CNO Financial Group, Inc. · NYSE:CNO
CNO Financial — Investor Presentation (March 2014)
35 slides from CNO Financial's investor presentation, Mar 26, 2014
Slide 1: CNO Overview
CNO Overview March 26, 26 2014
Slide 2: CNO Financial Group | CNO Overview | March 26, 2014
CNO Financial Group | CNO Overview | March 26, 2014 2
Slide 3: 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 4: Non-GAAP Measures
Non-GAAP Measures This presentation contains financial measures that differ from the comparable measures under Generally Accepted Accounting Principles (GAAP). Reconciliations between those non-GAAP GAAP measures and d th the comparable bl GAAP measures are iincluded l d d iin th the A Appendix. di
Slide 5: CNO Strategy & Execution
CNO Strategy & Execution What Differentiates CNO? Middle-Market Focus Exclusive Distribution Alignment Strategy to Build Long Term Shareholder Value Build on investment in the business Focus on sustainable profitable growth Increase operating effectiveness Enhance the Customer Experien
Slide 6: Key Initiatives
Key Initiatives Leveraging Middle Market Focus & Business Model Plan to Invest $45 - $55 million in Key Initiatives in 2014 to Drive Above Industry Growth Rates Investment Breakdown Key Initiatives Customer Agent productivity Experience / Agent Growth and Brand Branch and geographic expansion Ex
Slide 7: OCB Solutions – Strategic Considerations
OCB Solutions – Strategic Considerations Divested and Reinsured $4bn of Run-off Reserves Favorable pro forma economic impact unlocking An Economic Exit “trapped capital” for reinvestment Reduces exposure to low-for-long rates, LTC Reduce “Beta” volatility, and natural asset leverage Reduces complexi
Slide 8: OCB Solutions - $4bn in Run-Off Reserves
OCB Solutions - $4bn in Run-Off Reserves 12/31/13 OCB Net Statutory Reserves ($ millions) OCB – Ceded & Being Sold $550mm of statutory LTC reserves reinsured to Traditional Retained By CNO Life Beechwood Re - reported in 4Q 2013 results $424 Sale of Conseco Life Insurance Company (“CLIC”) to Ann
Slide 9: Financial Plan Underpinnings
Financial Plan Underpinnings Investing to Drive Long-Term Growth • Stepped Stepped-up up investment in growth and platform initiatives with an incremental impact on expenses in 2014 of ~$10 million Reshaping In-Force & Building Economic Value • Value of new business governs the run-on of profitable
Slide 10: Segment Earnings
Segment Earnings CNO ($ millions) Segment EBIT Excluding Significant Items* Strengths $129.3 Bankers annuity and Medicare $119.2 supplement margins $110.2 $34.6 $101.9 $107.1 $31.5 Washington National premium growth $30.3 $28.1 and health margins $29.4 Strongg corporate p investment results
Slide 11: Capital Targets & Excess Capital Deployment
Capital Targets & Excess Capital Deployment Investment-grade ratings dialed in while maintaining our tactical approach to deployment … 2013 2014 Outlook 2014 Share Repurchases Guidance RBC 410% ~ 400% v Liquidity $309mm ~ $434mm High end of our expected range of $225 to $300mm absent compelling alte
Slide 12: ROE Development
ROE Development CNO Notable Items Normalized Operating ROE* Results reflect net favorable 8.1% 8.3% 8.6% 8.5% 8.2% earnings performance offset by build in excess capital Sale of CLIC and reinsurance transactions add approximately 90 basis points to ROE on a pro forma basis Leverage continues t
Slide 13: CNO Moving Forward
CNO Moving Forward Financial Fi i l St Strength th – Focus on sustainable, profitable growth while reshaping in-force driving a higher quality ROE Focused on Core Franchise Growth – Investments in distribution productivity and growth yielding top-tier industry growth rates Tactical Deployment
Slide 14: Q&A
Q&A CNO Financial Group | CNO Overview | March 26, 2014 14
Slide 15: Appendix
A Appendix di CNO Financial Group | CNO Overview | March 26, 2014 15
Slide 16: Returning Capital to our Shareholders
Returning Capital to our Shareholders CNO Highlights Since initiating the share buyback Total Securities Repurchases p by y Quarter program, repurchased equivalent of 90 ($ in millions) million shares, leading to a 29%* reduction in weighted average diluted shares outstanding Cumulative investme
Slide 17: Loss Recognition & Cash Flow Testing
Loss Recognition & Cash Flow Testing CNO 2013 GAAP Loss Recognition Testing 2013 Statutory Cash Flow Testing Aggregate margins remain strong at 14% of Aggregate insurance company margins improved $25 billion in tested liabilities* at 12% of statutory reserves Testing margin increased modestly
Slide 18: Pro Forma Estimates
