CNO Financial Group, Inc. · NYSE:CNO

CNO Financial — Q2 2010 Earnings Presentation

66 slides from CNO Financial's earnings presentation, Aug 4, 2010

1. Slide 1: 2Q10 Financial and Operating Results

   2Q10 Financial and operating results for the period ended June 30, 2010 AUGUST 4, 2010 Unless otherwise specified, comparisons in this presentation are between 2Q10 and 2Q09.

2. Slide 2: Forward-Looking Statements

   Forward-Looking Statements Cautionary Statement Regarding Forward-Looking Statements. Our statements, trend analyses and other information contained in these materials relative to markets for CNO Financial Group, Inc.’s products and trends in CNO’s operations or financial results, as well as other s

3. Slide 3: Non-GAAP Measures

   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 other comprehensive income (loss) per share; operating return m

4. Slide 4: CNO Financial Group

   o CNO FINANCIAL GROUP CNO Financial Group

5. Slide 5: 2Q10: Positive Momentum Continues

   2Q10: Positive Momentum Continues CNO ƒ Net operating income** of $44.9 million, up 10% – 16 cents per diluted share, reflecting dilution from issuance of shares of common stock and convertible debentures ƒ Core sales* of $95.3 million, up 5% ƒ Asset values increased: AOCI of $319 million at 6/30/10

6. Slide 6: 2Q10 Summary of Results

   2Q10 Summary of Results CNO ($ millions, except per-share amounts) Pre-Tax After Tax EPS Bankers Life $64.0 Colonial Penn 7.6 Conseco Insurance Group 29.9 Corporate operations and interest expense (31.6) Income before net realized investment losses* 69.9 $44.9 $0.16 Loss on extinguishment of debt (0

7. Slide 7: Quarterly Earnings CNO Consolidated

   Quarterly Earnings CNO Consolidated ($ millions) 2Q09 3Q09 4Q09 1Q10 2Q10 Bankers Life $63.3 $85.4 $84.6 $53.2 $64.0 Colonial Penn 11.0 7.4 5.9 5.3 7.6 Conseco Insurance Group 21.2 21.6 (6.7) 25.7 29.9 Corporate operations, excluding interest expense (8.8) (7.4) (12.8) (5.0) (11.8) Total EBIT* 86.7

8. Slide 8: Operating ROE

   Operating ROE CNO Operating ROE*, Trailing 4 Quarters 2Q09 3Q09 4Q09 1Q10 2Q10 6.6% 6.6% 6.5% 6.2% 6.0% Average common shareholders’ equity, excluding AOCI/L and net operating loss $2,574.1 $2,503.9 $2,551.1 $2,679.2 $2,808.3 carryforwards, trailing 4 quarters ($ mils): *Operating return excludes ga

9. Slide 9: Operating EPS (Diluted)

   Operating EPS (Diluted)* CNO ƒ 65.9 million shares of common stock and $293.0 million of 3Q09 convertible debentures issued $0.29 over last three quarters 2Q09 $0.22 2Q10 4Q09 1Q10 $0.16 $0.15 $0.14 Weighted average diluted shares (in millions): 185.2 185.8 217.5 292.1 302.6 *Operating earnings per

10. Slide 10: Book Value

    Book Value CNO (in millions, except per-share amounts) 6/30/09 9/30/09 12/31/09 3/31/10 6/30/10 Shareholders’ Equity (Excluding AOCI/L) $3,461.9 $3,479.7 $3,796.7 $3,823.1 $3,864.0 Accumulated Other Comprehensive Income (Loss) (1,046.9) (146.0) (264.3) (103.0) 318.8 Total Shareholders’ Equity $2,415

11. Slide 11: Consolidated RBC Ratio

    Consolidated RBC Ratio* CNO ƒ Steady at 318% 1Q10 2Q10 ƒ 2Q10 statutory earnings offset 4Q09 319% 318% 309% impact of -8 points from modified 2Q09 3Q09 temporary MEAF relief 247% 252% *Risk-Based Capital (“RBC”) requirements provide a tool for insurance regulators to determine the levels of statutor

