Cno Financial Group, Inc. · NYSE:CNO
Cno Financial — Q3 2021 Earnings Presentation
45 slides from Cno Financial's earnings presentation, Oct 27, 2021
Slide 1: Third Quarter 2021 Financial and operating results
Third Quarter 2021 Financial and operating results for the period ended September 30, 2021 October 27, 2021 Unless otherwise specified, comparisons in this presentation are between 3Q20 and 3Q21. Exhibit 99.3
Slide 2: Important Legal Information
CNO Financial Group | Third Quarter 2021 Earnings | October 27, 2021 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 re
Slide 3: | October 27, 2021
CNO Financial Group | Third Quarter 2021 Earnings | October 27, 2021 3
Slide 4: Quarter in Review
CNO Financial Group | Third Quarter 2021 Earnings | October 27, 2021 4 Quarter in Review Strong Operational Performance • Operating income per share1 of $0.72 vs. $0.79 in 3Q20 • 3Q21 includes $0.02 unfavorable impact from significant items • 3Q21 reflects $0.09 YoY reduced net COVID benefit • Under
Slide 5: Growth Scorecard
CNO Financial Group | Third Quarter 2021 Earnings | October 27, 2021 5 2019 3Q 3Q 4Q TY 1Q 2Q 3Q vs. 3Q19 vs. 3Q20 New Annualized Premiums 1 Life $37.3 $44.3 $37.1 $169.9 $53.0 $52.3 $45.4 21.7% 2.5% Health 46.7 39.4 49.1 154.5 35.7 41.5 39.2 -16.1% -0.5% Total Life and Health $84.0 $83.7 $86.2 $324
Slide 6: Consumer Division Update
CNO Financial Group | Third Quarter 2021 Earnings | October 27, 2021 6 Consumer Division Update Third Quarter HighlightsKey Initiatives Strong D2C and annuity momentum; challenging agent recruiting environment Expand reach Maintain growth momentum Optimize distribution • Life sales flat YoY; up 25%
Slide 7: Worksite Division Update
CNO Financial Group | Third Quarter 2021 Earnings | October 27, 2021 7 Worksite Division Update Third Quarter Highlights • Life and Health sales up 42% YoY; up 12% sequentially • Fee revenue up 140% YoY; 11% organic growth • Stable employer base and premium collection • Growing DirectPath/WBD cross-
Slide 8: Excess Capital Allocation Strategy
CNO Financial Group | Third Quarter 2021 Earnings | October 27, 2021 8 Excess Capital Allocation Strategy Disciplined and opportunistic approach to maximize shareholder value Organic investments to sustain and grow the core businesses • Agent pilots, technology-driven customer experience enhancement
Slide 9: Financial Highlights
CNO Financial Group | Third Quarter 2021 Earnings | October 27, 2021 9 $0.79 $0.72 $0.91 $0.77 Financial Highlights Continued strong earnings; robust share repurchase activity Earnings ResultsThird Quarter 2021 Net operating income1 $112.6 $92.8 Net income $129.2 $99.8 Weighted average shares outsta
Slide 10: Insurance Product Margin Highlights
CNO Financial Group | Third Quarter 2021 Earnings | October 27, 2021 10 Highlights1 $45.3 $52.0 $57.9 $66.0 $52.5 $47.3 $41.6 $27.1 $39.7 $53.2 $152.2 $125.2 $124.7 $120.9 $117.9 Insurance Product Margin (dollars in millions) Positive net COVID impact; stable underlying margins excluding COVID Insur
Slide 11: Investment Results
CNO Financial Group | Third Quarter 2021 Earnings | October 27, 2021 11 $- $100.0 $200.0 $300.0 $400.0 3Q 2020 3Q 2021 Investment Income Not Allocated to Product Lines $- $100.0 $200.0 $300.0 $400.0 3Q 2020 3Q 2021 Total Net Investment Income1 Annuity Health Life Not Allocated $- $100.0 $200.0 $300.
