UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 11-K
[ x ] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED December 31, 2001 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _____________ TO _____________
Commission file number: 1-9250
A. Full title of the plan and the address of the plan, if different
from that of the issuer named below:
ConsecoSave Plan
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive offices:
Conseco, Inc.
11825 North Pennsylvania Street
Carmel, Indiana 46032
CONSECOSAVE PLAN
INDEX
a) Financial Statements
Report of Independent Accountants.................................................................... 3
Statement of Net Assets Available for Plan Benefits - December 31, 2001 and 2000..................... 4
Statement of Changes in Net Assets Available for Plan Benefits
for the year ended December 31, 2001............................................................. 5
Notes to Financial Statements........................................................................ 6
Supplemental Schedules............................................................................... 12
b) Exhibit
23 Consent of Independent Accountants
2
REPORT OF INDEPENDENT ACCOUNTANTS
To the Participants and Plan Trustees
ConsecoSave Plan
In our opinion, the accompanying statements of net assets available for plan
benefits and the related statements of changes in net assets available for plan
benefits present fairly, in all material respects, the net assets available for
benefits of the ConsecoSave Plan (the "Plan") at December 31, 2001 and 2000, and
the changes in net assets available for benefits for the year ended December 31,
2001 in conformity with accounting principles generally accepted in the United
States of America. These financial statements are the responsibility of the
Plan's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of assets held
for investment purposes as of December 31, 2001 and reportable transactions for
the year ended December 31, 2001 are presented for the purpose of additional
analysis and are not a required part of the basic financial statements but are
supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. These supplemental schedules are the responsibility of the
Plan's management. The supplemental schedules have been subjected to the
auditing procedures applied in the audits of the basic financial statements and,
in our opinion, are fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
/s/ PricewaterhouseCoopers LLP
------------------------------
PricewaterhouseCoopers LLP
June 27, 2002
3
CONSECOSAVE PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
December 31, 2001 and 2000
2001 2000
------------ ------------
Assets:
Investments at fair value $214,244,117 $249,790,496
Employer contribution receivable 7,683,168 9,420,317
Employee contribution receivable 544,502 586,924
------------ ------------
Total assets 222,471,787 259,797,737
Liabilities:
Excess contribution refunds due to participants 976,378 -
------------ ------------
Net assets available for plan benefits $221,495,409 $259,797,737
============ ============
The accompanying notes are an integral part of these financial statements.
4
CONSECOSAVE PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
for the year ended December 31, 2001
Investment loss:
Interest and dividends $ 4,558,889
Net depreciation in the fair value of investments (45,574,726)
------------
Net investment loss (41,015,837)
------------
Contributions:
Employee contributions 25,122,911
Employer contributions 6,780,888
------------
Total contributions 31,903,799
------------
Deductions:
Benefits paid 29,190,290
------------
Net decrease in net assets available for plan benefits (38,302,328)
Net assets available for plan benefits, beginning of year 259,797,737
------------
Net assets available for plan benefits, end of year $221,495,409
============
The accompanying notes are an integral part of these financial statements.
5
CONSECOSAVE PLAN
NOTES TO FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
The accompanying financial statements of the ConsecoSave Plan (the "Plan") have
been prepared in accordance with generally accepted accounting principles which
require management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities as of the date of the financial statements and the reported amounts
of income and expense during the reporting period. Actual results may differ
from these estimates.
Investments
The Plan provides the following investment options for voluntary employee
contributions: (i) the following funds offered by Conseco Fund Group, which is
managed by Conseco Capital Management, Inc., a wholly owned subsidiary of
Conseco - Conseco Balanced Fund, Conseco 20 Fund, Conseco Convertible Securities
Fund, Conseco High Yield Fund, Conseco Equity Fund, Conseco Fixed Income Fund
and Conseco Money Market Fund; (ii) Conseco Stock Portfolio; (iii) Interest
Income Portfolio; (iv) Vanguard Institutional Index Fund. Effective June 29,
2001, the Money Market Portfolio and the Standard and Poor's 500 Index ("S & P
500") Portfolio were replaced by the Conseco Fund Group Money Market Fund and
the Vanguard Institutional Index Fund, respectively. Employer contributions are
invested solely in the common stock of Conseco. The Plan's investments, except
for the Conseco Stock portfolio, which is held by the Trustees of the Plan, are
maintained under a group annuity contract in a separate account of Bankers
National Life Insurance Company, an indirect wholly owned subsidiary of Conseco.
