Cno Financial Group, Inc. · NYSE:CNO
Cno Financial — Conseco — Q4 2009 Earnings Presentation
80 slides from Cno Financial's earnings presentation, Feb 26, 2010
Slide 1: Fourth Quarter 2009 Financial and Operating Results
Fourth Quarter 2009 Financial and Operating Results For the period ended December 31, 2009 Conseco, Inc. February 26, 2010
Slide 2: Forward-Looking Statements
Forward-Looking Statements Cautionary Statement Regarding Forward-Looking Statements. Our statements, trend analyses and other information contained in these materials relative to markets for Conseco’s products and trends in Conseco’s operations or financial results, as well as other statements, con
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 m
Slide 4: Q4 2009 Summary
Q4 2009 Summary CNO Fourth consecutive quarter of net income Core sales* of $118.9 million, up 18% from Q4 2008 Net operating income** of $32.0 million, compared to net operating income of $33.4 million in Q4 2008 • Results impacted by legal and regulatory accruals of $16 million ($0.04 per sh
Slide 5: Impact of Capital Management Actions
Impact of Capital Management Actions CNO Common equity increased by $296 million through sale of stock ($223 million public issue/$73 million private placement) Senior Credit Facility • Balance reduced by $198 million • Covenants restructured and extended to provide greater flexibility Old 3.5
Slide 6: Litigation and Regulatory Exams
Litigation and Regulatory Exams CNO Reached settlement in principle involving approximately 700 policyholders who opted out of previously settled R-factor class action • Resolves final R-factor litigation pending against Conseco Life Reached settlement in principle of multi-state market conduct
Slide 7: Material Control Weakness
Material Control Weakness CNO Considerable progress has been made; issue isolated to portion of Specified Disease policies, comprising approximately 1% of total company reserves Newly enhanced controls have not been operating for sufficient time to demonstrate their effectiveness Given our enh
Slide 8: Collected Premiums
Collected Premiums CNO ($ millions) Collected Premiums-Trailing 4 Quarters Total collected premiums for trailing 4 quarters down Q4 2008 Q1 2009 Q2 2009 Q3 2009 $4,524.9 $4,549.3 $4,494.9 $4,423.1 9% vs 2008 Q4 2009 $4,114.8 Decline at Bankers due to CIG termination of PFFS group quota share con
Slide 9: Q4 2009 Summary of Results
Q4 2009 Summary of Results CNO ($ millions, except per-share amounts) Pre-Tax After Tax EPS Bankers Life $84.6 Colonial Penn 5.9 Conseco Insurance Group (6.7) Corporate operations and interest expense (35.9) Income before net realized investment losses and valuation allowance for deferred tax assets
Slide 10: Q4 Earnings Consolidated
Q4 Earnings CNO Consolidated ($ millions) Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Bankers Life $40.0 $44.7 $63.3 $85.4 $84.6 Colonial Penn 6.7 5.1 11.0 7.4 5.9 Conseco Insurance Group 31.5 31.2 21.2 21.6 (6.7) Corporate operations, excluding interest expense (0.1) (8.7) (8.8) (7.4) (12.8) Total EBIT
Slide 11: Operating ROE
Operating ROE CNO Operating ROE*, Trailing 4 Quarters Q2 2009 Q3 2009 Q4 2009 6.6% 6.6% 6.5% Q1 2009 5.7% Q4 2008 4.8% *Operating return excludes gain (loss) on extinguishment or modification of debt, net realized investment gains (losses), valuation allowance related to deferred tax assets and disc
Slide 12: Operating EPS (Diluted)
Operating EPS (Diluted)* CNO Q4 2009 impacted by: • Legal and regulatory accruals ($0.04 per share) Q3 2009 $0.29 Q2 2009 Q1 2009 $0.22 Q4 2008 $0.20 $0.18 Q4 2009 $0.15 ** *Operating earnings per share exclude gain (loss) on extinguishment or modification of debt, net realized investment gains (l
