CARMEL, Ind., April 27, 2016 /PRNewswire/ -- CNO
Financial Group, Inc. (NYSE: CNO) today announced first quarter of
2016 operating earnings (1) of $49.6
million, or 27 cents per
diluted share, compared to $60.1
million, or 30 cents per
diluted share, in the first quarter of 2015.
"We are encouraged by the growth in our business," said
Ed Bonach, CEO of CNO. "Our
earnings were largely in line with seasonal expectations, with cash
flow, capital, liquidity and returns to shareholders remaining
strong. Our strategic investment in Tennenbaum Capital
Partners is expected to increase non-life investment returns and
allow us to more fully utilize our valuable tax assets."
First Quarter 2016 Highlights
- Sales, as defined by total new annualized premium ("NAP") (2):
$107.8 million, up 2% from 1Q15
- Policies in-force of 3.5 million (including third party
policies in-force), up 1 percent from 1Q15
- Collected premiums: $896.3
million, up 11% from 1Q15
- Net income per diluted share: 25
cents in 1Q16 compared to 26
cents in 1Q15
- Net operating income (1) per diluted share: 27 cents in 1Q16 compared to 30 cents in 1Q15
- Investment income from general account assets decreased by
$9.1 million primarily due to a
reduction in income from alternative investments
- Unrestricted cash and investments held by our holding company
were $375 million at March 31, 2016
- Consolidated risk-based capital ratio was estimated at 441% at
March 31, 2016, reflecting estimated
statutory operating earnings of $80
million and insurance company dividends to the holding
company of $88.7 million during the
first three months of 2016
- Common stock repurchases of $90.0
million and dividends of $12.7
million in 1Q16
Quarterly Segment
Operating Results
|
|
|
Three months
ended
|
|
March 31,
|
|
2016
|
|
2015
|
|
(Dollars in
millions,
except per share data)
|
EBIT (3):
|
|
|
|
Bankers
Life
|
$
|
77.6
|
|
|
$
|
82.2
|
|
Washington
National
|
26.3
|
|
|
28.5
|
|
Colonial
Penn
|
(6.8)
|
|
|
(5.9)
|
|
EBIT from business
segments
|
97.1
|
|
|
104.8
|
|
Corporate Operations,
excluding corporate interest expense
|
(8.1)
|
|
|
(1.3)
|
|
EBIT
|
89.0
|
|
|
103.5
|
|
Corporate interest
expense
|
(11.4)
|
|
|
(10.5)
|
|
Operating earnings
before taxes
|
77.6
|
|
|
93.0
|
|
Tax expense on
operating income
|
28.0
|
|
|
32.9
|
|
Net operating income
(1)
|
49.6
|
|
|
60.1
|
|
Net realized
investment losses (net of related amortization and
taxes)
|
(.6)
|
|
|
(1.4)
|
|
Fair value changes in
embedded derivative liabilities (net of related amortization
and taxes)
|
(19.2)
|
|
|
(8.3)
|
|
Fair value changes
related to agent deferred compensation plan (net of
taxes)
|
(3.9)
|
|
|
—
|
|
Valuation allowance
for deferred tax assets
|
20.0
|
|
|
—
|
|
Other
|
(.4)
|
|
|
2.4
|
|
Net income
|
$
|
45.5
|
|
|
$
|
52.8
|
|
|
|
|
|
Per diluted
share:
|
|
|
|
Net operating
income
|
$
|
.27
|
|
|
$
|
.30
|
|
Net realized
investment losses (net of related amortization and
taxes)
|
—
|
|
|
(.01)
|
|
Fair value changes in
embedded derivative liabilities (net of related amortization and
taxes)
|
(.11)
|
|
|
(.04)
|
|
Fair value changes
related to agent deferred compensation plan (net of
taxes)
|
(.02)
