Cno Financial Group, Inc. · NYSE:CNO
Cno Financial — Q1 2022 Earnings Presentation
46 slides from Cno Financial's earnings presentation, May 2, 2022
Slide 1: First Quarter 2022 Financial and operating results
CNO Financial Group 1 First Quarter 2022 Financial and operating results for the period ended March 31, 2022 May 2, 2022 Unless otherwise specified, comparisons in this presentation are between 1Q21 and 1Q22. Exhibit 99.3
Slide 2: Important Legal Information
CNO Financial Group 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 results of operations and capital plans. We caution
Slide 3: CNO Financial Group 3
CNO Financial Group 3
Slide 4: Quarter in Review: Strong Operational Performance
CNO Financial Group 4 Solid sales metrics; stable underlying earnings; capital efficient Quarter in Review Strong Operational Performance Significant capital return; shares outstanding down 11% At targeted overall capital level Advancing strategic initiatives in Consumer and Worksite divisions
Slide 5: Growth Scorecard
CNO Financial Group 5 2022 1Q 2Q 3Q 4Q FY 1Q Y/Y New Annualized Premiums 1 Life $53.0 $52.3 $45.4 $39.8 $190.5 $55.8 5.3% Health 35.7 41.5 39.2 47.7 164.1 34.8 -2.5% Total Life and Health $88.7 $93.8 $84.6 $87.5 $354.6 $90.6 2.1% Collected Premiums Life Life - single premium WL $17.5 $12.6 $10.7 $11
Slide 6: Consumer Division Update
CNO Financial Group 6 Solid execution; continued strong D2C momentum Consumer Division Update First Quarter HighlightsKey Initiatives Expand reach Maintain growth momentum Optimize distribution Total Life sales up 3%; D2C Life sales up 16% Annuity collected premiums up 13% Supplemental Health
Slide 7: Worksite Division Update
CNO Financial Group 7 Sales gaining momentum; strong agent productivity Worksite Division Update First Quarter Highlights Life and Health insurance sales up 8% Stable employer base and premium collection Continued strong fee revenue growth Continued DirectPath / WBD synergies Launch of hyb
Slide 8: Excess Capital Allocation Strategy
CNO Financial Group 8 Agent pilots, technology- driven customer experience enhancements Hybrid distribution Worksite B2B marketing, lead generation Share repurchases: $100 million in 1Q22 Dividends: $16 million in 1Q22 Highly selective M&A CNO Ventures; strategic minority investments l
Slide 9: Financial Highlights: Earnings Results
CNO Financial Group 9 Financial Highlights Solid underlying earnings Earnings ResultsFirst Quarter 2022 Net operating income1 $75.2 $51.1 Net operating income excluding significant items1 $81.3 $51.1 Net income $147.4 $112.3 Weighted average shares outstanding (in millions) 136.7 121.0 (dollars in m
Slide 10: Insurance Product Margin
CNO Financial Group 10 1Q 2022 Highlights1 Insurance Product Margin (dollars in millions) Continued net COVID benefit; stable underlying margins Insurance Product Margin Excluding Significant Items1 Total margin down $20 million, or 10% $6 million decline in net favorable COVID impact $10 mill
Slide 11: Investment Results
CNO Financial Group 11 $- $50.0 $100.0 $150.0 $200.0 1Q 2021 1Q 2022 Investment Income Not Allocated to Product Lines $- $100.0 $200.0 $300.0 $400.0 1Q 2021 1Q 2022 Total Net Investment Income1 Annuity Health Life Not Allocated $- $100.0 $200.0 $300.0 $400.0 1Q 2021 1Q 2022 Investment Income Allocat
Slide 12: Portfolio Composition
CNO Financial Group 12 High quality, stable core returns with variable upside Portfolio Composition $27 billion of Invested Assets Highlights (Fair Value as of 3/31/2022) General Approach Positioned for stable performance across credit cycles Focus on quality - margin against adverse development
Slide 13: Cash Flow Profile
CNO Financial Group 13 1Q free cash flow reflects impact from market volatility, FABN issuance Cash Flow Profile 1 A non-GAAP measure. See the Appendix for a reconciliation to the corresponding GAAP measure. 2 Cash flows exclude acquisitions, dividend payments, stock repurchases, and financing trans
Slide 14: Debt to Capital and Consolidated RBC Ratio
CNO Financial Group 14 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 developed by the National Association of Insurance Commissioners. 2 Excluding accumula
Slide 15: 2022 Outlook
CNO Financial Group 15 Continued positive momentum Free cash flow expected to be lower than 2021 reflecting diminishing COVID impacts and alternative investment returns, capital strain from new business, and the ramp up of the FABN program Free cash flow conversion rate to remain strong Mana
