Cno Financial Group, Inc. · NYSE:CNO
Cno Financial — Q1 2021 Earnings Presentation
47 slides from Cno Financial's earnings presentation, Apr 28, 2021
Slide 1: Financial and operating results for the period ended March 31, 2021
Financial and operating results for the period ended March 31, 2021 April 28, 2021 Unless otherwise specified, comparisons in this presentation are between 1Q20 and 1Q21. Exhibit 99.3
Slide 2: Forward-Looking Statements and Non-GAAP Measures
CNO Financial Group | First Quarter 2021 Earnings | April 28, 2021 2 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 capita
Slide 3: | April 28, 2021
CNO Financial Group | First Quarter 2021 Earnings | April 28, 2021 3
Slide 4: Strong earnings; sales metrics approaching or exceeding pre-pandemic levels
CNO Financial Group | First Quarter 2021 Earnings | April 28, 2021 4 Strong earnings; sales metrics approaching or exceeding pre-pandemic levels • COVID demonstrated value of diversified model • Operating income per share1 up 2% excl. significant items • Insurance product margin up 10%; favorably im
Slide 5: Expand to the Right to Drive Growth
CNO Financial Group | First Quarter 2021 Earnings | April 28, 2021 5 New Annualized Premium 1 Life $41.1 $47.4 $44.3 $37.1 $169.9 $53.0 29.0% Health 44.0 22.0 39.4 49.1 154.5 35.7 -18.9% Total Life and Health $85.1 $69.4 $83.7 $86.2 $324.4 $88.7 4.2% Collected Premiums Life $207.7 $206.1 $213.3 $212
Slide 6: Transformation driving record Life sales and improved productivity
CNO Financial Group | First Quarter 2021 Earnings | April 28, 2021 6 Transformation driving record Life sales and improved productivity Maintain growth momentum Optimize distribution Expand reach • Life sales up record 34%, driven by D2C sales up 38% and exclusive field agent Life sales up 29% • Ann
Slide 7: Workplaces re-opening; momentum building
CNO Financial Group | First Quarter 2021 Earnings | April 28, 2021 7 Workplaces re-opening; momentum building Restore growth Evolve digital capabilities & tools Enhance portfolio • Continued sequential improvement in sales growth • Employer base stable • Steady premium collection • Solid veteran age
Slide 8: Disciplined and opportunistic approach to maximize shareholder value
CNO Financial Group | First Quarter 2021 Earnings | April 28, 2021 8 Disciplined and opportunistic approach to maximize shareholder value Organic investments to sustain and grow the core businesses • Agent pilots, technology-driven customer experience enhancements • Hybrid distribution • Worksite B2
Slide 9: Significant progress
CNO Financial Group | First Quarter 2021 Earnings | April 28, 2021 9 Significant progress • Performed GHG emissions inventory • Established GHG emissions reduction target • Earmarked $100 million for new impact investments • Advanced DE&I programs • Linked DE&I progress to executive compensation • A
Slide 10: Solid start to the year, emerging from pandemic
CNO Financial Group | First Quarter 2021 Earnings | April 28, 2021 10 $0.59 Solid start to the year, emerging from pandemic Earnings ResultsFirst Quarter 2021 Net operating income1 $84.3 $75.2 Net income (loss) $(21.2) $147.4 Weighted average shares outstanding (in millions) 145.8 136.7 (dollars in
Slide 11: Ongoing favorable net COVID impact; stable underlying margins
CNO Financial Group | First Quarter 2021 Earnings | April 28, 2021 11 $59.5 $72.3 $45.3 $52.0 $57.9 $44.3 $41.7 $47.3 $41.6 $27.1 $86.9 $95.5 $152.2 $125.2 $124.7 (dollars in millions) Ongoing favorable net COVID impact; stable underlying margins 2.47% 2.99% 1.86% 2.11% 2.33% Margin / average net in
Slide 12: Solid core investment results; up-in-quality
CNO Financial Group | First Quarter 2021 Earnings | April 28, 2021 12 $- $100.0 $200.0 $300.0 $400.0 1Q 2020 1Q 2021 Includes $2.0M trading gains $- $100.0 $200.0 $300.0 $400.0 1Q 2020 1Q 2021 Annuity Health Life Not Allocated $- $100.0 $200.0 $300.0 $400.0 1Q 2020 1Q 2021 Annuity Health Life • Inve
Slide 13: High quality, well-positioned invested assets
CNO Financial Group | First Quarter 2021 Earnings | April 28, 2021 13 High quality, well-positioned $26 billion of Invested Assets Highlights (Fair Value as of 3/31/2021) General Approach • Positioned for stable performance across credit cycles • Focus on quality • Lower than average allocation to m