12. Slide 12: 2Q Summary Bankers

    2Q Summary Bankers ƒ Earnings of $64.0 million, up 1% – Higher spreads on Annuities – Positive IBNR development in PFFS – Stable LTC results ƒ Sales (NAP) up 3% CNO Financial Group 12

13. Slide 13: Bankers Sales and Distribution Results

    Sales and Distribution Results Bankers ($ millions) Quarterly NAP* ƒ NAP up 3% 4Q09 $91.3 – Increases in Life (+11%) and Med Supp (+10%) 2Q09 $62.4 3Q09 $61.8 1Q10 2Q10 $64.0 $57.5 – Lower sales of LTC (-11%) and Annuities (-5%) Policies issued and not included in NAP (net of chargebacks, in thousan

14. Slide 14: Quarterly Earnings Bankers

    Quarterly Earnings Bankers ($ millions) 2Q09 3Q09 4Q09 1Q10 2Q10 Insurance policy income $497.6 $493.1 $477.0 $396.2 $400.7 Net investment income: General account assets 160.2 162.2 165.8 172.2 177.0 Other portfolios 3.4 37.4 6.9 13.7 (16.5) Fee revenue and other income 1.6 2.4 4.8 2.3 2.7 Total rev

15. Slide 15: 2Q Summary Colonial Penn

    2Q Summary Colonial Penn ƒ Earnings of $7.6 million, down 31% – Due to $3 million gain on termination of reinsurance pool in 2Q09 ƒ Sales growth accelerating: NAP up 16% – Building on 7% sales growth in 1Q10 – Lead generation momentum building following increased direct response advertising – Increa

16. Slide 16: Quarterly Earnings Colonial Penn

    Quarterly Earnings Colonial Penn ($ millions) 2Q09 3Q09 4Q09 1Q10 2Q10 Insurance policy income $52.7 $48.4 $47.9 $48.2 $49.3 Net investment income 9.8 9.5 9.6 9.7 9.7 Fee revenue and other income 0.2 0.2 0.3 0.2 0.1 Total revenues 62.7 58.1 57.8 58.1 59.1 Insurance policy benefits 36.0 34.7 35.1 36.

17. Slide 17: 2Q Summary CIG

    2Q Summary CIG ƒ Earnings of $29.9 million, up 41% – Higher investment spreads due to bond prepayment income – Improved annuity persistency ƒ Sales (NAP) of $19.1 million, up 6% – Fourth consecutive quarter of positive sales comparisons ƒ Strong specified disease sales growth in both Independent and

18. Slide 18: 2Q10 Sales Results CIG

    2Q10 Sales Results CIG ($ millions) $17.5 ƒ Specified Disease sales up 19% $14.7 – PMA up 18% – Independent up 23% ƒ Independent worksite sales up 32% 2Q09 NAP 2Q10 NAP $1.3 $1.3 $0.8 $0.7 $0.7 $0.2 Life Annuities Medicare Supplement Specified Disease CNO Financial Group 18

19. Slide 19: Quarterly Earnings CIG

    Quarterly Earnings CIG ($ millions) 2Q09 3Q09 4Q09 1Q10 2Q10 Insurance policy income $241.0 $230.5 $222.6 $220.2 $217.9 Net investment income: General account assets 138.5 134.5 131.9 133.3 134.3 Other portfolios 2.6 15.7 3.3 4.7 (8.0) Fee revenue and other income 0.4 0.5 (0.1) 0.3 0.2 Total revenue

20. Slide 20: Impact of Low Interest Rate Environment

    Impact of Low Interest Rate Environment CNO ƒ Factored into 2010 outlook we provided to investors in December 2009 ƒ Positive impact on asset market values ƒ Additional yields in selective asset classes to offset interest rate declines ƒ Assets and liabilities are closely matched CNO Financial Group

