CNO Financial Group, Inc. · NYSE:CNO
CNO Financial — Conseco — Q1 2008 Earnings Presentation
80 slides from CNO Financial's earnings presentation, May 2008
Slide 1: First Quarter 2008 Financial and Operating Results
First Quarter 2008 Financial and Operating Results For the period ended March 31, 2008 Conseco, Inc.
Slide 2: Forward-Looking Statements
Forward-Looking Statements Cautionary Statement Regarding Forward-Looking Statements. Our statements, trend analyses and other information contained in these materials relative to markets for Conseco’s products and trends in Conseco’s operations or financial results, as well as other statements, con
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 diluted share; operating r
Slide 4: Q1 2008 Summary
Q1 2008 Summary CNO Highest quarterly sales for CNO • Record sales quarter at Bankers • Strong Colonial Penn sales growth from core products (22%) and new products • CIG sales down, but specified disease up 23% Continued improved performance in LTC Closed Block Investment portfolio continues t
Slide 5: Q1 2008 Issues Update
Q1 2008 Issues Update CNO Results less volatile after choppy 2007 • No significant out of period adjustments • No extraordinary DAC or VOBA (intangibles) charges • Third consecutive stable quarter in LTC Closed Block Multi-state examination agreement Chicago facilities consolidation on track f
Slide 6: Settlement of Multistate Examination
Settlement of Multistate Examination CNO Conclusion of exam and settlement a positive step for CNO No finding of practice of improper claims denials Settlement requires: • Fine of up to $2.3 million, and up to $10 million if performance benchmarks are not achieved • Review of certain claims fr
Slide 7: Q1 2008 Summary of Results
Q1 2008 Summary of Results CNO ($ millions, except per share amounts) Pre-Tax After Tax EPS Bankers Life $29.1 Colonial Penn 3.7 Conseco Insurance Group 23.3 LTC Run-off Block (1.3) Corporate and interest expense (23.1) Income before net realized investment losses* 31.7 $20.7 $0.11 Net realized inve
Slide 8: Q1 Earnings Consolidated
Q1 Earnings CNO Consolidated ($ millions) Q1 2007 (Restated) Q1 2008 Bankers Life $45.5 $29.1 Colonial Penn 4.6 3.7 Conseco Insurance Group 33.5 23.3 Other Business in Run-Off (26.1) (1.3) Corporate operations, excluding interest expense (8.2) (6.7) EBIT, excluding costs related to a litigation sett
Slide 9: Equity Indexed Products
Equity Indexed Products CNO CNO fully hedges its current-year exposure to equity volatility (with future periods subject to product repricing) Hedge positions periodically adjusted for terminations • Terminations result in modestly overhedged position • Financial impact from overhedged position
Slide 10: Operating ROE
Operating ROE CNO Conseco’s goal is to improve Operating ROE to 11% in 2009 Operating ROE*, Trailing 4 Quarters Operating ROE (Before Litigation Settlement Charges, Coinsurance Transaction and Valuation Allowance)**, Trailing 4 Quarters Q1 2007 5.5% Q1 2007 2.4% Q2 2007 Q2 2007 1.7% 2.6% Q3 2007 Q
Slide 11: Operating EPS (Diluted)
Operating EPS (Diluted) CNO Operating EPS* Operating EPS (Before Litigation Settlement Charges, Coinsurance Transaction and Tax Valuation Allowance)** Q3 2007 $0.21 Q1 2008 Q4 2007 Q1 2008 $0.11 Q1 2007 $0.11 $0.11 Q1 2007 $0.08 $0.02 Q3 2007 ($0.12) Q2 2007 Q4 2007 ($0.16) Q2 2007 ($0.29) ($0.26) *
Slide 12: Financial Indicators
