Cno Financial Group, Inc. · NYSE:CNO

Cno Financial — Investor Presentation (December 2011)

30 slides from Cno Financial's investor presentation, Dec 14, 2011

  1. Slide 1: DAC Accounting Change: Estimated Impacts of Implementing ASU 2010-26

    DAC Accounting Change Estimated Impacts of Implementing ASU 2010-26 December 14, 2011 Exhibit 99.1

  2. Slide 2: Forward-Looking Statements

    CNO Financial Group 2 Forward-Looking Statements Cautionary Statement Regarding Forward-Looking Statements. Our statements, trend analyses and other information contained in these materials relative to markets for CNO Financial‟s products and trends in CNO Financial‟s operations or financial results

  3. Slide 3: Non-GAAP Measures

    CNO Financial Group 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 other comprehensive income (loss) per sha

  4. Slide 4: CNO Financial Group

    E 3 CNO FINANCIAL GROUP CNO Financial Group

  5. Slide 5: CNO's Stock Value Proposition

    CNO Financial Group 5 CNO’s Stock Value Proposition  Growth – Above average growth potential – Expected sales growth of 8-12% annually – Total population of 65+ expected to increase ~35% by 2020 and ~80% by 2030  Capital – Strong capital position • 359% RBC and $169 million of cash and investments

  6. Slide 6: CNO 3Q 2011 Earnings Call Disclosure: Estimated Impacts of ASU 2010-26

    CNO Financial Group 6 CNO 3Q 2011 Earnings Call Disclosure Estimated Impacts of ASU 2010-26 (formerly referred to as EITF 09-G) September 30, 2011 Pro Forma Estimates are unchanged from what we disclosed during our 3Q 2011 Earnings Call Aggregate Per Diluted Share Annual Net Income Reduction of $29

  7. Slide 7: Statutory earnings and cash generation remain unchanged

    CNO Financial Group 7 $223.4 $252.3 $281.6 $114.6 $159.0 $227.4 2008 2009 2010 Reported Pre-Tax GAAP Operating Income Restated* Pre-Tax GAAP Operating Income $107.0 $269.5 $279.3 $139.6 $137.1 $132.4 Pre-Tax Stat Operating Income Fees and Interest to Holding Company Dividends to Holding Company Impa

  8. Slide 8: Agenda

    CNO Financial Group 8 Agenda  Background and Summary of DAC Accounting Changes  Summary of Impacts on CNO  Additional Disclosures and Potential Mitigation Actions  Impacts on New and Inforce Business  Inforce results more indicative of business performance and long term value  Implications of

  9. Slide 9: Background and Summary of DAC Accounting Changes

    CNO Financial Group 9 Background and Summary of DAC Accounting Changes Reasons for Change – Diversity in practice relating to what costs are deferred – Concepts of “vary with” and “primarily related to” are not clearly defined – Improve comparability across insurers Changes in the Definition of De

  10. Slide 10: Summary of Impacts on CNO

    CNO Financial Group 10 Summary of Impacts on CNO  No change in the economics of our business – GAAP accounting change only – Will adopt retrospectively in 1Q 2012 – No changes to cash flow, Statutory financials, tax position (NOL) or capital generation  Change impacts GAAP results of each of our f

  11. Slide 11: Summary of EBIT Impact by Segment

    CNO Financial Group 11 Summary of EBIT Impact by Segment Year-ended December 31, 2010 ($ in millions) As Reported Total In-force New Business Bankers Life 284.1$ 238.5$ 330.0$ (91.5)$ Washington National 104.6 100.2 100.6 (0.4) Colonial Penn 26.5 4.1 38.4 (34.3) Other CNO Business (11.5) (9.1) (9.1)

  12. Slide 12: Where and Why CNO is Expected to be Impacted Disproportionately

    CNO Financial Group 12 Where and Why CNO is Expected to be Impacted Disproportionately  Direct marketing at Colonial Penn Career distribution at Bankers New business strains earnings in year of issue – Growth suppresses reported earnings – CNO sales growth rate higher than market  Fresh start ac

  13. Slide 13: Estimated Adjustments to Consolidated DAC Balance by Component

    CNO Financial Group 13 Estimated Adjustments to Consolidated DAC Balance - Summarized by DAC Component September 30, 2011 Pro Forma ($ millions) DAC Before Retroactive Adoption (1) Adjustments DAC After Retroactive Adoption (1) Commissions 933$ (28)$ 905$ Overhead 389 (389) - Labor Costs 320 (275) 4

  14. Slide 14: Estimated Impacts – Consolidated

    CNO Financial Group 14 Estimated Impacts – Consolidated September 30, 2011 Pro Forma Aggregate Per Diluted Share Annual Net Income Reduction of $29 million to $34 million 9¢ to 12¢ Book Value excluding AOCI Reduction of $465 million to $510 million (10% - 12%) $1.50 to $1.70 Operating ROE Not signif

  15. Slide 15: Impact on Debt Covenants

    CNO Financial Group 15 Impact on Debt Covenants (as of September 30, 2011)  Impact on debt to capital ratio – Current covenant level 30.0% – Current debt to capital ratio 18.0% – Pro Forma after accounting change 20.0% No impact on other key covenant metrics – Statutory surplus – RBC ratio – Inter

  16. Slide 16: Additional Disclosures and Potential Mitigation Actions

    CNO Financial Group 16 Additional Disclosures and Potential Mitigation Actions  Bifurcate Results Between Inforce and New Business – Inforce results more indicative of business performance and long term value –New business results impacted by rate of sales and direct advertising spend  Potential B

