Cno Financial Group, Inc. · NYSE:CNO
Cno Financial — Q1 2014 Earnings Presentation
43 slides from Cno Financial's earnings presentation, Apr 28, 2014
Slide 1: 1Q14 Financial and Operating Results
1Q14 Financial and operating results for the period ended March 31, 2014 April 28, 2014 Unless otherwise specified, comparisons in this presentation are between 1Q14 and 1Q13. Exhibit 99.3
Slide 2: Forward-Looking Statements
CNO Financial Group | 1Q2014 Earnings | April 28, 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 operat
Slide 3: Non-GAAP Measures
CNO Financial Group | 1Q2014 Earnings | April 28, 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 other
Slide 4: 28, 2014
CNO Financial Group | 1Q2014 Earnings | April 28, 2014 4
Slide 5: 1Q14 Summary
CNO Financial Group | 1Q2014 Earnings | April 28, 2014 5 Continued sustainable, profitable growth Maintained strong financial position Returned capital to shareholders CLIC transaction on track for mid-year close Moody’s upgraded debt ratings, maintained positive outlook 1Q14 Summary CNO
Slide 6: CNO Key Initiatives
CNO Financial Group | 1Q2014 Earnings | April 28, 2014 6 Agent productivity Branch and geographic expansion New product development Worksite platform Operating efficiencies Customer Experience Investments Driving Growth Investment Breakdown Plan to Invest $45 - $55 million in Key Initiat
Slide 7: Bankers Life 1Q14 Sales and Distribution Results
CNO Financial Group | 1Q2014 Earnings | April 28, 2014 7 1Q14 Sales and Distribution Results Sales up 4% – Driven by life and annuity – Partially offset by LTC Strong agent productivity, up 7% – Improved agent retention Collected premiums up 2% Bankers Life * MA/PDP sales are excluded from NAP
Slide 8: Washington National 1Q14 Sales and Distribution Results
CNO Financial Group | 1Q2014 Earnings | April 28, 2014 8 Washington National 1Q14 Sales and Distribution Results ($ millions) * Total producing agents includes appointed agents with $1000 or more of NAP in the prior 12 months Quarterly NAP Trailing 4-Quarters NAP $87.1 $88.1 $90.6 $94.0 $95.4 Sale
Slide 9: Colonial Penn 1Q14 Sales and Distribution Results
CNO Financial Group | 1Q2014 Earnings | April 28, 2014 9 Sales down 1% ‒ Challenges in 4Q13 impacted January Significant improvement in February and March ‒ Combined, sales up 9% Strong in-force growth ‒ Collected premiums up 7% ‒ In-force EBIT up 17% 1Q14 Sales and Distribution Results Coloni
Slide 10: Business Investments Delivering Results
CNO Financial Group | 1Q2014 Earnings | April 28, 2014 10 Business Investments Delivering Results Sales force automation and new CRM tools Advanced life sales training Revised branding and digital marketing Grow Financial Advisor program Patriot program growth Lead generation diversifica
Slide 11: 1Q14 Consolidated Financial Highlights
CNO Financial Group | 1Q2014 Earnings | April 28, 2014 11 1Q14 Consolidated Financial Highlights CNO Earnings ‒ In aggregate, core earnings drivers continued to perform within expected ranges ‒ Strength in Medicare supplement, life mortality and annuity margins ‒ Normalized LTC and supplemental he
Slide 12: CLIC Transaction Update
CNO Financial Group | 1Q2014 Earnings | April 28, 2014 12 After closing, Bankers Life results will reflect the business recaptured from Wilton Re. Transition services agreement begins with revenue less expenses reported as a non- operating item, largely offsetting. Historical Periods (Pre 2014) 2014
Slide 13: Segment Earnings
CNO Financial Group | 1Q2014 Earnings | April 28, 2014 13 $3.0 $(3.6) $(0.4) $3.8 $(3.0) $(5.4) $1.2 $(4.2) $(4.1) $(6.2) $(7.3) $(7.2) $(5.7) $(7.4) $71.3 $76.6 $80.6 $79.8 $84.2 $34.0 $34.3 $33.0 $37.8 $31.1 1Q13 2Q13 3Q13 4Q13 1Q14 Corporate CP OCB** BLC WN ($ millions) * A non-GAAP measure. See
Slide 14: Investment Results