Financial Indicators* CNO Book value per diluted share (excluding accumulated other comprehensive loss) • $24.40 at 3/31/08 vs $24.41 at 12/31/07 Debt to total capital ratio (excluding accumulated other comprehensive loss) • 21% at both 3/31/08 and 12/31/07 Consolidated RBC ratio • 281% at 3/3
Slide 13: Consolidated RBC Ratio
Consolidated RBC Ratio* CNO Q1 2007 Q3 2007 Q2 2007 344% 336% Q4 2007 330% Q1 2008 Decrease due primarily to: 296% 281% • Business growth • Statutory reserve pivoting • Changes in interest rate environment *Risk-Based Capital (“RBC”) requirements provide a tool for insurance regulators to determin
Slide 14: Collected Premiums
Collected Premiums CNO ($ millions) Collected Premiums-Trailing 4 Quarters Strong, consistent Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 growth in Bankers $4,380.9 $4,366.8 $4,315.1 $4,314.1 $4,322.3 and Colonial Penn Run-Off Decline in CIG due CIG to sale of annuity block and focus on CP more prof
Slide 15: Liquidity: Holding Company Sources and Uses of Funds
Liquidity: Holding Company Sources and Uses of Funds CNO ($ millions) Corporate liquidity • Available holding company liquidity in excess of $100 million at 3/31/08, plus $80 million revolver Sources of and uses of funds, excluding insurance subsidiary dividends 2007 Q1 2008 Sources: Interest on
Slide 16: Q1 Summary Bankers
Q1 Summary Bankers Q1 2008 New Annualized Premium (NAP) of $115 million, 11% above Q1 2007 Earnings affected by: • Increase in interest-adjusted benefit ratio on LTC policies driven by higher claim expenses • Accounting fluctuations related to equity indexed annuities • Reduction related to comp
Slide 17: LTC Summary Bankers
LTC Summary Bankers LTC earnings driven by unfavorable claims experience • Increased number of initial claims • Higher than expected payments on continuing claims What are we doing about LTC profitability? • Active rate management • Implementing improved underwriting tools • Reviewing claims man
Slide 18: Q1 Earnings Bankers
Q1 Earnings Bankers ($ millions) Q1 2007 (Restated) Q1 2008 Insurance policy income $412.0 $497.0 Net investment income 140.9 129.3 Fee revenue and other income 1.2 1.6 Total revenues 554.1 627.9 Insurance policy benefits 342.6 438.5 Amounts added to policyholder account balances 47.1 41.2 Amortizat
Slide 19: Q1 2008 Distribution Results: Strong Growth in Key Metrics
Q1 2008 Distribution Results: Strong Growth in Key Metrics Bankers $115 million NAP = 11% growth • Strong Med Advantage, Med Supp and Annuity sales • Lower LTC and Life sales Improved agent productivity while growing quantity • 4,759 agents at 3/31/08, up 6% vs 3/31/07 • 7% growth in new agents
Slide 20: NAP Growth Bankers
NAP Growth Bankers ($ millions) NAP-Trailing 4 Quarters Q1 2008 record NAP results Q1 2007 Q2 2007 $293.9 Q3 2007 Q4 2007 $294.4 Q1 2008 $306.1 $292.4 10% compound annual $281.7 growth since 2003 Increases driven by agent productivity and growth plus new product offerings Building a strong p
Slide 21: Q1 Summary Colonial Penn
Q1 Summary Colonial Penn Q1 2008 NAP of $17 million, 67% above Q1 2007 Continued strong growth in core life products, up 22% over Q1 2007 Launched new PFFS sales campaign in Q4 2007; generated $4.7 million of NAP in Q1 2008 Earnings down from Q1 2007 • Higher marketing expenses related to in
Slide 22: Q1 Earnings Colonial Penn
Q1 Earnings Colonial Penn ($ millions) Q1 2007 Q1 2008 Insurance policy income $29.3 $44.4 Net investment income 9.5 9.2 Fee revenue and other income 0.2 0.3 Total revenues 39.0 53.9 Insurance policy benefits 25.6 35.0 Amounts added to policyholder account balances 0.3 0.3 Amortization related to op
