Cno Financial Group, Inc. · NYSE:CNO
Cno Financial — Q4 2022 Earnings Presentation
42 slides from Cno Financial's earnings presentation, Feb 7, 2023
Slide 1: Fourth Quarter 2022 Financial and Operating Results
CNO Financial Group 1 Fourth Quarter 2022 Financial and operating results for the period ended December 31, 2022 February 7, 2023 Unless otherwise specified, comparisons in this presentation are between 4Q21 and 4Q22. Exhibit 99.3
Slide 2: Important Legal Information
CNO Financial Group 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 results of operations and capital plans. We caution
Slide 3: CNO Financial Group 3
CNO Financial Group 3
Slide 4: 2022 Year in Review
CNO Financial Group 4 Strong overall sales and capital position; continued robust new money rates 2022 Year in Review Strong Operational Performance 1 A non-GAAP measure. See the Appendix for a reconciliation to the corresponding GAAP measure. Building on Track Record of Execution 1 A non-GAAP measu
Slide 5: Growth Scorecard
CNO Financial Group 5 4Q FY 1Q 2Q 3Q 4Q FY vs. 4Q21 vs. FY21 New Annualized Premiums 1 Life $39.8 $190.5 $55.8 $51.4 $45.1 $40.8 $193.1 2.5% 1.4% Health 47.7 164.1 34.8 37.4 42.2 49.9 164.3 4.6% 0.1% Total Life and Health $87.5 $354.6 $90.6 $88.8 $87.3 $90.7 $357.4 3.7% 0.8% Collected Premiums Life
Slide 6: Consumer Division Update
CNO Financial Group 6 Continued sales momentum in Annuities & D2C Life; Medicare Supplement sales up sharply Consumer Division Update HighlightsKey Initiatives Expand reach Maintain growth momentum Optimize distribution ▪ Annuity collected premiums up 8% vs. 4Q21; up 15% YoY ▪ D2C Life sales up 9% v
Slide 7: Worksite Division Update
CNO Financial Group 7 Seventh consecutive quarter of insurance sales growth; producing agent count up Worksite Division Update Highlights ▪ Life and Health insurance sales up 8% vs. 4Q21; up 20% YoY ▪ Strong retention of existing employer customers ▪ Stable employee persistency and premium collectio
Slide 8: Financial Highlights: Earnings Results
CNO Financial Group 8 $0.71 Financial Highlights Solid earnings; continued net COVID benefit Earnings ResultsFourth Quarter and Full Year 2022 Earnings Drivers Net operating income1 $108.5 $65.8 $365.6 $273.9 Net operating income excluding significant items1 $88.3 $65.8 $357.3 $256.5 Net income $115
Slide 9: Insurance Product Margin
CNO Financial Group 9 4Q21 1Q22 2Q22 3Q22 4Q22 Annuity $67.0 $44.6 $37.1 $39.8 $39.6 Fixed indexed annuities $52.3 $33.2 $25.8 $29.3 $30.3 Fixed interest annuities $8.3 $8.1 $7.4 $7.8 $8.1 Other annuities $6.4 $3.3 $3.9 $2.7 $1.2 Health $129.5 $124.8 $113.4 $124.1 $115.0 Supplemental health $54.0 $5
Slide 10: GAAP Fixed Indexed Annuity Margin
CNO Financial Group 10 4Q 1Q 2Q 3Q 4Q Fixed indexed annuities margin excl. significant items 1 Margin before impacts due to market volatility $47.5 $43.4 $47.0 $46.3 $44.3 Impacts due to market volatility 4.8 (10.2) (21.2) (17.0) (14.0) Reported fixed indexed annuities margin $52.3 $33.2 $25.8 $29.3
Slide 11: Investment Results
CNO Financial Group 11 $42.8 $30.3 $- $50.0 $100.0 $150.0 $200.0 4Q 2021 4Q 2022 Investment Income Not Allocated to Product Lines $- $100.0 $200.0 $300.0 $400.0 4Q 2021 4Q 2022 Total Net Investment Income1 Annuity Health Life Not Allocated $259.3 $- $100.0 $200.0 $300.0 $400.0 4Q 2021 4Q 2022 Invest
Slide 12: Portfolio Composition
CNO Financial Group 12 High quality, stable core returns, continued up-in-quality bias Portfolio Composition $24 billion of Invested Assets Highlights (Fair Value as of 12/31/2022) General Approach ▪ Positioned for stable performance across credit cycles ▪ Focus on quality - margin against adverse d
Slide 13: Debt to Capital, RBC Ratio and Holding Company Liquidity
