Cno Financial Group, Inc. · NYSE:CNO
Cno Financial — Q1 2015 Earnings Presentation
41 slides from Cno Financial's earnings presentation, Apr 30, 2015
Slide 1: 1Q15 Financial and operating results
Exhibit 99.1 1Q15 Financial and operating results for the period ended March 31, 2015 April 30, 2015 Unless otherwise specified, comparisons in this presentation are between 1Q15 and 1Q14.
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
Slide 4: CNO Financial Group | 1Q2015 Earnings | April 30, 2015 4
CNO Financial Group | 1Q2015 Earnings | April 30, 2015 4
Slide 5: CNO 1Q15 Summary
CNO1Q15 Summary (amounts in millions, except per share data) Operating Earnings Per Share Excluding Significant Items*Notable Items 1Q14 $0.28 1Q15 $0.31 Bankers Life recruiting gains have stabilized agent count; positioned for future growth G th i W hi t N ti l row n as ng on a ona sales led by
Slide 6: LTC Strategic Focus
LTC Strategic Focus Short Range (1-3 yrs) Longer Range (4-7 yrs) Continued transparency on• performance and risk • Pursue rate actions if adverse experience develops • Reduce our relative economic exposure to LTC by ~50% through natural run-off and run-on as well as opportunistic reinsurance actions
Slide 7: Bankers Life 1Q15 Sales and Distribution Results
1Q15 Sales and Distribution Results Bankers Life ($ millions) Quarterly NAP* 1Q sales down 2% I i lif d h t d ti 1Q14 $63.1 2Q14 $63.1 3Q14 $61.8 4Q14 $73.6 1Q15 $61.6 ‒ ncreases n e an s or er ura on LTC, offset by lower annuity and Med supp Med Advantage fee income up 28% on a trailing 4-quarte
Slide 8: Washington National 1Q15 Sales and Distribution Results
Washington National1Q15 Sales and Di t ib ti R lts r u on esu s ($ millions) Quarterly NAP 1Q sales up 3% 1Q14 $22.0 2Q14 $25.3 3Q14 $25.6 4Q14 $26.3 1Q15 $22.6 ‒ PMA up 10%, contributing over 80% of total sales ‒WN Independent Partners down 21%; impacted by restructuring of one large independent p
Slide 9: Colonial Penn 1Q15 Sales and Distribution Results
1Q15 Sales and Di t ib ti R lt Colonial Penn s r u on esu s ($ millions) Quarterly NAP 1Q sales up 26% 1Q14 $16 8 2Q14 $16 5 3Q14 $16 4 4Q14 1Q15 $21.1 ‒ Strong growth across all lead sources including Direct Mail and Web ‒ Improvements in marketing costs and sales productivity . . . $14.9 ‒ Sales
Slide 10: Business Investments and Sales Outlook
Business Investments and Sales Outlook CNO Maintaining consolidated sales growth of 3% - 6% Maintaining 2015 sales growth: 3-5% Continued recovery in agent recruiting Agent productivity gains Initiative investments starting to gain traction Maintaining 2015 sales growth: 5-7% Continued stren
Slide 11: 1Q Consolidated Financial Highlights
1Q Consolidated Financial Highlights CNO Earnings Remain Strong ‒ Normalized operating EPS up 11% ‒ Health benefit ratios mixed with elevated LTC and supplemental health IABR’s* ‒ Annuity, life and investment results continue to drive favorable results C it l & Li idit ap a qu y ‒ RBC estimated a
Slide 12: Segment Earnings
($ millions)Segment Earnings CNO 1Q15 Earnings DriversSegment EBIT Excluding Significant Items* $118 7$119.7 Bankers Life strength in annuity $31.1 $32.3 $30.1 $30.2 $31.5 . $106.1 $119.8 $106.5 – spreads, favorable overall health results offset by lower LTC margins Washington National interest-
Slide 13: Investment Results
Investment Results CNO ($ millions) $24,850 $24,853 Average Invested Assets and Cash Realized Gains, Losses and Impairments Gross Realized Gains $21,687 $21,852 $21,854 $348.1 $347.4 $300.1 $305.4 $303.6 $3,512 $3,492 Gross Realized Losses Impairments $45.6 Realized Gains and Losses on OCB LTC sales
Slide 14: Capital Targets & Excess Capital Deployment
Capital Targets & Excess Capital Deployment CNO 2014 1Q15 2015 Y.E. Outlook RBC 431% 428% ~ 425% Key Capital Ratios v RBC remains strong on stable statutory Liquidity $345mm $311mm ~ $315mm Leverage* 17.1% 16.9% ~ 16% 2015 C it l Utili ti earnings after $88 million dividends and distributions to th
Slide 15: Bankers LTC – Critical Points of Differentiation
Bankers LTC – Critical Points of Differentiation Target Market • Middle-market and older issue/attained age drives reduced tail risk New Business • Significant claims data on older ages supports reliable studies and estimates • Over 70% of new business is “short duration” (benefit period ≤ 1 year) •
Slide 16: ROE Development
ROE Development CNO Notable Items Normalized Operating ROE* ROE trend reflects stable earnings and efforts to decrease “beta” and improve ratings Steady build in ROE recognizing headwinds 7.9% 9.0% ‒ Challenging new money investment rates ‒ LTC margins reflect a building future loss reserve and
Slide 17: Wrap-up
Wrap-up CNO Regaining momentum on agent recruiting and sales growth Investing in initiatives to increase sales and operating effectiveness Holistic management of our LTC businessHolisti Solid operating performance and favorable markets supports ratings momentum and recapitalization Develop
Slide 18: Questions and Answers
