Cno Financial Group, Inc. · NYSE:CNO
Cno Financial — Q1 2023 Earnings Presentation
44 slides from Cno Financial's earnings presentation, May 1, 2023
Slide 1: First Quarter 2023 Financial and Operating Results
CNO Financial Group 1 First Quarter 2023 Financial and operating results for the period ended March 31, 2023 May 1, 2023 Unless otherwise specified, comparisons in this presentation are between 1Q22 and 1Q23. Exhibit 99.3
Slide 2: Important Legal Information
CNO Financial Group 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 results of operations and capital plans. We caution
Slide 3: CNO Financial Group 3
CNO Financial Group 3
Slide 4: Quarter in Review
CNO Financial Group 4 Continued strong overall sales, strong insurance product margins, resilient capital position Quarter in Review Strong Operational Results Disciplined Execution 1 A non-GAAP measure. See the Appendix for a reconciliation to the corresponding GAAP measure. Operating EPS1 of $0.
Slide 5: Growth Scorecard
CNO Financial Group 5 2023 1Q 2Q 3Q 4Q FY 1Q Y/Y New Annualized Premiums 1 Life $55.8 $51.4 $45.1 $40.8 $193.1 $57.1 2.3% Health 34.8 37.4 42.2 49.9 164.3 39.5 13.5% Total Life and Health $90.6 $88.8 $87.3 $90.7 $357.4 $96.6 6.6% Collected Premiums Life $226.7 $229.2 $226.4 $229.5 $911.8 $234.6 3.5%
Slide 6: Consumer Division Update
CNO Financial Group 6 Balanced growth across nearly all product lines, record D2C Life sales Consumer Division Update Strong Operational Results Disciplined Execution Total Life and Health NAP up 4% Total third-party policies issued up 81%, Medicare Advantage sales up 55% Life NAP - record D2C
Slide 7: Worksite Division Update
CNO Financial Group 7 Eighth consecutive quarter of insurance sales growth; fourth consecutive quarter of producing agent count growth Worksite Division Update Life and Health insurance sales up 28% Strong retention of existing employer customers Stable employee persistency and premium collect
Slide 8: Financial Highlights
CNO Financial Group 8 Financial Highlights Non-economic accounting impact to GAAP earnings, solid operating earnings Earnings ResultsFirst Quarter 2023 Net operating income1 $64.5 $58.6 Net income (loss) $183.4 ($0.8) Weighted average shares outstanding (in millions) 121.0 114.5 (dollars in millions
Slide 9: Insurance Product Margin
CNO Financial Group 9 1Q22 2Q22 3Q22 4Q22 1Q23 Annuity $55.9 $60.1 $60.1 $54.0 $57.3 Fixed indexed annuities $44.8 $48.4 $48.9 $44.5 $46.5 Fixed interest annuities $8.5 $7.9 $8.2 $7.8 $9.1 Other annuities $2.6 $3.8 $3.0 $1.7 $1.7 Health $115.3 $125.4 $123.3 $122.1 $116.5 Supplemental health $56.1 $5
Slide 10: Investment Results
CNO Financial Group 10 $27.0 $15.5 $- $50.0 $100.0 $150.0 $200.0 1Q 2022 1Q 2023 Investment Income Not Allocated to Product Lines $- $100.0 $200.0 $300.0 $400.0 1Q 2022 1Q 2023 Total Net Investment Income1 Annuity Health Life Not Allocated $251.2 $- $100.0 $200.0 $300.0 $400.0 1Q 2022 1Q 2023 Invest
Slide 11: Portfolio Composition
CNO Financial Group 11 Quality of portfolio evident during recent market turmoil, continued up-in-quality bias Portfolio Composition $25 billion of Invested Assets Highlights (Fair Value as of 3/31/2023) General Approach Positioned for relative stable performance across credit cycles Focus on qu
Slide 12: Capital and Liquidity: Debt to Capital, RBC Ratio
CNO Financial Group 12 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 developed by the National Association of Insurance Commissioners. 2 Excluding accumula
Slide 13: 2023 Outlook
CNO Financial Group 13 2023 Outlook1 1Applying LDTI, the new FIA operating income methodology, and excluding significant items. Free Cash Flow / Excess Capital Earnings 375% consolidated RBC ratio target Target leverage of 25.0% – 28.0% $170mm – $200mm of excess cash flow to holdco before impa
Slide 14: Investment Highlights
CNO Financial Group 14 Investment Highlights Sustainable growth initiatives in place Favorable demographic tailwinds Exclusive focus on underserved middle market Diverse and integrated "last mile" virtual & in-person model Strong balance sheet and solid free cash flow generation