Slide 13: Book Value
Book Value CNO (millions, except per-share amounts) 12/31/08 3/31/09 6/30/09 9/30/09 12/31/09 Shareholders’ Equity (excluding AOCL) $3,400.7 $3,431.7 $3,461.9 $3,479.7 $3,796.7 Accumulated Other Comprehensive Loss (1,770.7) (1,840.5) (1,046.9) (146.0) (264.3) Total Shareholders’ Equity $1,630.0 $1,5
Slide 14: Q4 2009 Liquidity
Q4 2009 Liquidity CNO ($ millions) Cash Balance 9/30/09 $85.6 Sources Equity Proceeds, net of expenses $297.7 Net Proceeds from New Convertible Debentures 172.0 Surplus Debenture Interest 12.3 Management and Investment Fees and Other 21.4 Total Sources 503.4 Uses Interest 24.9 Debt Repayments: Senio
Slide 15: Consolidated RBC Ratio
Consolidated RBC Ratio* CNO Exceeded year-end target of 275% and mid-term target of 300%+ Q4 2009 Q4 2009 positive impacts: Q4 2008 Q3 2009 309% Q2 2009 255% Q1 2009 252% • RMBS re-rating (35 pts) 230% 247% • Statutory operating results (12 pts) • Bankers reinsurance transaction with Wilton Re (
Slide 16: Consolidated RBC Ratio Changes Over Last Four Quarters
CNO 16 309% 12/31/09 RBC -4% Changes Over Last Four Quarters Other, Including Changes in Covariance -32% Net Statutory Investment Losses -51% Credit Rating Migration Consolidated RBC Ratio – +22% Reinsurance Transactions +34% Mortgage Experience Adjustment Factor +35% Re-Rating of RMBS +50% Statutor
Slide 17: Q4 Summary Bankers
Q4 Summary Bankers Earnings of $84.6 million, up 112% over Q4 2008: • Higher PDP and PFFS income due to favorable IBNR development (+$24 million) • Higher LTC income due to favorable development of prior-period reserves and policyholder actions following recent rate increases (+$7 million) • Favor
Slide 18: Sales & Distribution Results Bankers
Sales & Distribution Results Bankers ($ millions) Quarterly Core NAP (Excludes PFFS) Core NAP up 28% vs Q4 2008 • Strong Med Supp sales include Q4 2009 $91.7 successful conversion of portion of Q4 2008 Coventry PFFS policyholders $71.9 Q1 2009 Q2 2009 Q3 2009 $63.1 $62.5 (+104%) $60.4 • Increases
Slide 19: Medicare Update Bankers
Medicare Update Bankers As previously disclosed, approximately 51,000 Coventry PFFS policies terminated as of 12/31/09. During Q4 2009: • 18% of these customers purchased a Bankers Med Supp product (recognized in Q4 sales) • Another 17% of these customers purchased Humana Med-Advantage plans (fee-
Slide 20: Q4 Earnings Bankers
Q4 Earnings Bankers ($ millions) Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Insurance policy income $531.8 $491.5 $497.6 $493.1 $477.0 Net investment income: General account assets 159.0 155.4 160.2 162.2 165.8 Other portfolios (3.6) (13.2) 3.4 37.4 6.9 Fee revenue and other income 4.2 1.4 1.6 2.4 4.8
Slide 21: Q4 Summary Colonial Penn
Q4 Summary Colonial Penn Earnings of $5.9 million, down 12% from Q4 2008 • Primarily due to lower investment income, partially offset by expense reductions Life sales of $8.4 million, down 22% from Q4 2008 • Consistent with advertising reductions arising from capital management activities Coll
Slide 22: Q4 Earnings Colonial Penn
Q4 Earnings Colonial Penn ($ millions) Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Insurance policy income $46.5 $47.1 $52.7 $48.4 $47.9 Net investment income 10.2 9.8 9.8 9.5 9.6 Fee revenue and other income 0.5 0.2 0.2 0.2 0.3 Total revenues 57.2 57.1 62.7 58.1 57.8 Insurance policy benefits 33.8 36.1
Slide 23: Q4 Summary CIG
Q4 Summary CIG NAP of $18.8 million, up 4% vs Q4 2008 • Second consecutive quarter of positive sales comparisons • Full-year NAP up, despite de-emphasis of Annuities and Med Supp Strong sales growth in both CIG Sales and PMA • Worksite sales continue strong momentum, up 11% for year • Strong rec
