Cno Financial Group, Inc. · NYSE:CNO
Cno Financial — Investor Presentation (August 2022)
38 slides from Cno Financial's investor presentation, Aug 26, 2022
Slide 1: Investor Overview August 2022
CNO Financial Group 1 Investor Overview August 2022 Exhibit 99.1
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 Overview
CNO Financial Group 3 Focused on serving the protection needs of the fast-growing but underserved middle-income American market at or near retirement CNO Financial Group Overview Manufactured products include life, fixed annuities, Medicare supplement, supplemental health and limited benefit durat
Slide 4: What Makes CNO Different
CNO Financial Group 4 What Makes CNO Different Exclusive Focus on Middle-Income America Our Diverse Distribution & Integrated Approach Health and Wealth Solutions Insurance and Securities Solutions Strong Cash Flow Generation
Slide 5: Well-Positioned in the Attractive Senior Middle Market
CNO Financial Group 5 ~45% of middle-income households have no life insurance1; ~55% of baby boomers lack financial advisors2 Well-Positioned in the Attractive Senior Middle Market Extensive experience and understanding of the middle market Differentiated with our market vs. product focus Dive
Slide 6: Highly Diversified Product Mix
CNO Financial Group 6 Broad & balanced portfolio focused on protection needs Highly Diversified Product Mix Key PointsProduct Offering Mix of protection and accumulation products to serve varied customer needs Basic products that meet the insurance needs of the middle market Attractive and pre
Slide 7: Risk Management via Diversification and Natural Hedges
CNO Financial Group 7 Relative degree of risk present (before mitigation) within each product Risk Management via Diversification and Natural Hedges Fixed Indexed Annuity Fixed Interest Annuity Trad Life Interest Sensitive Life Med Supp Supp Health LTC Mortality Morbidity Persistency Interest rate E
Slide 8: Unique Multi-Channel Operating Model
CNO Financial Group 8 Leveraging products, brands, leads and fulfillment across channels Unique Multi-Channel Operating Model Consumer Division ⁃ Strong exclusive agent franchise Top distributor of health/wealth protection products through ~4,400 exclusive producing agents and financial represen
Slide 9: Strategic Initiatives Successfully Reinvigorating Growth
CNO Financial Group 9 Strategic Initiatives Successfully Reinvigorating Growth (dollars in millions) $- $50.0 $100.0 $150.0 $200.0 2020 2021 2Q21 2Q22 Life NAP $- $50.0 $100.0 $150.0 $200.0 2020 2021 2Q21 2Q22 Health NAP $- $500.0 $1,000.0 $1,500.0 2020 2021 2Q21 2Q22 Annuity Collected Premiums $- $
Slide 10: Capital and Liquidity: Debt to Capital and RBC Ratio
CNO Financial Group 10 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 11: Cash Flow Profile
CNO Financial Group 11 2Q free cash flow reflects impact from market volatility; Rialto Capital investment 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 fin
Slide 12: Excess Capital Allocation Strategy
CNO Financial Group 12 Agent pilots, technology-driven customer experience enhancements Hybrid distribution Worksite B2B marketing, lead generation Share repurchases: $60 million in 2Q22 Dividends: $17 million in 2Q22 Return capital to shareholders Organic investments to sustain and grow t
Slide 13: Investment Portfolio Composition
CNO Financial Group 13 High quality, stable core returns with variable upside Portfolio Composition $25 billion of Invested Assets Highlights (Fair Value as of 6/30/2022) General Approach Positioned for stable performance across credit cycles Focus on quality - margin against adverse development
Slide 14: 2022 Outlook
CNO Financial Group 14 Increasing sales momentum Growth in producing agent counts Free cash flow expected to be lower than 2021 reflecting diminishing COVID impacts and alternative investment returns, capital strain from new business, and the ramp up of the FABN program Free cash flow conver
Slide 15: Environmental, Social and Governance
CNO Financial Group 15 Environmental Significant progress in 2021; CSR Report published August 2022 Environmental, Social and Governance Performed second GHG emissions inventory Funded $167 million in new impact investments, exceeding our goal of $100 million Social Governance Developed Respon
Slide 16: Funding Agreement-Backed Notes (FABN) Program
CNO Financial Group 16 Established in 3Q21 to leverage CNO’s core investment competencies; generating incremental earnings at an attractive return on the underlying capital Funding Agreement-Backed Notes (FABN) Program CNO Global Funding (Trust) Institutional Investors Funding Agreement FABN Cash Ca
Slide 17: Delivering on our Commitments
CNO Financial Group 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) Sold Legacy Life Insurance Block (2014) Migrated ra
Slide 18: Appendix
CNO Financial Group 18 Appendix 1 Strong Operational Performance Experienced Management Team Slide 19 Broker-Dealer/Registered Investment Advisor Slide 20 Exclusive Agent Counts Slide 21 Building on Strong Track Record of Execution New Money Rate Walk Slide 22 New Money Summary Slide 23 Tax Asset Su