CNO Financial Group 13 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 of Insurance Commissioners. 2 Excluding accumula
Slide 14: Investment Highlights
CNO Financial Group 14 Investment Highlights Sustainable growth initiatives in place Favorable demographic tailwinds Well-positioned in underserved middle market Differentiated "last mile" virtual & in-person model Strong balance sheet; robust free cash flow generation
Slide 15: Questions and Answers
CNO Financial Group 15 Questions and Answers
Slide 16: Excess Capital Allocation Strategy
CNO Financial Group 16 ▪ Agent pilots, technology- driven customer experience enhancements ▪ Hybrid distribution ▪ Worksite B2B marketing, lead generation ▪ Share repurchases: $10 million in 4Q22, $180 million in 2022 ▪ Dividends: $16 million in 4Q22, $65 million in 2022 ▪ Highly selective M&A ▪ CNO
Slide 17: Cash Flow Profile
CNO Financial Group 17 Cash Flow Profile 1 A non-GAAP measure. See the Appendix for a reconciliation to the corresponding GAAP measure. 2 Cash flows exclude acquisitions, dividend payments, stock repurchases, and financing transactions. (dollars in millions) 4Q21 4Q22 4Q21 4Q22 Net Operating Income
Slide 18: Appendix 1: Quarter in Review
CNO Financial Group 18 Appendix 1: Quarter in Review Strong Operational Performance ▪ Broker-Dealer/Registered Investment Advisor Slide 19 ▪ Exclusive Agent Counts Slide 20 Building on Strong Track Record of Execution ▪ New Money Rate Walk Slide 21 ▪ New Money Summary Slide 22 ▪ Long-Term Care Insur
Slide 19: Broker-Dealer/Registered Investment Advisor
CNO Financial Group 19 Account values down 9% YoY; $2.6 billion in client assets Broker-Dealer/Registered Investment Advisor 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 m
Slide 20: Exclusive Agent Counts
CNO Financial Group 20 Softening macro environment helping recruiting, veteran agent retention strong Exclusive Agent Counts 1 Producing agents represent the monthly average of exclusive agents that have submitted at least one policy in the month. 2 Registered agents are dually licensed as insurance
Slide 21: New Money Rate Walk
CNO Financial Group 21 Significant NMR increase reflects higher market yields New Money Rate Walk 5.36% 5.96% 0.32% 0.08% 0.20% 0.00%
Slide 22: New Money Summary
CNO Financial Group 22 Strategically harvesting rising market yields, in the context of up-in-quality strategy New Money Summary 4Q General Account New Money Purchases $ % GAAP YTM Duration IG Corp AAA-A 87.6 15.42% 5.63% 9.4 IG Corp BBB 16.0 2.81% 7.97% 8.5 HY Corp 5.3 0.93% 7.04% 5.1 Municipals 72
Slide 23: Long-Term Care Insurance
CNO Financial Group 23 New sales (~$25 million annually) focused on short duration products ▪ 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 Reserve assumptions informed by historical experience ▪ No morbid
Slide 24: Tax Asset Summary
CNO Financial Group 24 Non-Life NOLs $166 DTAs related to tax strategy $215 Value of NOLs and deferred tax assets (DTAs) related to tax strategy Details ▪ Total estimated economic value of tax assets related to our NOLs and tax strategy of approximately $211 million @ 10% discount rate ($1.81 on a p
Slide 25: Appendix 2: Financial Exhibits
CNO Financial Group 25 Appendix 2: Financial Exhibits Non-GAAP Financial Measures Slides 26 - 42
Slide 26: Insurance Product Margin, Three Months Ended June 30, 2022
CNO Financial Group 26 Insurance product margin Annuity 37.1$ -$ 37.1$ Health 113.4 - 113.4 Life 56.8 - 56.8 Total insurance product margin 207.3 - 207.3 Allocated expenses (152.2) - (152.2) Income from insurance products 55.1 - 55.1 Fee income 3.2 - 3.2 Investment income not allocated to product li
Slide 27: Insurance Product Margin, Three Months Ended December 31, 2021