Slide 12: Portfolio Composition
CNO Financial Group | Third Quarter 2021 Earnings | October 27, 2021 12 IG Corporates, 51.7% Non-Agency RMBS, 7.2% Mortgage Loans, 4.6% HY Corporates, 3.0% CMBS, 8.2% Municipals, 10.3% ABS, 3.7% Govts/Agency, 1.3% CLO, 1.9% Equities, 0.5% Other Invested Assets, 2.1% Alternatives, 2.1% Policy Loans,
Slide 13: Cash Flow Profile
CNO Financial Group | Third Quarter 2021 Earnings | October 27, 2021 13 Cash Flow Profile Strong free cash flow generation and conversion (dollars in millions) 1 A non-GAAP measure. See the Appendix for a reconciliation to the corresponding GAAP measure. 2 Cash flows exclude acquisitions, dividend p
Slide 14: Capital and Liquidity Overview
CNO Financial Group | Third Quarter 2021 Earnings | October 27, 2021 14 Capital and Liquidity Overview 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 develo
Slide 15: Outlook for 4Q 2021
CNO Financial Group | Third Quarter 2021 Earnings | October 27, 2021 15 Outlook for 4Q 2021 Sales Modest growth in total Life & Health new annualized premiums and total collected premiums Earnings Free Cash Flow / Excess Capital Reduced dividends from operating companies due to impact of year-en
Slide 16: Delivering on our Commitments
CNO Financial Group | Third Quarter 2021 Earnings | October 27, 2021 16 Delivering on our Commitments Turnaround / De-risking Pivot to Growth Optimize Long-term Value Pre 2017 2017 - 2019 2020 - 2021 Post-COVID • Reinsured life block (2009) • Recapitalized company (2012) • Initiated dividend (2012)
Slide 17: Investment Highlights
CNO Financial Group | Third Quarter 2021 Earnings | October 27, 2021 17 Well-positioned in underserved senior middle-income market Highly differentiated business model Favorable demographic tailwinds Sustainable growth initiatives in place Strong balance sheet; robust free cash flow generation Inves
Slide 18: Questions and Answers
CNO Financial Group | Third Quarter 2021 Earnings | October 27, 2021 18 Questions and Answers
Slide 19: Appendix 1: Quarter in Review
CNO Financial Group | Third Quarter 2021 Earnings | October 27, 2021 19 Appendix 1: Quarter in Review Strong Operational Performance • 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 •
Slide 20: Broker-Dealer/Registered Investment Advisor
CNO Financial Group | Third Quarter 2021 Earnings | October 27, 2021 20 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 management
Slide 21: Exclusive Agent Counts
CNO Financial Group | Third Quarter 2021 Earnings | October 27, 2021 21 % Change Consumer 3Q 4Q 1Q 2Q 3Q Y/Y Producing Field Agents1,3 4,448 4,539 4,389 4,360 4,168 -6.3% Producing Tele-Sales Agents1,3 239 257 258 247 235 -1.7% Total Producing Agents1,3 4,687 4,796 4,647 4,607 4,403 -6.1% Registered
Slide 22: New Money Rate Walk
CNO Financial Group | Third Quarter 2021 Earnings | October 27, 2021 22 New Money Rate Walk 3Q NMR up 17 bps QoQ due to selective direct investments, higher market yields
Slide 23: New Money Summary
CNO Financial Group | Third Quarter 2021 Earnings | October 27, 2021 23 New Money Summary Continued up-in-quality bias during third quarter 93% Investment Grade Third Quarter Investments Allocation $ Allocation% Yield Average Rating Average Duration IG Corporates 366 43.1% 3.64% A- 16.6 Structured S
Slide 24: Long-Term Care Insurance
CNO Financial Group | Third Quarter 2021 Earnings | October 27, 2021 24 New sales (~$25 million annually) focused on short duration products – 99% of new sales for policies with 2 years or less in benefits – Average benefit period of 12 months – New business 25% reinsured since 2008 Reserve assu
Slide 25: Tax Asset Summary
CNO Financial Group | Third Quarter 2021 Earnings | October 27, 2021 25 Non-life NOLs $265 DTAs related to tax strategy $143 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 approximate
Slide 26: Appendix 2: Financial Exhibits
CNO Financial Group | Third Quarter 2021 Earnings | October 27, 2021 26 Appendix 2: Financial Exhibits • Non-GAAP Financial Measures Slides 27-45
Slide 27: 3Q21 Significant Items
CNO Financial Group | Third Quarter 2021 Earnings | October 27, 2021 27 The table below summarizes the financial impact of significant items on our 3Q21 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results. 3Q21 Sign
Slide 28: 2Q21 Significant Items
