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

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

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

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

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

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

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

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

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

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

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

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

Conseco solved earlier problems, spinning off a troubled acquisition made by a prior generation of leaders. The insurer created Senior Health Insurance Co. of Pennsylvania to take control of a complicated long-term health-care business.

However, the collapse of Wall Street dragged down the stock market and the value of Conseco assets, prompting renewed calls for the insurer to cushion itself by finding new sources of capital, Lipponen said.

Paulson’s move relieves pressure from investors on James Prieur, the highly regarded Sun Life executive who came aboard Conseco recently as chief executive officer.

“He and his team have done a lot of heavy lifting to fix many of the issues previous CEOs had only talked about,” Lipponen said. "If you’re an investor and you bought stock in the $20s and are still holding it, it’s easy to get frustrated with whoever is running the show. ’’

Conseco officials declined comment Tuesday. Paulson’s public relations firm, Walek&Associates in New York, issued a statement from Paulson that says:

“We believe Conseco has a sound business model and, with this financing, a much improved financial position,” said John Paulson of Paulson&Co. “We have great confidence in Conseco’s future direction, in Jim Prieur, his management team and the board of directors.”

Conseco stock closed Tuesday at $4.99 a share, off Monday’s close by 13 cents, but surged in after-market trading as news of the Paulson deal circulated among investors. By early evening, it was selling for $5.79 a share.

Its most recent peak was $25.39 a share in March 2006, before the plunge three years later to the trough of 37 cents a share.