content: SECURITIES AND EXCHANGE COMMISSION
                               Washington, D.C. 20549
  
  
  
                                      FORM 8-K
  
                                   CURRENT REPORT
  
                       Pursuant to Section 13 or 15(d) of the
                           Securities Exchange Act of 1934
  
  
  
                  Date of Report (date of earliest event reported):
  
                                   August 31, 1995
  
  
  
                                    CONSECO, INC.
  
                               State of Incorporation:
                                       Indiana
  
  
                 Commission File                 IRS Employer Id.
  
                   No. 1-9250                     No. 35-1468632
  
                       Address of Principal Executive Offices:
                           11825 North Pennsylvania Street
                                Carmel, Indiana 46032
  
                                    Telephone No.
                                   (317) 817-6100
  
  
  
  
  <PAGE>
  
                           CONSECO, INC. AND SUBSIDIARIES
  
  <TABLE>
  <CAPTION>
  
  
  
  
                                        INDEX
  
                                                                                                         Page
                                                                                                         ----        
  <S>                                                                                                       <C>
  Item 2.   Acquisition or Disposition of Assets.........................................................   
  
  Item 7.   Financial Statements and Exhibit
            (a)  CCP Insurance, Inc. and Subsidiaries Unaudited
                 Consolidated  Financial  Statements as of June 30, 1995,  and for
                 the six months ended June 30, 1995 and 1994
                    Consolidated Balance Sheet...........................................................   
                    Consolidated Statement of Operations.................................................   
                    Consolidated Statement of Shareholders' Equity.......................................   
                    Consolidated Statement of Cash Flows.................................................   
                    Notes to Consolidated Financial Statements...........................................   
  
                 CCP Insurance, Inc. and Subsidiaries Audited
                 Consolidated Financial Statements as of December 31,
                 1994 and 1993, and for each of the three years ended
                 December 31, 1994
                    Report of Independent Accountants....................................................   
                    Consolidated Balance Sheet...........................................................   
                    Consolidated Statement of Operations.................................................   
                    Consolidated Statement of Shareholders' Equity.......................................   
                    Consolidated Statement of Cash Flows.................................................   
                    Notes to Consolidated Financial Statements...........................................   
  
  
         (b)   Pro  forma  financial  statements  required  to be  filed  for this
               acquisition  under Article 11 of Regulation  S-X will be filed with
               an amendment to Item 7(a)(4) of Form 8-K.
  
         (c)     Exhibit
                 2.1   Agreement and Plan of Merger dated May 19, 1995...................................   
  
                 The Credit  Agreement  obtained by Conseco as described in Item 2
                 has been omitted as an exhibit to the Form 8-K,  pursuant to Item
                 601(b)(4)(iii) of Regulation S-K, because the total amount of the
                 Credit  Agreement  is less than 10 percent of the total assets of
                 the Registrant and its subsidiaries on a consolidated  basis. The
                 Registrant  hereby undertakes to furnish copies of such documents
                 to the Commission upon request.
  
  </TABLE>
  
  
  <PAGE>
                           CONSECO, INC. AND SUBSIDIARIES
  
  ITEM 2.  ACQUISITION OR DISPOSITION OF ASSETS.
  
         On August 31, 1995,  Conseco,  Inc. ("Conseco" or the "Company") acquired
  all of the common stock of CCP Insurance,  Inc. ("CCP") not owned by Conseco, in
  a transaction pursuant to which CCP was merged with Conseco,  with Conseco being
  the surviving corporation (the "Merger"). The Merger was consummated pursuant to
  an Agreement and Plan of Merger dated May 19, 1995 (the "Merger Agreement").  In
  the Merger,  each of the 11.8 million outstanding shares of CCP common stock not
  owned by Conseco were  converted  into the right to receive  $23.25 in cash. The
  Merger and the Merger  Agreement were approved by holders of a majority of CCP's
  outstanding  shares  (other  than  shares  held  by the  Company)  at a  special
  stockholders meeting held on August 25, 1995.
  
         The Merger and  related  transactions  (including  the  repayment  of the
  existing $251.0 million  revolving  credit facility of Conseco) were funded with
  available  cash and net proceeds from a $600.0  million  credit  facility by and
  among the Company and several financial  institutions (the "Credit  Agreement").
  The  sources  and uses of the  financing  to  complete  the Merger  and  related
  transactions are summarized below (dollars in millions):
  <TABLE>
  <CAPTION>
  
                 <S>                                                                     <C>
                 Sources of funds:
                    Credit agreement..................................................   $530.0
                    Cash on hand......................................................      9.7
                                                                                         ------    
                       Total sources..................................................   $539.7
  
                 Uses of funds:
                    Purchase of all common equity interest in CCP,
                       not owned by Conseco...........................................   $273.9
                    Settlement of outstanding stock options of CCP....................      5.4
                    Repayment of revolving credit facility of Conseco.................    251.0
                    Debt issuance and other transaction costs.........................      9.4
                                                                                         ------
  
                       Total uses.....................................................   $539.7
                                                                                         ====== 
  </TABLE>
  
        The Credit  Agreement  has two  tranches.  One  tranche  permits  maximum
  principal  borrowings  of $350.0  million  ("Tranche  A") and the other  tranche
  permits  maximum  principal  borrowings of $250.0 million  ("Tranche B"). On the
  Merger date,  the Company  borrowed  $280.0  million  under Tranche A and $250.0
  million under Tranche B.
  
         Tranche  A and  Tranche B  borrowings  bear  interest  based on either an
  offshore rate or a base rate.  Offshore rates are equal to the reserve  adjusted
  Interbank  Offered  Rate  plus an  applicable  margin  based on:  (i)  Conseco's
  aggregate  outstanding  bank debt; and (ii) the rating of Conseco's senior notes
  by Moodys and  Standard & Poor's.  Such  margin  varies from .75 percent to 1.75
  percent.  Base rates are equal to the bank's  reference  rate plus the  offshore
  rate  margin  less 1.25  percent  (provided  such margin is not less than zero).
  Borrowings  under Tranche A and Tranche B bear  interest at 7.5 percent  through
  September 29, 1995.
  
         The principal  amounts are payable  according to the  following  schedule
  (dollars in millions):
  <TABLE>
  <CAPTION>
                                                        Tranche A                 Tranche B
                                                        ---------                 ---------
                    <S>                                  <C>                      <C>
                    1998                                 $ 10.0                    $   -
                    1999                                   65.0                     250.0 <F1>
                    2000                                   65.0                        -
                    2001                                  140.0                        -
                                                         ------                    ------
  
                         Total par value                 $280.0                    $250.0
                                                         ======                    ======
  <FN>
         <F1>The  repayment  date can be extended for an  additional  year on each
             extension date to the year 2001 subject to defined conditions.
  </FN>
  </TABLE>
         Mandatory  prepayments  are  required as follows:  (i) from 50 percent of
  excess  cash flow (the  excess of  amounts  that may be  payable  to the  parent
  company from  subsidiaries  over dividends,  expenses and other cash payments of
  the parent company); (ii) upon the sale or disposition of any significant assets
  other  than in the  ordinary  course of  business;  and  (iii)  upon the sale or
  issuance of debt or equity securities of Conseco or any of its subsidiaries. The
  Credit Agreement is secured by, among other things,  pledges of: (i) the capital
  stock of Conseco's  wholly  owned  subsidiaries;  and (ii) the capital  stock of
  Bankers Life Holding Corporation owned by Conseco.
  
  <PAGE>
                        CONSECO, INC. AND SUBSIDIARIES
  
  
  
  ITEM 7(a).     Financial Statements and Exhibit
  
            (a)  CCPInsurance,   Inc.  and  Subsidiaries   Unaudited  Consolidated
                 Financial  Statements as of June 30, 1995, and for the six months
                 ended June 30, 1995 and 1994.
  
  <PAGE>
  
                                              CCP INSURANCE, INC. AND SUBSIDIARIES
  
  <TABLE>
  <CAPTION>
                                                  CONSOLIDATED BALANCE SHEET
                                                     (Dollars in millions)
  
                                                            ASSETS
                                                                                       June 30,         December 31,
                                                                                        1995               1994
                                                                                        ----               ----
                                                                                     (unaudited)         (audited)
  <S>                                                                                 <C>                 <C>
  Investments:
    Actively managed fixed maturities at fair value (amortized cost:
       1995 - $3,973.3; 1994 - $3,796.1)...........................................   $4,002.0             $3,497.3
    Mortgage loans.................................................................      243.1                251.4
    Credit-tenant loans............................................................      153.3                116.2
    Policy loans...................................................................      136.5                136.4
    Investment in Bankers Life Holding Corporation.................................       25.9                 25.9
    Investment in American Life Group, Inc. .......................................       43.4                 20.1
    Other invested assets..........................................................       65.0                 30.6
    Short-term investments.........................................................      153.9                123.0
    Assets held in separate accounts...............................................      108.9                 91.4
                                                                                      --------             --------
  
              Total investments....................................................    4,932.0              4,292.3
  
  Accrued investment income........................................................       76.9                 70.1
  Reinsurance receivables..........................................................       38.5                 42.6
  Income taxes.....................................................................        -                   13.6
  Cost of policies purchased.......................................................      189.6                345.2
  Cost of policies produced........................................................      118.1                111.9
  Goodwill (net of accumulated amortization: 1995 - $9.4; 1994 - $8.4).............       68.9                 69.9
  Other assets.....................................................................       12.8                 14.7
                                                                                      ---------           ---------
  
              Total assets.........................................................   $5,436.8             $4,960.3
                                                                                      ========             ========
  
  
                                             LIABILITIES AND SHAREHOLDERS' EQUITY
  Liabilities:
    Insurance liabilities..........................................................  $4,351.7              $4,243.1
    Income tax liabilities.........................................................      59.8                   -
    Investment borrowings..........................................................     185.7                   -
    Other liabilities..............................................................      36.6                  48.1
    Liabilities related to separate accounts.......................................     108.9                  91.4
    Notes payable .................................................................     196.9                 196.8
                                                                                     --------              --------
  
              Total liabilities....................................................   4,939.6               4,579.4
                                                                                     --------              --------
  
  Shareholders' equity:
    Common stock and additional paid-in capital (no par value, 200,000,000
        shares authorized, shares issued and outstanding: 1995 - 23,334,623;
       1994 - 25,543,516)..........................................................     153.3                 197.8
    Unrealized appreciation (depreciation) of securities (net of applicable
       deferred income taxes: 1995 - $6.2; 1994 -($57.9))..........................      29.1                 (96.4)
    Retained earnings..............................................................     314.8                 279.5
                                                                                     --------              --------
  
              Total shareholders' equity...........................................     497.2                 380.9
                                                                                     --------              --------
  
              Total liabilities and shareholders' equity...........................  $5,436.8              $4,960.3
                                                                                     ========              ========
  </TABLE>
  
                 The accompanying notes are an integral part of the
                         consolidated financial statements.
  
  
  
  <PAGE>
  
  
  
  
  
                                             CCP INSURANCE, INC. AND SUBSIDIARIES
  <TABLE>
  <CAPTION>
  
                                             CONSOLIDATED STATEMENT OF OPERATIONS
                                         (Dollars in millions, except per share data)
                                                          (unaudited)
  
                                                                               Three months ended           Six months ended
                                                                                     June 30,                   June 30,
                                                                              ----------------------       ------------------
                                                                                1995          1994         1995          1994
                                                                               ------        ------        ----          ----
  <S>                                                                           <C>           <C>          <C>          <C>
  Revenues:
     Insurance policy income.............................................      $ 27.8        $ 28.1       $ 54.4       $ 58.2
     Investment activity:
        Net investment income............................................       102.5          92.8        194.8        188.0
        Net trading income ..............................................         3.5           -            3.6          -
        Net realized gains ..............................................        14.4           9.4         14.8         10.9
                                                                               ------        ------       ------       ------
  
                Total revenues...........................................       148.2         130.3        267.6        257.1
                                                                               ------        ------       ------       ------
  
  Benefits and expenses:
     Insurance policy benefits...........................................        19.5          16.2         38.7         35.1
     Change in future policy benefits....................................          .4            .1         (2.5)        (1.9)
     Interest expense on annuities and financial products................        55.5          51.6        106.3        105.4
     Interest expense on notes payable...................................         5.2           2.3         10.5          5.1
     Interest expense on investment borrowings ..........................         4.5           2.3          5.7          3.9
     Amortization related to operations..................................         9.5           6.3         18.7         13.1
     Amortization related to realized gains..............................         8.1           5.5          8.2          6.4
     Other operating costs and expenses..................................        12.3           9.9         25.2         22.2
                                                                               ------        ------       ------      -------
  
                Total benefits and expenses..............................       115.0          94.2        210.8        189.3
                                                                               ------        ------       ------      -------
  
                Income before income taxes and extraordinary charge......        33.2          36.1         56.8         67.8
  
  Income tax expense.....................................................        11.6          13.6         20.5         24.9
                                                                               ------        ------       ------      -------
  
                Income before extraordinary charge.......................        21.6          22.5         36.3         42.9
  
  Extraordinary charge on extinguishment of debt, net of tax.............        -              -            -            1.3
                                                                               ------        ------       ------      -------
  
                Net income...............................................      $ 21.6        $ 22.5       $ 36.3      $  41.6
                                                                               ======        ======       ======      =======
  
  Earnings per common share:
  
     Weighted average shares ............................................  23,335,000    27,988,000   23,405,000   28,386,000
                                                                           ==========    ==========   ==========   ==========
  
     Earnings before extraordinary charge................................        $.93          $.81        $1.55        $1.52
     Extraordinary charge................................................       -            -             -              .05
                                                                              -------      --------     --------      -------
  
                Net income...............................................        $.93          $.81        $1.55        $1.47
                                                                                 ====          ====        =====        =====
  </TABLE>
  
  
  
                 The accompanying notes are an integral part of the
                         consolidated financial statements.
  
  
  
  <PAGE>
  
  
  
                                             CCP INSURANCE, INC. AND SUBSIDIARIES
  <TABLE>
  <CAPTION>
  
                                        CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
                                                     (Dollars in millions)
                                                          (unaudited)
  
  
  
  
                                                                                           Six months ended
                                                                                               June 30,
                                                                                       ----------------------
                                                                                        1995             1994
                                                                                       ------           -----
  <S>                                                                                  <C>               <C>
  Common stock and additional paid-in capital:
      Balance, beginning of period................................................     $197.8            $269.6
        Cost of shares acquired...................................................      (44.5)            (34.9)
                                                                                       ------           -------
  
      Balance, end of period......................................................     $153.3            $234.7
                                                                                       ======            ======
  
  Unrealized appreciation (depreciation) of securities:
      Balance, beginning of period................................................     $(96.4)           $ 70.7
        Change in unrealized appreciation (depreciation)..........................      125.5            (105.4)
                                                                                       ------            ------
  
      Balance, end of period......................................................     $ 29.1            $(34.7)
                                                                                       ======            ======
  
  Retained earnings:
      Balance, beginning of period................................................     $279.5            $223.6
        Net income ...............................................................       36.3              41.6
        Dividends on common stock.................................................       (1.0)             (1.1)
                                                                                       ------            ------
  
      Balance, end of period......................................................     $314.8            $264.1
                                                                                       ======            ======
  
             Total shareholders' equity, end of period............................     $497.2            $464.1
                                                                                       ======            ======
  </TABLE>
  
  
  
  
                 The accompanying notes are an integral part of the
                         consolidated financial statements.
  
  
  
  <PAGE>
  
  
  
                                             CCP INSURANCE, INC. AND SUBSIDIARIES
  <TABLE>
  <CAPTION>
  
                                             CONSOLIDATED STATEMENT OF CASH FLOWS
                                                     (Dollars in millions)
                                                          (unaudited)
  
                                                                                            Six months ended
                                                                                                June 30,
                                                                                        ----------------------
                                                                                         1995             1994
                                                                                        ------           -----
  <S>                                                                                 <C>               <C>
  Cash flows from operating activities:
      Net income..................................................................    $  36.3           $  41.6
      Adjustments to reconcile net income to net
         cash provided by operating activities:
            Amortization..........................................................       26.9              19.5
            Income taxes..........................................................        9.3              (1.8)
            Interest credited to insurance liabilities............................      106.3             105.4
  
            Fees charged to insurance liabilities.................................      (20.2)            (22.3)
            Insurance liabilities.................................................      (16.4)             (9.6)
            Accrual and amortization of investment income.........................       (7.3)             (6.7)
            Deferral of cost of policies produced.................................      (36.6)            (11.0)
            Trading account securities............................................        -                18.0
            Other.................................................................       (8.0)             12.0
                                                                                      -------          --------
  
                Net cash provided by operating activities.........................       90.3             145.1
                                                                                      -------          --------
  
  Cash flows from investing activities:
      Sales ......................................................................      567.8           1,030.2
      Maturities..................................................................       94.2             170.4
      Purchases...................................................................     (867.9)         (1,149.2)
      Other ......................................................................      (32.0)           -
                                                                                      -------          --------
  
                Net cash provided (used) by investing activities .................     (237.9)             51.4
                                                                                      -------          --------
  
  Cash flows from financing activities:
      Deposits to insurance liabilities...........................................      363.5             156.7
      Investment borrowings.......................................................      185.7             (14.6)
      Withdrawals from insurance liabilities......................................     (325.2)           (285.6)
      Payments on notes payable...................................................        -               (46.7)
      Purchases of Company's common stock.........................................      (44.5)            (34.9)
      Dividends paid on common stock..............................................       (1.0)             (1.1)
                                                                                      -------          --------
  
                Net cash provided (used) by financing activities..................      178.5            (226.2)
                                                                                      -------          --------
  
                Net increase (decrease) in short-term investments.................       30.9             (29.7)
  
  Short-term investments, beginning of period.....................................      123.0             209.9
                                                                                      -------           -------
  
  Short-term investments, end of period...........................................   $  153.9          $  180.2
                                                                                     ========          ========
  </TABLE>
  
                 The accompanying notes are an integral part of the
                         consolidated financial statements.
  
  
  
  <PAGE>
  
  
  
                        CCP INSURANCE, INC. AND SUBSIDIARIES
  
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                     (unaudited)
  
  
         The  following  notes  should  be read in  conjunction  with the notes to
  consolidated  financial  statements  contained  in the  1994  Form  10-K  of CCP
  Insurance, Inc. (the "Company").
  
         SIGNIFICANT ACCOUNTING POLICIES
  
         The unaudited  consolidated financial statements as of June 30, 1995, and
  for the  three  and six  months  ended  June 30,  1995  and  1994,  reflect  all
  adjustments,  consisting only of normal recurring items,  which are necessary to
  present fairly the Company's  financial  position and results of operations on a
  basis  consistent  with  that  of  the  prior  audited  consolidated   financial
  statements.  Certain amounts from the prior period were  reclassified to conform
  to the 1995 presentation.
  
         ADJUSTMENT TO ACTIVELY MANAGED FIXED MATURITIES
  
         The Company  classifies  fixed maturity  investments into two categories:
  "actively  managed"  (which are  carried at  estimated  fair value) and "held to
  maturity"  (which are  carried at  amortized  cost).  No fixed  maturities  were
  classified in the "held to maturity" category in 1995 or 1994. The adjustment to
  carry actively managed fixed maturity investments at fair value (as described in
  Note 1 to the consolidated  financial  statements included in the Company's 1994
  Form 10-K)  resulted  in the  following  cumulative  effects  on  balance  sheet
  accounts as of June 30, 1995:
  <TABLE>
  <CAPTION>
  
                                                                                 Adjustment to Carry
                                                                   Balance        Actively Managed
                                                                    before        Fixed Maturities        Reported
                                                                  Adjustment        at Fair Value          Amount
                                                                  ----------        -------------          ------
                                                                                (Dollars in millions)
  
  <S>                                                             <C>                   <C>               <C>    
  Actively managed fixed maturities............................   $3,973.3              $ 28.7            $4,002.0
  Investment in American Life Group, Inc.......................       26.2                17.2                43.4
  Cost of policies purchased...................................      202.3               (12.7)              189.6
  Cost of policies produced....................................      123.3                (5.2)              118.1
  Income tax liabilities ......................................       54.1                 5.7                59.8
  Unrealized appreciation of securities........................        6.8                22.3                29.1
  </TABLE>
  
         REINSURANCE
  
         The cost of  reinsurance  ceded for  policies  containing  mortality  and
  morbidity risks,  which is deducted from insurance policy income,  totaled $19.2
  million  and  $23.4   million  in  the  first  six  months  of  1995  and  1994,
  respectively.  Reinsurance  premiums  assumed on policies  containing  mortality
  risks  totaled $1.5 million and $1.8 million in the first six months of 1995 and
  1994,  respectively.  Reinsurance  recoveries  netted against  insurance  policy
  benefits totaled $13.3 million and $17.8 million in the first six months of 1995
  and 1994, respectively.
  
         Certain  annuity  policies  that  were  sold  by  Western  National  Life
  Insurance Company ("WNL"),  a former affiliate of the Company,  and subsequently
  ceded to the  Company  through  a  reinsurance  agreement,  with an  accumulated
  account balance of approximately  $73 million at June 30, 1995, are subject to a
  provision  whereby  they may be  recaptured  by WNL. WNL informed the Company in
  February 1995 that it wished to exercise its option to recapture these policies.
  This recapture will transpire upon the  establishment  of a mutually agreed upon
  value for the business.
  
         CHANGES IN SHAREHOLDERS' EQUITY
  
         The Company  repurchased  approximately  3.5 million shares of its common
  stock for $71.8 million during 1994 under its common stock  repurchase  program.
  In January 1995,  the Company  announced  that this program had been expanded to
  6.0 million  shares.  During the first three months of 1995,  approximately  2.2
  million additional shares were repurchased by the Company for $44.5 million.  No
  shares  were  repurchased  during  the second  quarter  of 1995 and the  Company
  currently has no plans to repurchase additional shares.
  
  
  
  
  
  <PAGE>
  
  
                        CCP INSURANCE, INC. AND SUBSIDIARIES
  
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                     (unaudited)
  
  
  
         RELATED PARTY TRANSACTIONS
  
         The Company's  day-to-day  operations are administered by subsidiaries of
  Conseco,  Inc. ("Conseco") pursuant to management and service agreements.  Total
  fees incurred by the Company under such  agreements were $19.5 million and $18.5
  million for the first six months of 1995 and 1994, respectively.
  
         The Company  collected  premiums of $1.4  million and $1.7 million in the
  first six  months of 1995 and 1994,  respectively,  from  guaranteed  investment
  contracts issued as investment options for qualified retirement plans maintained
  by Conseco.  Such  premiums  were  recorded as deposits to  insurance  liability
  accounts.
  
         On June 28,  1995,  Conseco  borrowed  $32  million  from the  Company in
  exchange for a promissory note which bears interest at 6.4 percent and is due on
  December 28, 1995. The note is classified as an other invested asset.
  
         The Company is a limited  partner in Conseco  Capital  Partners  II, L.P.
  ("Partnership  II"),  a  partnership  formed  by  Conseco  in 1994 to  invest in
  privately negotiated  acquisitions of specialized annuity, life and accident and
  health  insurance  companies  and related  businesses.  Partnership  II received
  capital  commitments  of $624  million,  which  included a $25  million  capital
  commitment by the Company.  The Company funded $1.9 million of its commitment in
  connection  with  Partnership  II's  acquisition  of American  Life Group,  Inc.
  "American Life" (formerly The Statesman Group,  Inc. prior to its name change in
  August 1995) in September  1994;  therefore,  it has a remaining  commitment  of
  $23.1 million.
  
         PROPOSED MERGER
  
         On May 21, 1995,  the Company and Conseco  announced a definitive  merger
  agreement  under  which  Conseco  would  acquire the  outstanding  shares of the
  Company that  Conseco does not already own for $23.25 per share in cash.  In the
  transaction,  the Company would be merged into  Conseco,  with Conseco being the
  surviving corporation. The terms of the agreement were approved unanimously by a
  special committee of the Company's independent directors.  The special committee
  received an opinion from the  investment  banking firm serving as its  financial
  advisor to the effect that the  consideration  to be received by the non-Conseco
  stockholders  of the Company is fair to such holders  from a financial  point of
  view.  The  transaction  requires  the  approval of holders of a majority of the
  Company's  outstanding  shares  (excluding  shares held by  Conseco)  present in
  person or represented by proxy at a special  stockholders' meeting scheduled for
  August 25, 1995. A definitive  proxy  statement  for the special  meeting  dated
  August 1, 1995 was first mailed to  stockholders  on or about August 2, 1995. On
  August 1, 1995,  Conseco owned  11,555,581 of the Company's  common  shares,  or
  approximately 49.5 percent of the common stock outstanding on that date.
  
  
  <PAGE>
  
  
  
  
  
                           CONSECO, INC. AND SUBSIDIARIES
  
  
  
  ITEM 7(a).     Financial Statements and Exhibit, continued
  
                 (a), continued
  
                      CCP Insurance,  Inc. and Subsidiaries  Audited  Consolidated
                      Financial  Statements as of December 31, 1994 and 1993,  and
                      for each of the three years ended December 31, 1994.
  <PAGE>
  
                          REPORT OF INDEPENDENT ACCOUNTANTS
  
  
  
  
  
  To the Board of Directors
      and Shareholders
      CCP Insurance, Inc.
  
  
         We have  audited  the  accompanying  consolidated  balance  sheet  of CCP
  Insurance,  Inc.  and  Subsidiaries  as of December  31, 1994 and 1993,  and the
  related consolidated  statements of operations,  shareholders'  equity, and cash
  flows for each of the three years in the period ended  December 31, 1994.  These
  financial  statements are the  responsibility of the Company's  management.  Our
  responsibility  is to express an opinion on these financial  statements based on
  our audits.
  
         We conducted our audits in accordance  with generally  accepted  auditing
  standards. Those standards require that we plan and perform the audits 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.  An audit also includes
  assessing the  accounting  principles  used and  significant  estimates  made by
  management,  as well as evaluating the overall financial statement presentation.
  We believe that our audits provide a reasonable basis for our opinion.
  
         In our  opinion,  the  financial  statements  referred  to above  present
  fairly, in all material  respects,  the consolidated  financial  position of CCP
  Insurance,  Inc.  and  Subsidiaries  as of December  31, 1994 and 1993,  and the
  consolidated  results of their  operations  and their cash flows for each of the
  three years ended  December 31, 1994,  in  conformity  with  generally  accepted
  accounting principles.
  
  
  
  
                                        COOPERS & LYBRAND L.L.P.
  
  Indianapolis, Indiana
  March 6, 1995
  
  
  <PAGE>
  
                                            CCP INSURANCE, INC. AND SUBSIDIARIES
  
  <TABLE>
  <CAPTION>
                                                  CONSOLIDATED BALANCE SHEET
                                                  December 31, 1994 and 1993
                                                     (Dollars in millions)
  
  
                                                            ASSETS
  
  
                                                                                1994                      1993
                                                                                ----                      ----
  <S>                                                                         <C>                      <C>
  Investments:
      Actively managed fixed maturities at fair value
        (amortized cost:  1994 - $3,796.1; 1993 - $3,780.2)..............     $3,497.3                 $3,963.0
      Mortgage loans.....................................................        251.4                    305.1
      Credit-tenant loans................................................        116.2                     87.1
      Policy loans.......................................................        136.4                    137.3
      Investment in Bankers Life Holding Corporation.....................         25.9                     29.3
      Investment in The Statesman Group, Inc.............................         20.1                      -
      Other invested assets..............................................         30.6                     35.3
      Trading account securities.........................................          -                       25.8
      Short-term investments.............................................        123.0                    209.9
      Assets held in separate accounts...................................         91.4                     79.7
                                                                              --------                ---------
  
           Total investments.............................................      4,292.3                  4,872.5
  
  Accrued investment income..............................................         70.1                     71.6
  Reinsurance receivables................................................         42.6                     44.4
  Income taxes...........................................................         13.6                      -
  Cost of policies purchased.............................................        345.2                    175.5
  Cost of policies produced..............................................        111.9                     42.3
  Goodwill (net of accumulated amortization:
      1994 - $8.4; 1993 - $6.4)..........................................         69.9                     71.9
  Other assets...........................................................         14.7                     19.9
                                                                              --------                ---------
  
           Total assets..................................................     $4,960.3                 $5,298.1
                                                                              ========                 ========
  </TABLE>
  
  
  
  
  
  
  
  
  
  
  
  
                              (continued on next page)
  
                    The  accompanying  notes are an  integral part  
                     of  the  consolidated   financial statements.
  
  
  
  
  
  <PAGE>
  
  
                       CCP INSURANCE, INC. AND SUBSIDIARIES
  
  <TABLE>
  <CAPTION>
   
                       CONSOLIDATED BALANCE SHEET (continued)
                             December 31, 1994 and 1993
                                (Dollars in millions)
  
  
                        LIABILITIES AND SHAREHOLDERS' EQUITY
  
  
  
                                                                                1994                      1993
                                                                                ----                      ----
  <S>                                                                         <C>                      <C>
  Liabilities:
      Insurance liabilities..............................................     $4,243.1                 $4,233.3
      Income tax liabilities.............................................         -                        86.0
      Investment borrowings..............................................         -                       134.1
      Other liabilities..................................................         48.1                     27.6
      Liabilities related to separate accounts...........................         91.4                     79.7
      Notes payable......................................................        196.8                    173.5
                                                                              --------                 --------
  
           Total liabilities.............................................      4,579.4                  4,734.2
                                                                              --------                 --------
  
  
  Shareholders' equity:
      Common stock and additional paid-in capital (no par
        value, 200,000,000 shares authorized, shares issued
        and outstanding: 1994 - 25,543,516; 1993 - 29,049,968)...........        197.8                    269.6
      Unrealized appreciation (depreciation) of securities
        (net of applicable deferred income taxes:
        1994 - $(57.9); 1993 - $36.4)....................................        (96.4)                    70.7
      Retained earnings .................................................        279.5                    223.6
                                                                              --------                 --------
  
           Total shareholders' equity....................................        380.9                    563.9
                                                                              --------                 --------
  
           Total liabilities and shareholders' equity....................     $4,960.3                 $5,298.1
                                                                              ========                 ========
  </TABLE>
  
  
                     The accompanying notes are an integral part
                   part of the consolidated financial statements.
  