CNO Financial Group | 1Q2014 Earnings | April 28, 2014 14 $3.3 $7.4 $10.7 $0.6 $2.9 $8.1 $11.9 Investment Results Unadjusted for CLIC Operations Being Sold CNO ($ millions) Earned Yield*: 5.89% 5.88% 5.86% 5.85% 5.88% New Money Rate: 5.09% 5.13% 4.93% 5.01% 5.17% Average Invested Assets and Cash 1
Slide 15: Capital Targets & Excess Capital Deployment
CNO Financial Group | 1Q2014 Earnings | April 28, 2014 15 v v Interest $45 Holdco Exp & Other $14 Debt Repayment / Financing Costs $73 Common Stock Dividends $24 Securities Repurchases $253 2013 Capital Deployment $409mm Capital Targets & Excess Capital Deployment CNO 2013 1Q14 2014 Outlook RBC 410%
Slide 16: ROE Development
CNO Financial Group | 1Q2014 Earnings | April 28, 2014 16 ROE Development CNO Notable Items Normalized Operating ROE* * A non-GAAP measure. Refer to the Appendix for a reconciliation to the corresponding GAAP measure Operating ROE*: 6.3% 6.8% 8.4% 8.7% 9.0% 8.3% 8.6% 8.5% 8.2% 8.3% 1Q13 2Q13 3Q13 4Q
Slide 17: CNO Moving Forward
CNO Financial Group | 1Q2014 Earnings | April 28, 2014 17 CNO Moving Forward Focused on Sustainable, Profitable Growth – Investments in distribution productivity and growth yielding top-tier industry growth rates Improving Operational Efficiencies and Effectiveness – Investments in back-office t
Slide 18: Questions and Answers
CNO Financial Group | 1Q2014 Earnings | April 28, 2014 18 Questions and Answers
Slide 19: Appendix
CNO Financial Group | 1Q2014 Earnings | April 28, 2014 19 Appendix
Slide 20: 1Q14 Holding Company Liquidity
CNO Financial Group | 1Q2014 Earnings | April 28, 2014 20 1Q14 Holding Company Liquidity CNO ($ millions) 1Q14 Cash and Investments Balance - Beginning $309.0 Sources Net Dividends from Insurance Subsidiaries 40.0 Dividends from Non-insurance Subsidiaries 5.0 Interest/Earnings on Corporate Investmen
Slide 21: Debt Maturity Profile
CNO Financial Group | 1Q2014 Earnings | April 28, 2014 21 $46.9 $79.3 $60.5 3.5 $275.0 $46.9 $79.3 $64.0 $4.2 $378.1 2014 2015 2016 2017 2018 2019 2020 Term Loan Senior Unsecured Debentures Senior Secured Notes Debt Maturity Profile ($ millions) $378.1 $275.0 CNO
Slide 22: Holding Company Investments at 3/31/14
CNO Financial Group | 1Q2014 Earnings | April 28, 2014 22 Holding Company Investments at 3/31/14 CNO ($ millions) Cash & Money Market / Fixed Income $150.5 Equities $103.0 Portfolio strategy prioritizes consistent returns that utilize non-life tax benefits Cash & Money Market Fixed Income Equities A
Slide 23: Returning Capital to our Shareholders
CNO Financial Group | 1Q2014 Earnings | April 28, 2014 23 Returning Capital to our Shareholders CNO Since initiating the share buyback program, repurchased equivalent of 92 million shares, leading to a 30%* reduction in weighted average diluted shares outstanding Cumulative investment of $886mm
Slide 24: OCB Solutions for $4bn in Run-Off Reserves
CNO Financial Group | 1Q2014 Earnings | April 28, 2014 24 Annuities & Deposits $788 Other Health $7 Interest- Sensitive Life $166 Annuities & Deposits $705** Interest- Sensitive Life $2,232 LTC $525* Traditional Life $424 OCB Solutions For $4bn in Run-Off Reserves 12/31/13 OCB Net Statutory Reserves
Slide 25: Sale of CLIC Subsidiary – Transaction Detail
CNO Financial Group | 1Q2014 Earnings | April 28, 2014 25 Sale of CLIC Subsidiary – Transaction Detail Washington National Insurance Company (WNIC) Sale & Transition Intercompany transactions to move A&H business out of CLIC to WNIC, increasing CLIC capital by $36mm Wilton Re purchases CLIC lega
Slide 26: Leveraging Considerable Tax Assets
CNO Financial Group | 1Q2014 Earnings | April 28, 2014 26 Capital $1 Non-Life $905 Life $300 Loss Carryforwards Valuation Allowance Leveraging Considerable Tax Assets CNO ($ millions) 1Q 2014 Loss Carryforwards $1,206 $297 2014 Outlook and Value v Annual cash flows are expected to be reduced by $5
