Cno Financial Group, Inc. · NYSE:CNO
Cno Financial — Q4 2015 Earnings Presentation
42 slides from Cno Financial's earnings presentation, Feb 11, 2016
Slide 1: 4Q15 Financial and Operating Results
4Q15 Financial and operating results for the period ended December 31, 2015 February 11, 2016 Unless otherwise specified, comparisons in this presentation are between 4Q15 and 4Q14. Exhibit 99.1
Slide 2: Forward-Looking Statements
CNO Financial Group | 4Q2015 Earnings | February 11, 2016 2 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 ope
Slide 3: Non-GAAP Measures
CNO Financial Group | 4Q2015 Earnings | February 11, 2016 3 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 oth
Slide 4: 11, 2016
CNO Financial Group | 4Q2015 Earnings | February 11, 2016 4
Slide 5: 4Q15 Summary
CNO Financial Group | 4Q2015 Earnings | February 11, 2016 5 CNO Operating Earnings Per Share Excluding Significant Items* Operating Earnings Excl. Significant Items* $69.7 $71.3 Weighted Average Shares Outstanding 206.9 188.0 4Q15 Summary * A non-GAAP measure. Refer to the Appendix for a reconciliat
Slide 6: 2015 Year in Review
CNO Financial Group | 4Q2015 Earnings | February 11, 2016 6 CNO Mixed sales results; continued to grow the franchise − Collected premiums up 1%; policies issued up 3%; 3rd party fee income up 14% Strong performance at Colonial Penn resulting from successful execution and investments in our direc
Slide 7: 4Q15 Sales and Distribution Results: Bankers Life
CNO Financial Group | 4Q2015 Earnings | February 11, 2016 7 4Q15 Sales and Distribution Results Bankers Life * Third party sales are excluded from NAP in all periods ** Includes Medicare Advantage, Medicare supplement, PDP, Dental/Vision and ACA products (prior periods have been restated to include
Slide 8: Washington National 4Q15 Sales and Distribution Results
CNO Financial Group | 4Q2015 Earnings | February 11, 2016 8 Washington National 4Q15 Sales and Distribution Results ($ millions) Quarterly NAP Trailing 4-Quarters NAP $99.2 $99.8 $100.2 $100.4 $100.4 Supplemental Health Collected Premiums $133.3 $132.7 $136.1 $138.6 $137.4 4Q NAP flat; total year
Slide 9: 4Q15 Sales and Distribution Results: Colonial Penn
CNO Financial Group | 4Q2015 Earnings | February 11, 2016 9 4Q14 $14.9 1Q15 $21.1 2Q15 $18.5 3Q15 $18.9 4Q15 $15.6 4Q15 Sales and Distribution Results Colonial Penn ($ millions) Quarterly NAP Trailing 4-Quarters NAP $64.6 $68.9 $70.9 $73.4 $74.1 Collected Premiums $61.3 $65.1 $65.1 $66.7 $66.0 Infor
Slide 10: 4Q Consolidated Financial Highlights
CNO Financial Group | 4Q2015 Earnings | February 11, 2016 10 4Q Consolidated Financial Highlights CNO Earnings Remain Strong ‒ Operating earnings per diluted share* of $0.52; $0.38 excluding significant items ‒ Operating ROE* of 9.2%; 8.8% excluding significant items ‒ Health benefit ratios in-lin
Slide 11: Segment Earnings
CNO Financial Group | 4Q2015 Earnings | February 11, 2016 11 $(8.8) $(1.3) $(5.0) $(4.4) $(4.9) $2.8 $(5.9) $4.2 $0.6 $6.7 $94.5 $82.2 $86.4 $79.8 $89.1 $30.2 $31.5 $29.1 $30.6 $31.3 4Q14 1Q15 2Q15 3Q15 4Q15 Corporate CP BLC WN ($ millions) * A non-GAAP measure. See the Appendix for a reconciliation
Slide 12: Health Margins
CNO Financial Group | 4Q2015 Earnings | February 11, 2016 12 $132 $133 $134 $137 $138 54.4% 57.6% 65.7% 57.4% 57.5% 4Q14 1Q15 2Q15 3Q15 4Q15 Earned Premium Reported Benefit Ratio ($ millions) * Interest-adjusted benefit ratio (IABR); a non-GAAP measure. Refer to the Appendix for the corresponding GA
Slide 13: Investment Results
CNO Financial Group | 4Q2015 Earnings | February 11, 2016 13 $21,852 $21,854 $21,956 $22,042 $22,219 $305.4 $300.1 $302.1 $298.2 $303.2 4Q14 1Q15 2Q15 3Q15 4Q15 Net Investment Income $4.2 $21.3 $15.4 $30.3 $48.5 $12.6 $1.3 $7.9 $12.4 $18.3 Investment Results CNO ($ millions) Earned Yield*: 5.83% 5.8
Slide 14: 2015 GAAP Loss Recognition Testing Results