Slide 23: Q1 Summary CIG
Q1 Summary CIG Q1 2008 NAP of $17 million, 21% less than Q1 2007 • Strong sales gains in specified disease, up 23% from Q1 2007 • Decreases in Medicare supplement and annuities, consistent with CIG’s focus on more profitable business • Higher value from new business compared to Q1 2007, despite lo
Slide 24: Q1 Earnings CIG
Q1 Earnings CIG ($ millions) Q1 2007 (Restated) Q1 2008 Insurance policy income $242.0 $234.3 Net investment income 175.4 129.3 Fee revenue and other income 0.2 0.7 Total revenues 417.6 364.3 Insurance policy benefits 209.9 199.4 Amounts added to policyholder account balances 67.0 40.8 Amortization
Slide 25: NAP: Q1 2007 vs Q1 2008 CIG
NAP: Q1 2007 vs Q1 2008 CIG ($ millions) Q1 2007 Q1 2008 $9.6 $7.8 $7.2 $4.9 $3.0 $2.3 $0.9 $0.6 Life Annuities Med Sup Spec Dis 25
Slide 26: Q1 Summary LTC Closed Block
Q1 Summary LTC Closed Block Third consecutive stable quarter; continued reserve adequacy Earnings close to breakeven Premium rate management, improved claims management practices and expense efficiency improvements have contributed to earnings trend Migration to LTCG system and processes pro
Slide 27: Segment Performance LTC Closed Block
Segment Performance LTC Closed Block ($ millions) Pre-Tax Operating Income* Continued reserve stability Favorable prior-period Q4 2007 Q1 2008 -$1.3 development Q1 2007 Q3 2007 -$19.5 -$10.0 -$26.1 Increasing impact from improvement initiatives Q2 2007 -$130.3 PTOI-Trailing 4 Quarters: $(76.2)
Slide 28: Q1 Earnings LTC Closed Block
Q1 Earnings LTC Closed Block ($ millions) Q1 2007 (Restated) Q1 2008 Insurance policy income $79.5 $75.5 Net investment income 47.0 50.5 Fee revenue and other income 0.1 0.1 Total revenues 126.6 126.1 Insurance policy benefits 124.9 102.6 Amortization related to operations 6.0 5.4 Other operating co
Slide 29: Verified Incurred Development LTC Closed Block
Verified Incurred Development* LTC Closed Block Developed ($ millions) Deficiencies in Periods Prior to 2004 2004 2005 2006 Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Reported Claims $0.0 $370.8 $396.0 $433.3 $119.7 $212.0 $100.7 $104.7 $89.1 Prior Period Development 0 (44.2) (58.9) (72.2) (34.9) (109.
Slide 30: Operating Data LTC Closed Block
Operating Data LTC Closed Block Q1 2006 Q2 2006 Q3 2006 Q4 2006 Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Claims Paid (mils.) $90.4 $101.2 $96.1 $81.6 $102.0 $96.8 $97.7 $104.9 $93.6 Open Claimant Counts 11,805 12,536 12,228 12,048 11,870 12,424 12,121 12,338 11,783 In Force Policy Counts 197,585 194,
Slide 31: Premium Re-rates (as of 5/1/08)
Premium Re-rates (as of 5/1/08) LTC Closed Block Round 1 - exceeded each goal: • Re-rates submitted: $64.0 million (115% of goal) • Re-rates approved: $46.0 million (110% of goal) • Re-rates implemented: $44.6 million (107% of goal) • Re-rates financial impact: $37.4 million (107% of goal) Round
Slide 32: What We Have Left to Do LTC Closed Block
What We Have Left to Do LTC Closed Block Continue working within the regulatory environment to achieve equitable and actuarially justified rate increases Continue progress on claims management improvements and expense efficiencies Meet multistate performance standards: • Prompt pay compliance
Slide 33: Investment Quality
