Lehman/A.M. Best Co. 2nd Annual Conference

"It's not to our advantage to own Van Gogh paintings or the biggest air force east of the Mississippi." Gary Wendt Chairman & Chief Executive Officer Conseco, Inc.

CEO Details Conseco Turnaround Plan

Conseco Inc. Chief Executive Officer Gary C. Wendt, who was brought in last June to turn the company around, said the company's insurance operations need to grow by 10% a year through 2004 to return to the results last seen in 1997, the year before the company began to experience financial troubles.

Speaking at the second annual Insurance Conference held in New York May 21 and 22, Wendt said two-thirds of that growth will come from cost reductions. And Conseco Finance Co., its credit and mortgage lending arm, must earn an interest rate of an additional 25 basis points on its loans as the company works to return to profitability, he said.

Conseco (NYSE: CNC) posted a 9.5% jump in first-quarter net income, largely on the strength of cost-cutting and a one-time gain from the sale of its stake in a riverboat operation.

First-quarter net income was up 9.5% to $80.2 million, compared to a year earlier.

Wendt has restructured operations, cleaned house, sold off noncore assets and instituted management processes that he used in his former position as president, chairman and chief executive officer of GE Capital Services. Among the changes:

-- Nonstrategic assets valued at $2 billion were sold. "It's not to our advantage to own Van Gogh paintings or the biggest air force east of the Mississippi," Wendt said at the conference, referring to the sale of the corporate art collection and private planes.

-- Conseco's bank debt was restructured for up to five years.

-- The corporate staff has been reduced to 250 positions from 750 positions, and all business units report directly to Wendt.

-- More than 2,000 data processing jobs will be moved to India.

-- Wendt instituted the management performance tool, six sigma, that gained publicity when it was adopted by GE CEO Jack Welch. Wendt is optimistic the six sigma process will help further the Conseco brand name throughout all its insurance companies.

-- Conseco Finance was reorganized, changing accounting practices, closing 46 branches, eliminating 2,000 employees and reducing expenses by $150 million.

Although Conseco Finance was being shopped around by the previous management, Wendt termed it "a rare commodity because it has a 30% share of the manufactured housing market."

Conseco sells several lines of insurance, including long-term care, supplemental health, life, and specific illness. It also markets mutual funds and annuities.

The company will continue to target its products to Middle America, the 51 million households with annual income between $25,000 and $70,000.

Conseco has a particular marketing emphasis on retirement products, including a series of television commercials that show bizarre ways of funding retirement. The newest commercial, Wendt said, shows Grandma arriving unexpectedly at her children's home in a bag.

(By Marilyn Ostermiller, executive editor, ostermm@ambest.com)