Slide 14: Strong free cash flow generation and conversion
CNO Financial Group | First Quarter 2021 Earnings | April 28, 2021 14 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 to insurance subsidiar
Slide 15: Conservative approach to capital
CNO Financial Group | First Quarter 2021 Earnings | April 28, 2021 15 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 developed by the National Association o
Slide 16: 2021 outlook and COVID scenarios
CNO Financial Group | First Quarter 2021 Earnings | April 28, 2021 16 1 Assumes approximately 360k U.S. COVID deaths in 2021 with pandemic trailing off through 2021; economic growth and investment portfolio assumptions market consistent and in-line with base case assumptions from rating agencies. 2
Slide 17: Company history and strategic progress
CNO Financial Group | First Quarter 2021 Earnings | April 28, 2021 17 • Reinsured life block (2009) • Recapitalized company (2012) • Initiated dividend (2012) • Sold Legacy Life Insurance Block (2014) • Migrated ratings upwards–within non-investment grade ratings classes • Completed Senior Leadershi
Slide 18: Well-positioned in underserved senior middle-income market
CNO Financial Group | First Quarter 2021 Earnings | April 28, 2021 18 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
Slide 19: | April 28, 2021
CNO Financial Group | First Quarter 2021 Earnings | April 28, 2021 19
Slide 20: Appendix contents
CNO Financial Group | First Quarter 2021 Earnings | April 28, 2021 20 • Broker-Dealer/Registered Investment Advisor Slide 21 • Exclusive Agent Counts Slide 22 • New Money Rate Walk Slide 23 • New Money Summary Slide 24 • Investment Overview Slides 25-27 • Long-Term Care Insurance Slide 28 • Tax Asse
Slide 21: Broker-Dealer/Registered Investment Advisor
CNO Financial Group | First Quarter 2021 Earnings | April 28, 2021 21 1 Client assets include cash and securities in brokerage, broker/dealer customer account assets custodied directly at fund companies and insurance carriers, and assets under management in advisory accounts. Prior periods have been
Slide 22: Exclusive agent counts
CNO Financial Group | First Quarter 2021 Earnings | April 28, 2021 22 Producing Field Agents 1,3 4,531 4,066 4,448 4,539 4,389 -3% Producing Tele-Sales Agents 1,3 238 237 239 257 258 8% Total Producing Agents 1,3 4,769 4,303 4,687 4,796 4,647 -3% Registered Agents 2,3 609 603 618 641 646 6% Producin
Slide 23: New money rate walk
CNO Financial Group | First Quarter 2021 Earnings | April 28, 2021 23 Flat sequentially; higher rates offset by tighter spreads, up-in-quality actions
Slide 24: New money summary
CNO Financial Group | First Quarter 2021 Earnings | April 28, 2021 24 IG Corporates 73% Structured Securities 13% Municipals 7% HY Corporates 5% CML 2% Direct investment 0.3% Emphasis on up-in-quality investments during first quarter 95% Investment Grade Allocation First Quarter Investments Allocati
Slide 25: Investment overview: structured securities
CNO Financial Group | First Quarter 2021 Earnings | April 28, 2021 25 AAA 11.6%AA+ 3.7% AA 50.1% A 30.2% A- 2.2% Key Portfolio Metrics Cumulative loss scenarios versus Break Points 100% AAA-A Ratings Composition Portfolio Portfolio Index AAA 11.6% - - AA 53.8% - - A 34.6% - - BBB - N/A 5.0% BB - N/A
Slide 26: Commercial mortgage loans
CNO Financial Group | First Quarter 2021 Earnings | April 28, 2021 26 Eas t 25.6% South 34.5% Centra l 13.7% Mounta in 8.2% Pacific 17.9% CM1 78.3% CM2 21.7% Apartment 29.0% Industrial 20.0% Offi ce Building 18.5% Other commercial 12.0% Reta il 20.5% Key Portfolio Facts Portfolio Geography Underlyin
Slide 27: CMBS portfolio
CNO Financial Group | First Quarter 2021 Earnings | April 28, 2021 27 Conduit 50.9% Agency MF 15.6% SASB 33.5% Hotels 9.3% Retail 13.7% Office 30.0% Multi family 24.5% Industrial 11.1% Mixed Use 11.4% Key Portfolio Facts Underlying Property Type SASB versus Conduit $2.0 billion of net invested asset
Slide 28: Long-term care insurance
CNO Financial Group | First Quarter 2021 Earnings | April 28, 2021 28 – 98% of new sales for policies with 2 years or less in benefits – Average benefit period of 11 months – New business 25% reinsured since 2008 – No morbidity improvement – No mortality improvement – Minimal future rate increas