CNO Financial Group | 4Q2015 Earnings | February 11, 2016 14 • Increased to $3.8 billion or 22% of net GAAP liabilities • Run-on / Run-off: +$260mm • Experience assumptions: +$50mm • Earned rate assumptions: $(35)mm • Recovery in rates flattened and pushed out one year; no changes to ultimate new mo
Slide 15: LTC - Margin & Sensitivity Testing
CNO Financial Group | 4Q2015 Earnings | February 11, 2016 15 LTC - Margin & Sensitivity Testing Key Variable Sensitivity Test* LRT Margin Impact Lapse Rate +/- 10% +/- $70mm Morbidity +/- 1% +/- $60mm Mortality +/- 1% +/- $30mm Ultimate New Money Rate - 50bps - $50mm * Represents a one-time permanen
Slide 16: 2015 Milestones
CNO Financial Group | 4Q2015 Earnings | February 11, 2016 16 Invest $80-$85mm in strategic business initiatives Accelerate run-on and run-off Enhance customer experience and operational efficiency ROE run-rate of 9% Drive to investment grade Target dividend payout ratio of 20% Invested
Slide 17: 2016 Priorities
CNO Financial Group | 4Q2015 Earnings | February 11, 2016 17 CNO Re-energize growth in Bankers Life and Washington National Roll out of wholly owned Broker / Dealer and Registered Investment Advisor Transform and leverage data Reduce LTC exposure Corporate Development / M&A 2016 Priorities
Slide 18: Questions and Answers
CNO Financial Group | 4Q2015 Earnings | February 11, 2016 18 Questions and Answers
Slide 19: Appendix
CNO Financial Group | 4Q2015 Earnings | February 11, 2016 19 Appendix
Slide 20: Energy Sector Overview
CNO Financial Group | 4Q2015 Earnings | February 11, 2016 20 Energy Sector Overview December 31, 2015 48% 28% 8% 13% 2% 1% Midstream Independent E&P Oilf ield Services Integrated Ref iners Other 18% 70% 7% 4% 1% A or Better BBB BB B <B $1.6 billion exposure is reasonably calibrated to enterprise c
Slide 21: New Money Investment Rate Assumptions
CNO Financial Group | 4Q2015 Earnings | February 11, 2016 21 Assumption Change: NMR’s reflect year- end market conditions for 2015 with new money rate increases projected in 2014 largely flattened and pushed out one year LTC Margin Sensitivity: Moderate stress margin impact of ~$90mm and Severe
Slide 22: Producing Agent Counts
CNO Financial Group | 4Q2015 Earnings | February 11, 2016 22 Producing Agent Counts 1st Yr 2nd Yr 3rd Yr + Total Qtr Avg (3) 1st Yr 2nd Yr 3rd Yr + Total Qtr Avg (3) 12/31/2015 2,051 584 1,927 4,562 4,565 410 127 367 904 899 9/30/2015 2,077 601 1,871 4,549 4,693 411 115 365 891 892 6/30/2015 2,484 6
Slide 23: 4Q15 Holding Company Liquidity
CNO Financial Group | 4Q2015 Earnings | February 11, 2016 23 4Q15 Holding Company Liquidity CNO ($ millions) 4Q15 YTD Cash and Investments Balance - Beginning $354.1 $344.6 Sources Net Dividends from Insurance Subsidiaries 88.5 265.7 Dividends from Non-insurance Subsidiaries (1.0) 4.3 Interest/Earni
Slide 24: Leveraging Considerable Tax Assets
CNO Financial Group | 4Q2015 Earnings | February 11, 2016 24 Non-Life $848 Life $68 Loss Carryforwards Valuation Allowance Leveraging Considerable Tax Assets CNO ($ millions) 4Q 2015 Loss Carryforwards $197** Outlook and Value v Expect modest future valuation allowance releases as taxable income h
Slide 25: 4Q14 Significant Items
CNO Financial Group | 4Q2015 Earnings | February 11, 2016 25 Net Operating Income: Bankers Life $ 103.5 $ (9.0) (1) $ 94.5 Washington National (2) Colonial Penn EBIT from business segments continuing after the CLIC sale Corporate Operations, excluding corporate interest expense EBIT from operations
Slide 26: 1Q15 Significant Items
CNO Financial Group | 4Q2015 Earnings | February 11, 2016 26 The table below summarizes the financial impact of the significant item on our 1Q2015 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results (dollars in mill
Slide 27: 2Q15 Significant Items
CNO Financial Group | 4Q2015 Earnings | February 11, 2016 27 The table below summarizes the financial impact of the significant item on our 2Q2015 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results (dollars in mill