Slide 24: Q4 2009 Sales Results CIG
Q4 2009 Sales Results CIG ($ millions) Supplemental Health sales up 27% over Q4 2008 Q4 2008 $15.2 Q4 2009 Life sales up 163% over Q4 2008 $12.0 $3.5 $1.9 $1.5 $1.4 $0.5 $0.7 Life Annuities Medicare Supplement Specified Disease 24
Slide 25: Q4 Earnings CIG
Q4 Earnings CIG ($ millions) Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Insurance policy income $238.4 $244.2 $241.0 $230.5 $222.6 Net investment income: General account assets 149.6 143.4 138.5 134.5 131.9 Other portfolios (5.9) (9.1) 2.6 15.7 3.3 Fee revenue and other income 0.3 0.7 0.4 0.5 (0.1) Tot
Slide 26: Unrealized Gain/Loss
Unrealized Gain/Loss* CNO ($ millions) Unrealized Loss % of Invested Assets 3,500 16.0% 3,000 Unrealized Loss 14.0% % of Invested Assets 12.0% 2,500 10.0% 2,000 8.0% 1,500 6.0% 1,000 4.0% 500 2.0% 0 0.0% Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 • Includes debt and equity securities classified as avai
Slide 27: Q4 2009 Realized Gain/Loss
Q4 2009 Realized Gain/Loss CNO ($ millions) Amount Recognized through Net Income Gains on sales $110.5 Losses on sales (96.4) Losses due to recognition of other- than-temporary impairments* (31.1) Amortization adjustment to insurance intangibles (0.5) Net investment losses before tax (17.5) Tax bene
Slide 28: Q4 2009 Impairments
Q4 2009 Impairments CNO ($ millions) Amount Recognized through Accumulated Gross Other Comprehensive Amount Recognized Amounts Loss through Net Income Corporates $5.3 $0.0 $5.3 Alt-A 4.5 0.4 4.1 ABS 14.3 12.7 1.6 CMBS 0.0 (0.3) 0.3 Prime Jumbos 22.6 16.9 5.7 Commercial Mortgage Loans 8.8 0.0 8.8 Oth
Slide 29: Asset Allocation at 12/31/09
Asset Allocation at 12/31/09* CNO ($ millions) Improved MTM reflects lower rates and tighter spreads $13,169 $13,111 Mar ket Val ue Book Val ue $2,202 $1,966 $2,021 $1,376 $1,757 $995 $874 $936 $536 $1,364 $906 $771 $858 $246 $538 $193 *Excludes investments from a variable interest entity which we c
Slide 30: Investment Quality: Fixed Maturities
Investment Quality: Fixed Maturities* CNO Actively Managed Fixed Maturities by Rating at 12/31/09 (Market Value) 93% investment-grade: • Essentially unchanged in Q4: sales of below investment-grade <BBB 7% AAA 15% securities offset credit cycle- AA related ratings migration 7% • Slowing pace of ra
Slide 31: Impact at 12/31/09 of NAIC RMBS Rerates
Impact at 12/31/09 of NAIC RMBS Rerates CNO (RBC points) New NAIC Rating 1 2 3 4 5 6 Total 1 2 1 (1) Old NAIC Rating 3 2 2 4 1 1 5 5 8 2 15 6 11 6 17 Total 8 20 8 (1) 35 31
Slide 32: Alt-A at 12/31/09
Alt-A at 12/31/09 CNO ($ millions) Market Book % of Avg. Avg. Avg. 60+ Avg. Accum. % of Rating Value (mil.) Value (mil.) Alt-A* FICO Support Delinq. Loss Portfolio* AA $13.9 $17.1 8.7% 693 14.6% 10.8% 1.51% 0.06% BBB $2.4 $4.1 1.5% 694 18.7% 14.5% 4.84% 0.01% <BBB $142.7 $188.6 89.8% 710 9.8% 22.5%
Slide 33: Prime Jumbo at 12/31/09
Prime Jumbo at 12/31/09 CNO ($ millions) % of Market Book Prime Avg. Avg. Avg. 60+ Avg. Accum. % of Rating Value (mil.) Value (mil.) Jumbo* FICO Support Delinq. Loss Portfolio* AAA $107.1 $120.7 28.3% 735 6.3% 1.6% 0.05% 0.50% AA $30.6 $34.1 8.1% 742 4.6% 2.3% 0.17% 0.14% A $41.3 $57.6 10.9% 744 5.3
Slide 34: CMBS at 12/31/09
CMBS at 12/31/09 CNO (GAAP book value - $ millions) Our CMBS exposure is heavily weighted toward securities with high ratings and seasoned vintages with relatively stronger qualitative characteristics 2009 8.1% 2007 AAA AA A BBB <BBB 5.4% 2006 3.9% Pre-2004 $182.5 $40.5 $35.8 $12.0 $0.0 Pre-2004 31.