Slide 16: Long Duration Targeted Improvements
CNO Financial Group 16 Balance sheet impacts at transition in line with expectations Long Duration Targeted Improvements Expect shareholders equity ex. AOCI to be reduced by $100 - $200 million primarily from negative margin in older LTC blocks ⁃ Debt leverage ex. AOCI to increase by 60 - 120 basi
Slide 17: Delivering on our Commitments
CNO Financial Group 17 Delivering on our Commitments Turnaround / De-risking Pivot to Growth Optimize Long-term Value Pre 2017 2017 – 2019 2020 – ? Ongoing Reinsured life block (2009) Recapitalized company (2012) Initiated dividend (2012) Sold Legacy Life Insurance Block (2014) Migrated ra
Slide 18: Investment Highlights
CNO Financial Group 18 Investment Highlights Sustainable growth initiatives in place Favorable demographic tailwinds Well-positioned in underserved senior middle-income market Highly differentiated business model Strong balance sheet; robust free cash flow generation
Slide 19: Questions and Answers
CNO Financial Group 19 Questions and Answers
Slide 20: Appendix 1: Quarter in Review
CNO Financial Group 20 Appendix 1: Quarter in Review Strong Operational Performance Broker-Dealer/Registered Investment Advisor Slide 21 Exclusive Agent Counts Slide 22 Building on Strong Track Record of Execution New Money Rate Walk Slide 23 New Money Summary Slide 24 Long-Term Care Insur
Slide 21: Broker-Dealer/Registered Investment Advisor
CNO Financial Group 21 Account values up 16% YoY; $2.8 billion in client assets 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 ma
Slide 22: Exclusive Agent Counts
CNO Financial Group 22 Labor market conditions impacting producing agent counts; veteran agent retention strong Exclusive Agent Counts 1 Producing agents represent the monthly average of exclusive agents that have submitted at least one policy in the month. 2 Registered agents are dually licensed as
Slide 23: New Money Rate Walk
CNO Financial Group 23 Higher market yields balanced by up-in-quality trend, shorter duration requirements New Money Rate Walk 3.67% 3.73% -0.27%
Slide 24: New Money Summary
CNO Financial Group 24 Strategically harvesting rising market yields, while sliding up-in-quality / down the curve. New Money Summary First Quarter General Account New Money Purchases
Slide 25: Long-Term Care
CNO Financial Group 25 New sales (~$30 million annually) focused on short duration products 99% of new sales for policies with 2 years or less in benefits Average benefit period of 11 months New business 25% reinsured since 2008 Reserve assumptions informed by historical experience No morbid
Slide 26: Tax Asset Summary
CNO Financial Group 26 Non-Life NOLs $237 DTAs related to tax strategy $171 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 approximately $245 million @ 10% discount rate ($2.02 on a p
Slide 27: Appendix 2: Financial Exhibits
CNO Financial Group 27 Appendix 2: Financial Exhibits Non-GAAP Financial Measures Slides 28 - 46
Slide 28: Insurance product margin, Q4 2021
CNO Financial Group 28 Insurance product margin Annuity 93.9$ (26.9)$ (1) 67.0$ Health 129.5 - 129.5 Life 30.4 1.0 (1) 31.4 Total insurance product margin 253.8 (25.9) 227.9 Allocated expenses (143.3) - (143.3) Income from insurance products 110.5 (25.9) 84.6 Fee income 2.9 - 2.9 Investment income n
Slide 29: Insurance product margin, Q3 2021
CNO Financial Group 29 Insurance product margin Annuity 52.5$ -$ 52.5$ Health 117.9 - 117.9 Life 53.2 - 53.2 Total insurance product margin 223.6 - 223.6 Allocated expenses (140.5) - (140.5) Income from insurance products 83.1 - 83.1 Fee income 2.6 - 2.6 Investment income not allocated to product li
Slide 30: Insurance product margin, Q2 2021
CNO Financial Group 30 Insurance product margin Annuity 66.0$ -$ 66.0$ Health 120.9 - 120.9 Life 39.7 - 39.7 Total insurance product margin 226.6 - 226.6 Allocated expenses (141.6) - (141.6) Income from insurance products 85.0 - 85.0 Fee income 6.6 - 6.6 Investment income not allocated to product li
Slide 31: Insurance product margin, Q1 2021
CNO Financial Group 31 Insurance product margin Annuity 57.9$ -$ 57.9$ Health 124.7 - 124.7 Life 27.1 - 27.1 Total insurance product margin 209.7 - 209.7 Allocated expenses (141.1) - (141.1) Income from insurance products 68.6 - 68.6 Fee income 7.3 - 7.3 Investment income not allocated to product li
