Cno Financial Group, Inc. · NYSE:CNO
Cno Financial — Q4 2020 Earnings Presentation
48 slides from Cno Financial's earnings presentation, Feb 9, 2021
Slide 1: Fourth Quarter 2020 Financial and operating results
Fourth Quarter 2020 Financial and operating results for the period ended December 31, 2020 February 9, 2021 Unless otherwise specified, comparisons in this presentation are between 4Q19 and 4Q20. Exhibit 99.3
Slide 2: Important Legal Information
CNO Financial Group | Fourth Quarter 2020 Earnings | February 9, 2021 2 Important Legal Information 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 r
Slide 3: | February 9, 2021
CNO Financial Group | Fourth Quarter 2020 Earnings | February 9, 2021 3
Slide 4: DirectPath Transaction
CNO Financial Group | Fourth Quarter 2020 Earnings | February 9, 2021 4 DirectPath Transaction Acquisition enhances Worksite Division growth outlook (As of 12/31/2020) Strategic RationaleDirectPath Description • DirectPath is a leading national provider of year- round, technology-driven employee ben
Slide 5: 2020 Year in Review
CNO Financial Group | Fourth Quarter 2020 Earnings | February 9, 2021 5 2020 Year in Review Solid execution in face of challenging backdrop Strong Operational Performance Building on Track Record of Execution • Operating income per share1 up 37% • Strong execution on Transformation objectives • D2C
Slide 6: Quarter in Review
CNO Financial Group | Fourth Quarter 2020 Earnings | February 9, 2021 6 Quarter in Review Continued favorable health margins; accelerated investments in growth Strong Operational Performance • Operating income per share1 up 17%; up 21% ex. significant items • Insurance product margin up 15% due to c
Slide 7: Growth Scorecard
CNO Financial Group | Fourth Quarter 2020 Earnings | February 9, 2021 7 4Q TY 1Q 2Q 3Q 4Q TY Q/Q TY New Annualized Premium 1 Life $34.9 $151.3 $41.1 $47.4 $44.3 $37.1 $169.9 6.3% 12.3% Health 62.7 195.3 44.0 22.0 39.4 49.1 154.5 -21.7% -20.9% Total Life and Health $97.6 $346.6 $85.1 $69.4 $83.7 $86.
Slide 8: Consumer Division Update
CNO Financial Group | Fourth Quarter 2020 Earnings | February 9, 2021 8 Consumer Division Update Continued strong Life sales; expanding synergies between direct-to-consumer/field Fourth Quarter HighlightsKey Initiatives Maintain growth momentum Optimize distribution Expand reach • Life sales up 17%;
Slide 9: Worksite Division Update
CNO Financial Group | Fourth Quarter 2020 Earnings | February 9, 2021 9 Worksite Division Update Stable in force block; sequential improvement in sales; new group product launched Fourth Quarter Highlights Restore growth Evolve digital capabilities Enhance portfolio • Employer base growing • 61% seq
Slide 10: Excess Capital Allocation Strategy
CNO Financial Group | Fourth Quarter 2020 Earnings | February 9, 2021 10 Excess Capital Allocation Strategy Disciplined and opportunistic approach to maximize shareholder value Organic investments to sustain and grow the core businesses • myHealthPolicy.com start up expenses • Agent pilots, technolo
Slide 11: CNO Ventures
CNO Financial Group | Fourth Quarter 2020 Earnings | February 9, 2021 11 CNO Ventures Minority stakes with strong growth potential, strategic proximity to CNO Representative Portfolio Companies • Strong standalone merits • Clear vision, strong management • Access to capital, realistic valuation • Le
Slide 12: Financial Highlights
CNO Financial Group | Fourth Quarter 2020 Earnings | February 9, 2021 12 $0.52 $0.61 $1.85 $2.53 4Q19 4Q20 FY19 FY20 $(0.04) $0.57 $(0.05) $1.80 Financial Highlights Operating EPS up 17%; favorable net COVID impact, strong NII partially offset by growth investments Earnings ResultsFourth Quarter 202
Slide 13: Insurance Product Margin
CNO Financial Group | Fourth Quarter 2020 Earnings | February 9, 2021 13 $60.8 $59.5 $72.3 $45.3 $52.0 $56.4 $44.3 $41.7 $47.3 $41.6 $93.0 $86.9 $95.5 $152.2 $125.2 Insurance Product Margin (dollars in millions) Favorable net COVID impact Insurance Product Margin Excluding Significant Items1 4Q19 1Q
Slide 14: Investment Results
CNO Financial Group | Fourth Quarter 2020 Earnings | February 9, 2021 14 $- $100.0 $200.0 $300.0 $400.0 4Q 2019 4Q 2020 Total Net Investment Income1 Annuity Health Life Not Allocated $- $100.0 $200.0 $300.0 $400.0 4Q 2019 4Q 2020 Investment Income Allocated to Product Lines Annuity Health Life $- $1
Slide 15: Portfolio Composition
CNO Financial Group | Fourth Quarter 2020 Earnings | February 9, 2021 15 IG Corporates, 50.6% Non-Agency RMBS, 8.0% Mortgage Loans, 5.2% HY Corporates, 3.1% CMBS, 7.7% Municipals, 9.7% ABS, 3.9% Govts/Agency, 1.4% CLO, 1.7% Equities, 0.6% Other Invested Assets, 2.1% Alternatives, 2.1% Policy Loans,
