Cno Financial Group, Inc. · NYSE:CNO
Cno Financial — Q3 2013 Earnings Presentation
49 slides from Cno Financial's earnings presentation, Oct 29, 2013
Slide 1: 3Q13 Financial and operating results
3Q13 Financial and operating results for the period ended September 30, 2013 October 29, 2013 Unless otherwise specified, comparisons in this presentation are between 3Q13 and 3Q12. Exhibit 99.1
Slide 2: Forward-Looking Statements
CNO Financial Group | 3Q2013 Earnings | October 29, 2013 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 results of oper
Slide 3: Non-GAAP Measures
CNO Financial Group | 3Q2013 Earnings | October 29, 2013 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 accumulated othe
Slide 4: 29, 2013
CNO Financial Group | 3Q2013 Earnings | October 29, 2013 4
Slide 5: 3Q13 Summary
CNO Financial Group | 3Q2013 Earnings | October 29, 2013 5 Businesses continue to perform well; growth in – Sales and premiums – Operating earnings per share Accelerating investment in our business – Expanding locations, geographies, and product offerings – Growing agent force and improving prod
Slide 6: Operating Earnings Per Share
CNO Financial Group | 3Q2013 Earnings | October 29, 2013 6 3Q12 $0.26 3Q13 $0.29 Operating Earnings Per Share Building * A non-GAAP measure. See the Appendix for a reconciliation to the corresponding GAAP measure. ** In the third quarter of 2012, equivalent common shares of 56.7 million related to a
Slide 7: Investments in the Business Driving Growth
CNO Financial Group | 3Q2013 Earnings | October 29, 2013 7 $781.1 $809.6 3Q12 3Q13 $94.1 $101.8 3Q12 3Q13 Investments in the Business Driving Growth CNO Investing in productivity and growth of the agent force Expanding presence by adding new locations and geographies Developing and launching n
Slide 8: Bankers Life 3Q13 Sales and Distribution Results
CNO Financial Group | 3Q2013 Earnings | October 29, 2013 8 3Q12 $57.6 4Q12 $69.3 1Q13 $60.5 2Q13 $63.2 3Q13 $62.5 3Q13 Sales and Distribution Results Sales up 9% – Life sales up 24% – Annuity sales improved, up 11% – Health sales down 3% • Driven primarily by declines in LTC partially offset by cr
Slide 9: Washington National 3Q13 Sales and Distribution Results
CNO Financial Group | 3Q2013 Earnings | October 29, 2013 9 3Q12 $21.4 4Q12 $22.8 1Q13 $20.6 2Q13 $23.3 3Q13 $23.9 Washington National 3Q13 Sales and Distribution Results ($ millions) * Collected premiums excludes Medicare supplement premiums ** Total producing agents includes appointed agents with $
Slide 10: Colonial Penn 3Q13 Sales and Distribution Results
CNO Financial Group | 3Q2013 Earnings | October 29, 2013 10 Sales up 2% ‒ Increased marketing drove 6% growth in August and September combined ‒Positive momentum continuing into 4Q13 ‒Sales results in line with seasonal patterns Collected premiums up 8% reflecting growth in inforce 3Q13 Sales an
Slide 11: Outlook
CNO Financial Group | 3Q2013 Earnings | October 29, 2013 11 Outlook New sales locations will continue to contribute to sales growth as start-up offices ramp up to full productivity Continued strength in life insurance sales backed by new products, cross sell initiatives, and more focused agent t
Slide 12: 3Q13 Consolidated Financial Highlights
CNO Financial Group | 3Q2013 Earnings | October 29, 2013 12 3Q13 Consolidated Financial Highlights CNO Earnings ‒ Solid results across all segments ‒ In aggregate, core earnings drivers performed as expected ‒ FAS 97 (interest sensitive products) assumptions reviewed with no significant adjustment
Slide 13: Segment Earnings