Slide 27: 1Q2013 Significant Item Impact on Net Operating Income
CNO Financial Group | 1Q2014 Earnings | April 28, 2014 27 The table below summarizes the financial impact of the significant item on our 1Q2013 net operating income. Management believes that identifying the impact of this item enhances the understanding of our operating results (dollars in millions)
Slide 28: 2Q2013 Significant Items Impact on Net Operating Income
CNO Financial Group | 1Q2014 Earnings | April 28, 2014 28 The table below summarizes the financial impact of the significant items on our 2Q2013 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results (dollars in millio
Slide 29: 3Q2013 Significant Items Impact on Net Operating Income
CNO Financial Group | 1Q2014 Earnings | April 28, 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: 4Q2013 Significant Item Impact on Net Operating Income
CNO Financial Group | 1Q2014 Earnings | April 28, 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 millions
Slide 31: 1Q2014 Significant Item Impact on Net Operating Income
CNO Financial Group | 1Q2014 Earnings | April 28, 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 millions)
Slide 32: Quarterly Earnings
CNO Financial Group | 1Q2014 Earnings | April 28, 2014 32 Quarterly Earnings CNO *Management believes that an analysis of earnings before the loss on the operations of CLIC being sold, the earnings of CLIC being sold, loss on reinsurance transaction, net realized investment gains (losses), fair valu
Slide 33: Additional Information on Non-GAAP Measures
CNO Financial Group | 1Q2014 Earnings | April 28, 2014 33 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 amo
Slide 34: Net Income to Net Operating Income Reconciliation
CNO Financial Group | 1Q2014 Earnings | April 28, 2014 34 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): 1Q13 2
Slide 35: Operating Earnings Per Share Reconciliation
CNO Financial Group | 1Q2014 Earnings | April 28, 2014 35 1Q13 2Q13 3Q13 4Q13 1Q14 (a) Operating income 45.6$ 63.9$ 72.7$ 66.2$ 59.9$ Add: interest expense on 7.0% Convertible Senior Debentures due 2016, net of income taxes 1.2 0.4 - - - Total adjusted operating income 46.8$ 64.3$ 72.7$ 66.2$ 59.9$
Slide 36: Book Value per Diluted Share
CNO Financial Group | 1Q2014 Earnings | April 28, 2014 36 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 securities
Slide 37: Operating Return Measures
CNO Financial Group | 1Q2014 Earnings | April 28, 2014 37 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 loss on the operations of CLIC being sold, the earnings of CLIC bein
Slide 38: Operating Return on Equity Calculations
CNO Financial Group | 1Q2014 Earnings | April 28, 2014 38 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 39: Operating Earnings and Significant Items Summary
CNO Financial Group | 1Q2014 Earnings | April 28, 2014 39 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 O
Slide 40: Pretax Operating Earnings Reconciliation
CNO Financial Group | 1Q2014 Earnings | April 28, 2014 40 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): 1Q13 2Q13 3Q13 4Q13 1Q14 Pretax operating earnings (a n
Slide 41: Consolidated Capital Reconciliation
CNO Financial Group | 1Q2014 Earnings | April 28, 2014 41 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 shareho
Slide 42: Consolidated Capital Reconciliation (1Q13-1Q14)
CNO Financial Group | 1Q2014 Earnings | April 28, 2014 42 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 shareho
Slide 43: Debt to Capital Ratio Reconciliation
CNO Financial Group | 1Q2014 Earnings | April 28, 2014 43 Information Related to Certain Non-GAAP Financial Measures 1Q13 2Q13 3Q13 4Q13 1Q14 Corporate notes payable 934.2$ 905.7$ 868.6$ 856.4$ 844.1$ Total shareholders' equity 5,028.6 4,581.4 4,786.6 4,955.2 4,710.2 Total capital 5,962.8$ 5,487.1$