Questions and Answers CNO Financial Group | 1Q2015 Earnings | April 30, 2015 18
Slide 19: Appendix
Appendix CNO Financial Group | 1Q2015 Earnings | April 30, 2015 19
Slide 20: Producing Agent Counts
Producing Agent Counts 1st Yr 2nd Yr 3rd Yr + Total Qtr Avg (3) 1st Yr 2nd Yr 3rd Yr + Total Qtr Avg (3) 3/31/2015 2,468 657 1,894 5,019 4,850 344 127 340 811 830 Bankers Life (1) Washington National (2) 12/31/2014 2,258 664 1,868 4,790 4,842 365 128 337 830 831 9/30/2014 2,233 667 1,822 4,722 4,783
Slide 21: 1Q15 Holding Company Liquidity
1Q15 Holding Company Liquidity CNO ($ millions) 1Q15 Cash and Investments Balance - Beginning $344.6 Sources Net Dividends from Insurance Subsidiaries 75.5 Interest/Earnings on Corporate Investments 2.6 Surplus Debenture Interest 12 0 . Service and Investment Fees, Net (0.9) * Total Sources 89.2 Use
Slide 22: Debt Maturity Profile
Debt Maturity Profile ($ millions) CNO $378.1 $275 $59.4 $60.5 $4.3 2015 2016 2017 2018 2019 2020 CNO Financial Group | 1Q2015 Earnings | April 30, 2015 22 Term Loan Senior Secured Notes
Slide 23: Leveraging Considerable Tax Assets
Leveraging Considerable Tax Assets CNO ($ millions) 1Q 2015 Loss Carryforwards 2015 Outlook and Value v Expect modest future valuation allowance Life $157 Annual cash flows are expected to be reduced by $50 million in 2016 as life NOL’s are fully utilized releases as taxable income stabilizes $1,
Slide 24: 1Q14 Significant Items
Th t bl b l i th fi i l i t f th i ifi t it 1Q2014 t ti i M t b li 1Q14 Significant Items CNO e a e e ow summar zes e nanc a mpac o e s gn can em on our ne opera ng ncome. anagemen e eves that identifying the impact of this item enhances the understanding of our operating results (dollars in million
Slide 25: 2Q14 Significant Items
f f f 2Q201 2Q14 Significant Items CNO Three months ended June 30, 2014 Excluding The table below summarizes the inancial impact o the signi icant items on our 4 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results (
Slide 26: 3Q14 Significant Items
Th t bl b l i th fi i l i t f i ifi t it 3Q2014 t ti i M t b li th t 3Q14 Significant Items CNO e a e e ow summar zes e nanc a mpac o s gn can ems on our ne opera ng ncome. anagemen e eves a identifying the impact of these items enhances the understanding of our operating results (dollars in million
Slide 27: 4Q14 Significant Items
f f f Q201 4Q14 Significant Items CNO Three months ended December 31, 2014 E l di The table below summarizes the inancial impact o the signi icant items on our 4 4 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results
Slide 28: 1Q15 Significant Items
f f f 1Q201 1Q15 Significant Items CNO The table below summarizes the inancial impact o the signi icant item on our 5 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results (dollars in millions). Three months ended Mar
Slide 29: Quarterly Earnings
Quarterly Earnings CNO 1Q14 2Q14 3Q14 4Q14 1Q15 Bankers Life 84.2$ 87.4$ 111.8$ 103.5$ 82.2$ Washington National 31.1 32.3 27.6 20.2 28.5 ($ millions) Colonial Penn (6.2) 3.8 0.4 2.8 (5.9) EBIT from business segments continuing after the CLIC sale 109.1 123.5 139.8 126.5 104.8 Corporate operations,
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 applicable to common stock to net operating income (and related per-share amounts) is as follows (dollars in millions, except per-share amounts): 1Q14 2Q14 3Q14 4Q14 1Q15 Net income applicable to common stock (
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): 1Q14 (a) 2Q14 3Q14 4Q14 1Q15 Operating i
Slide 33: Information Related to Certain Non-GAAP Financial Measures
B k l dil t d h Information Related to Certain Non-GAAP Financial Measures oo va ue per u e s are 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
Slide 34: Information Related to Certain Non-GAAP Financial Measures
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 backing the insurance liabilities by insurance policy income. I
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 the net loss on sale of CLIC and gain (loss) on reinsurance transactions, the earnings of CLIC prior to being sold, net realized g
Slide 36: Information Related to Certain Non-GAAP Financial Measures
Information Related to Certain Non-GAAP Financial Measures Th l l ti f (i) ti t it l di l t d th h i i (l ) d te ca cu a ons o : (i opera ng re urn on equ y, exc u ng accumu a e o er compre ens ve ncome oss an ne operating loss carryforwards (a non-GAAP financial measure); (ii) operating return, exc
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 (dollars in millions): Operating Operating earnings, earnings, excluding Net excluding signi
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 is as follows (dollars in millions): 1Q14 2Q14 3Q14 4Q14 1Q15 Twelve months ended Pretax operating earnings (a non-GAAP financial measure) 383.2$ 399.
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): 1Q13 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): 1Q14 2
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