  17. Slide 17: Estimated Impact Illustration – CNO Consolidated

    CNO Financial Group 17 Estimated Impact Illustration – CNO Consolidated ($ millions) As Reported Total In-force New Business New annualized premiums 366.1$ 366.1$ -$ 366.1$ Insurance policy income 2,670.0$ 2,670.0$ 2,327.8$ 342.2$ Investment / other income 1,383.7 1,383.7 1,322.5 61.2 Benefits & cha

  18. Slide 18: CNO Consolidated GAAP EBIT: New Business vs. Inforce

    CNO Financial Group 18 $293.6 $361.5 $417.1 $172.6 $248.2 $290.9 $(121.0) $(113.3) $(126.2) $(150.0) $(100.0) $(50.0) $- $50.0 $100.0 $150.0 $200.0 $250.0 $300.0 $350.0 $400.0 $450.0 2008 2009 2010 In-Force Net EBIT New Business Estimated Impact Illustration – CNO Consolidated ($ millions) CNO Conso

  19. Slide 19: Estimated Impact Illustration – Bankers Life

    CNO Financial Group 19 Estimated Impact Illustration – Bankers Life ($ millions) Bankers Life - GAAP EBIT Restated for ASU 2010-26: New Business vs. Inforce Restated acquisition expenses (net of deferrals) & amortization $173.8 $171.8 $169.4 As reported EBIT $171.5 $278.0 $284.1 $169.2 $297.0 $330.0

  20. Slide 20: Estimated Impact Illustration – Washington National

    CNO Financial Group 20 Estimated Impact Illustration – Washington National ($ millions) Washington National - GAAP EBIT Restated for ASU 2010-26: New Business vs. Inforce Restated acquisition expenses (net of deferrals) & amortization $34.2 $30.1 $23.2 As reported EBIT $121.1 $110.9 $104.6 $121.5 $1

  21. Slide 21: Estimated Impact Illustration – Colonial Penn

    CNO Financial Group 21 Estimated Impact Illustration – Colonial Penn ($ millions) Colonial Penn- GAAP EBIT Restated for ASU 2010-26: New Business vs. Inforce * $29.8 $36.0 $38.4 $(10.7) $9.9 $4.1 $(40.5) $(26.1) $(34.3) $(50.0) $(40.0) $(30.0) $(20.0) $(10.0) $- $10.0 $20.0 $30.0 $40.0 $50.0 2008 20

  22. Slide 22: Estimated Impact Illustration – Other CNO Business

    CNO Financial Group 22 Estimated Impact Illustration – Other CNO Business ($ millions) Other CNO Business - GAAP EBIT Restated for ASU 2010-26: New Business vs. Inforce $(0.2) $(43.5) $(9.1) $(50.0) $(40.0) $(30.0) $(20.0) $(10.0) $- $10.0 2008 2009 2010 In-Force ROAC Impact 2010 As Reported (2.9%)

  23. Slide 23: Pro Forma Illustration – If PVFP were treated like DAC

    CNO Financial Group 23 Pro Forma Illustration – If PVFP were treated like DAC (1) DAC and PVFP balances are before the impacts of unrealized appreciation of investments (2) Pro Forma assuming the balance of PVFP and amortization of PVFP is reduced by the same proportional decreases as DAC and DAC am

  24. Slide 24: Summary

    CNO Financial Group 24 Summary  GAAP accounting change only; economics of the business do not change – No impact to statutory financials or cash flow – No impact on valuable NOL asset  Continued above average growth potential – Focus on underserved and growing senior and middle income market – Inv

  25. Slide 25: Questions and Answers

    Ei CNO FINANCIAL GROUP Questions and Answers

  26. Slide 26: Appendix

    Ei CNO FINANCIAL GROUP Appendix

  27. Slide 27: Estimated Impact Illustration – Bankers Life

    CNO Financial Group 27 Estimated Impact Illustration – Bankers Life ($ millions) As Reported Total In-force New Business New annualized premiums 245.4$ 245.4$ -$ 245.4$ Insurance policy income 1,596.2$ 1,596.2$ 1,341.1$ 255.1$ Investment / other income 771.7 771.7 710.5 61.2 Benefits & changes in re

  28. Slide 28: Estimated Impact Illustration – Washington National

    CNO Financial Group 28 Estimated Impact Illustration – Washington National ($ millions) As Reported Total In-force New Business New annualized premiums 74.4$ 74.4$ -$ 74.4$ Insurance policy income 581.0$ 581.0$ 526.2$ 54.8$ Investment / other income 186.5 186.5 186.5 - Benefits & changes in reserves

  29. Slide 29: Estimated Impact Illustration – Colonial Penn

    CNO Financial Group 29 Estimated Impact Illustration – Colonial Penn ($ millions) As Reported Total In-force New Business New annualized premiums 46.3$ 46.3$ -$ 46.3$ Insurance policy income 194.9$ 194.9$ 162.6$ 32.3$ Investment / other income 40.0 40.0 40.0 - Benefits & changes in reserves 144.8 14

  30. Slide 30: Estimated Impact Illustration – Other CNO Business

    CNO Financial Group 30 Estimated Impact Illustration – Other CNO Business ($ millions) As Reported Total In-force New Business New annualized premiums -$ -$ -$ -$ Insurance policy income 297.9$ 297.9$ 297.9$ -$ Investment / other income 364.6 364.6 364.6 - Benefits & changes in reserves 521.0 521.0

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