Slide 35: CMBS at 12/31/09
CMBS at 12/31/09 CNO ($ millions) Market Book % of Avg. Avg. 60+ Avg. Cum. % of Rating Value (mil.) Value (mil.) CMBS* Support Del. & FCR Loss Portfolio* AAA $630.2 $643.4 81.7% 31.8% 2.0% 0.36% 2.92% AA $67.8 $86.0 8.8% 18.9% 0.9% 0.08% 0.31% A $39.0 $64.6 5.1% 9.0% 1.0% 0.14% 0.18% BBB $33.6 $78.7
Slide 36: Commercial Mortgage Loans at 12/31/09
Commercial Mortgage Loans at 12/31/09 CNO By Vintage By Property Type 2009 0.4% Other Indus. 0.8% 2008 15.2% 16.9% 2004 and Before 29.8% Office 38.6% 2007 20.6% Retail 2005 40.6% 11.8% 2006 20.5% Multi-Family 4.8% Current LTV of approximately 63% Trailing debt service coverage ratio (DSCR) stabl
Slide 37: CNO Summary
CNO Summary CNO Core sales and agent recruitment continue to improve in declining market Recapitalization addressed company’s most pressing financial priority • Refinances the 3.5% convertible debentures • Structured to protect the NOLs • Demonstrates investor confidence in Conseco Capital and
Slide 38: Riding the Age Wave of America
Riding the Age Wave of America CNO First of Boomer population will become Medicare-eligible next year; in 10 years, number of those 65 and over will increase by 50% Boomers confess to being unprepared for retirement and greatly concerned about unforeseen health care costs and adequacy of retirem
Slide 39: Outlook – Resuming Our Investment in Growth
Outlook – Resuming Our Investment in Growth CNO Bankers • Retain more new LTC and Med Supp business by reducing reinsurance • Continued expansion of sales force Colonial Penn • Capital improvement at CNO permits re-focusing on profitable growth in 2010 • Funding increase for direct response sale
Slide 40: Questions and Answers
S CONSECO. Questions and Answers 40
Slide 41: Appendix
S CONSECO. Appendix 41
Slide 42: Recapitalization of Conseco – Update
Recapitalization of Conseco – Update CNO November 2009 • Completed first closing of $176.5 million of new 7% Debentures (due 2016) upon settlement of tender offer for old 3.5% Debentures • Completed private placement of stock and warrants to Paulson December 2009 • Completed public equity offeri
Slide 43: Amendment to Senior Credit Facility – December 2009
Amendment to Senior Credit Facility – December 2009 CNO Gradual tightening of covenants through 2012 instead of “snap-back” in Q3 2010 Lenders to be paid $150 million of first $200 million of net proceeds from public offering of common stock, plus 50% of any net offering proceeds in excess of $2
Slide 44: Amendment to Senior Credit Facility - December 2009
Amendment to Senior Credit Facility - December 2009 CNO Minimum risk-based capital ratio will remain at 200% through 12/31/10 and increase to 225% for 2011 and 250% for 2012 (had been scheduled to return to 250% after 6/30/10) Minimum statutory capital and surplus will remain at $1.1 billion thr
Slide 45: Covenant Metrics
Covenant Metrics CNO Prior Amendment Level New 2011 Level New 2012 Level Debt to Capital* Interest Coverage 3.3x 35% 3.1x 3.1x 32.5% 3.0x 30% 30.0% 2.4x 2.4x 25% 28.3% 27.9% 27.0% 26.8% 20% 2.0x 2.0x 21.6% 1.75x 15% 1.5x 10% 1.0x 5% 0% 0.0x 12/31/08 3/31/09 6/30/09 9/30/09 12/31/09 12/31/08 3/31/09
Slide 46: Key Debt Covenants
Key Debt Covenants CNO ($ millions) Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Covenant Margins as of 12/31/09 Debt/Capital Ratio* Covenant Maximum 30.0% 32.5% 32.5% 32.5% 32.5% Reduction to shareholders’ equity of approximately $1,620 million or Actual 28.3% 27.9% 27.0% 26.8% 21.6% additional debt of
Slide 47: Capital Structure
