Reinsurance agreement boosts Conseco's capital ratios

Conseco Inc. said Friday that a subsidiary has reached a reinsurance agreement with Wilton Reassurance Co. covering about 237,000 life insurance policies. Wilton Re will pay a ceding commission of about $45 million and will 50 percent co-insure the policies with an effective date of Oct. 1, 2009, Conseco said. Conseco's Bankers Life and Casualty subsidiary will continue to administer the policies, Carmel, Ind.-based Conseco said. Bankers Life also will transfer to Wilton Re about $95 million in investment securities and policy loans, and $140 million of statutory policy and other liabilities. The transaction, expected to be completed in the current quarter, is subject to approval by insurance regulators in Illinois and Wisconsin. Conseco CEO Jim Prieur said the transaction is expected to increase his company's consolidated risk-based capital ratio by 9 percentage points, and increase statutory capital. Reinsurance is effectively insurance for insurers — it allows companies to transfer some of the risk associated with certain policies, in order to reduce the amount it might have to pay out in the event of an insurance claim. As a result of the transaction, Conseco expects to record an increase to its deferred tax valuation allowance of about $19 million in the current quarter. Conseco also expects to record a pre-tax deferred cost of reinsurance of about $30 million.