21. Slide 21: Accounting for Costs Associated with Acquiring Insurance Contracts (EITF 09-G)

    Accounting for Costs Associated with Acquiring Insurance Contracts (EITF 09-G) CNO ƒ Proposes modifications to types of costs that can be deferred – Must be incremental or directly related to successful sales – Certain costs previously deferred will be expensed immediately ƒ No impact on value of po

22. Slide 22: Realized Gains/Losses Recognized through Net Income

    Realized Gains/Losses Recognized through Net Income CNO ($ millions) 2Q09 3Q09 4Q09 1Q10 2Q10 Gross gains $83.6 $99.5 $110.5 $50.9 $60.9 Gross losses (63.3) (84.1) (96.4) (35.5) (49.7) Losses due to recognition of other-than-tempor- ary impairments recognized in earnings (36.6) (35.7) (31.1) (20.3)

23. Slide 23: Unrealized Gain/Loss

    Unrealized Gain/Loss* CNO ($ millions) Unrealized Gain/Loss % of Invested Assets 1,000 4.0% 500 2.0% 2Q09 3Q09 4Q09 1Q10 0 0.0% 2Q10 (500) -2.0% (1,000) -4.0% (1,500) -6.0% (2,000) -8.0% *Includes debt and equity securities classified as available for sale. Excludes investments from variable interes

24. Slide 24: 2Q10 Impairments

    2Q10 Impairments CNO ($ millions) Amount Recognized through Accumulated Gross Other Comprehensive Amount Recognized Amounts Income (Loss) through Net Income* Corporates $2.8 $0.0 $2.8 Alt-A 0.0 (2.1) 2.1 CMBS 4.3 3.4 0.9 Prime Jumbos 5.7 (1.1) 6.8 Subprime 0.0 (0.5) 0.5 Commercial Mortgage Loans 12.

25. Slide 25: Asset Allocation at 6/30/10

    Asset Allocation at 6/30/10* CNO ($ millions) $14,289 $13,528 MTM reflects low market yields in most credit sectors Market Value Book Value $1,948 $1,513 $1,923 $1,183 $1,177 $1,308 $1,057 $1,472 $1,174 $1,297 $1,134 $302 $454 $1,040 $294 $483 IG Corporates CMOs Mortgage HY Corporates CMBS Municipal

26. Slide 26: Investment Quality: Fixed Maturities

    Investment Quality: Fixed Maturities* CNO Actively Managed Fixed Maturities by Rating at ƒ 92% investment grade: 6/30/10 (Market Value) – Substantially unchanged <BBB – Slowed ratings migration 8% AAA 10% AA 8% BBB 45% A 29% 6/30/09 9/30/09 12/31/09 3/31/10 6/30/10 % of Bonds which are Investment Gr

27. Slide 27: Alt-A at 6/30/10

    Alt-A at 6/30/10 CNO ($ millions) Market Book % of Avg. Avg. Avg. 60+ Avg. Accum. % of Rating Value (mil.) Value (mil.) Alt-A* FICO Support Delinq. Loss Portfolio* AAA $4.4 $4.2 2.0% 720 10.9% 6.4% 0.3% 0.02% AA $61.5 $63.0 28.5% 709 16.4% 11.0% 0.8% 0.27% A $45.3 $42.4 21.0% 711 10.6% 11.9% 0.8% 0.

28. Slide 28: Prime Jumbo at 6/30/10

    Prime Jumbo at 6/30/10 CNO ($ millions) % of Market Book Prime Avg. Avg. Avg. 60+ Avg. Accum. % of Rating Value (mil.) Value (mil.) Jumbo* FICO Support Delinq. Loss Portfolio* AAA $142.6 $148.0 18.1% 736 6.5% 2.8% 0.08% 0.62% AA $62.5 $62.8 7.9% 746 6.9% 5.2% 0.36% 0.27% A $95.4 $108.4 12.1% 741 11.