CNO Financial Group 27 Insurance product margin Annuity 93.9$ (26.9)$ (1) 67.0$ Health 129.5 - 129.5 Life 30.4 1.0 (1) 31.4 Total insurance product margin 253.8 (25.9) 227.9 Allocated expenses (143.3) - (143.3) Income from insurance products 110.5 (25.9) 84.6 Fee income 2.9 - 2.9 Investment income n
Slide 28: Insurance Product Margin, Three Months Ended September 30, 2021
CNO Financial Group 28 Insurance product margin Annuity 52.5$ -$ 52.5$ Health 117.9 - 117.9 Life 53.2 - 53.2 Total insurance product margin 223.6 - 223.6 Allocated expenses (140.5) - (140.5) Income from insurance products 83.1 - 83.1 Fee income 2.6 - 2.6 Investment income not allocated to product li
Slide 29: Insurance Product Margin, Three Months Ended June 30, 2021
CNO Financial Group 29 Insurance product margin Annuity 66.0$ -$ 66.0$ Health 120.9 - 120.9 Life 39.7 - 39.7 Total insurance product margin 226.6 - 226.6 Allocated expenses (141.6) - (141.6) Income from insurance products 85.0 - 85.0 Fee income 6.6 - 6.6 Investment income not allocated to product li
Slide 30: Insurance Product Margin, Three Months Ended March 31, 2021
CNO Financial Group 30 Insurance product margin Annuity 57.9$ -$ 57.9$ Health 124.7 - 124.7 Life 27.1 - 27.1 Total insurance product margin 209.7 - 209.7 Allocated expenses (141.1) - (141.1) Income from insurance products 68.6 - 68.6 Fee income 7.3 - 7.3 Investment income not allocated to product li
Slide 31: (dollars in millions) * Management believes that an analysis of Net income applicable to
CNO Financial Group 31 (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 of related amortization and taxes; (ii) net chan
Slide 32: Information Related to Certain Non-GAAP Financial Measures
CNO Financial Group 32 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
Slide 33: Reconciliation of Net Income to Net Operating Income
CNO Financial Group 33 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) Information Related to Certain Non-GAAP Financial Measures 4Q21 1Q22 2Q22 3Q22 4Q22 Net income appli
Slide 34: Operating Income and Shares for Operating EPS
CNO Financial Group 34 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) Information Related to Certain Non-GAAP Financial Measures 4Q21 1Q22 2Q22 3Q
Slide 35: Book Value per Diluted Share
CNO Financial Group 35 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 converted. The dilution from options, res
Slide 36: Operating Return Measures
CNO Financial Group 36 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 in market value of investments recognized in ear
Slide 37: Operating Return on Equity Calculations
CNO Financial Group 37 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, excluding accumulated other comprehen
Slide 38: Operating Earnings, Significant Items and Net Income Summary
CNO Financial Group 38 The following summarizes: (i) operating earnings; (ii) significant items; (iii) operating earnings, excluding significant items; and (iv) net income: (dollars in millions) (a) The significant items have been discussed in prior press releases. (Continued on next page) Informati
Slide 39: Operating Return on Equity Calculations (Continued)
CNO Financial Group 39 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, excluding accumulated other comprehen
Slide 40: Reconciliation of Consolidated Capital to Common Shareholders' Equity
CNO Financial Group 40 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 millions) Information Related to Certain Non-GAAP Fi
Slide 41: Reconciliation of Consolidated Capital to Common Shareholders' Equity
CNO Financial Group 41 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 millions) Information Related to Certain Non-GAAP Fi
Slide 42: Debt to Capital Ratio, Excluding AOCI
CNO Financial Group 42 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 income (loss) has been excluded fro