CNO Financial Group | 3Q2013 Earnings | October 29, 2013 13 $3.3 $(2.7) $3.0 $(3.6) $(0.4) $(2.6) $3.2 $(5.4) $1.2 $(4.2) $10.4 $16.5 $3.6 $2.6 $6.1 $80.6 $77.7 $71.3 $76.6 $80.6 $33.9 $34.6 $29.4 $30.3 $28.1 3Q12 4Q12 1Q13 2Q13 3Q13 Corporate CP OCB BLC WN ($ millions) * A non-GAAP measure. See the
Slide 14: Health Margins 3Q13 Highlights
CNO Financial Group | 3Q2013 Earnings | October 29, 2013 14 ($ millions) * A non-GAAP measure. Refer to the Appendix for the corresponding GAAP measure Health Margins 3Q13 Highlights Bankers Medicare supplement benefited from a favorable reserve adjustment, positive claims trends and persistency
Slide 15: Summary of Investment Results
CNO Financial Group | 3Q2013 Earnings | October 29, 2013 15 $24,487 $24,695 $24,986 $24,861 $24,933 $349.4 $352.8 $351.9 $348.8 $350.7 3Q12 4Q12 1Q13 2Q13 3Q13 Net Investment Income Summary of Investment Results CNO ($ millions) Earned Yield*: 5.90% 5.90% 5.89% 5.88% 5.86% New Money Rate: 4.71% 4.79
Slide 16: Capital Position
CNO Financial Group | 3Q2013 Earnings | October 29, 2013 16 2011 18.3% 2012 20.7% 3Q2013 17.3% 2011 358% 2012 367% 3Q2013 392% 2011 $202.8 2012 $293.6 3Q2013 $292.0 Capital Position CNO Leverage* RBC Ratio Liquidity ($ millions) Insurance Company Capitalization – RBC of 392% reflects: • YTD statut
Slide 17: 3Q13 Capital Generation and Deployment
CNO Financial Group | 3Q2013 Earnings | October 29, 2013 17 Net Statutory Dividends $203 Fees and Interest $103 Other $30 Decrease in Corporate Liquidity $7 3Q13 Capital Generation and Deployment ($ in millions) 3Q YTD Sources and Uses Highlights Generated over $500mm of capital over the last twel
Slide 18: Loss Carryforwards and 3Q13 Tax Items
CNO Financial Group | 3Q2013 Earnings | October 29, 2013 18 Capital $278 Non-Life $974 Life $271 Loss Carryforwards Valuation Allowance Loss Carryforwards and 3Q13 Tax Items * Issue regarding the allocation of cancellation of indebtedness income between life and non-life NOLs. See the Form 10-Q for
Slide 19: ROE Progression
CNO Financial Group | 3Q2013 Earnings | October 29, 2013 19 ROE Progression CNO Calculated on a trailing 4 quarter basis and excluding AOCI and NOLs Normalized removes significant earnings items identified each quarter 3Q2012 operating ROE includes litigation and interest rate charges 2013 b
Slide 20: 2013 Outlook
CNO Financial Group | 3Q2013 Earnings | October 29, 2013 20 2013 Outlook Core Earnings: - Expect no material change in normalized health benefit ratios - Expect continued strong annuity income and spreads - Colonial Penn: no change to annual guidance of $(5)mm to $(10)mm EBIT loss - OCB: no change
Slide 21: Driving Toward 2015 Milestones
CNO Financial Group | 3Q2013 Earnings | October 29, 2013 21 Driving Toward 2015 Milestones CNO CNO to host an outlook call 3rd week in December 2015 Milestones Invest $80-$85mm in strategic business initiatives Accelerate run-on and run-off Enhance customer experience and operational efficienc
Slide 22: Questions and Answers
CNO Financial Group | 3Q2013 Earnings | October 29, 2013 22 Questions and Answers
Slide 23: Appendix
CNO Financial Group | 3Q2013 Earnings | October 29, 2013 23 Appendix
Slide 24: Significant items impact on 3Q2012 net operating income
CNO Financial Group | 3Q2013 Earnings | October 29, 2013 24 The table below summarizes the financial impact of significant items on our 3Q2012 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results (dollars in millions
Slide 25: Significant items impact on 4Q2012 net operating income
CNO Financial Group | 3Q2013 Earnings | October 29, 2013 25 The table below summarizes the financial impact of significant items on our 4Q2012 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results (dollars in millions
