Oct. 14--Humbled in the wake of Wall Street's collapse last fall, Carmel insurer Conseco propped itself up Tuesday on the arm of a New York hedge fund used to winning big on long shots.

Paulson & Co. agreed to buy 9.9 percent of the stock in Conseco, which in turn will refinance heavy debts and issue $200 million in new stock.

Conseco, one of the region's largest white-collar employers, with 2,500 workers at its corporate center, faced an uncertain future last spring when auditors questioned its ability to stay afloat.

Paulson, which made millions betting against subprime mortgage companies, stepped up as a long-term investor, buying 16.4 million shares in Conseco and warrants to buy another 5 million shares.

Paulson's action should persuade investors to lend cash to the insurer as it goes forward with the refinancing and issues new stock, said Jukka Lipponen, president of Independent Insurance Analysts of West Simsbury, Conn.

"Considering the size of the position they're taking, Paulson is clearly making a long-term decision," Lipponen said, noting he doubted the investor would quickly try to sell off the stock or force a move of offices out of Carmel.

George Farra, principal with Indianapolis investment firm Woodley Farra Manion Portfolio Management, said the investment was a good sign for long-struggling Conseco.

"It looks like they're doing a significant amount of capital restructuring to position themselves, hopefully, for better days."

He said Paulson had done well by betting against, or shorting, subprime lenders. Paulson has been one of the best performing hedge funds of the past three years, said Ben Silverman, research director at InsiderScore.com, a service that tracks and analyzes insider stock transactions.

"That's a nice vote of confidence there for the company," Silverman said. "Of course, the trade-off is dilution for existing shareholders."

But Silverman noted that Conseco shares did rise sharply on the news, gaining 15 percent in after-hours trading Tuesday evening.

Conseco said its planned stock sale next year will bring in at least $200 million in proceeds. The company, under its agreement with lenders, is required to use half of the proceeds from the offering to repay debts. Conseco also plans to sell $293 million worth of convertible notes -- by borrowing from investors -- and use the cash to retire some existing debts.

Conseco solved earlier problems, spinning off a troubled acquisition made by a prior generation of leaders. The insurer created Senior Health Insurance Co.