Slide 28: 3Q15 Significant Items
CNO Financial Group | 4Q2015 Earnings | February 11, 2016 28 The table below summarizes the financial impact of the significant item on our 3Q2015 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results (dollars in mill
Slide 29: 4Q15 Significant Items
CNO Financial Group | 4Q2015 Earnings | February 11, 2016 29 The table below summarizes the financial impact of the significant item on our 4Q2015 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results (dollars in mill
Slide 30: Quarterly Earnings
CNO Financial Group | 4Q2015 Earnings | February 11, 2016 30 Quarterly Earnings CNO *Management believes that an analysis of earnings before the net loss on sale of CLIC and gain (loss) on reinsurance transactions, net realized investment gains (losses), fair value changes in embedded derivative lia
Slide 31: Information Related to Certain Non-GAAP Financial Measures
CNO Financial Group | 4Q2015 Earnings | February 11, 2016 31 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
Slide 32: Net Income to Net Operating Income Reconciliation
CNO Financial Group | 4Q2015 Earnings | February 11, 2016 32 Information Related to Certain Non-GAAP Financial Measures 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): 4Q1
Slide 33: Operating Earnings Per Share Reconciliation
CNO Financial Group | 4Q2015 Earnings | February 11, 2016 33 4Q14 1Q15 2Q15 3Q15 4Q15 Operating income 69.1$ 60.1$ 60.8$ 56.8$ 97.0$ Weighted average shares outstanding for basic earnings per share 204,298 200,491 195,857 190,259 185,608 Effect of dilutive securities on weighted average shares: Stoc
Slide 34: Book Value per Diluted Share
CNO Financial Group | 4Q2015 Earnings | February 11, 2016 34 Book value per diluted share Book value per diluted share reflects the potential dilution that could occur if outstanding stock options and warrants were exercised, restricted stock and performance units were vested and convertible securit
Slide 35: Interest-Adjusted Benefit Ratio
CNO Financial Group | 4Q2015 Earnings | February 11, 2016 35 Information Related to Certain Non-GAAP Financial Measures 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 ba
Slide 36: Operating Return Measures
CNO Financial Group | 4Q2015 Earnings | February 11, 2016 36 Information Related to Certain Non-GAAP Financial Measures Operating return measures Management believes that an analysis of net income applicable to common stock before the net loss on sale of CLIC and gain (loss) on reinsurance transacti
Slide 37: Operating Return on Equity Calculations
CNO Financial Group | 4Q2015 Earnings | February 11, 2016 37 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); (i
Slide 38: Operating Earnings and Significant Items Summary
CNO Financial Group | 4Q2015 Earnings | February 11, 2016 38 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 (dollars in millions): Operatin
Slide 39: Pretax Operating Earnings to Net Income Reconciliation
CNO Financial Group | 4Q2015 Earnings | February 11, 2016 39 Information Related to Certain Non-GAAP Financial Measures A reconciliation of pretax operating earnings (a non-GAAP financial measure) to net income is as follows (dollars in millions): 4Q14 1Q15 2Q15 3Q15 4Q15 Pretax operating earnings (
Slide 40: Consolidated Capital Reconciliation
CNO Financial Group | 4Q2015 Earnings | February 11, 2016 40 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 shar
Slide 41: Consolidated Capital Reconciliation
CNO Financial Group | 4Q2015 Earnings | February 11, 2016 41 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 shar
Slide 42: Debt to Capital Ratio Reconciliation
CNO Financial Group | 4Q2015 Earnings | February 11, 2016 42 Information Related to Certain Non-GAAP Financial Measures 4Q14 1Q15 2Q15 3Q15 4Q15 Corporate notes payable 780.3$ 761.8$ 909.2$ 909.8$ 911.1$ Total shareholders' equity 4,688.2 4,753.6 4,364.2 4,171.0 4,138.5 Total capital 5,468.5$ 5,515.