Slide 26: Significant item impact on 1Q2013 net operating income
CNO Financial Group | 3Q2013 Earnings | October 29, 2013 26 The table below summarizes the financial impact of the significant item on our 1Q2013 net operating income. Management believes that identifying the impact of this item enhances the understanding of our operating results (dollars in million
Slide 27: Significant items impact on 2Q2013 net operating income
CNO Financial Group | 3Q2013 Earnings | October 29, 2013 27 The table below summarizes the financial impact of the significant items on our 2Q2013 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results (dollars in mill
Slide 28: Significant items impact on 3Q2013 net operating income
CNO Financial Group | 3Q2013 Earnings | October 29, 2013 28 The table below summarizes the financial impact of significant items on our 3Q2013 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results (dollars in millions
Slide 29: Quarterly Earnings
CNO Financial Group | 3Q2013 Earnings | October 29, 2013 29 Quarterly Earnings CNO *Management believes that an analysis of earnings before net realized investment gains (losses), fair value changes in embedded derivative liabilities, equity in earnings of certain non-strategic investments and earni
Slide 30: Loss Recognition & Cash Flow Testing
CNO Financial Group | 3Q2013 Earnings | October 29, 2013 30 Loss Recognition & Cash Flow Testing 2012 Statutory Cash Flow Testing 2012 GAAP Loss Recognition Testing Aggregate testing margins remain strong Testing margin Increased in 2012 ↑ - ASU 2010-26 ↑ - Net Growth from New Business (+6%) ↓ -
Slide 31: 3Q13 Holding Company Liquidity
CNO Financial Group | 3Q2013 Earnings | October 29, 2013 31 3Q13 Holding Company Liquidity CNO ($ millions) 3Q13 YTD Cash and Investments Balance - Beginning $229.7 $293.6 Sources Dividends from Insurance Subsidiaries 64.0 202.5 Dividends from Non-insurance Subsidiaries - 6.1 Interest/Earnings on Co
Slide 32: Returning Capital to our Shareholders
CNO Financial Group | 3Q2013 Earnings | October 29, 2013 32 $16.2 $39.5 $14.1 $18.9 $39.3 $41.4 $80.7 $50.0 $37.3 $342.0 $124.8 $9.4 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 Share Repurchases Convertible Repurchases Returning Capital to our Shareholders CNO Since initiating the share
Slide 33: Debt Maturity Profile
CNO Financial Group | 3Q2013 Earnings | October 29, 2013 33 $12.5 $59.4 $79.3 $60.5 $378.1 $3.5 $275.0 $12.5 $59.4 $79.3 $64.0 $4.2 2013 2014 2015 2016 2017 2018 2019 2020 Term Loan Senior Unsecured Debentures Senior Secured Notes Debt Maturity Profile ($ millions) $378.1 $275.0 CNO
Slide 34: Holding Company Investments at 9/30/13
CNO Financial Group | 3Q2013 Earnings | October 29, 2013 34 Holding Company Investments at 9/30/13 CNO ($ millions) Cash & Money Market / Fixed Income $184.7 Equities $69.1 Portfolio strategy is to prioritize liquidity for corporate capital needs, while balanced allocation generates consistent retur
Slide 35: Information Related to Certain Non-GAAP Financial Measures
CNO Financial Group | 3Q2013 Earnings | October 29, 2013 35 The following provides additional information regarding certain non-GAAP measures used in this presentation. A non-GAAP measure is a numerical measure of a company’s performance, financial position, or cash flows that excludes or includes a
Slide 36: Net income to net operating income reconciliation
CNO Financial Group | 3Q2013 Earnings | October 29, 2013 36 Information Related to Certain Non-GAAP Financial Measures A reconciliation of net income (loss) applicable to common stock to net operating income (and related per-share amounts) is as follows (dollars in millions, except per-share amounts