The Conseco Balanced Fund invests in debt securities, equity securities, and
money market instruments.
The Conseco 20 Fund generally invests at least 65 percent of its assets in
common stocks of companies that the advisor believes have above-average growth
prospects. The fund is non-diversified and will generally concentrate its
investments in a core position of approximately 20 to 30 common stocks.
The Conseco Convertible Securities Fund generally invests at least 65 percent of
the fund's assets in convertible securities. These are often lower grade
investment quality than other types of investments. At any given time over 50
percent of the fund's assets may be invested in below investment grade
securities.
The Conseco High Yield Fund seeks to provide a high level of current income with
a secondary objective of capital appreciation. The fund generally invests at
least 65 percent of the fund's assets in below investment grade securities.
6
CONSECOSAVE PLAN
NOTES TO FINANCIAL STATEMENTS - (Continued)
1. Summary of Significant Accounting Policies (Continued)
Investments (continued)
The Conseco Equity Fund invests primarily in equity securities and other
securities having the investment characteristics of common stocks.
The Conseco Fixed Income Fund invests primarily in investment-grade debt
securities.
The Conseco Money Market Fund invests exclusively in high quality short-term
money market instruments.
The Vanguard Institutional Index Fund invests in stocks that make up the
Standard & Poor's 500 Index, which is dominated by the stocks of large U.S.
companies.
The above funds are valued using the net asset value at the end of each New York
Stock Exchange business day.
The Conseco Stock Portfolio only invests in the common stock of Conseco except
for cash which remains in the fund to meet the fund's liquidity needs. The
Conseco common stock is valued at its closing market price on the New York Stock
Exchange.
The Interest Income Portfolio consists of guaranteed interest contracts. The
guaranteed interest contracts are carried at the accumulated contract values,
which are cost adjusted for interest credited (at a blended rate of 6.13 percent
and 5.84 percent for years ended December 31, 2001 and 2000, respectively). Such
carrying values approximate fair values. As of January 1, 2002, the contract,
interest rate, and expiration date are as follows:
Conseco Variable Insurance Company, an
indirect wholly owned subsidiary of Conseco - 5.00% June 30, 2002
The Money Market Portfolio invests in money market instruments maturing within
one year, with an average maturity of 120 days or less. Such investments are
carried at amortized cost which approximates fair value.
The S & P 500 Portfolio invests in a Standard and Poor's Depository Receipt,
which is a trust that is traded on the American Stock Exchange (Ticker Symbol
SPY) and is intended to track the price performance and dividend yield of the S
& P 500 Index. The S & P 500 Portfolio is valued using the net asset value at
the end of each New York Stock Exchange business day.
7
CONSECOSAVE PLAN
NOTES TO FINANCIAL STATEMENTS - (Continued)
1. Summary of Significant Accounting Policies (Continued)
Investments (continued)
The Plan presents in the Statement of Changes in Net Assets Available for Plan
Benefits the net appreciation (depreciation) in the fair value of its
investments which consists of the realized gains (losses) and the unrealized
appreciation (depreciation) on those investments.
Administrative Expenses
Operating expenses and maintenance fees incurred during the years ended December
31, 2001 and 2000, of $654,904 and $801,510, respectively, were paid by Conseco
Services, LLC ("CSL"), the Plan sponsor and a wholly owned subsidiary of
Conseco, on behalf of the Plan. Future payment of such expenses by CSL is at its
discretion.
Income Taxes
Under Sections 401(a) and 501(a), respectively, of the Internal Revenue Code
(the "IRC"), the Plan is qualified and the ConsecoSave Trust, a trust
established under the Plan, is tax-exempt. The Plan has been amended since
receiving its last determination letter. However, the Plan administrator
believes that the Plan is currently designed and being operated in compliance
with the applicable requirements of the IRC.
2. Plan Description
The Plan is a defined contribution plan pursuant to Section 401(k) of the IRC.
The Plan is subject to the provisions of the Employee Retirement Income Security
Act of 1974 ("ERISA"). Established on April 1, 1989, and amended and restated on
January 1, 1993, October 1, 1995, January 1, 1997, and November 15, 1999, the
Plan includes all employees of CSL as determined pursuant to the Plan of CSL and
any participating employer (unless otherwise excluded pursuant to the Plan).