29. Slide 29: CMBS at 6/30/10

    CMBS at 6/30/10 CNO (GAAP book value - $ millions) Our CMBS exposure is heavily weighted toward securities with high ratings and seasoned vintages with relatively stronger qualitative characteristics 2009 7.3% AAA AA A BBB <BBB Pre-2004 20.7% $200.7 $26.3 $37.3 $5.9 $0.0 Pre-2004 2007 2004 $135.9 $1

30. Slide 30: CMBS at 6/30/10

    CMBS at 6/30/10 CNO ($ millions) Market Book % of Avg. Avg. 60+ Avg. Cum. % of Rating Value (mil.) Value (mil.) CMBS* Support Del. & FCR Loss Portfolio* AAA $1,008.6 $970.2 85.9% 30.1% 4.1% 0.4% 4.37% AA $85.7 $92.2 7.3% 19.9% 2.7% 0.6% 0.37% A $44.6 $52.0 3.8% 8.5% 1.4% 0.2% 0.19% BBB $30.0 $48.8 2

31. Slide 31: Commercial Mortgage Loans at 6/30/10

    Commercial Mortgage Loans at 6/30/10 CNO By Vintage By Property Type 2010 2009 2.1% 0.4% Indus. Other 2008 16.4% 0.8% 17.0% 2004 and Before 28.5% Office 38.3% 2007 20.4% 2005 Retail 11.9% 2006 39.7% 19.7% Multi-Family 4.8% ƒ Current LTV of approximately 63% ƒ Trailing debt service coverage ratio (DS

32. Slide 32: Summary

    Summary CNO ƒ Core sales and lead generation continue to be strong ƒ Demographics are trending favorably – First Boomers will become Medicare-eligible in 2011; in 10 years, number of those 65 and older will increase by 50% ƒ Focus: – Drive sales growth in all channels – Improve results of underperfo

33. Slide 33: Questions and Answers

    Questions and Answers CNO Financial Group 33

34. Slide 34: Appendix

    Appendix CNO Financial Group 34

35. Slide 35: Covenant Metrics

    Covenant Metrics Prior Amendment Level CNO New 2011 Level* New 2012 Level Debt to Capital** Interest Coverage 35% 3.3x 3.1x 32.5% 30% 30.0% 3.0x 2.4x 25% 27.0% 26.8% 20% 2.0x 1.8x 2.0x 1.7x 21.6% 21.6% 21.3% 1.75x 15% 1.5x 10% 1.0x 5% 0% 0.0x 6/30/09 9/30/09 12/31/09 3/31/10 6/30/10 6/30/09 9/30/09

36. Slide 36: 2Q10 Liquidity

    2Q10 Liquidity CNO ($ millions) Cash Balance 3/31/10 $131.2 Sources Dividends from insurance subsidiary $30.0 Net Proceeds from New Convertible Debentures 49.4 Surplus Debenture Interest 12.1 Management and Investment Fees, Net 25.6 Total Sources $117.1 Uses Interest $22.7 Debt Repayments: Retiremen

37. Slide 37: Net Investment Income

    Net Investment Income CNO ($ millions) General Account Investment Income ƒ 2Q10 portfolio yield increase due 1Q10 2Q10 2Q09 3Q09 4Q09 primarily to sustained new money $308.5 $306.3 $307.3 $315.2 $321.1 rates exceeding portfolio rate Yield: 5.65% 5.62% 5.63% 5.76% 5.83% CNO Financial Group 37

38. Slide 38: Commercial Mortgage Loans at 6/30/10

    Commercial Mortgage Loans at 6/30/10 CNO Geographic Distribution New England 9.0% Pacific Middle 9.3% West North Atlantic Central East North 7.5% 11.7% Central Mountain 21.5% 9.2% East South South Central Atlantic 5.3% 20.7% West South Central 5.8% CNO Financial Group 38