Investment Quality* CNO Actively Managed Fixed Maturities by Rating at 3/31/08 (Market Value) Below-investment grade BB+ and below securities represent 5% of BBB- 9% 5% AAA total portfolio 25% Limiting the new money BBB allocated to below- 12% investment grade securities AA 9% BBB+ 11% A 29% 3/3
Slide 34: Q1 2008 Other-than-Temporary Impairments
Q1 2008 Other-than-Temporary Impairments CNO Total Q1 2008 gross realized losses included other-than- temporary impairment losses on investments of $41.3 million • $29.8 million (74%) in mortgage products, particularly Prime Jumbo CMOs • $10.5 million (26%) in Corporate Bonds, including $5.4 milli
Slide 35: Structured Securities and ABS at 3/31/08
Structured Securities and ABS at 3/31/08 CNO (Market value in millions) Structured securities and Other asset-backed securities Planned amortization class, target $41.8 0.8% Commercial represent 24% of total amortization class, and accretion- directed bonds mortgage-backed securities actively mana
Slide 36: Sub-Prime Home Equity ABS
Sub-Prime Home Equity ABS CNO Exposure by Vintage Year (Book Value in millions) 12/31/2007 3/31/2008 $88.2 $80.7 $36.5 $24.6 $15.8 $15.2 $10.0 $10.0 $0.0 $0.0 2003 2004 2005 2006 2007 Market value represents 0.44% of invested assets at 3/31/08, compared to 0.52% at 12/31/07 Despite poor market c
Slide 37: Sub-Prime Home Equity ABS at 3/31/08
Sub-Prime Home Equity ABS at 3/31/08 CNO Market Book % of Avg. Avg. Avg. 60+ % of Rating Value (mil.) Value (mil.) Subprime* FICO Support Delinq. Portfolio* AAA $31.8 $36.0 30.9% 641 31.0% 11.5% 0.14% AA $33.6 $45.4 32.6% 640 25.6% 10.3% 0.14% A $37.1 $48.7 36.1% 645 28.6% 7.6% 0.16% BBB $0.4 $0.4 0
Slide 38: Sub-Prime Home Equity ABS and Structured Credit
Sub-Prime Home Equity ABS and Structured Credit CNO No ABS CDO investments No hedge fund investments No “mark to model” structured securities No NIM securities No CDO Squared Investments Highly developed cashflow and default analytic models, along with rigorous management oversight proce
Slide 39: CMBS Exposure Summary at 3/31/08
CMBS Exposure Summary* at 3/31/08 CNO Exposure by Rating Category (in millions) $669 $650 Market Value $923 Book Value $1,030 $153 $114 $105 $90 $58 $71 $20 $23 AAA AA A BBB BB *Includes exposure held in our trading portfolios. 39
Slide 40: CNO Summary
CNO Summary Continued strong growth in new business • Bankers Life – continuing to grow at 10% plus • Colonial Penn • Growth in excess of 20% in core products • Broadening product line • CIG • Greater focus on distinctive capabilities • Producing more economic value from refocused sales efforts
Slide 41: CNO Summary (cont.)
CNO Summary (cont.) Strategic alternatives • Goal to increase shareholder value • On track to complete analysis by late summer/early fall Operations • Bulk of organizational realignment completed • On track to complete transfer of administration of $3 billion coinsured annuity block in Q2 2008 •
Slide 42: Questions and Answers
S CONSECO. Questions and Answers 42
Slide 43: Appendix
S CONSECO. Appendix 43
Slide 44: Book Value Per Diluted Share
Book Value Per Diluted Share* CNO Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Consistent with prior quarter $25.12 $24.80 $24.68 $24.41 $24.40 *Book value excludes accumulated other comprehensive income (loss). Shares outstanding assumes: (1) conversion of convertible securities; and (2) the exercise
Slide 45: Ratio of Debt and Preferred Stock to Total Capital
Ratio of Debt and Preferred Stock to Total Capital* CNO Consistent with prior quarter Q1 2007 29.0% Q2 2007 Q3 2007 Q4 2007 Q1 2008 Preferred Stock 20.4% 20.6% 20.9% 20.9% 20.3% 20.6% 20.9% 20.9% Debt 17.4% *Excludes accumulated other comprehensive income (loss). See Appendix for corresponding GAA