Slide 16: Cash Flow Profile
CNO Financial Group | Fourth Quarter 2020 Earnings | February 9, 2021 16 Cash Flow Profile Strong free cash flow generation and conversion (dollars in millions) 1 A non-GAAP measure. See the Appendix for a reconciliation to the corresponding GAAP measure. 2 Cash flows exclude capital contributions t
Slide 17: Capital and Liquidity Overview
CNO Financial Group | Fourth Quarter 2020 Earnings | February 9, 2021 17 Capital and Liquidity Overview 1 The ratio of the combined capital of the insurance companies to the minimum amount of capital appropriate to support the overall business operations, as determined based on the methodology devel
Slide 18: 2021 Outlook
CNO Financial Group | Fourth Quarter 2020 Earnings | February 9, 2021 18 2021 Outlook Base Case1: Sales • Continued positive momentum Earnings • Headwinds • COVID-related • Diminished favorable impact from deferral of healthcare • Net mortality/morbidity impact modestly favorable in 1H21; unfavorabl
Slide 19: Delivering On Our Commitments
CNO Financial Group | Fourth Quarter 2020 Earnings | February 9, 2021 19 Delivering On Our Commitments Turnaround / De-risking Pivot to Growth Optimize Long-term Value Pre 2017 2017 - 2019 2020 - 2021 Post COVID • Reinsured life block (2009) • Recapitalized company (2012) • Initiated dividend (2012)
Slide 20: Investment Highlights
CNO Financial Group | Fourth Quarter 2020 Earnings | February 9, 2021 20 Well-positioned in underserved senior middle-income market Highly differentiated business model Favorable demographic tailwinds Sustainable growth initiatives in place Strong balance sheet; robust free cash flow generation Inve
Slide 21: Questions and Answers
CNO Financial Group | Fourth Quarter 2020 Earnings | February 9, 2021 21 Questions and Answers
Slide 22: Appendix 1: Quarter in Review
CNO Financial Group | Fourth Quarter 2020 Earnings | February 9, 2021 22 Appendix 1: Quarter in Review Strong Operational Performance • Broker-Dealer/Registered Investment Advisor Slide 23 • Exclusive Agent Counts Slide 24 Building on Strong Track Record of Execution • Retained LTC Insurance Slide 2
Slide 23: Broker-Dealer/Registered Investment Advisor
CNO Financial Group | Fourth Quarter 2020 Earnings | February 9, 2021 23 Broker-Dealer/Registered Investment Advisor 1 Client assets include cash and securities in brokerage and managed advisory accounts. Net new client assets includes total inflows of cash and securities into brokerage and managed
Slide 24: Exclusive Agent Counts
CNO Financial Group | Fourth Quarter 2020 Earnings | February 9, 2021 24 2019 % Change Consumer 4Q 1Q 2Q 3Q 4Q Q/Q Producing Field Agents 1,3 4,709 4,531 4,066 4,448 4,539 -4% Producing Tele-Sales Agents 1,3 211 238 237 239 257 22% Total Producing Agents 1,3 4,920 4,769 4,303 4,687 4,796 -3% Financi
Slide 25: Retained Long-Term Care Insurance
CNO Financial Group | Fourth Quarter 2020 Earnings | February 9, 2021 25 New sales (~$25 million annually) focused on short duration products – 98.5% of new sales for policies with 2 years or less in benefits – Average benefit period of 11 months – New business 25% reinsured since 2008 Reserve a
Slide 26: New Money Summary
CNO Financial Group | Fourth Quarter 2020 Earnings | February 9, 2021 26 New Money Summary Traditional, high quality fixed income investments during fourth quarter 94% Investment Grade Allocation Fourth Quarter Investments Allocation $ Allocation% Yield Average Rating Average Duration IG Corporates
Slide 27: Portfolio Overview – Sector Breakdown
CNO Financial Group | Fourth Quarter 2020 Earnings | February 9, 2021 27 Positioning allows flexibility for opportunistic approach to changing conditions Portfolio Overview – Sector Breakdown Sector Book Value Market Value Unrealized Gain Loss Portfolio% Average NAIC Over|Underweight Airlines 42.3 4
Slide 28: Portfolio Overview: CLO Debt
CNO Financial Group | Fourth Quarter 2020 Earnings | February 9, 2021 28 Portfolio Overview: CLO Debt Key Portfolio Metrics Cumulative loss scenarios versus Break Points 100% AAA-A Significant cushion against stress scenarios Ratings Composition AAA 11.8% AA+ 2.2% AA 52.3% A 31.5% A- 2.2% AAA AA A C
Slide 29: Portfolio Overview: Commercial Mortgage Loans
CNO Financial Group | Fourth Quarter 2020 Earnings | February 9, 2021 29 Apartment 31.1% Industrial 19.3% Offi ce Building 17.8% Other commercial 12.0% Reta il 19.9% Portfolio Overview: Commercial Mortgage Loans Key Portfolio Facts Portfolio Geography Underlying Property Type Ratings Composition $1.
