<font color=red>CNC Turnaround Memo #2 from Wendt.
This is original allright. Can be seen in CNC website:
conseco.com
Turnaround Memo #2
October 17, 2000
To: Conseco Shareholders
From: Gary Wendt Chairman & CEO
From time to time in the coming weeks, I will be updating you on the turnaround we are executing here at Conseco.
You can expect these reports to include the block-and-tackle kind of work that must be done to conduct a turnaround. That work is not especially glamorous, but it is important. We are restoring some of the old foundation. But we are also building new. All our stockholders should understand that we are building value for the long term, not the quick hit. And that means there isn't much sizzle. The sizzle is for 2001 and beyond. As I was quoted as saying three weeks ago: In 2000, Conseco is a turnaround stock; in 2001 it will be an EPS stock.
So, here's the report:
First, and most important, we continue to make excellent progress selling non-strategic assets and paying down debt. Our goal is to sell or monetize more than $2 billion of these assets. As of today, we are more than half way there, with total proceeds exceeding $1.1 billion in cash. What's more, the assets we've sold have fetched $130 million more than we estimated, a 14% premium. As you know, we paid off $650 million in bank debt in September. We are already holding all the cash necessary to repay public debt that comes due in December ($131 million), and are well on the way to having the cash for the June, 2001 debt payments.
Second, we have begun the reorganization of Conseco's insurance operations. The challenges here are the continued integration of multiple acquisitions. In the past two weeks I've taken the first steps toward reorganizing these business units.
Structurally, I have eliminated the two layers of management that used to stand between the CEO and the business units. As of this month, the ten Conseco operating business unit heads report directly to me. The attached chart shows the before and after organization chart.
Slide 1 - Old Structure
Slide 2 - New Structure
This is the first step in reorganizing the insurance businesses. The nature of these businesses requires a different approach than the one we took with Conseco Finance. We have an ambitious schedule for completing this reorganization. It will include cost savings of an as-yet-undetermined amount. But more importantly, it will be based on the paramount objective of increasing productivity --- getting more profit out of each unit of expense.
Third, one of the immediate benefits of "de-layering" is that it enables our most experienced insurance executive to run Conseco's Bankers Life subsidiary -- our most prominent insurance entity. Ed Berube will take the helm as President of Bankers Life effective immediately. Ed had been serving as President of Conseco's entire insurance group. Prior to joining Conseco in June 1999, Ed was President and Chief Operating Officer of American Life Insurance Company, a subsidiary of AIG, and prior to that, he was president of CIGNA Financial Advisors. His 25 years in the industry will be a great asset at Bankers. Headquartered at The Merchandise Mart in downtown Chicago, Bankers has one of the best career agent sales forces serving the middle market. With over 5,000 career agents and nationwide distribution of multiple insurance lines, I am counting on Ed Berube to maximize the sales and marketing competitive advantage at Bankers.
In other news, you may have read about recent departures among our equity fund team at Conseco Capital Management. The nature of this business is that good fund managers become celebrities and are then confronted with the huge temptation to "cash-in". This is what happened at CCM. Although it received a fair amount of public play, these activities at CCM are immaterial to our core businesses and will not affect earnings.
Finally, if you have questions about the turnaround that you'd like me to address in future memos, let me know. The best way to get them to me is through a fax or e-mail to our Investor Relations Department. The e-mail address is ir@conseco.com. The fax number is 317-817-2847.
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