Slide 46: Key Debt Covenants
Key Debt Covenants CNO ($ millions) Q4 2005 Q4 2006 Q4 2007 Q1 2008* In compliance with all Debt/Capital Ratio financial covenants Covenant Maximum 25.0% 30.0% 30.0% 30.0% Actual 16.2% 17.4% 21.0% 21.0% Interest Coverage** Covenant Minimum 2.00X 2.00X 2.00X 2.00X Actual 2.06X 2.06X 3.34X 3.30X Sta
Slide 47: Net Investment Income
Net Investment Income CNO ($ millions) General Account Investment Income, Excluding Corporate Segment Yield unchanged from Q1 2007 Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 $376.8 $381.5 $389.9 $362.7 $352.2 Net investment income from the prepayment of securities: $5.0 $1.1 $0.6 $5.0 $1.5 Yield: 5.8
Slide 48: Expenses
Expenses CNO ($ millions) Adjusted Operating Expenses* Back-office consolidation when Q1 2007 Q2 2007 $105.6 Q3 2007 $105.3 Q4 2007 $107.5 Q1 2008 $105.9 $103.2 completed expected to produce run- rate savings of $25 million annually by YE 2008 • Approximately $11 million in savings realized in 200
Slide 49: Segment Performance Bankers
Segment Performance Bankers ($ millions) Pre-Tax Operating Income* Lower earnings driven by: Q2 2007 $70.5 Q3 2007 $67.5 Q4 2007 • Lower margins on LTC as a result $58.3 of higher incurred claims Q1 2007 $45.5 • Increased investment volatility Q1 2008 $29.1 PTOI-Trailing 4 Quarters: $252.8 $257.9
Slide 50: Premiums – Medicare Supplement Bankers
Premiums – Medicare Supplement Bankers Medicare Supplement – First-Year Premiums (in millions) Q1 2007 $22.2 Q4 2007 Q2 2007 $21.0 Strong sales of Medicare Q3 2007 Q1 2008 $20.0 $19.3 $19.1 Supplement continue, along with our distribution of PFFS products Med. Supp. First-Year Prems.-Tr. 4 Qtrs: $
Slide 51: Premiums – PDP/PFFS Bankers
Premiums – PDP/PFFS Bankers (in millions) PDP/PFFS – First-Year Premiums Q4 2007 Q1 2007-Q1 2008 growth reflects Q3 2007 $86.0 strong overall growth of $78.5 Q1 2008 membership $70.4 Q1 2007-Q1 2008 NAP growth of 26% reflects successful OEP Decrease from Q4 2007-Q1 2008 $84.0 $76.2 driven by t
Slide 52: Premiums – Long-Term Care Bankers
Premiums – Long-Term Care Bankers Long-Term Care – First-Year Premiums ($ millions) Decline in NAP due to shift to Q2 2007 lower-premium Short Term Q1 2007 $11.6 $12.2 Q3 2007 $11.7 Q4 2007 Q1 2008 $11.5 Care product $11.0 First-Year Prems.-Tr. 4 Qtrs: $48.6 $47.7 $47.4 $47.0 $46.4 Total Premiums-
Slide 53: Premiums – Life Insurance Bankers
Premiums – Life Insurance Bankers Life – First-Year Premiums ($ millions) Q2 2007 $25.3 Fluctuations in life insurance Q1 2007 $21.4 Q3 2007 Q4 2007 $21.3 $21.2 premiums primarily reflect Q1 2008 $18.5 variance in sales of single premium life insurance policies First-Year Prems.-Tr. 4 Qtrs: $91.0
Slide 54: Premiums – Annuity Bankers
Premiums – Annuity Bankers Annuity – First-Year Premiums ($ millions) Q3 2007 Increase in first-year $250.5 Q4 2007 Q1 2008 Q1 2007 $228.0 premiums reflects higher $211.4 Q2 2007 $199.6 $221.2 sales First-Year Prems.-Tr. 4 Qtrs: $973.5 $935.8 $909.0 $882.7 $899.3 Total Premiums-Quarterly: $212.2 $
Slide 55: Benefit Ratio – Medicare Supplement Bankers
Benefit Ratio* – Medicare Supplement Bankers Benefit ratio is consistent Q1 2007 Q2 2007 67.4% Q3 2007 69.4% Q4 2007 67.6% Q1 2008 with our expectations 64.6% 64.6% Trailing 4 Quarter Avg.: 65.8% 65.7% 66.6% 67.2% 67.3% *We calculate benefit ratios by dividing insurance policy benefits by insuranc
