Cno Financial Group, Inc. · NYSE:CNO
Cno Financial — Q4 2021 Earnings Presentation
46 slides from Cno Financial's earnings presentation, Feb 8, 2022
Slide 1: Fourth Quarter 2021 Financial and Operating Results
Fourth Quarter 2021 Financial and operating results for the period ended December 31, 2021 February 8, 2022 Unless otherwise specified, comparisons in this presentation are between 4Q20 and 4Q21. Exhibit 99.3
Slide 2: Important Legal Information
CNO Financial Group | Fourth Quarter 2021 Earnings | February 8, 2022 2 Important Legal Information 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 r
Slide 3: | February 8, 2022
CNO Financial Group | Fourth Quarter 2021 Earnings | February 8, 2022 3
Slide 4: 2021 Year in Review
CNO Financial Group | Fourth Quarter 2021 Earnings | February 8, 2022 4 2021 Year in Review Strong Operational Performance • Operating EPS1 of $2.79 vs. $2.53 in 2020, up 10% • Continued execution of Transformation objectives • Deepened integration between D2C / field agents • Enhanced attractivenes
Slide 5: Quarter in Review
CNO Financial Group | Fourth Quarter 2021 Earnings | February 8, 2022 5 Quarter in Review Strong Operational Performance • Moved closer to target capital levels • Returned $116 million to shareholders • $100 million in share repurchases • Established FABN program; funded $500 million (additional $90
Slide 6: Growth Scorecard
CNO Financial Group | Fourth Quarter 2021 Earnings | February 8, 2022 6 4Q FY 1Q 2Q 3Q 4Q FY vs. 4Q20 vs. FY20 New Annualized Premiums1 Life $37.1 $169.9 $53.0 $52.3 $45.4 $39.8 $190.5 7.3% 12.1% Health 49.1 154.5 35.7 41.5 39.2 47.7 164.1 -2.9% 6.2% Total Life and Health $86.2 $324.4 $88.7 $93.8 $8
Slide 7: Consumer Division Update
CNO Financial Group | Fourth Quarter 2021 Earnings | February 8, 2022 7 Consumer Division Update Fourth Quarter HighlightsKey Initiatives Transformation continues to drive sales momentum Expand reach Maintain growth momentum Optimize distribution • Total Life sales up 4% YoY; up 22% vs. 4Q19 • D2C L
Slide 8: Worksite Division Update
CNO Financial Group | Fourth Quarter 2021 Earnings | February 8, 2022 8 Worksite Division Update Fourth Quarter Highlights • Life and Health sales up 16% YoY; up 31% sequentially • Fee revenue up 125%, driven by the addition of DirectPath • Stable employer base and premium collection • Continued Dir
Slide 9: Excess Capital Allocation Strategy
CNO Financial Group | Fourth Quarter 2021 Earnings | February 8, 2022 9 Excess Capital Allocation Strategy Disciplined and opportunistic approach to maximize shareholder value Organic investments to sustain and grow the core businesses • Agent pilots, technology-driven customer experience enhancemen
Slide 10: Financial Highlights
CNO Financial Group | Fourth Quarter 2021 Earnings | February 8, 2022 10 Financial Highlights Strong earnings, disciplined expense and capital management Earnings ResultsFourth Quarter 2021 Net operating income1 $86.0 $108.5 $362.3 $365.6 Net operating income excluding significant items1 $79.6 $88.3
Slide 11: 4Q 2021 Highlights: Insurance Product Margin
CNO Financial Group | Fourth Quarter 2021 Earnings | February 8, 2022 11 4Q 2021 Highlights1 $52.0 $57.9 $66.0 $52.5 $67.0 $41.6 $27.1 $39.7 $53.2 $31.4 $125.2 $124.7 $120.9 $117.9 $129.5 Insurance Product Margin (dollars in millions) Continued net COVID benefit; stable underlying margins Insurance
Slide 12: Investment Results
CNO Financial Group | Fourth Quarter 2021 Earnings | February 8, 2022 12 $- $100.0 $200.0 $300.0 $400.0 4Q 2020 4Q 2021 Investment Income Not Allocated to Product Lines $- $100.0 $200.0 $300.0 $400.0 4Q 2020 4Q 2021 Total Net Investment Income1 Annuity Health Life Not Allocated $- $100.0 $200.0 $300
Slide 13: Portfolio Composition
CNO Financial Group | Fourth Quarter 2021 Earnings | February 8, 2022 13 IG Corporates, 51.1% Non-Agency RMBS, 7.4% Mortgage Loans, 4.5% HY Corporates, 3.0% CMBS, 8.3% Municipals, 10.5% ABS, 4.1% Govts/Agency, 1.3% CLO, 2.1% Equities, 0.5% Other Invested Assets, 2.1% Alternatives, 2.1% Policy Loans,
Slide 14: Cash Flow Profile