39. Slide 39: Commercial Mortgage Loans at 6/30/10

    Commercial Mortgage Loans at 6/30/10 CNO ($ millions) By Maturity 2018 Post 2024 2017 $322 $324 $315 2013 $158 2015 2016 $149 $145 2014 2022 2011 $91 2019 $105 2010 $74 $78 2012 2023 $50 $46 2020 $42 $49 2024 2021 $25 $12 CNO Financial Group 39

40. Slide 40: Expenses

    Expenses CNO ($ millions) Adjusted Operating Expenses* ƒ 2010 expenses stable 2Q09 3Q09 4Q09 1Q10 2Q10 $99.7 $98.3 $97.8 $96.0 $96.4 *Adjusted operating expenses exclude primarily acquisition costs, capitalization of software development costs, initial PFFS marketing costs and contractual vacancy ch

41. Slide 41: Collected Premiums

    Collected Premiums CNO ($ millions) Collected Premiums-Trailing 4 Quarters ƒ Trailing 4 quarters down 15% – Decline at Bankers due to 2Q09 3Q09 $4,494.9 $4,423.1 termination of PFFS 4Q09 1Q10 reinsurance contracts and $4,114.8 2Q10 $3,937.2 $3,819.6 lower annuity sales, as CIG expected CP – Consiste

42. Slide 42: Segment Performance Bankers

    Segment Performance Bankers ($ millions) Pre-Tax Operating Income* ƒ Earnings of $64.0 million, up 1% 3Q09 4Q09 – Higher spreads on Annuities $85.4 $84.6 – Stable LTC results 2Q09 $63.3 2Q10 $64.0 1Q10 – Positive IBNR development in $53.2 PFFS PTOI-Trailing 4 Quarters: $215.8 $233.4 $278.0 $286.5 $2

43. Slide 43: Premiums – Medicare Supplement Bankers

    Premiums – Medicare Supplement Bankers ($ millions) Medicare Supplement – First-Year Premiums 2Q10 4Q09 $29.4 1Q10 ƒ First-year premiums up 39% $28.2 $27.2 3Q09 2Q09 $22.7 $21.1 Med. Supp. First-Year Prems.-Tr. 4 Qtrs: $83.6 $86.5 $91.7 $99.2 $107.5 Med. Supp. Total Premiums-Quarterly: $155.2 $168.9

44. Slide 44: Premiums – Long-Term Care Bankers

    Premiums – Long-Term Care Bankers ($ millions) Long-Term Care – First-Year Premiums* ƒ Net first-year premiums* up 17%, 3Q09 4Q09 1Q10 reflecting reduction in new 2Q09 (Direct) (Direct) (Direct) 2Q10 (Direct) (Direct) $9.8 $9.8 $9.5 business reinsurance $9.1 $9.0 (Net) (Net) (Net) $5.9 (Net) $5.5 $4

45. Slide 45: Premiums – Life Insurance Bankers

    Premiums – Life Insurance Bankers ($ millions) Life – First-Year Premiums 2Q10 ƒ Fluctuations in first-year 3Q09 4Q09 $24.8 $23.4 $23.0 premiums primarily reflect 2Q09 1Q10 $20.2 variance in sales of single- $19.4 $12.4 premium policies $10.5 $10.8 SPWL $7.8 $9.6 Non- $11.6 $12.9 $12.2 $12.4 SPWL $1

46. Slide 46: Premiums – Annuity Bankers

    Premiums – Annuity Bankers ($ millions) Annuity – First-Year Premiums ƒ First-year premiums up 2% 3Q09 2Q10 2Q09 $284.0 $280.0 $274.7 1Q10 4Q09 $223.1 $197.3 First-Year Prems.-Tr. 4 Qtrs: $1,308.7 $1,270.3 $1,057.1 $979.1 $984.4 Total Premiums-Quarterly: $275.4 $284.7 $198.2 $224.4 $281.1 CNO Financ