  
  
  
  <PAGE>
  
  
  <TABLE>
  <CAPTION>
  
                       CCP INSURANCE, INC. AND SUBSIDIARIES
  
                        CONSOLIDATED STATEMENT OF OPERATIONS
                for the years ended December 31, 1994, 1993 and 1992
                    (Dollars in millions, except per share data)
  
                                                                         1994            1993             1992
                                                                         ----            ----             ----
  <S>                                                                   <C>             <C>              <C>
  Revenues:
       Insurance policy income....................................      $114.5          $127.8           $139.5
       Investment activity:
         Net investment income....................................       367.8           412.9            380.4
         Net trading income (losses)..............................         (.9)           24.3             15.6
         Net realized gains ......................................         2.9            55.8             63.5
       Equity in earnings of Bankers Life Holding Corporation.....        -                1.2               .7
       Gain on sale of stock by Bankers Life
         Holding Corporation   ...................................        -               10.5             -
                                                                       -------         -------           ------
  
             Total revenues    ...................................       484.3           632.5            599.7
                                                                       -------         -------          -------
  
  Benefits and expenses:
       Insurance policy benefits..................................        75.7            77.6             75.2
       Change in future policy benefits...........................          .1             (.6)             1.9
       Interest expense on annuities and financial products.......       208.6           243.5            251.1
       Interest expense on long-term debt.........................        10.7            16.1             26.1
       Interest expense on investment borrowings..................         5.2             4.4              2.3
       Amortization related to operations.........................        25.3            29.4             23.2
       Amortization related to realized gains.....................         3.7            36.4             45.9
       Other operating costs and expenses.........................        54.6            52.2             55.1
                                                                        ------          ------           ------
  
             Total benefits and expenses..........................       383.9           459.0            480.8
                                                                        ------          ------           ------
  
             Income before income taxes
                and extraordinary charge..........................       100.4           173.5            118.9
  
  Income tax expense..............................................        37.4            65.9             42.0
                                                                        ------          ------           ------
  
             Income before extraordinary charge ..................        63.0           107.6             76.9
  
  Extraordinary charge on extinguishment of
       debt, net of tax...........................................         4.9            -                 8.8
                                                                        ------          -------          ------
  
             Net income                                                   58.1           107.6             68.1
  
  Less preferred stock dividends..................................       -                -                 3.8
                                                                       -------          -------          ------
  
             Earnings applicable to common stock..................       $58.1          $107.6           $ 64.3
                                                                         =====          ======           ======
  
  Earnings per common share and common equivalent share:
  
       Weighted average shares ...................................  27,656,000      26,779,000       20,784,000
       Earnings before extraordinary charge.......................       $2.28           $4.02            $3.52
       Extraordinary charge.......................................         .18           -                  .43
                                                                        ------      ----------         --------
  
             Net income ..........................................       $2.10           $4.02            $3.09
                                                                         =====           =====            =====
  </TABLE>
  
                     The accompanying notes are an integral part
                      of the consolidated financial statements.
  
  
  
  
  <PAGE>
  
  <TABLE>
  <CAPTION>
  
                        CCP INSURANCE, INC. AND SUBSIDIARIES
  
                   CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
                       for the years ended December 31, 1994,
                                    1993 and 1992
                                (Dollars in millions)
  
  
  
                                                                      1994               1993             1992
                                                                      ----               ----             ----
  <S>                                                            <C>                   <C>               <C>
  Preferred stock:
      Balance, beginning of period..............................     $   -             $   -             $   49.2
        Dividends paid-in-kind of 15% Series C preferred stock           -                 -                  2.2
        Redemption of preferred stock ..........................         -                 -                (51.4)
                                                                    --------           -------           --------
  
      Balance, end of period....................................     $   -             $   -             $    -
                                                                     =======           ========          ========
  
  Common stock and additional paid-in capital:
      Balance, beginning of period..............................      $269.6             $188.7           $  56.7
        Cost of shares acquired.................................       (71.8)              -                  -
        Issuance of common stock and warrants...................        -                  80.9             132.0
                                                                      ------            -------           -------
  
      Balance, end of period....................................      $197.8             $269.6            $188.7
                                                                      ======             ======            ======
  
  Unrealized appreciation (depreciation) of securities:.........
      Balance, beginning of period..............................     $  70.7            $  27.0          $    9.2
        Change in unrealized appreciation (depreciation)........      (167.1)              43.7              17.8
                                                                     -------             ------           -------
  
      Balance, end of period....................................     $ (96.4)           $  70.7           $  27.0
                                                                     =======            =======           =======
  
  Retained earnings:
      Balance, beginning of period..............................      $223.6             $118.1           $  54.8
        Net income..............................................        58.1              107.6              68.1
        Dividends on common stock...............................        (2.2)              (2.1)             (1.0)
        Dividends on preferred stock............................       -                 -                   (3.8)
                                                                     -------            -------           -------
  
      Balance, end of period....................................      $279.5             $223.6            $118.1
                                                                      ======             ======            ======
  
             Total shareholders' equity, end of period..........      $380.9             $563.9            $333.8
                                                                      ======             ======            ======
  </TABLE>
  
  
  
  
  
  
  
                     The accompanying notes are an integral part
                      of the consolidated financial statements.
  
  
  
  
  
  
  <PAGE>
  
  <TABLE>
  <CAPTION>
  
  
                        CCP INSURANCE, INC. AND SUBSIDIARIES
  
                        CONSOLIDATED STATEMENT OF CASH FLOWS
                    for the years ended December 31, 1994, 1993
                                      and 1992
                               (Dollars in millions)
  
                                                                            1994             1993           1992
                                                                            ----             ----           ----
  
  <S>                                                                     <C>             <C>              <C>
  Cash flows from operating activities:
      Net income.......................................................    $ 58.1         $  107.6         $  68.1
      Adjustments to reconcile net income to net.......................
        cash provided by operating activities:
        Amortization...................................................      29.0             65.8            69.1
        Income taxes...................................................      (5.4)             3.8             3.3
        Interest credited to insurance liabilities.....................     208.6            243.5           251.1
        Fees charged to insurance liabilities..........................     (43.1)           (45.3)          (57.5)
        Insurance liabilities..........................................      (2.3)           (29.6)           36.8
        Accrual and amortization of investment income..................       (.7)           (10.9)          (26.1)
        Deferral of cost of policies produced  ........................     (37.3)           (25.0)          (32.8)
        Equity in earnings of Bankers Life Holding Corporation.........       -               (1.2)            (.7)
        Gain on sale of stock by Bankers Life Holding Corporation......       -              (10.5)            -
        Trading account securities.....................................      25.8             94.6           147.7
        Other   .......................................................      35.7             (4.9)           (4.6)
                                                                          -------         --------        --------
  
             Net cash provided by operating activities.................     268.4            387.9           454.4
                                                                          -------         --------        --------
  
  Cash flows from investing activities:
      Sales ...........................................................   1,236.1          2,068.5         1,327.8
      Maturities.......................................................     259.8            558.8           413.0
      Purchases........................................................  (1,505.5)        (3,015.4)       (2,370.2)
                                                                         --------         --------        ---------
  
             Net cash used by investing activities ....................      (9.6)          (388.1)         (629.4)
                                                                         --------         --------        --------
  
  Cash flows from financing activities:
      Deposits to insurance liabilities................................     450.7            368.5           539.4
      Investment borrowings............................................    (134.1)           134.1          -
      Issuance of debt securities, net.................................     196.8           -                192.6
      Issuance of common stock, net....................................      -                80.9           111.2
      Withdrawals from insurance liabilities...........................    (605.0)          (459.2)         (404.3)
      Payments on long-term debt.......................................    (180.1)           (62.3)         (307.0)
      Purchases of Company's common stock..............................     (71.8)           -                -
      Redemption of preferred stock....................................      -               -               (34.1)
      Dividends paid on common stock...................................      (2.2)            (2.1)            (.5)
      Dividends paid on preferred stock................................      -               -                (2.2)
                                                                          --------        --------        --------
  
           Net cash provided (used) by financing activities............    (345.7)            59.9            95.1
                                                                          --------        --------        --------
  
             Net increase (decrease) in short-term investments.........     (86.9)            59.7           (79.9)
  
  Short-term investments, beginning of period..........................     209.9            150.2           230.1
                                                                          -------         --------        --------
  
  Short-term investments, end of period................................   $ 123.0         $  209.9        $  150.2
                                                                          =======         ========        ========
  </TABLE>
  
  
                     The accompanying notes are an integral part
                     of the consolidated financial statements.
  
  <PAGE>
  
                        CCP INSURANCE, INC. AND SUBSIDIARIES
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  
  
  
         1. SIGNIFICANT ACCOUNTING POLICIES:
  
         Organization and Basis of Presentation
  
         CCP Insurance,  Inc. (the  "Company") was formed in April 1992 by Conseco
  Capital Partners,  L.P. (the  "Partnership") as an Indiana corporation to be the
  holding  company  for  the  insurance  companies   previously  acquired  by  the
  Partnership:   Great  American  Reserve   Insurance   Company  ("Great  American
  Reserve"),  Jefferson National Life Insurance Company ("Jefferson National") and
  Beneficial  Standard  Life  Insurance  Company  ("Beneficial   Standard").   The
  Partnership was organized in 1990 as a Delaware limited  partnership by Conseco,
  Inc.  ("Conseco")  to extend its  activities  of acquiring  and  operating  life
  insurance companies and related businesses.  Conseco,  through its subsidiaries,
  was a 50  percent  owner and sole  general  partner  of the  Partnership.  Great
  American Reserve,  Jefferson National and Beneficial  Standard were purchased by
  majority-owned  subsidiaries of the Partnership as of June 30, 1990, October 31,
  1990 and March 31, 1991, respectively.  Jefferson National was merged into Great
  American Reserve on December 31, 1994.
  
         In July 1992, the Company:  (i) completed an initial  public  offering of
  its common stock  receiving  net  proceeds of $111.2  million;  (ii)  executed a
  senior  loan   agreement  for  $200  million;   and  (iii)   completed   certain
  recapitalization  and  related  transactions.   Including  overallotment  shares
  purchased  by the  underwriters,  the  Company  issued  8,010,700  shares in the
  offering,  representing  a  31  percent  ownership  interest  in  the  Company's
  outstanding  common stock.  The remaining common shares were held by Conseco (36
  percent)  and others who  exchanged  their  equity and debt  investments  in the
  Partnership  and its  former  subsidiaries  for shares of the  Company's  common
  stock.
  
         The  exchange  of the equity and debt of the  Partnership  and its former
  subsidiaries   for  the  Company's   common  stock  was  accounted  for  in  the
  consolidated  financial  statements  of the  Company  similarly  to a pooling of
  interests.  The assets,  liabilities and shareholders' equity of the Company and
  its subsidiaries  were combined at their prior carrying  values;  the results of
  operations  have been  reported as if the exchange had occurred at the beginning
  of the periods presented.
  
         In September 1993, CCP completed a public offering of 9,545,000 shares of
  its common stock. The offering included 3,039,268 shares sold by the Company and
  6,505,732  shares sold by certain  selling  shareholders.  Net proceeds of $80.9
  million from the shares sold by the Company were added to the Company's  general
  funds.  In a separate  transaction  also  completed in September  1993,  Conseco
  purchased 2.0 million  additional  shares of the Company's common stock from the
  same selling shareholders.
  
         In December 1994, CCP completed a public  offering of $200 million of its
  10.5 percent  senior notes due in 2004.  Net proceeds of $196.8 million from the
  sale of the notes were used to retire the  Company's  senior  loan and for other
  general  corporate  purposes,  including the  repurchase of shares of its common
  stock under a program  initiated  in February  1994.  During  1994,  the Company
  repurchased  3,507,400 shares of its common stock. On December 31, 1994, Conseco
  owned  11,555,581  shares of CCP, or approximately  45.2 percent,  of the common
  stock outstanding.
  
         The consolidated financial statements include CCP Insurance, Inc. and its
  wholly owned subsidiaries.  All acquisitions were accounted for as purchases and
  are reflected in operations as of their  effective  dates.  The costs to acquire
  Great  American  Reserve,   Jefferson  National  and  Beneficial  Standard  were
  allocated to the assets and liabilities  purchased based on their fair values on
  the  date  of  acquisition.   Intercompany   transactions  among  the  Company's
  subsidiaries  have been  eliminated.  Certain  amounts  from prior  periods were
  reclassified to conform to the 1994 presentation.
  
         Investments
  
         Fixed maturity  investments are securities that mature more than one year
  after they are issued and include bonds,  notes  receivable and preferred stocks
  with mandatory  redemption  features.  Effective  December 31, 1993, the Company
  adopted  Statement of Financial  Accounting  Standards No. 115,  "Accounting for
  Certain   Investments  in  Debt  and  Equity   Securities"   ("SFAS  115"),  and
  accordingly,  classifies  its fixed  maturity  and  equity  securities  into the
  following three categories:
  
         -  Actively managed fixed maturity  securities are securities that may be
            sold  prior to  maturity  due to changes  that  might  occur in market
            interest  rates,   changes  in  a  security's   prepayment  risk,  the
            management  of  income  tax  position,  general  liquidity  needs,  an
            increase  in loan  demand,  the need to increase  regulatory  capital,
            changes in foreign currency risk, or similar
  
  
  <PAGE>
  
            factors. Actively managed securities are carried at fair value and the
            unrealized gain or loss is recorded to  shareholders'  equity,  net of
            tax and the related adjustments described below.
  
         -  Trading  account  securities are fixed maturity and equity  securities
            that are bought and held  principally  for the purpose of selling them
            in the near term.  Trading account securities are carried at estimated
            fair value and the unrealized  gain or loss is included as a component
            of net trading  income.  No trading  account  securities  were held at
            December 31, 1994.
  
         -  All other fixed  maturity  securities are those  securities  which the
            Company has the ability and positive  intent to hold to maturity,  and
            are  carried  at  amortized  cost.  The  Company  may  dispose of such
            securities  under  certain  unforeseen  circumstances,  such as issuer
            credit deterioration or regulatory  requirements.  No fixed maturities
            were held in this category during 1994 or 1993.
  
         The above categories for classifying fixed maturity and equity securities
  are consistent with the Company's policy prior to adoption of SFAS 115, with one
  exception,  that net unrealized gains and losses on trading account  securities,
  which had previously been recorded as an adjustment net of tax to  shareholders'
  equity,  are now  recognized as trading income under the provisions of SFAS 115.
  At December 31, 1993,  the net  unrealized  loss on trading  account  securities
  recorded in trading income as a result of adopting SFAS 115 was immaterial.
  
         Anticipated  returns,  including  realized  gains  and  losses,  from the
  investment  of   policyholder   balances  are  considered  in  determining   the
  amortization  of the  cost  of  policies  purchased  and the  cost  of  policies
  produced.  When actively  managed fixed  maturity  securities are stated at fair
  value,  an adjustment is made to the cost of policies  purchased and the cost of
  policies produced equal to the change in cumulative amortization that would have
  been  recorded  if such  securities  had been sold at their  fair  value and the
  proceeds reinvested at current yields. Furthermore, if future yields expected to
  be earned on such securities  decline,  it may be necessary to increase  certain
  insurance  liabilities.  Adjustments to such liabilities are required when their
  balances,  in addition to future net cash flows including investment income, are
  insufficient  to cover future  benefits and  expenses.  No such  adjustments  to
  insurance liabilities were required in 1994 or 1993.
  
         Unrealized gains and losses and the related adjustments  described in the
  preceding paragraph have no effect on earnings, but are recorded, net of tax, to
  shareholders'  equity.  The  following  table  summarizes  the  effect  of these
  adjustments as of December 31, 1994.
  <TABLE>
  <CAPTION>
                                                                                       Adjustment to Carry
                                                                                        Actively Managed
                                                                      Balance            Fixed Maturities           Reported
                                                                 before Adjustment         at Fair Value             Amount
                                                                 -----------------         -------------             ------
                                                                                     (Dollars in millions)
  <S>                                                               <C>                      <C>                    <C>
  Actively managed fixed maturities.........................        $3,796.1                 $(298.8)               $3,497.3
  Cost of policies purchased................................           219.2                   126.0                   345.2
  Cost of policies produced.................................            95.6                    16.3                   111.9
  Income tax asset (liability)..............................           (43.7)                   57.3                    13.6
  Unrealized appreciation (depreciation) of securities......             2.8                   (99.2)                  (96.4)
  </TABLE>
  
         Effective  December  31,  1993,  when the Company  recognizes  changes in
  conditions  that  cause a  fixed  maturity  investment  to be  transferred  to a
  different category (e.g.,  actively managed,  held to maturity or trading),  the
  security is transferred to the new category at its fair value at the date of the
  transfer. At the date of transfer, the security's unrealized gain or loss, which
  was immaterial for 1994, is accounted for as follows:
  
  -    For  transfers  to the trading  category,  the  unrealized  gain or loss is
       recognized in earnings;
  
  -    For  transfers  from the  trading  category,  the  unrealized  gain or loss
       already recognized in earnings is not reversed;
  
  -    For  transfers to actively  managed from held to maturity,  the  unrealized
       gain or loss is recognized in shareholders' equity; and
  
   <PAGE>
  
  -    For transfers to held maturity from actively  managed,  the unrealized gain
       or loss at the date of transfer  continues to be reported in  shareholders'
       equity, but is amortized over the remaining life of the security as a yield
       adjustment.
  
         Prior  to  adopting  SFAS  115,  the  fixed  maturity   investments  were
  transferred  to the new  category at the lower of cost or fair value at the date
  of transfer.  Unrealized losses were recognized upon such transfers;  unrealized
  gains were deferred  until the final  disposition of the  securities.  Transfers
  between  categories in 1993 and 1992 and the  resulting  impact on earnings were
  immaterial.
  
         Credit-tenant loans are commercial mortgage loans which require:  (i) the
  lease of the  principal  tenant to be  assigned  to the  Company  and to produce
  adequate cash flow to fund  substantially  all the requirements of the loan, and
  (ii) the principal tenant or the guarantor of such tenant's  obligations to have
  an investment-grade  credit rating at the time of origination of the loan. These
  loans are also secured by the value of the related  property.  The  underwriting
  guidelines consider such factors as: (i) the terms of the lease on the property;
  (ii) the  borrower's  financial  soundness  and  management  ability,  including
  business  experience  and  property  management  capabilities,  and  (iii)  such
  economic,  demographic or other factors that may affect the income  generated by
  the  property  or  its  value.  The  underwriting   guidelines  also  require  a
  loan-to-value ratio of 75 percent or less.
  
         Mortgage and  credit-tenant  loans are stated at amortized  cost.  Policy
  loans are stated at their current  unpaid  principal  balances.  Other  invested
  assets are  accounted for using the equity method  (principally  investments  in
  unconsolidated  operating  limited  partnerships) or in accordance with SFAS 115
  (principally  investments in unconsolidated  limited  partnerships  which invest
  solely in debt or equity securities).  Short-term investments include commercial
  paper,  invested cash and other investments  purchased with maturities less than
  three months and are carried at amortized  cost,  which  approximates  estimated
  fair  value.  The  Company  considers  all  short-term  investments  to be  cash
  equivalents.
  
         Fees received and costs  incurred in connection  with the  origination of
  investments,  principally mortgages and credit-tenant loans, are deferred. Fees,
  costs,  discounts  and premiums  are  amortized  as yield  adjustments  over the
  contractual life of the investments.  Anticipated prepayments on mortgage-backed
  securities are taken into  consideration in determining  estimated future yields
  on such securities.
  
         As part of its  investment  strategy,  the Company  enters  into  reverse
  repurchase  agreements  and dollar roll  transactions  to increase its return on
  investments  and increase  liquidity.  These  transactions  are accounted for as
  collateral borrowings,  where the amount borrowed is equal to the sales price of
  the underlying securities.
  
         The specific identification method is used to account for the disposition
  of investments.  The  differences  between sale proceeds and carrying values are
  reported as gains and losses on  investments,  or as  adjustments  to investment
  income if the proceeds are prepayments by issuers prior to maturity.
  
         The Company regularly  evaluates mortgage loans,  credit-tenant loans and
  other  securities  based  on  current  economic  conditions,  past  credit  loss
  experience and other circumstances of the investee.  Impaired loans are revalued
  at the present value of expected cash flows  discounted at the loan's  effective
  interest rate when it is probable that the Company will be unable to collect all
  amounts due according to the contractual terms of the agreement.  A decline in a
  security's  net  realizable  value that is other than  temporary is treated as a
  realized  loss and the cost basis of the  security  is reduced to its  estimated
  fair value. The Company accrues  interest  thereafter on the net carrying amount
  of impaired loans.
  
         Separate Accounts
  
         Separate  accounts  represent funds for which investment income and gains
  or losses accrue directly to certain policyholders. The assets of these accounts
  are legally  segregated and are not subject to the claims which may arise out of
  any other  business of the  Company.  Separate  account  assets are  reported at
  market value since the underlying  investment  risks are assumed by the contract
  owners. The related  liabilities are recorded at amounts equal to the underlying
  assets  and the  fair  value  of those  liabilities  is equal to their  carrying
  amount.
  
  
  <PAGE>
  
         Cost of Policies Purchased
  
         The cost of  policies  purchased  represents  the  portion of the cost to
  acquire a subsidiary  that is  attributable  to the right to receive future cash
  flows  from  insurance  contracts  existing  at the date of  acquisition  of the
  subsidiary.  The  value of the cost of  policies  purchased  is the  actuarially
  determined  present value of the  projected  future cash flows from the acquired
  policies.
  
         The method used by the Company to value the cost of policies purchased is
  consistent  with the  valuation  methods  used most  commonly to value blocks of
  insurance  business,  which  is  also  consistent  with  the  basic  methodology
  generally used to value assets.  The method used by the Company is summarized as
  follows:
  
         -  Identify the expected future cash flows from the blocks of business.
  
         -  Identify  the risks  inherent  in  realizing  those cash flows (i.e.,
            the probability that the cash flows will be realized).
  
         -  Identify the rate of return that the Company  believes it must earn in
            order to accept the risks inherent in realizing the cash flows,  based
            on consideration of the factors summarized below.
  
         -  Determine  the value of the  policies  purchased  by  discounting  the
            expected future cash flows by the Company's required discount rate.
  
         Expected  future cash flows used in  determining  such value are based on
  actuarially  determined  projections of future premium  collections,  mortality,
  surrenders,   benefit  payments,   operating  expenses,   changes  in  insurance
  liabilities, investment yields on the assets held to back the policy liabilities
  and other  factors.  These  projections  take into account all factors  known or
  expected  at  the  valuation  date  based  on  the  collective  judgment  of the
  management of the Company. Actual experience on purchased business may vary from
  projections due to differences in renewal premiums collected, investment spread,
  investment gains or losses, mortality and morbidity costs and other factors.
  
         The  discount  rate used to  determine  the value of the cost of policies
  purchased  is the rate of return  required in order for the Company to invest in
  the business being acquired. In determining the rate of return to be used by the
  Company, the following factors are considered:
  
         -  The  magnitude  of the risks  associated  with  each of the  actuarial
            assumptions  used  in  determining   expected  future  cash  flows  as
            described in the preceding paragraphs.
  
         -  The cost of capital to fund the acquisition.
  
         -  The  perceived  likelihood  of changes in projected  future cash flows
            that might occur if there are changes in insurance regulations and tax
            laws.
  
         -  The  compatibility  with other  activities that may favorably affect 
            future cash flows.
  
         -  The complexity of the acquired company.
  
         -  Recent  purchase  prices  (i.e.,  discount  rates  used in determining
            valuations) on similar blocks of business.
  
         After the cost of  policies  purchased  is  determined  using the methods
  described  above, the amount is amortized based on the incidence of the expected
  cash flows. For each of the Company's subsidiaries,  the asset is amortized with
  interest at the same rate used to determine the discounted value of the asset.
  
         To the extent that past or future experience on purchased business varies
  from  projections due to differences in renewal premiums  collected,  investment
  spread,  investment  gains or losses,  mortality and  morbidity  costs and other
  factors, amortization of
  
  
  <PAGE>
  
  the cost of policies purchased is adjusted. For example, sales of fixed maturity
  investments  that result in a gain (or loss),  but also reduce (or increase) the
  future investment spread because the sale proceeds are reinvested at a lower (or
  higher)  earnings  rate,  may  cause  amortization  to  increase  (or  decrease)
  reflecting  the change in the  incidence  of cash  flows.  Amortization  is also
  adjusted for the current and future years to reflect:  (i) the revised  estimate
  of future cash flows,  and (ii) the revised  interest rate (but not greater than
  the rate  initially  used and not  lower  than the rate of  interest  earned  on
  invested  assets) at which the discounted  present value of such expected future
  profits equals the unamortized asset balance.
  
         Recoverability of the cost of policies purchased is evaluated annually by
  comparing the current estimate of expected future cash flows  (discounted at the
  rate of interest earned on invested assets) to the unamortized  asset balance by
  line of insurance business. If such current estimate indicates that the existing
  insurance liabilities,  together with the present value of future net cash flows
  from the blocks of business  purchased,  will not be  sufficient  to recover the
  cost of policies purchased, the difference is charged to expense.
  
         Cost of Policies Produced
  
         Costs of producing new business (primarily  commissions and certain costs
  of policy issuance and underwriting,  net of fees charged to the policy),  which
  vary with and are  primarily  related to the  production  of new  business,  are
  deferred to the extent recoverable from future profits. Such costs are amortized
  with interest as follows:
  
         -  For universal life-type contracts and  investment-type  contracts,  in
            relation to the present  value of expected  gross  profits  from these
            contracts, discounted using the interest rate credited to the policy.
  
         -  For immediate  annuities  with  mortality  risks,  in  relation to the
            present value of benefits to be paid.
  
         -  For traditional life and accident and health products,  in relation to
            future anticipated premium revenue using the same assumptions that are
            used in calculating the insurance liabilities.
  
         Recoverability  of the  unamortized  balance  of  the  cost  of  policies
  produced is evaluated at least annually.  For universal  life-type contracts and
  investment-type  contracts, the accumulated amortization is adjusted (whether an
  increase or a decrease)  whenever there is a material change in the incidence of
  the  estimated  gross  profits  expected over the life of a block of business in
  order to maintain a constant  relationship  between cumulative  amortization and
  the  present  value  (discounted  at the rate of  interest  that  accrues to the
  policies) of expected gross profits.  For most other contracts,  the unamortized
  asset  balance is reduced by a charge to income only when the  present  value of
  future cash flows,  net of policy  liabilities,  is not sufficient to cover such
  asset balance.
  
         Goodwill
  
         The excess of the cost to acquire purchased companies over the net assets
  acquired is recorded as goodwill  and is amortized  on the  straight-line  basis
  over a  40-year  period.  The  Company  continually  monitors  the  value of its
  goodwill based upon estimates of future earnings. If it determines that goodwill
  has been impaired, the carrying value is reduced and charged to expense (no such
  changes have been made).
  
       Insurance  Liabilities
  
       Recognition  of Insurance  Policy Income and Related  Benefits and Expenses
  Reserves for universal life-type and investment-type  contracts are based on the
  contract  account  balance,  if future benefit payments in excess of the account
  balance are not guaranteed,  or on the present value of future benefit  payments
  when such  payments  are  guaranteed.  Additions to  insurance  liabilities  for
  universal life-type contracts are made if future cash flows including investment
  income are insufficient to cover future benefits and expenses.
  
         Premium  deposits  and benefit  payments  are  recorded as  increases  or
  decreases  in a  liability  account  rather  than as  revenue  and  expense  for
  investment  contracts  without  mortality  risk (such as deferred  annuities and
  immediate  annuities  with  benefits  paid  only for a period  certain)  and for
  contracts that permit the Company or the insured to make changes in the contract
  terms (such as single- premium whole life and universal  life).  Amounts charged
  against the liability account for the cost of insurance,  policy  administration
  and  surrender  penalties  are  recorded as revenues.  Interest  credited to the
  liability account and benefit payments made in excess of the contract  liability
  account balance are charged to expense.
  
       Reserves  for  traditional  and  limited-payment  contracts  are  generally
  calculated using the net level premium method and
  
  
  <PAGE>
  
  assumptions as to investment yields,  mortality,  withdrawals and dividends. The
  assumptions are based on projections of past  experience and include  provisions
  for  possible  adverse  deviation.  These  assumptions  are made at the time the
  contract is issued or, in the case of  contracts  acquired by  purchase,  at the
  purchase date.
  
         Premiums  are  recognized  as income when due for  traditional  insurance
  contracts  or,  for  short  duration  contracts,  over the  period  to which the
  premiums  relate.  Benefits and expenses are recognized as a level percentage of
  earned  premiums.  Such  recognition is  accomplished  through the provision for
  future policy benefits and the amortization of cost of policies produced.
  
         For  contracts  with  mortality  risk,  but with premiums paid for only a
  limited period (such as  single-premium  immediate  annuities with benefits paid
  for  the  life  of the  annuitant),  the  accounting  treatment  is  similar  to
  traditional  contracts.  However,  the excess of the gross  premium over the net
  premium is deferred and  recognized in relation to the present value of expected
  future benefit payments (when  accounting for annuity  contracts) or in relation
  to insurance in force (when accounting for life insurance contracts).
  
         Liabilities   for  incurred  claims  are  determined   using   historical
  experience and published  tables for disabled lives and represent an estimate of
  the  present  value  of the  remaining  ultimate  net cost of all  reported  and
  unreported  claims.  Management  believes  these  estimates are  adequate.  Such
  estimates are periodically reviewed and any adjustments are reflected in current
  operations.
  
         The liability for future policy benefits for accident and health policies
  consists  of  active  life  reserves  and the  estimated  present  value  of the
  remaining ultimate net cost of incurred claims. The active life reserves include
  unearned premiums and additional reserves.  The additional reserves are computed
  on the net level premium method using  assumptions for future  investment yield,
  mortality and morbidity experience.  The assumptions are based on projections of
  past experience and reflect provisions for possible adverse deviation.
  
         The amount of dividends to be paid on  participating  policies (which are
  not  significant)  is  determined  annually by the  Company.  The portion of the
  earnings  allocated to  participating  policyholders is recorded as an insurance
  liability.
  
         Reinsurance
  
         In the normal course of business, the Company seeks to limit its exposure
  to loss on any single  insured and to recover a portion of the benefits  paid by
  ceding  insurance to other  insurance  enterprises  or  reinsurers  under excess
  coverage and coinsurance contracts. The Company has set its retention limits for
  acceptance  of risk on life  insurance  policies  at  various  levels  up to $.5
  million.
  
