Cno Financial Group, Inc. · NYSE:CNO
Cno Financial — Q1 2019 Earnings Presentation
40 slides from Cno Financial's earnings presentation, Apr 30, 2019
Slide 1: First Quarter 2019 Financial and Operating Results
Exhibit 99.1 First Quarter 2019 Financial and operating results for the period ended March 31, 2019 April 30, 2019 Unless otherwise specified, comparisons in this presentation are between 1Q18 and 1Q19. 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 | First Quarter 2019 Earnings | April 30, 2019 4
Slide 5: Web Benefits Design (WBD) Transaction
Web Benefits Design (“WBD”)Transaction Strategic acquisition to accelerate worksite growth . Transaction Summary – Adds leading online benefits administration with best-in-class proprietary technology platform for employer benefits programs – Invests in key growth area within CNO – $66 million purch
Slide 6: Quarter in Review
Quarter in Review • Operating EPS, excluding significant items,1 (adjusted for LTC transaction) up 8% • Growth initiatives progressing; all growth scorecard metrics up Strong • All heath benefit ratios within or better than provided guidance Operational • First year collected premiums up 18% Perform
Slide 7: Growth Scorecard
Growth Scorecard ($ millions) All Growth Scorecard metrics positive compared to same quarter of 2018 2018 2019 % Change 1Q 2Q 3Q 4Q TY 1Q Q/Q New Annualized Premium 1 Life Insurance $36.9 $36.9 $37.4 $36.3 $147.5 $39.7 7.6% Health Insurance 41.2 44.9 44.3 53.3 183.7 40.1 -2.7% Total Life & Health In
Slide 8: Segment Update: Bankers Life
Segment Update Key Initiatives First Quarter Highlights • First year collected premium up 20% • Total collected premium up 9% Reinvigorate Growth • Health NAP up 1%; Life NAP down 15% • Med Advantage issued policies up 96%; third party fee revenue up 36% • $1.2 billion of total client assets at BD/R
Slide 9: Segment Update: Washington National
Segment Update Key Initiatives First Quarter Highlights • Life sales up 78% and life collected premium up 16% Maintain growth momentum • Quarterly average producing agents up 2% • Restructuring plan underway in Individual business • Entered six underpenetrated territories Expand geographically • $1.
Slide 10: Segment Update: Colonial Penn
Segment Update Key Initiatives First Quarter Highlights • NAP up 20% Continue sales growth • Total collected premium up 3% • First year collected premium up 8% Improve sales productivity • Delivered cost effective marketing spend • Technology enhancements driving productivity and expand web/digital
Slide 11: Excess Capital Allocation Strategy
Excess Capital Allocation Strategy Disciplined and opportunistic 100% deployment to highest and best use over time Organic investments to sustain and grow the core businesses Opportunistic Deployment - Highly selective M&A to expand product offerings or enhance distribution - Share repurchases Divid
Slide 12: Financial Highlights
Financial Highlights ($ millions, except where noted) First Quarter 2019 Financial Results 1Q19 • Net income per diluted share of $0.32 1Q18 • Net operating income per diluted share1 of $0.41 $0.44 $0.43 $0.41 $0.41 Earnings on long-term $0.05 $0.05 • Adjusted to remove the earnings from the care ce
Slide 13: Segment Results
1 Segment Results ($ millions) Segment Adjusted EBIT Excluding Significant Items2 1Q18 2Q18 3Q18 4Q18 1Q19 Segment Highlights • Bankers Life results reflect lower investment $90.7 $94.4 $76.7 $81.1 Bankers Life $63.1 earnings from alternatives and higher spend on growth initiatives Washington • Wash
Slide 14: Health Margins
Health Margins ($ millions) Bankers Life Medicare Bankers Life Long-term Care Washington National Supplement Benefit Ratio IABR1,2 Supplemental Health IABR1 $193 $192 $192 $190 $191 $151 $152 $152 $156 $156 75.6% 76.0% 73.3% 73.1% 72.3% $64 $64 $64 $64 $64 56.6% 56.9% 79.0% 54.4% 53.8% 53.4% 73.9% 7
Slide 15: Investment Results
Investment Results ($ millions) Average Invested Assets and Cash Quarter Highlights LTC Reinsurance Ceded Assets1 . Decline in invested assets reflects impact of 3Q18 $22,058 LTC reinsurance transaction $21,422 $21,603 $21,751 $21,832 . Income impacted by reduction in asset base, Y/Y decline in inco
Slide 16: 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 17: Questions and Answers
Questions and Answers CNO Financial Group | First Quarter 2019 Earnings | April 30, 2019 17