Capital Structure CNO ($ millions) Actual Recapitalization Q4 2009 Actual 9/30/09 Adjustments Activity 12/31/09 Senior Credit Facility (10/13) $854.6 $(202.5) - $652.1 6% Senior Note 125.0 - $(25.0) 100.0 3.5% Convertible Debentures 293.0 (176.5) - 116.5 Unamortized Discount on 3.5% Convertible Debe
Slide 48: Book Value Per Share
Book Value Per Share* CNO Decrease in Q4 2009 Q3 2009 primarily due to common Q4 2008 $18.41 Q1 2009 $18.57 Q2 2009 $18.72 $18.82 stock issuance Q4 2009 $15.14 *Book value excludes accumulated other comprehensive income (loss). See Appendix for a reconciliation to the corresponding GAAP measure. 4
Slide 49: Net Investment Income
Net Investment Income CNO ($ millions) General Account Investment Income Q4 2009 results consistent with Q4 2008 declining market yields and $319.8 Q1 2009 $308.6 Q2 2009 $308.0 Q3 2009 $306.8 Q4 2009 $308.9 reductions in invested assets, compared to prior periods Yield: 5.93% 5.67% 5.65% 5.63% 5.
Slide 50: Commercial Mortgage Loans at 12/31/09
Commercial Mortgage Loans at 12/31/09 CNO Geographic Distribution New England 8.9% Pacific Middle 8.8% West North Atlantic Central East North 6.4% 12.3% Central Mountain 22.4% 9.4% East South South Central Atlantic 5.4% 20.3% West South Central 5.9% 50
Slide 51: Commercial Mortgage Loans at 12/31/09
Commercial Mortgage Loans at 12/31/09 CNO ($ millions) By Maturity 2018 2017 $331 $323 Post 2024 $285 2013 $159 2015 2016 $150 $153 2014 2022 2011 $93 2019 $106 2010 $75 $81 2012 $52 2020 2023 $47 $43 $49 2024 2021 $25 $12 51
Slide 52: Expenses
Expenses CNO ($ millions) Adjusted Operating Expenses* Approximately $20 million in Q4 2009 Q4 2008 Q2 2009 savings from back-office $99.2 Q1 2009 $99.7 Q3 2009 $96.0 $102.2 $94.4 consolidation realized in 2007 and 2008; remaining $5 million in 2009 Q4 2009 expenses include higher litigation cos
Slide 53: Segment Performance Bankers
Segment Performance Bankers ($ millions) Pre-Tax Operating Income* Earnings up 112% vs Q4 2008, positively affected by: Q3 2009 $85.4 Q4 2009 $84.6 • Higher PFFS/PDP income Q2 2009 $63.3 Q1 2009 • Favorable persistency and lower Q4 2008 $40.0 $44.7 incurred claims in Med Supp • Favorable developme
Slide 54: Premiums – Medicare Supplement Bankers
Premiums – Medicare Supplement Bankers Medicare Supplement – First-Year Premiums ($ millions) Q4 2009 $28.2 First-year premiums up 23% Q4 2008 $23.0 Q2 2009 Q3 2009 $22.7 vs Q4 2008 Q1 2009 $19.7 $21.1 Med. Supp. First-Year Prems.-Tr. 4 Qtrs: $81.3 $81.9 $83.6 $86.5 $91.7 Med. Supp. Total Premiums
Slide 55: Premiums – Long-Term Care Bankers
Premiums – Long-Term Care Bankers ($ millions) Long-Term Care – First-Year Premiums* Quarterly first-year premium declines due to new business Q4 2009 Q2 2009 Q3 2009 reinsurance Q4 2008 $10.3 Q1 2009 (Direct) (Direct) (Direct) (Direct) $9.8 $9.1 $9.5 NAP decline attributable to three $8.6 (Net)
Slide 56: Premiums – Life Insurance Bankers
Premiums – Life Insurance Bankers ($ millions) Life – First-Year Premiums Q3 2009 Q4 2009 Fluctuations in first-year Q4 2008 $23.4 $23.0 Q2 2009 premiums primarily reflect $20.2 $19.4 Q1 2009 variance in sales of single- $16.8 $10.5 $10.8 premium policies SPWL $8.2 $7.8 Non-SPWL premiums up 2% $
Slide 57: Premiums – Annuity Bankers
Premiums – Annuity Bankers ($ millions) Annuity – First-Year Premiums Q4 2008 First-year premiums down $410.5 52% from Q4 2008 as result Q1 2009 $301.1 Q3 2009 of current interest rate Q2 2009 $274.7 $284.0 environment Q4 2009 $197.3 First-Year Prems.-Tr. 4 Qtrs: $1,220.6 $1,294.1 $1,308.7 $1,270.
