Cno Financial Group, Inc. · NYSE:CNO
Cno Financial — Q4 2014 Earnings Presentation
48 slides from Cno Financial's earnings presentation, Feb 11, 2015
Slide 1: 4Q14 Financial and operating results
4Q14 Financial and operating results for the period ended December 31, 2014 February 11, 2015 Unless otherwise specified, comparisons in this presentation are between 4Q14 and 4Q13. Exhibit 99.1
Slide 2: Forward-Looking Statements
CNO Financial Group | 4Q2014 Earnings | February 11, 2015 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 ope
Slide 3: Non-GAAP Measures
CNO Financial Group | 4Q2014 Earnings | February 11, 2015 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 oth
Slide 4: 11, 2015
CNO Financial Group | 4Q2014 Earnings | February 11, 2015 4
Slide 5: 4Q14 Summary
CNO Financial Group | 4Q2014 Earnings | February 11, 2015 5 4Q14 Summary CNO Continued growth in the franchise Completed year end assumption review − Aggregate margins continue to be strong − LTC margins remain thin Continued strength in key capital ratios Repurchased $75 million of common s
Slide 6: CNO Compelling Per Share Growth Story
CNO Financial Group | 4Q2014 Earnings | February 11, 2015 6 CNO Compelling Per Share Growth Story Operating Earnings Per Share Excluding Significant Items* Operating Earnings Excl. Significant Items* $64.2 $69.7 Weighted Average Shares Outstanding 227.1 206.9 Significant EPS Growth * A non-GAAP meas
Slide 7: Strategic IT Partnership with Cognizant
CNO Financial Group | 4Q2014 Earnings | February 11, 2015 7 Strategic IT Partnership with Cognizant Comprehensive, multi-year agreement forming a strategic partnership for technology delivery and services ‒ After the transition period, Cognizant will assume CNO’s: ‒ Application development, mainte
Slide 8: CNO 2014 Accomplishments
CNO Financial Group | 4Q2014 Earnings | February 11, 2015 8 CNO 2014 Accomplishments Continued to grow the business Significantly reduced risk profile of the company through reinsurance and the sale of the CLIC legal entity Met and exceeded earnings growth, ROE and financial strength targets
Slide 9: 4Q14 Sales and Distribution Results: Bankers Life
CNO Financial Group | 4Q2014 Earnings | February 11, 2015 9 4Q14 Sales and Distribution Results Bankers Life *MA/PDP sales are excluded from NAP in all periods **See appendix for producing agent count details ($ millions) Quarterly NAP* Med Advantage Policies Issued 16,814 1,075 2,154 1,660 14,269 T
Slide 10: Washington National 4Q14 Sales and Distribution Results
CNO Financial Group | 4Q2014 Earnings | February 11, 2015 10 Washington National 4Q14 Sales and Distribution Results ($ millions) Quarterly NAP Trailing 4-Quarters NAP $94.0 $95.4 $97.4 $99.1 $99.2 Supplemental Health Collected Premiums $126.4 $125.9 $129.1 $127.1 $133.3 4Q13 $26.2 1Q14 $22.0 2Q14 $
Slide 11: 4Q14 Sales and Distribution Results: Colonial Penn
CNO Financial Group | 4Q2014 Earnings | February 11, 2015 11 4Q14 Sales and Distribution Results Colonial Penn ($ millions) Quarterly NAP Trailing 4-Quarters NAP $62.2 $62.0 $62.7 $63.7 $64.6 Collected Premiums $58.5 $61.0 $60.9 $61.9 $61.3 4Q13 $14.0 1Q14 $16.8 2Q14 $16.5 3Q14 $16.4 4Q14 $14.9 4Q
Slide 12: 2015 Sales Outlook
CNO Financial Group | 4Q2014 Earnings | February 11, 2015 12 2015 Sales Outlook Expect consolidated sales growth of 3% - 6% 2015 sales growth: 3-5% Sharpen focus on agent recruiting Continue gains in agent productivity 2015 sales growth: 6-8% Diversified sales channels and products Increased
Slide 13: 4Q Consolidated Financial Highlights
CNO Financial Group | 4Q2014 Earnings | February 11, 2015 13 4Q Consolidated Financial Highlights CNO Earnings Remain Strong ‒ Normalized EBIT and EPS up 8% and 21% respectively over 4Q 2013 ‒ Health benefit ratios and margins generally consistent with guidance ‒ Annuity and life account value gro
Slide 14: Segment Earnings and 4Q14 Earnings Drivers
CNO Financial Group | 4Q2014 Earnings | February 11, 2015 14 $3.8 $(3.0) $(3.7) $(9.1) $(8.8) $(4.1) $(6.2) $3.8 $0.4 $2.8 $(7.4) $79.8 $84.2 $87.4 $98.3 $94.5 $37.8 $31.1 $32.3 $30.1 $30.2 4Q13 1Q14 2Q14 3Q14 4Q14 Corporate CP OCB** BLC WN ($ millions) * A non-GAAP measure. See the Appendix for a r
Slide 15: Health Margins 4Q14 Highlights & Outlook
CNO Financial Group | 4Q2014 Earnings | February 11, 2015 15 $124 $126 $127 $126 $132 50.6% 53.0% 54.8% 56.0% 54.4% 4Q13 1Q14 2Q14 3Q14 4Q14 Earned Premium Reported Benefit Ratio $131 $129 $127 $126 $124 80.0% 81.0% 79.2% 70.5% 77.8% 4Q13 1Q14 2Q14 3Q14 4Q14 ($ millions) * A non-GAAP measure. Refer