|
|
|
—
|
|
Valuation allowance
for deferred tax assets
|
.11
|
|
|
—
|
|
Other
|
—
|
|
|
.01
|
|
Net
income
|
$
|
.25
|
|
|
$
|
.26
|
|
The following table summarizes the financial impact of
significant items on our 1Q16 net operating income (dollars in
millions, except per share
amounts):
|
Three months
ended
|
|
March 31,
2016*
|
|
Actual
results
|
|
Significant
items
|
|
Excluding
significant
items
|
Net Operating Income
(1):
|
|
|
|
|
|
Bankers
Life
|
$
|
77.6
|
|
|
$
|
(7.7)
|
|
|
$
|
69.9
|
|
Washington
National
|
26.3
|
|
|
—
|
|
|
26.3
|
|
Colonial
Penn
|
(6.8)
|
|
|
—
|
|
|
(6.8)
|
|
EBIT from business
segments
|
97.1
|
|
|
(7.7)
|
|
|
89.4
|
|
Corporate Operations,
excluding corporate interest expense
|
(8.1)
|
|
|
3.0
|
|
|
(5.1)
|
|
EBIT (3)
|
89.0
|
|
|
(4.7)
|
|
|
84.3
|
|
Corporate interest
expense
|
(11.4)
|
|
|
—
|
|
|
(11.4)
|
|
Operating earnings
before taxes
|
77.6
|
|
|
(4.7)
|
|
|
72.9
|
|
Tax expense on
operating income
|
28.0
|
|
|
(1.7)
|
|
|
26.3
|
|
Net operating income
|
$
|
49.6
|
|
|
$
|
(3.0)
|
|
|
$
|
46.6
|
|
|
|
|
|
|
|
Net operating income
per diluted share
|
$
|
.27
|
|
|
$
|
(.01)
|
|
|
$
|
.26
|
|
The significant items in 1Q16 included: (i) the $7.7 million release of long-term care reserves
(net of the reduction in insurance intangibles) due to the impact
of policyholder actions following rate increases; and (ii)
$3 million of accelerated stock
compensation expense related to retirement eligible employees.
* See page 9 for the table of Net Operating Income
Excluding Significant Items for the three months ended March 31, 2015.
Segment Results
Bankers Life markets and
distributes a variety of insurance products to middle-income
Americans at or near retirement through a dedicated field force of
career agents. NAP in 1Q16 was $60.3
million, down $1.3 million
from 1Q15. Sales results for the quarter primarily reflect
lower sales of life and Medicare supplement products, partially
offset by higher sales of annuities and long-term care
products. It should be noted that 80 percent of the long-term
care NAP in 1Q16 related to policies with maximum benefit periods
of one year. Our recruiting results were relatively flat in
1Q16 compared to 1Q15. Average producing agents were down 6
percent from 1Q15, however, agent productivity (defined as NAP
divided by the average producing agents) was up 4 percent.
Collected premiums were up 13 percent in 1Q16 compared to 1Q15,
reflecting an increase in premiums from annuity products and strong
persistency in the Medicare supplement and life blocks.
Annuity account values, on which spread income is earned, increased
2 percent to $7.6 billion in 1Q16
compared to 1Q15, driven by sales and strong persistency.
Total policies in-force increased 1 percent in 1Q16, including a 10
percent increase in third party policies in-force.
Pre-tax operating earnings in 1Q16 compared to 1Q15 were down
$4.6 million, or 6 percent.
Pre-tax operating earnings in 1Q16 reflected $7 million of lower investment income from
alternative investments compared to 1Q15.
The long-term care interest-adjusted benefit ratio was 75.3
percent in 1Q16, lower than the 1Q15 ratio of 83.0 percent.