         Assets and liabilities related to insurance contracts are reported before
  the effects of  reinsurance.  Reinsurance  receivables  and prepaid  reinsurance
  premiums  (including  amounts related to insurance  liabilities) are reported as
  assets.  Estimated reinsurance receivables are recognized in a manner consistent
  with the liabilities related to the underlying reinsured contracts. Such amounts
  have been  presented  in  accordance  with  Statement  of  Financial  Accounting
  Standards No. 113,  "Accounting and Reporting for Reinsurance of  Short-Duration
  and Long-Duration Contracts."
  
         Income Taxes
  
         Income  tax  expense  includes  deferred  taxes  arising  from  temporary
  differences  between  the  tax and  financial  reporting  basis  of  assets  and
  liabilities.  Additionally, this liability method of accounting for income taxes
  requires the effect of a tax rate change on accumulated deferred income taxes to
  be reflected in income in the period in which the change is enacted.
  
         Earnings Per Share
  
         Primary  net income per share is  computed  by  dividing  earnings,  less
  preferred  dividend  requirements,  by the weighted average number of common and
  common  equivalent  shares  outstanding  for the year.  Equivalent  shares  were
  computed  for 1992 based on the number of shares of the  Company's  common stock
  exchanged for the common stock and warrants of the former life  subsidiaries  of
  the Partnership,  which now comprise the operating  subsidiaries of the Company.
  Dilution  related to stock options is not  considered  because it is immaterial.
  There is no difference between primary and fully-diluted earnings per share.
  
  <PAGE>
  
         Fair Values of Financial Instruments
  
         The  following  methods  and  assumptions  were  used by the  Company  in
  determining estimated fair values of financial instruments:
  
         Investment  securities:  The  estimated  fair  values for fixed  maturity
         securities  (including  redeemable  preferred stocks) are based on quoted
         market  prices,  where  available.  For  fixed  maturity  securities  not
         actively  traded,  the estimated fair values are determined  using values
         obtained  from  independent  pricing  services or, in the case of private
         placements,  by  discounting  expected  future cash flows using a current
         market rate  applicable to the yield,  credit quality and maturity of the
         investments. The estimated fair values for trading account securities are
         based on quoted market prices.
  
         Short-term   investments:   The  estimated  fair  values  for  short-term
         investments  are based on  quoted  market  prices.  The  carrying  amount
         reported  in  the  consolidated   balance  sheet  for  these  instruments
         approximates their estimated fair value.
  
         Mortgage loans,  credit-tenant loans and policy loans: The estimated fair
         values of these loans are determined by discounting  future expected cash
         flows using interest rates  currently  being offered for similar loans to
         borrowers with similar credit ratings. Loans with similar characteristics
         are aggregated for purposes of the calculations.
  
         Other invested assets: The estimated fair values of other invested assets
         are determined using quoted market prices for similar instruments or, for
         an  insignificant   portion  for  which  quoted  market  prices  are  not
         available, are assumed to be equal to the carrying amount.
  
         Insurance liabilities for investment contracts: The estimated fair values
         of the Company's  liabilities under  investment-type  insurance contracts
         are determined using discounted cash flow calculations  based on interest
         rates  currently  being  offered for similar  contracts  with  maturities
         consistent with those remaining for the contracts being valued.
  
         Investment  borrowings:  Due to the short-term nature of these borrowings
         (terms generally less than 30 days), estimated fair values are assumed to
         approximate  the  carrying  (face)  amount  reported in the  consolidated
         balance sheet.
  
         Notes payable:  The estimated fair values of the Company's  notes payable
         are determined using discounted cash flow analyses based on the Company's
         current  incremental  borrowing  rates  for  similar  types of  borrowing
         arrangements.
  
  
  <PAGE>
  
         The estimated fair values of the Company's financial  instruments were as
  follows:
  <TABLE>
  <CAPTION>
                                                                           1994                           1993
                                                                   -----------------------    ----------------------
                                                                    Carrying        Fair       Carrying        Fair
                                                                     Amount         Value       Amount         Value
                                                                     ------         -----       ------         -----
                                                                                    (Dollars in millions)
      <S>                                                           <C>           <C>          <C>            <C>
      Financial assets issued for purposes other than trading:
            Actively managed fixed maturities..................     $3,497.3      $3,497.3     $3,963.0       $3,963.0
            Mortgage loans.....................................        251.4         258.2        305.1          338.9
            Credit-tenant loans................................        116.2         101.1         87.1           87.1
            Policy loans.......................................        136.4         136.4        137.3          137.3
            Other invested assets..............................         30.6          30.6         35.3           35.3
            Short-term investments.............................        123.0         123.0        209.9          209.9
  
      Trading account securities...............................       -              -             25.8           25.8
  
      Financial liabilities issued for purposes other than trading:
            Insurance liabilities for investment contracts <F1>.     3,344.1       3,344.1      3,339.0        3,339.0
            Investment borrowings..............................       -              -            134.1          134.1
            Notes payable-senior unsecured notes...............        196.8         199.3        -              -
            Notes payable-senior secured note..................       -              -            162.2          166.7
            Notes payable-unsecured note related to
               Jefferson National acquisition..................       -              -             11.3           13.4
  
  <FN>
  
         <F1>The estimated fair value of the liabilities for investment  contracts
             was  approximately  equal to its carrying  value at December 31, 1994
             and 1993,  because  interest  rates  credited on the vast majority of
             account   balances   approximate   current   rates  paid  on  similar
             investments  and are not generally  guaranteed  beyond one year. Fair
             values for the Company's  insurance  liabilities other than those for
             investment  contracts are not required to be disclosed.  However, the
             estimated fair values of liabilities for all insurance  contracts are
             taken into  consideration  in the  Company's  overall  management  of
             interest rate risk,  which  minimizes  exposure to changing  interest
             rates through the matching of investment  maturities with amounts due
             under insurance contracts.
  </FN>
  </TABLE>
         
  
  
  <PAGE>
  
         2.  INVESTMENTS:
  
         At December 31, 1994, the amortized  cost and estimated  fair  (carrying)
  value of actively managed fixed maturities were as follows:
  <TABLE>
  <CAPTION>
  
                                                                                                 Estimated
                                                                       Gross         Gross         Fair
                                                       Amortized    Unrealized    Unrealized    (Carrying)
                                                         Cost          Gains        Losses         Value
                                                         ----          -----        ------         ----      
                                                                        (Dollars in millions)
  <S>                                                <C>            <C>          <C>           <C>
  United States Treasury securities
      and obligations of
      United States government
      corporations and agencies..................    $     63.2     $    .2      $    4.6      $     58.8
  Obligations of states and .....................
      political subdivisions.....................          41.8         -             3.3            38.5
  Debt securities issued
      by foreign governments.....................            .4         -             -                .4
  Public utility securities......................         874.2         7.0          86.7           794.5
  Other corporate securities.....................       1,504.1         8.9         115.8         1,397.2
  Mortgage-backed securities.....................       1,312.4         5.8         110.3         1,207.9
                                                      ---------    --------       -------       ---------
  
               Total.............................      $3,796.1       $21.9        $320.7        $3,497.3
                                                       ========       =====        ======        ========
  </TABLE>
  
  
         At December 31, 1993, the amortized  cost and estimated  fair  (carrying)
  value of actively managed fixed maturities were as follows:
  <TABLE>
  <CAPTION>
  
                                                                                                 Estimated
                                                                       Gross         Gross         Fair
                                                       Amortized    Unrealized    Unrealized    (Carrying)
                                                         Cost          Gains        Losses         Value
                                                         ----          -----        ------         ----- 
                                                                        (Dollars in millions)
  <S>                                                 <C>           <C>            <C>          <C>
  United States Treasury securities
      and obligations of
      United States government
      corporations and agencies..................     $    47.8     $   6.3        $  -         $    54.1
  Obligations of states and
      political subdivisions.....................          34.7         1.3           1.1            34.9
  Debt securities issued
      by foreign governments.....................            .4          .1           -                .5
  Public utility securities......................         840.4        43.1          10.4           873.1
  Other corporate securities.....................       1,633.0       113.3          14.4         1,731.9
  Mortgage-backed securities.....................       1,223.9        48.8           4.2         1,268.5
                                                       --------      ------         -----        --------
  
               Total.............................      $3,780.2      $212.9         $30.1        $3,963.0
                                                       ========      ======         =====        ========
  </TABLE>
  
  
  
  
  <PAGE>
  
         The  following  table sets forth the amortized  cost and  estimated  fair
  value of actively  managed fixed  maturities as of December 31, 1994, based upon
  the source of the estimated fair value:
  <TABLE>
  <CAPTION>
                                                                                                            Estimated
                                                                                           Amortized          Fair
                                                                                              Cost            Value
                                                                                              ----            -----
                                                                                               (Dollars in millions)
  
  <S>                                                                                      <C>               <C>
  Nationally recognized pricing services................................................   $3,667.7          $3,372.3
  Broker-dealer market makers...........................................................      118.3             116.2
  Internally developed methods (calculated based on a
      weighted average current market yield of 11.2 percent)............................       10.1               8.8
                                                                                           --------          --------
  
                 Total..................................................................   $3,796.1          $3,497.3
                                                                                           ========          ========
  </TABLE>
  
          The  following  table sets forth the quality of actively  managed  fixed
  maturity investments as of December 31, 1994,  classified in accordance with the
  highest rating by a nationally recognized statistical rating organization or, as
  to $44.7  million fair value of  investments  not rated by such firms,  based on
  ratings assigned by the National  Association of Insurance  Commissioners,  (the
  "NAIC") as follows: NAIC Class 1 is included in the "A" rating; Class 2, "BBB-";
  Class 3, "BB-"; and Classes 4-6, "B+ and below."
  <TABLE>
  <CAPTION>
  
                                                                    Percent of
                                                                 Actively Managed               Percent of
                              Investment Rating                  Fixed Maturities            Total Investments
                              -----------------                  ----------------            -----------------
  <S>                                                                     <C>                         <C>
  AAA     ....................................................            39%                         31%
  AA      ....................................................             6                           5
  A       ....................................................            22                          18
  BBB+    ....................................................             9                           7
  BBB     ....................................................             8                           7
  BBB-    ....................................................             9                           8
                                                                         ---                         ---
  
         Investment-grade.....................................            93                          76
                                                                         ---                         ---
  
  BB+     ....................................................             2                           2
  BB      ....................................................             1                           1
  BB-     ....................................................             2                           1
  B+ and below................................................             2                           1
                                                                         ---                         ---
  
      Below investment-grade..................................             7                           5
                                                                         ---                         ---
  
         Total ...............................................           100%                         81%
                                                                         ===                          ==
  </TABLE>
  
  
  
  
  <PAGE>
  
         Below  investment-grade  actively  managed  fixed  maturity  investments,
  summarized  by the amount  their  amortized  cost  exceeds  fair value,  were as
  follows at December 31, 1994:
  <TABLE>
  <CAPTION>
                                                                                                  Estimated
                                                                                 Amortized          Fair
                                                                                   Cost             Value
                                                                                   ----             -----       
                                                                                   (Dollars in millions)
  
  <S>                                                                            <C>               <C>
  Amortized cost exceeds market value by 30% or more.......................      $  10.7           $  6.9
  Amortized cost exceeds market value by 15%,
      but not more than 30%................................................         60.6             46.7
  Amortized cost exceeds market value by 5%,
      but not more than 15%................................................         79.0             70.7
  All others...............................................................        104.4            109.6
                                                                                  ------           ------
  
          Total below investment-grade actively
            managed fixed maturity investments.............................       $254.7           $233.9
                                                                                  ======           ======
  </TABLE>
  
         The  amortized  cost and estimated  fair value of actively  managed fixed
  maturities  at December  31, 1994,  by  contractual  maturity,  are shown below.
  Actual maturities will differ from contractual  maturities because borrowers may
  have the right to call or prepay  obligations with or without call or prepayment
  penalties  and because  most  mortgage-backed  securities  provide for  periodic
  payments throughout their lives.
  <TABLE>
  <CAPTION>
  
                                                                                                  Estimated
                                                                                 Amortized          Fair
                                                                                   Cost             Value
                                                                                   ----             ----         
                                                                                  (Dollars in millions)
  <S>                                                                         <C>              <C>
  Due in one year or less................................................     $     29.5       $     29.8
  Due after one year through five years..................................          190.5            187.4
  Due after five years through ten years.................................          608.1            575.2
  Due after ten years....................................................        1,655.6          1,497.0
                                                                                --------         --------
  
               Subtotal..................................................        2,483.7          2,289.4
  
  Mortgage-backed securities.............................................        1,312.4          1,207.9
                                                                                --------        ---------
  
             Total ......................................................       $3,796.1         $3,497.3
                                                                                ========         ========
  </TABLE>
  
  
  
  
  
  <PAGE>
  
         Net investment income consisted of the following:
  <TABLE>
  <CAPTION>
                                                                  1994           1993          1992
                                                                  ----           ----          ----
                                                                         (Dollars in millions)
  <S>                                                            <C>            <C>           <C>
  Fixed maturities.......................................        $305.3         $337.6        $300.8
  Mortgage loans.........................................          31.8           39.9          53.0
  Credit-tenant loans....................................           7.2            5.2           1.4
  Policy loans...........................................           8.6            8.9           8.8
  Other invested assets..................................           5.7            4.3           1.2
  Short-term investments.................................           9.1            7.9          11.6
  Separate accounts......................................           2.3           11.8           6.9
                                                                 ------         ------        ------
  
            Gross investment income .....................         370.0          415.6         383.7
  
  Investment expenses....................................           2.2            2.7           3.3
                                                                 ------         ------        ------
  
            Net investment income........................        $367.8         $412.9        $380.4
                                                                 ======         ======        ======
  </TABLE>
  
  
      The carrying value of  investments  not accruing  investment  income totaled
  $18.7  million,  $17.8 million and $16.4 million at December 31, 1994,  1993 and
  1992, respectively.
  
      Trading income (losses),  net of related expenses,  were included in revenue
  as follows:
  <TABLE>
  <CAPTION>
  
                                                                   1994           1993         1992
                                                                   ----           ----         ----
                                                                          (Dollars in millions)
  <S>                                                            <C>              <C>          <C>
  Gross gains...............................................      $ 3.7           $33.2        $28.3
  Gross losses..............................................       (2.5)           (5.0)        (9.4)
                                                                  -----           -----        -----
  
            Net trading income before expenses..............        1.2            28.2         18.9
  
  Trading expenses..........................................        2.1             3.9          3.3
                                                                  -----           -----        -----
  
            Net trading income (losses).....................      $ (.9)          $24.3        $15.6
                                                                  =====           =====        =====
  </TABLE>
  
  
  
  
  
  
  <PAGE>
  
          Realized  gains,  net of related  expenses,  were included in revenue as
  follows:
  <TABLE>
  <CAPTION>
  
                                                                           1994              1993             1992
                                                                           ----              ----             ----
                                                                                   (Dollars in millions)
  <S>                                                                     <C>               <C>               <C>
  Actively managed fixed maturities:
      Gross gains.................................................       $  31.0            $ 80.7            $73.2
      Gross losses................................................         (17.5)             (5.8)            (5.8)
      Decline in net realizable value ............................          (1.4)            (17.2)            (1.6)
                                                                         -------           -------          -------
  
            Net realized gains from actively managed
               fixed maturities before expenses...................          12.1              57.7             65.8
  
  Mortgage loans..................................................           (.6)              2.0              1.0
  Other invested assets...........................................          (2.2)              -                -
  Other...........................................................           (.7)              -                 .3
                                                                         -------           -------          -------
  
           Net realized gains before expenses.....................           8.6              59.7             67.1
  
  Realized gain expenses..........................................           5.7               3.9              3.6
                                                                         -------          --------          -------
  
            Net realized gains ...................................       $   2.9            $ 55.8            $63.5
                                                                         =======            ======            =====
  </TABLE>
  
  
      The proceeds from sales of actively managed fixed maturity  investments were
  $1.2  billion,   $2.1  billion  and  $1.3  billion  for  1994,  1993  and  1992,
  respectively.
  
         Changes in unrealized  appreciation  (depreciation) of securities were as
  follows:
  <TABLE>
  <CAPTION>
  
                                                                           1994              1993             1992
                                                                           ----              ----             ----
                                                                                     (Dollars in millions)
  <S>                                                                   <C>               <C>               <C>
  Investments carried at amortized cost:
      Fixed maturities held to maturity...........................      $    -            $   -             $(145.1)
                                                                        ========          ========          =======
  
  Investments carried at estimated fair value:
      Actively managed fixed maturities...........................       $(481.6)            $ 92.3         $  90.5
      Trading account securities..................................           -                 (1.6)          (12.4)
      Investment in Bankers Life Holding Corporation..............          (3.4)              11.9           -
      Investment in The Statesman Group, Inc......................          (3.1)              -              -
      Other invested assets.......................................          (2.4)              -               -
                                                                        --------          ---------        --------
  
                                                                          (490.5)             102.6            78.1
  
  Adjustment for effect on other balance sheet accounts:
      Cost of policies purchased..................................         188.8              (19.1)          (43.7)
      Cost of policies produced...................................          40.3              (16.5)           (7.5)
      Income taxes................................................          94.3              (23.3)           (9.1)
                                                                        --------           --------        --------
  
          Change in unrealized appreciation (depreciation)
            of securities.........................................       $(167.1)            $ 43.7        $   17.8
                                                                         =======             ======        ========
  </TABLE>
  
  
         The amortized cost and fair  (carrying)  value of actively  managed fixed
  maturity  investments in default as to the payment of principal or interest were
  $12.2 million (net of recorded  writedowns  of $4.7 million) and $18.4  million,
  respectively,  at December 31, 1994.  During  1994,  1993 and 1992,  the Company
  recorded  writedowns of fixed maturity  investments  totaling $1.0 million,  $.3
  million and $1.6  million,  respectively,  as a result of changes in  conditions
  which caused it to conclude that it would not be able to collect all amounts due
  according to the terms of the securities.  Additionally,  the Company wrote down
  exchange-rate-linked
  
  <PAGE>
  
  securities by $.4 million and $16.9 million in 1994 and 1993, respectively,  due
  to foreign  currency  fluctuations  which  caused it to  conclude  that the full
  amount   of   its   investment   would   not  be   realized.   Most   of   these
  exchange-rate-linked  securities  subsequently  matured  in 1993 and  1994;  the
  carrying  value  of  such  securities   remaining  at  December  31,  1994,  was
  approximately $.7 million.
  
         Investments in mortgage-backed  securities at December 31, 1994, included
  collateralized   mortgage   obligations   ("CMOs")   of   $796.2   million   and
  mortgage-backed pass-through securities of $411.7 million. At December 31, 1994,
  the par  value,  amortized  cost and  estimated  fair  value of  investments  in
  mortgage-backed  securities  summarized  by  interest  rates  on the  underlying
  collateral were comprised of the following:
  <TABLE>
  <CAPTION>
  
                                                                                 Par          Amortized       Estimated
                                                                                 Value          Cost         Fair Value
                                                                                 -----          ----         ----------
                                                                                        (Dollars in millions)
  <S>                                                                          <C>             <C>             <C>
  Pass-through securities:
               Below 7%..................................................      $ 250.8         $ 250.4        $  222.1
               7% - 8%...................................................        130.8           132.0           120.0
               8% - 9%...................................................         35.0            35.3            34.0
               Above 9%..................................................         34.7            35.0            35.6
  
  Planned amortized class CMO instruments:
               Below 7%..................................................        139.2           128.9           110.8
               7% - 8%...................................................        333.2           313.4           281.6
               8% - 9%...................................................        177.1           172.4           159.3
               Above 9%..................................................        107.5           105.8           107.6
  
  Other CMO instruments:
               Below 7%..................................................          9.7            14.0            12.7
               7% - 8%...................................................         14.0            16.6            16.5
               8% - 9%...................................................         30.9            29.2            29.4
               Above 9%..................................................         80.0            79.4            78.3
                                                                              --------        --------        --------
  
                    Total mortgage-backed securities ....................     $1,342.9        $1,312.4        $1,207.9
                                                                              ========        ========        ========
  </TABLE>
  
  
         The  following  table sets forth the amortized  cost and  estimated  fair
  value of  mortgage-backed  securities  as of December 31,  1994,  based upon the
  source of the estimated fair value:
  <TABLE>
  <CAPTION>
  
                                                                                                            Estimated
                                                                                          Amortized           Fair
                                                                                             Cost             Value
                                                                                             ----             -----
                                                                                               (Dollars in millions)
  <S>                                                                                      <C>               <C>
  Nationally recognized pricing services..............................................     $1,223.8          $1,120.3
  Broker-dealer market makers.........................................................         88.4              87.4
  Internally developed methods (calculated based on a
      current market yield of 9.2 percent)............................................           .2                .2
                                                                                           --------          --------
  
                 Total................................................................     $1,312.4          $1,207.9
                                                                                           ========          ========
  </TABLE>
  
  
           At December 31, 1994, less than 3 percent of the book value of mortgage
  loans held by the Company had  defaulted  as to  principal  or interest for more
  than 60 days, were in foreclosure,  had been converted to foreclosed real estate
  or had been restructured  while the Company owned them. The Company maintained a
  loan loss  reserve of $1.2  million on that date.  Approximately  59 percent,  9
  percent  and 6 percent  of the  mortgage  loans  were on  properties  located in
  California,  Texas and Indiana,  respectively.  No other state comprised greater
  than 5 percent of the mortgage loan balance.
  
           As part of its  investment  strategy,  the Company  enters into reverse
  repurchase  agreements  and dollar roll  transactions  to increase its return on
  investments and increase liquidity. These transactions generally terminate after
  30 days and are accounted for
  
  <PAGE>
  
  as short-term collateralized borrowings. These borrowings, which were as high as
  $298.6 million during 1994, averaged approximately $151 million in 1994 compared
  to $155 million in 1993 and were  collateralized  by securities with fair values
  approximately  equal to the loan value.  The weighted  average  interest rate on
  short-term  collateralized borrowings was 3.4 percent in 1994 and 2.8 percent in
  1993.
  
          Life  insurance  companies are required to maintain  certain  amounts of
  assets  on  deposit  with  state  regulatory  authorities.  Such  assets  had an
  aggregate carrying value of $21.1 million at December 31, 1994.
  
          Investments in a single entity in excess of 10 percent of  shareholders'
  equity  at  December  31,  1994,   other  than  investments  in  affiliates  and
  investments  issued or  guaranteed  by the U.S.  government,  all of which  were
  actively managed fixed maturity investments, were as follows:
  <TABLE>
  <CAPTION>
  
                                                                                                          Estimated
                                                                                      Amortized             Fair
                            Investment                                                   Cost               Value
                            ----------                                                   ----               ----- 
                                                                                           (Dollars in millions)
  
                            <S>                                                        <C>                  <C>
                            Hydro-Quebec.......................................        $41.8                $39.1
                            Pacific Gas & Electric.............................         44.9                 38.3
  </TABLE>
  
  
  
         3.  INVESTMENTS IN UNCONSOLIDATED AFFILIATES:
  
         In  March  1993,  Bankers  Life  Holding  Corporation  ("BLH"),   then  a
  subsidiary  of  the  Partnership,   completed  an  initial  public  offering  of
  19,550,000 shares of its common stock at $22 per share. In conjunction with this
  offering,  the  Company's  investment  in  the  Partnership  was  exchanged  for
  1,513,131  shares of BLH common  stock.  During the first  quarter of 1993,  the
  Company  recognized  equity in earnings of BLH of $1.2 million and a gain on the
  sale of stock by BLH of $10.5 million.  Effective with the date of the exchange,
  the Company  carries its investment in BLH at fair value.  At December 31, 1994,
  the Company's investment in BLH had an estimated fair value of $25.9 million and
  an unrealized gain of $7.6 million,  net of taxes of $.9 million.  Shares of BLH
  held by the  Company  are not freely  tradable,  and the sale of such shares may
  require a registration statement with the Securities and Exchange Commission. On
  March 1, 1995,  BLH received a proposal  from Conseco  under which Conseco would
  acquire the outstanding shares of BLH that Conseco does not currently own. Under
  the  proposal,  BLH would merge into  Conseco,  with Conseco being the surviving
  corporation. Each holder of BLH common shares, other than Conseco, would receive
  $22 per share in cash. The proposed transaction requires the approval of holders
  of a majority of BLH's  outstanding  shares  (other than shares held by Conseco)
  voting at a special shareholders' meeting.
  
         In January  1994,  Conseco  announced  the  formation of Conseco  Capital
  Partners,  II,  L.P.  ("Partnership  II"),  a  partnership  formed  to invest in
  privately negotiated  acquisitions of specialized annuity, life and accident and
  health  insurance  companies  and related  businesses.  Partnership  II received
  capital  commitments  of $624  million,  which  included a $25  million  capital
  commitment by the Company as a limited  partner of Partnership  II. On September
  29, 1994, the Company  participated  in funding the acquisition of The Statesman
  Group, Inc. ("Statesman") by Partnership II. The Company indirectly acquired 3.2
  percent of the outstanding  common shares of Statesman  through its $1.9 million
  contribution to Partnership II. In a separate transaction, the Company purchased
  $24.0 million of  payment-in-kind  ("PIK")  preferred stock issued by Statesman,
  although  $3.0  million  of  this  investment  was  later  sold  at  cost  to an
  unaffiliated  company.  As partial  consideration  for the PIK  preferred  stock
  purchases,  the  Company  received  7.3  percent of  Statesman's  common  shares
  outstanding. Dividends on the Statesman PIK preferred stock are payable annually
  through  2006 at 13 percent in  additional  shares of  Statesman  PIK  preferred
  stock.  Thereafter,  dividends will be payable quarterly in cash at a 15 percent
  annual  rate.  During the fourth  quarter of 1994,  the Company  recognized  $.3
  million of  investment  income for its equity in the earnings of  Statesman.  At
  December 31, 1994, the carrying  value of the Company's  investment in Statesman
  was $20.1  million,  which included an unrealized  loss of $2.8 million,  net of
  taxes of $.3 million.
  
  <PAGE>
  
         4.  INSURANCE LIABILITIES:
  
         Insurance liabilities consisted of the following:
  <TABLE>
  <CAPTION>
  
                                                                                 Interest
                                                  Withdrawal      Mortality        Rate              December 31,
                                                  Assumption     Assumption     Assumption      1994             1993
                                                  ----------     ----------     ----------      ----             ---
                                                                                                (Dollars in millions)
  <S>                                             <C>                <C>            <C>       <C>              <C>
  Future policy benefits:
         Investment contracts.............            N/A            N/A            <F3>      $3,344.1         $3,339.0
         Limited-payment contracts........           None            <F1>            7%          158.4            154.4
         Traditional life insurance                 Company
            contracts.....................        experience         <F2>            8%          181.7            187.7
         Universal life-type contracts....            N/A            N/A            N/A          472.0            478.3
  Claims payable and other
         policyholders' funds ............            N/A            N/A            N/A           86.9             73.9
                                                                                              --------         --------
  
         Total insurance liabilities....................................................      $4,243.1         $4,233.3
                                                                                              ========         ========
  <FN>
  
  <F1> Principally the 1971  Individual  Annuitant Table and the 1965 - 70 and the
       1975 - 80 Basic, Select and Ultimate Tables.
  
  <F2> Principally  modifications of the 1965 - 70 and 1975 - 80 Basic, Select 
       and Ultimate  Tables.
  
  <F3> At  December  31, 1994 and 1993,  approximately  89 percent and 85 percent,
       respectively,  of this liability  represented account balances where future
       benefits were not  guaranteed.  The weighted  average  interest rate on the
       remainder of  liabilities,  representing  the present  value of  guaranteed
       future benefits, was approximately 6 percent at December 31, 1994.
  </FN>
  </TABLE>
  
         Participating policies represented approximately 3.6 percent, 3.8 percent
  and 3.3 percent of total life insurance in force at December 31, 1994,  1993 and
  1992 respectively, and approximately 6.8 percent, 6.0 percent and 6.5 percent of
  premium income for 1994, 1993 and 1992, respectively. Dividends on participating
  policies  amounted to $1.8 million,  $2.0 million and $1.8 million in 1994, 1993
  and 1992, respectively.
  
         5.  REINSURANCE:
  
         Cost of reinsurance  ceded where the reinsured policy contains  mortality
  risks totaled $45.0 million,  $52.4 million and $51.8 million in 1994,  1993 and
  1992,  respectively,  and has been deducted from insurance  policy  income.  The
  Company is contingently  liable for claims  reinsured if the assuming company is
  unable to pay.  Reinsurance  recoveries netted against insurance policy benefits
  totaled $31.6 million,  $36.9 million and $35.3 million in 1994,  1993 and 1992,
  respectively.
  
         The Company has ceded policy  liabilities  under  assumption  reinsurance
  agreements where all obligations  under the insurance  contracts have been ceded
  to another company. Accordingly,  insurance liabilities related to such policies
  were not  reported  in the balance  sheet.  The Company  believes  the  assuming
  companies are able to honor all  contractual  commitments  under the  assumption
  reinsurance  agreements  based on  periodic  reviews  of  financial  statements,
  insurance industry reports and reports filed with state insurance departments.
  