47. Slide 47: Annuity Surrenders Bankers

    Annuity Surrenders Bankers IA Surrenders ƒ Surrenders: both indexed and non- (annualized quarterly rate) indexed annuity surrenders lower 2Q09 than prior year 3Q08 4Q08 10.9% 1Q09 10.5% 12.4% 2Q10 9.8% 1Q10 10.5% 2Q08 3Q09 4Q09 ƒ Total account value: 8.6% 9.1% 9.2% 8.3% – IAs - $1.8 billion – Non-IA

48. Slide 48: Benefit Ratio – PDP Bankers

    Benefit Ratio* – PDP Bankers ƒ Down 7.3 points, impacted by 2Q09 improved pricing and plan design 97.1% 1Q10 2Q10 88.7% 89.8% changes 3Q09 4Q09 68.0% 68.4% *We calculate benefit ratios by dividing insurance policy benefits by insurance policy income. CNO Financial Group 48

49. Slide 49: Benefit Ratio – Medicare Supplement Bankers

    Benefit Ratio* – Medicare Supplement Bankers ƒ 2Q10 impacted by higher incurred claims vs. 2Q09 2Q09 3Q09 4Q09 1Q10 2Q10 72.4% 71.7% 72.8% 70.7% 68.6% *We calculate benefit ratios by dividing insurance policy benefits by insurance policy income. CNO Financial Group 49

50. Slide 50: Interest-Adjusted Benefit Ratio – LTC Bankers

    Interest-Adjusted Benefit Ratio* – LTC Bankers 1Q10 ƒ Stable results overall 2Q09 3Q09 4Q09 2Q10 75.2% 71.9% 70.4% ƒ 2Q09 favorably impacted by 66.4% 66.4% reserve releases related to rate increases Trailing 4 Quarter Avg.: 67.6% 68.2% 67.9% 69.6% 71.0% Qtrly. non-int. adjusted: 103.2% 108.3% 104.3%

51. Slide 51: Segment Performance Colonial Penn

    Segment Performance Colonial Penn ($ millions) Pre-Tax Operating Income* 2Q09 $11.0 ƒ Earnings down 31% – Due to $3 million gain on 3Q09 2Q10 $7.6 termination of reinsurance $7.4 4Q09 pool in 2009 $5.9 1Q10 $5.3 PTOI-Trailing 4 Quarters: $29.3 $30.2 $29.4 $29.6 $26.2 Revenues-Quarterly: $62.7 $58.1

52. Slide 52: Premiums – Life Insurance Colonial Penn

    Premiums – Life Insurance Colonial Penn ($ millions) Life – First-Year Premiums ƒ Sales (NAP) up 16% 2Q09 – Lead generation momentum $8.4 3Q09 $7.9 4Q09 1Q10 $7.9 2Q10 $8.1 building following 2009 capital $7.5 limitations – Increased lead activity will drive return to pre-2009 sales levels – Buildin

53. Slide 53: Segment Performance CIG

    Segment Performance CIG ($ millions) Pre-Tax Operating Income (Loss)* ƒ Earnings up 41% – Higher investment spreads due to 1Q10 2Q10 $29.9 bond prepayment income 2Q09 3Q09 $21.6 $25.7 $21.2 – Improved annuity persistency 4Q09 -$6.7 PTOI-Trailing 4 Quarters: $118.1 $105.5 $67.3 $61.8 $70.5 Revenues-Q

54. Slide 54: Premiums - Medicare Supplement CIG

    Premiums - Medicare Supplement CIG ($ millions) Medicare Supplement – First-Year Premiums ƒ First-year collections down 42% – Focus on core products (i.e., Specified Disease) 3Q09 2Q09 $2.2 $1.9 4Q09 $1.6 1Q10 2Q10 $1.2 $1.1 First-Year Prems.-Tr. 4 Qtrs: $7.9 $8.0 $7.2 $6.9 $6.1 Total Premiums-Quart

