Cno Financial Group, Inc. · NYSE:CNO
Cno Financial — Q4 2024 Earnings Presentation
46 slides from Cno Financial's earnings presentation, Feb 7, 2024
Slide 1: Fourth Quarter 2024
Fourth Quarter 2024 Financial and operating results for the period ended December 31, 2024 February 6, 2025 Unless otherwise specified, comparisons in this presentation are between 4Q23 and 4Q24. 1
Slide 2: Important Legal Information
IMPORTANT LEGAL INFORMATION 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 ca
Slide 3: Our Purpose and Mission
OUR PURPOSE We secure the future of middle-income America. OUR MISSION We secure the future of middle-income America by providing insurance and financial services that help protect their health, income and retirement needs, while building enduring value for all our stakeholders. 3
Slide 4: Year in Review
YEAR IN REVIEW Exceptional full-year earnings and production results 10th consecutive quarter of strong sales momentum, growth in nearly all product categories Operational Highlights – Total new annualized premiums (NAP) up 7%; Total Health NAP up 17% – Record Annuity collected premiums – Record W
Slide 5: Growth Scorecard
GROWTH SCORECARD Record setting production in 2024 2023 2024 Change 4Q FY 1Q 2Q 3Q 4Q FY vs 4Q23 vs FY23 1 New Annualized Premiums $96.1 $389.7 $104.5 $102.9 $99.4 $108.6 $415.4 13.0% 6.6% Consumer 81.8 336.2 91.5 87.4 83.5 91.0 353.4 11.2% 5.1% Worksite 14.3 53.5 13.0 15.5 15.9 17.6 62.0 23.1% 15.9
Slide 6: Consumer Division Update
CONSUMER DIVISION UPDATE Strong 2024; 9th consecutive quarter of sustained sales growth Life and Health NAP up 5%, up 11% vs 4Q23 Operational – Field agent NAP up 10% Highlights Health NAP up 18%, up 21% vs 4Q23 – LTC NAP up 35%, Supplemental Health up 6% Medicare Supplement up 26%, Medicare A
Slide 7: Worksite Division Update
WORKSITE DIVISION UPDATE Record year and 4Q for insurance sales; 11th consecutive quarter of NAP growth Operational Life and Health NAP up 16%, up 23% vs 4Q23 Highlights New products driving growth – Critical Illness product up 24%, up 54% vs 4Q23 – Accident product up 13%, up 12% vs 4Q23 – Hosp
Slide 8: Financial Highlights
FINANCIAL HIGHLIGHTS Operating EPS1 up ~40% for both the quarter and the year, excluding significant items Earnings Results Earnings Drivers $3.97 Fourth Quarter 2024 Operating EPS1 up 11%, up 41% excl. significant items Net operating $3.09 $3.80 earnings per — Continued strength in insurance prod
Slide 9: Insurance Product Margin
INSURANCE PRODUCT MARGIN Strong underwriting margin throughout 2024 Insurance Product Margin Excluding Significant Items1 Highlights 4Q23 1Q24 2Q24 3Q24 4Q24 Annuity margin Fixed Indexed Annuities – growth in the Annuity $50.7 $52.0 $76.1 $54.9 $55.0 block, partially offset by higher amortization
Slide 10: Investment Results
INVESTMENT RESULTS Favorable net investment income comparison year-over-year Investment Income Investment Income Not Total Net Allocated to Product Lines Allocated to Product Lines Investment Income1 $300.0 $325.4 $300.0 $300.0 $280.8 $242.5 $ 260.1 $200.0 $200.0 $200.0 $100.0 $100.0 $100.0 $65.3 $3
Slide 11: Portfolio Composition
PORTFOLIO COMPOSITION High-quality, liquid portfolio delivering strong and durable results $29 Billion of Invested Assets1 Highlights High degree of liquidity: over 43% of portfolio in corporate and government bonds HY Corporates, 2.2% CMBS, 7.9% Municipals, 9.5% Strong credit risk profile Mortg
Slide 12: Capital and Liquidity Overview
CAPITAL AND LIQUIDITY OVERVIEW Capital and liquidity remain above target levels Consolidated Risk Based Capital (RBC) Ratio1 384% 402% 383% Target consolidated RBC ratio of approximately 375% RBC variability expected in periods of market volatility 2022 2023 2024 Holding Company Liquidity Targ
Slide 13: 2025 Guidance
2025 GUIDANCE Earnings Improve run rate operating ROE by 150 basis points over the next three years 50 basis points of improvement in 2025 to a run rate Operating ROE of ~10.5% $3.70 - $3.90 operating EPS 19.0% – 19.4% expense ratio ~23% effective tax rate Free Cash Flow / Excess Capital