  <PAGE>
  
       6.   INCOME TAXES:
  
         Income tax assets (liabilities) were comprised of the following:
  <TABLE>
  <CAPTION>
  
                                                                                       December 31,
                                                                              1994               1993
                                                                              ----               ----
                                                                                (Dollars in millions)
  <S>                                                                         <C>            <C>
  Deferred income tax assets (liabilities):
      Investments......................................................       $ 50.8         $    3.8
      Cost of policies purchased and ..................................
         cost of policies produced.....................................       (150.0)           (88.6)
      Insurance liabilities............................................         72.8             68.3
      Unrealized depreciation (appreciation) ..........................         57.9            (36.4)
      Other............................................................        (22.8)           (25.2)
                                                                             -------           -------
  
               Deferred income tax assets (liabilities)................          8.7            (78.1)
  
  Current income tax assets (liabilities)..............................          4.9             (7.9)
                                                                             -------           ------
  
               Income tax assets (liabilities).........................      $  13.6           $(86.0)
                                                                             =======           ======
  </TABLE>
  
         Income tax expense was as follows:
  <TABLE>
  <CAPTION>
  
                                                                               1994            1993             1992
                                                                               ----            ----             ----
                                                                                       (Dollars in millions)
  <S>                                                                          <C>              <C>              <C>
  Current tax provision................................................        $29.7            $59.5            $ 40.5
  Deferred tax provision...............................................          7.7              6.4               1.5
                                                                               -----            -----            ------
  
             Income tax expense........................................        $37.4            $65.9            $ 42.0
                                                                               =====            =====            ======
  </TABLE>
  
         Income tax expense differed from that computed at the applicable  federal
  statutory  rate (35  percent  in 1994 and 1993 and 34  percent  in 1992) for the
  following reasons:
  <TABLE>
  <CAPTION>
  
                                                                               1994              1993           1992
                                                                               ----              ----           ----
                                                                                         (Dollars in millions)
  <S>                                                                          <C>              <C>              <C>
  Federal tax on income before taxes at statutory rates................        $35.1            $60.7            $40.4
  Additional tax on unrealized gains and income of prior
      periods related to increase in corporate income tax rate.........          -                2.4              -
  State taxes .........................................................          1.6              1.5               .5
  Nondeductible items .................................................           .8               .7               .7
  Taxes related to prior years.........................................          -                 .7              -
  Nontaxable investment income and dividends received deduction........          (.4)             (.3)             (.2)
  Other................................................................           .3               .2               .6
                                                                               -----            -----            -----
  
             Income tax expense........................................        $37.4            $65.9            $42.0
                                                                               =====            =====            =====
  </TABLE>
  
         The Omnibus Budget  Reconciliation Act of 1993 (the "Act") was enacted on
  August 10, 1993. The most significant provision of the Act affecting the Company
  was the increase in the corporate  income tax rate to 35 percent from 34 percent
  effective for taxable income  reported in 1993. In addition to increasing  taxes
  on  current  year  income,  the  impact  of the Act on the  Company  in 1993 was
  additional  expense of $1.3  million for a one-time  adjustment  to  accumulated
  deferred  taxes  related to prior years'  income and $1.1 million for a one-time
  adjustment to unrealized  appreciation  of  securities.  The impact of the other
  provisions of the Act was not material to the Company.
  
         The  Internal  Revenue  Service  ("IRS")   completed  an  examination  of
  Beneficial  Standard  for the tax years  1986 - 1989,  which are years  prior to
  Beneficial  Standard's  acquisition  by the  Company,  and  issued a  notice  of
  deficiency. Beneficial Standard has filed
  
  <PAGE>
  
  a petition with the Tax Court  disputing the claimed  deficiency.  The seller of
  Beneficial  Standard is obligated to  indemnify  the Company for any  additional
  income  taxes  attributable  to these years.  The Company  believes  that,  upon
  completion  of the appeal  process,  this  examination  will not have a material
  impact on the Company's financial position or results of operations.
  
         Great American Reserve,  Jefferson  National and Beneficial  Standard are
  currently  being  examined  by the IRS for the years 1991 and 1992.  The Company
  believes that the outcome of these  examinations will not have a material impact
  on the Company's financial position or results of operations.
  
         7.  NOTES PAYABLE:
  
         Notes payable consisted of the following:
  <TABLE>
  <CAPTION>
  
                                                                                               Amount
                                                                                             Outstanding
                                                                                               Net of
                                                                                             Unamortized
                                                                          Par Value         Discount and        Estimated
                                                                      Outstanding at       Issuance Costs       Fair Value
                                                      Initially        December 31,        at December 31,    at December 31,
                                                       Issued        1994        1993     1994      1993      1994      1993
                                                       ------        ----        ----     ----      ----      ----      ---- 
                                                                                (Dollars in millions)
  
  <S>                                                  <C>           <C>    <C>           <C>     <C>        <C>      <C>    
  Senior unsecured notes issued in
     December 1994...............................      $200.0        $200.0 $   -         $196.8  $    -     $199.3   $   -
  Senior secured note issued in July 1992........       200.0           -       166.7        -      162.2       -       166.7
  Unsecured note related to Jefferson
     National acquisition issued in
       November 1989.............................        10.0           -        13.4        -       11.3       -        13.4
                                                                     ------    ------     ------   ------   -------    ------  
       Total.....................................                    $200.0    $180.1      $196.8  $173.5    $199.3    $180.1
                                                                     ======    ======      ======  ======    ======    ======
  </TABLE>
  
       In December 1994, the Company  completed a public  offering of $200 million
  of its 10.5  percent  senior  notes due in 2004.  Proceeds  from the offering of
  approximately $196.8 million (after original issue discount and other associated
  costs) were used to prepay in full the senior secured note, to repurchase common
  shares of the Company, and for general corporate purposes. The retirement of the
  senior  secured  note,  which had a par value of $133.3  million  at the time of
  retirement,  resulted in an extraordinary  charge of $3.6 million, net of a $2.0
  million  tax  benefit.  The 10.5  percent  senior  notes bear  interest  payable
  semi-annually  on June 15 and December 15. The notes are unsecured and rank pari
  passu with all other unsecured and unsubordinated  indebetedness of the Company.
  The notes are not redeemable prior to maturity.
  
         In 1990,  the  Company  issued a note with a par  value of $10.0  million
  which was due in 2000 in connection with the acquisition of Jefferson  National.
  Interest at the rate of 10 percent was payable in additional notes (scheduled to
  mature in 2000) through November 1995 and at the rate of 12 percent  thereafter,
  payable in cash.  In  February  1994,  the  Company  retired  the note for $13.6
  million,  resulting in an  extraordinary  charge of $1.3  million,  net of a $.7
  million tax benefit. Also in connection with the Jefferson National acquisition,
  the Company  issued a note with a par value of $15.0  million  which  matures in
  2000. However,  under the terms of the note agreement,  the principal balance of
  the note plus accrued  interest may be reduced for certain  potential losses for
  which the seller has agreed to indemnify the Company.  The Company believes that
  potential  adjustments  which approximate the note balance have been identified;
  accordingly,  the  outstanding  balance of the note has been classified as other
  liabilities for financial reporting purposes.
  
         In October 1993,  the Company  retired at par a $29.0  million  unsecured
  note which was due in 1998.  This note,  which was issued to the seller of Great
  American Reserve and had an interest rate of 14 percent,  was carried net of $.4
  million of unamortized discount at the time of retirement.  The write-off of the
  unamortized discount was included with interest expense on long-term debt.
  
         In July 1992,  in  connection  with the  initial  public  offering of its
  common stock,  the Company  issued a senior  secured note for $200.0 million and
  completed certain  recapitalization and related  transactions.  As a result, the
  Company repaid the remaining  balances on a $75.0 million senior secured note, a
  $23.0 million subordinated note, a $119.0 million senior secured note, $6.7
  
  
  <PAGE>
  
  million of  subordinated  notes ($3.0  million of which was exchanged for common
  stock of the Company) and a $79.5 million senior secured note.  Related interest
  rate swap and cap agreements were also terminated. Furthermore, notes payable of
  $9.5  million  and $6.3  million,  issued  to  Conseco  in  connection  with the
  acquisitions of Beneficial Standard and Jefferson National,  respectively,  were
  also  repaid.  As a result  of the early  extinguishment  of debt,  the  Company
  recognized an  extraordinary  charge of $8.8 million,  net of a $4.5 million tax
  benefit. As discussed above, the senior secured note that was issued in 1992 was
  retired in December  1994.  The retired note  contained  an interest  rate which
  varied  with  prime or LIBOR and was 7.4  percent at the time of  retirement.  A
  scheduled  principal payment of $33.3 million was made on April 1, 1994, and the
  remaining  principal  repayments  would have been due in annual  installments of
  $33.3 million on April 1 in the years 1995 through 1998.
  
         8. OTHER DISCLOSURES:
  
         Litigation
  
         From time to time,  the  Company  and its  subsidiaries  are  involved in
  lawsuits  which are related to their  operations.  In most cases,  such lawsuits
  involve claims under insurance policies or other contracts of the Company.  Even
  though the Company may be contesting  the validity or extent of its liability in
  response  to  such  lawsuits,  the  Company  has  established  reserves  in  its
  consolidated  financial  statements  which  approximate its estimated  potential
  liability.   Accordingly,   none  of  the  lawsuits  currently  pending,  either
  individually  or in the aggregate,  is expected to have a material effect on the
  Company's consolidated financial position or results of operations.
  
         Guaranty Fund Assessments
  
         From time to time,  mandatory  assessments  are  levied on the  Company's
  insurance  subsidiaries by life and health guaranty  associations of most states
  in which these  subsidiaries  are licensed to cover losses to  policyholders  of
  insolvent  or  rehabilitated   insurance  companies.   These  associations  levy
  assessments  (up to  prescribed  limits) on all member  insurers in a particular
  state in order to pay claims on the basis of the proportionate share of premiums
  written by member  insurers in the lines of business in which the  insolvent  or
  rehabilitated insurer engaged.  These assessments may be deferred or forgiven in
  certain  states if they would threaten an insurer's  financial  strength and, in
  some states, these assessments can be partially recovered through a reduction in
  future premium taxes. The  accompanying  financial  statements  include accruals
  ($5.5 million at December 31, 1994) which  approximate  the Company's  estimated
  potential liability for guaranty  assessments.  Amounts for guaranty assessments
  charged to expense in 1994,  1993 and 1992 were $8.8  million,  $2.4 million and
  $2.7 million,  respectively.  The 1994 amount includes a $5.5 million charge for
  future  guaranty  assessments  on  known  insolvencies  in  the  life  insurance
  industry.
  
         Related Party Transactions
  
         The Company  operates  without direct  employees  through  management and
  service  agreements  with  subsidiaries  of Conseco.  Total fees incurred by the
  Company  under such  agreements  were $37.3  million,  $36.8  million  and $34.4
  million for 1994, 1993 and 1992, respectively.
  
  
  <PAGE>
  
         At the time the Company  acquired  Great American  Reserve,  the acquiree
  held a note receivable from Conseco with an original  principal balance of $10.0
  million  that was  recorded at its fair value.  This note was retired by Conseco
  for cash of $7.0 million in March 1993. At the time of retirement, the principal
  balance  and  book  value of the  note  were  $7.0  million  and  $6.3  million,
  respectively.
  
         During 1994 and 1993, the Company collected  premiums of $5.0 million and
  $7.2 million,  respectively,  from  guaranteed  investment  contracts  issued as
  investment options for qualified retirement plans maintained by Conseco and BLH.
  
         9.  SHAREHOLDERS' EQUITY:
  
         Authorized  preferred  stock is 20,000,000  shares.  All of the shares of
  preferred  stock  previously   issued  as  part  of  the  financing  of  various
  acquisitions  were redeemed on July 21, 1992,  in connection  with the Company's
  initial public offering and recapitalization. Of the preferred stock redeemed, a
  portion  was  exchanged  for  shares  of  common  stock of the  Company  and the
  remainder was retired for cash of $33.8 million.
  
         Changes in the number of shares of common stock outstanding for the years
  ended December 31, 1994, 1993 and 1992, were as follows:
  <TABLE>
  <CAPTION>
  
                                                                              1994                1993               1992
                                                                              ----                ----               ----
  <S>                                                                    <C>                  <C>                <C>
  Balance, beginning of year......................................       29,049,968           26,010,700         15,244,920
      Shares issued in public offerings...........................         -                   3,039,268          8,010,700
      Shares issued in exchange for debt and preferred stock......         -                   -                  1,350,000
      Shares issued for exercised warrants <F1>...................         -                   -                  1,405,080
      Shares issued under stock option and
         employee benefits plans..................................              948            -                  -
      Common shares repurchased...................................       (3,507,400)           -                  -
                                                                         ----------           ----------         ----------
  Balance, end of year............................................       25,543,516           29,049,968         26,010,700
                                                                         ==========           ==========         ==========
  <FN>
            <F1>In connection with the  acquisitions of Great American Reserve and
                Jefferson National, the Company issued warrants to purchase shares
                of the Company's common stock at a nominal cost to the lenders who
                provided  acquisition  financing.  Such warrants were exercised in
                1992.
  </FN>
  </TABLE>
  
         Dividends  declared  on common  stock for 1994,  1993 and 1992 were $.08,
  $.08 and $.04 per common  share,  respectively.  A  liability  was  accrued  for
  dividends declared but unpaid at December 31, 1994,  totaling $.5 million.  Such
  dividends were paid in January 1995.
  
         During 1994, the Company repurchased  approximately 3.5 million shares of
  its common stock for $71.8 million.
  
         The Company is authorized  under its employee  stock option plan to grant
  options to purchase up to 1,750,000  shares of the  Company's  common stock at a
  price not less than its  market  value on the date the  option is  granted.  The
  options  are  exercisable  for up to 10 years  from the date of grant and become
  exercisable over a period of time which began in 1994. In addition to the shares
  of common  stock  reserved for  issuance  under the employee  stock option plan,
  9,064 shares of common stock are reserved for issuance under the stock bonus and
  deferred compensation program for directors.
  
  
  
  
  
  
  <PAGE>
  
         Stock options activity was as follows:
  <TABLE>
  <CAPTION>
  
  
                                                                                                  Number of Shares
                                                                 Option Price           1994         1993          1992
                                                                 ------------           ----         ----          ----
  <S>                                                       <C>                        <C>          <C>          <C>
  Outstanding at January 1,.................................$15.00 to $24.00           715,600      790,000         -
  Granted during the year
      1992  ................................................$15.00 to $18.75             -           -            790,000
      1993  ................................................$19.875 to $22.50            -           25,600         -
      1994  ................................................$17.00 to $24.00            72,200       -              -
  Exercised during the year.................................$22.50                        (840)      -              -
  Canceled during the year..................................$15.00 to $22.50            (8,760)    (100,000)        -
                                                                                       -------     --------       -------
  
  Outstanding at December 31, ..............................$15.00 to $24.00           778,200      715,600       790,000
                                                                                       =======     ========       =======
  
  Portion thereof that is exercisable
      at December 31,.......................................$22.50                       3,200      -              -
                                                                                       ========    ========       =======
  
  Available for future grant at December 31,................                            970,960    1,034,400      960,000
                                                                                        =======    =========      =======
  </TABLE>
  
  
         10.  OTHER OPERATING STATEMENT DATA:
  
         Insurance policy income consisted of the following:
  <TABLE>
  <CAPTION>
  
                                                                               1994             1993              1992
                                                                               ----             ----              ----
                                                                                       (Dollars in millions)
  <S>                                                                         <C>              <C>               <C>
  Direct premiums collected............................................       $563.9           $497.7            $664.5
  Reinsurance assumed..................................................          3.2              5.7               8.7
  Reinsurance ceded....................................................        (45.0)           (52.4)            (51.8)
                                                                              ------           ------            ------
  
      Premiums collected, net of reinsurance...........................        522.1            451.0             621.4
  Less premiums on universal life and products
         without mortality risk which are recorded
         as additions to insurance liabilities.........................        450.7            368.5             539.4
                                                                              ------           ------            ------
      Premiums on products with mortality risk,
          recorded as insurance policy income..........................         71.4             82.5              82.0
  Fees and surrender charges...........................................         43.1             45.3              57.5
                                                                              ------           ------            ------
  
              Insurance policy income..................................       $114.5           $127.8            $139.5
                                                                              ======           ======            ======
  </TABLE>
  
         The  three  states  with the  largest  shares of the  Company's  premiums
  collected in 1994 were Texas (19 percent),  Florida (17 percent) and  California
  (10 percent).  Minnesota, Indiana, Michigan, Ohio, Wisconsin, North Carolina and
  Illinois  each  represented  between 2.1  percent  and 6.0 percent of  collected
  premiums. No other states's share of premiums collected exceeded 2.0 percent.
  
  
  
  
  
  
  <PAGE>
  
         Other operating costs and expenses were as follows:
  <TABLE>
  <CAPTION>
  
  
                                                                              1994               1993             1992
                                                                              ----               ----             ----
                                                                                        (Dollars in millions)
  <S>                                                                          <C>              <C>               <C>
  Policy maintenance expense.............................................      $23.0            $24.3             $28.1
  Commission expense.....................................................       18.8             20.5              21.3
  State premium taxes and guaranty fund assessments......................       10.8              4.2               5.0
  Holding company expenses...............................................        2.0              3.2               0.7
                                                                               -----            -----             -----
  
              Other operating costs and expenses.........................      $54.6            $52.2             $55.1
                                                                               =====            =====             =====
  </TABLE>
  
  
         The changes in the cost of policies purchased were as follows:
  <TABLE>
  <CAPTION>
  
                                                                               1994             1993              1992
                                                                               ----             ----              ----
                                                                                        (Dollars in millions)
  <S>                                                                          <C>             <C>               <C>
  Balance, beginning of year.............................................      $175.5          $247.9            $343.2
      Amounts acquired...................................................         -               -                11.1
      Amortization related to operations:
         Cash flow realized..............................................       (55.1)          (71.1)            (78.9)
         Interest added..................................................        39.4            47.4              58.8
      Amortization related to gains on sales of investments..............        (3.4)          (29.6)            (42.6)
      Amounts related to fair value adjustment
         of actively managed fixed maturities ...........................       188.8           (19.1)            (43.7)
                                                                               ------          ------            ------
  
  Balance, end of year...................................................      $345.2          $175.5            $247.9
                                                                               ======          ======            ======
  </TABLE>
  
  
         The cost of policies  purchased  includes 1992  additions of $6.4 million
  acquired  upon the  purchase  of a block of annuity  business  and $4.7  million
  related  to  adjustments  to the fair  value  of the net  assets  acquired  with
  Beneficial  Standard.  Based on current  conditions and assumptions as to future
  events on all policies in force,  approximately  9.7 percent,  9.5 percent,  9.0
  percent,  8.6  percent  and  7.9  percent  of the  cost  of  policies  purchased
  (determined  before the  adjustment  related to  unrealized  gains  (losses)  on
  actively  managed fixed  maturities) as of December 31, 1994, are expected to be
  amortized  in each of the next five years,  respectively.  The average  discount
  rate for the cost of policies purchased was 18 percent at December 31, 1994.
  
         Anticipated  returns from the  investment  of  policyholder  balances are
  considered in determining  the  amortization  of cost of policies  purchased and
  cost of  policies  produced.  Sales of fixed  maturity  investments  change  the
  incidence  of profits on such  policies  because  resulting  gains  (losses) are
  recognized  currently  and the  expected  future  yields  on the  investment  of
  policyholder  balances  are  reduced  (increased)  when  the sale  proceeds  are
  invested at current  rates.  Accordingly,  amortization  of the cost of policies
  purchased  was  increased by $3.4  million,  $29.6  million and $42.6 million in
  1994,  1993 and 1992,  respectively,  and  amortization  of the cost of policies
  produced was  increased  by $.3 million,  $6.8 million and $3.3 million in 1994,
  1993 and 1992, respectively.
  
  
  
  
  
  
  <PAGE>
  
         The changes in the cost of policies produced were as follows:
  <TABLE>
  <CAPTION>
  
                                                                               1994             1993              1992
                                                                               ----             ----              ----
                                                                                        (Dollars in millions)
  <S>                                                                         <C>              <C>               <C>
  Balance, beginning of year...........................................       $ 42.3           $ 44.4            $23.5
      Additions........................................................         37.3             25.0             32.8
      Amortization related to operations...............................         (7.7)            (3.8)           (1.1)
      Amortization related to gains on sales of investments............          (.3)            (6.8)           (3.3)
      Amounts related to fair value adjustment
         of actively managed fixed maturities .........................         40.3            (16.5)           (7.5)
                                                                              ------           ------           -----
  
  Balance, end of year.................................................       $111.9           $ 42.3            $44.4
                                                                              ======           ======            =====
  </TABLE>
  
  
         11.  CONSOLIDATED STATEMENT OF CASH FLOWS:
  
         Cash flows from operations include interest paid on debt of $8.6 million,
  $14.9 million and $24.3 million in 1994, 1993 and 1992, respectively.
  
         Income taxes of $33.7 million,  $62.2 million and $34.7 million were paid
  in 1994, 1993 and 1992, respectively.
  
         The  following  non-cash  items  are not  reflected  in the  consolidated
  statement  of cash flows:  (i)  issuance of  paid-in-kind  interest on unsecured
  notes of $.2  million,  $1.2  million and $1.2  million in 1994,  1993 and 1992,
  respectively;  (ii)  exchange of debt and  preferred  stock for shares of common
  stock  amounting to $20.8 million in 1992,  and (iii)  issuance of  paid-in-kind
  dividends on preferred stock of $2.2 million in 1992.
  
         Short-term investments having original maturities of three months or less
  are  considered  to be cash  equivalents.  All cash is  invested  in  short-term
  investments.
  
         12.  STATUTORY INFORMATION:
  
         Statutory  accounting practices prescribed or permitted for the Company's
  insurance  subsidiaries by regulatory authorities differ from generally accepted
  accounting  principles.   The  Company's  insurance  subsidiaries  reported  the
  following  amounts to regulatory  agencies,  after  appropriate  eliminations of
  intercompany accounts among such subsidiaries:
  <TABLE>
  <CAPTION>
  
  
                                                                                                       December 31,
                                                                                                 1994               1993
                                                                                                 ----               ----
                                                                                                   (Dollars in millions)
  
  <S>                                                                                           <C>                 <C>
  Statutory capital and surplus.........................................................        $181.9              $172.2
  Asset valuation reserve ("AVR").......................................................          45.6                39.3
  Interest maintenance reserve ("IMR")..................................................         107.8               107.4
  Portion of surplus debentures carried as a liability..................................          76.7                73.2
                                                                                                ------              ------
  
             Total......................................................................        $412.0              $392.1
                                                                                                ======              ======
  </TABLE>
  
  
        Combined statutory net income of the Company's life insurance subsidiaries
  was $53.7  million,  $59.7  million  and $46.4  million in 1994,  1993 and 1992,
  respectively, after appropriate eliminations of intercompany accounts among such
  subsidiaries.
  
        As  a  result  of  the   acquisitions   and  subsequent   recapitalization
  transactions of the insurance subsidiaries, a surplus debenture was issued by an
  insurance  subsidiary  to its direct  parent  company.  As required by the state
  regulatory  authorities,  the  debenture  is  classified  as a part of statutory
  capital  and  surplus of the  subsidiary  to the extent  that such  capital  and
  surplus equals the level of capital and surplus required by the regulators.  The
  balance of the  debenture  in excess of such amount is carried as a liability on
  the statutory  balance sheet.  This amount,  however,  would be  reclassified to
  statutory  capital  and  surplus to the extent  subsequently  needed to meet the
  level of capital and surplus required by the regulators.  The surplus  debenture
  is eliminated in the Company's consolidated financial statements.
  
  <PAGE>
  
        Statutory  accounting  practices  require  that AVR and IMR be reported as
  liabilities.  The IMR captures all realized  investment gains and losses, net of
  tax,  resulting  from  changes in interest  rates and  provides  for  subsequent
  amortization of such amounts into statutory net income on a basis reflecting the
  remaining  lives of the assets sold. The AVR captures all realized,  net of tax,
  and   unrealized   investment   gains  and   losses   related   to   changes  in
  creditworthiness  and is also adjusted  each year based on a formula  related to
  the quality of the Company's investment portfolio.
  
        The following table compares the consolidated pre-tax income determined on
  a statutory accounting basis with such income reported herein in accordance with
  generally accepted accounting principles:
  <TABLE>
  <CAPTION>
  
  
                                                                               1994             1993              1992
                                                                               ----             ----              ----
                                                                                       (Dollars in millions)
  <S>                                                                         <C>              <C>               <C>
  Life insurance subsidiaries:
      Pre-tax income as reported on a statutory  accounting basis before 
         deduction of expenses paid to affiliates and transfers
         to and from and amortization of the IMR ......................       $ 99.2           $197.9            $160.3
  
      Adjustments for generally accepted accounting principles:
         Investments valuation.........................................          9.6             14.1              15.4
         Amortization related to operations............................        (25.3)           (29.4)            (23.2)
         Amortization related to realized gains........................         (3.7)           (36.4)            (45.9)
         Deferral of cost of policies produced.........................         37.3             25.0              32.8
         Insurance liabilities valuation...............................         (3.1)             4.3              (4.1)
         Other liabilities.............................................         (3.6)             2.0               7.1
         Other.........................................................          (.1)             1.9               1.5
                                                                              ------           ------            ------
  
                 Pre-tax income, generally accepted
                   accounting principles...............................        110.3            179.4             143.9
  
  Non-life companies:
      Interest expense.................................................        (10.7)           (16.1)            (26.1)
      Gain on sale of stock by Bankers Life Holding Corporation........          -               10.5               -
      All other income and expense, net................................           .8              (.3)              1.1
                                                                              ------           ------            ------
  
               Consolidated pre-tax income, generally
                  accepted accounting principles.......................       $100.4           $173.5            $118.9
                                                                              ======           ======            ======
  </TABLE>
  
  
         State  insurance  laws  generally   restrict  the  ability  of  insurance
  companies  to pay  dividends  or make  other  distributions.  Net  assets of the
  Company's  insurance  subsidiaries,  determined  in  accordance  with  generally
  accepted  accounting  principles,  aggregated  approximately  $296.6  million at
  December  31,  1994,  of which  approximately  $61.3  million is  available  for
  distribution in 1995 without the permission of state regulatory authorities.
  
         Some  states  have  adopted  risk-based  capital  ("RBC")   requirements,
  effective December 31, 1993, to evaluate the adequacy of an insurer's  statutory
  capital and surplus in relation to its investment and insurance  risks.  The RBC
  formula is designed as an early warning tool to help state  regulators  identify
  possible weakly capitalized  companies for the purpose of initiating  regulatory
  action.  At December 31, 1994, the ratios of total  adjusted  capital to RBC, as
  defined by the requirements, for both of the Company's primary subsidiaries were
  greater than twice the level at which any regulatory attention is triggered.
  
  
  
  
  
  <PAGE>
  
         13.  LINES OF BUSINESS:
  
         The  Company  operates  principally  in the  single  business  segment of
  providing  individual  life  insurance  and annuity  coverage  within the United
  States.  Within that segment,  the significant  lines of business are individual
  life insurance,  annuities and other insurance products (principally  individual
  and group accident and health  insurance and group life  insurance).  Assets and
  related  investment  income  are  allocated  to the  lines  of  business  and to
  corporate based on the source of the funds.
  
         Information as to the Company's lines of business is as follows:
  <TABLE>
  <CAPTION>
  
                                                                              1994             1993              1992
                                                                              ----             ----              ----
                                                                                       (Dollars in millions)
  <S>                                                                       <C>               <C>              <C>
  Premiums collected, net of reinsurance:
      Life..........................................................        $   55.9        $    62.0          $   70.7
      Annuities.....................................................           427.6            343.1             503.3
      Accident and health and other.................................            38.6             45.9              47.4
                                                                            --------        ---------          --------
  
         Total......................................................        $  522.1        $   451.0          $  621.4
                                                                            ========        =========          ========
  
  Revenues:
      Life .........................................................        $  114.5        $   138.0          $  140.6
      Annuities.....................................................           317.2            401.9             383.7
      Accident and health and other.................................            41.0             51.4              54.1
      Corporate.....................................................            11.6             41.2              21.3
                                                                            --------        ---------          --------
  
         Total......................................................        $  484.3        $   632.5          $  599.7
                                                                            ========        =========          ========
  
  Income before income taxes and extraordinary charge:
      Life..........................................................        $   15.9        $    27.6          $   25.5
      Annuities.....................................................            82.4            113.9              80.7
      Accident and health and other.................................             8.7             10.1               9.6
      Corporate.....................................................             4.1             38.0              29.2
      Interest expense..............................................           (10.7)           (16.1)            (26.1)
                                                                            --------         --------          --------
  
         Total .....................................................        $  100.4         $  173.5          $  118.9
                                                                            ========         ========          ========
  
  Assets:
      Life..........................................................        $  869.1         $  987.9          $  986.3
      Annuities.....................................................         3,846.0          4,037.9           3,666.4
      Accident and health and other.................................            75.3             83.9              75.4
      Corporate.....................................................           169.9            188.4             128.4
                                                                            --------         --------          --------
  
         Total......................................................        $4,960.3         $5,298.1          $4,856.5
                                                                            ========         ========          ========
  </TABLE>
  
  
  
  
  
  
  
  <PAGE>
  
         14.    QUARTERLY FINANCIAL DATA (UNAUDITED):
  
         Earnings per common share for each quarter are computed  independently of
  earnings per share for the year. Due to the transactions  affecting the weighted
  average  number of shares  outstanding  in each  quarter  and due to the  uneven
  distribution of earnings during the year, the sum of the quarterly  earnings per
  share may not equal the earnings per share for the year.
  <TABLE>
  <CAPTION>
  
  
                                                                                       1994
                                                          1st Qtr.          2nd Qtr.         3rd Qtr.         4th Qtr.
                                                          --------          --------         --------         --------
                                                               (Dollars in millions, except per share amounts)
  <S>                                                      <C>              <C>               <C>               <C>
  Insurance policy income............................      $ 30.1           $ 28.1            $ 30.0            $ 26.3
  Revenues...........................................       126.8            130.3             116.5             110.7
  Income before income taxes and
      extraordinary charge...........................        31.7             36.1              19.4              13.2
  Net income.........................................        19.1             22.5              12.6               3.9
  
  Earnings per common share before
      extraordinary charge...........................       $ .71            $ .81              $.46             $.29
  Extraordinary charge...............................         .05               -                -                .14
                                                            -----            -----             -----             ----
  Earnings per common share..........................       $ .66            $ .81             $ .46             $.15
                                                            =====            =====             =====             ====
  </TABLE>
  
  
  <TABLE>
  <CAPTION>
  
                                                                                       1993
                                                          1st Qtr.          2nd Qtr.         3rd Qtr.           4th Qtr.
                                                          --------          --------         --------           --------
                                                                  (Dollars in millions, except per share amounts)
  
  <S>                                                       <C>             <C>               <C>                <C>
  Insurance policy income...........................        $ 32.3          $ 30.9            $ 34.3             $ 30.3
  Revenues..........................................         157.3           155.6             156.9              162.7
  Income before income taxes .......................          44.3            40.3              41.9               47.0
  Net income........................................          28.3            26.9              23.3               29.1
  
  Earnings per common share ........................        $ 1.09           $1.03             $ .89              $1.00
  </TABLE>
  
         Quarterly  results  of  operations  are  based  on  numerous   estimates,
  principally  related  to  policy  reserves,  amortization  of cost  of  policies
  purchased,  amortization  of cost of policies  produced and income  taxes.  Such
  estimates are revised each quarter and are ultimately adjusted at the end of the
  year.  When such  revisions  are  determined,  they are  reported as part of the
  operations of the current quarter.
  
