Cno Financial Group, Inc. · NYSE:CNO
Cno Financial — Q3 2014 Earnings Presentation
46 slides from Cno Financial's earnings presentation, Oct 29, 2014
Slide 1: 3Q14 Financial and Operating Results
3Q14 Financial and operating results for the period ended September 30, 2014 October 29, 2014 Unless otherwise specified, comparisons in this presentation are between 3Q14 and 3Q13. Exhibit 99.1
Slide 2: Forward-Looking Statements
CNO Financial Group | 3Q2014 Earnings | October 29, 2014 2 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 oper
Slide 3: Non-GAAP Measures
CNO Financial Group | 3Q2014 Earnings | October 29, 2014 3 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 othe
Slide 4: 29, 2014
CNO Financial Group | 3Q2014 Earnings | October 29, 2014 4
Slide 5: 3Q14 Summary
CNO Financial Group | 3Q2014 Earnings | October 29, 2014 5 Growth in the business and operating EPS Bankers Life sales down due to weakness in recruiting; consistent sales growth at Washington National and Colonial Penn Continued strength in key capital ratios Ongoing return of capital to sh
Slide 6: CNO Compelling Per Share Growth Story
CNO Financial Group | 3Q2014 Earnings | October 29, 2014 6 CNO Compelling Per Share Growth Story Diversified business model driving growth in operating earnings Returned over $1.1 billion to shareholders via securities repurchases since 2011 Continued focus on execution and operating effective
Slide 7: 3Q14 Sales and Distribution Results: Bankers Life
CNO Financial Group | 3Q2014 Earnings | October 29, 2014 7 3Q14 Sales and Distribution Results Bankers Life * MA/PDP sales are excluded from NAP in all periods ($ millions) Quarterly NAP* Med Advantage Policies Issued 1,729 16,814 1,075 2,154 1,660 Trailing 4-Quarters NAP $255.5 $260.1 $262.7 $262.6
Slide 8: Agent Recruiting and Productivity
CNO Financial Group | 3Q2014 Earnings | October 29, 2014 8 Agent Recruiting and Productivity Bankers Life New recruits down 11% YTD ‒ More competitive employment market ‒Average 3Q agent count down 6% Continuing to achieve gains in agent productivity ‒ Elevating culture & retention ‒ Larger base
Slide 9: Washington National 3Q14 Sales and Distribution Results
CNO Financial Group | 3Q2014 Earnings | October 29, 2014 9 Washington National 3Q14 Sales and Distribution Results ($ millions) Quarterly NAP Trailing 4-Quarters NAP $90.6 $94.0 $95.4 $97.4 $99.1 Sales up 7% ‒ Individual sales up 10% ‒ Worksite sales up 2% Growth in PMA agent force ‒ Producing a
Slide 10: 3Q14 Sales and Distribution Results: Colonial Penn
CNO Financial Group | 3Q2014 Earnings | October 29, 2014 10 Sales up 7% ‒ Strong web, term, and whole life product sales ‒ Improvement in marketing cost effectiveness Continued solid sales pace ‒ February through September sales up 7% In-force EBIT up 16% and collected premiums up 6% 3Q14 Sale
Slide 11: Business Investments and Sales Outlook
CNO Financial Group | 3Q2014 Earnings | October 29, 2014 11 Business Investments and Sales Outlook Sales force automation and CRM tools Advanced life sales training Grow Financial Advisor program New applicant tracking system New term & whole life growth (Patriot Program) Web/digital str
Slide 12: 3Q14 Consolidated Financial Highlights
CNO Financial Group | 3Q2014 Earnings | October 29, 2014 12 3Q14 Consolidated Financial Highlights CNO Strong Overall Earnings ‒ Favorable normalized Medicare supplement and long-term care benefit ratios ‒ Continued growth in annuity account values and strong margins ‒ In-force earnings growth at
Slide 13: Segment Earnings
CNO Financial Group | 3Q2014 Earnings | October 29, 2014 13 $(0.4) $3.8 $(3.0)) $(3.7) $(9.1) $(4.2) $(4.1) $(6.2) $3.8 $0.4 $(5.7) $(7.4) $80.6 $79.8 $84.2 $87.4 $98.3 $33.0 $37.8 $31.1 $32.3 $30.1 3Q13 4Q13 1Q14 2Q14 3Q14 Corporate CP OCB** BLC WN ($ millions) * A non-GAAP measure. See the Appendi
Slide 14: Health Margins
CNO Financial Group | 3Q2014 Earnings | October 29, 2014 14 $122 $124 $126 $127 $126 55.1% 50.6% 53.0% 54.8% 56.0% 3Q13 4Q13 1Q14 2Q14 3Q14 Premium Reported Benefit Ratio ($ millions) * A non-GAAP measure. Refer to the Appendix for the corresponding GAAP measure. Health Margins 3Q14 Highlights Nor
Slide 15: Investment Results
CNO Financial Group | 3Q2014 Earnings | October 29, 2014 15 $10.7 $4.9 $4.2 $2.9 $8.1 $11.9 $4.9 $2.8 $1.3 $1.1 $4.4 $24,933 $25,272 $21,687 $350.7 $354.4 $348.1 $347.4 $300.1 3Q13 4Q13 1Q14 2Q14 3Q14 Net Investment Income Investment Results CNO ($ millions) Earned Yield*: 5.86% 5.85% 5.88% 5.83% 5.