CNO Financial Group | Third Quarter 2021 Earnings | October 27, 2021 28 The table below summarizes the financial impact of significant items on our 2Q21 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results. 2Q21 Sign
Slide 29: 1Q21 Significant Items
CNO Financial Group | Third Quarter 2021 Earnings | October 27, 2021 29 The table below summarizes the financial impact of significant items on our 1Q21 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results. 1Q21 Sign
Slide 30: 4Q20 Significant Items
CNO Financial Group | Third Quarter 2021 Earnings | October 27, 2021 30 The table below summarizes the financial impact of significant items on our 4Q20 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results. 4Q20 Sign
Slide 31: 2Q20 Significant Items
CNO Financial Group | Third Quarter 2021 Earnings | October 27, 2021 31 The table below summarizes the financial impact of significant items on our 2Q20 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results. 2Q20 Sign
Slide 32: 2Q20 Significant Items (Continued)
CNO Financial Group | Third Quarter 2021 Earnings | October 27, 2021 32 2Q20 Significant Items (Continued from the previous page) (1) Given our expectation that interest rates will remain low for the long-term, we performed an actuarial unlocking exercise in the second quarter of 2020 to reflect our
Slide 33: 4Q19 Significant Items
CNO Financial Group | Third Quarter 2021 Earnings | October 27, 2021 33 The table below summarizes the financial impact of significant items on our 4Q19 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results. 4Q19 Sign
Slide 34: Quarterly Operating Results
CNO Financial Group | Third Quarter 2021 Earnings | October 27, 2021 34 3Q20 4Q20 1Q21 2Q21 3Q21 Insurance product margin Annuity 45.3$ 68.1$ 57.9$ 66.0$ 52.5$ Health 152.2 125.2 124.7 120.9 117.9 Life 47.3 37.3 27.1 39.7 53.2 Total insurance product margin 244.8 230.6 209.7 226.6 223.6 Allocated ex
Slide 35: Information Related to Certain Non-GAAP Financial Measures
CNO Financial Group | Third Quarter 2021 Earnings | October 27, 2021 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 per
Slide 36: Net Income to Net Operating Income Reconciliation
CNO Financial Group | Third Quarter 2021 Earnings | October 27, 2021 36 Information Related to Certain Non-GAAP Financial Measures A reconciliation of net income (loss) applicable to common stock to net operating income (and related per-share amounts) is as follows: (dollars in millions, except per-
Slide 37: Operating Income and Shares Reconciliation
CNO Financial Group | Third Quarter 2021 Earnings | October 27, 2021 37 Information Related to Certain Non-GAAP Financial Measures A reconciliation of operating income and shares used to calculate basic and diluted operating earnings per share is as follows: (dollars in millions, except per-share am
Slide 38: Book Value per Diluted Share
CNO Financial Group | Third Quarter 2021 Earnings | October 27, 2021 38 Information Related to Certain Non-GAAP Financial Measures 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
Slide 39: Operating Return Measures
CNO Financial Group | Third Quarter 2021 Earnings | October 27, 2021 39 Information Related to Certain Non-GAAP Financial Measures Operating return measures Management believes that an analysis of net income applicable to common stock before net realized investment gains or losses from sales, impair
Slide 40: Operating Return on Equity Calculations
CNO Financial Group | Third Quarter 2021 Earnings | October 27, 2021 40 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 41: Operating Earnings and Significant Items Summary
CNO Financial Group | Third Quarter 2021 Earnings | October 27, 2021 41 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 (loss): (dollars in
Slide 42: Operating Return on Equity Calculations (Continued)
CNO Financial Group | Third Quarter 2021 Earnings | October 27, 2021 42 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 43: Consolidated Capital Reconciliation 2018-2019
CNO Financial Group | Third Quarter 2021 Earnings | October 27, 2021 43 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 44: Consolidated Capital Reconciliation 3Q20-3Q21
CNO Financial Group | Third Quarter 2021 Earnings | October 27, 2021 44 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 45: Debt to Capital Ratio
CNO Financial Group | Third Quarter 2021 Earnings | October 27, 2021 45 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), differ