Cno Financial Group, Inc. · NYSE:CNO
Cno Financial — Q4 2018 Earnings Presentation
41 slides from Cno Financial's earnings presentation, Feb 13, 2019
Slide 1: Fourth Quarter 2018 Financial and Operating Results
Exhibit 99.1 Fourth Quarter 2018 Financial and operating results for the period ended December 31, 2018 February 13, 2019 Unless otherwise specified, comparisons in this presentation are between 4Q17 and 4Q18. CNO Financial Group | 2017 Investor Day | June 5, 2017 1
Slide 2: Forward-Looking Statements
Forward-Looking Statements Certain statements made in this presentation should be considered forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These include statements about future results of operations and capital plans. We caution investors that these f
Slide 3: Non-GAAP Measures
Non-GAAP Measures This presentation contains the following financial measures that differ from the comparable measures under Generally Accepted Accounting Principles (GAAP): operating earnings measures; book value, excluding accumulated other comprehensive income (loss) per share; operating return m
Slide 4: 13, 2019
CNO Financial Group | Fourth Quarter 2018 Earnings | February 13, 2019 4
Slide 5: 2018 Year in Review
2018 Year in Review • Growth initiatives gaining traction • Accelerated new product launches Strong • Bankers Life initiatives drove producing agent growth of 4% Operational • BD/RIA client assets over $1.1 billion • Bankers Life annuity collected premiums up 13% Performance • Record production from
Slide 6: Growth Scorecard
Growth Scorecard ($ millions) All Growth Scorecard metrics positive compared to same quarter 2017 2017 2018 % Change 4Q TY 1Q 2Q 3Q 4Q TY Q/Q Y/Y New Annualized Premium 1 Life Insurance $33.6 $145.4 $36.9 $36.9 $37.4 $36.3 $147.5 8.0% 1.4% Health Insurance 51.8 187.2 41.2 44.9 44.3 53.3 183.7 2.9% -
Slide 7: Segment Update: Bankers Life
Segment Update Key Initiatives Fourth Quarter Results • Total collected premiums up 12% • Annuity first year collected premiums up 30% Reinvigorate growth • Health NAP up 1%; Life NAP down 10% • Med Advantage issued polices up 34% • More than $1.1 billion of total client assets at BD/RIA Expand to t
Slide 8: Segment Update: Washington National
Segment Update Key Initiatives Fourth Quarter Results • Life/Health NAP up 11% Maintain growth momentum • Total collected premiums up 5% • Quarterly producing agents up 6% • $1.5 million in sales from geographic Expand geographically expansion; full-year sales of $4.7 million • Life sales up 78%; no
Slide 9: Segment Update: Colonial Penn
Segment Update Key Initiatives Fourth Quarter Results • NAP up 17% Continue sales growth • Total collected premiums up 4% Expand web/digital • Web/digital NAP up 28%; 16% of 2018 sales • Strong results from investments in lead sales capabilities generation expansion • Technology enhancements driving
Slide 10: Excess Capital Allocation Strategy
Excess Capital Allocation Strategy Disciplined and opportunistic 100% deployment to highest and best use Organic investments to sustain and grow the core businesses Opportunistic Deployment - Highly selective M&A to expand product offerings or enhance distribution - Share repurchases Dividend payout
Slide 11: Financial Highlights
Financial Highlights ($ millions, except where noted) Fourth Quarter 2018 Financial Results 4Q17 4Q18 • Net income per diluted share of $0.17 $0.51 • Net operating income per diluted share1 of $0.36 $0.47 $0.45 − Excluding significant items, net operating $0.36 income per diluted share1 was $0.45 Ne
Slide 12: Segment Results
1 Segment Results ($ millions) Segment Adjusted EBIT Excluding Significant Items2 4Q17 1Q18 2Q18 3Q18 4Q18 Segment Highlights $94.4 • Bankers Life results reflect lower $88.6 $90.7 $81.1 Bankers Life $76.7 Medicare supplement margins • Washington National results reflect Washington higher Supplement
Slide 13: Health Margins
Health Margins ($ millions) Bankers Life Medicare Bankers Life Long-term Care Washington National Supplement Benefit Ratio IABR1,2 Supplemental Health IABR1 $193 $193 $192 $192 $190 $156 $149 $151 $152 $152 75.6% 76.0% 73.3% 73.1% 70.7% $64 $64 $64 $64 $64 56.6% 56.6% 56.9% 54.4% 53.8% 73.3% 73.9% 7
Slide 14: Bankers Life Retained Long-term Care Insurance Key Takeaways
Bankers Life Retained Long-term Care Insurance Key Takeaways . Differentiated block of in-force business ─ 55% of policies with benefit periods one year or less ─ 94% of policies with benefit periods less than 4 years ─ 2% of policies with lifetime benefits . New sales (~$25mm annually) focused on s