CNO Financial Group | Fourth Quarter 2021 Earnings | February 8, 2022 14 Cash Flow Profile 4Q free cash flow reflects impact from NAIC changes; FABN issuance (dollars in millions) 1 A non-GAAP measure. See the Appendix for a reconciliation to the corresponding GAAP measure. 2 Cash flows exclude acqu
Slide 15: Capital and Liquidity Overview
CNO Financial Group | Fourth Quarter 2021 Earnings | February 8, 2022 15 Capital and Liquidity Overview 1 The ratio of the combined capital of the insurance companies to the minimum amount of capital appropriate to support the overall business operations, as determined based on the methodology devel
Slide 16: 2022 Outlook
CNO Financial Group | Fourth Quarter 2021 Earnings | February 8, 2022 16 2022 Outlook Sales Continued positive momentum Earnings Free Cash Flow / Excess Capital Free cash flow expected to be lower than recent trend reflecting diminishing COVID impacts and alternative investment returns, capital
Slide 17: Delivering on our Commitments
CNO Financial Group | Fourth Quarter 2021 Earnings | February 8, 2022 17 Delivering on our Commitments Turnaround / De-risking Pivot to Growth Optimize Long-term Value Pre 2017 2017 – 2019 2020 – ? Ongoing • Reinsured life block (2009) • Recapitalized company (2012) • Initiated dividend (2012) • Sol
Slide 18: Investment Highlights
CNO Financial Group | Fourth Quarter 2021 Earnings | February 8, 2022 18 Well-positioned in underserved senior middle-income market Highly differentiated business model Favorable demographic tailwinds Sustainable growth initiatives in place Strong balance sheet; robust free cash flow generation Inve
Slide 19: Questions and Answers
CNO Financial Group | Fourth Quarter 2021 Earnings | February 8, 2022 19 Questions and Answers
Slide 20: Appendix 1: Quarter in Review
CNO Financial Group | Fourth Quarter 2021 Earnings | February 8, 2022 20 Appendix 1: Quarter in Review Strong Operational Performance • Broker-Dealer/Registered Investment Advisor Slide 21 • Exclusive Agent Counts Slide 22 Building on Strong Track Record of Execution • New Money Rate Walk Slide 23 •
Slide 21: Broker-Dealer/Registered Investment Advisor
CNO Financial Group | Fourth Quarter 2021 Earnings | February 8, 2022 21 Broker-Dealer/Registered Investment Advisor 1 Client assets include cash and securities in brokerage, broker/dealer customer account assets custodied directly at fund companies and insurance carriers, and assets under managemen
Slide 22: Exclusive Agent Counts
CNO Financial Group | Fourth Quarter 2021 Earnings | February 8, 2022 22 2020 % Change Consumer 4Q 1Q 2Q 3Q 4Q Y/Y Producing Field Agents1,3 4,539 4,389 4,360 4,168 4,008 -11.7% Producing Tele-Sales Agents1,3 257 258 247 235 220 -14.4% Total Producing Agents1,3 4,796 4,647 4,607 4,403 4,228 -11.8% R
Slide 23: New Money Rate Walk
CNO Financial Group | Fourth Quarter 2021 Earnings | February 8, 2022 23 New Money Rate Walk 4Q NMR up 12 bps QoQ due to selective direct investments, higher market yields
Slide 24: New Money Summary
CNO Financial Group | Fourth Quarter 2021 Earnings | February 8, 2022 24 IG Corporates 38% Structured Securities 30% Municipals 18% HY Corporates 4% CML 6% Direct investment 4% Allocation $ Allocation% Yield Average Rating Average Duration IG Corporates 262 38.3% 3.36% BBB+ 15.8 Structured Securitie
Slide 25: Long-Term Care Insurance
CNO Financial Group | Fourth Quarter 2021 Earnings | February 8, 2022 25 New sales (~$30 million annually) focused on short duration products – 99% of new sales for policies with 2 years or less in benefits – Average benefit period of 12 months – New business 25% reinsured since 2008 Reserve ass
Slide 26: Tax Asset Summary
CNO Financial Group | Fourth Quarter 2021 Earnings | February 8, 2022 26 Non-Life NOLs $242 DTAs related to tax strategy $158 Value of NOLs and deferred tax assets (DTAs) related to tax strategy Details • Total estimated economic value of tax assets related to our NOLs and tax strategy of approximat
Slide 27: Appendix 2: Financial Exhibits
CNO Financial Group | Fourth Quarter 2021 Earnings | February 8, 2022 27 Appendix 2: Financial Exhibits • Non-GAAP Financial Measures Slides 28-46
Slide 28: 4Q21 Significant Items
