Cno Financial Group, Inc. · NYSE:CNO
Cno Financial — Q3 2022 Earnings Presentation
45 slides from Cno Financial's earnings presentation, Oct 31, 2022
Slide 1: Third Quarter 2022 Financial and operating results
CNO Financial Group 1 Third Quarter 2022 Financial and operating results for the period ended September 30, 2022 October 31, 2022 Unless otherwise specified, comparisons in this presentation are between 3Q21 and 3Q22. 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
CNO Financial Group 4 Solid overall sales and capital position; continued strong new money rates Quarter in Review Strong Operational Performance Key capital ratios at or above target levels Benefitting from investments in Consumer & Worksite divisions Returned $26 million to shareholders; wei
Slide 5: Growth Scorecard
CNO Financial Group 5 3Q 4Q FY 1Q 2Q 3Q Y/Y New Annualized Premiums 1 Life $45.4 $39.8 $190.5 $55.8 $51.4 $45.1 -0.7% Health 39.2 47.7 164.1 34.8 37.4 42.2 7.7% Total Life and Health $84.6 $87.5 $354.6 $90.6 $88.8 $87.3 3.2% Collected Premiums Life $222.2 $223.7 $895.8 $226.7 $229.2 $226.4 1.9% Heal
Slide 6: Consumer Division Update
CNO Financial Group 6 Continued sales growth in Annuity and D2C Life; recruiting improvement accelerating Consumer Division Update Third Quarter HighlightsKey Initiatives Expand reach Maintain growth momentum Optimize distribution Annuity collected premiums up 11% D2C Life sales up 4% Third-pa
Slide 7: Worksite Division Update
CNO Financial Group 7 Insurance sales momentum continuing; strong producing agent count growth Worksite Division Update Third Quarter Highlights Life and Health insurance sales up 33% Stable employer base and premium collection Positive early indicators on hybrid enrollment platform – Optavise
Slide 8: Financial Highlights
CNO Financial Group 8 $0.74 Financial Highlights Stable underlying insurance margins and investment income allocated to products Earnings ResultsThird Quarter 2022 Net operating income1 $92.8 $56.9 Net operating income excluding significant items1 $95.1 $56.9 Net income $99.8 $105.0 Weighted average
Slide 9: Insurance Product Margin
CNO Financial Group 9 3Q 2022 Highlights1 Insurance Product Margin (dollars in millions) Stable underlying margins; unfavorable GAAP accounting impacts Insurance Product Margin Excluding Significant Items1 Total margin down $16 million; flat adjusting for the items noted below Annuity margin dow
Slide 10: Annuity Margin
CNO Financial Group 10 3Q 4Q 1Q 2Q 3Q Annuity Margin excl. significant items 1 Margin before impacts due to market volatility $58 $62 $55 $58 $57 Impacts due to market volatility ($6) $5 ($10) ($21) ($17) Reported margin $53 $67 $45 $37 $40 2021 2022 Attractive and stable annuity margins GAAP Annuit
Slide 11: Investment Results
CNO Financial Group 11 $- $50.0 $100.0 $150.0 $200.0 3Q 2021 3Q 2022 Investment Income Not Allocated to Product Lines $- $100.0 $200.0 $300.0 $400.0 3Q 2021 3Q 2022 Total Net Investment Income1 Annuity Health Life Not Allocated $- $100.0 $200.0 $300.0 $400.0 3Q 2021 3Q 2022 Investment Income Allocat
Slide 12: Portfolio Composition
CNO Financial Group 12 High quality, stable core returns with variable upside, continued up-in-quality bias Portfolio Composition $23 billion of Invested Assets Highlights (Fair Value as of 9/30/2022) General Approach Positioned for stable performance across credit cycles Focus on quality - marg
Slide 13: Debt to Capital, RBC Ratio and Holding Company Liquidity
CNO Financial Group 13 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 14: Long-Duration Targeted Improvements Implementation
CNO Financial Group 14 Expect modest consolidated near-term earnings gains as a result of implementation Long-Duration Targeted Improvement Description Expected Earnings Restatement Impact Impact to Insurance Policy Benefits Less quarter-to-quarter volatility as temporary deviations from experience,
Slide 15: Investment Highlights
CNO Financial Group 15 Investment Highlights Sustainable growth initiatives in place Favorable demographic tailwinds Well-positioned in underserved middle market Differentiated "last mile" virtual & in-person model Strong balance sheet; robust free cash flow generation
Slide 16: Questions and Answers
CNO Financial Group 16 Questions and Answers
Slide 17: 2022 Outlook
CNO Financial Group 17 Increasing sales momentum Growth in producing agent counts 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 conver