Pro Forma Estimates Financial Metric Pro Forma Estimates Purchase Price (1) $237mm Price to Statutory Capital & Surplus (1) 1.5x Estimated Increase to Holding Company Liquidity (2) $125mm Pro Forma GAAP Loss on Sale (3) $( $(303)mm ) Pro Forma GAAP Book Value Impact (3) $(447)mm Pro Forma EPS Impact
Slide 19: OCB Solutions Reduce Capital-at-Risk
OCB Solutions Reduce Capital-at-Risk Interest Rate Risk CFT Margin Impact Assuming 70 basis point drop in new money rate indefinitely OCB Reserve Margins: Thin aggregate Loss Recognition Testing 12/31/13 Actual 12/31/13 Pro Forma* and Cash Flow Testing margins for OCB ISL and LTC (~1%) ISL and L
Slide 20: Information Related to Certain Non-GAAP Financial Measures
Information Related to Certain Non-GAAP Financial Measures The following provides additional information regarding certain non-GAAP measures used in this presentation. A non-GAAP measure is a numerical measure of a company’s performance, financial position, or cash flows that excludes or includes am
Slide 21: Quarterly Earnings
Quarterlyy Earnings g CNO ($ millions) 4Q12 1Q13 2Q13 3Q13 4Q13 Bankers Life $ 73.7 $ 62.1 $ 79.1 $ 86.3 $ 83.0 Washington National 34.6 29.4 31.8 28.1 31.5 Colonial Penn 3.2 (5.4) 1.2 (4.2) (4.1) Other CNO Business 5.2 3.6 2.6 6.1 13.2 EBIT* from business segments 116.7 89.7 114.7 116.3 123.6 Corpo
Slide 22: 4Q12 Significant Items
4Q12 Significant Items CNO The table Th t bl b below l summarizes i th the fi financial i l iimpactt off significant i ifi t it items on our 4Q2012 nett operating ti income. i Management M t believes b li th thatt identifying the impact of these items enhances the understanding of our operating resu
Slide 23: 1Q13 Significant Items
1Q13 Significant Items CNO The ttable Th bl bbelow l summarizes i th the fi financial i l iimpactt off the th significant i ifi t it item on our 1Q2013 nett operating ti income. i Management M t believes b li that identifying the impact of this item enhances the understanding of our operating result
Slide 24: 2Q13 Significant Items
2Q13 Significant Items CNO Th ttable The bl bbelow l summarizes i th the fi financial i l iimpactt off the th significant i ifi t it items on our 2Q2013 nett operating ti income. i M Managementt believes b li that identifying the impact of these items enhances the understanding of our operating resu
Slide 25: 3Q13 Significant Items
3Q13 Significant Items CNO The table Th t bl b below l summarizes i th the fi financial i l iimpactt off significant i ifi t it items on our 3Q2013 nett operating ti income. i Management M t believes b li th thatt identifying the impact of these items enhances the understanding of our operating resu
Slide 26: 4Q13 Significant Items
4Q13 Significant Items CNO The table Th t bl b below l summarizes i th the fi financial i l iimpactt off significant i ifi t it items on our 4Q2013 nett operating ti income. i Management M t believes b li th thatt identifying the impact of these items enhances the understanding of our operating resu
Slide 27: 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 loss related to reinsurance transaction, net realized gains or losses, fair value changes due to fluctuations in the interest rate
Slide 28: Information Related to Certain Non-GAAP Financial Measures
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); (ii) operating return, excluding significant items, on equity,
Slide 29: 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, earnings, excluding Net exclud
Slide 30: 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): Twelve months ended 4Q12 1Q13 2Q13 3Q13 4Q13 Pretax operating earnings (a non-GAAP financial measure) $ 284.1 $ 2
Slide 31: 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): 4Q11 1
Slide 32: 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): Traili
Slide 33: 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
Slide 34: Information Related to Certain Non-GAAP Financial Measures
Information Related to Certain Non-GAAP Financial Measures Pro forma impacts The pro forma impacts are calculated as if the sale of CLIC and the recapture of a traditional life block by Bankers Life had been completed on December 31, 2013. Actual results will vary based on the fair value of CLIC’s i
Slide 35: Information Related to Certain Non-GAAP Financial Measures
Information Related to Certain Non-GAAP Financial Measures Pro forma impacts The following presents the pro forma impact on our operating earnings measures as if the sale of CLIC and the recapture of a traditional life block by Bankers Life had been completed on January 1, 2013 (dollars in millions,
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