Slide 16: Investment Results
CNO Financial Group | 4Q2014 Earnings | February 11, 2015 16 $4.9 $4.3 $4.2 $8.1 $11.9 $2.8 $12.6 $25,272 $21,687 $21,852 $354.4 $348.1 $347.4 $300.1 $305.4 4Q13 1Q14 2Q14 3Q14 4Q14 Net Investment Income $1.3 $1.1 $4.4 Investment Results CNO ($ millions) Earned Yield*: 5.85% 5.88% 5.83% 5.79% 5.83%
Slide 17: 2014 GAAP Loss Recognition Testing
CNO Financial Group | 4Q2014 Earnings | February 11, 2015 17 2014 GAAP Loss Recognition Testing Key Lines of Business Tested Liabilities* ($ in billions) Key Risks to Margin Aggregate Margins Traditional life $1.4 Mortality Aggregate margins of approximately 60% Medicare supplement and supplemental
Slide 18: LTC - Actuarial Analysis & Sensitivity Testing
CNO Financial Group | 4Q2014 Earnings | February 11, 2015 18 LTC - Actuarial Analysis & Sensitivity Testing Key Variable Sensitivity Test** LRT Margin Impact Lapse Rate +/- 10% +/- $75mm Morbidity +/- 1% -/+ $65mm Mortality +/- 1% +/- $30mm * NGL (Net GAAP Liability) totaled $4.35 billion **Represen
Slide 19: New Money Investment Rate Assumptions
CNO Financial Group | 4Q2014 Earnings | February 11, 2015 19 • Assumption Change: NMR reflect year- end market conditions and 2015 investment strategy with ultimate rates reduced 50 basis points Overall Impact: negative impact to LRT margins of ~$110mm across all product lines. Earnings impact on
Slide 20: Capital Targets & Excess Capital Deployment
CNO Financial Group | 4Q2014 Earnings | February 11, 2015 20 v v Capital Targets & Excess Capital Deployment CNO 2013 2014 2015 Y.E. Outlook RBC 410% 434% ~ 425% Liquidity $309mm $345mm ~ $315mm* Leverage** 16.9% 17.1% ~ 16% Key Capital Ratios Securities Repurchases $376mm in total securities repu
Slide 21: ROE Progression & Considerations
CNO Financial Group | 4Q2014 Earnings | February 11, 2015 21 7.0% 7.6% 8.9% 9.5% ROE Progression & Considerations Considerations ROE Drivers -Stable growth in core earnings -Cumulative sales projections revised -Interest rates and LTC headwinds - Repurchase a “plug” for deployable capital Recapitali
Slide 22: CNO Focus
CNO Financial Group | 4Q2014 Earnings | February 11, 2015 22 CNO Focus Invest in our business and grow our franchise Enhance the customer experience Increase operating effectiveness Increase profitability and return on equity Effectively manage risk and deploy capital
Slide 23: Questions and Answers
CNO Financial Group | 4Q2014 Earnings | February 11, 2015 23 Questions and Answers
Slide 24: Appendix
CNO Financial Group | 4Q2014 Earnings | February 11, 2015 24 Appendix
Slide 25: Energy Sector Overview
CNO Financial Group | 4Q2014 Earnings | February 11, 2015 25 Energy Sector Overview December 31, 2014 Overall energy exposure of $1.8bn is appropriately sized relative to capital, highly diversified, and liquid $145mm of unrealized gains Investment grade energy exposure (87% of overall exposur
Slide 26: Producing Exclusive Agent Counts
CNO Financial Group | 4Q2014 Earnings | February 11, 2015 26 Producing Exclusive Agent Counts 1st Yr 2nd Yr 3rd Yr + Total Qtr Avg (3) 1st Yr 2nd Yr 3rd Yr + Total Qtr Avg (3) 12/31/2014 2,258 664 1,868 4,790 4,842 365 128 337 830 831 9/30/2014 2,233 667 1,822 4,722 4,783 382 134 336 852 835 6/30/20
Slide 27: 4Q14 Holding Company Liquidity
CNO Financial Group | 4Q2014 Earnings | February 11, 2015 27 4Q14 Holding Company Liquidity CNO ($ millions) 4Q14 YTD Cash and Investments Balance - Beginning $432.2 $309.0 Sources Net Dividends from Insurance Subsidiaries - 174.0 * Dividends from Non-insurance Subsidiaries - 9.5 Interest/Earnings o
Slide 28: Debt Maturity Profile
CNO Financial Group | 4Q2014 Earnings | February 11, 2015 28 $79.2 $60.5 $378.1 $275 $4.3 2015 2016 2017 2018 2019 2020 Term Loan Senior Secured Notes Debt Maturity Profile ($ millions) CNO
Slide 29: Holding Company Investments at 12/31/14
CNO Financial Group | 4Q2014 Earnings | February 11, 2015 29 Holding Company Investments at 12/31/14 CNO ($ millions) Cash & Money Market / Fixed Income $198.3 Equities $125.3 Portfolio strategy prioritizes consistent returns that utilize non-life tax benefits Cash & Money Market Fixed Income Equiti
Slide 30: Leveraging Considerable Tax Assets
CNO Financial Group | 4Q2014 Earnings | February 11, 2015 30 Non-Life $869 Life $179 Loss Carryforwards Valuation Allowance Leveraging Considerable Tax Assets CNO ($ millions) 4Q 2014 Loss Carryforwards $233* 2015 Outlook and Value v Annual cash flows are expected to be reduced by $50 million in 2