Slide 15: Investment Results
Investment Results ($ millions) Average Invested Assets and Cash1 Quarter Highlights $24,580 $24,642 $24,823 $24,971 . Results benefiting from alternatives and $21,832 prepayment income $325.1 $329.1 $328.2 $332.0 $290.4 . Continued positive credit performance with Net Investment low levels of impai
Slide 16: Committed to Long-term Shareholder Value Creation
Committed to Long-term Shareholder Value Creation Continued progress on strategic initiatives Effectively deploy excess capital Extend depth and breadth of product offerings Leverage diverse distribution channels and unique product combination Expand to the Right Enhance customer experience Growth i
Slide 17: Questions and Answers
Questions and Answers CNO Financial Group | Fourth Quarter 2018 Earnings | February 13, 2019 17
Slide 18: Appendix
Appendix CNO Financial Group | Fourth Quarter 2018 Earnings | February 13, 2019 18
Slide 19: Portfolio Composition
Portfolio Composition (Carrying Value as of 12/31/2018) $23 billion of Invested Assets Fixed Maturity Securities by Ratings Mortgage Loans, HY Corporates, 7.2% 3.6% NAIC 3, 3.5% Non-Agency RMBS, 8.0% NAIC 4, 1.1% CMBS, 7.2% NAIC 2, 44.8% NAIC 5, 0.1% Municipals, 8.4% Govts/Agency, ABS, 6.8% 1.7% CDO
Slide 20: BBB Portfolio
BBB Portfolio (Fair Value as of 12/31/2018) CNO has benefited from Positive BBB selection relative to Index 2 % Default/Impairments Portfolio Market1 % Downgrades 8.04% 1.02% 7.29% 0.93% 7.26% 5.55% 5.28% 4.75% 4.13% 0.49% 3.63% 3.41% 0.36% 2.73% 2.66% 2.34% 2.62% 2.15% 2.09% 1.68% 1.72% 1.09% 0.94%
Slide 21: Broker-Dealer and Registered Investment Advisor Disclosures
Broker-Dealer and Registered Investment Advisor Disclosures ($ millions) 2017 2018 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Net New Client Assets in Brokerage $4.2 $10.9 $4.7 $15.2 $12.2 $3.1 $26.3 -$1.1 Brokerage and Advisory 1 Advisory 17.9 26.7 32.3 39.1 50.5 49.1 44.2 13.2 Total $22.1 $37.6 $37.0 $54.3 $62.7 $52
Slide 22: Agent Counts
Agent Counts Producing agent count returns to growth; 1 out of every 8 Bankers Life agents is a financial advisor 2017 2018 % Change Bankers Life 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Q/Q Total Quarterly Average Producing Agents 4,252 4,291 4,109 4,029 3,999 4,167 4,168 4,177 3.7% Total LTM Average Producing Agen
Slide 23: Bankers Life Retained Long-term Care Insurance
Bankers Life Retained Long-term Care Insurance (As of 12/31/2018) % of Policies by Benefit Period Key LTC Data GAAP Reserves $1.82B Greater than 1yr Statutory Reserves $1.86B 2% and <= 4 Yrs Policies In-Force 185,450 Greater Than 4 Average Attained Age 67 years 39% Yrs but Not Life Avg. Daily Benefi
Slide 24: 2018 Holding Company Liquidity
2018 Holding Company Liquidity ($ millions) 4Q18 FY18 Cash and Investments Balance - Beginning $165.9 $396.6 Sources Dividends from Insurance Subsidiaries 114.4 213.9 Dividends from Non-insurance Subsidiaries - 11.0 Management Fees 26.2 108.9 Surplus Debenture Interest 12.3 58.2 Earnings on Corporat
Slide 25: Tax Asset Summary
Tax Asset Summary ($ millions) Loss Carryforwards Details $685 . Total estimated economic value of NOLs of $354 million @ 10% Life $194 discount rate (~$2.16 on per share basis) . Life NOLs are expected to offset Non-Life $491 80% of life taxable income until fully utilized. Non-life NOLs are expect
Slide 26: 4Q17 Significant Items
4Q17 Significant Items The table below summarizes the financial impact of significant items on our 4Q17 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results (dollars in millions). Three months ended December 31, 2017
Slide 27: 1Q18 Significant Items
1Q18 Significant Items The table below summarizes the financial impact of significant items on our 1Q18 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results (dollars in millions). Three months ended March 31, 2018 Ex
Slide 28: 4Q18 Significant Items
4Q18 Significant Items The table below summarizes the financial impact of significant items on our 4Q18 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results (dollars in millions). Three months ended December 31, 2018
Slide 29: Quarterly Earnings
Quarterly Earnings ($ millions) 4Q17 1Q18 2Q18 3Q18 4Q18 Bankers Life$ 99.4 $ 77.5 $ 90.7 $ 94.4 $ 78.0 Washington National 23.7 34.3 25.4 30.3 31.9 Colonial Penn 5.9 (1.5) 5.4 6.1 4.8 Long-term care in run-off 10.9 12.0 8.5 2.1 0.3 Adjusted EBIT from business segments 139.9 122.3 130.0 132.9 115.0