         15.  SUBSEQUENT EVENTS (UNAUDITED):
  
         On  January  3,  1995,  the  Company  announced  that  its  common  share
  repurchase  program  had been  expanded  to 6 million  shares.  In  January  and
  February  of 1995,  the  Company  repurchased  approximately  2.2 million of its
  common shares for $44.7 million in open market transactions.
  
         Certain  annuity  policies  that  were  sold  by  Western  National  Life
  Insurance Company ("WNL"),  a former affiliate of the Company,  and subsequently
  ceded to the  Company  through  a  reinsurance  agreement,  with an  accumulated
  account balance of  approximately  $73 million at December 31, 1994, are subject
  to a provision  whereby they may be  recaptured by WNL. WNL informed the Company
  in  February  1995 that it wished to  exercise  its  option to  recapture  these
  policies.  This recapture will  transpire upon the  establishment  of a mutually
  agreed upon value of the business.
  
         On March 1, 1995,  the Company  received a proposal  from  Conseco  under
  which  Conseco  would  acquire  the  outstanding  shares of CCP that it does not
  currently own for $22.50 per share in cash . Under the proposal, CCP would merge
  into Conseco, with Conseco being the surviving corporation.  The proposed merger
  transaction,  which will be  evaluated by a special  committee of the  Company's
  independent board members, requires the approval of holders of a majority of the
  Company's  outstanding  shares  (other than shares held by Conseco)  voting at a
  special  shareholders'  meeting.  The special committee has retained independent
  counsel and an investment banking firm to advise it on the proposal. On March 9,
  1995,  Conseco held 11,555,581  shares of CCP, or approximately  49.5 percent of
  the common stock outstanding on that date.
  
  
  
  
  
  
                           CONSECO, INC. AND SUBSIDIARIES
  
  
  
  ITEM 7(b).     Financial Statements and Exhibit, continued
  
                 (b) Pro forma financial  statements required to be filed for this
                     acquisition  under Article 11 of Regulation S-X will be filed
                     with an amendment to Item 7(a)(4) of Form 8-K.
  
  
  
  
  
  
  <PAGE>
  
  
  
  
                           CONSECO, INC. AND SUBSIDIARIES
  
  
  
  
  ITEM 7(c).     EXHIBIT.
  
                 (c) Exhibit
  
                     2.1    Agreement and Plan of Merger dated as of May 19, 1995.
  
                            The Credit Agreement  obtained by Conseco as described
                            in Item 2 has been  omitted  as an exhibit to the Form
                            8-K,  pursuant to Item  601(b)(4)(iii)  of  Regulation
                            S-K,  because the total amount of the Credit Agreement
                            is less than 10  percent  of the  total  assets of the
                            Registrant  and  its  subsidiaries  on a  consolidated
                            basis.  The  Registrant  hereby  undertakes to furnish
                            copies  of  such  documents  to  the  Commission  upon
                            request.
  
  
  <PAGE>
  
  
  
                           CONSECO, INC. AND SUBSIDIARIES
  
  
                                      SIGNATURE
  
           Pursuant to the  requirements  of the  Securities  and  Exchange Act of
  1934,  the  Registrant has duly caused this report to be signed on its behalf by
  the undersigned thereunto duly authorized.
  
  
  
  Date: September 14, 1995                    CONSECO, INC.
  
  
  
                                  By:     /s/ ROLLIN M. DICK
                                          -------------------------
                                          Rollin M. Dick
                                            Executive Vice President
                                            and Chief Financial Officer
metadata_documents: [{"type": "8-K", "sequence": "1", "description": "FORM 8-K FOR CONSECO, INC. DATED 8/31/95", "secsgml_size_bytes": 182590}]
metadata_filer: {"company-data": {"conformed-name": "CONSECO INC ET AL", "cik": "0000719241", "assigned-sic": "6311", "irs-number": "351468632", "state-of-incorporation": "IN", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "001-09250", "film-number": "95574117"}, "business-address": {"street1": "11825 N PENNSYLVANIA ST", "city": "CARMEL", "state": "IN", "zip": "46032", "phone": "3175736100"}, "former-company": {"former-conformed-name": "SECURITY NATIONAL OF INDIANA CORP", "date-changed": "19840207"}}
text: SECURITIES AND EXCHANGE COMMISSION
                               Washington, D.C. 20549
  
                                      FORM 8-K
  
                                   CURRENT REPORT
  
                       Pursuant to Section 13 or 15(d) of the
                           Securities Exchange Act of 1934
  
                  Date of Report (date of earliest event reported):
  
                                   August 31, 1995
  
                                    CONSECO, INC.
  
                               State of Incorporation:
                                       Indiana
  
                 Commission File                 IRS Employer Id.
  
                   No. 1-9250                     No. 35-1468632
  
                       Address of Principal Executive Offices:
                           11825 North Pennsylvania Street
                                Carmel, Indiana 46032
  
                                    Telephone No.
                                   (317) 817-6100
  CONSECO, INC. AND SUBSIDIARIES
  INDEX
  
                                                                                                         Page
                                                                                                         ----
  Item 2.   Acquisition or Disposition of Assets.........................................................   
  
  Item 7.   Financial Statements and Exhibit
            (a)  CCP Insurance, Inc. and Subsidiaries Unaudited
                 Consolidated  Financial  Statements as of June 30, 1995,  and for
                 the six months ended June 30, 1995 and 1994
                    Consolidated Balance Sheet...........................................................   
                    Consolidated Statement of Operations.................................................   
                    Consolidated Statement of Shareholders' Equity.......................................   
                    Consolidated Statement of Cash Flows.................................................   
                    Notes to Consolidated Financial Statements...........................................   
  
                 CCP Insurance, Inc. and Subsidiaries Audited
                 Consolidated Financial Statements as of December 31,
                 1994 and 1993, and for each of the three years ended
                 December 31, 1994
                    Report of Independent Accountants....................................................   
                    Consolidated Balance Sheet...........................................................   
                    Consolidated Statement of Operations.................................................   
                    Consolidated Statement of Shareholders' Equity.......................................   
                    Consolidated Statement of Cash Flows.................................................   
                    Notes to Consolidated Financial Statements...........................................   
  
         (b)   Pro  forma  financial  statements  required  to be  filed  for this
               acquisition  under Article 11 of Regulation  S-X will be filed with
               an amendment to Item 7(a)(4) of Form 8-K.
  
         (c)     Exhibit
                 2.1   Agreement and Plan of Merger dated May 19, 1995...................................   
  
                 The Credit  Agreement  obtained by Conseco as described in Item 2
                 has been omitted as an exhibit to the Form 8-K,  pursuant to Item
                 601(b)(4)(iii) of Regulation S-K, because the total amount of the
                 Credit  Agreement  is less than 10 percent of the total assets of
                 the Registrant and its subsidiaries on a consolidated  basis. The
                 Registrant  hereby undertakes to furnish copies of such documents
                 to the Commission upon request.
  CONSECO, INC. AND SUBSIDIARIES
  
  ITEM 2.  ACQUISITION OR DISPOSITION OF ASSETS.
  
         On August 31, 1995,  Conseco,  Inc. ("Conseco" or the "Company") acquired
  all of the common stock of CCP Insurance,  Inc. ("CCP") not owned by Conseco, in
  a transaction pursuant to which CCP was merged with Conseco,  with Conseco being
  the surviving corporation (the "Merger"). The Merger was consummated pursuant to
  an Agreement and Plan of Merger dated May 19, 1995 (the "Merger Agreement").  In
  the Merger,  each of the 11.8 million outstanding shares of CCP common stock not
  owned by Conseco were  converted  into the right to receive  $23.25 in cash. The
  Merger and the Merger  Agreement were approved by holders of a majority of CCP's
  outstanding  shares  (other  than  shares  held  by the  Company)  at a  special
  stockholders meeting held on August 25, 1995.
  
         The Merger and  related  transactions  (including  the  repayment  of the
  existing $251.0 million  revolving  credit facility of Conseco) were funded with
  available  cash and net proceeds from a $600.0  million  credit  facility by and
  among the Company and several financial  institutions (the "Credit  Agreement").
  The  sources  and uses of the  financing  to  complete  the Merger  and  related
  transactions are summarized below (dollars in millions):
  Sources of funds:
                    Credit agreement..................................................   $530.0
                    Cash on hand......................................................      9.7
                                                                                         ------    
                       Total sources..................................................   $539.7
  
                 Uses of funds:
                    Purchase of all common equity interest in CCP,
                       not owned by Conseco...........................................   $273.9
                    Settlement of outstanding stock options of CCP....................      5.4
                    Repayment of revolving credit facility of Conseco.................    251.0
                    Debt issuance and other transaction costs.........................      9.4
                                                                                         ------
  
                       Total uses.....................................................   $539.7
                                                                                         ======
  The Credit  Agreement  has two  tranches.  One  tranche  permits  maximum
  principal  borrowings  of $350.0  million  ("Tranche  A") and the other  tranche
  permits  maximum  principal  borrowings of $250.0 million  ("Tranche B"). On the
  Merger date,  the Company  borrowed  $280.0  million  under Tranche A and $250.0
  million under Tranche B.
  
         Tranche  A and  Tranche B  borrowings  bear  interest  based on either an
  offshore rate or a base rate.  Offshore rates are equal to the reserve  adjusted
  Interbank  Offered  Rate  plus an  applicable  margin  based on:  (i)  Conseco's
  aggregate  outstanding  bank debt; and (ii) the rating of Conseco's senior notes
  by Moodys and  Standard & Poor's.  Such  margin  varies from .75 percent to 1.75
  percent.  Base rates are equal to the bank's  reference  rate plus the  offshore
  rate  margin  less 1.25  percent  (provided  such margin is not less than zero).
  Borrowings  under Tranche A and Tranche B bear  interest at 7.5 percent  through
  September 29, 1995.
  
         The principal  amounts are payable  according to the  following  schedule
  (dollars in millions):
  Tranche A                 Tranche B
                                                        ---------                 ---------
  1998                                 $ 10.0                    $   -
                    1999                                   65.0                     250.0
  2000                                   65.0                        -
                    2001                                  140.0                        -
                                                         ------                    ------
  
                         Total par value                 $280.0                    $250.0
                                                         ======                    ======
  The  repayment  date can be extended for an  additional  year on each
             extension date to the year 2001 subject to defined conditions.
  Mandatory  prepayments  are  required as follows:  (i) from 50 percent of
  excess  cash flow (the  excess of  amounts  that may be  payable  to the  parent
  company from  subsidiaries  over dividends,  expenses and other cash payments of
  the parent company); (ii) upon the sale or disposition of any significant assets
  other  than in the  ordinary  course of  business;  and  (iii)  upon the sale or
  issuance of debt or equity securities of Conseco or any of its subsidiaries. The
  Credit Agreement is secured by, among other things,  pledges of: (i) the capital
  stock of Conseco's  wholly  owned  subsidiaries;  and (ii) the capital  stock of
  Bankers Life Holding Corporation owned by Conseco.
  CONSECO, INC. AND SUBSIDIARIES
  
  ITEM 7(a).     Financial Statements and Exhibit
  
            (a)  CCPInsurance,   Inc.  and  Subsidiaries   Unaudited  Consolidated
                 Financial  Statements as of June 30, 1995, and for the six months
                 ended June 30, 1995 and 1994.
  CCP INSURANCE, INC. AND SUBSIDIARIES
  CONSOLIDATED BALANCE SHEET
                                                     (Dollars in millions)
  
                                                            ASSETS
                                                                                       June 30,         December 31,
                                                                                        1995               1994
                                                                                        ----               ----
                                                                                     (unaudited)         (audited)
  Investments:
    Actively managed fixed maturities at fair value (amortized cost:
       1995 - $3,973.3; 1994 - $3,796.1)...........................................   $4,002.0             $3,497.3
    Mortgage loans.................................................................      243.1                251.4
    Credit-tenant loans............................................................      153.3                116.2
    Policy loans...................................................................      136.5                136.4
    Investment in Bankers Life Holding Corporation.................................       25.9                 25.9
    Investment in American Life Group, Inc. .......................................       43.4                 20.1
    Other invested assets..........................................................       65.0                 30.6
    Short-term investments.........................................................      153.9                123.0
    Assets held in separate accounts...............................................      108.9                 91.4
                                                                                      --------             --------
  
              Total investments....................................................    4,932.0              4,292.3
  
  Accrued investment income........................................................       76.9                 70.1
  Reinsurance receivables..........................................................       38.5                 42.6
  Income taxes.....................................................................        -                   13.6
  Cost of policies purchased.......................................................      189.6                345.2
  Cost of policies produced........................................................      118.1                111.9
  Goodwill (net of accumulated amortization: 1995 - $9.4; 1994 - $8.4).............       68.9                 69.9
  Other assets.....................................................................       12.8                 14.7
                                                                                      ---------           ---------
  
              Total assets.........................................................   $5,436.8             $4,960.3
                                                                                      ========             ========
  
                                             LIABILITIES AND SHAREHOLDERS' EQUITY
  Liabilities:
    Insurance liabilities..........................................................  $4,351.7              $4,243.1
    Income tax liabilities.........................................................      59.8                   -
    Investment borrowings..........................................................     185.7                   -
    Other liabilities..............................................................      36.6                  48.1
    Liabilities related to separate accounts.......................................     108.9                  91.4
    Notes payable .................................................................     196.9                 196.8
                                                                                     --------              --------
  
              Total liabilities....................................................   4,939.6               4,579.4
                                                                                     --------              --------
  
  Shareholders' equity:
    Common stock and additional paid-in capital (no par value, 200,000,000
        shares authorized, shares issued and outstanding: 1995 - 23,334,623;
       1994 - 25,543,516)..........................................................     153.3                 197.8
    Unrealized appreciation (depreciation) of securities (net of applicable
       deferred income taxes: 1995 - $6.2; 1994 -($57.9))..........................      29.1                 (96.4)
    Retained earnings..............................................................     314.8                 279.5
                                                                                     --------              --------
  
              Total shareholders' equity...........................................     497.2                 380.9
                                                                                     --------              --------
  
              Total liabilities and shareholders' equity...........................  $5,436.8              $4,960.3
                                                                                     ========              ========
  The accompanying notes are an integral part of the
                         consolidated financial statements.
  CCP INSURANCE, INC. AND SUBSIDIARIES
  CONSOLIDATED STATEMENT OF OPERATIONS
                                         (Dollars in millions, except per share data)
                                                          (unaudited)
  
                                                                               Three months ended           Six months ended
                                                                                     June 30,                   June 30,
                                                                              ----------------------       ------------------
                                                                                1995          1994         1995          1994
                                                                               ------        ------        ----          ----
  Revenues:
     Insurance policy income.............................................      $ 27.8        $ 28.1       $ 54.4       $ 58.2
     Investment activity:
        Net investment income............................................       102.5          92.8        194.8        188.0
        Net trading income ..............................................         3.5           -            3.6          -
        Net realized gains ..............................................        14.4           9.4         14.8         10.9
                                                                               ------        ------       ------       ------
  
                Total revenues...........................................       148.2         130.3        267.6        257.1
                                                                               ------        ------       ------       ------
  
  Benefits and expenses:
     Insurance policy benefits...........................................        19.5          16.2         38.7         35.1
     Change in future policy benefits....................................          .4            .1         (2.5)        (1.9)
     Interest expense on annuities and financial products................        55.5          51.6        106.3        105.4
     Interest expense on notes payable...................................         5.2           2.3         10.5          5.1
     Interest expense on investment borrowings ..........................         4.5           2.3          5.7          3.9
     Amortization related to operations..................................         9.5           6.3         18.7         13.1
     Amortization related to realized gains..............................         8.1           5.5          8.2          6.4
     Other operating costs and expenses..................................        12.3           9.9         25.2         22.2
                                                                               ------        ------       ------      -------
  
                Total benefits and expenses..............................       115.0          94.2        210.8        189.3
                                                                               ------        ------       ------      -------
  
                Income before income taxes and extraordinary charge......        33.2          36.1         56.8         67.8
  
  Income tax expense.....................................................        11.6          13.6         20.5         24.9
                                                                               ------        ------       ------      -------
  
                Income before extraordinary charge.......................        21.6          22.5         36.3         42.9
  
  Extraordinary charge on extinguishment of debt, net of tax.............        -              -            -            1.3
                                                                               ------        ------       ------      -------
  
                Net income...............................................      $ 21.6        $ 22.5       $ 36.3      $  41.6
                                                                               ======        ======       ======      =======
  
  Earnings per common share:
  
     Weighted average shares ............................................  23,335,000    27,988,000   23,405,000   28,386,000
                                                                           ==========    ==========   ==========   ==========
  
     Earnings before extraordinary charge................................        $.93          $.81        $1.55        $1.52
     Extraordinary charge................................................       -            -             -              .05
                                                                              -------      --------     --------      -------
  
                Net income...............................................        $.93          $.81        $1.55        $1.47
                                                                                 ====          ====        =====        =====
  The accompanying notes are an integral part of the
                         consolidated financial statements.
  CCP INSURANCE, INC. AND SUBSIDIARIES
  CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
                                                     (Dollars in millions)
                                                          (unaudited)
  
                                                                                           Six months ended
                                                                                               June 30,
                                                                                       ----------------------
                                                                                        1995             1994
                                                                                       ------           -----
  Common stock and additional paid-in capital:
      Balance, beginning of period................................................     $197.8            $269.6
        Cost of shares acquired...................................................      (44.5)            (34.9)
                                                                                       ------           -------
  
      Balance, end of period......................................................     $153.3            $234.7
                                                                                       ======            ======
  
  Unrealized appreciation (depreciation) of securities:
      Balance, beginning of period................................................     $(96.4)           $ 70.7
        Change in unrealized appreciation (depreciation)..........................      125.5            (105.4)
                                                                                       ------            ------
  
      Balance, end of period......................................................     $ 29.1            $(34.7)
                                                                                       ======            ======
  
  Retained earnings:
      Balance, beginning of period................................................     $279.5            $223.6
        Net income ...............................................................       36.3              41.6
        Dividends on common stock.................................................       (1.0)             (1.1)
                                                                                       ------            ------
  
      Balance, end of period......................................................     $314.8            $264.1
                                                                                       ======            ======
  
             Total shareholders' equity, end of period............................     $497.2            $464.1
                                                                                       ======            ======
  The accompanying notes are an integral part of the
                         consolidated financial statements.
  CCP INSURANCE, INC. AND SUBSIDIARIES
  CONSOLIDATED STATEMENT OF CASH FLOWS
                                                     (Dollars in millions)
                                                          (unaudited)
  
                                                                                            Six months ended
                                                                                                June 30,
                                                                                        ----------------------
                                                                                         1995             1994
                                                                                        ------           -----
  Cash flows from operating activities:
      Net income..................................................................    $  36.3           $  41.6
      Adjustments to reconcile net income to net
         cash provided by operating activities:
            Amortization..........................................................       26.9              19.5
            Income taxes..........................................................        9.3              (1.8)
            Interest credited to insurance liabilities............................      106.3             105.4
  
            Fees charged to insurance liabilities.................................      (20.2)            (22.3)
            Insurance liabilities.................................................      (16.4)             (9.6)
            Accrual and amortization of investment income.........................       (7.3)             (6.7)
            Deferral of cost of policies produced.................................      (36.6)            (11.0)
            Trading account securities............................................        -                18.0
            Other.................................................................       (8.0)             12.0
                                                                                      -------          --------
  
                Net cash provided by operating activities.........................       90.3             145.1
                                                                                      -------          --------
  
  Cash flows from investing activities:
      Sales ......................................................................      567.8           1,030.2
      Maturities..................................................................       94.2             170.4
      Purchases...................................................................     (867.9)         (1,149.2)
      Other ......................................................................      (32.0)           -
                                                                                      -------          --------
  
                Net cash provided (used) by investing activities .................     (237.9)             51.4
                                                                                      -------          --------
  
  Cash flows from financing activities:
      Deposits to insurance liabilities...........................................      363.5             156.7
      Investment borrowings.......................................................      185.7             (14.6)
      Withdrawals from insurance liabilities......................................     (325.2)           (285.6)
      Payments on notes payable...................................................        -               (46.7)
      Purchases of Company's common stock.........................................      (44.5)            (34.9)
      Dividends paid on common stock..............................................       (1.0)             (1.1)
                                                                                      -------          --------
  
                Net cash provided (used) by financing activities..................      178.5            (226.2)
                                                                                      -------          --------
  
                Net increase (decrease) in short-term investments.................       30.9             (29.7)
  
  Short-term investments, beginning of period.....................................      123.0             209.9
                                                                                      -------           -------
  
  Short-term investments, end of period...........................................   $  153.9          $  180.2
                                                                                     ========          ========
  The accompanying notes are an integral part of the
                         consolidated financial statements.
  CCP INSURANCE, INC. AND SUBSIDIARIES
  
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                     (unaudited)
  
         The  following  notes  should  be read in  conjunction  with the notes to
  consolidated  financial  statements  contained  in the  1994  Form  10-K  of CCP
  Insurance, Inc. (the "Company").
  
         SIGNIFICANT ACCOUNTING POLICIES
  
         The unaudited  consolidated financial statements as of June 30, 1995, and
  for the  three  and six  months  ended  June 30,  1995  and  1994,  reflect  all
  adjustments,  consisting only of normal recurring items,  which are necessary to
  present fairly the Company's  financial  position and results of operations on a
  basis  consistent  with  that  of  the  prior  audited  consolidated   financial
  statements.  Certain amounts from the prior period were  reclassified to conform
  to the 1995 presentation.
  
         ADJUSTMENT TO ACTIVELY MANAGED FIXED MATURITIES
  
         The Company  classifies  fixed maturity  investments into two categories:
  "actively  managed"  (which are  carried at  estimated  fair value) and "held to
  maturity"  (which are  carried at  amortized  cost).  No fixed  maturities  were
  classified in the "held to maturity" category in 1995 or 1994. The adjustment to
  carry actively managed fixed maturity investments at fair value (as described in
  Note 1 to the consolidated  financial  statements included in the Company's 1994
  Form 10-K)  resulted  in the  following  cumulative  effects  on  balance  sheet
  accounts as of June 30, 1995:
  Adjustment to Carry
                                                                   Balance        Actively Managed
                                                                    before        Fixed Maturities        Reported
                                                                  Adjustment        at Fair Value          Amount
                                                                  ----------        -------------          ------
                                                                                (Dollars in millions)
  Actively managed fixed maturities............................   $3,973.3              $ 28.7            $4,002.0
  Investment in American Life Group, Inc.......................       26.2                17.2                43.4
  Cost of policies purchased...................................      202.3               (12.7)              189.6
  Cost of policies produced....................................      123.3                (5.2)              118.1
  Income tax liabilities ......................................       54.1                 5.7                59.8
  Unrealized appreciation of securities........................        6.8                22.3                29.1
  REINSURANCE
  
         The cost of  reinsurance  ceded for  policies  containing  mortality  and
  morbidity risks,  which is deducted from insurance policy income,  totaled $19.2
  million  and  $23.4   million  in  the  first  six  months  of  1995  and  1994,
  respectively.  Reinsurance  premiums  assumed on policies  containing  mortality
  risks  totaled $1.5 million and $1.8 million in the first six months of 1995 and
  1994,  respectively.  Reinsurance  recoveries  netted against  insurance  policy
  benefits totaled $13.3 million and $17.8 million in the first six months of 1995
  and 1994, respectively.
  
         Certain  annuity  policies  that  were  sold  by  Western  National  Life
  Insurance Company ("WNL"),  a former affiliate of the Company,  and subsequently
  ceded to the  Company  through  a  reinsurance  agreement,  with an  accumulated
  account balance of approximately  $73 million at June 30, 1995, are subject to a
  provision  whereby  they may be  recaptured  by WNL. WNL informed the Company in
  February 1995 that it wished to exercise its option to recapture these policies.
  This recapture will transpire upon the  establishment  of a mutually agreed upon
  value for the business.
  
         CHANGES IN SHAREHOLDERS' EQUITY
  
         The Company  repurchased  approximately  3.5 million shares of its common
  stock for $71.8 million during 1994 under its common stock  repurchase  program.
  In January 1995,  the Company  announced  that this program had been expanded to
  6.0 million  shares.  During the first three months of 1995,  approximately  2.2
  million additional shares were repurchased by the Company for $44.5 million.  No
  shares  were  repurchased  during  the second  quarter  of 1995 and the  Company
  currently has no plans to repurchase additional shares.
  CCP INSURANCE, INC. AND SUBSIDIARIES
  
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                     (unaudited)
  
         RELATED PARTY TRANSACTIONS
  
         The Company's  day-to-day  operations are administered by subsidiaries of
  Conseco,  Inc. ("Conseco") pursuant to management and service agreements.  Total
  fees incurred by the Company under such  agreements were $19.5 million and $18.5
  million for the first six months of 1995 and 1994, respectively.
  
         The Company  collected  premiums of $1.4  million and $1.7 million in the
  first six  months of 1995 and 1994,  respectively,  from  guaranteed  investment
  contracts issued as investment options for qualified retirement plans maintained
  by Conseco.  Such  premiums  were  recorded as deposits to  insurance  liability
  accounts.
  
         On June 28,  1995,  Conseco  borrowed  $32  million  from the  Company in
  exchange for a promissory note which bears interest at 6.4 percent and is due on
  December 28, 1995. The note is classified as an other invested asset.
  
         The Company is a limited  partner in Conseco  Capital  Partners  II, L.P.
  ("Partnership  II"),  a  partnership  formed  by  Conseco  in 1994 to  invest in
  privately negotiated  acquisitions of specialized annuity, life and accident and
  health  insurance  companies  and related  businesses.  Partnership  II received
  capital  commitments  of $624  million,  which  included a $25  million  capital
  commitment by the Company.  The Company funded $1.9 million of its commitment in
  connection  with  Partnership  II's  acquisition  of American  Life Group,  Inc.
  "American Life" (formerly The Statesman Group,  Inc. prior to its name change in
  August 1995) in September  1994;  therefore,  it has a remaining  commitment  of
  $23.1 million.
  
         PROPOSED MERGER
  
         On May 21, 1995,  the Company and Conseco  announced a definitive  merger
  agreement  under  which  Conseco  would  acquire the  outstanding  shares of the
  Company that  Conseco does not already own for $23.25 per share in cash.  In the
  transaction,  the Company would be merged into  Conseco,  with Conseco being the
  surviving corporation. The terms of the agreement were approved unanimously by a
  special committee of the Company's independent directors.  The special committee
  received an opinion from the  investment  banking firm serving as its  financial
  advisor to the effect that the  consideration  to be received by the non-Conseco
  stockholders  of the Company is fair to such holders  from a financial  point of
  view.  The  transaction  requires  the  approval of holders of a majority of the
  Company's  outstanding  shares  (excluding  shares held by  Conseco)  present in
  person or represented by proxy at a special  stockholders' meeting scheduled for
  August 25, 1995. A definitive  proxy  statement  for the special  meeting  dated
  August 1, 1995 was first mailed to  stockholders  on or about August 2, 1995. On
  August 1, 1995,  Conseco owned  11,555,581 of the Company's  common  shares,  or
  approximately 49.5 percent of the common stock outstanding on that date.
  CONSECO, INC. AND SUBSIDIARIES
  
  ITEM 7(a).     Financial Statements and Exhibit, continued
  
                 (a), continued
  
                      CCP Insurance,  Inc. and Subsidiaries  Audited  Consolidated
                      Financial  Statements as of December 31, 1994 and 1993,  and
                      for each of the three years ended December 31, 1994.
  REPORT OF INDEPENDENT ACCOUNTANTS
  
  To the Board of Directors
      and Shareholders
      CCP Insurance, Inc.
  
         We have  audited  the  accompanying  consolidated  balance  sheet  of CCP
  Insurance,  Inc.  and  Subsidiaries  as of December  31, 1994 and 1993,  and the
  related consolidated  statements of operations,  shareholders'  equity, and cash
  flows for each of the three years in the period ended  December 31, 1994.  These
  financial  statements are the  responsibility of the Company's  management.  Our
  responsibility  is to express an opinion on these financial  statements based on
  our audits.
  
         We conducted our audits in accordance  with generally  accepted  auditing
  standards. Those standards require that we plan and perform the audits 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.  An audit also includes
  assessing the  accounting  principles  used and  significant  estimates  made by
  management,  as well as evaluating the overall financial statement presentation.
  We believe that our audits provide a reasonable basis for our opinion.
  
         In our  opinion,  the  financial  statements  referred  to above  present
  fairly, in all material  respects,  the consolidated  financial  position of CCP
  Insurance,  Inc.  and  Subsidiaries  as of December  31, 1994 and 1993,  and the
  consolidated  results of their  operations  and their cash flows for each of the
  three years ended  December 31, 1994,  in  conformity  with  generally  accepted
  accounting principles.
  
                                        COOPERS & LYBRAND L.L.P.
  