Slide 58: Annuity Surrenders Bankers
Annuity Surrenders Bankers IA Surrenders Surrenders: both indexed and non- (annualized quarterly rate) indexed annuity surrenders lower Q4 2007 Q3 2008 Q4 2008 Q12009 Q2 2009 12.4% 10.9% than prior year 10.3% Q12008 10.5% Q2 2008 9.8% Q3 2009 9.0% 9.1% Q4 2009 8.6% 8.3% Total account value: • IA
Slide 59: Benefit Ratio – PDP Bankers
Benefit Ratio* – PDP Bankers Down 16% from Q4 2008: Q2 2009 Q1 2009 • Impacted by favorable IBNR Q4 2008 95.5% 97.1% development 84.6% Q3 2009 Q4 2009 68.0% 68.4% *We calculate benefit ratios by dividing insurance policy benefits by insurance policy income. 59
Slide 60: Benefit Ratio – PFFS Individual Business Bankers
Benefit Ratio* – PFFS Individual Business Bankers Q4 2008 Down 20% vs Q4 2008: 107.5% Q1 2009 Q2 2009 96.2% 95.5% Q4 2009 • Impacted by favorable IBNR Q3 2009 87.6% 82.0% development *We calculate benefit ratios by dividing insurance policy benefits by insurance policy income. 60
Slide 61: Benefit Ratio – Medicare Supplement Bankers
Benefit Ratio* – Medicare Supplement Bankers 4Q 2009 ratio in line with expectations Q4 2008 Q3 2009 Q1 2009 Q4 2009 74.7% Q2 2009 70.2% 72.4% 71.7% 68.6% *We calculate benefit ratios by dividing insurance policy benefits by insurance policy income. 61
Slide 62: Interest-Adjusted Benefit Ratio – Long Term Care Bankers
Interest-Adjusted Benefit Ratio* – Long Term Care Bankers Favorable development of prior- period LTC reserves Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 67.4% 68.6% 66.4% 70.4% 66.4% Trailing 4 Quarter Avg.: 74.0% 71.4% 67.6% 68.2% 67.9% Qtrly. non-int. adjusted: 102.2% 105.1% 103.2% 108.3% 104.3% *W
Slide 63: LTC Update Bankers
LTC Update Bankers Rate increase filings (2008 round – policies issued prior to 2002) exceeded original filing goals • Completed filing of $102.5 million of rate increases • As of 12/31/09: • Approvals = $81.8 million, 116% of original goal • Projected financial impact = $59.6 million, 112% of ori
Slide 64: Segment Performance Colonial Penn
Segment Performance Colonial Penn ($ millions) Pre-Tax Operating Income* Q4 2008 to Q4 2009 decrease: Q2 2009 $11.0 • Primarily due to lower investment income, partially offset by expense Q3 2009 reductions Q4 2008 $7.4 $6.7 Q4 2009 Q3 2009 to Q4 2009 decrease: Q1 2009 $5.9 $5.1 • Lower margins
Slide 65: Premiums – Life Insurance Colonial Penn
Premiums – Life Insurance Colonial Penn ($ millions) Life – First-Year Premiums Q1 2009 NAP: Q4 2008 $8.9 $9.2 Q2 2009 $8.4 Q3 2009 • Consistent with previous communication, $7.9 Q4 2009 $7.5 quarterly and trailing four quarters aligned with capital management actions Premium: • First-year premi
Slide 66: Segment Performance CIG
Segment Performance CIG ($ millions) Pre-Tax Operating Income (loss)* Q4 2008 favorably impacted by Specified Disease deferred ROP Q4 2008 Q1 2009 adjustment $31.5 $31.2 Q2 2009 Q3 2009 $21.2 $21.6 Higher expenses related to legal and regulatory accruals Q4 2009 -$6.7 PTOI-Trailing 4 Quarters: $
Slide 67: Premiums - Medicare Supplement CIG
Premiums - Medicare Supplement CIG ($ millions) Medicare Supplement – First-Year Premiums First-year collections down 33% from Q4 2008: • Focus on profitable products Q4 2008 (i.e., Specified Disease) $2.4 Q2 2009 Q3 2009 $2.2 Q1 2009 $1.9 Q4 2009 $1.5 $1.6 First-Year Prems.-Tr. 4 Qtrs: $9.6 $8.3
Slide 68: Premiums – Specified Disease CIG
