Cno Financial Group, Inc. · NYSE:CNO
Cno Financial — Q2 2019 Earnings Presentation
41 slides from Cno Financial's earnings presentation, Jul 30, 2019
Slide 1: Second Quarter 2019 Financial and Operating Results
Exhibit 99.3 Second Quarter 2019 Financial and operating results for the period ended June 30, 2019 July 30, 2019 Unless otherwise specified, comparisons in this presentation are between 2Q18 and 2Q19. CNO Financial Group | 2017 Investor Day | June 5, 2017 1
Slide 2: Forward-Looking Statements
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 operations and capital plans. We caution investors that these f
Slide 3: Non-GAAP Measures
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 comprehensive income (loss) per share; operating return m
Slide 4: 30, 2019
CNO Financial Group | Second Quarter 2019 Earnings | July 30, 2019 4
Slide 5: Quarter in Review
Quarter in Review Investments in growth delivering expected results • Operating EPS1 up 4%, adjusted for 3Q18 LTC transaction • Growth initiatives progressing; all growth scorecard metrics up for 4th Strong consecutive quarter Operational • All health benefit ratios within provided guidance Performa
Slide 6: Growth Scorecard
Growth Scorecard All 5 metrics up for 4th consecutive quarter 2018 2019 % Change ($ millions) 2Q 3Q 4Q TY 1Q 2Q Q/Q New Annualized Premium 1 Life Insurance $36.9 $37.4 $36.3 $147.5 $39.7 $39.4 6.8% Health Insurance 44.9 44.3 53.3 183.7 40.1 45.8 2.0% Total Life & Health Insurance $81.8 $81.7 $89.6 $
Slide 7: Segment Update: Bankers Life
Segment Update Solid execution fueling continued growth momentum Key Initiatives Second Quarter Highlights • First year collected premiums up 15%; total collected premiums up 8% Reinvigorate • Health NAP up 6%; Life NAP down 4% growth • Launched Medicare Supplement Plan D • Med Advantage issued poli
Slide 8: Segment Update: Washington National
Segment Update Worksite strength offset by Individual market challenges Key Initiatives Second Quarter Highlights Maintain growth • Life NAP up 29%; Life collected premiums up 11% • Worksite producing agent count up 28% momentum • Plan underway to reinvigorate growth in Individual business Expand •
Slide 9: Segment Update: Colonial Penn
Segment Update Cost effective marketing driving sales growth Key Initiatives Second Quarter Highlights Continue • NAP up 16% • Total collected premiums up 4% sales growth • First year collected premiums up 16% Improve sales productivity and • Realizing operating leverage in sales acquisition costs •
Slide 10: Excess Capital Allocation Strategy
Excess Capital Allocation Strategy Disciplined and opportunistic approach Organic investments to sustain and grow the core businesses Return capital to shareholders - $55 million in share repurchases in 2Q; $102 million YTD - Increased dividend 10% in 2Q; 7th consecutive annual increase - Dividend p
Slide 11: Financial Highlights
Financial Highlights Adj. operating income per share up 4%; operating ROE up 150 bps Second Quarter 2019 Financial Results ($ millions, except where noted) • Net operating income per diluted share1 of $0.48, up 4.3% on an adjusted basis 2Q18 2Q19 $0.49 $0.48 • Adjusted to remove the earnings from th
Slide 12: Segment Results
Segment Results1 Flat earnings when adj. for LTC transaction, in line with expectations Segment Adjusted EBIT Excluding Significant Items2 Segment Highlights ($ millions) 2Q18 3Q18 4Q18 1Q19 2Q19 • Bankers Life results reflect increased investment earnings from alternatives and Bankers Life $90.7 $9
Slide 13: Health Margins
Health Margins All benefit ratios within guidance Bankers Life Medicare Bankers Life Long-term Care Washington National Supplement Benefit Ratio IABR1,2 Supplemental Health IABR1 $192 $192 $190 $191 $191 $152 $152 $156 $156 $157 75.6% 76.0% 73.1% 72.3% 74.0% $64 $64 $64 $64 $64 56.6% 56.9% 56.2% 76.