  Indianapolis, Indiana
  March 6, 1995
  CCP INSURANCE, INC. AND SUBSIDIARIES
  CONSOLIDATED BALANCE SHEET
                                                  December 31, 1994 and 1993
                                                     (Dollars in millions)
  
                                                            ASSETS
  
                                                                                1994                      1993
                                                                                ----                      ----
  Investments:
      Actively managed fixed maturities at fair value
        (amortized cost:  1994 - $3,796.1; 1993 - $3,780.2)..............     $3,497.3                 $3,963.0
      Mortgage loans.....................................................        251.4                    305.1
      Credit-tenant loans................................................        116.2                     87.1
      Policy loans.......................................................        136.4                    137.3
      Investment in Bankers Life Holding Corporation.....................         25.9                     29.3
      Investment in The Statesman Group, Inc.............................         20.1                      -
      Other invested assets..............................................         30.6                     35.3
      Trading account securities.........................................          -                       25.8
      Short-term investments.............................................        123.0                    209.9
      Assets held in separate accounts...................................         91.4                     79.7
                                                                              --------                ---------
  
           Total investments.............................................      4,292.3                  4,872.5
  
  Accrued investment income..............................................         70.1                     71.6
  Reinsurance receivables................................................         42.6                     44.4
  Income taxes...........................................................         13.6                      -
  Cost of policies purchased.............................................        345.2                    175.5
  Cost of policies produced..............................................        111.9                     42.3
  Goodwill (net of accumulated amortization:
      1994 - $8.4; 1993 - $6.4)..........................................         69.9                     71.9
  Other assets...........................................................         14.7                     19.9
                                                                              --------                ---------
  
           Total assets..................................................     $4,960.3                 $5,298.1
                                                                              ========                 ========
  (continued on next page)
  
                    The  accompanying  notes are an  integral part  
                     of  the  consolidated   financial statements.
  CCP INSURANCE, INC. AND SUBSIDIARIES
  CONSOLIDATED BALANCE SHEET (continued)
                             December 31, 1994 and 1993
                                (Dollars in millions)
  
                        LIABILITIES AND SHAREHOLDERS' EQUITY
  
                                                                                1994                      1993
                                                                                ----                      ----
  Liabilities:
      Insurance liabilities..............................................     $4,243.1                 $4,233.3
      Income tax liabilities.............................................         -                        86.0
      Investment borrowings..............................................         -                       134.1
      Other liabilities..................................................         48.1                     27.6
      Liabilities related to separate accounts...........................         91.4                     79.7
      Notes payable......................................................        196.8                    173.5
                                                                              --------                 --------
  
           Total liabilities.............................................      4,579.4                  4,734.2
                                                                              --------                 --------
  
  Shareholders' equity:
      Common stock and additional paid-in capital (no par
        value, 200,000,000 shares authorized, shares issued
        and outstanding: 1994 - 25,543,516; 1993 - 29,049,968)...........        197.8                    269.6
      Unrealized appreciation (depreciation) of securities
        (net of applicable deferred income taxes:
        1994 - $(57.9); 1993 - $36.4)....................................        (96.4)                    70.7
      Retained earnings .................................................        279.5                    223.6
                                                                              --------                 --------
  
           Total shareholders' equity....................................        380.9                    563.9
                                                                              --------                 --------
  
           Total liabilities and shareholders' equity....................     $4,960.3                 $5,298.1
                                                                              ========                 ========
  The accompanying notes are an integral part
                   part of the consolidated financial statements.
  CCP INSURANCE, INC. AND SUBSIDIARIES
  
                        CONSOLIDATED STATEMENT OF OPERATIONS
                for the years ended December 31, 1994, 1993 and 1992
                    (Dollars in millions, except per share data)
  
                                                                         1994            1993             1992
                                                                         ----            ----             ----
  Revenues:
       Insurance policy income....................................      $114.5          $127.8           $139.5
       Investment activity:
         Net investment income....................................       367.8           412.9            380.4
         Net trading income (losses)..............................         (.9)           24.3             15.6
         Net realized gains ......................................         2.9            55.8             63.5
       Equity in earnings of Bankers Life Holding Corporation.....        -                1.2               .7
       Gain on sale of stock by Bankers Life
         Holding Corporation   ...................................        -               10.5             -
                                                                       -------         -------           ------
  
             Total revenues    ...................................       484.3           632.5            599.7
                                                                       -------         -------          -------
  
  Benefits and expenses:
       Insurance policy benefits..................................        75.7            77.6             75.2
       Change in future policy benefits...........................          .1             (.6)             1.9
       Interest expense on annuities and financial products.......       208.6           243.5            251.1
       Interest expense on long-term debt.........................        10.7            16.1             26.1
       Interest expense on investment borrowings..................         5.2             4.4              2.3
       Amortization related to operations.........................        25.3            29.4             23.2
       Amortization related to realized gains.....................         3.7            36.4             45.9
       Other operating costs and expenses.........................        54.6            52.2             55.1
                                                                        ------          ------           ------
  
             Total benefits and expenses..........................       383.9           459.0            480.8
                                                                        ------          ------           ------
  
             Income before income taxes
                and extraordinary charge..........................       100.4           173.5            118.9
  
  Income tax expense..............................................        37.4            65.9             42.0
                                                                        ------          ------           ------
  
             Income before extraordinary charge ..................        63.0           107.6             76.9
  
  Extraordinary charge on extinguishment of
       debt, net of tax...........................................         4.9            -                 8.8
                                                                        ------          -------          ------
  
             Net income                                                   58.1           107.6             68.1
  
  Less preferred stock dividends..................................       -                -                 3.8
                                                                       -------          -------          ------
  
             Earnings applicable to common stock..................       $58.1          $107.6           $ 64.3
                                                                         =====          ======           ======
  
  Earnings per common share and common equivalent share:
  
       Weighted average shares ...................................  27,656,000      26,779,000       20,784,000
       Earnings before extraordinary charge.......................       $2.28           $4.02            $3.52
       Extraordinary charge.......................................         .18           -                  .43
                                                                        ------      ----------         --------
  
             Net income ..........................................       $2.10           $4.02            $3.09
                                                                         =====           =====            =====
  The accompanying notes are an integral part
                      of the consolidated financial statements.
  CCP INSURANCE, INC. AND SUBSIDIARIES
  
                   CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
                       for the years ended December 31, 1994,
                                    1993 and 1992
                                (Dollars in millions)
  
                                                                      1994               1993             1992
                                                                      ----               ----             ----
  Preferred stock:
      Balance, beginning of period..............................     $   -             $   -             $   49.2
        Dividends paid-in-kind of 15% Series C preferred stock           -                 -                  2.2
        Redemption of preferred stock ..........................         -                 -                (51.4)
                                                                    --------           -------           --------
  
      Balance, end of period....................................     $   -             $   -             $    -
                                                                     =======           ========          ========
  
  Common stock and additional paid-in capital:
      Balance, beginning of period..............................      $269.6             $188.7           $  56.7
        Cost of shares acquired.................................       (71.8)              -                  -
        Issuance of common stock and warrants...................        -                  80.9             132.0
                                                                      ------            -------           -------
  
      Balance, end of period....................................      $197.8             $269.6            $188.7
                                                                      ======             ======            ======
  
  Unrealized appreciation (depreciation) of securities:.........
      Balance, beginning of period..............................     $  70.7            $  27.0          $    9.2
        Change in unrealized appreciation (depreciation)........      (167.1)              43.7              17.8
                                                                     -------             ------           -------
  
      Balance, end of period....................................     $ (96.4)           $  70.7           $  27.0
                                                                     =======            =======           =======
  
  Retained earnings:
      Balance, beginning of period..............................      $223.6             $118.1           $  54.8
        Net income..............................................        58.1              107.6              68.1
        Dividends on common stock...............................        (2.2)              (2.1)             (1.0)
        Dividends on preferred stock............................       -                 -                   (3.8)
                                                                     -------            -------           -------
  
      Balance, end of period....................................      $279.5             $223.6            $118.1
                                                                      ======             ======            ======
  
             Total shareholders' equity, end of period..........      $380.9             $563.9            $333.8
                                                                      ======             ======            ======
  The accompanying notes are an integral part
                      of the consolidated financial statements.
  CCP INSURANCE, INC. AND SUBSIDIARIES
  
                        CONSOLIDATED STATEMENT OF CASH FLOWS
                    for the years ended December 31, 1994, 1993
                                      and 1992
                               (Dollars in millions)
  
                                                                            1994             1993           1992
                                                                            ----             ----           ----
  Cash flows from operating activities:
      Net income.......................................................    $ 58.1         $  107.6         $  68.1
      Adjustments to reconcile net income to net.......................
        cash provided by operating activities:
        Amortization...................................................      29.0             65.8            69.1
        Income taxes...................................................      (5.4)             3.8             3.3
        Interest credited to insurance liabilities.....................     208.6            243.5           251.1
        Fees charged to insurance liabilities..........................     (43.1)           (45.3)          (57.5)
        Insurance liabilities..........................................      (2.3)           (29.6)           36.8
        Accrual and amortization of investment income..................       (.7)           (10.9)          (26.1)
        Deferral of cost of policies produced  ........................     (37.3)           (25.0)          (32.8)
        Equity in earnings of Bankers Life Holding Corporation.........       -               (1.2)            (.7)
        Gain on sale of stock by Bankers Life Holding Corporation......       -              (10.5)            -
        Trading account securities.....................................      25.8             94.6           147.7
        Other   .......................................................      35.7             (4.9)           (4.6)
                                                                          -------         --------        --------
  
             Net cash provided by operating activities.................     268.4            387.9           454.4
                                                                          -------         --------        --------
  
  Cash flows from investing activities:
      Sales ...........................................................   1,236.1          2,068.5         1,327.8
      Maturities.......................................................     259.8            558.8           413.0
      Purchases........................................................  (1,505.5)        (3,015.4)       (2,370.2)
                                                                         --------         --------        ---------
  
             Net cash used by investing activities ....................      (9.6)          (388.1)         (629.4)
                                                                         --------         --------        --------
  
  Cash flows from financing activities:
      Deposits to insurance liabilities................................     450.7            368.5           539.4
      Investment borrowings............................................    (134.1)           134.1          -
      Issuance of debt securities, net.................................     196.8           -                192.6
      Issuance of common stock, net....................................      -                80.9           111.2
      Withdrawals from insurance liabilities...........................    (605.0)          (459.2)         (404.3)
      Payments on long-term debt.......................................    (180.1)           (62.3)         (307.0)
      Purchases of Company's common stock..............................     (71.8)           -                -
      Redemption of preferred stock....................................      -               -               (34.1)
      Dividends paid on common stock...................................      (2.2)            (2.1)            (.5)
      Dividends paid on preferred stock................................      -               -                (2.2)
                                                                          --------        --------        --------
  
           Net cash provided (used) by financing activities............    (345.7)            59.9            95.1
                                                                          --------        --------        --------
  
             Net increase (decrease) in short-term investments.........     (86.9)            59.7           (79.9)
  
  Short-term investments, beginning of period..........................     209.9            150.2           230.1
                                                                          -------         --------        --------
  
  Short-term investments, end of period................................   $ 123.0         $  209.9        $  150.2
                                                                          =======         ========        ========
  The accompanying notes are an integral part
                     of the consolidated financial statements.
  CCP INSURANCE, INC. AND SUBSIDIARIES
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  
         1. SIGNIFICANT ACCOUNTING POLICIES:
  
         Organization and Basis of Presentation
  
         CCP Insurance,  Inc. (the  "Company") was formed in April 1992 by Conseco
  Capital Partners,  L.P. (the  "Partnership") as an Indiana corporation to be the
  holding  company  for  the  insurance  companies   previously  acquired  by  the
  Partnership:   Great  American  Reserve   Insurance   Company  ("Great  American
  Reserve"),  Jefferson National Life Insurance Company ("Jefferson National") and
  Beneficial  Standard  Life  Insurance  Company  ("Beneficial   Standard").   The
  Partnership was organized in 1990 as a Delaware limited  partnership by Conseco,
  Inc.  ("Conseco")  to extend its  activities  of acquiring  and  operating  life
  insurance companies and related businesses.  Conseco,  through its subsidiaries,
  was a 50  percent  owner and sole  general  partner  of the  Partnership.  Great
  American Reserve,  Jefferson National and Beneficial  Standard were purchased by
  majority-owned  subsidiaries of the Partnership as of June 30, 1990, October 31,
  1990 and March 31, 1991, respectively.  Jefferson National was merged into Great
  American Reserve on December 31, 1994.
  
         In July 1992, the Company:  (i) completed an initial  public  offering of
  its common stock  receiving  net  proceeds of $111.2  million;  (ii)  executed a
  senior  loan   agreement  for  $200  million;   and  (iii)   completed   certain
  recapitalization  and  related  transactions.   Including  overallotment  shares
  purchased  by the  underwriters,  the  Company  issued  8,010,700  shares in the
  offering,  representing  a  31  percent  ownership  interest  in  the  Company's
  outstanding  common stock.  The remaining common shares were held by Conseco (36
  percent)  and others who  exchanged  their  equity and debt  investments  in the
  Partnership  and its  former  subsidiaries  for shares of the  Company's  common
  stock.
  
         The  exchange  of the equity and debt of the  Partnership  and its former
  subsidiaries   for  the  Company's   common  stock  was  accounted  for  in  the
  consolidated  financial  statements  of the  Company  similarly  to a pooling of
  interests.  The assets,  liabilities and shareholders' equity of the Company and
  its subsidiaries  were combined at their prior carrying  values;  the results of
  operations  have been  reported as if the exchange had occurred at the beginning
  of the periods presented.
  
         In September 1993, CCP completed a public offering of 9,545,000 shares of
  its common stock. The offering included 3,039,268 shares sold by the Company and
  6,505,732  shares sold by certain  selling  shareholders.  Net proceeds of $80.9
  million from the shares sold by the Company were added to the Company's  general
  funds.  In a separate  transaction  also  completed in September  1993,  Conseco
  purchased 2.0 million  additional  shares of the Company's common stock from the
  same selling shareholders.
  
         In December 1994, CCP completed a public  offering of $200 million of its
  10.5 percent  senior notes due in 2004.  Net proceeds of $196.8 million from the
  sale of the notes were used to retire the  Company's  senior  loan and for other
  general  corporate  purposes,  including the  repurchase of shares of its common
  stock under a program  initiated  in February  1994.  During  1994,  the Company
  repurchased  3,507,400 shares of its common stock. On December 31, 1994, Conseco
  owned  11,555,581  shares of CCP, or approximately  45.2 percent,  of the common
  stock outstanding.
  
         The consolidated financial statements include CCP Insurance, Inc. and its
  wholly owned subsidiaries.  All acquisitions were accounted for as purchases and
  are reflected in operations as of their  effective  dates.  The costs to acquire
  Great  American  Reserve,   Jefferson  National  and  Beneficial  Standard  were
  allocated to the assets and liabilities  purchased based on their fair values on
  the  date  of  acquisition.   Intercompany   transactions  among  the  Company's
  subsidiaries  have been  eliminated.  Certain  amounts  from prior  periods were
  reclassified to conform to the 1994 presentation.
  
         Investments
  
         Fixed maturity  investments are securities that mature more than one year
  after they are issued and include bonds,  notes  receivable and preferred stocks
  with mandatory  redemption  features.  Effective  December 31, 1993, the Company
  adopted  Statement of Financial  Accounting  Standards No. 115,  "Accounting for
  Certain   Investments  in  Debt  and  Equity   Securities"   ("SFAS  115"),  and
  accordingly,  classifies  its fixed  maturity  and  equity  securities  into the
  following three categories:
  
         -  Actively managed fixed maturity  securities are securities that may be
            sold  prior to  maturity  due to changes  that  might  occur in market
            interest  rates,   changes  in  a  security's   prepayment  risk,  the
            management  of  income  tax  position,  general  liquidity  needs,  an
            increase  in loan  demand,  the need to increase  regulatory  capital,
            changes in foreign currency risk, or similar
  factors. Actively managed securities are carried at fair value and the
            unrealized gain or loss is recorded to  shareholders'  equity,  net of
            tax and the related adjustments described below.
  
         -  Trading  account  securities are fixed maturity and equity  securities
            that are bought and held  principally  for the purpose of selling them
            in the near term.  Trading account securities are carried at estimated
            fair value and the unrealized  gain or loss is included as a component
            of net trading  income.  No trading  account  securities  were held at
            December 31, 1994.
  
         -  All other fixed  maturity  securities are those  securities  which the
            Company has the ability and positive  intent to hold to maturity,  and
            are  carried  at  amortized  cost.  The  Company  may  dispose of such
            securities  under  certain  unforeseen  circumstances,  such as issuer
            credit deterioration or regulatory  requirements.  No fixed maturities
            were held in this category during 1994 or 1993.
  
         The above categories for classifying fixed maturity and equity securities
  are consistent with the Company's policy prior to adoption of SFAS 115, with one
  exception,  that net unrealized gains and losses on trading account  securities,
  which had previously been recorded as an adjustment net of tax to  shareholders'
  equity,  are now  recognized as trading income under the provisions of SFAS 115.
  At December 31, 1993,  the net  unrealized  loss on trading  account  securities
  recorded in trading income as a result of adopting SFAS 115 was immaterial.
  
         Anticipated  returns,  including  realized  gains  and  losses,  from the
  investment  of   policyholder   balances  are  considered  in  determining   the
  amortization  of the  cost  of  policies  purchased  and the  cost  of  policies
  produced.  When actively  managed fixed  maturity  securities are stated at fair
  value,  an adjustment is made to the cost of policies  purchased and the cost of
  policies produced equal to the change in cumulative amortization that would have
  been  recorded  if such  securities  had been sold at their  fair  value and the
  proceeds reinvested at current yields. Furthermore, if future yields expected to
  be earned on such securities  decline,  it may be necessary to increase  certain
  insurance  liabilities.  Adjustments to such liabilities are required when their
  balances,  in addition to future net cash flows including investment income, are
  insufficient  to cover future  benefits and  expenses.  No such  adjustments  to
  insurance liabilities were required in 1994 or 1993.
  
         Unrealized gains and losses and the related adjustments  described in the
  preceding paragraph have no effect on earnings, but are recorded, net of tax, to
  shareholders'  equity.  The  following  table  summarizes  the  effect  of these
  adjustments as of December 31, 1994.
  Adjustment to Carry
                                                                                        Actively Managed
                                                                      Balance            Fixed Maturities           Reported
                                                                 before Adjustment         at Fair Value             Amount
                                                                 -----------------         -------------             ------
                                                                                     (Dollars in millions)
  Actively managed fixed maturities.........................        $3,796.1                 $(298.8)               $3,497.3
  Cost of policies purchased................................           219.2                   126.0                   345.2
  Cost of policies produced.................................            95.6                    16.3                   111.9
  Income tax asset (liability)..............................           (43.7)                   57.3                    13.6
  Unrealized appreciation (depreciation) of securities......             2.8                   (99.2)                  (96.4)
  Effective  December  31,  1993,  when the Company  recognizes  changes in
  conditions  that  cause a  fixed  maturity  investment  to be  transferred  to a
  different category (e.g.,  actively managed,  held to maturity or trading),  the
  security is transferred to the new category at its fair value at the date of the
  transfer. At the date of transfer, the security's unrealized gain or loss, which
  was immaterial for 1994, is accounted for as follows:
  
  -    For  transfers  to the trading  category,  the  unrealized  gain or loss is
       recognized in earnings;
  
  -    For  transfers  from the  trading  category,  the  unrealized  gain or loss
       already recognized in earnings is not reversed;
  
  -    For  transfers to actively  managed from held to maturity,  the  unrealized
       gain or loss is recognized in shareholders' equity; and
  -    For transfers to held maturity from actively  managed,  the unrealized gain
       or loss at the date of transfer  continues to be reported in  shareholders'
       equity, but is amortized over the remaining life of the security as a yield
       adjustment.
  
         Prior  to  adopting  SFAS  115,  the  fixed  maturity   investments  were
  transferred  to the new  category at the lower of cost or fair value at the date
  of transfer.  Unrealized losses were recognized upon such transfers;  unrealized
  gains were deferred  until the final  disposition of the  securities.  Transfers
  between  categories in 1993 and 1992 and the  resulting  impact on earnings were
  immaterial.
  
         Credit-tenant loans are commercial mortgage loans which require:  (i) the
  lease of the  principal  tenant to be  assigned  to the  Company  and to produce
  adequate cash flow to fund  substantially  all the requirements of the loan, and
  (ii) the principal tenant or the guarantor of such tenant's  obligations to have
  an investment-grade  credit rating at the time of origination of the loan. These
  loans are also secured by the value of the related  property.  The  underwriting
  guidelines consider such factors as: (i) the terms of the lease on the property;
  (ii) the  borrower's  financial  soundness  and  management  ability,  including
  business  experience  and  property  management  capabilities,  and  (iii)  such
  economic,  demographic or other factors that may affect the income  generated by
  the  property  or  its  value.  The  underwriting   guidelines  also  require  a
  loan-to-value ratio of 75 percent or less.
  
         Mortgage and  credit-tenant  loans are stated at amortized  cost.  Policy
  loans are stated at their current  unpaid  principal  balances.  Other  invested
  assets are  accounted for using the equity method  (principally  investments  in
  unconsolidated  operating  limited  partnerships) or in accordance with SFAS 115
  (principally  investments in unconsolidated  limited  partnerships  which invest
  solely in debt or equity securities).  Short-term investments include commercial
  paper,  invested cash and other investments  purchased with maturities less than
  three months and are carried at amortized  cost,  which  approximates  estimated
  fair  value.  The  Company  considers  all  short-term  investments  to be  cash
  equivalents.
  
         Fees received and costs  incurred in connection  with the  origination of
  investments,  principally mortgages and credit-tenant loans, are deferred. Fees,
  costs,  discounts  and premiums  are  amortized  as yield  adjustments  over the
  contractual life of the investments.  Anticipated prepayments on mortgage-backed
  securities are taken into  consideration in determining  estimated future yields
  on such securities.
  
         As part of its  investment  strategy,  the Company  enters  into  reverse
  repurchase  agreements  and dollar roll  transactions  to increase its return on
  investments  and increase  liquidity.  These  transactions  are accounted for as
  collateral borrowings,  where the amount borrowed is equal to the sales price of
  the underlying securities.
  
         The specific identification method is used to account for the disposition
  of investments.  The  differences  between sale proceeds and carrying values are
  reported as gains and losses on  investments,  or as  adjustments  to investment
  income if the proceeds are prepayments by issuers prior to maturity.
  
         The Company regularly  evaluates mortgage loans,  credit-tenant loans and
  other  securities  based  on  current  economic  conditions,  past  credit  loss
  experience and other circumstances of the investee.  Impaired loans are revalued
  at the present value of expected cash flows  discounted at the loan's  effective
  interest rate when it is probable that the Company will be unable to collect all
  amounts due according to the contractual terms of the agreement.  A decline in a
  security's  net  realizable  value that is other than  temporary is treated as a
  realized  loss and the cost basis of the  security  is reduced to its  estimated
  fair value. The Company accrues  interest  thereafter on the net carrying amount
  of impaired loans.
  
         Separate Accounts
  
         Separate  accounts  represent funds for which investment income and gains
  or losses accrue directly to certain policyholders. The assets of these accounts
  are legally  segregated and are not subject to the claims which may arise out of
  any other  business of the  Company.  Separate  account  assets are  reported at
  market value since the underlying  investment  risks are assumed by the contract
  owners. The related  liabilities are recorded at amounts equal to the underlying
  assets  and the  fair  value  of those  liabilities  is equal to their  carrying
  amount.
  Cost of Policies Purchased
  
         The cost of  policies  purchased  represents  the  portion of the cost to
  acquire a subsidiary  that is  attributable  to the right to receive future cash
  flows  from  insurance  contracts  existing  at the date of  acquisition  of the
  subsidiary.  The  value of the cost of  policies  purchased  is the  actuarially
  determined  present value of the  projected  future cash flows from the acquired
  policies.
  
         The method used by the Company to value the cost of policies purchased is
  consistent  with the  valuation  methods  used most  commonly to value blocks of
  insurance  business,  which  is  also  consistent  with  the  basic  methodology
  generally used to value assets.  The method used by the Company is summarized as
  follows:
  
         -  Identify the expected future cash flows from the blocks of business.
  
         -  Identify  the risks  inherent  in  realizing  those cash flows (i.e.,
            the probability that the cash flows will be realized).
  
         -  Identify the rate of return that the Company  believes it must earn in
            order to accept the risks inherent in realizing the cash flows,  based
            on consideration of the factors summarized below.
  
         -  Determine  the value of the  policies  purchased  by  discounting  the
            expected future cash flows by the Company's required discount rate.
  
         Expected  future cash flows used in  determining  such value are based on
  actuarially  determined  projections of future premium  collections,  mortality,
  surrenders,   benefit  payments,   operating  expenses,   changes  in  insurance
  liabilities, investment yields on the assets held to back the policy liabilities
  and other  factors.  These  projections  take into account all factors  known or
  expected  at  the  valuation  date  based  on  the  collective  judgment  of the
  management of the Company. Actual experience on purchased business may vary from
  projections due to differences in renewal premiums collected, investment spread,
  investment gains or losses, mortality and morbidity costs and other factors.
  
         The  discount  rate used to  determine  the value of the cost of policies
  purchased  is the rate of return  required in order for the Company to invest in
  the business being acquired. In determining the rate of return to be used by the
  Company, the following factors are considered:
  
         -  The  magnitude  of the risks  associated  with  each of the  actuarial
            assumptions  used  in  determining   expected  future  cash  flows  as
            described in the preceding paragraphs.
  
         -  The cost of capital to fund the acquisition.
  
         -  The  perceived  likelihood  of changes in projected  future cash flows
            that might occur if there are changes in insurance regulations and tax
            laws.
  
         -  The  compatibility  with other  activities that may favorably affect 
            future cash flows.
  
         -  The complexity of the acquired company.
  
         -  Recent  purchase  prices  (i.e.,  discount  rates  used in determining
            valuations) on similar blocks of business.
  
         After the cost of  policies  purchased  is  determined  using the methods
  described  above, the amount is amortized based on the incidence of the expected
  cash flows. For each of the Company's subsidiaries,  the asset is amortized with
  interest at the same rate used to determine the discounted value of the asset.
  
         To the extent that past or future experience on purchased business varies
  from  projections due to differences in renewal premiums  collected,  investment
  spread,  investment  gains or losses,  mortality and  morbidity  costs and other
  factors, amortization of
  the cost of policies purchased is adjusted. For example, sales of fixed maturity
  investments  that result in a gain (or loss),  but also reduce (or increase) the
  future investment spread because the sale proceeds are reinvested at a lower (or
  higher)  earnings  rate,  may  cause  amortization  to  increase  (or  decrease)
  reflecting  the change in the  incidence  of cash  flows.  Amortization  is also
  adjusted for the current and future years to reflect:  (i) the revised  estimate
  of future cash flows,  and (ii) the revised  interest rate (but not greater than
  the rate  initially  used and not  lower  than the rate of  interest  earned  on
  invested  assets) at which the discounted  present value of such expected future
  profits equals the unamortized asset balance.
  
         Recoverability of the cost of policies purchased is evaluated annually by
  comparing the current estimate of expected future cash flows  (discounted at the
  rate of interest earned on invested assets) to the unamortized  asset balance by
  line of insurance business. If such current estimate indicates that the existing
  insurance liabilities,  together with the present value of future net cash flows
  from the blocks of business  purchased,  will not be  sufficient  to recover the
  cost of policies purchased, the difference is charged to expense.
  
         Cost of Policies Produced
  
         Costs of producing new business (primarily  commissions and certain costs
  of policy issuance and underwriting,  net of fees charged to the policy),  which
  vary with and are  primarily  related to the  production  of new  business,  are
  deferred to the extent recoverable from future profits. Such costs are amortized
  with interest as follows:
  
         -  For universal life-type contracts and  investment-type  contracts,  in
            relation to the present  value of expected  gross  profits  from these
            contracts, discounted using the interest rate credited to the policy.
  
         -  For immediate  annuities  with  mortality  risks,  in  relation to the
            present value of benefits to be paid.
  
         -  For traditional life and accident and health products,  in relation to
            future anticipated premium revenue using the same assumptions that are
            used in calculating the insurance liabilities.
  
         Recoverability  of the  unamortized  balance  of  the  cost  of  policies
  produced is evaluated at least annually.  For universal  life-type contracts and
  investment-type  contracts, the accumulated amortization is adjusted (whether an
  increase or a decrease)  whenever there is a material change in the incidence of
  the  estimated  gross  profits  expected over the life of a block of business in
  order to maintain a constant  relationship  between cumulative  amortization and
  the  present  value  (discounted  at the rate of  interest  that  accrues to the
  policies) of expected gross profits.  For most other contracts,  the unamortized
  asset  balance is reduced by a charge to income only when the  present  value of
  future cash flows,  net of policy  liabilities,  is not sufficient to cover such
  asset balance.
  
         Goodwill
  
         The excess of the cost to acquire purchased companies over the net assets
  acquired is recorded as goodwill  and is amortized  on the  straight-line  basis
  over a  40-year  period.  The  Company  continually  monitors  the  value of its
  goodwill based upon estimates of future earnings. If it determines that goodwill
  has been impaired, the carrying value is reduced and charged to expense (no such
  changes have been made).
  
       Insurance  Liabilities
  
       Recognition  of Insurance  Policy Income and Related  Benefits and Expenses
  Reserves for universal life-type and investment-type  contracts are based on the
  contract  account  balance,  if future benefit payments in excess of the account
  balance are not guaranteed,  or on the present value of future benefit  payments
  when such  payments  are  guaranteed.  Additions to  insurance  liabilities  for
  universal life-type contracts are made if future cash flows including investment
  income are insufficient to cover future benefits and expenses.
  
         Premium  deposits  and benefit  payments  are  recorded as  increases  or
  decreases  in a  liability  account  rather  than as  revenue  and  expense  for
  investment  contracts  without  mortality  risk (such as deferred  annuities and
  immediate  annuities  with  benefits  paid  only for a period  certain)  and for
  contracts that permit the Company or the insured to make changes in the contract
  terms (such as single- premium whole life and universal  life).  Amounts charged
  against the liability account for the cost of insurance,  policy  administration
  and  surrender  penalties  are  recorded as revenues.  Interest  credited to the
  liability account and benefit payments made in excess of the contract  liability
  account balance are charged to expense.
  
       Reserves  for  traditional  and  limited-payment  contracts  are  generally
  calculated using the net level premium method and
  assumptions as to investment yields,  mortality,  withdrawals and dividends. The
  assumptions are based on projections of past  experience and include  provisions
  for  possible  adverse  deviation.  These  assumptions  are made at the time the
  contract is issued or, in the case of  contracts  acquired by  purchase,  at the
  purchase date.
  
         Premiums  are  recognized  as income when due for  traditional  insurance
  contracts  or,  for  short  duration  contracts,  over the  period  to which the
  premiums  relate.  Benefits and expenses are recognized as a level percentage of
  earned  premiums.  Such  recognition is  accomplished  through the provision for
  future policy benefits and the amortization of cost of policies produced.
  