Slide 15: Questions and Answers
CNO Financial Group 15 Questions and Answers
Slide 16: Excess Capital Allocation Strategy
CNO Financial Group 16 Agent pilots, technology- driven customer experience enhancements Hybrid distribution Worksite B2B marketing, lead generation Share repurchases: $15 million in 1Q23 Dividends: $17 million in 1Q23 Highly selective M&A CNO Ventures; strategic minority investments l
Slide 17: Cash Flow Profile
CNO Financial Group 17 Cash Flow Profile 1 A non-GAAP measure. See the Appendix for a reconciliation to the corresponding GAAP measure. 2 Cash flows exclude acquisitions, dividend payments, stock repurchases, and financing transactions. (dollars in millions) 1Q22 1Q23 1Q22 1Q23 Net Operating Income1
Slide 18: Appendix 1: Quarter in Review
CNO Financial Group 18 Appendix 1: Quarter in Review Strong Operational Performance Broker-Dealer/Registered Investment Advisor Slide 19 Exclusive Agent Counts Slide 20 Building on Strong Track Record of Execution New Money Rate Walk Slide 21 New Money Summary Slide 22 Commercial Mortgage
Slide 19: Broker-Dealer/Registered Investment Advisor
CNO Financial Group 19 Account values down 8% YoY; $2.6 billion in client assets 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 m
Slide 20: Exclusive Agent Counts
CNO Financial Group 20 PAC growth across both divisions a result of successful recruiting strategies and a softening labor market, veteran agent retention strong Exclusive Agent Counts 1 Producing agents represent the monthly average of exclusive agents that have submitted at least one policy in the
Slide 21: New Money Rate Walk
CNO Financial Group 21 Significant NMR increase reflects higher market yields New Money Rate Walk 5.96% 6.34% -0.45% 0.84% 0.00% -0.01%
Slide 22: New Money Summary
CNO Financial Group 22 Strategically harvesting rising market yields, in the context of up-in-quality strategy New Money Summary 1Q General Account New Money Purchases $ % GAAP YTM Duration IG Corp AAA-A 146.6 21.3% 6.10% 5.64 IG Corp BBB 14.5 2.1% 6.24% 5.94 HY Corp 0.9 0.1% 6.30% 5.59 Municipals 3
Slide 23: Commercial Mortgage Loans
CNO Financial Group 23 36% 17% 30% 11% 6% 0% < 40% 40% - 50% 50% - 60% 60% - 70% 70% - 75% >75% Commercial Mortgage Loans Our CRE loan portfolio emphasizes lower risk sectors Our CRE loan portfolio is conservatively margined with cushion for adverse development % o f T ot al A U M LTV Apartment 37.3
Slide 24: Commercial Mortgage-Backed Securities
CNO Financial Group 24 CNO Index Multifamily Office Other Industrial Retail Hotel $4.4 $5.4 $6.1 $8.6 $12.3 $14.7 $17.2 $21.5 Source: NAIC Loss Scenario Commercial Mortgage-Backed Securities Our CMBS investments have significant structural cushion for collateral losses Our holdings have limited loss
Slide 25: Long-Term Care Insurance
CNO Financial Group 25 New sales (~$25 million annually) focused on short duration products 98% of new sales for policies with 2 years or less in benefits Average benefit period of 11 months New business 25% reinsured since 2008 Reserve assumptions informed by historical experience No morbid
Slide 26: Tax Asset Summary
CNO Financial Group 26 Non-Life NOLs $150 DTAs related to tax strategy $224 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 approximately $218 million @ 10% discount rate ($1.88 on a p
Slide 27: Appendix 2: Financial Exhibits
CNO Financial Group 27 Appendix 2: Financial Exhibits Non-GAAP Financial Measures Slides 28 - 44
Slide 28: Insurance Product Margin, Three Months Ended December 31, 2022
CNO Financial Group 28 Insurance product margin Annuity 50.8$ 3.2$ (1) 54.0$ Health 140.4 (18.3) (1) 122.1 Life 43.3 14.4 (1) 57.7 Total insurance product margin 234.5 (0.7) 233.8 Allocated expenses (149.1) - (149.1) Income from insurance products 85.4 (0.7) 84.7 Fee income 9.2 - 9.2 Investment inco
Slide 29: Insurance Product Margin, Three Months Ended June 30, 2022