Slide 14: Investment Results
Investment Results Strong Alts/Prepay income; ongoing interest rate headwinds Average Invested Assets and Cash Quarter Highlights LTC Reinsurance . Decline in invested assets reflects impact of 3Q18 1 Ceded Assets LTC reinsurance transaction $22,201 $21,603 $21,751 $21,832 $22,058 . Results benefite
Slide 15: Committed to Long-Term Shareholder Value Creation
Committed to Long-Term Shareholder Value Creation Continued progress on strategic initiatives Effectively deploy excess capital Extend depth and breadth of product offerings Leverage diverse distribution channels and unique product combination Expand to the right Enhance customer experience Growth i
Slide 16: Questions and Answers
Questions and Answers CNO Financial Group | Second Quarter 2019 Earnings | July 30, 2019 16
Slide 17: Appendix 1: Quarter in Review
Appendix 1: Quarter in Review Strong Operational Performance • Broker-Dealer/Registered Investment Advisor Slide 18 • Agent Count Slide 19 Building on Strong Track Record of Execution • Bankers Life Retained LTC Insurance Slides 20-21 • Portfolio Composition Slide 22 CNO Financial Group | Second Qua
Slide 18: Broker-Dealer/Registered Investment Advisor
Broker-Dealer/Registered Investment Advisor Account value tops $1.3 billion; up 20% YoY ($ millions) 2018 2019 2Q 3Q 4Q 1Q 2Q Net New Client Assets in Brokerage $3.1 $26.3 -$1.1 -$3.0 $5.1 Brokerage and Advisory1 Advisory 49.1 44.2 13.2 35.7 33.2 Total $52.2 $70.5 $12.1 $32.7 $38.3 Client Assets in
Slide 19: Agent Counts
Agent Counts Bankers Life producing agent count up for fourth consecutive quarter 2018 2019 % Change Bankers Life 2Q 3Q 4Q 1Q 2Q Q/Q Total Quarterly Average Producing Agents1,3 4,167 4,168 4,177 4,125 4,294 3.0% Quarterly Average Financial Advisors2,3 499 534 560 583 595 19.2% Washington National To
Slide 20: Bankers Life Retained Long-Term Care Insurance
Bankers Life Retained Long-Term Care Insurance Retained book characterized by limited benefits, shorter duration periods % of Policies by Benefit Period Key LTC Data (As of 6/30/2019) 2% GAAP Reserves $1.87B <= 1 Yr 4% Statutory Reserves $1.92B Between 1 and 4 Policies In-Force 185,914 Yrs 38% Avera
Slide 21: Bankers Life Retained Long-Term Care Insurance
Bankers Life Retained Long-Term Care Insurance Highly-differentiated in-force block; prudently managed . New sales (~$25mm annually) focused on short duration products ─ 98% of new sales for policies with 2 years or less in benefits ─ Average benefit period of 10 months ─ New business 25% reinsured
Slide 22: Portfolio Composition
Portfolio Composition Conservative construction; recent up in quality repositioning $24 billion of Invested Assets Fixed Maturity Securities by Ratings Mortgage Loans, HY Corporates, (Fair Value as of 6/30/2019) 7.0% 3.4% CMO, 3.2% CMBS, 7.7% Municipals, 8.8% NAIC 2, 39.0% ABS, 11.6% NAIC 1, 57.0% G
Slide 23: Appendix 2: Financial Exhibits
Appendix 2: Financial Exhibits • Holding Company Liquidity Slide 24 • Tax Asset Summary Slide 25 • Non-GAAP Financial Measures Slides 26-41 CNO Financial Group | Second Quarter 2019 Earnings | July 30, 2019 23
Slide 24: 2019 Holding Company Liquidity
2019 Holding Company Liquidity ($ millions) 2Q19 Cash and Investments Balance - Beginning $229.8 Sources Dividends from Insurance Subsidiaries 89.9 Management Fees 28.3 Surplus Debenture Interest 12.3 Earnings on Corporate Investments 3.7 Gross Proceeds from New Debt 500.0 Net Intercompany Settlemen
Slide 25: Tax Asset Summary
Tax Asset Summary ($ millions) Loss Carryforwards Details $632 . Total estimated economic value of Life $153 NOLs of $322 million @ 10% discount rate (~$2.04 on per share basis) . Life NOLs are expected to offset Non-Life $479 80% of life taxable income until fully utilized. Non-life NOLs are expect