         For  contracts  with  mortality  risk,  but with premiums paid for only a
  limited period (such as  single-premium  immediate  annuities with benefits paid
  for  the  life  of the  annuitant),  the  accounting  treatment  is  similar  to
  traditional  contracts.  However,  the excess of the gross  premium over the net
  premium is deferred and  recognized in relation to the present value of expected
  future benefit payments (when  accounting for annuity  contracts) or in relation
  to insurance in force (when accounting for life insurance contracts).
  
         Liabilities   for  incurred  claims  are  determined   using   historical
  experience and published  tables for disabled lives and represent an estimate of
  the  present  value  of the  remaining  ultimate  net cost of all  reported  and
  unreported  claims.  Management  believes  these  estimates are  adequate.  Such
  estimates are periodically reviewed and any adjustments are reflected in current
  operations.
  
         The liability for future policy benefits for accident and health policies
  consists  of  active  life  reserves  and the  estimated  present  value  of the
  remaining ultimate net cost of incurred claims. The active life reserves include
  unearned premiums and additional reserves.  The additional reserves are computed
  on the net level premium method using  assumptions for future  investment yield,
  mortality and morbidity experience.  The assumptions are based on projections of
  past experience and reflect provisions for possible adverse deviation.
  
         The amount of dividends to be paid on  participating  policies (which are
  not  significant)  is  determined  annually by the  Company.  The portion of the
  earnings  allocated to  participating  policyholders is recorded as an insurance
  liability.
  
         Reinsurance
  
         In the normal course of business, the Company seeks to limit its exposure
  to loss on any single  insured and to recover a portion of the benefits  paid by
  ceding  insurance to other  insurance  enterprises  or  reinsurers  under excess
  coverage and coinsurance contracts. The Company has set its retention limits for
  acceptance  of risk on life  insurance  policies  at  various  levels  up to $.5
  million.
  
         Assets and liabilities related to insurance contracts are reported before
  the effects of  reinsurance.  Reinsurance  receivables  and prepaid  reinsurance
  premiums  (including  amounts related to insurance  liabilities) are reported as
  assets.  Estimated reinsurance receivables are recognized in a manner consistent
  with the liabilities related to the underlying reinsured contracts. Such amounts
  have been  presented  in  accordance  with  Statement  of  Financial  Accounting
  Standards No. 113,  "Accounting and Reporting for Reinsurance of  Short-Duration
  and Long-Duration Contracts."
  
         Income Taxes
  
         Income  tax  expense  includes  deferred  taxes  arising  from  temporary
  differences  between  the  tax and  financial  reporting  basis  of  assets  and
  liabilities.  Additionally, this liability method of accounting for income taxes
  requires the effect of a tax rate change on accumulated deferred income taxes to
  be reflected in income in the period in which the change is enacted.
  
         Earnings Per Share
  
         Primary  net income per share is  computed  by  dividing  earnings,  less
  preferred  dividend  requirements,  by the weighted average number of common and
  common  equivalent  shares  outstanding  for the year.  Equivalent  shares  were
  computed  for 1992 based on the number of shares of the  Company's  common stock
  exchanged for the common stock and warrants of the former life  subsidiaries  of
  the Partnership,  which now comprise the operating  subsidiaries of the Company.
  Dilution  related to stock options is not  considered  because it is immaterial.
  There is no difference between primary and fully-diluted earnings per share.
  Fair Values of Financial Instruments
  
         The  following  methods  and  assumptions  were  used by the  Company  in
  determining estimated fair values of financial instruments:
  
         Investment  securities:  The  estimated  fair  values for fixed  maturity
         securities  (including  redeemable  preferred stocks) are based on quoted
         market  prices,  where  available.  For  fixed  maturity  securities  not
         actively  traded,  the estimated fair values are determined  using values
         obtained  from  independent  pricing  services or, in the case of private
         placements,  by  discounting  expected  future cash flows using a current
         market rate  applicable to the yield,  credit quality and maturity of the
         investments. The estimated fair values for trading account securities are
         based on quoted market prices.
  
         Short-term   investments:   The  estimated  fair  values  for  short-term
         investments  are based on  quoted  market  prices.  The  carrying  amount
         reported  in  the  consolidated   balance  sheet  for  these  instruments
         approximates their estimated fair value.
  
         Mortgage loans,  credit-tenant loans and policy loans: The estimated fair
         values of these loans are determined by discounting  future expected cash
         flows using interest rates  currently  being offered for similar loans to
         borrowers with similar credit ratings. Loans with similar characteristics
         are aggregated for purposes of the calculations.
  
         Other invested assets: The estimated fair values of other invested assets
         are determined using quoted market prices for similar instruments or, for
         an  insignificant   portion  for  which  quoted  market  prices  are  not
         available, are assumed to be equal to the carrying amount.
  
         Insurance liabilities for investment contracts: The estimated fair values
         of the Company's  liabilities under  investment-type  insurance contracts
         are determined using discounted cash flow calculations  based on interest
         rates  currently  being  offered for similar  contracts  with  maturities
         consistent with those remaining for the contracts being valued.
  
         Investment  borrowings:  Due to the short-term nature of these borrowings
         (terms generally less than 30 days), estimated fair values are assumed to
         approximate  the  carrying  (face)  amount  reported in the  consolidated
         balance sheet.
  
         Notes payable:  The estimated fair values of the Company's  notes payable
         are determined using discounted cash flow analyses based on the Company's
         current  incremental  borrowing  rates  for  similar  types of  borrowing
         arrangements.
  The estimated fair values of the Company's financial  instruments were as
  follows:
  1994                           1993
                                                                   -----------------------    ----------------------
                                                                    Carrying        Fair       Carrying        Fair
                                                                     Amount         Value       Amount         Value
                                                                     ------         -----       ------         -----
                                                                                    (Dollars in millions)
  Financial assets issued for purposes other than trading:
            Actively managed fixed maturities..................     $3,497.3      $3,497.3     $3,963.0       $3,963.0
            Mortgage loans.....................................        251.4         258.2        305.1          338.9
            Credit-tenant loans................................        116.2         101.1         87.1           87.1
            Policy loans.......................................        136.4         136.4        137.3          137.3
            Other invested assets..............................         30.6          30.6         35.3           35.3
            Short-term investments.............................        123.0         123.0        209.9          209.9
  
      Trading account securities...............................       -              -             25.8           25.8
  
      Financial liabilities issued for purposes other than trading:
            Insurance liabilities for investment contracts
  .     3,344.1       3,344.1      3,339.0        3,339.0
            Investment borrowings..............................       -              -            134.1          134.1
            Notes payable-senior unsecured notes...............        196.8         199.3        -              -
            Notes payable-senior secured note..................       -              -            162.2          166.7
            Notes payable-unsecured note related to
               Jefferson National acquisition..................       -              -             11.3           13.4
  The estimated fair value of the liabilities for investment  contracts
             was  approximately  equal to its carrying  value at December 31, 1994
             and 1993,  because  interest  rates  credited on the vast majority of
             account   balances   approximate   current   rates  paid  on  similar
             investments  and are not generally  guaranteed  beyond one year. Fair
             values for the Company's  insurance  liabilities other than those for
             investment  contracts are not required to be disclosed.  However, the
             estimated fair values of liabilities for all insurance  contracts are
             taken into  consideration  in the  Company's  overall  management  of
             interest rate risk,  which  minimizes  exposure to changing  interest
             rates through the matching of investment  maturities with amounts due
             under insurance contracts.
  2.  INVESTMENTS:
  
         At December 31, 1994, the amortized  cost and estimated  fair  (carrying)
  value of actively managed fixed maturities were as follows:
  Estimated
                                                                       Gross         Gross         Fair
                                                       Amortized    Unrealized    Unrealized    (Carrying)
                                                         Cost          Gains        Losses         Value
                                                         ----          -----        ------         ----      
                                                                        (Dollars in millions)
  United States Treasury securities
      and obligations of
      United States government
      corporations and agencies..................    $     63.2     $    .2      $    4.6      $     58.8
  Obligations of states and .....................
      political subdivisions.....................          41.8         -             3.3            38.5
  Debt securities issued
      by foreign governments.....................            .4         -             -                .4
  Public utility securities......................         874.2         7.0          86.7           794.5
  Other corporate securities.....................       1,504.1         8.9         115.8         1,397.2
  Mortgage-backed securities.....................       1,312.4         5.8         110.3         1,207.9
                                                      ---------    --------       -------       ---------
  
               Total.............................      $3,796.1       $21.9        $320.7        $3,497.3
                                                       ========       =====        ======        ========
  At December 31, 1993, the amortized  cost and estimated  fair  (carrying)
  value of actively managed fixed maturities were as follows:
  Estimated
                                                                       Gross         Gross         Fair
                                                       Amortized    Unrealized    Unrealized    (Carrying)
                                                         Cost          Gains        Losses         Value
                                                         ----          -----        ------         ----- 
                                                                        (Dollars in millions)
  United States Treasury securities
      and obligations of
      United States government
      corporations and agencies..................     $    47.8     $   6.3        $  -         $    54.1
  Obligations of states and
      political subdivisions.....................          34.7         1.3           1.1            34.9
  Debt securities issued
      by foreign governments.....................            .4          .1           -                .5
  Public utility securities......................         840.4        43.1          10.4           873.1
  Other corporate securities.....................       1,633.0       113.3          14.4         1,731.9
  Mortgage-backed securities.....................       1,223.9        48.8           4.2         1,268.5
                                                       --------      ------         -----        --------
  
               Total.............................      $3,780.2      $212.9         $30.1        $3,963.0
                                                       ========      ======         =====        ========
  The  following  table sets forth the amortized  cost and  estimated  fair
  value of actively  managed fixed  maturities as of December 31, 1994, based upon
  the source of the estimated fair value:
  Estimated
                                                                                           Amortized          Fair
                                                                                              Cost            Value
                                                                                              ----            -----
                                                                                               (Dollars in millions)
  Nationally recognized pricing services................................................   $3,667.7          $3,372.3
  Broker-dealer market makers...........................................................      118.3             116.2
  Internally developed methods (calculated based on a
      weighted average current market yield of 11.2 percent)............................       10.1               8.8
                                                                                           --------          --------
  
                 Total..................................................................   $3,796.1          $3,497.3
                                                                                           ========          ========
  The  following  table sets forth the quality of actively  managed  fixed
  maturity investments as of December 31, 1994,  classified in accordance with the
  highest rating by a nationally recognized statistical rating organization or, as
  to $44.7  million fair value of  investments  not rated by such firms,  based on
  ratings assigned by the National  Association of Insurance  Commissioners,  (the
  "NAIC") as follows: NAIC Class 1 is included in the "A" rating; Class 2, "BBB-";
  Class 3, "BB-"; and Classes 4-6, "B+ and below."
  Percent of
                                                                 Actively Managed               Percent of
                              Investment Rating                  Fixed Maturities            Total Investments
                              -----------------                  ----------------            -----------------
  AAA     ....................................................            39%                         31%
  AA      ....................................................             6                           5
  A       ....................................................            22                          18
  BBB+    ....................................................             9                           7
  BBB     ....................................................             8                           7
  BBB-    ....................................................             9                           8
                                                                         ---                         ---
  
         Investment-grade.....................................            93                          76
                                                                         ---                         ---
  
  BB+     ....................................................             2                           2
  BB      ....................................................             1                           1
  BB-     ....................................................             2                           1
  B+ and below................................................             2                           1
                                                                         ---                         ---
  
      Below investment-grade..................................             7                           5
                                                                         ---                         ---
  
         Total ...............................................           100%                         81%
                                                                         ===                          ==
  Below  investment-grade  actively  managed  fixed  maturity  investments,
  summarized  by the amount  their  amortized  cost  exceeds  fair value,  were as
  follows at December 31, 1994:
  Estimated
                                                                                 Amortized          Fair
                                                                                   Cost             Value
                                                                                   ----             -----       
                                                                                   (Dollars in millions)
  Amortized cost exceeds market value by 30% or more.......................      $  10.7           $  6.9
  Amortized cost exceeds market value by 15%,
      but not more than 30%................................................         60.6             46.7
  Amortized cost exceeds market value by 5%,
      but not more than 15%................................................         79.0             70.7
  All others...............................................................        104.4            109.6
                                                                                  ------           ------
  
          Total below investment-grade actively
            managed fixed maturity investments.............................       $254.7           $233.9
                                                                                  ======           ======
  The  amortized  cost and estimated  fair value of actively  managed fixed
  maturities  at December  31, 1994,  by  contractual  maturity,  are shown below.
  Actual maturities will differ from contractual  maturities because borrowers may
  have the right to call or prepay  obligations with or without call or prepayment
  penalties  and because  most  mortgage-backed  securities  provide for  periodic
  payments throughout their lives.
  Estimated
                                                                                 Amortized          Fair
                                                                                   Cost             Value
                                                                                   ----             ----         
                                                                                  (Dollars in millions)
  Due in one year or less................................................     $     29.5       $     29.8
  Due after one year through five years..................................          190.5            187.4
  Due after five years through ten years.................................          608.1            575.2
  Due after ten years....................................................        1,655.6          1,497.0
                                                                                --------         --------
  
               Subtotal..................................................        2,483.7          2,289.4
  
  Mortgage-backed securities.............................................        1,312.4          1,207.9
                                                                                --------        ---------
  
             Total ......................................................       $3,796.1         $3,497.3
                                                                                ========         ========
  Net investment income consisted of the following:
  1994           1993          1992
                                                                  ----           ----          ----
                                                                         (Dollars in millions)
  Fixed maturities.......................................        $305.3         $337.6        $300.8
  Mortgage loans.........................................          31.8           39.9          53.0
  Credit-tenant loans....................................           7.2            5.2           1.4
  Policy loans...........................................           8.6            8.9           8.8
  Other invested assets..................................           5.7            4.3           1.2
  Short-term investments.................................           9.1            7.9          11.6
  Separate accounts......................................           2.3           11.8           6.9
                                                                 ------         ------        ------
  
            Gross investment income .....................         370.0          415.6         383.7
  
  Investment expenses....................................           2.2            2.7           3.3
                                                                 ------         ------        ------
  
            Net investment income........................        $367.8         $412.9        $380.4
                                                                 ======         ======        ======
  The carrying value of  investments  not accruing  investment  income totaled
  $18.7  million,  $17.8 million and $16.4 million at December 31, 1994,  1993 and
  1992, respectively.
  
      Trading income (losses),  net of related expenses,  were included in revenue
  as follows:
  1994           1993         1992
                                                                   ----           ----         ----
                                                                          (Dollars in millions)
  Gross gains...............................................      $ 3.7           $33.2        $28.3
  Gross losses..............................................       (2.5)           (5.0)        (9.4)
                                                                  -----           -----        -----
  
            Net trading income before expenses..............        1.2            28.2         18.9
  
  Trading expenses..........................................        2.1             3.9          3.3
                                                                  -----           -----        -----
  
            Net trading income (losses).....................      $ (.9)          $24.3        $15.6
                                                                  =====           =====        =====
  Realized  gains,  net of related  expenses,  were included in revenue as
  follows:
  1994              1993             1992
                                                                           ----              ----             ----
                                                                                   (Dollars in millions)
  Actively managed fixed maturities:
      Gross gains.................................................       $  31.0            $ 80.7            $73.2
      Gross losses................................................         (17.5)             (5.8)            (5.8)
      Decline in net realizable value ............................          (1.4)            (17.2)            (1.6)
                                                                         -------           -------          -------
  
            Net realized gains from actively managed
               fixed maturities before expenses...................          12.1              57.7             65.8
  
  Mortgage loans..................................................           (.6)              2.0              1.0
  Other invested assets...........................................          (2.2)              -                -
  Other...........................................................           (.7)              -                 .3
                                                                         -------           -------          -------
  
           Net realized gains before expenses.....................           8.6              59.7             67.1
  
  Realized gain expenses..........................................           5.7               3.9              3.6
                                                                         -------          --------          -------
  
            Net realized gains ...................................       $   2.9            $ 55.8            $63.5
                                                                         =======            ======            =====
  The proceeds from sales of actively managed fixed maturity  investments were
  $1.2  billion,   $2.1  billion  and  $1.3  billion  for  1994,  1993  and  1992,
  respectively.
  
         Changes in unrealized  appreciation  (depreciation) of securities were as
  follows:
  1994              1993             1992
                                                                           ----              ----             ----
                                                                                     (Dollars in millions)
  Investments carried at amortized cost:
      Fixed maturities held to maturity...........................      $    -            $   -             $(145.1)
                                                                        ========          ========          =======
  
  Investments carried at estimated fair value:
      Actively managed fixed maturities...........................       $(481.6)            $ 92.3         $  90.5
      Trading account securities..................................           -                 (1.6)          (12.4)
      Investment in Bankers Life Holding Corporation..............          (3.4)              11.9           -
      Investment in The Statesman Group, Inc......................          (3.1)              -              -
      Other invested assets.......................................          (2.4)              -               -
                                                                        --------          ---------        --------
  
                                                                          (490.5)             102.6            78.1
  
  Adjustment for effect on other balance sheet accounts:
      Cost of policies purchased..................................         188.8              (19.1)          (43.7)
      Cost of policies produced...................................          40.3              (16.5)           (7.5)
      Income taxes................................................          94.3              (23.3)           (9.1)
                                                                        --------           --------        --------
  
          Change in unrealized appreciation (depreciation)
            of securities.........................................       $(167.1)            $ 43.7        $   17.8
                                                                         =======             ======        ========
  The amortized cost and fair  (carrying)  value of actively  managed fixed
  maturity  investments in default as to the payment of principal or interest were
  $12.2 million (net of recorded  writedowns  of $4.7 million) and $18.4  million,
  respectively,  at December 31, 1994.  During  1994,  1993 and 1992,  the Company
  recorded  writedowns of fixed maturity  investments  totaling $1.0 million,  $.3
  million and $1.6  million,  respectively,  as a result of changes in  conditions
  which caused it to conclude that it would not be able to collect all amounts due
  according to the terms of the securities.  Additionally,  the Company wrote down
  exchange-rate-linked
  securities by $.4 million and $16.9 million in 1994 and 1993, respectively,  due
  to foreign  currency  fluctuations  which  caused it to  conclude  that the full
  amount   of   its   investment   would   not  be   realized.   Most   of   these
  exchange-rate-linked  securities  subsequently  matured  in 1993 and  1994;  the
  carrying  value  of  such  securities   remaining  at  December  31,  1994,  was
  approximately $.7 million.
  
         Investments in mortgage-backed  securities at December 31, 1994, included
  collateralized   mortgage   obligations   ("CMOs")   of   $796.2   million   and
  mortgage-backed pass-through securities of $411.7 million. At December 31, 1994,
  the par  value,  amortized  cost and  estimated  fair  value of  investments  in
  mortgage-backed  securities  summarized  by  interest  rates  on the  underlying
  collateral were comprised of the following:
  Par          Amortized       Estimated
                                                                                 Value          Cost         Fair Value
                                                                                 -----          ----         ----------
                                                                                        (Dollars in millions)
  Pass-through securities:
               Below 7%..................................................      $ 250.8         $ 250.4        $  222.1
               7% - 8%...................................................        130.8           132.0           120.0
               8% - 9%...................................................         35.0            35.3            34.0
               Above 9%..................................................         34.7            35.0            35.6
  
  Planned amortized class CMO instruments:
               Below 7%..................................................        139.2           128.9           110.8
               7% - 8%...................................................        333.2           313.4           281.6
               8% - 9%...................................................        177.1           172.4           159.3
               Above 9%..................................................        107.5           105.8           107.6
  
  Other CMO instruments:
               Below 7%..................................................          9.7            14.0            12.7
               7% - 8%...................................................         14.0            16.6            16.5
               8% - 9%...................................................         30.9            29.2            29.4
               Above 9%..................................................         80.0            79.4            78.3
                                                                              --------        --------        --------
  
                    Total mortgage-backed securities ....................     $1,342.9        $1,312.4        $1,207.9
                                                                              ========        ========        ========
  The  following  table sets forth the amortized  cost and  estimated  fair
  value of  mortgage-backed  securities  as of December 31,  1994,  based upon the
  source of the estimated fair value:
  Estimated
                                                                                          Amortized           Fair
                                                                                             Cost             Value
                                                                                             ----             -----
                                                                                               (Dollars in millions)
  Nationally recognized pricing services..............................................     $1,223.8          $1,120.3
  Broker-dealer market makers.........................................................         88.4              87.4
  Internally developed methods (calculated based on a
      current market yield of 9.2 percent)............................................           .2                .2
                                                                                           --------          --------
  
                 Total................................................................     $1,312.4          $1,207.9
                                                                                           ========          ========
  At December 31, 1994, less than 3 percent of the book value of mortgage
  loans held by the Company had  defaulted  as to  principal  or interest for more
  than 60 days, were in foreclosure,  had been converted to foreclosed real estate
  or had been restructured  while the Company owned them. The Company maintained a
  loan loss  reserve of $1.2  million on that date.  Approximately  59 percent,  9
  percent  and 6 percent  of the  mortgage  loans  were on  properties  located in
  California,  Texas and Indiana,  respectively.  No other state comprised greater
  than 5 percent of the mortgage loan balance.
  
           As part of its  investment  strategy,  the Company  enters into reverse
  repurchase  agreements  and dollar roll  transactions  to increase its return on
  investments and increase liquidity. These transactions generally terminate after
  30 days and are accounted for
  as short-term collateralized borrowings. These borrowings, which were as high as
  $298.6 million during 1994, averaged approximately $151 million in 1994 compared
  to $155 million in 1993 and were  collateralized  by securities with fair values
  approximately  equal to the loan value.  The weighted  average  interest rate on
  short-term  collateralized borrowings was 3.4 percent in 1994 and 2.8 percent in
  1993.
  
          Life  insurance  companies are required to maintain  certain  amounts of
  assets  on  deposit  with  state  regulatory  authorities.  Such  assets  had an
  aggregate carrying value of $21.1 million at December 31, 1994.
  
          Investments in a single entity in excess of 10 percent of  shareholders'
  equity  at  December  31,  1994,   other  than  investments  in  affiliates  and
  investments  issued or  guaranteed  by the U.S.  government,  all of which  were
  actively managed fixed maturity investments, were as follows:
  Estimated
                                                                                      Amortized             Fair
                            Investment                                                   Cost               Value
                            ----------                                                   ----               ----- 
                                                                                           (Dollars in millions)
  Hydro-Quebec.......................................        $41.8                $39.1
                            Pacific Gas & Electric.............................         44.9                 38.3
  3.  INVESTMENTS IN UNCONSOLIDATED AFFILIATES:
  
         In  March  1993,  Bankers  Life  Holding  Corporation  ("BLH"),   then  a
  subsidiary  of  the  Partnership,   completed  an  initial  public  offering  of
  19,550,000 shares of its common stock at $22 per share. In conjunction with this
  offering,  the  Company's  investment  in  the  Partnership  was  exchanged  for
  1,513,131  shares of BLH common  stock.  During the first  quarter of 1993,  the
  Company  recognized  equity in earnings of BLH of $1.2 million and a gain on the
  sale of stock by BLH of $10.5 million.  Effective with the date of the exchange,
  the Company  carries its investment in BLH at fair value.  At December 31, 1994,
  the Company's investment in BLH had an estimated fair value of $25.9 million and
  an unrealized gain of $7.6 million,  net of taxes of $.9 million.  Shares of BLH
  held by the  Company  are not freely  tradable,  and the sale of such shares may
  require a registration statement with the Securities and Exchange Commission. On
  March 1, 1995,  BLH received a proposal  from Conseco  under which Conseco would
  acquire the outstanding shares of BLH that Conseco does not currently own. Under
  the  proposal,  BLH would merge into  Conseco,  with Conseco being the surviving
  corporation. Each holder of BLH common shares, other than Conseco, would receive
  $22 per share in cash. The proposed transaction requires the approval of holders
  of a majority of BLH's  outstanding  shares  (other than shares held by Conseco)
  voting at a special shareholders' meeting.
  
         In January  1994,  Conseco  announced  the  formation of Conseco  Capital
  Partners,  II,  L.P.  ("Partnership  II"),  a  partnership  formed  to invest in
  privately negotiated  acquisitions of specialized annuity, life and accident and
  health  insurance  companies  and related  businesses.  Partnership  II received
  capital  commitments  of $624  million,  which  included a $25  million  capital
  commitment by the Company as a limited  partner of Partnership  II. On September
  29, 1994, the Company  participated  in funding the acquisition of The Statesman
  Group, Inc. ("Statesman") by Partnership II. The Company indirectly acquired 3.2
  percent of the outstanding  common shares of Statesman  through its $1.9 million
  contribution to Partnership II. In a separate transaction, the Company purchased
  $24.0 million of  payment-in-kind  ("PIK")  preferred stock issued by Statesman,
  although  $3.0  million  of  this  investment  was  later  sold  at  cost  to an
  unaffiliated  company.  As partial  consideration  for the PIK  preferred  stock
  purchases,  the  Company  received  7.3  percent of  Statesman's  common  shares
  outstanding. Dividends on the Statesman PIK preferred stock are payable annually
  through  2006 at 13 percent in  additional  shares of  Statesman  PIK  preferred
  stock.  Thereafter,  dividends will be payable quarterly in cash at a 15 percent
  annual  rate.  During the fourth  quarter of 1994,  the Company  recognized  $.3
  million of  investment  income for its equity in the earnings of  Statesman.  At
  December 31, 1994, the carrying  value of the Company's  investment in Statesman
  was $20.1  million,  which included an unrealized  loss of $2.8 million,  net of
  taxes of $.3 million.
  4.  INSURANCE LIABILITIES:
  
         Insurance liabilities consisted of the following:
  Interest
                                                  Withdrawal      Mortality        Rate              December 31,
                                                  Assumption     Assumption     Assumption      1994             1993
                                                  ----------     ----------     ----------      ----             ---
                                                                                                (Dollars in millions)
  Future policy benefits:
         Investment contracts.............            N/A            N/A
  $3,344.1         $3,339.0
         Limited-payment contracts........           None
  7%          158.4            154.4
         Traditional life insurance                 Company
            contracts.....................        experience
  8%          181.7            187.7
         Universal life-type contracts....            N/A            N/A            N/A          472.0            478.3
  Claims payable and other
         policyholders' funds ............            N/A            N/A            N/A           86.9             73.9
                                                                                              --------         --------
  
         Total insurance liabilities....................................................      $4,243.1         $4,233.3
                                                                                              ========         ========
  Principally the 1971  Individual  Annuitant Table and the 1965 - 70 and the
       1975 - 80 Basic, Select and Ultimate Tables.
  Principally  modifications of the 1965 - 70 and 1975 - 80 Basic, Select 
       and Ultimate  Tables.
  At  December  31, 1994 and 1993,  approximately  89 percent and 85 percent,
       respectively,  of this liability  represented account balances where future
       benefits were not  guaranteed.  The weighted  average  interest rate on the
       remainder of  liabilities,  representing  the present  value of  guaranteed
       future benefits, was approximately 6 percent at December 31, 1994.
  Participating policies represented approximately 3.6 percent, 3.8 percent
  and 3.3 percent of total life insurance in force at December 31, 1994,  1993 and
  1992 respectively, and approximately 6.8 percent, 6.0 percent and 6.5 percent of
  premium income for 1994, 1993 and 1992, respectively. Dividends on participating
  policies  amounted to $1.8 million,  $2.0 million and $1.8 million in 1994, 1993
  and 1992, respectively.
  
         5.  REINSURANCE:
  
         Cost of reinsurance  ceded where the reinsured policy contains  mortality
  risks totaled $45.0 million,  $52.4 million and $51.8 million in 1994,  1993 and
  1992,  respectively,  and has been deducted from insurance  policy  income.  The
  Company is contingently  liable for claims  reinsured if the assuming company is
  unable to pay.  Reinsurance  recoveries netted against insurance policy benefits
  totaled $31.6 million,  $36.9 million and $35.3 million in 1994,  1993 and 1992,
  respectively.
  
         The Company has ceded policy  liabilities  under  assumption  reinsurance
  agreements where all obligations  under the insurance  contracts have been ceded
  to another company. Accordingly,  insurance liabilities related to such policies
  were not  reported  in the balance  sheet.  The Company  believes  the  assuming
  companies are able to honor all  contractual  commitments  under the  assumption
  reinsurance  agreements  based on  periodic  reviews  of  financial  statements,
  insurance industry reports and reports filed with state insurance departments.
  6.   INCOME TAXES:
  
         Income tax assets (liabilities) were comprised of the following:
  December 31,
                                                                              1994               1993
                                                                              ----               ----
                                                                                (Dollars in millions)
  Deferred income tax assets (liabilities):
      Investments......................................................       $ 50.8         $    3.8
      Cost of policies purchased and ..................................
         cost of policies produced.....................................       (150.0)           (88.6)
      Insurance liabilities............................................         72.8             68.3
      Unrealized depreciation (appreciation) ..........................         57.9            (36.4)
      Other............................................................        (22.8)           (25.2)
                                                                             -------           -------
  
               Deferred income tax assets (liabilities)................          8.7            (78.1)
  
  Current income tax assets (liabilities)..............................          4.9             (7.9)
                                                                             -------           ------
  
               Income tax assets (liabilities).........................      $  13.6           $(86.0)
                                                                             =======           ======
  Income tax expense was as follows:
  1994            1993             1992
                                                                               ----            ----             ----
                                                                                       (Dollars in millions)
  Current tax provision................................................        $29.7            $59.5            $ 40.5
  Deferred tax provision...............................................          7.7              6.4               1.5
                                                                               -----            -----            ------
  
             Income tax expense........................................        $37.4            $65.9            $ 42.0
                                                                               =====            =====            ======
  Income tax expense differed from that computed at the applicable  federal
  statutory  rate (35  percent  in 1994 and 1993 and 34  percent  in 1992) for the
  following reasons:
  1994              1993           1992
                                                                               ----              ----           ----
                                                                                         (Dollars in millions)
  Federal tax on income before taxes at statutory rates................        $35.1            $60.7            $40.4
  Additional tax on unrealized gains and income of prior
      periods related to increase in corporate income tax rate.........          -                2.4              -
  State taxes .........................................................          1.6              1.5               .5
  Nondeductible items .................................................           .8               .7               .7
  Taxes related to prior years.........................................          -                 .7              -
  Nontaxable investment income and dividends received deduction........          (.4)             (.3)             (.2)
  Other................................................................           .3               .2               .6
                                                                               -----            -----            -----
  
             Income tax expense........................................        $37.4            $65.9            $42.0
                                                                               =====            =====            =====
  The Omnibus Budget  Reconciliation Act of 1993 (the "Act") was enacted on
  August 10, 1993. The most significant provision of the Act affecting the Company
  was the increase in the corporate  income tax rate to 35 percent from 34 percent
  effective for taxable income  reported in 1993. In addition to increasing  taxes
  on  current  year  income,  the  impact  of the Act on the  Company  in 1993 was
  additional  expense of $1.3  million for a one-time  adjustment  to  accumulated
  deferred  taxes  related to prior years'  income and $1.1 million for a one-time
  adjustment to unrealized  appreciation  of  securities.  The impact of the other
  provisions of the Act was not material to the Company.
  