Participation is voluntary. Every employee is eligible to become a participant
on the first day of the fourth month immediately following the employee's date
of hire.
Employee contributions to the Plan are made through periodic payroll deductions
in increments of 1.0 percent of the participant's annual earnings, not to exceed
the lesser of 15.0 percent of the participant's annual earnings or the maximum
amount specified by federal tax law ($10,500 for pre-tax contributions for
2001). Participants can make pre-tax and/or after-tax contributions.
Participants designate the portfolios in which their contributions are invested.
8
CONSECOSAVE PLAN
NOTES TO FINANCIAL STATEMENTS - (Continued)
2. Plan Description (continued)
The employer matches 50.0 percent of each participant's pre-tax contributions up
to a maximum of 6.0 percent of the participant's annual earnings. All employer
contributions are made to the Conseco Stock Portfolio. Such contributions are
made no later than the due date for filing Conseco's federal income tax return,
including extensions.
ERISA and the IRC provide that qualified plans, such as the Plan, cannot
discriminate in favor of highly compensated individuals. Certain highly
compensated individuals may be required to receive refunds of any contributions
in excess of the IRC Sections 401(k)(3) and 401(m) limits and all earnings
attributable to such contributions. Amounts in excess of the limits discussed
above are presented in the statement of net assets available for plan benefits
as "Excess contribution refunds due to participants" and generally were refunded
within 2-1/2 months of the Plan's year end.
Participants are immediately vested in their voluntary contributions plus actual
earnings thereon. Participants have a gradual vesting schedule based upon length
of service and are fully vested in Conseco's contributions after six years of
service. At December 31, 2001, forfeited non-vested amounts totaled $328,613.
These non-vested interests of withdrawn participants were used to reduce the
employer contribution receivable at December 31, 2001.
Benefits under the Plan are paid in cash in a lump sum, in quarterly or annual
installment payments, whole shares of Conseco common stock, or a combination
thereof. Participants may make withdrawals after reaching age 55 or 59 1/2, and
under certain circumstances are allowed to make hardship withdrawals and
after-tax deposit account withdrawals. Participants are permitted to transfer
account balances between portfolios, except the Conseco Stock Portfolio, at any
time in 1.0 percent increments. Transfers involving participant-directed
contributions to the Conseco Stock Portfolio may only be made during a
10-business day period each quarter, beginning on the 3rd business day following
the quarterly earnings release.
Participants may obtain loans up to 50.0 percent of the vested portion of their
account balances, excluding employer contributions, to a maximum loan of
$50,000. Only one loan may be outstanding at a time. Repayment of both principal
and interest is made to the participant's account via payroll deduction or a
lump sum. As of December 31, 2001, the participant loans had interest rates
ranging from 5.0 percent to 10.5 percent, and maturity dates ranging from
January 2002 to October 2017.
The Plan is administered by CSL which establishes the rules and procedures
necessary for the Plan's operations. Although it has not expressed any intent to
do so, CSL has the right to terminate the Plan. In the event the Plan is
terminated, each participant's account shall be non-forfeitable with respect to
both the participant's and employer's contributions and the net assets shall be
set aside for payment to the participants. Distribution shall be made by the
Trustee in a lump sum or in substantially equal installments during a period not
exceeding one year following such termination.
9
CONSECOSAVE PLAN
NOTES TO FINANCIAL STATEMENTS - (Continued)
2. Plan Description (continued)
The foregoing description of the Plan provides only limited information.
Participants should refer to the Summary Plan Description for a more complete
description of the Plan's provisions.
3. Investments
Investments that represent 5 percent or more of the Plan's net assets available
for Plan benefits as of December 31, 2001 and 2000, are summarized as follows:
2001 2000
---- ----
Conseco Equity Fund $78,423,637 $99,279,935
Vanguard Institutional Index Fund 30,788,904 (b)
Conseco Money Market Fund 30,557,814 (b)
Fixed Income Fund 17,391,698 12,818,946
Conseco Stock Portfolio (a) 17,100,082 32,487,490
Interest Income Portfolio 16,428,441 15,230,244
S&P 500 Portfolio (b) 37,854,420
Money Market Portfolio (b) 25,187,447
-----------------------
(a) Includes both participant-directed and non-participant-directed
investments.