Slide 30: Portfolio Overview: CMBS
CNO Financial Group | Fourth Quarter 2020 Earnings | February 9, 2021 30 Hotels 9.6% Retail 13.5% Offi ce 31.1% Multi family 24.5% Industrial 9.8% Mixed Us e 11.4% Portfolio Overview: CMBS Key Portfolio Facts Underlying Property Type SASB versus Conduit $2.0 billion of net invested assets 82.0% Rate
Slide 31: Tax Asset Summary
CNO Financial Group | Fourth Quarter 2020 Earnings | February 9, 2021 31 Non-life NOLs $339 DTAs related to tax strategy $106 Value of NOLs and deferred tax assets (DTAs) related to tax strategy Details • Total estimated economic value of NOLs and DTAs related to tax strategy of approximately $380 m
Slide 32: Appendix 2: Financial Exhibits
CNO Financial Group | Fourth Quarter 2020 Earnings | February 9, 2021 32 Appendix 2: Financial Exhibits • Non-GAAP Financial Measures Slides 33-48
Slide 33: 4Q20 Significant Items
CNO Financial Group | Fourth Quarter 2020 Earnings | February 9, 2021 33 The table below summarizes the financial impact of significant items on our 4Q20 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results. 4Q20 Sig
Slide 34: 2Q20 Significant Items
CNO Financial Group | Fourth Quarter 2020 Earnings | February 9, 2021 34 The table below summarizes the financial impact of significant items on our 2Q20 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results. 2Q20 Sig
Slide 35: 2Q20 Significant Items (Continued)
CNO Financial Group | Fourth Quarter 2020 Earnings | February 9, 2021 35 2Q20 Significant Items (Continued from the previous page) (1) Given our expectation that interest rates will remain low for the long-term, we performed an actuarial unlocking exercise in the second quarter of 2020 to reflect ou
Slide 36: 4Q19 Significant Items
CNO Financial Group | Fourth Quarter 2020 Earnings | February 9, 2021 36 The table below summarizes the financial impact of significant items on our 4Q19 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results. 4Q19 Sig
Slide 37: Quarterly Earnings
CNO Financial Group | Fourth Quarter 2020 Earnings | February 9, 2021 37 Quarterly Earnings (dollars in millions) * Management believes that an analysis of Net income applicable to common stock before: (i) net realized investment gains or losses from sales, impairments and the change in allowance fo
Slide 38: Information Related to Certain Non-GAAP Financial Measures
CNO Financial Group | Fourth Quarter 2020 Earnings | February 9, 2021 38 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 pe
Slide 39: Net Income to Net Operating Income Reconciliation
CNO Financial Group | Fourth Quarter 2020 Earnings | February 9, 2021 39 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
Slide 40: Operating Income and Share Reconciliation
CNO Financial Group | Fourth Quarter 2020 Earnings | February 9, 2021 40 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 a
Slide 41: Book Value per Diluted Share
CNO Financial Group | Fourth Quarter 2020 Earnings | February 9, 2021 41 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
Slide 42: Operating Return Measures
CNO Financial Group | Fourth Quarter 2020 Earnings | February 9, 2021 42 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, impai
Slide 43: Operating Return on Equity Calculations
CNO Financial Group | Fourth Quarter 2020 Earnings | February 9, 2021 43 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
Slide 44: Operating Earnings and Significant Items Summary
CNO Financial Group | Fourth Quarter 2020 Earnings | February 9, 2021 44 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
Slide 45: Operating Return on Equity Calculations (Continued)
CNO Financial Group | Fourth Quarter 2020 Earnings | February 9, 2021 45 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
Slide 46: Consolidated Capital Reconciliation
CNO Financial Group | Fourth Quarter 2020 Earnings | February 9, 2021 46 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
Slide 47: Consolidated Capital Reconciliation (Continued)
CNO Financial Group | Fourth Quarter 2020 Earnings | February 9, 2021 47 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
Slide 48: Debt to Capital Ratio Reconciliation
CNO Financial Group | Fourth Quarter 2020 Earnings | February 9, 2021 48 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), diffe