Slide 14: Levers to Drive Operating ROE
LEVERS TO DRIVE OPERATING ROE Combination of top and bottom line actions to improve Operating ROE over the long-term Accelerating brokerage and advisory growth Products Product introductions (both insurance and services) New business terms, processing and underwriting Optimize agent count an
Slide 15: Why Invest in CNO
WHY INVEST IN CNO 1 Exclusive focus on underserved middle-income market 2 Significant demographic tailwinds 3 Diverse and integrated "last mile" in-person and virtual model 4 Delivering growth while improving ROE 5 Strong balance sheet and solid free cash flow generation 15
Slide 16: Questions and Answers
Questions and Answers CNO FINANCIAL GROUP 16
Slide 17: Appendix 1: Quarter in Review
Appendix 1: Quarter in Review Cash Flow Profile Slide 18 Broker-Dealer/Registered Investment Advisor Slide 19 Expense Ratio Slide 20 Financial Results Seasonality Slide 21 New Money Rate Walk Slide 22 New Money Summary Slide 23 Commercial Mortgage Loans Slide 24 Commercial Mortgage-B
Slide 18: Cash Flow Profile
CASH FLOW PROFILE (dollars in millions) 1 Cash flows exclude acquisitions, dividend payments, stock repurchases, and financing transactions 18
Slide 19: Broker-Dealer/Registered Investment Advisor
BROKER-DEALER/REGISTERED INVESTMENT ADVISOR Account values up 28% YoY; Record $4.1 billion in client assets 2023 2024 4Q 1Q 2Q 3Q 4Q Net New Client Assets in Brokerage $ (1.0) $ 10.5 $ 55.9 $ 36.6 $ 60.7 1 Brokerage and Advisory Advisory 18.7 57.7 82.9 91.7 94.2 Total $ 17.7 $ 68.2 $ 138.8 $ 128.3 $
Slide 20: Expense Ratio
EXPENSE RATIO1 2023 2024 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Allocated & Non Allocated Expenses $ 175.8 $ 170.6 $ 145.7 $ 158.6 $ 178.4 $ 172.1 $ 171.5 $ 165.1 Allocated & Non Allocated Expenses - YTD 175.8 346.4 492.1 650.7 178.4 350.5 522.0 687.1 Significant Items2 $ - $ - $ (21.7) $ - $ - $ - $ 2.9 $ - Signi
Slide 21: Financial Results Seasonality
FINANCIAL RESULTS SEASONALITY 2025 1Q 2Q 3Q 4Q Seasonally Medicare Supplement Margin highest claims and surrenders Seasonally Mortality highest mortality Traditionally Traditionally D2C Advertising highest lowest advertising advertising Fee Income ~1/4 income Near breakeven Near breakeven ~3/4 incom
Slide 22: New Money Rate Walk
NEW MONEY RATE WALK 6.50% 3Q24 NMR 0.33% 0.66% 6.72% lL] 0.47% Po -0.30% Yield Curve Spread Duration Direct Investment 4Q24 NMR CNO FINANCIAL GROUP 22
Slide 23: New Money Summary
NEW MONEY SUMMARY 4Q24 General Account New Money Purchases $ % GAAP YTM Duration Residential Mortgage Loans 177.3 21.6% 6.76% 3.12 IG Corp AAA-A 113.6 13.9% 5.21% 9.62 Rated IG Corp BBB Alternatives RMBS 108.0 13.2% 4.84% 11.46 Notes 5.8% 11.2% 10.2% Municipals 92.4 11.3% 5.50% 9.39 CRE Loans 3.8% A
Slide 24: Commercial Mortgage Loans
COMMERCIAL MORTGAGE LOANS High-performing portfolio with low delinquencies, result of consistent underwriting discipline Our CRE loan portfolio is conservatively margined Our CRE loan portfolio emphasizes lower risk sectors with cushion for adverse development 41.2% Prop Type Avg LTV (%) Other Apart
Slide 25: Commercial Mortgage-Backed Securities
COMMERCIAL MORTGAGE-BACKED SECURITIES Our CMBS allocation is highly rated - Our CMBS investments have significant structural 94% AAA/AA/A categories cushion for collateral losses % Loss Absorbing Subordination in 53% AA, 12% Structure A, 11% 25% AAA, 71% BBB, 3% 13% BIG, 3% 8% <10 10-15 15-30 >30 Th
Slide 26: Long-Term Care Insurance
LONG-TERM CARE INSURANCE Highly differentiated; prudently-managed in-force block New sales (~$54 million annually) focused on short duration products Recent growth due to launch of new LTC Fundamental product 99.9% of new sales for policies with 2 years or less in benefits Average benefit peri
Slide 27: Tax Asset Summary as of December 31, 2024
