The encyclopedia · Finance & Accounting · Financial decision · 1979–2002
Conseco grew by buying insurance companies — then bought the wrong lender and collapsed
Conseco grew through 40+ acquisitions then bought subprime lender Green Tree for $6B. The deal triggered the third-largest US bankruptcy — $61B in assets.
Conseco (now CNO Financial Group) · Green Tree Financial · 2002-12-18
What happened
Conseco was founded in 1979 by Stephen Hilbert, a former insurance salesman, and grew into a financial services powerhouse through relentless acquisitions. Hilbert's strategy was to buy insurance companies, slash costs, and squeeze out earnings for a rising stock price. Over two decades Conseco acquired more than 40 companies, including Bankers Life, Transport Life, American Travellers, and Washington National. At its peak in the late 1990s, the stock traded above $58 and the company was worth over $10 billion.
The turning point was April 1998, when Conseco purchased Green Tree Financial in a stock deal valued at roughly $6 billion. Green Tree was the largest US lender for manufactured housing — mobile homes — a market dominated by subprime borrowers. Hilbert saw it as a natural diversification beyond insurance. But just months after the deal closed, an accounting rule change forced Green Tree to recognise expected loan losses earlier. The effect was devastating: Green Tree's earnings vanished and Conseco was forced into billions in write-downs.
By 1999, Conseco had taken over $1.3 billion in charges on Green Tree, and its stock had fallen from $58 to well under $10. Hilbert tried to buy back the company in a leveraged deal with Berkshire Hathaway in January 2000, but it fell apart. In April 2000, the board ousted Hilbert. Gary Wendt, former chairman of GE Capital, was brought in to orchestrate a turnaround — but Green Tree's loan portfolio kept deteriorating, and the recession after the dot-com crash made things worse.
On 18 December 2002, Conseco filed for Chapter 11 bankruptcy with $61.4 billion in assets — the third-largest US bankruptcy at the time, after Enron and WorldCom. It emerged nine months later in 2003, having divested Green Tree and refocused entirely on insurance. The company renamed itself CNO Financial Group in 2010. Hilbert lost a personal fortune estimated at over $300 million, mostly in Conseco stock he had leveraged to buy more.
Why it happened
- The $6B acquisition of Green Tree Financial diversified Conseco into subprime mobile home lending — a business that immediately collapsed under its own credit losses after an accounting rule changed.
- Conseco's acquisition-driven growth model depended on cheap debt and a high stock price. When Green Tree cratered, both disappeared.
- The 1998 accounting rule required Green Tree to recognise expected losses upfront — turning future loan defaults into immediate charges that overwhelmed Conseco's balance sheet.
- By the time Hilbert was ousted in 2000 and a GE Capital veteran brought in, the damage was done: Green Tree's loan losses were structural, not fixable by new management.
The lesson
An acquisition that looks like diversification is concentration in a new risk. Conseco bought a subprime lender because insurance was boring — and lost company when lending turned out to be harder.
Aftermath
Conseco emerged from bankruptcy in September 2003, having shed Green Tree and all non-insurance operations. The company renamed itself CNO Financial Group in 2010 and continues to operate insurance brands including Bankers Life, Colonial Penn, and Washington National. Hilbert lost his entire fortune — he had borrowed against Conseco stock to buy more, and when the stock fell from $58 to pennies, the loans came due. The case is taught in business schools as the canonical example of an acquisition-driven strategy that worked until the one deal that broke it.
Sources
- NPR — Conseco Bankruptcy Is Nation's Third-Largest (18 Dec 2002; $61B in assets; behind Enron and WorldCom)
- Conseco — Wikipedia (founded 1979, 40+ acquisitions, Green Tree 1998, Chapter 11 Dec 2002, renamed CNO 2010)
- Chapter 11 — Wikipedia (list of largest cases; Conseco $61.4B in 2002)
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