Premiums – Specified Disease CIG ($ millions) Specified Disease – First-Year Premiums Q4 2009 Q3 2009 NAP up 27% from Q4 2008: Q4 2008 Q2 2009 $11.1 $11.8 $12.3 Q1 2009 $10.5 • Increased CIG Sales focus on $10.2 Specified Disease products • Increased recruitment of Health IMOs • Momentum increasin
Slide 69: Premiums – Annuity CIG
Premiums – Annuity CIG ($ millions) Annuity – First-Year Premiums First-year collections down Q3 2009 $23.4 Q4 2008 53% from Q4 2008: $21.2 Q2 2009 $20.6 Q1 2009 • Focus on profitable products $17.8 (i.e., Specified Disease) Q4 2009 $10.0 First-Year Prems.-Tr. 4 Qtrs: $119.9 $98.5 $84.7 $83.0 $71.
Slide 70: Benefit Ratio – Medicare Supplement CIG
Benefit Ratio* – Medicare Supplement CIG In line with expectations and Q1 2009 Q2 2009 71.2% Q3 2009 68.2% Q4 2009 Q4 2008 67.3% 66.3% recent trends 62.8% Stable persistency Trailing 4 Quarter Avg.: 68.4% 68.8% 68.6% 67.3% 68.3% *We calculate benefit ratios by dividing insurance policy benefits
Slide 71: Interest-Adjusted Benefit Ratio – Specified Disease CIG
Interest-Adjusted Benefit Ratio* – Specified Disease CIG Q4 2008 included recognition of Q2 2009 49.7% Q4 2009 49.1% Q1 2009 Q3 2009 deferred ROP adjustment 42.2% 42.9% related to prior periods Q4 2008 30.1% Trailing 4 Quarter Avg.: 43.3% 41.8% 42.6% 41.2% 46.0% Qtrly. non-int. adjusted: 63.8% 76.
Slide 72: 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 73: 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): Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Net income (loss) applic
Slide 74: Information Related to Certain Non-GAAP Financial Measures
Information Related to Certain Non-GAAP Financial Measures Book value, excluding accumulated other comprehensive income, per share This non-GAAP financial measure differs from book value per diluted share because accumulated other comprehensive income has been excluded from the book value used to de
Slide 75: 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 return before gain (loss) on extinguishment or modification of debt, net realized gains or losses, discontinued operations and increases to our valuation allowance for deferre
Slide 76: Information Related to Certain Non-GAAP Financial Measures
Information Related to Certain Non-GAAP Financial Measures A reconciliation of return on common equity to operating return on common equity (excluding accumulated other comprehensive income (loss) and net operating loss carryforwards) is as follows (dollars in millions, except per share amounts): Q4
Slide 77: 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 segment operating income (loss) and consolidated net income (loss) for the year ended December 31, 2009, is as follows (dollars in millions): CIG Bankers Colonia
Slide 78: Information Related to Certain Non-GAAP Financial Measures
Information Related to Certain Non-GAAP Financial Measures A reconciliation of common shareholders’ equity, excluding accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-GAAP financial measure) to common shareholders’ equity at December 31, 2009, is as follows (
Slide 79: Information Related to Certain Non-GAAP Financial Measures
Information Related to Certain Non-GAAP Financial Measures A reconciliation of average common shareholders’ equity, excluding accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-GAAP financial measure) to average common shareholders’ equity at December 31, 2009,
Slide 80: 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) This non-GAAP financial measure differs from the debt to capital ratio because accumulated other comprehensive income has been excluded from the value of capital