Cno Financial Group, Inc. · NYSE:CNO
Cno Financial — Q3 2016 Earnings Presentation
40 slides from Cno Financial's earnings presentation, Nov 2, 2016
Slide 1: 3Q16 Financial and operating results
3Q16 Financial and operating results for the period ended September 30, 2016 November 2, 2016 Unless otherwise specified, comparisons in this presentation are between 3Q16 and 3Q15. Exhibit 99.1
Slide 2: Forward-Looking Statements
CNO Financial Group | Third Quarter 2016 Earnings | November 2, 2016 2 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 res
Slide 3: Non-GAAP Measures
CNO Financial Group | Third Quarter 2016 Earnings | November 2, 2016 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 accu
Slide 4: | November 2, 2016
CNO Financial Group | Third Quarter 2016 Earnings | November 2, 2016 4
Slide 5: 3Q16 Summary
CNO Financial Group | Third Quarter 2016 Earnings | November 2, 2016 5 Operating Earnings Per Share Excluding Significant Items** Operating Earnings Excl. Significant Items** $64.3 $60.9 Weighted Average Shares Outstanding 192.4 175.7 3Q16 Summary * New Annualized Premium (“NAP”) includes 6% of annu
Slide 6: Closed Block LTC Recapture Update
CNO Financial Group | Third Quarter 2016 Earnings | November 2, 2016 6 Closed Block LTC Recapture Update Assets and liabilities have been recaptured Administrative functions transitioned to CNO; policyholder administration has continued without disruption Expanded asset audit progressing; inte
Slide 7: 3Q16 Sales and Distribution Results: Bankers Life
CNO Financial Group | Third Quarter 2016 Earnings | November 2, 2016 7 3Q15 4Q15 1Q16 2Q16 3Q16 $282.1 $290.6 $294.5 $270.4 $304.8 $366.6 $363.9 $366.2 $357.8 $361.1 3Q15 $648.7 4Q15 $654.5 1Q16 $660.7 2Q16 $628.2 3Q16 $665.9 First Year Premium Renewal Premium 3Q15 $59.9 4Q15 $69.1 1Q16 $60.3 2Q16 $
Slide 8: 3Q16 Sales and Distribution Results: Washington National
CNO Financial Group | Third Quarter 2016 Earnings | November 2, 2016 8 $20.2 $20.0 $20.1 $19.8 $19.0 $125.9 $125.7 $129.1 $130.3 $129.8 $19.4 $17.9 $16.3 $15.1 $14.6 3Q15 $165.5 4Q15 $163.6 1Q16 $165.5 2Q16 $165.2 3Q16 $163.4 First Year Premium Renewal Premium Medicare Supplement Run-off Premium 3Q1
Slide 9: 3Q16 Sales and Distribution Results: Colonial Penn
CNO Financial Group | Third Quarter 2016 Earnings | November 2, 2016 9 $13.2 $12.9 $14.0 $13.8 $13.8 $53.5 $53.1 $56.1 $55.8 $56.9 3Q15 $66.7 4Q15 $66.0 1Q16 $70.1 2Q16 $69.6 3Q16 $70.7 First Year Premium Renewal Premium 3Q16 Sales and Distribution Results Colonial Penn ($ millions) Collected Premiu
Slide 10: Department of Labor Fiduciary Standards Rule
CNO Financial Group | Third Quarter 2016 Earnings | November 2, 2016 10 Department of Labor Fiduciary Standards Rule CNO will meet April 2017 and January 2018 compliance deadlines Colonial Penn will not be impacted Washington National will be impacted, but immaterial due to low volume of subje
Slide 11: 3Q16 Consolidated Financial Highlights
CNO Financial Group | Third Quarter 2016 Earnings | November 2, 2016 11 3Q16 Consolidated Financial Highlights Earnings Remain Strong ‒ Bankers Life, Colonial Penn and Corporate segment results in-line with expectations; Washington National results reflect lower supplemental health margins ‒ Opera
Slide 12: Closed Block LTC Recapture
CNO Financial Group | Third Quarter 2016 Earnings | November 2, 2016 12 Closed Block LTC Recapture Key In-Force Statistics as of 9/30/16 Impact to Earnings & Investment Update Recorded $53 million after-tax charge, consistent with previous estimate Contributed $200 million to insurance subsidiar
Slide 13: 3Q16 Segment Earnings