The 1Q16 ratio was favorably impacted by $8
million of one-time reserve releases related to policyholder
decisions to surrender or reduce coverage following rate
increases. The 1Q16 long-term care interest-adjusted benefit
ratio excluding the favorable reserve releases related to rate
increases was 82.4 percent. We continue to expect the
long-term care interest-adjusted benefit ratio to be in the range
of 81 percent to 86 percent during 2016, excluding the
reserve-related impacts of rate increase actions. We also
expect that the impacts of rate increases will continue to
favorably impact the interest-adjusted benefit ratio in 2016.
Pre-tax operating earnings in 1Q16 reflected a Medicare
supplement benefit ratio of 71.1 percent, higher than the 1Q15
ratio of 67.4 percent. The benefit ratio for the first
quarter of 2015 reflected favorable experience in a small block of
other health policies that are aggregated with these policies due
to their relative immateriality. We continue to expect the
Medicare supplement benefit ratio to be in the range of 70 percent
to 73 percent during 2016.
Washington National markets and distributes supplemental
health and life insurance to middle-income consumers through a
wholly-owned subsidiary and independent insurance agencies.
NAP in 1Q16 was $23.4 million, up 4
percent from 1Q15, reflecting strong sales of our supplemental
health products. The average number of producing agents was
up 9 percent compared to 1Q15, driven by strong recruiting and
steady retention.
Collected premiums from the segment's supplemental health block
were up 6 percent in 1Q16 compared to 1Q15.
Pre-tax operating earnings in 1Q16 compared to 1Q15 were down
$2.2 million, or 8 percent.
Pre-tax operating earnings in 1Q16 reflected $3 million of lower investment income from
alternative investments compared to 1Q15.
The supplemental health interest-adjusted benefit ratio was 57.7
percent and 57.6 percent in 1Q16 and 1Q15, respectively. We
continue to expect the supplemental health interest-adjusted
benefit ratio to be in the range of 56 percent to 59 percent during
2016.
Colonial Penn markets primarily graded benefit and
simplified issue life insurance directly to customers through
television advertising, direct mail, the internet and
telemarketing. NAP in 1Q16 was $24.1
million, up 14 percent from 1Q15, benefiting from lead
diversification and sales productivity initiatives.
Collected premiums were up 8 percent in 1Q16 compared to 1Q15,
driven by increased sales and steady persistency.
The pre-tax operating loss in 1Q16 was $6.8 million compared to a loss of $5.9 million in 1Q15, primarily reflecting higher
seasonal marketing costs and investments in new business.
In-force EBIT was $12.7 million, up
20 percent from 1Q15, primarily reflecting growth in the block.
Recognizing the accounting standard related to deferred
acquisition costs, the amount of our investment in new business
during a particular period will have a significant impact on this
segment's results. We continue to expect this segment to
report earnings in 2016 in the range of breakeven to $6 million. The range of earnings we expect
to report in 2016 reflects uncertainty related to how the U.S.
presidential election will impact the cost of television
advertising.
Corporate Operations includes our investment advisory
subsidiary and corporate expenses.
Pre-tax losses in 1Q16 were $8.1
million compared to $1.3
million of losses in 1Q15 primarily reflecting less
favorable investment returns and higher expenses in 1Q16 compared
to 1Q15, including $3 million of
accelerated stock compensation expense related to retirement
eligible employees.
Non-Operating Items
Net realized investment losses in
1Q16 were $.6 million (net of related
amortization and taxes) including total other-than-temporary
impairment losses of $10.0 million
recorded in earnings. Net realized investment losses in 1Q15
were $1.4 million (net of related
amortization and taxes) including total other-than-temporary
impairment losses of $1.3 million
recorded in earnings.
During 1Q16 and 1Q15, we recognized decreases in earnings of
$19.2 million and $8.3 million, respectively, resulting from
changes in the estimated fair value of embedded derivative
liabilities related to our fixed index annuities, net of related
amortization and income taxes. Such amount includes the
impacts of changes in market interest rates used to determine the
derivative's estimated fair value.