Slide 16: Capital Targets & Excess Capital Deployment
CNO Financial Group | 3Q2014 Earnings | October 29, 2014 16 v v Capital Targets & Excess Capital Deployment CNO 2013 3Q14 2014 Y.E. Outlook RBC 410% 425% ~ 415% Liquidity $309mm $432mm ~ $400mm* Leverage** 16.9% 17.4% ~ 17% Key Capital Ratios 3Q Securities Repurchases $107 million of common stock
Slide 17: ROE Development
CNO Financial Group | 3Q2014 Earnings | October 29, 2014 17 ROE Development CNO Notable Items Normalized Operating ROE* * A non-GAAP measure. Refer to the Appendix for a reconciliation to the corresponding GAAP measure. Operating ROE*: 7.9% 8.6% ROE trends reflect strength in earnings and OCB tran
Slide 18: CNO Focus
CNO Financial Group | 3Q2014 Earnings | October 29, 2014 18 Addressing recruiting challenges at Bankers Life to re-energize sales; sustaining sales momentum at Washington National and Colonial Penn Operational effectiveness; deploying technology to increase productivity and enhance the customer
Slide 19: Questions and Answers
CNO Financial Group | 3Q2014 Earnings | October 29, 2014 19 Questions and Answers
Slide 20: Appendix
CNO Financial Group | 3Q2014 Earnings | October 29, 2014 20 Appendix
Slide 21: LTC Low-For-Long Rate Stress Tests
CNO Financial Group | 3Q2014 Earnings | October 29, 2014 21 Mild : NMR held flat for 5 years then recovering over 4 additional years Moderate: NMR reduced 50 bps in all years, recovering to a lower ultimate Severe: NMR reduced 100 basis points and held flat indefinitely No mitigating managemen
Slide 22: LTC Low-For-Long Rates Sensitivity
CNO Financial Group | 3Q2014 Earnings | October 29, 2014 22 LTC – “Low-For-Long” Rates Sensitivity From June 2014 Investor Conference Observations Reserve and capital impacts emerge under severe scenario as margins are exhausted Mild and Moderate Scenarios: ‒ No material impact for GAAP or Stat
Slide 23: Key Initiatives: Investments Driving Growth
CNO Financial Group | 3Q2014 Earnings | October 29, 2014 23 Agent productivity Branch and geographic expansion New product development Worksite platform Operating efficiencies Customer Experience Investments Driving Growth Investment Breakdown Investments in Key Initiatives in 2014 to Dr
Slide 24: 3Q14 Holding Company Liquidity
CNO Financial Group | 3Q2014 Earnings | October 29, 2014 24 3Q14 Holding Company Liquidity CNO ($ millions) 3Q14 YTD Cash and Investments Balance - Beginning $276.9 $309.0 Sources Net Dividends from Insurance Subsidiaries 59.0 * 174.0 Dividends from Non-insurance Subsidiaries - 9.5 Interest/Earnings
Slide 25: Debt Maturity Profile
CNO Financial Group | 3Q2014 Earnings | October 29, 2014 25 $19.8 $79.3 $60.5 $275.0 $19.8 $79.3 $60.5 $4.2 $378.1 2014 2015 2016 2017 2018 2019 2020 Term Loan Senior Secured Notes Debt Maturity Profile ($ millions) $378.1 $275.0 CNO
Slide 26: Holding Company Investments at 9/30/14
CNO Financial Group | 3Q2014 Earnings | October 29, 2014 26 Holding Company Investments at 9/30/14 CNO ($ millions) Cash & Money Market / Fixed Income $279.7 Equities $102.5 Portfolio strategy prioritizes consistent returns that utilize non-life tax benefits Cash & Money Market Fixed Income Equities
Slide 27: Returning Capital to our Shareholders
CNO Financial Group | 3Q2014 Earnings | October 29, 2014 27 $69.8 $180.3 $118.4 $244.0 $342.0 $134.2 $57.4 2011 2012 2013 YTD2014 Share Repurchases Convertible/Warrant Repurchases Returning Capital to our Shareholders CNO Since initiating the share buyback program, repurchased equivalent of 107 mi
Slide 28: Leveraging Considerable Tax Assets
CNO Financial Group | 3Q2014 Earnings | October 29, 2014 28 Non-Life $877 Life $220 Loss Carryforwards Valuation Allowance Leveraging Considerable Tax Assets CNO ($ millions) 3Q 2014 Loss Carryforwards $1,097 $269* 2014 Outlook and Value v Annual cash flows are expected to be reduced by $50 millio
Slide 29: Significant Items: 3Q2013 Net Operating Income
CNO Financial Group | 3Q2014 Earnings | October 29, 2014 29 The table below summarizes the financial impact of significant items on our 3Q2013 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results (dollars in millions
Slide 30: Significant Items: 4Q2013 Net Operating Income
CNO Financial Group | 3Q2014 Earnings | October 29, 2014 30 The table below summarizes the financial impact of the significant item on our 4Q2013 net operating income. Management believes that identifying the impact of this items enhances the understanding of our operating results (dollars in millio