Slide 26: 1Q18 Significant Items
1Q18 Significant Items The table below summarizes the financial impact of significant items on our 1Q18 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results (dollars in millions). Three months ended March 31, 2018 Ex
Slide 27: 4Q18 Significant Items
4Q18 Significant Items The table below summarizes the financial impact of significant items on our 4Q18 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results (dollars in millions). Three months ended December 31, 2018
Slide 28: Quarterly Earnings
Quarterly Earnings ($ millions) 2Q18 3Q18 4Q18 1Q19 2Q19 Bankers Life$ 90.7 $ 94.4 $ 78.0 $ 63.1 $ 86.4 Washington National 25.4 30.3 31.9 30.5 25.9 Colonial Penn 5.4 6.1 4.8 (1.4) 5.8 Long-term care in run-off 8.5 2.1 0.3 2.5 3.2 Adjusted EBIT from business segments 130.0 132.9 115.0 94.7 121.3 Cor
Slide 29: Colonial Penn Segment Adjusted EBIT Summarized by In-Force and New Business
Colonial Penn Segment Adjusted EBIT Summarized by In-Force and New Business An analysis of Adjusted EBIT for Colonial Penn, separated between in-force and new business, provides increased clarity for this segment as the vast majority of the costs to generate new business in this segment are not defe
Slide 30: Information Related to Certain Non-GAAP Financial Measures
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 excludes or includes am
Slide 31: Information Related to Certain Non-GAAP Financial Measures
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-share amounts): 2Q18 3Q18 4Q18 1Q19 2Q19 Net income(loss) applicable to co
Slide 32: Information Related to Certain Non-GAAP Financial Measures
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 amounts, and shares in thousands): 2Q18 3Q18 (a) 4Q18 1Q19 2Q19 Operating i
Slide 33: Information Related to Certain Non-GAAP Financial Measures
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 and performance units were vested and convertible securities were conver
Slide 34: Information Related to Certain Non-GAAP Financial Measures
Information Related to Certain Non-GAAP Financial Measures Interest-adjusted benefit ratios 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 backing the insurance liabilit
Slide 35: Information Related to Certain Non-GAAP Financial Measures
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 and impairments, net change in market value of investments recognized in earnin
Slide 36: Information Related to Certain Non-GAAP Financial Measures
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) operating return, excluding significant items, on equity,
Slide 37: Information Related to Certain Non-GAAP Financial Measures
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 millions): Net Operating Net Operating Income, income, excluding Net exclu
Slide 38: Information Related to Certain Non-GAAP Financial Measures
Information Related to Certain Non-GAAP Financial Measures A reconciliation of pretax operating earnings (a non-GAAP financial measure) to net income (loss) is as follows (dollars in millions): Twelve Months Ended 2Q18 3Q18 4Q18 1Q19 2Q19 Pretax operating earnings (a non-GAAP financial measure)$ 439
Slide 39: Information Related to Certain Non-GAAP Financial Measures
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 shareholders’ equity, is as follows (dollars in millions): 1Q17 2
Slide 40: Information Related to Certain Non-GAAP Financial Measures
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 shareholders’ equity, is as follows (dollars in millions): Traili
Slide 41: Information Related to Certain Non-GAAP Financial Measures
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), differs from the debt to capital ratio because accumulated other comprehensive