Cno Financial Group, Inc. · NYSE:CNO
Cno Financial — Q2 2014 Earnings Presentation
43 slides from Cno Financial's earnings presentation, Jul 29, 2014
Slide 1: 2Q14 Financial and operating results
2Q14 Financial and operating results for the period ended June 30, 2014 July 29, 2014 Unless otherwise specified, comparisons in this presentation are between 2Q14 and 2Q13. Exhibit 99.1
Slide 2: Forward-Looking Statements
CNO Financial Group | 2Q2014 Earnings | July 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 operati
Slide 3: Non-GAAP Measures
CNO Financial Group | 2Q2014 Earnings | July 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 other c
Slide 4: 29, 2014
CNO Financial Group | 2Q2014 Earnings | July 29, 2014 4
Slide 5: 2Q14 Summary
CNO Financial Group | 2Q2014 Earnings | July 29, 2014 5 Growth in the business and operating EPS Continued strength in key capital ratios Ongoing return of capital to shareholders and increased securities repurchase guidance Closed sale of Conseco Life Insurance Company (CLIC) on July 1st
Slide 6: CNO Key Initiatives
CNO Financial Group | 2Q2014 Earnings | July 29, 2014 6 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 Continue
Slide 7: CNO Compelling Per Share Growth Story
CNO Financial Group | 2Q2014 Earnings | July 29, 2014 7 2Q13 $0.25 2Q14 $0.32 CNO Compelling Per Share Growth Story Investments in business driving growth Returned over $1bn in securities repurchase since inception of program through July Excess capital, ratings upgrades and de-levering has re
Slide 8: Bankers Life 2Q14 Sales and Distribution Results
CNO Financial Group | 2Q2014 Earnings | July 29, 2014 8 2Q14 Sales and Distribution Results Sales flat, but leading indicators tracking with expectations – Strong life and annuity sales offset by lower health sales Shortfall in recruiting offset by gains in productivity – Agent productivity** up
Slide 9: Washington National 2Q14 Sales and Distribution Results
CNO Financial Group | 2Q2014 Earnings | July 29, 2014 9 Washington National 2Q14 Sales and Distribution Results ($ millions) * Total producing agents includes appointed agents with $1000 or more of NAP in the prior 12 months Quarterly NAP Trailing 4-Quarters NAP $88.1 $90.6 $94.0 $95.4 $97.4 Sales
Slide 10: Colonial Penn 2Q14 Sales and Distribution Results
CNO Financial Group | 2Q2014 Earnings | July 29, 2014 10 Sales up 4% ‒ Strong web, term, and whole life product sales ‒ Improvement in marketing costs effectiveness Continue to build momentum ‒ February through June sales up 7% Continued growth in collected premiums and in-force EBIT, both up
Slide 11: Business Investments Delivering Results
CNO Financial Group | 2Q2014 Earnings | July 29, 2014 11 Business Investments Delivering Results Sales force automation and new CRM tools Advanced life sales training Revised branding and digital marketing Grow Financial Advisor program New term & whole life growth (Patriot Program) Web/
Slide 12: 2Q14 Consolidated Financial Highlights
CNO Financial Group | 2Q2014 Earnings | July 29, 2014 12 2Q14 Consolidated Financial Highlights CNO Strong Overall Earnings ‒ Med supp and LTC benefit ratios performed within expected ranges ‒ Continued growth in annuity account value and strong margins ‒ Supplemental health benefit ratios elevate
Slide 13: Segment Earnings
CNO Financial Group | 2Q2014 Earnings | July 29, 2014 13 $(3.6) $(0.4) $3.8 $(3.0) $(3.7) $1.2 $(4.2) $(4.1) $(6.2) $3.8 $(7.2) $(5.7) $(7.4) $76.6 $80.6 $79.8 $84.2 $87.4 $34.3 $33.0 $37.8 $31.1 $32.3 2Q13 3Q13 4Q13 1Q14 2Q14 Corporate CP OCB** BLC WN ($ millions) * A non-GAAP measure. See the Appe
Slide 14: Health Margins
CNO Financial Group | 2Q2014 Earnings | July 29, 2014 14 $120 $122 $124 $126 $127 53.5% 55.1% 50.6% 53.0% 54.8% 2Q13 3Q13 4Q13 1Q14 2Q14 Premium Reported Benefit Ratio $189 $191 $190 $195 $193 67.2% 67.0% 65.7% 67.7% 69.5% 2Q13 3Q13 4Q13 1Q14 2Q14 $134 $133 $131 $129 $127 81.4% 79.4% 80.0% 81.0% 79.
Slide 15: Investment Results
CNO Financial Group | 2Q2014 Earnings | July 29, 2014 15 $24,861 $24,933 $25,272 $348.8 $350.7 $354.4 $348.1 $347.4 2Q13 3Q13 4Q13 1Q14 2Q14 Net Investment Income $7.4 $10.7 $4.9 $2.9 $8.1 $11.9 $0.0 Investment Results Unadjusted for CLIC Assets Being Sold CNO ($ millions) Earned Yield*: 5.88% 5.86%
Slide 16: Capital Targets & Excess Capital Deployment
CNO Financial Group | 2Q2014 Earnings | July 29, 2014 16 v v v Capital Targets & Excess Capital Deployment CNO 2013 2Q14 2014 Outlook RBC 410% 437% ~ 415% Liquidity $309mm $277mm ~ $400mm* Leverage** 16.9% 17.4% ~17% Investment-grade ratings dialed-in while maintaining our tactical approach to deplo
Slide 17: ROE Development
CNO Financial Group | 2Q2014 Earnings | July 29, 2014 17 ROE Development CNO Notable Items Normalized Operating ROE* * A non-GAAP measure. Refer to the Appendix for a reconciliation to the corresponding GAAP measure. Operating ROE*: 7.4% 8.4% Trailing 4 quarter basis dampens the impact of recent O
Slide 18: Why CNO?