TAX ASSET SUMMARY AS OF DECEMBER 31, 2024 $281 million / $2.70 per diluted share value of remaining NOLs Value of NOLs Details Effective January 1, 2024, the Company changed its method of accounting for indirect costs allocable to self-constructed real estate assets. This tax method change will re
Slide 28: Appendix 2: Financial Exhibits
Appendix 2: Financial Exhibits Non-GAAP Financial Measures Slides 29 - 46 28
Slide 29: 2024 Significant Items
2024 SIGNIFICANT ITEMS The table below summarizes the financial impact of significant items on our 2024 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results. Year ended December 31, 2024 Excluding significant Actual
Slide 30: 4Q24 Significant Items
4Q24 SIGNIFICANT ITEMS The table below summarizes the financial impact of significant items on our 4Q24 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results. Three months ended December 31, 2024 Excluding significant
Slide 31: 3Q24 Significant Items
3Q24 SIGNIFICANT ITEMS The table below summarizes the financial impact of significant items on our 3Q24 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results. Three months ended September 30, 2024 Excluding significan
Slide 32: 2023 Significant Items
2023 SIGNIFICANT ITEMS The table below summarizes the financial impact of significant items on our 2023 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results. Year ended December 31, 2023 Excluding significant Actual
Slide 33: 4Q23 Significant Items
4Q23 SIGNIFICANT ITEMS The table below summarizes the financial impact of significant items on our 4Q23 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results. Three months ended December 31, 2023 Excluding significant
Slide 34: 3Q23 Significant Items
3Q23 SIGNIFICANT ITEMS The table below summarizes the financial impact of significant items on our 3Q23 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results. Three months ended September 30, 2023 Excluding significan
Slide 35: Quarterly Earnings
QUARTERLY EARNINGS YTD YTD 4Q23 4Q23 1Q24 2Q24 3Q24 4Q24 4Q24 Insurance product margin Annuity $ 63.6 $ 235.0 $ 52.0 $ 76.1 $ 91.1 $ 55.0 $ 274.2 Health 146.4 494.3 123.0 135.9 127.8 130.1 516.8 Life 64.6 229.7 54.6 63.1 63.3 68.0 249.0 Total insurance product margin 274.6 959.0 229.6 275.1 282.2 25
Slide 36: 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 37: Net Income to Net Operating Income Reconciliation
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: YTD YTD 4Q23 4Q23 1Q24 2Q24 3Q24 4Q24 4Q24 Net income applicable to common stock $ 36.3 $ 276.5 $ 112.3 $ 116.3
Slide 38: Operating Income and Shares Reconciliation
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: 4Q23 1Q24 2Q24 3Q24 4Q24 Operating income $ 133.9 $ 57.5 $ 114.6 $ 119.2 $ 138.0 Weighted average shares outstand
Slide 39: Book Value per Diluted Share
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 conve
Slide 40: Operating Return 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: (i) net realized investment gains or losses from sales, impairments and change in allowance for credit losses, net of taxes; (ii)
Slide 41: Operating Return on Equity Calculations
INFORMATION RELATED TO CERTAIN NON-GAAP FINANCIAL MEASURES The calculations of: (i) Operating return on equity as adjusted to exclude accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-GAAP financial measure); (ii) Operating return, excluding significant items,
Slide 42: Operating Earnings, Significant Items and Net Income Summary
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): Net operating Net operating income, income, excluding excluding significant Net inco
Slide 43: Operating Return on Equity Calculations (continued)
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 item, on equity, e
Slide 44: Consolidated Capital Reconciliation
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: 1Q22 2Q22 3Q22 4Q22 Consolid
Slide 45: Consolidated Capital Reconciliation, Trailing Four Quarter Average
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: Trailing Four Quarter Averag
Slide 46: Debt to Capital Ratio Reconciliation
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