Slide 18: Excess Capital Allocation Strategy
CNO Financial Group 18 Agent pilots, technology- driven customer experience enhancements Hybrid distribution Worksite B2B marketing, lead generation Share repurchases: $10 million in 3Q22 Dividends: $16 million in 3Q22 Highly selective M&A CNO Ventures; strategic minority investments l
Slide 19: Cash Flow Profile
CNO Financial Group 19 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 transactions. (dollars in millions) 3Q21 3Q22 3Q21 3Q22 Net Operating Income1
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 down 9% YoY; $2.5 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 m
Slide 22: Exclusive Agent Counts
CNO Financial Group 22 Softening macro environment helping recruiting, 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 insurance
Slide 23: New Money Rate Walk
CNO Financial Group 23 Significant NMR increase reflects higher market yields offset by the contribution from direct investments New Money Rate Walk 5.53% 5.36%
Slide 24: New Money Summary
CNO Financial Group 24 Strategically harvesting rising market yields, while sliding up-in-quality New Money Summary 3Q General Account New Money Purchases $ % GAAP YTM Duration IG Corp AAA-A 220 24.4% 5.11% 7.8 Muni 187 20.7% 5.22% 12.0 ABS 177 19.6% 5.42% 3.0 Non- Agency RMBS 95 10.5% 5.53% 3.1 CMB
Slide 25: Long-Term Care Insurance
CNO Financial Group 25 New sales (~$25 million annually) focused on short duration products 98% 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 $189 DTAs related to tax strategy $199 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 $214 million @ 10% discount rate ($1.84 on a p
Slide 27: Appendix 2: Financial Exhibits
CNO Financial Group 27 Appendix 2: Financial Exhibits Non-GAAP Financial Measures Slides 28 - 45
Slide 28: Significant items: Three months ended June 30, 2022
CNO Financial Group 28 Insurance product margin Annuity 37.1$ -$ 37.1$ Health 113.4 - 113.4 Life 56.8 - 56.8 Total insurance product margin 207.3 - 207.3 Allocated expenses (152.2) - (152.2) Income from insurance products 55.1 - 55.1 Fee income 3.2 - 3.2 Investment income not allocated to product li
Slide 29: Significant items: Three months ended December 31, 2021
CNO Financial Group 29 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 30: Significant items: Three months ended September 30, 2021
CNO Financial Group 30 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 31: Significant items: Three months ended June 30, 2021
CNO Financial Group 31 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 32: Significant items: Three months ended March 31, 2021
CNO Financial Group 32 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 33: Significant items: Three months ended December 31, 2020
CNO Financial Group 33 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 34: Net operating income definition and reconciliation
CNO Financial Group 34 (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 35: Information Related to Certain Non-GAAP Financial Measures
CNO Financial Group 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 performance, financial position, or cash flows that
Slide 36: Net income to net operating income reconciliation
CNO Financial Group 36 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 3Q21 4Q21 1Q22 2Q22 3Q22 Net income appli
Slide 37: Operating income and shares for operating EPS
CNO Financial Group 37 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 3Q21 4Q21 1Q22 2Q
Slide 38: Book value per diluted share
CNO Financial Group 38 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 39: Operating return measures
CNO Financial Group 39 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 40: Operating return on equity calculations
CNO Financial Group 40 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 41: Operating earnings and significant items summary
CNO Financial Group 41 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 42: Operating return on equity calculations (continued)
CNO Financial Group 42 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 43: Consolidated capital reconciliation 2019-2020
CNO Financial Group 43 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 44: Consolidated capital reconciliation 2021-2022
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: Debt to capital ratio excluding AOCI
CNO Financial Group 45 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