55. Slide 55: Premiums – Specified Disease CIG

    Premiums – Specified Disease CIG ($ millions) Specified Disease – First-Year Premiums ƒ NAP up 19% 1Q10 2Q10 4Q09 $13.1 3Q09 $12.5 – Increased focus on Specified 2Q09 $11.8 $12.3 $11.1 Disease products – Momentum increasing in Worksite market First-Year Prems.-Tr. 4 Qtrs: $41.5 $43.6 $45.4 $47.7 $49

56. Slide 56: Premiums – Annuity CIG

    Premiums – Annuity CIG ($ millions) Annuity – First-Year Premiums ƒ First-year collections down 88% 3Q09 $23.4 2Q09 – Increased focus on core products $20.6 4Q09 $10.0 1Q10 $3.7 2Q10 $2.5 First-Year Prems.-Tr. 4 Qtrs: $84.7 $83.0 $71.8 $57.7 $39.6 Total Premiums-Quarterly: $22.3 $25.2 $11.4 $5.1 $4.

57. Slide 57: Interest-Adjusted Benefit Ratio – Specified Disease CIG

    Interest-Adjusted Benefit Ratio* – Specified Disease CIG 2Q10 2Q09 4Q09 1Q10 ƒ Up 2.3 points vs. 2Q09 49.7% 3Q09 49.1% 49.4% 52.0% ƒ Non-interest adjusted ratio flat 42.9% vs. 2Q09 Trailing 4 Quarter Avg.: 42.6% 41.2% 46.0% 47.8% 48.4% Qtrly. non-int. adjusted: 83.3% 76.6% 82.0% 82.3% 83.2% *We calc

58. Slide 58: Information Related to Certain Non-GAAP Financial Measures

    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 excludes or includes am

59. Slide 59: Information Related to Certain Non-GAAP Financial Measures

    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): 2Q09 3Q09 4Q09 1Q10 2Q10 Net income applicable to common stock $

60. Slide 60: Information Related to Certain Non-GAAP Financial Measures

    Information Related to Certain Non-GAAP Financial Measures Book value, excluding accumulated other comprehensive income (loss), per share This non-GAAP financial measure differs from book value per share because accumulated other comprehensive income (loss) has been excluded from the book value used

61. Slide 61: Information Related to Certain Non-GAAP Financial Measures

    Information Related to Certain Non-GAAP Financial Measures Operating return measures Management believes that an analysis of return before loss on extinguishment or modification of debt, net realized gains or losses, and increases to our valuation allowance for deferred tax assets (“net operating in

62. Slide 62: Information Related to Certain Non-GAAP Financial Measures

    Information Related to Certain Non-GAAP Financial Measures A reconciliation of return on common equity to operating return on common equity (excluding accumulated other comprehensive income (loss) and net operating loss carryforwards) is as follows (dollars in millions, except per share amounts): 2Q

63. Slide 63: Information Related to Certain Non-GAAP Financial Measures

    Information Related to Certain Non-GAAP Financial Measures A reconciliation of pretax operating earnings (a non-GAAP financial measure) to segment operating income (loss) and consolidated net income (loss) for the six months ended June 30, 2010, is as follows (dollars in millions): CIG Bankers Colon

64. Slide 64: Information Related to Certain Non-GAAP Financial Measures

    Information Related to Certain Non-GAAP Financial Measures A reconciliation of common shareholders’ equity, excluding accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-GAAP financial measure) to common shareholders’ equity at June 30, 2010, is as follows (doll

65. Slide 65: Information Related to Certain Non-GAAP Financial Measures

    Information Related to Certain Non-GAAP Financial Measures A reconciliation of average common shareholders’ equity, excluding accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-GAAP financial measure) to average common shareholders’ equity at June 30, 2010, is

66. Slide 66: Information Related to Certain Non-GAAP Financial Measures

    Information Related to Certain Non-GAAP Financial Measures Debt to capital ratio, excluding accumulated other comprehensive income (loss) This non-GAAP financial measure differs from the debt to capital ratio because accumulated other comprehensive income (loss) has been excluded from the value of c

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