CNO Financial Group 29 Insurance product margin Annuity 60.1$ -$ 60.1$ Health 125.4 - 125.4 Life 70.2 - 70.2 Total insurance product margin 255.7 - 255.7 Allocated expenses (152.2) - (152.2) Income from insurance products 103.5 - 103.5 Fee income 3.2 - 3.2 Investment income not allocated to product
Slide 30: Insurance Product Margin, Three Months Ended December 31, 2021
CNO Financial Group 30 Insurance product margin Annuity 65.6$ 0.7$ (1) 66.3$ Health 126.2 (7.1) (1) 119.1 Life 53.4 3.4 (1) 56.8 Total insurance product margin 245.2 (3.0) 242.2 Allocated expenses (143.3) - (143.3) Income from insurance products 101.9 (3.0) 98.9 Fee income 2.9 - 2.9 Investment incom
Slide 31: Insurance Product Margin, Three Months Ended September 30, 2021
CNO Financial Group 31 Insurance product margin Annuity 58.5$ -$ 58.5$ Health 122.8 - 122.8 Life 60.8 - 60.8 Total insurance product margin 242.1 - 242.1 Allocated expenses (140.5) - (140.5) Income from insurance products 101.6 - 101.6 Fee income 2.6 - 2.6 Investment income not allocated to product
Slide 32: Insurance Product Margin, Three Months Ended June 30, 2021
CNO Financial Group 32 Insurance product margin Annuity 60.0$ -$ 60.0$ Health 121.7 - 121.7 Life 50.3 - 50.3 Total insurance product margin 232.0 - 232.0 Allocated expenses (141.6) - (141.6) Income from insurance products 90.4 - 90.4 Fee income 6.6 - 6.6 Investment income not allocated to product li
Slide 33: (dollars in millions) * Management believes that an analysis of Net income applicable to
CNO Financial Group 33 (dollars in millions) * Management believes that an analysis of Net income applicable to common stock before: (i) net realized investment gains or losses from sales, impairments and the change in allowance for credit losses, net of taxes; (ii) net change in market value of inv
Slide 34: Information Related to Certain Non-GAAP Financial Measures
CNO Financial Group 34 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
Slide 35: Reconciliation of Net Income to Net Operating Income
CNO Financial Group 35 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) Information Related to Certain Non-GAAP Financial Measures 1Q22 2Q22 3Q22 4Q22 1Q23 Net income (loss
Slide 36: Operating Income and Shares for Operating EPS
CNO Financial Group 36 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) Information Related to Certain Non-GAAP Financial Measures 1Q22 2Q22 3Q22 4Q
Slide 37: Book Value per Diluted Share
CNO Financial Group 37 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 converted. The dilution from options, res
Slide 38: Operating Return Measures
CNO Financial Group 38 Operating return measures Management believes that an analysis of net income applicable to common stock before net realized investment gains or losses from sales, impairments and change in allowance for credit losses, net change in market value of investments recognized in ear
Slide 39: Operating Return on Equity Calculations
CNO Financial Group 39 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 item, on equity, excluding accumulated other comprehen
Slide 40: Operating Earnings and Significant Items Summary
CNO Financial Group 40 The following summarizes: (i) operating earnings; (ii) significant items; (iii) operating earnings, excluding significant items; and (iv) net income (loss): (dollars in millions) (a) The significant items have been discussed in prior press releases. (Continued on next page) In
Slide 41: Operating Return on Equity Calculations (continued)
CNO Financial Group 41 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 item, on equity, excluding accumulated other comprehen
Slide 42: Reconciliation of Consolidated Capital to Shareholders' Equity
CNO Financial Group 42 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) Information Related to Certain Non-GAAP Fi
Slide 43: Reconciliation of Consolidated Capital, Trailing Four Quarter Average
CNO Financial Group 43 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) Information Related to Certain Non-GAAP Fi
Slide 44: Debt to Capital Ratio, Excluding AOCI
CNO Financial Group 44 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 income (loss) has been excluded fro