CNO Financial Group, Inc. · NYSE:CNO
CNO Financial — CFO Summit 2010
16 slides from CNO Financial's conference presentation, Nov 6, 2010
Slide 1: CFO Summit: Survived and Thrived – Emerging Stronger
CFO Summit Case Study: Survived and Thrived – Emerging Stronger Through Successful Positioning November 6, 2010
Slide 2: Forward-looking statements
Forward-looking statements Cautionary Statement Regarding Forward-Looking Statements. Our statements, trend analyses and other information contained in this press release relative to markets for CNO Financial’s products and trends in CNO Financial’s operations or financial results, as well as other
Slide 3: Topics to be Covered – Surviving the Financial Crisis and Emerging Stronger
Topics to be Covered – Surviving the Financial Crisis and Emerging Stronger Brief Company Overview Situation Summary Actions Taken Where We Are Now Moving Forward CNO Financial Group 3
Slide 4: The Company: CNO Financial Group
The Company: CNO Financial Group Focused on serving the protection needs of the fast-growing but underserved senior middle income market Products include supplemental health, life, annuity and long-term care Sold through efficient, growing, primarily controlled distribution channels: – Bankers
Slide 5: Broad Distribution Reach
Broad Distribution Reach Captive PMA/Independent Direct • Focused on middle-income senior • Focused on middle-income • Focused on lower middle-income market with Medicare supplement, working Americans and retirees retirees with simple, low-cost life life, annuity, LTC, Medicare Part D with supplemen
Slide 6: Situation Summary
Situation Summary February, 2009 – Auditors informed company of potential going concern Primary Issue was the adequacy of margins to four key debt covenants over the next year given the extraordinary market uncertainties No debt covenants were violated as of 12/31/08 (or any other period) Qu
Slide 7: Debt & Covenant Summary
Debt & Covenant Summary As of 12/31/08 $912 mm Senior Secured Debt Outstanding (including $55 M revolver Interest at Libor +200bp (~ 2.75%) Primary Covenants & Margins Covenants 12/31/08 Minimum Capital & Surplus* $ 1,381 mm $ 1,270 mm Risk Based Capital* 258% 250% Debt/Cap 27.9% 30.0% Interes
Slide 8: Amended Debt & Covenant Summary (3/30/09 Amendment)
Amended Debt & Covenant Summary (3/30/09 Amendment) Interest at Libor + 400bp (2.50% Libor floor so rate at 6.5%) 1% Payment in Kind Interest Removal of Ability to Buy Back Stock and Issue pari passu Debt Primary Covenants and Margins Covenants Prior Amended ** Capital & Surplus $ 1,270mm $
Slide 9: Capital Management Initiatives - 2009
Capital Management Initiatives -2009 Reinsured two significant blocks of inforce life insurance business –received $ 100 million Reinsured selected new business Managed investment portfolio to mitigate RBC impact of ratings migration Limited Bankers branch expansion Reduced direct marketing spe
Slide 10: Recapitalization of CNO
Recapitalization of CNO Basics of the deal: – Private placement of common stock and warrants – Issuance of new convertible debentures to refinance existing convertible debentures – Tender offer for existing convertible debentures – Followed by public equity offering – Further amended the Senior Cr
Slide 11: Sources and Uses of Cash
Sources and Uses of Cash ($ millions) Sources Net Proceeds from Private Placement $ 74 Net Proceeds from New Convertible Debenture Issue 281* Total Source $355 Uses Retirement of Old Convertible Debentures $ 293 Payment under Credit Agreement (50% of Net Proceeds of Private Placement) 37 Funds Avail
Slide 12: Capital Structure
Capital Structure ($millions) Actual Recapitalization As Adjusted 9/30/09 Adjustments 9/30/09 Credit Facility (matures 10/13) $855 $(37) $818 6% Senior Note ($25MM due annually beginning 11/09) 125 125 3.5% Convertible Debentures (puttable by holders 9/10) 293 (293) - 7.0% Convertible Debentures (ma
Slide 13: Impact of Capital Management Actions
Impact of Capital Management Actions Common equity increased by $296 million through sale of stock ($223 million public issue/$73 million private placement) Senior Credit Facility – Balance reduced by $198 million – Covenants restructured and extended to provide greater flexibility Old 3.5% Co
Slide 14: Covenant Metrics
Covenant Metrics Prior Amendment Level New 2011 Level* New 2012 Level Debt to Capital** Interest Coverage 35% 3.3x 3.1x 32.5% 30% 30.0% 3.0x 2.4x 25% 27.0% 26.8% 20% 2.0x 1.8x 2.0x 1.7x 21.6% 21.6% 21.3% 1.75x 15% 1.5x 10% 1.0x 5% 0% 0.0x 6/30/09 9/30/09 12/31/09 3/31/10 6/30/10 6/30/09 9/30/09 12/3
Slide 15: Current Debt Maturity Profile
Current Debt Maturity Profile Sr Credit SHIP Convertible Year Facility (7.5%) Note (6.0%) Debenture (7.0%) Total 2010 - 25 - 25 2011 35 25 - 60 2012 40 25 - 65 2013 577 25 - 602 2014 - - - - 2015 - - - - 2016 - - 293 293 Total 652 100 293 1,045 CNO Financial Group 15
Slide 16: Well-Capitalized To Continue Growth Momentum
Well-Capitalized To Continue Growth Momentum CNO Financial is well-capitalized because in 2009 we: – Completed two significant reinsurance transactions, receiving $100 million in ceding commission – Refinanced $293 million of convertible debentures early – Raised $296 million in public and private