Slide 56: Benefit Ratio – PDP and PFFS Business Bankers
Benefit Ratio* – PDP and PFFS Business Bankers PDP and individual PFFS Q1 2007 Q1 2008 93.3% 93.9% continue to trend as expected, Q2 2007 Q3 2007 85.4% Q4 2007 83.6% 80.9% factoring in seasonal fluctuations Q3/Q4 2007 and Q1 2008 include large group case premiums/losses, which has a higher loss
Slide 57: Interest-Adjusted Benefit Ratio – Long Term Care Bankers
Interest-Adjusted Benefit Ratio* – Long Term Care Bankers Q3 2007 Q1 2008 Q1 2008 negatively impacted by: Q1 2007 72.1% Q2 2007 75.2% Q4 2007 71.2% 79.0% 64.6% • Higher levels of incurred claims Began implementation of premium re-rates in Q3 2007 on more recent business not previously re-rated;
Slide 58: Segment Performance Colonial Penn
Segment Performance Colonial Penn ($ millions) Pre-Tax Operating Income* Q3 2007 Q2 2007 Higher marketing expenses $6.7 $7.0 related to growth initiatives Q1 2007 resulted in lower Q4 2007 and $4.6 Q1 2008 Q1 2008 earnings $3.7 Q4 2007 -$0.2 PTOI-Trailing 4 Quarters: $21.1 $21.3 $23.7 $18.1 $17.2
Slide 59: Premiums – Life Insurance Colonial Penn
Premiums – Life Insurance Colonial Penn Life – First-Year Premiums ($ millions) Q1 2008 $8.4 Q4 2007 Continued strong sales growth Q3 2007 Q2 2007 $7.6 $7.4 Q1 2007 $7.0 Trailing four quarters data: $6.7 • NAP grew 22% • First-year premium grew 25% First-Year Prems.-Tr. 4 Qtrs: $24.1 $25.4 $27.0
Slide 60: Segment Performance CIG
Segment Performance CIG ($ millions) Pre-Tax Operating Income* Unlocking adjustment on interest- Q2 2007 sensitive life block of $14.8 million $43.3 in Q4 2007 Q1 2007 $33.5 Q1 2008 $23.3 Q3 2007 $18.2 Q4 2007 $7.7 PTOI-Trailing 4 Quarters: $181.1 $161.3 $122.9 $102.7 $92.5 Revenues-Quarterly: $41
Slide 61: Premiums - Medicare Supplement CIG
Premiums - Medicare Supplement CIG ($ millions) Medicare Supplement – First-Year Premiums Sales down 53% from Q1 2007: Q1 2007 • We continue to focus on the $6.6 profitability of this business rather Q2 2007 $5.2 than increased sales Q3 2007 $4.2 Q4 2007 $3.4 Q1 2008 $2.8 First-Year Prems.-Tr. 4 Q
Slide 62: Premiums – Specified Disease CIG
Premiums – Specified Disease CIG ($ millions) Specified Disease – First-Year Premiums Q4 2007 Q1 2008 $8.7 $8.9 Sales up 23% from Q1 2007: Q1 2007 Q2 2007 $7.7 Q3 2007 $7.7 $7.3 • New products • Increased PMA focus on specified disease products • Recruitment of Health IMOs First-Year Prems.-Tr. 4
Slide 63: Premiums – Annuity CIG
Premiums – Annuity CIG ($ millions) Annuity – First-Year Premiums Collections down 65% from Q1 2007: Q1 2007 Q2 2007 • Discontinuance of products due $116.3 $108.3 to coinsurance transaction Q3 2007 $73.2 Q4 2007 • Focus on profitable products $56.6 Q1 2008 $39.2 First-Year Prems.-Tr. 4 Qtrs: $500
Slide 64: Benefit Ratio – Medicare Supplement CIG
Benefit Ratio* – Medicare Supplement CIG Q2 2007 Q3 2007 Q1 2007 Q4 2007 Consistent with expectations 68.9% Q1 2008 66.9% 68.6% 66.0% 65.8% Trailing 4 Quarter Avg.: 63.6% 66.6% 67.1% 67.6% 67.4% *We calculate benefit ratios by dividing insurance policy benefits by insurance policy income. 64
Slide 65: Interest-Adjusted Benefit Ratio – Specified Disease CIG
Interest-Adjusted Benefit Ratio* – Specified Disease CIG Q1 2008 increase primarily driven by lower policy Q3 2007 Q4 2007 Q1 2008 49.1% 48.1% terminations Q1 2007 42.8% Q2 2007 46.5% 40.4% Trailing 4 Quarter Avg.: 44.2% 41.8% 43.2% 44.7% 46.0% Qtrly. non-int. adjusted: 75.7% 73.2% 81.9% 80.6% 81.