Slide 31: Significant items in 4Q2013 net operating income
CNO Financial Group | 4Q2014 Earnings | February 11, 2015 31 The table below summarizes the financial impact of the significant items on our 4Q2013 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results (dollars in mil
Slide 32: Significant item in 1Q2014 net operating income
CNO Financial Group | 4Q2014 Earnings | February 11, 2015 32 The table below summarizes the financial impact of the significant item on our 1Q2014 net operating income. Management believes that identifying the impact of this item enhances the understanding of our operating results (dollars in millio
Slide 33: Significant items in 2Q2014 net operating income
CNO Financial Group | 4Q2014 Earnings | February 11, 2015 33 Net Operating Income: Bankers Life $ 87.4 $ - $ 87.4 Washington National Colonial Penn EBIT from business segments continuing after the CLIC sale Corporate Operations, excluding corporate interest expense (1) EBIT from operations continuin
Slide 34: Significant items in 3Q2014 net operating income
CNO Financial Group | 4Q2014 Earnings | February 11, 2015 34 The table below summarizes the financial impact of significant items on our 3Q2014 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results (dollars in million
Slide 35: Significant items in 4Q2014 net operating income
CNO Financial Group | 4Q2014 Earnings | February 11, 2015 35 Net Operating Income: Bankers Life $ 103.5 $ (9.0) (1) $ 94.5 Washington National (2) Colonial Penn EBIT from business segments continuing after the CLIC sale Corporate Operations, excluding corporate interest expense (3) EBIT from operati
Slide 36: Quarterly Earnings
CNO Financial Group | 4Q2014 Earnings | February 11, 2015 36 Quarterly Earnings CNO *Management believes that an analysis of earnings before the net loss on sale of CLIC and gain (loss) on reinsurance transactions, the earnings of CLIC prior to being sold, net realized investment gains (losses), fai
Slide 37: Additional information on non-GAAP measures
CNO Financial Group | 4Q2014 Earnings | February 11, 2015 37 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
Slide 38: Net income to net operating income reconciliation
CNO Financial Group | 4Q2014 Earnings | February 11, 2015 38 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): 4Q1
Slide 39: Operating income and share reconciliation
CNO Financial Group | 4Q2014 Earnings | February 11, 2015 39 4Q13 1Q14 (a) 2Q14 3Q14 4Q14 Operating income 66.2$ 59.9$ 63.7$ 76.6$ 59.3$ Weighted average shares outstanding for basic earnings per share 221,056 220,307 216,538 210,525 204,298 Effect of dilutive securities on weighted average shares:
Slide 40: Book value per diluted share
CNO Financial Group | 4Q2014 Earnings | February 11, 2015 40 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 securit
Slide 41: Interest-adjusted benefit ratio
CNO Financial Group | 4Q2014 Earnings | February 11, 2015 41 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 ba
Slide 42: Operating return measures
CNO Financial Group | 4Q2014 Earnings | February 11, 2015 42 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 sale of CLIC and gain (loss) on reinsurance transacti
Slide 43: Operating return on equity calculations
CNO Financial Group | 4Q2014 Earnings | February 11, 2015 43 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); (i
Slide 44: Operating earnings and significant items summary
CNO Financial Group | 4Q2014 Earnings | February 11, 2015 44 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): Operatin
Slide 45: Pretax operating earnings to net income
CNO Financial Group | 4Q2014 Earnings | February 11, 2015 45 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): 4Q13 1Q14 2Q14 3Q14 4Q14 Pretax operating earnings (
Slide 46: Consolidated capital to shareholders' equity (2012-2013)
CNO Financial Group | 4Q2014 Earnings | February 11, 2015 46 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 shar
Slide 47: Consolidated capital to shareholders' equity (2013-2014)
CNO Financial Group | 4Q2014 Earnings | February 11, 2015 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 shar
Slide 48: Debt to capital ratio, excluding AOCI
CNO Financial Group | 4Q2014 Earnings | February 11, 2015 48 Information Related to Certain Non-GAAP Financial Measures 4Q13 1Q14 2Q14 3Q14 4Q14 Corporate notes payable 856.4$ 844.1$ 827.3$ 814.0$ 794.4$ Total shareholders' equity 4,955.2 4,710.2 4,844.3 4,722.0 4,688.2 Total capital 5,811.6$ 5,554.