(b) Effective June 29, 2001, the Money Market Portfolio and the Standard and
Poor's 500 Index ("S & P 500") Portfolio were replaced by the Conseco Fund
Group Money Market Fund and the Vanguard Institutional Index Fund,
respectively.
During 2001, the Plan's investments (including gains and losses on investments
bought and sold, as well as held during the year) depreciated as follows:
Various investment portfolios, primarily
mutual funds of the Conseco Fund Group $(20,016,298)
Conseco Stock Portfolio (25,558,428)
------------
$(45,574,726)
============
10
CONSECOSAVE PLAN
NOTES TO FINANCIAL STATEMENTS - (Continued)
4. Conseco Stock Portfolio
The Conseco Stock Portfolio includes both participant-directed and
nonparticipant-directed investments. Changes in net assets relating to this
portfolio for the year ended December 31, 2001, are as follows:
Net investment loss:
Interest and dividends $ 37,931
Net depreciation in fair value of investments (25,558,428)
------------
Net investment loss (25,520,497)
------------
Contributions:
Employee contributions 4,142,251
Employer contributions 8,518,037
------------
Total contributions 12,660,288
------------
Deductions:
Benefits paid 4,921,578
------------
Net employee transfers to participant-
directed investments 2,394,379
------------
Net decrease for the year (15,387,408)
Balance, beginning of year 32,487,490
------------
Balance, end of year $ 17,100,082
============
11
CONSECOSAVE PLAN
SCHEDULE H, LINE 4i - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
As of December 31, 2001
(a) (b) (c) (d) (e)
Identity of Issuer, Borrower, Description Total Current
Lessor or Similar Party of Investment Cost Value
------------------------------------------------------------------------------------------------------------------------------------
Conseco Fund Group 989,773 shares of Conseco Balanced Fund $ 12,235,461 $ 10,115,479
Conseco Fund Group 845,428 shares of Conseco 20 Fund 11,085,374 5,182,477
Conseco Fund Group 145,956 shares of Conseco Convertible Securities Fund 1,877,734 1,404,096
Conseco Fund Group 126,293 shares of Conseco High Yield Fund 1,075,314 983,826
Conseco Fund Group 8,627,463 shares of Conseco Equity Fund 107,268,889 78,423,637
Conseco Fund Group 1,708,418 shares of Conseco Fixed Income Fund 17,138,807 17,391,698
Conseco Fund Group 30,557,814 shares of Conseco Money Market Fund 30,557,814 30,557,814
Conseco, Inc. 3,739,215 shares of Conseco, Inc. Common Stock 55,007,468 17,100,082(a)
Conseco Variable Insurance Guaranteed interest contract, interest rate-5.00%,
Company maturity date-December 31, 2002 (Interest Income Portfolio) 16,428,441 16,428,441
Vanguard Group 293,535 shares of Vanguard Institutional Index Fund 32,594,402 30,788,904
Participant loans Interest rates from 5.0% to 10.5%, maturity dates from
January 2002 to October 2017 5,867,663 5,867,663
------------ ------------
Total Assets Held for Investment
Purposes $291,137,367 $214,244,117
============ ============
------------------
(a) Includes $359,650 of short-term investments.
12
CONSECOSAVE PLAN
SCHEDULE H, LINE 4j - SCHEDULE OF REPORTABLE TRANSACTIONS
for the year ended December 31, 2001
Current
Value of
Identity Description Number Cost Asset on Net
of Party of of Purchase Selling of Transaction Gain
Involved Transactions Transactions Price Price Asset Date (Loss)
--------------------------------------------------------------------------------- -----------------------------------------
Conseco, Inc. Purchases of
Conseco, Inc.
common stock 41 13,952,845 - - 13,952,845 -
Sales of
Conseco, Inc.
common stock 23 - 2,856,187 3,248,253 2,856,187 (392,066)
13
CONSECOSAVE PLAN
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees of the Plan have duly caused this annual report to be signed on its
behalf by the undersigned thereunto duly authorized.
CONSECOSAVE PLAN
Dated: June 27, 2002 By: /s/ William J. Shea
-----------------------------
William J. Shea, Trustee
14