Slide 30: Information Related to Certain Non-GAAP Financial Measures
Information Related to Certain Non-GAAP Financial Measures The following provides additional information regarding certain non-GAAP measures used in this presentation. A non-GAAP measure is a numerical measure of a company’s performance, financial position, or cash flows that excludes or includes am
Slide 31: Information Related to Certain Non-GAAP Financial Measures
Information Related to Certain Non-GAAP Financial Measures A reconciliation of net income(loss) applicable to common stock to net operating income (and related per-share amounts) is as follows (dollars in millions, except per-share amounts): 4Q17 1Q18 2Q18 3Q18 4Q18 Net income(loss) applicable to co
Slide 32: Information Related to Certain Non-GAAP Financial Measures
Information Related to Certain Non-GAAP Financial Measures A reconciliation of operating income and shares used to calculate basic and diluted operating earnings per share is as follows (dollars in millions, except per-share amounts, and shares in thousands): 4Q17 (a) 1Q18 2Q18 3Q18 (b) 4Q18 Operati
Slide 33: Information Related to Certain Non-GAAP Financial Measures
Information Related to Certain Non-GAAP Financial Measures Book value per diluted share Book value per diluted share reflects the potential dilution that could occur if outstanding stock options were exercised, restricted stock and performance units were vested and convertible securities were conver
Slide 34: Information Related to Certain Non-GAAP Financial Measures
Information Related to Certain Non-GAAP Financial Measures Interest-adjusted benefit ratios The interest-adjusted benefit ratio (a non-GAAP measure) is calculated by dividing the product's insurance policy benefits less imputed interest income on the accumulated assets backing the insurance liabilit
Slide 35: Information Related to Certain Non-GAAP Financial Measures
Information Related to Certain Non-GAAP Financial Measures Operating return measures Management believes that an analysis of net income applicable to common stock before net realized investment gains or losses from sales and impairments, net change in market value of investments recognized in earnin
Slide 36: Information Related to Certain Non-GAAP Financial Measures
Information Related to Certain Non-GAAP Financial Measures The calculations of: (i) operating return on equity, excluding accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-GAAP financial measure); (ii) operating return, excluding significant items, on equity,
Slide 37: Information Related to Certain Non-GAAP Financial Measures
Information Related to Certain Non-GAAP Financial Measures The following summarizes: (i) operating earnings; (ii) significant items; (iii) operating earnings, excluding significant items; and (iv) net income(loss) (dollars in millions): Net Operating Net Operating Income, income, excluding Net exclu
Slide 38: Information Related to Certain Non-GAAP Financial Measures
Information Related to Certain Non-GAAP Financial Measures A reconciliation of pretax operating earnings (a non-GAAP financial measure) to net income (loss) is as follows (dollars in millions): Twelve Months Ended 4Q17 1Q18 2Q18 3Q18 4Q18 Pretax operating earnings (a non-GAAP financial measure)$ 454
Slide 39: Information Related to Certain Non-GAAP Financial Measures
Information Related to Certain Non-GAAP Financial Measures A reconciliation of consolidated capital, excluding accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-GAAP financial measure) to common shareholders’ equity, is as follows (dollars in millions): 1Q16 2
Slide 40: Information Related to Certain Non-GAAP Financial Measures
Information Related to Certain Non-GAAP Financial Measures A reconciliation of consolidated capital, excluding accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-GAAP financial measure) to common shareholders’ equity, is as follows (dollars in millions): Traili
Slide 41: Information Related to Certain Non-GAAP Financial Measures
Information Related to Certain Non-GAAP Financial Measures Debt to capital ratio, excluding accumulated other comprehensive income (loss) The debt to capital ratio, excluding accumulated other comprehensive income (loss), differs from the debt to capital ratio because accumulated other comprehensive