Slide 66: Balance Sheet Detail LTC Closed Block
Balance Sheet Detail LTC Closed Block ($ millions) Insurance Liabilities and Intangible Assets, Net of Reinsurance Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Reserve for Future Benefits $2,412.2 $2,409.0 $2,402.3 $2,392.7 $2,394.4 Claim Reserve 829.1 952.6 954.3 962.1 957.2 Insurance Acquisition Costs
Slide 67: Benefit Detail LTC Closed Block
Benefit Detail LTC Closed Block ($ millions) Total Benefits Q2 2007 Third consecutive stable $228.4 quarter; continued reserve adequacy Q2 2007 total benefits and Q1 2007 $124.9 Q3 2007 $122.3 Q4 2007 $113.3 Q1 2008 incurred claims reflect $110 $102.6 million claim reserve strengthening Incurred
Slide 68: Interest-Adjusted Benefit Ratio LTC Closed Block
Interest-Adjusted Benefit Ratio* LTC Closed Block Q2 2007 Third consecutive stable 232.6% quarter; continued reserve adequacy Q2 2007 benefit ratio reflects Q1 2007 Q3 2007 $110 million claim reserve 98.9% 96.2% Q4 2007 82.2% Q1 2008 strengthening 69.8% Trailing 4 Quarter Avg.: 92.3% 134.1% 138.
Slide 69: 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 70: Information Related to Certain Non-GAAP Financial Measures
Information Related to Certain Non-GAAP Financial Measures A reconciliation of net income applicable to common stock to the net operating income, excluding: (i) Q2 2006 charge related to the litigation settlement and refinements to such estimates recognized in subsequent periods; (ii) a Q3 2007 char
Slide 71: Information Related to Certain Non-GAAP Financial Measures
Information Related to Certain Non-GAAP Financial Measures Book value, excluding accumulated other comprehensive income, per diluted share This non-GAAP financial measure differs from book value per diluted share because accumulated other comprehensive income has been excluded from the book value us
Slide 72: Information Related to Certain Non-GAAP Financial Measures
Information Related to Certain Non-GAAP Financial Measures A reconciliation from book value per diluted share to book value per diluted share, excluding accumulated other comprehensive income (loss) is as follows (dollars in millions, except per share amounts): Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Total sh
Slide 73: 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 return before net realized gains or losses (“net operating income”, a non-GAAP financial measure) is important to evaluate the performance of the Company and is a key measure
Slide 74: Information Related to Certain Non-GAAP Financial Measures
Information Related to Certain Non-GAAP Financial Measures A reconciliation of return on common equity to operating return (less: (i) Q2 2006 charge related to the litigation settlement and refinements to such estimates recognized in subsequent periods; (ii) a Q3 2007 charge related to a coinsurance
Slide 75: Information Related to Certain Non-GAAP Financial Measures
Information Related to Certain Non-GAAP Financial Measures (continued from previous page) Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Average common shareholders' equity 4,032.3 4,194.2 4,320.8 4,260.7 4,087.8 Average common shareholder's equity, excluding accumulated other comprehensive income (loss) (a non-GAAP
Slide 76: 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 segment operating income (loss) and consolidated net income (loss) for the three months ended March 31, 2008, is as follows (dollars in millions): Other Business
Slide 77: Information Related to Certain Non-GAAP Financial Measures
Information Related to Certain Non-GAAP Financial Measures A reconciliation of common shareholders’ equity, excluding accumulated other comprehensive income (loss), the Q2 2006 charge related to the litigation settlement and refinements to such estimates recognized in subsequent periods, the Q3 2007
Slide 78: Information Related to Certain Non-GAAP Financial Measures
Information Related to Certain Non-GAAP Financial Measures A reconciliation of average common shareholders’ equity, excluding accumulated other comprehensive income (loss), the Q2 2006 charge related to the litigation settlement and refinements to such estimates recognized in subsequent periods, the
Slide 79: 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) This non-GAAP financial measure differs from the debt to capital ratio because accumulated other comprehensive income has been excluded from the value of capital
Slide 80: Information Related to Certain Non-GAAP Financial Measures
Information Related to Certain Non-GAAP Financial Measures Reconciliations of the: (i) debt to capital ratio to debt to capital, excluding accumulated other comprehensive loss; and (ii) debt and preferred stock to capital ratio to debt and preferred stock to capital, excluding accumulated other comp