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Conseco (CNC) - Get Centene Corporation Report, the beleaguered insurance firm and lender, reported a steep operating loss for the third quarter even before taking nearly $500 million in charges, most of which are aimed at amending accounting practices used by the firm's former management team.

The Carmel, Ind.-based firm, undergoing a deep restructuring under new managers, reported an operating loss of $64 million in the third quarter, swinging from a $267 million operating profit in the year-ago period, and nearly double the $29 million loss posted in the previous quarter. (Operating numbers in each of the three quarters exclude a raft of special charges.)

The third-quarter operating loss works out to 20 cents per share, compared with 80 cents per share in profits in the year-earlier period. The third-quarter operating number falls way short of the 23-cent profit that analysts surveyed by

First Call/Thomson Financial

had been expecting.

With all the charges factored in, Conseco lost $487 million in the third quarter, compared with a $156 million profit in the year-earlier period and a $405 million loss in the second quarter.

In the third quarter, Conseco took a hefty after-tax charge of $323 million to deal with what it calls "legacy practices," presumably accounting practices used when Conseco was headed by Stephen Hilbert, who served as CEO for 21 years until leaving under a cloud

in May. Ex-

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head Gary Wendt became CEO in June and is implementing an ambitious turnaround plan. The firm also took $166 million of charges in the third quarter, mostly resulting from restructuring initiatives in

Conseco Finance

, the firm's lending arm.

Hilbert's Legacy?

The size of the "legacy practices" charge will stun many investors. It suggests Conseco has been in a much sicker state than current management team may have thought when it took over. The finance and insurance divisions made income of $232 million in the third quarter, down 54% from the year-ago period, but up 30% from the $179 million posted in the second quarter.

Conseco's most pressing need has been to reduce its debt levels. However, despite having paid back some $571 million in debt as part of a $2.6 billion

debt restructuring done in September, the level of corporate debt actually jumped by 18% from second-quarter levels to $4.3 billion in the third quarter. On a conference call Thursday, a Conseco official said the rise was due to a reallocation of debt within the company.

Conseco's stock has been in free fall since the beginning of last year as investors began to doubt Hilbert's leadership. Skepticism remains: The stock is 76% below its 52-week high and down 34% since Wendt joined. Thursday Conseco shares were off 69 cents, or 10%, to $6.