Slide 31: Significant Items: 1Q2014 Net Operating Income
CNO Financial Group | 3Q2014 Earnings | October 29, 2014 31 The table below summarizes the financial impact of the significant item on our 1Q2014 net operating income. Management believes that identifying the impact of this item enhances the understanding of our operating results (dollars in million
Slide 32: Significant Items: 2Q2014 Net Operating Income
CNO Financial Group | 3Q2014 Earnings | October 29, 2014 32 Net Operating Income: Bankers Life $ 87.4 $ - $ 87.4 Washington National Colonial Penn EBIT from business segments continuing after the CLIC sale Corporate Operations, excluding corporate interest expense (1) EBIT from operations continuing
Slide 33: Significant Items: 3Q2014 Net Operating Income
CNO Financial Group | 3Q2014 Earnings | October 29, 2014 33 The table below summarizes the financial impact of significant items on our 3Q2014 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results (dollars in millions
Slide 34: Quarterly Earnings
CNO Financial Group | 3Q2014 Earnings | October 29, 2014 34 Quarterly Earnings CNO *Management believes that an analysis of earnings before the net loss on sale of CLIC and gain (loss) on reinsurance transactions, the earnings of CLIC prior to being sold, net realized investment gains (losses), fair
Slide 35: Non-GAAP Measures Information
CNO Financial Group | 3Q2014 Earnings | October 29, 2014 35 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 a
Slide 36: Information Related to Certain Non-GAAP Financial Measures
CNO Financial Group | 3Q2014 Earnings | October 29, 2014 36 Information Related to Certain Non-GAAP Financial Measures A reconciliation of net income applicable to common stock to net operating income (and related per-share amounts) is as follows (dollars in millions, except per-share amounts): 3Q13
Slide 37: Operating Earnings Per Diluted Share Reconciliation
CNO Financial Group | 3Q2014 Earnings | October 29, 2014 37 3Q13 4Q13 1Q14 (a) 2Q14 3Q14 Operating income 72.7$ 66.2$ 59.9$ 63.7$ 76.6$ Weighted average shares outstanding for basic earnings per share 222,876 221,056 220,307 216,538 210,525 Effect of dilutive securities on weighted average shares: 7
Slide 38: Book Value per Diluted Share
CNO Financial Group | 3Q2014 Earnings | October 29, 2014 38 Book value per diluted share Book value per diluted share reflects the potential dilution that could occur if outstanding stock options and warrants were exercised, restricted stock and performance units were vested and convertible securiti
Slide 39: Interest-Adjusted Benefit Ratio
CNO Financial Group | 3Q2014 Earnings | October 29, 2014 39 Information Related to Certain Non-GAAP Financial Measures 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 bac
Slide 40: Operating Return Measures
CNO Financial Group | 3Q2014 Earnings | October 29, 2014 40 Information Related to Certain Non-GAAP Financial Measures Operating return measures Management believes that an analysis of net income applicable to common stock before the net loss on sale of CLIC and gain (loss) on reinsurance transactio
Slide 41: Operating Return on Equity Calculations
CNO Financial Group | 3Q2014 Earnings | October 29, 2014 41 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
Slide 42: Operating Earnings and Significant Items Summary
CNO Financial Group | 3Q2014 Earnings | October 29, 2014 42 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 (dollars in millions): Operating
Slide 43: Pretax Operating Earnings Reconciliation
CNO Financial Group | 3Q2014 Earnings | October 29, 2014 43 Information Related to Certain Non-GAAP Financial Measures A reconciliation of pretax operating earnings (a non-GAAP financial measure) to net income is as follows (dollars in millions): 3Q13 4Q13 1Q14 2Q14 3Q14 Pretax operating earnings (a
Slide 44: Consolidated Capital Reconciliation (2012-2013)
CNO Financial Group | 3Q2014 Earnings | October 29, 2014 44 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 share
Slide 45: Consolidated Capital Reconciliation (3Q13-3Q14)
CNO Financial Group | 3Q2014 Earnings | October 29, 2014 45 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 share
Slide 46: Debt to Capital Ratio Reconciliation
CNO Financial Group | 3Q2014 Earnings | October 29, 2014 46 Information Related to Certain Non-GAAP Financial Measures 3Q13 4Q13 1Q14 2Q14 3Q14 Corporate notes payable 868.6$ 856.4$ 844.1$ 827.3$ 814.0$ Total shareholders' equity 4,786.6 4,955.2 4,710.2 4,844.3 4,722.0 Total capital 5,655.2$ 5,811.6