CNO Financial Group | Third Quarter 2016 Earnings | November 2, 2016 13 $(4.4) $(4.9) $(5.1) $(7.0) $(4.4) $0.6 $6.7 $(6.8) $3.0 $0.9 $79.8 $89.1 $69.9 $88.8 $82.9 $30.6 $31.3 $26.3 $21.5 $25.2 3Q15 4Q15 1Q16 2Q16 3Q16 Corporate CP BL WN ($ millions) * A non-GAAP measure. See the Appendix for a reco
Slide 14: Health Margins
CNO Financial Group | Third Quarter 2016 Earnings | November 2, 2016 14 $137 $138 $139 $141 $141 57.4% 57.5% 57.7% 61.6% 59.8% 3Q15 4Q15 1Q16 2Q16 3Q16 Earned Premium Reported Benefit Ratio Adjusted Benefit Ratio** ($ millions) * Interest-adjusted benefit ratio (IABR); a non-GAAP measure. Refer to t
Slide 15: Investment Results
CNO Financial Group | Third Quarter 2016 Earnings | November 2, 2016 15 $30.3 $48.5 $93.1 $8.7 $13.2 $12.4 $18.3 $10.0 $13.6 $1.2 Investment Results ($ millions) Earned Yield*: 5.68% 5.72% 5.47% 5.52% 5.59% New Money Rate: 5.21% 5.17% 4.90% 5.50% 5.29% Average Invested Assets and Cash Realized Gains
Slide 16: Wrap-up
CNO Financial Group | Third Quarter 2016 Earnings | November 2, 2016 16 Wrap-up CNO remains a compelling investment Continued focus on profitably reaching the underserved middle-income market Strong free cash flow generation provides ability to withstand periods of stress and to rebuild excess
Slide 17: Questions and Answers
CNO Financial Group | Third Quarter 2016 Earnings | November 2, 2016 17 Questions and Answers
Slide 18: Appendix
CNO Financial Group | Third Quarter 2016 Earnings | November 2, 2016 18 Appendix
Slide 19: Bankers Life LTC – Key Points of Differentiation
CNO Financial Group | Third Quarter 2016 Earnings | November 2, 2016 19 Bankers Life LTC – Key Points of Differentiation Sold primarily to middle-income individuals at/near retirement ‒ Results in higher average issue age (~67) and higher average attained age (~77) ‒ Assets and liabilities matched
Slide 20: Producing Agent Counts
CNO Financial Group | Third Quarter 2016 Earnings | November 2, 2016 20 Producing Agent Counts 1st Yr 2nd Yr 3rd Yr + Total Qtr Avg (3) 1st Yr 2nd Yr 3rd Yr + Total Qtr Avg (3) 9/30/2016 1,953 521 1,863 4,337 4,436 458 144 372 974 953 6/30/2016 2,196 588 1,854 4,638 4,608 425 130 377 932 928 3/31/20
Slide 21: 3Q16 Holding Company Liquidity
CNO Financial Group | Third Quarter 2016 Earnings | November 2, 2016 21 3Q16 Holding Company Liquidity ($ millions) 3Q16 YTD Cash and Investments Balance - Beginning $375.7 $382.2 Sources Net Dividends from Insurance Subsidiaries (154.8) (24.2) Dividends from Non-insurance Subsidiaries 2.0 11.0 Inte
Slide 22: Loss Carryforwards
CNO Financial Group | Third Quarter 2016 Earnings | November 2, 2016 22 Non-Life $737 Non-Life $68 Non-Life $52 Life $98 Loss Carryforwards Valuation Allowance Impact of Settlement with the IRS1 ($ millions) Value of 3Q16 Loss Carryforwards $2343,4 Impacts v Value of life NOLs will increase by $98
Slide 23: 3Q15 Significant Items
CNO Financial Group | Third Quarter 2016 Earnings | November 2, 2016 23 The table below summarizes the financial impact of significant items on our 3Q15 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results (dollars i
Slide 24: 4Q15 Significant Items
CNO Financial Group | Third Quarter 2016 Earnings | November 2, 2016 24 The table below summarizes the financial impact of significant items on our 4Q15 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results (dollars i
Slide 25: 1Q16 Significant Items
CNO Financial Group | Third Quarter 2016 Earnings | November 2, 2016 25 The table below summarizes the financial impact of significant items on our 1Q16 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results (dollars i
Slide 26: 2Q16 Significant Items