Slide 18: Appendix
Appendix CNO Financial Group | First Quarter 2019 Earnings | April 30, 2019 18
Slide 19: Portfolio Composition
Portfolio Composition (Fair Value as of 3/31/2019) $23 billion of Invested Assets Fixed Maturity Securities by Ratings HY Corporates, Mortgage Loans, 3.3% 6.6% CMO, 3.5% CMBS, 7.9% Municipals, 8.9% NAIC 2, 38.8% ABS, 12.2% NAIC 1, 57.0% Govts/Agency, 1.1% IG Corporates, CDO, 1.2% 47.5% Equities, 0.2
Slide 20: Broker-Dealer and Registered Investment Advisor Disclosures
Broker-Dealer and Registered Investment Advisor Disclosures ($ millions) 2018 2019 1Q 2Q 3Q 4Q 1Q Net New Client Assets in Brokerage $12.2 $3.1 $26.3 -$1.1 -$3.0 Brokerage and Advisory 1 Advisory 50.5 49.1 44.2 13.2 35.7 Total $62.7 $52.2 $70.5 $12.1 $32.7 Client Assets in Brokerage and Brokerage $8
Slide 21: Agent Counts
Agent Counts Producing agent count returns to growth; 1 out of every 7 Bankers Life agents is a financial advisor 2018 2019 % Change Bankers Life 1Q 2Q 3Q 4Q 1Q Q/Q Total Quarterly Average Producing Agents 3,999 4,167 4,168 4,177 4,125 3.2% Quarterly Average Financial Advisors 483 499 534 560 583 20
Slide 22: Bankers Life Retained Long-term Care Insurance
Bankers Life Retained Long-term Care Insurance Key Takeaways . Differentiated block of in-force business ─ 55% of policies with benefit periods one year or less ─ 94% of policies with benefit periods less than 4 years ─ 2% of policies with lifetime benefits . New sales (~$25mm annually) focused on s
Slide 23: Bankers Life Retained Long-term Care Insurance (As of 3/31/2019)
Bankers Life Retained Long-term Care Insurance (As of 3/31/2019) % of Policies by Benefit Period Key LTC Data GAAP Reserves $1.84B Greater than 1yr Statutory Reserves $1.89B 2% and <= 4 Yrs Policies In-Force 185,468 Greater Than 4 Average Attained Age 67 years 39% Yrs but Not Life Avg. Daily Benefit
Slide 24: 2019 Holding Company Liquidity
2019 Holding Company Liquidity ($ millions) 1Q19 Cash and Investments Balance - Beginning $220.4 Sources Dividends from Insurance Subsidiaries 41.0 Dividends from Non-insurance Subsidiaries 8.0 Management Fees 29.2 Surplus Debenture Interest 12.6 Earnings on Corporate Investments 4.9 Tax Refund 5.8
Slide 25: Tax Asset Summary
Tax Asset Summary ($ millions) Loss Carryforwards Details $660 . Total estimated economic value of Life $173 NOLs of $339 million @ 10% discount rate (~$2.10 on per share basis) . Life NOLs are expected to offset Non-Life $487 80% of life taxable income until fully utilized. Non-life NOLs are expect
Slide 26: 1Q18 Significant Items
1Q18 Significant Items The table below summarizes the financial impact of significant items on our 1Q18 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results (dollars in millions). Three months ended March 31, 2018 Ex
Slide 27: 4Q18 Significant Items
4Q18 Significant Items The table below summarizes the financial impact of significant items on our 4Q18 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results (dollars in millions). Three months ended December 31, 2018
Slide 28: Quarterly Earnings
Quarterly Earnings ($ millions) 1Q18 2Q18 3Q18 4Q18 1Q19 Bankers Life$ 77.5 $ 90.7 $ 94.4 $ 78.0 $ 63.1 Washington National 34.3 25.4 30.3 31.9 30.5 Colonial Penn (1.5) 5.4 6.1 4.8 (1.4) Long-term care in run-off 12.0 8.5 2.1 0.3 2.5 Adjusted EBIT from business segments 122.3 130.0 132.9 115.0 94.7
Slide 29: 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 30: 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): 1Q18 2Q18 3Q18 4Q18 1Q19 Net income(loss) applicable to co
Slide 31: 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): 1Q18 2Q18 3Q18 (a) 4Q18 1Q19 Operating i
Slide 32: 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 33: 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 34: 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 35: 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 36: 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 37: 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 1Q18 2Q18 3Q18 4Q18 1Q19 Pretax operating earnings (a non-GAAP financial measure)$ 456
Slide 38: 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 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): Traili
Slide 40: 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