Slide 29: Tax asset summary
CNO Financial Group | First Quarter 2021 Earnings | April 28, 2021 29 Non-life NOLs $322 DTAs related to tax strategy $119 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 $366 mill
Slide 30: Non-GAAP Financial Measures
CNO Financial Group | First Quarter 2021 Earnings | April 28, 2021 30 • Non-GAAP Financial Measures Slides 31-47
Slide 31: Significant items impact on 1Q21 net operating income
CNO Financial Group | First Quarter 2021 Earnings | April 28, 2021 31 The table below summarizes the financial impact of significant items on our 1Q21 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results. (dollars in
Slide 32: Significant items impact on 4Q20 net operating income
CNO Financial Group | First Quarter 2021 Earnings | April 28, 2021 32 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. (dollars in
Slide 33: Significant items impact on 2Q20 net operating income
CNO Financial Group | First Quarter 2021 Earnings | April 28, 2021 33 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. (dollars in
Slide 34: Actuarial unlocking exercise (continued)
CNO Financial Group | First Quarter 2021 Earnings | April 28, 2021 34 (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 our assumption that average
Slide 35: Significant items impact on 4Q19 net operating income
CNO Financial Group | First Quarter 2021 Earnings | April 28, 2021 35 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. (dollars in
Slide 36: Net operating income reconciliation notes
CNO Financial Group | First Quarter 2021 Earnings | April 28, 2021 36 (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 for credit losses, net o
Slide 37: Non-GAAP measures: operating earnings measures
CNO Financial Group | First Quarter 2021 Earnings | April 28, 2021 37 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
Slide 38: Net income to net operating income reconciliation
CNO Financial Group | First Quarter 2021 Earnings | April 28, 2021 38 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-share amounts) 1Q20 2Q20 3Q20 4Q20 1Q21 (21.2)$ 82.0$ 129.2$
Slide 39: Operating earnings per share reconciliation
CNO Financial Group | First Quarter 2021 Earnings | April 28, 2021 39 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 amounts, and shares in thousands) (a) Equivalent common shares
Slide 40: Book value per diluted share
CNO Financial Group | First Quarter 2021 Earnings | April 28, 2021 40 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
Slide 41: Operating return measures
CNO Financial Group | First Quarter 2021 Earnings | April 28, 2021 41 Operating return measures Management believes that an analysis of net income applicable to common stock before net realized investment gains or losses from sales, impairments and change in allowance for credit losses, net change i
Slide 42: Operating return on equity calculations
CNO Financial Group | First Quarter 2021 Earnings | April 28, 2021 42 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, o
Slide 43: Operating earnings and significant items summary
CNO Financial Group | First Quarter 2021 Earnings | April 28, 2021 43 The following summarizes: (i) operating earnings; (ii) significant items; (iii) operating earnings, excluding significant items; and (iv) net income (loss): (dollars in millions) Net operating income Significant items (a) Net oper
Slide 44: Operating return on equity calculations (continued)
CNO Financial Group | First Quarter 2021 Earnings | April 28, 2021 44 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, o
Slide 45: Consolidated capital reconciliation, 2018-2019
CNO Financial Group | First Quarter 2021 Earnings | April 28, 2021 45 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: (dollars in milli
Slide 46: Consolidated capital reconciliation, 2020-1Q21
CNO Financial Group | First Quarter 2021 Earnings | April 28, 2021 46 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: (dollars in milli
Slide 47: Debt to capital ratio, excluding AOCI
CNO Financial Group | First Quarter 2021 Earnings | April 28, 2021 47 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 co