Slide 37: Operating earnings per diluted share reconciliation
CNO Financial Group | 3Q2013 Earnings | October 29, 2013 37 3Q12 4Q12 1Q13 2Q13 3Q13 Operating income 25.6$ 60.0$ 49.7$ 67.7$ 77.2$ Add: interest expense on 7.0% Convertible Senior Debentures due 2016, net of income taxes - 1.2 1.2 0.4 - Total adjusted operating income 25.6$ 61.2$ 50.9$ 68.1$ 77.2$
Slide 38: Book value per diluted share
CNO Financial Group | 3Q2013 Earnings | October 29, 2013 38 Book value per diluted share Book value per diluted share reflects the potential dilution that could occur if outstanding stock options and warrants were exercised, restricted stock and performance units were vested and convertible securiti
Slide 39: Interest-adjusted benefit ratio
CNO Financial Group | 3Q2013 Earnings | October 29, 2013 39 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 accumulated assets bac
Slide 40: Operating return measures
CNO Financial Group | 3Q2013 Earnings | October 29, 2013 40 Information Related to Certain Non-GAAP Financial Measures Operating return measures Management believes that an analysis of return before loss on extinguishment of debt, net realized gains or losses, fair value changes due to fluctuations
Slide 41: Operating return on allocated capital and return on equity
CNO Financial Group | 3Q2013 Earnings | October 29, 2013 41 Information Related to Certain Non-GAAP Financial Measures The calculations of: (i) operating return on allocated capital, excluding accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-GAAP financial me
Slide 42: Pretax operating earnings to segment operating return
CNO Financial Group | 3Q2013 Earnings | October 29, 2013 42 Information Related to Certain Non-GAAP Financial Measures A reconciliation of pretax operating earnings (a non-GAAP financial measure) to segment operating return and consolidated net income for the twelve months ended September 30, 2013,
Slide 43: Average allocated capital reconciliation
CNO Financial Group | 3Q2013 Earnings | October 29, 2013 43 Information Related to Certain Non-GAAP Financial Measures A reconciliation of average allocated capital (for the purpose of determining return on allocated capital), excluding accumulated other comprehensive income (loss) and net operating
Slide 44: Operating return on equity calculations
CNO Financial Group | 3Q2013 Earnings | October 29, 2013 44 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
Slide 45: Operating earnings, significant items and net income summary
CNO Financial Group | 3Q2013 Earnings | October 29, 2013 45 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
Slide 46: Pretax operating earnings to net income
CNO Financial Group | 3Q2013 Earnings | October 29, 2013 46 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): 3Q12 4Q12 1Q13 2Q13 3Q13 Segment pretax operating ear
Slide 47: Consolidated capital to common shareholders' equity
CNO Financial Group | 3Q2013 Earnings | October 29, 2013 47 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 share
Slide 48: Consolidated capital to common shareholders' equity (trailing average)
CNO Financial Group | 3Q2013 Earnings | October 29, 2013 48 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 share
Slide 49: Debt to capital ratio, excluding AOCI
CNO Financial Group | 3Q2013 Earnings | October 29, 2013 49 Information Related to Certain Non-GAAP Financial Measures 3Q12 4Q12 1Q13 2Q13 3Q13 Corporate notes payable 1,035.1$ 1,004.2$ 934.2$ 905.7$ 868.6$ Total shareholders' equity 5,066.2 5,049.3 5,028.6 4,581.4 4,786.6 Total capital 6,101.3$ 6,0