Slide 19: Experienced Management Team With a Proven Track Record
CNO Financial Group 19 12-year average tenure; 23-year average service in the insurance sector Experienced Management Team With a Proven Track Record Name Title Years with CNO Years in Insurance Sector Age Gary C. Bhojwani Chief Executive Officer 6 33 54 Paul H. McDonough Chief Financial Officer 3 2
Slide 20: Broker-Dealer/Registered Investment Advisor
CNO Financial Group 20 Account values down 3% 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 21: Exclusive Agent Counts
CNO Financial Group 21 Softening macro environment helping recruiting, 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 month. 2 Registered agents are dually licensed as insurance
Slide 22: New Money Rate Walk
CNO Financial Group 22 Significant NMR increase reflects higher market yields and significant contribution from direct investments New Money Rate Walk 3.73% 5.53%
Slide 23: New Money Summary
CNO Financial Group 23 Strategically harvesting rising market yields, while sliding up-in-quality / down the curve New Money Summary 2Q22 General Account New Money Purchases $ % GAAP YTM Duration IG Corp AAA-A 172 16.89% 5.06% 11.5 IG Corp BBB 205 20.14% 5.04% 9.5 HY Corp 20 1.99% 5.83% 6.3 Non- Age
Slide 24: Tax Asset Summary as of June 30, 2022
CNO Financial Group 24 Non-Life NOLs $212 DTAs related to tax strategy $185 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 $236 million @ 10% discount rate ($2.03 on a p
Slide 25: 2018 Transformative LTC Reinsurance Transaction
CNO Financial Group 25 Divestiture of legacy LTC exposure significantly improves risk profile 2018 Transformative LTC Reinsurance Transaction In September 2018, Bankers Life entered into an agreement with Wilton Re to cede 100% of Bankers Life legacy (prior to 2003) comprehensive and nursing home
Slide 26: Long-Term Care Insurance
CNO Financial Group 26 New sales (~$30 million annually) focused on short duration products 98% of new sales for policies with 2 years or less in benefits Average benefit period of 11 months New business 25% reinsured since 2008 Reserve assumptions informed by historical experience No morbid
Slide 27: Appendix 2: Financial Exhibits
CNO Financial Group 27 Appendix 2: Financial Exhibits Non-GAAP Financial Measures Slides 28-38
Slide 28: Significant Items: 2Q22 Insurance Product Margin
CNO Financial Group 28 Insurance product margin Annuity 37.1$ -$ 37.1$ Health 113.4 - 113.4 Life 56.8 - 56.8 Total insurance product margin 207.3 - 207.3 Allocated expenses (152.2) - (152.2) Income from insurance products 55.1 - 55.1 Fee income 3.2 - 3.2 Investment income not allocated to product li
Slide 29: 4Q21 Significant Items
CNO Financial Group 29 (1) Adjustments arising from our comprehensive annual actuarial review of assumptions. (2) A non-GAAP measure. See pages 34 and 36 for a reconciliation to the corresponding GAAP measure. The table below summarizes the financial impact of significant items on our 4Q21 net opera
Slide 30: 3Q21 Significant Items
CNO Financial Group 30 (1) Comprised of $3.0 million from legal and regulatory matters. (2) A non-GAAP measure. See pages 34 and 36 for a reconciliation to the corresponding GAAP measure. Insurance product margin Annuity 52.5$ -$ 52.5$ Health 117.9 - 117.9 Life 53.2 - 53.2 Total insurance product ma
Slide 31: 2Q21 Significant Items
CNO Financial Group 31 Insurance product margin Annuity 66.0$ -$ 66.0$ Health 120.9 - 120.9 Life 39.7 - 39.7 Total insurance product margin 226.6 - 226.6 Allocated expenses (141.6) - (141.6) Income from insurance products 85.0 - 85.0 Fee income 6.6 - 6.6 Investment income not allocated to product li
Slide 32: 1Q21 Significant Items
CNO Financial Group 32 Insurance product margin Annuity 57.9$ -$ 57.9$ Health 124.7 - 124.7 Life 27.1 - 27.1 Total insurance product margin 209.7 - 209.7 Allocated expenses (141.1) - (141.1) Income from insurance products 68.6 - 68.6 Fee income 7.3 - 7.3 Investment income not allocated to product li
Slide 33: 4Q20 Significant Items
CNO Financial Group 33 (1) Adjustments arising from our comprehensive annual actuarial review of assumptions. (2) Unfavorable impact related to asset impairments. (3) A non-GAAP measure. See pages 34 and 36 for a reconciliation to the corresponding GAAP measure. Insurance product margin Annuity 68.1
Slide 34: Net Operating Income Reconciliation
CNO Financial Group 34 (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 related amortization and taxes; (ii) net chan
Slide 35: Information Related to Certain Non-GAAP Financial Measures
CNO Financial Group 35 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 36: Reconciliation of Net Income to Net Operating Income
CNO Financial Group 36 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 2Q21 3Q21 4Q21 1Q22 2Q22 Net income appli
Slide 37: Operating Return on Equity Reconciliation
CNO Financial Group 37 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 38: Debt to Capital Ratio Reconciliation
CNO Financial Group 38 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
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