CNO Financial Group | Fourth Quarter 2021 Earnings | February 8, 2022 28 The table below summarizes the financial impact of significant items on our 4Q21 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results. 4Q21 Sig
Slide 29: 3Q21 Significant Items
CNO Financial Group | Fourth Quarter 2021 Earnings | February 8, 2022 29 The table below summarizes the financial impact of significant items on our 3Q21 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results. 3Q21 Sig
Slide 30: 2Q21 Significant Items
CNO Financial Group | Fourth Quarter 2021 Earnings | February 8, 2022 30 The table below summarizes the financial impact of significant items on our 2Q21 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results. 2Q21 Sig
Slide 31: 1Q21 Significant Items
CNO Financial Group | Fourth Quarter 2021 Earnings | February 8, 2022 31 The table below summarizes the financial impact of significant items on our 1Q21 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results. 1Q21 Sig
Slide 32: 4Q20 Significant Items
CNO Financial Group | Fourth Quarter 2021 Earnings | February 8, 2022 32 The table below summarizes the financial impact of significant items on our 4Q20 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results. 4Q20 Sig
Slide 33: 2Q20 Significant Items
CNO Financial Group | Fourth Quarter 2021 Earnings | February 8, 2022 33 The table below summarizes the financial impact of significant items on our 2Q20 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results. 2Q20 Sig
Slide 34: 2Q20 Significant Items (Continued)
CNO Financial Group | Fourth Quarter 2021 Earnings | February 8, 2022 34 2Q20 Significant Items (Continued from the previous page) (1) Given our expectation that interest rates will remain low for the long-term, we performed an actuarial unlocking exercise in the second quarter of 2020 to reflect ou
Slide 35: Quarterly Insurance Product Margin and Net Operating Income
CNO Financial Group | Fourth Quarter 2021 Earnings | February 8, 2022 35 4Q20 1Q21 2Q21 3Q21 4Q21 Insurance product margin Annuity 68.1$ 57.9$ 66.0$ 52.5$ 93.9$ Health 125.2 124.7 120.9 117.9 129.5 Life 37.3 27.1 39.7 53.2 30.4 Total insurance product margin 230.6 209.7 226.6 223.6 253.8 Allocated e
Slide 36: Information Related to Certain Non-GAAP Financial Measures
CNO Financial Group | Fourth Quarter 2021 Earnings | February 8, 2022 36 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 pe
Slide 37: Net Income to Net Operating Income Reconciliation
CNO Financial Group | Fourth Quarter 2021 Earnings | February 8, 2022 37 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
Slide 38: Operating Earnings Per Share Reconciliation
CNO Financial Group | Fourth Quarter 2021 Earnings | February 8, 2022 38 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 a
Slide 39: Book Value per Diluted Share
CNO Financial Group | Fourth Quarter 2021 Earnings | February 8, 2022 39 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
Slide 40: Operating Return Measures
CNO Financial Group | Fourth Quarter 2021 Earnings | February 8, 2022 40 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, impai
Slide 41: Operating Return on Equity Calculations
CNO Financial Group | Fourth Quarter 2021 Earnings | February 8, 2022 41 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
Slide 42: Operating Earnings and Significant Items Summary
CNO Financial Group | Fourth Quarter 2021 Earnings | February 8, 2022 42 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
Slide 43: Operating Return on Equity Calculations (Continued)
CNO Financial Group | Fourth Quarter 2021 Earnings | February 8, 2022 43 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
Slide 44: Consolidated Capital Reconciliation 2018-2019
CNO Financial Group | Fourth Quarter 2021 Earnings | February 8, 2022 44 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
Slide 45: Consolidated Capital Reconciliation 2020-2021
CNO Financial Group | Fourth Quarter 2021 Earnings | February 8, 2022 45 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
Slide 46: Debt to Capital Ratio Reconciliation
CNO Financial Group | Fourth Quarter 2021 Earnings | February 8, 2022 46 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), diffe