CNO Financial Group | 2Q2014 Earnings | July 29, 2014 18 Significant opportunity in the middle market Well positioned to capitalize on the opportunity with our unique business model Investing in the business model to continue to drive above industry sales growth and improved efficiencies Gene
Slide 19: Questions and Answers
CNO Financial Group | 2Q2014 Earnings | July 29, 2014 19 Questions and Answers
Slide 20: Appendix
CNO Financial Group | 2Q2014 Earnings | July 29, 2014 20 Appendix
Slide 21: 2Q14 Holding Company Liquidity
CNO Financial Group | 2Q2014 Earnings | July 29, 2014 21 2Q14 Holding Company Liquidity CNO ($ millions) 2Q14 YTD Cash and Investments Balance - Beginning $306.1 $309.0 Sources Net Dividends from Insurance Subsidiaries 75.0 115.0 Dividends from Non-insurance Subsidiaries 4.5 9.5 Interest/Earnings on
Slide 22: Debt Maturity Profile
CNO Financial Group | 2Q2014 Earnings | July 29, 2014 22 $33.4 $79.3 $60.5 $275.0 $33.4 $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 $275.0 CNO
Slide 23: Holding Company Investments at 6/30/14
CNO Financial Group | 2Q2014 Earnings | July 29, 2014 23 Holding Company Investments at 6/30/14 CNO ($ millions) Cash & Money Market / Fixed Income $182.7 Equities $52.8 Portfolio strategy prioritizes consistent returns that utilize non-life tax benefits Cash & Money Market Fixed Income Equities Alt
Slide 24: Returning Capital to our Shareholders
CNO Financial Group | 2Q2014 Earnings | July 29, 2014 24 $69.8 $180.3 $118.4 $136.6 $342.0 $134.2 2011 2012 2013 YTD2014 Share Repurchases Convertible Repurchases Returning Capital to our Shareholders CNO Since initiating the share buyback program, repurchased equivalent of 98 million shares, lead
Slide 25: Leveraging Considerable Tax Assets
CNO Financial Group | 2Q2014 Earnings | July 29, 2014 25 Capital $1 Non-Life $895 Life $245 Loss Carryforwards Valuation Allowance Leveraging Considerable Tax Assets CNO ($ millions) 2Q 2014 Loss Carryforwards $1,141 $283* 2014 Outlook and Value v Annual cash flows are expected to be reduced by $5
Slide 26: 2Q2013 significant items
CNO Financial Group | 2Q2014 Earnings | July 29, 2014 26 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 million
Slide 27: 3Q2013 significant items
CNO Financial Group | 2Q2014 Earnings | July 29, 2014 27 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 28: 4Q2013 significant items
CNO Financial Group | 2Q2014 Earnings | July 29, 2014 28 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 29: 1Q2014 significant items
CNO Financial Group | 2Q2014 Earnings | July 29, 2014 29 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 30: 2Q2014 net operating income
CNO Financial Group | 2Q2014 Earnings | July 29, 2014 30 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 af
Slide 31: Quarterly Earnings
CNO Financial Group | 2Q2014 Earnings | July 29, 2014 31 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, gain (loss) related to reinsurance transactions, net realized investment gains (los
Slide 32: Non-GAAP measures information
CNO Financial Group | 2Q2014 Earnings | July 29, 2014 32 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 amou
Slide 33: Information Related to Certain Non-GAAP Financial Measures
CNO Financial Group | 2Q2014 Earnings | July 29, 2014 33 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): 2Q13 3Q
Slide 34: Operating earnings per diluted share reconciliation
CNO Financial Group | 2Q2014 Earnings | July 29, 2014 34 2Q13 3Q13 4Q13 1Q14 (a) 2Q14 Operating income 63.9$ 72.7$ 66.2$ 59.9$ 63.7$ Add: interest expense on 7.0% Convertible Senior Debentures due 2016, net of income taxes 0.4 - - - - Total adjusted operating income 64.3$ 72.7$ 66.2$ 59.9$ 63.7$ Wei
Slide 35: Book value per diluted share
CNO Financial Group | 2Q2014 Earnings | July 29, 2014 35 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 36: Interest-adjusted benefit ratio
CNO Financial Group | 2Q2014 Earnings | July 29, 2014 36 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 backin
Slide 37: Operating return measures
CNO Financial Group | 2Q2014 Earnings | July 29, 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 being
Slide 38: Operating return on equity calculations
CNO Financial Group | 2Q2014 Earnings | July 29, 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) o
Slide 39: Operating earnings and significant items summary
CNO Financial Group | 2Q2014 Earnings | July 29, 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 Op
Slide 40: Pretax operating earnings reconciliation
CNO Financial Group | 2Q2014 Earnings | July 29, 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): 2Q13 3Q13 4Q13 1Q14 2Q14 Pretax operating earnings (a no
Slide 41: Consolidated capital reconciliation
CNO Financial Group | 2Q2014 Earnings | July 29, 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 sharehol
Slide 42: Consolidated capital reconciliation (2Q13-2Q14)
CNO Financial Group | 2Q2014 Earnings | July 29, 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 sharehol
Slide 43: Debt to capital ratio
CNO Financial Group | 2Q2014 Earnings | July 29, 2014 43 Information Related to Certain Non-GAAP Financial Measures 2Q13 3Q13 4Q13 1Q14 2Q14 Corporate notes payable 905.7$ 868.6$ 856.4$ 844.1$ 827.3$ Total shareholders' equity 4,581.4 4,786.6 4,955.2 4,710.2 4,844.3 Total capital 5,487.1$ 5,655.2$ 5