Slide 32: Insurance product margin, Q4 2020
CNO Financial Group 32 Insurance product margin Annuity 68.1$ (16.1)$ (1) 52.0$ Health 125.2 - 125.2 Life 37.3 4.3 (1) 41.6 Total insurance product margin 230.6 (11.8) 218.8 Allocated expenses (162.7) - (162.7) Income from insurance products 67.9 (11.8) 56.1 Fee income 2.9 - 2.9 Investment income no
Slide 33: Insurance product margin, Q2 2020
CNO Financial Group 33 Insurance product margin Annuity 123.8$ 40.0$ (1) 72.3$ (91.5) (1) Health 95.5 - 95.5 Life 36.1 5.6 (1) 41.7 Total insurance product margin 255.4 (45.9) 209.5 Allocated expenses (128.1) - (128.1) Income from insurance products 127.3 (45.9) 81.4 Fee income 5.2 - 5.2 Investment
Slide 34: Continued from the previous page
CNO Financial Group 34 (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 assumption that average new money rates will remain flat at 4 percent f
Slide 35: (dollars in millions) * Management believes that an analysis of Net income applicable to
CNO Financial Group 35 (dollars in millions) * Management believes that an analysis of Net income applicable to common stock before: (i) net realized investment gains or losses from sales, impairments and the change in allowance for credit losses, net of related amortization and taxes; (ii) net chan
Slide 36: Information Related to Certain Non-GAAP Financial Measures
CNO Financial Group 36 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
Slide 37: Reconciliation of net income to net operating income
CNO Financial Group 37 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) Information Related to Certain Non-GAAP Financial Measures 1Q21 2Q21 3Q21 4Q21 1Q22 Net income appli
Slide 38: Reconciliation of operating income and diluted shares
CNO Financial Group 38 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 amounts, and shares in thousands) Information Related to Certain Non-GAAP Financial Measures 1Q21 2Q21 3Q21 4Q
Slide 39: Book value per diluted share
CNO Financial Group 39 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 securities were converted. The dilution from options, res
Slide 40: Operating return measures
CNO Financial Group 40 Operating return measures Management believes that an analysis of net income applicable to common stock before net realized investment gains or losses from sales, impairments and change in allowance for credit losses, net change in market value of investments recognized in ear
Slide 41: Operating return on equity calculations
CNO Financial Group 41 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) operating return, excluding significant item, on equity, excluding accumulated other comprehen
Slide 42: Operating earnings and significant items summary
CNO Financial Group 42 The following summarizes: (i) operating earnings; (ii) significant items; (iii) operating earnings, excluding significant items; and (iv) net income: (dollars in millions) (a) The significant items have been discussed in prior press releases. (Continued on next page) Informati
Slide 43: Operating return on equity calculations (continued)
CNO Financial Group 43 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) operating return, excluding significant item, on equity, excluding accumulated other comprehen
Slide 44: Reconciliation of consolidated capital to shareholders' equity
CNO Financial Group 44 A reconciliation of consolidated capital, excluding accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-GAAP financial measure) to common shareholders’ equity, is as follows: (dollars in millions) Information Related to Certain Non-GAAP Fi
Slide 45: Reconciliation of consolidated capital to shareholders' equity
CNO Financial Group 45 A reconciliation of consolidated capital, excluding accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-GAAP financial measure) to common shareholders’ equity, is as follows: (dollars in millions) Information Related to Certain Non-GAAP Fi
Slide 46: Debt to capital ratio, excluding AOCI
CNO Financial Group 46 Debt to capital ratio, excluding accumulated other comprehensive income (loss) The debt to capital ratio, excluding accumulated other comprehensive income (loss), differs from the debt to capital ratio because accumulated other comprehensive income (loss) has been excluded fro