         The  Internal  Revenue  Service  ("IRS")   completed  an  examination  of
  Beneficial  Standard  for the tax years  1986 - 1989,  which are years  prior to
  Beneficial  Standard's  acquisition  by the  Company,  and  issued a  notice  of
  deficiency. Beneficial Standard has filed
  a petition with the Tax Court  disputing the claimed  deficiency.  The seller of
  Beneficial  Standard is obligated to  indemnify  the Company for any  additional
  income  taxes  attributable  to these years.  The Company  believes  that,  upon
  completion  of the appeal  process,  this  examination  will not have a material
  impact on the Company's financial position or results of operations.
  
         Great American Reserve,  Jefferson  National and Beneficial  Standard are
  currently  being  examined  by the IRS for the years 1991 and 1992.  The Company
  believes that the outcome of these  examinations will not have a material impact
  on the Company's financial position or results of operations.
  
         7.  NOTES PAYABLE:
  
         Notes payable consisted of the following:
  Amount
                                                                                             Outstanding
                                                                                               Net of
                                                                                             Unamortized
                                                                          Par Value         Discount and        Estimated
                                                                      Outstanding at       Issuance Costs       Fair Value
                                                      Initially        December 31,        at December 31,    at December 31,
                                                       Issued        1994        1993     1994      1993      1994      1993
                                                       ------        ----        ----     ----      ----      ----      ---- 
                                                                                (Dollars in millions)
  Senior unsecured notes issued in
     December 1994...............................      $200.0        $200.0 $   -         $196.8  $    -     $199.3   $   -
  Senior secured note issued in July 1992........       200.0           -       166.7        -      162.2       -       166.7
  Unsecured note related to Jefferson
     National acquisition issued in
       November 1989.............................        10.0           -        13.4        -       11.3       -        13.4
                                                                     ------    ------     ------   ------   -------    ------  
       Total.....................................                    $200.0    $180.1      $196.8  $173.5    $199.3    $180.1
                                                                     ======    ======      ======  ======    ======    ======
  In December 1994, the Company  completed a public  offering of $200 million
  of its 10.5  percent  senior  notes due in 2004.  Proceeds  from the offering of
  approximately $196.8 million (after original issue discount and other associated
  costs) were used to prepay in full the senior secured note, to repurchase common
  shares of the Company, and for general corporate purposes. The retirement of the
  senior  secured  note,  which had a par value of $133.3  million  at the time of
  retirement,  resulted in an extraordinary  charge of $3.6 million, net of a $2.0
  million  tax  benefit.  The 10.5  percent  senior  notes bear  interest  payable
  semi-annually  on June 15 and December 15. The notes are unsecured and rank pari
  passu with all other unsecured and unsubordinated  indebetedness of the Company.
  The notes are not redeemable prior to maturity.
  
         In 1990,  the  Company  issued a note with a par  value of $10.0  million
  which was due in 2000 in connection with the acquisition of Jefferson  National.
  Interest at the rate of 10 percent was payable in additional notes (scheduled to
  mature in 2000) through November 1995 and at the rate of 12 percent  thereafter,
  payable in cash.  In  February  1994,  the  Company  retired  the note for $13.6
  million,  resulting in an  extraordinary  charge of $1.3  million,  net of a $.7
  million tax benefit. Also in connection with the Jefferson National acquisition,
  the Company  issued a note with a par value of $15.0  million  which  matures in
  2000. However,  under the terms of the note agreement,  the principal balance of
  the note plus accrued  interest may be reduced for certain  potential losses for
  which the seller has agreed to indemnify the Company.  The Company believes that
  potential  adjustments  which approximate the note balance have been identified;
  accordingly,  the  outstanding  balance of the note has been classified as other
  liabilities for financial reporting purposes.
  
         In October 1993,  the Company  retired at par a $29.0  million  unsecured
  note which was due in 1998.  This note,  which was issued to the seller of Great
  American Reserve and had an interest rate of 14 percent,  was carried net of $.4
  million of unamortized discount at the time of retirement.  The write-off of the
  unamortized discount was included with interest expense on long-term debt.
  
         In July 1992,  in  connection  with the  initial  public  offering of its
  common stock,  the Company  issued a senior  secured note for $200.0 million and
  completed certain  recapitalization and related  transactions.  As a result, the
  Company repaid the remaining  balances on a $75.0 million senior secured note, a
  $23.0 million subordinated note, a $119.0 million senior secured note, $6.7
  million of  subordinated  notes ($3.0  million of which was exchanged for common
  stock of the Company) and a $79.5 million senior secured note.  Related interest
  rate swap and cap agreements were also terminated. Furthermore, notes payable of
  $9.5  million  and $6.3  million,  issued  to  Conseco  in  connection  with the
  acquisitions of Beneficial Standard and Jefferson National,  respectively,  were
  also  repaid.  As a result  of the early  extinguishment  of debt,  the  Company
  recognized an  extraordinary  charge of $8.8 million,  net of a $4.5 million tax
  benefit. As discussed above, the senior secured note that was issued in 1992 was
  retired in December  1994.  The retired note  contained  an interest  rate which
  varied  with  prime or LIBOR and was 7.4  percent at the time of  retirement.  A
  scheduled  principal payment of $33.3 million was made on April 1, 1994, and the
  remaining  principal  repayments  would have been due in annual  installments of
  $33.3 million on April 1 in the years 1995 through 1998.
  
         8. OTHER DISCLOSURES:
  
         Litigation
  
         From time to time,  the  Company  and its  subsidiaries  are  involved in
  lawsuits  which are related to their  operations.  In most cases,  such lawsuits
  involve claims under insurance policies or other contracts of the Company.  Even
  though the Company may be contesting  the validity or extent of its liability in
  response  to  such  lawsuits,  the  Company  has  established  reserves  in  its
  consolidated  financial  statements  which  approximate its estimated  potential
  liability.   Accordingly,   none  of  the  lawsuits  currently  pending,  either
  individually  or in the aggregate,  is expected to have a material effect on the
  Company's consolidated financial position or results of operations.
  
         Guaranty Fund Assessments
  
         From time to time,  mandatory  assessments  are  levied on the  Company's
  insurance  subsidiaries by life and health guaranty  associations of most states
  in which these  subsidiaries  are licensed to cover losses to  policyholders  of
  insolvent  or  rehabilitated   insurance  companies.   These  associations  levy
  assessments  (up to  prescribed  limits) on all member  insurers in a particular
  state in order to pay claims on the basis of the proportionate share of premiums
  written by member  insurers in the lines of business in which the  insolvent  or
  rehabilitated insurer engaged.  These assessments may be deferred or forgiven in
  certain  states if they would threaten an insurer's  financial  strength and, in
  some states, these assessments can be partially recovered through a reduction in
  future premium taxes. The  accompanying  financial  statements  include accruals
  ($5.5 million at December 31, 1994) which  approximate  the Company's  estimated
  potential liability for guaranty  assessments.  Amounts for guaranty assessments
  charged to expense in 1994,  1993 and 1992 were $8.8  million,  $2.4 million and
  $2.7 million,  respectively.  The 1994 amount includes a $5.5 million charge for
  future  guaranty  assessments  on  known  insolvencies  in  the  life  insurance
  industry.
  
         Related Party Transactions
  
         The Company  operates  without direct  employees  through  management and
  service  agreements  with  subsidiaries  of Conseco.  Total fees incurred by the
  Company  under such  agreements  were $37.3  million,  $36.8  million  and $34.4
  million for 1994, 1993 and 1992, respectively.
  At the time the Company  acquired  Great American  Reserve,  the acquiree
  held a note receivable from Conseco with an original  principal balance of $10.0
  million  that was  recorded at its fair value.  This note was retired by Conseco
  for cash of $7.0 million in March 1993. At the time of retirement, the principal
  balance  and  book  value of the  note  were  $7.0  million  and  $6.3  million,
  respectively.
  
         During 1994 and 1993, the Company collected  premiums of $5.0 million and
  $7.2 million,  respectively,  from  guaranteed  investment  contracts  issued as
  investment options for qualified retirement plans maintained by Conseco and BLH.
  
         9.  SHAREHOLDERS' EQUITY:
  
         Authorized  preferred  stock is 20,000,000  shares.  All of the shares of
  preferred  stock  previously   issued  as  part  of  the  financing  of  various
  acquisitions  were redeemed on July 21, 1992,  in connection  with the Company's
  initial public offering and recapitalization. Of the preferred stock redeemed, a
  portion  was  exchanged  for  shares  of  common  stock of the  Company  and the
  remainder was retired for cash of $33.8 million.
  
         Changes in the number of shares of common stock outstanding for the years
  ended December 31, 1994, 1993 and 1992, were as follows:
  1994                1993               1992
                                                                              ----                ----               ----
  Balance, beginning of year......................................       29,049,968           26,010,700         15,244,920
      Shares issued in public offerings...........................         -                   3,039,268          8,010,700
      Shares issued in exchange for debt and preferred stock......         -                   -                  1,350,000
      Shares issued for exercised warrants
  ...................         -                   -                  1,405,080
      Shares issued under stock option and
         employee benefits plans..................................              948            -                  -
      Common shares repurchased...................................       (3,507,400)           -                  -
                                                                         ----------           ----------         ----------
  Balance, end of year............................................       25,543,516           29,049,968         26,010,700
                                                                         ==========           ==========         ==========
  In connection with the  acquisitions of Great American Reserve and
                Jefferson National, the Company issued warrants to purchase shares
                of the Company's common stock at a nominal cost to the lenders who
                provided  acquisition  financing.  Such warrants were exercised in
                1992.
  Dividends  declared  on common  stock for 1994,  1993 and 1992 were $.08,
  $.08 and $.04 per common  share,  respectively.  A  liability  was  accrued  for
  dividends declared but unpaid at December 31, 1994,  totaling $.5 million.  Such
  dividends were paid in January 1995.
  
         During 1994, the Company repurchased  approximately 3.5 million shares of
  its common stock for $71.8 million.
  
         The Company is authorized  under its employee  stock option plan to grant
  options to purchase up to 1,750,000  shares of the  Company's  common stock at a
  price not less than its  market  value on the date the  option is  granted.  The
  options  are  exercisable  for up to 10 years  from the date of grant and become
  exercisable over a period of time which began in 1994. In addition to the shares
  of common  stock  reserved for  issuance  under the employee  stock option plan,
  9,064 shares of common stock are reserved for issuance under the stock bonus and
  deferred compensation program for directors.
  Stock options activity was as follows:
  Number of Shares
                                                                 Option Price           1994         1993          1992
                                                                 ------------           ----         ----          ----
  Outstanding at January 1,.................................$15.00 to $24.00           715,600      790,000         -
  Granted during the year
      1992  ................................................$15.00 to $18.75             -           -            790,000
      1993  ................................................$19.875 to $22.50            -           25,600         -
      1994  ................................................$17.00 to $24.00            72,200       -              -
  Exercised during the year.................................$22.50                        (840)      -              -
  Canceled during the year..................................$15.00 to $22.50            (8,760)    (100,000)        -
                                                                                       -------     --------       -------
  
  Outstanding at December 31, ..............................$15.00 to $24.00           778,200      715,600       790,000
                                                                                       =======     ========       =======
  
  Portion thereof that is exercisable
      at December 31,.......................................$22.50                       3,200      -              -
                                                                                       ========    ========       =======
  
  Available for future grant at December 31,................                            970,960    1,034,400      960,000
                                                                                        =======    =========      =======
  10.  OTHER OPERATING STATEMENT DATA:
  
         Insurance policy income consisted of the following:
  1994             1993              1992
                                                                               ----             ----              ----
                                                                                       (Dollars in millions)
  Direct premiums collected............................................       $563.9           $497.7            $664.5
  Reinsurance assumed..................................................          3.2              5.7               8.7
  Reinsurance ceded....................................................        (45.0)           (52.4)            (51.8)
                                                                              ------           ------            ------
  
      Premiums collected, net of reinsurance...........................        522.1            451.0             621.4
  Less premiums on universal life and products
         without mortality risk which are recorded
         as additions to insurance liabilities.........................        450.7            368.5             539.4
                                                                              ------           ------            ------
      Premiums on products with mortality risk,
          recorded as insurance policy income..........................         71.4             82.5              82.0
  Fees and surrender charges...........................................         43.1             45.3              57.5
                                                                              ------           ------            ------
  
              Insurance policy income..................................       $114.5           $127.8            $139.5
                                                                              ======           ======            ======
  The  three  states  with the  largest  shares of the  Company's  premiums
  collected in 1994 were Texas (19 percent),  Florida (17 percent) and  California
  (10 percent).  Minnesota, Indiana, Michigan, Ohio, Wisconsin, North Carolina and
  Illinois  each  represented  between 2.1  percent  and 6.0 percent of  collected
  premiums. No other states's share of premiums collected exceeded 2.0 percent.
  Other operating costs and expenses were as follows:
  1994               1993             1992
                                                                              ----               ----             ----
                                                                                        (Dollars in millions)
  Policy maintenance expense.............................................      $23.0            $24.3             $28.1
  Commission expense.....................................................       18.8             20.5              21.3
  State premium taxes and guaranty fund assessments......................       10.8              4.2               5.0
  Holding company expenses...............................................        2.0              3.2               0.7
                                                                               -----            -----             -----
  
              Other operating costs and expenses.........................      $54.6            $52.2             $55.1
                                                                               =====            =====             =====
  The changes in the cost of policies purchased were as follows:
  1994             1993              1992
                                                                               ----             ----              ----
                                                                                        (Dollars in millions)
  Balance, beginning of year.............................................      $175.5          $247.9            $343.2
      Amounts acquired...................................................         -               -                11.1
      Amortization related to operations:
         Cash flow realized..............................................       (55.1)          (71.1)            (78.9)
         Interest added..................................................        39.4            47.4              58.8
      Amortization related to gains on sales of investments..............        (3.4)          (29.6)            (42.6)
      Amounts related to fair value adjustment
         of actively managed fixed maturities ...........................       188.8           (19.1)            (43.7)
                                                                               ------          ------            ------
  
  Balance, end of year...................................................      $345.2          $175.5            $247.9
                                                                               ======          ======            ======
  The cost of policies  purchased  includes 1992  additions of $6.4 million
  acquired  upon the  purchase  of a block of annuity  business  and $4.7  million
  related  to  adjustments  to the fair  value  of the net  assets  acquired  with
  Beneficial  Standard.  Based on current  conditions and assumptions as to future
  events on all policies in force,  approximately  9.7 percent,  9.5 percent,  9.0
  percent,  8.6  percent  and  7.9  percent  of the  cost  of  policies  purchased
  (determined  before the  adjustment  related to  unrealized  gains  (losses)  on
  actively  managed fixed  maturities) as of December 31, 1994, are expected to be
  amortized  in each of the next five years,  respectively.  The average  discount
  rate for the cost of policies purchased was 18 percent at December 31, 1994.
  
         Anticipated  returns from the  investment  of  policyholder  balances are
  considered in determining  the  amortization  of cost of policies  purchased and
  cost of  policies  produced.  Sales of fixed  maturity  investments  change  the
  incidence  of profits on such  policies  because  resulting  gains  (losses) are
  recognized  currently  and the  expected  future  yields  on the  investment  of
  policyholder  balances  are  reduced  (increased)  when  the sale  proceeds  are
  invested at current  rates.  Accordingly,  amortization  of the cost of policies
  purchased  was  increased by $3.4  million,  $29.6  million and $42.6 million in
  1994,  1993 and 1992,  respectively,  and  amortization  of the cost of policies
  produced was  increased  by $.3 million,  $6.8 million and $3.3 million in 1994,
  1993 and 1992, respectively.
  The changes in the cost of policies produced were as follows:
  1994             1993              1992
                                                                               ----             ----              ----
                                                                                        (Dollars in millions)
  Balance, beginning of year...........................................       $ 42.3           $ 44.4            $23.5
      Additions........................................................         37.3             25.0             32.8
      Amortization related to operations...............................         (7.7)            (3.8)           (1.1)
      Amortization related to gains on sales of investments............          (.3)            (6.8)           (3.3)
      Amounts related to fair value adjustment
         of actively managed fixed maturities .........................         40.3            (16.5)           (7.5)
                                                                              ------           ------           -----
  
  Balance, end of year.................................................       $111.9           $ 42.3            $44.4
                                                                              ======           ======            =====
  11.  CONSOLIDATED STATEMENT OF CASH FLOWS:
  
         Cash flows from operations include interest paid on debt of $8.6 million,
  $14.9 million and $24.3 million in 1994, 1993 and 1992, respectively.
  
         Income taxes of $33.7 million,  $62.2 million and $34.7 million were paid
  in 1994, 1993 and 1992, respectively.
  
         The  following  non-cash  items  are not  reflected  in the  consolidated
  statement  of cash flows:  (i)  issuance of  paid-in-kind  interest on unsecured
  notes of $.2  million,  $1.2  million and $1.2  million in 1994,  1993 and 1992,
  respectively;  (ii)  exchange of debt and  preferred  stock for shares of common
  stock  amounting to $20.8 million in 1992,  and (iii)  issuance of  paid-in-kind
  dividends on preferred stock of $2.2 million in 1992.
  
         Short-term investments having original maturities of three months or less
  are  considered  to be cash  equivalents.  All cash is  invested  in  short-term
  investments.
  
         12.  STATUTORY INFORMATION:
  
         Statutory  accounting practices prescribed or permitted for the Company's
  insurance  subsidiaries by regulatory authorities differ from generally accepted
  accounting  principles.   The  Company's  insurance  subsidiaries  reported  the
  following  amounts to regulatory  agencies,  after  appropriate  eliminations of
  intercompany accounts among such subsidiaries:
  December 31,
                                                                                                 1994               1993
                                                                                                 ----               ----
                                                                                                   (Dollars in millions)
  Statutory capital and surplus.........................................................        $181.9              $172.2
  Asset valuation reserve ("AVR").......................................................          45.6                39.3
  Interest maintenance reserve ("IMR")..................................................         107.8               107.4
  Portion of surplus debentures carried as a liability..................................          76.7                73.2
                                                                                                ------              ------
  
             Total......................................................................        $412.0              $392.1
                                                                                                ======              ======
  Combined statutory net income of the Company's life insurance subsidiaries
  was $53.7  million,  $59.7  million  and $46.4  million in 1994,  1993 and 1992,
  respectively, after appropriate eliminations of intercompany accounts among such
  subsidiaries.
  
        As  a  result  of  the   acquisitions   and  subsequent   recapitalization
  transactions of the insurance subsidiaries, a surplus debenture was issued by an
  insurance  subsidiary  to its direct  parent  company.  As required by the state
  regulatory  authorities,  the  debenture  is  classified  as a part of statutory
  capital  and  surplus of the  subsidiary  to the extent  that such  capital  and
  surplus equals the level of capital and surplus required by the regulators.  The
  balance of the  debenture  in excess of such amount is carried as a liability on
  the statutory  balance sheet.  This amount,  however,  would be  reclassified to
  statutory  capital  and  surplus to the extent  subsequently  needed to meet the
  level of capital and surplus required by the regulators.  The surplus  debenture
  is eliminated in the Company's consolidated financial statements.
  Statutory  accounting  practices  require  that AVR and IMR be reported as
  liabilities.  The IMR captures all realized  investment gains and losses, net of
  tax,  resulting  from  changes in interest  rates and  provides  for  subsequent
  amortization of such amounts into statutory net income on a basis reflecting the
  remaining  lives of the assets sold. The AVR captures all realized,  net of tax,
  and   unrealized   investment   gains  and   losses   related   to   changes  in
  creditworthiness  and is also adjusted  each year based on a formula  related to
  the quality of the Company's investment portfolio.
  
        The following table compares the consolidated pre-tax income determined on
  a statutory accounting basis with such income reported herein in accordance with
  generally accepted accounting principles:
  1994             1993              1992
                                                                               ----             ----              ----
                                                                                       (Dollars in millions)
  Life insurance subsidiaries:
      Pre-tax income as reported on a statutory  accounting basis before 
         deduction of expenses paid to affiliates and transfers
         to and from and amortization of the IMR ......................       $ 99.2           $197.9            $160.3
  
      Adjustments for generally accepted accounting principles:
         Investments valuation.........................................          9.6             14.1              15.4
         Amortization related to operations............................        (25.3)           (29.4)            (23.2)
         Amortization related to realized gains........................         (3.7)           (36.4)            (45.9)
         Deferral of cost of policies produced.........................         37.3             25.0              32.8
         Insurance liabilities valuation...............................         (3.1)             4.3              (4.1)
         Other liabilities.............................................         (3.6)             2.0               7.1
         Other.........................................................          (.1)             1.9               1.5
                                                                              ------           ------            ------
  
                 Pre-tax income, generally accepted
                   accounting principles...............................        110.3            179.4             143.9
  
  Non-life companies:
      Interest expense.................................................        (10.7)           (16.1)            (26.1)
      Gain on sale of stock by Bankers Life Holding Corporation........          -               10.5               -
      All other income and expense, net................................           .8              (.3)              1.1
                                                                              ------           ------            ------
  
               Consolidated pre-tax income, generally
                  accepted accounting principles.......................       $100.4           $173.5            $118.9
                                                                              ======           ======            ======
  State  insurance  laws  generally   restrict  the  ability  of  insurance
  companies  to pay  dividends  or make  other  distributions.  Net  assets of the
  Company's  insurance  subsidiaries,  determined  in  accordance  with  generally
  accepted  accounting  principles,  aggregated  approximately  $296.6  million at
  December  31,  1994,  of which  approximately  $61.3  million is  available  for
  distribution in 1995 without the permission of state regulatory authorities.
  
         Some  states  have  adopted  risk-based  capital  ("RBC")   requirements,
  effective December 31, 1993, to evaluate the adequacy of an insurer's  statutory
  capital and surplus in relation to its investment and insurance  risks.  The RBC
  formula is designed as an early warning tool to help state  regulators  identify
  possible weakly capitalized  companies for the purpose of initiating  regulatory
  action.  At December 31, 1994, the ratios of total  adjusted  capital to RBC, as
  defined by the requirements, for both of the Company's primary subsidiaries were
  greater than twice the level at which any regulatory attention is triggered.
  13.  LINES OF BUSINESS:
  
         The  Company  operates  principally  in the  single  business  segment of
  providing  individual  life  insurance  and annuity  coverage  within the United
  States.  Within that segment,  the significant  lines of business are individual
  life insurance,  annuities and other insurance products (principally  individual
  and group accident and health  insurance and group life  insurance).  Assets and
  related  investment  income  are  allocated  to the  lines  of  business  and to
  corporate based on the source of the funds.
  
         Information as to the Company's lines of business is as follows:
  1994             1993              1992
                                                                              ----             ----              ----
                                                                                       (Dollars in millions)
  Premiums collected, net of reinsurance:
      Life..........................................................        $   55.9        $    62.0          $   70.7
      Annuities.....................................................           427.6            343.1             503.3
      Accident and health and other.................................            38.6             45.9              47.4
                                                                            --------        ---------          --------
  
         Total......................................................        $  522.1        $   451.0          $  621.4
                                                                            ========        =========          ========
  
  Revenues:
      Life .........................................................        $  114.5        $   138.0          $  140.6
      Annuities.....................................................           317.2            401.9             383.7
      Accident and health and other.................................            41.0             51.4              54.1
      Corporate.....................................................            11.6             41.2              21.3
                                                                            --------        ---------          --------
  
         Total......................................................        $  484.3        $   632.5          $  599.7
                                                                            ========        =========          ========
  
  Income before income taxes and extraordinary charge:
      Life..........................................................        $   15.9        $    27.6          $   25.5
      Annuities.....................................................            82.4            113.9              80.7
      Accident and health and other.................................             8.7             10.1               9.6
      Corporate.....................................................             4.1             38.0              29.2
      Interest expense..............................................           (10.7)           (16.1)            (26.1)
                                                                            --------         --------          --------
  
         Total .....................................................        $  100.4         $  173.5          $  118.9
                                                                            ========         ========          ========
  
  Assets:
      Life..........................................................        $  869.1         $  987.9          $  986.3
      Annuities.....................................................         3,846.0          4,037.9           3,666.4
      Accident and health and other.................................            75.3             83.9              75.4
      Corporate.....................................................           169.9            188.4             128.4
                                                                            --------         --------          --------
  
         Total......................................................        $4,960.3         $5,298.1          $4,856.5
                                                                            ========         ========          ========
  14.    QUARTERLY FINANCIAL DATA (UNAUDITED):
  
         Earnings per common share for each quarter are computed  independently of
  earnings per share for the year. Due to the transactions  affecting the weighted
  average  number of shares  outstanding  in each  quarter  and due to the  uneven
  distribution of earnings during the year, the sum of the quarterly  earnings per
  share may not equal the earnings per share for the year.
  1994
                                                          1st Qtr.          2nd Qtr.         3rd Qtr.         4th Qtr.
                                                          --------          --------         --------         --------
                                                               (Dollars in millions, except per share amounts)
  Insurance policy income............................      $ 30.1           $ 28.1            $ 30.0            $ 26.3
  Revenues...........................................       126.8            130.3             116.5             110.7
  Income before income taxes and
      extraordinary charge...........................        31.7             36.1              19.4              13.2
  Net income.........................................        19.1             22.5              12.6               3.9
  
  Earnings per common share before
      extraordinary charge...........................       $ .71            $ .81              $.46             $.29
  Extraordinary charge...............................         .05               -                -                .14
                                                            -----            -----             -----             ----
  Earnings per common share..........................       $ .66            $ .81             $ .46             $.15
                                                            =====            =====             =====             ====
  1993
                                                          1st Qtr.          2nd Qtr.         3rd Qtr.           4th Qtr.
                                                          --------          --------         --------           --------
                                                                  (Dollars in millions, except per share amounts)
  Insurance policy income...........................        $ 32.3          $ 30.9            $ 34.3             $ 30.3
  Revenues..........................................         157.3           155.6             156.9              162.7
  Income before income taxes .......................          44.3            40.3              41.9               47.0
  Net income........................................          28.3            26.9              23.3               29.1
  
  Earnings per common share ........................        $ 1.09           $1.03             $ .89              $1.00
  Quarterly  results  of  operations  are  based  on  numerous   estimates,
  principally  related  to  policy  reserves,  amortization  of cost  of  policies
  purchased,  amortization  of cost of policies  produced and income  taxes.  Such
  estimates are revised each quarter and are ultimately adjusted at the end of the
  year.  When such  revisions  are  determined,  they are  reported as part of the
  operations of the current quarter.
  
         15.  SUBSEQUENT EVENTS (UNAUDITED):
  
         On  January  3,  1995,  the  Company  announced  that  its  common  share
  repurchase  program  had been  expanded  to 6 million  shares.  In  January  and
  February  of 1995,  the  Company  repurchased  approximately  2.2 million of its
  common shares for $44.7 million in open market transactions.
  
         Certain  annuity  policies  that  were  sold  by  Western  National  Life
  Insurance Company ("WNL"),  a former affiliate of the Company,  and subsequently
  ceded to the  Company  through  a  reinsurance  agreement,  with an  accumulated
  account balance of  approximately  $73 million at December 31, 1994, are subject
  to a provision  whereby they may be  recaptured by WNL. WNL informed the Company
  in  February  1995 that it wished to  exercise  its  option to  recapture  these
  policies.  This recapture will  transpire upon the  establishment  of a mutually
  agreed upon value of the business.
  
         On March 1, 1995,  the Company  received a proposal  from  Conseco  under
  which  Conseco  would  acquire  the  outstanding  shares of CCP that it does not
  currently own for $22.50 per share in cash . Under the proposal, CCP would merge
  into Conseco, with Conseco being the surviving corporation.  The proposed merger
  transaction,  which will be  evaluated by a special  committee of the  Company's
  independent board members, requires the approval of holders of a majority of the
  Company's  outstanding  shares  (other than shares held by Conseco)  voting at a
  special  shareholders'  meeting.  The special committee has retained independent
  counsel and an investment banking firm to advise it on the proposal. On March 9,
  1995,  Conseco held 11,555,581  shares of CCP, or approximately  49.5 percent of
  the common stock outstanding on that date.
  
                           CONSECO, INC. AND SUBSIDIARIES
  
  ITEM 7(b).     Financial Statements and Exhibit, continued
  
                 (b) Pro forma financial  statements required to be filed for this
                     acquisition  under Article 11 of Regulation S-X will be filed
                     with an amendment to Item 7(a)(4) of Form 8-K.
  CONSECO, INC. AND SUBSIDIARIES
  
  ITEM 7(c).     EXHIBIT.
  
                 (c) Exhibit
  
                     2.1    Agreement and Plan of Merger dated as of May 19, 1995.
  
                            The Credit Agreement  obtained by Conseco as described
                            in Item 2 has been  omitted  as an exhibit to the Form
                            8-K,  pursuant to Item  601(b)(4)(iii)  of  Regulation
                            S-K,  because the total amount of the Credit Agreement
                            is less than 10  percent  of the  total  assets of the
                            Registrant  and  its  subsidiaries  on a  consolidated
                            basis.  The  Registrant  hereby  undertakes to furnish
                            copies  of  such  documents  to  the  Commission  upon
                            request.
  CONSECO, INC. AND SUBSIDIARIES
  
                                      SIGNATURE
  
           Pursuant to the  requirements  of the  Securities  and  Exchange Act of
  1934,  the  Registrant has duly caused this report to be signed on its behalf by
  the undersigned thereunto duly authorized.
  
  Date: September 14, 1995                    CONSECO, INC.
  
                                  By:     /s/ ROLLIN M. DICK
                                          -------------------------
                                          Rollin M. Dick
                                            Executive Vice President
                                            and Chief Financial Officer