1996; (iii) Exhibit 99.2 included in Conseco's Current Report
on Form 8-K dated September 25, 1996; (iv) Conseco's Current Report on Form 8-K
dated August 2, 1996; and (v) Exhibit 99.1 included in Conseco's Current Report
on Form 8-K dated April 10, 1996.
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: (i) the TOPrS Offering; (ii) the
TruPs Offering; (iii) the THI Merger; (iv) the ATC Merger; (v) the Series D
Call; (vi) the ALH Transaction; (vii) the LPG Merger; (viii) the issuance of
4.37 million shares of Conseco PRIDES in January 1996; and (ix) the BLH Tender
Offer. Such pro forma adjustments are set forth in: (i) Conseco's Current Report
on Form 8-K dated December 23, 1996; (ii) Conseco's Current Report on Form 8-K
dated December 17, 1996; and (iii) Exhibit 99.1 included in Conseco's Form 10-Q
for the quarterly period ended September 30, 1996.
The unaudited pro forma consolidated balance sheet of Conseco as of
September 30, 1996, gives effect to the Merger as if it had occurred on
September 30, 1996.
The unaudited pro forma consolidated balance sheet data as of September 30,
1996, set forth in the unaudited pro forma 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: (i) the
TOPrS Offering; (ii) the TruPS Offering; (iii) the THI Merger; and (iv) the ATC
Merger. Such pro forma adjustments are set forth in: (i) Conseco's Current
Report on Form 8-K dated December 23, 1996; and (ii) Conseco's Current Report on
Form 8-K dated December 17, 1996.
The pro forma consolidated financial statements are based on the historical
financial statements of Conseco, LPG, ATC and THI 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 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
<PAGE>
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 ATC Merger, the THI
Merger and the Merger using estimated values of the assets and liabilities of
LPG, ALH, ATC, THI and BLH 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 ATC Merger, the THI Merger and the Merger had occurred on
the assumed merger dates.
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<TABLE>
<CAPTION>
CONSECO, INC AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
for the nine months ended September 30, 1996
(Amounts in millions, except per share amounts)
(unaudited)
Pro forma
Pro forma adjustments
Conseco relating Pro forma
before the to the Conseco
Merger Merger totals
--------- ---------- ---------
<S> <C> <C> <C>
Revenues:
Insurance policy income $1,714.7 $ - $1,714.7
Investment activity:
Net investment income 1,143.3 1,143.3
Net trading losses (6.5) (6.5)
Net realized gains 26.6 (.2)(1) 26.4
Fee revenue 29.7 29.7
Restructuring income 30.4 30.4
Other income 12.8 12.8
--------- -------- --------
Total revenues 2,951.0 (.2) 2,950.8
--------- -------- --------
Benefits and expenses:
Insurance policy benefits
and change in future
policy benefits 1,203.5 (1.5)(1) 1,202.0
Interest expense
on annuities and
financial products 549.5 549.5
Interest expense on
notes payable 76.7 76.7
Interest expense on
investment borrowings 17.2 17.2
Amortization related
to operations 283.9 .4 (1) 284.3
Amortization related
to realized gains 22.3 (.1)(1) 22.2
Other operating
costs and expenses 332.3 1.6 (1) 333.9
--------- -------- -------
Total benefits
and expenses 2,485.4 .4 2,485.8
--------- -------- -------
Income before income
taxes, minority interest
and extraordinary
charge 465.6 (.6) 465.0
Income tax expense 178.1 (.1)(2) 178.0
--------- -------- -------
Income before
minority interest
and extraordinary
charge 287.5 (.5) 287.0
Minority interest in consolidated
subsidiaries:
Dividends on Company - obligated
mandatorily redeemable
preferred securities of
subsidiary trusts 26.1 26.1
Dividends on preferred stock 6.4 6.4
Equity in earnings 13.9 (13.9)(3) -
-------- -------- -------
Income before
extraordinary charge $ 241.1 $ 13.4 $ 254.5
======== ======== =======
Earnings per common share and
common equivalent share:
Primary:
Weighted average
shares outstanding 92.1 2.0 (4) 94.1
==== ====== ====
Income before
extraordinary charge $2.62 $2.70
===== =====
Fully diluted:
Weighted average shares
outstanding 97.6 2.0 (4) 99.6
==== ====== ====
Income before
extraordinary charge $2.48 $2.57
===== =====
The accompanying notes are an integral part of the pro forma consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSECO, INC AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
for the year ended December 31, 1995
(Amounts in millions, except per share amounts)
(unaudited)
Pro forma
Pro forma adjustments
Conseco relating Pro forma
before the to the Conseco
Merger Merger totals
--------- ---------- ---------
<S> <C> <C> <C>
Revenues:
Insurance policy income $2,216.9 $ (.3)(1) $2,216.6
Investment activity:
Net investment income 1,528.9 (.1)(1) 1,528.8
Net trading income 2.5 2.5
Net realized gains 222.5 (.4)(1) 222.1
Fee revenue 33.9 33.9
