Fitch Ratings has downgraded the ratings assigned to Conseco Inc. (Conseco). The Rating Outlook on Conseco Inc. and its subsidiaries remains Negative. In addition, the Insurer Financial Strength (IFS) rating for Senior Health Insurance Company of Pennsylvania (SHICP) is withdrawn following Conseco's spin-off of that company. See the full rating list at the end of this release.

The downgrade widens the notching between the debt ratings at the holding company and the IFS ratings at the insurance subsidiaries. This reflects the company's decreased financial flexibility due to:

--Higher financial leverage;

--Approximately $88 million in 2009 debt maturities;

--Reduced cushion in its secured bank facility financial covenants.

The covenants of immediate concern are those related to statutory capital, risk-based capital ratios, and leverage, which are expected to end the year 2008 significantly closer to covenant levels. Conseco's anticipated position versus these covenants was affected by the SHICP spin-off transaction and impairments in its investment portfolio. Fitch believes that while the spin-off of SHICP had a positive impact on Conseco's insurance risk profile, it also weakened the financial profile of the holding company.

Fitch continues to maintain a Negative Outlook on the holding company and its insurance subsidiaries reflecting the current challenging investment environment. Fitch believes Conseco's statutory capital will be pressured by impairments in the deteriorating market for commercial mortgage backed securities and commercial mortgages. Fitch also notes Conseco's exposure to a sizable but highly rated Alt-A residential mortgage-backed security portfolio and below-investment-grade fixed maturity corporate securities that are greater than 100% of statutory capital. The company has a meaningful exposure to GAAP unrealized losses on its investment portfolio that under statutory accounting rules are not reflected in capital.

In addition to investment results, the future of Conseco's ratings and Outlook will be based on the company's ability to improve its financial profile. Fitch notes that the company is currently working on various initiatives to improve statutory capital. Fitch also expects continuation of the progress the company has made in improving operating performance in its business lines.

Fitch downgrades the following with a Negative Outlook:

Conseco, Inc.

--Issuer default rating to 'BB-' from 'BB';

--Senior secured bank credit facility to 'BB-' from 'BB+';

--Senior unsecured debt to 'B' from 'BB-'.

The following rating is withdrawn:

Senior Health Insurance Company of Pennsylvania

--IFS rating of 'CCC+'.

The following ratings are unchanged, with a Negative Outlook:

Bankers Life and Casualty Company

--IFS rating 'BBB'.

Conseco Life Insurance Company

Bankers Conseco Life Insurance Company

Conseco Insurance Company

Conseco Health Insurance Company

Colonial Penn Life Insurance Company

Washington National Insurance Company

--IFS rating 'BBB-'.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.

Fitch Ratings, Chicago
Bruce E. Cox, +1-312-606-2316
Julie A. Burke, CPA, CFA, +1-312-368-3158
Douglas A. Meyer, CFA, +1-312-368-2061
Media Relations:
Sandro Scenga, +1-212-908-0278 (New York)
sandro.scenga@fitchratings.com