CNO Financial Group | Third Quarter 2016 Earnings | November 2, 2016 26 The table below summarizes the financial impact of significant items on our 2Q16 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results (dollars i
Slide 27: 3Q16 Significant Items
CNO Financial Group | Third Quarter 2016 Earnings | November 2, 2016 27 The table below summarizes the financial impact of significant items on our 3Q16 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results (dollars i
Slide 28: Quarterly Earnings
CNO Financial Group | Third Quarter 2016 Earnings | November 2, 2016 28 Quarterly Earnings *Management believes that an analysis of earnings before net realized investment gains (losses), fair value changes in embedded derivative liabilities, fair value changes and amendment related to the agent def
Slide 29: Additional Information on Non-GAAP Measures
CNO Financial Group | Third Quarter 2016 Earnings | November 2, 2016 29 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 o
Slide 30: Information Related to Certain Non-GAAP Financial Measures
CNO Financial Group | Third Quarter 2016 Earnings | November 2, 2016 30 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 am
Slide 31: Operating Earnings Per Diluted Share Reconciliation
CNO Financial Group | Third Quarter 2016 Earnings | November 2, 2016 31 3Q15 4Q15 1Q16 2Q16 3Q16 Operating income 56.8$ 97.0$ 49.6$ 63.7$ 64.3$ Weighted average shares outstanding for basic earnings per share 190,259 185,608 180,350 178,323 174,247 Effect of dilutive securities on weighted average s
Slide 32: Book value per diluted share
CNO Financial Group | Third Quarter 2016 Earnings | November 2, 2016 32 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 securitie
Slide 33: Interest-adjusted benefit ratio
CNO Financial Group | Third Quarter 2016 Earnings | November 2, 2016 33 Information Related to Certain Non-GAAP Financial Measures The interest-adjusted benefit ratio (a non-GAAP measure) is calculated by dividing the product's insurance policy benefits less imputed interest income on the accumulate
Slide 34: Operating return measures
CNO Financial Group | Third Quarter 2016 Earnings | November 2, 2016 34 Information Related to Certain Non-GAAP Financial Measures Operating return measures Management believes that an analysis of net income applicable to common stock before the net loss on sales of CLIC and loss on reinsurance tran
Slide 35: Operating return on equity calculations
CNO Financial Group | Third Quarter 2016 Earnings | November 2, 2016 35 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 m
Slide 36: Operating earnings and significant items summary
CNO Financial Group | Third Quarter 2016 Earnings | November 2, 2016 36 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
Slide 37: Pretax operating earnings to net income
CNO Financial Group | Third Quarter 2016 Earnings | November 2, 2016 37 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): 3Q15 4Q15 1Q16 2Q16 3Q16 Pretax operating
Slide 38: Consolidated capital reconciliation
CNO Financial Group | Third Quarter 2016 Earnings | November 2, 2016 38 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
Slide 39: Consolidated capital reconciliation
CNO Financial Group | Third Quarter 2016 Earnings | November 2, 2016 39 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
Slide 40: Debt to capital ratio
CNO Financial Group | Third Quarter 2016 Earnings | November 2, 2016 40 Information Related to Certain Non-GAAP Financial Measures 3Q15 4Q15 1Q16 2Q16 3Q16 Corporate notes payable 909.8$ 911.1$ 911.5$ 912.0$ 912.5$ Total shareholders' equity 4,171.0 4,138.5 4,226.6 4,456.2 4,493.8 Total capital 5,08