Restructuring income 15.2 15.2
Other income 12.6 (.1)(1) 12.5
--------- -------- --------
Total revenues 4,032.5 (.9) 4,031.6
--------- -------- --------
Benefits and expenses:
Insurance policy benefits
and change in future
policy benefits 1,566.2 (1.7)(1) 1,564.5
Interest expense
on annuities and
financial products 758.5 .3 (1) 758.8
Interest expense on
notes payable 108.5 (.4)(1) 108.1
Interest expense on
investment borrowings 30.2 30.2
Amortization related
to operations 361.1 (2.8)(1) 358.3
Amortization related
to realized gains 144.4 (.6)(1) 143.8
Other operating
costs and expenses 478.4 5.9 (1) 484.3
--------- -------- -------
Total benefits
and expenses 3,447.3 .7 3,448.0
--------- -------- -------
Income before income
taxes, minority interest
and extraordinary
charge 585.2 (1.6) 583.6
Income tax expense 226.6 (.6)(2) 226.0
--------- -------- -------
Income before
minority interest
and extraordinary
charge 358.6 (1.0) 357.6
Minority interest in consolidated
subsidiaries:
Dividends on Company - obligated
mandatorily redeemable
preferred securities of
subsidiary trusts 34.8 34.8
Dividends on preferred stock 8.7 8.7
Equity in earnings 12.6 (12.6)(3) -
-------- -------- -------
Income before
extraordinary
charge $ 302.5 $ 11.6 $ 314.1
======== ======== =======
Earnings per common share and
common equivalent share:
Primary:
Weighted average
shares outstanding 90.6 2.0 (4) 92.6
==== ====== ====
Income before
extraordinary charge $3.34 $3.39
===== =====
Fully diluted:
Weighted average shares
outstanding 94.9 2.0 (4) 96.9
==== ====== ====
Income before
extraordinary charge $3.19 $3.24
===== =====
The accompanying notes are an integral part of the pro forma consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSECO, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
September 30, 1996
(Dollars in millions)
(unaudited)
Pro forma
Pro forma adjustments
Conseco relating Pro forma
before the to the Conseco
Merger Merger totals
--------- ---------- ---------
<S> <C> <C> <C>
Assets
Investments:
Actively managed fixed
maturity securities
at fair value $17,048.6 $ - $17,048.6
Equity securities at
fair value 105.3 105.3
Mortgage loans 381.2 381.2
Credit-tenant loans 393.8 393.8
Policy loans 542.9 542.9
Other invested assets 217.5 217.5
Short-term investments 259.1 259.1
Assets held in separate
accounts 300.4 300.4
-------- ------- ---------
Total investments 19,248.8 - 19,248.8
Accrued investment income 290.1 290.1
Cost of policies purchased 2,228.7 65.9 (1) 2,294.6
Cost of policies produced 541.0 (50.7)(1) 490.3
Reinsurance receivables 469.2 469.2
Income taxes 42.3 (5.3)(2) 37.0
Goodwill 2,087.5 57.3 (1) 2,144.8
Property and equipment 110.5 110.5
Securities segregated for
future redemption of
redeemable preferred
stock of a
subsidiary 45.0 45.0
Other assets 247.5 247.5
--------- ------- ---------
Total assets $25,310.6 $ 67.2 $25,377.8
========= ======= =========
The accompanying notes are an integral part of the pro forma consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSECO, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
September 30, 1996
(Dollars in millions)
(unaudited)
Pro forma
Pro forma adjustments
Conseco relating Pro forma
for the to the Conseco
Merger Merger totals
--------- ---------- ---------
<S> <C> <C> <C>
Liabilities:
Insurance liabilities $19,100.4 $ - $19,100.4
Investment borrowings 539.4 539.4
Other liabilities 522.7 522.7
Liabilities related
to separate accounts 300.1 300.1
Notes payable of Conseco 869.7 418.1 (5) 1,287.8
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
--------- ------- --------
Total liabilities 21,763.4 - 21,763.4
--------- ------- --------
Minority interest in consolidated
subsidiaries:
Company - obligated mandatorily
redeemable preferred securities
of subsidiary trusts 600.0 600.0
Preferred stock 92.5 92.5
Common stock 55.3 (55.3)(3) -
--------- ------- ---------
Shareholders' equity:
Preferred stock 267.1 267.1
Common stock and additional
paid-in capital 1,898.0 122.5 (6) 2,020.5
Unrealized appreciation
(depreciation) of securities (47.0) (47.0)
Retained earnings 681.3 681.3
--------- ------- ---------
Total shareholders' equity 2,799.4 122.5 2,921.9
--------- ------- ---------
Total liabilities and
shareholders' equity $25,310.6 $ 67.2 $25,377.8
========= ======= =========
The accompanying notes are an integral part of the pro forma consolidated financial statements.
</TABLE>
<PAGE>
CONSECO AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
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: (1) 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; (2) the portion of BLH's net assets acquired
by Conseco on September 30, 1993, is valued as of that acquisition date; (3) 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 (4) 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 Merger.
(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 Merger.