During 1Q16, we recognized a decrease in earnings of
$3.9 million, net of taxes, for the
mark-to-market change in the agent deferred compensation plan
liability which was impacted by changes in interest rates used to
value the liability. We recognize the mark-to-market change
in the estimated value of this liability through earnings as
assumptions change.
In 1Q16, we reduced the valuation allowance for deferred tax
assets by $20 million primarily
related to higher expected non-life income from: (i) our recently
announced investment in Tennenbaum Capital Partners ("TCP"); and
(ii) $250 million of additional
investments in various TCP managed funds and strategies we agreed
to make over time.
Statutory (based on non-GAAP measures) and GAAP Capital
Information
Our consolidated statutory risk-based capital
ratio was estimated at 441% at March 31,
2016, reflecting estimated 1Q16 consolidated statutory
operating earnings of $80 million and
the payment of insurance company dividends to the holding company
of $88.7 million during the first
three months of 2016.
During the first quarter of 2016, we repurchased $90.0 million of common stock under our
securities repurchase program. We repurchased 5.3 million
common shares at an average cost of $16.88 per share. CNO anticipates
repurchasing common stock in the range of $275 million to $375 million in 2016, absent
compelling alternatives. As of March
31, 2016, we had 179.1 million shares outstanding and had
authority to repurchase up to an additional $365.7 million of our common stock. During
1Q16, dividends paid on common stock totaled $12.7 million.
Book value per diluted share, excluding accumulated other
comprehensive income (loss) (4), increased to $20.38 at March 31,
2016, compared to $20.05 at
December 31, 2015.
Our debt-to-total capital ratio, excluding accumulated other
comprehensive income (5) at March 31,
2016, was 19.8 percent, an increase of 20 basis points from
December 31, 2015. Unrestricted
cash and investments held by our holding company were $375 million at March 31,
2016, compared to $382 million
at December 31, 2015, reflecting
dividends from subsidiaries, common stock repurchases and dividend
payments.
Conference Call
The Company will host a conference
call to discuss results on April 28,
2016 at 11:00 a.m. Eastern
Time. The webcast can be accessed through the
Investors section of the company's website:
http://ir.CNOinc.com. Participants should go to the website
at least 15 minutes before the event to register and download any
necessary audio software. During the call, we will be
referring to a presentation that will be available the morning of
the call at the Investors section of the company's website.
About CNO Financial Group
CNO Financial Group, Inc.
(NYSE: CNO) is a holding company. Our insurance subsidiaries
- principally Bankers Life and Casualty Company, Colonial Penn Life
Insurance Company and Washington National Insurance Company -
primarily serve middle-income pre-retiree and retired Americans by
helping them protect against financial adversity and provide for a
more secure retirement. For more information, visit CNO
online at www.CNOinc.com.
CNO FINANCIAL
GROUP, INC. AND SUBSIDIARIES
|
CONSOLIDATED
BALANCE SHEET
|
(Dollars in
millions)
|
(unaudited)
|
|
|
March 31,
2016
|
|
December
31,
2015
|
ASSETS
|
|
|
|
Investments:
|
|
|
|
Fixed maturities,
available for sale, at fair value (amortized cost: March 31,
2016 -
$18,765.4; December 31, 2015 - $18,947.0)
|
$
|
20,105.1
|
|
|
$
|
19,882.9
|
|
Equity securities at
fair value (cost: March 31, 2016 - $586.0; December 31, 2015 -
$447.4)
|
610.7
|
|
|
463.0
|
|
Mortgage
loans
|
1,700.8
|
|
|
1,721.0
|
|
Policy
loans
|
110.1
|
|
|
109.4
|
|
Trading
securities
|
285.2
|
|
|
262.1
|
|
Investments held by
variable interest entities
|
1,691.0
|
|
|
1,633.6
|
|
Other invested
assets
|
433.4
|
|
|
415.1
|
|
Total
investments
|
24,936.3
|
|
|
24,487.1
|
|
Cash and cash
equivalents - unrestricted
|
635.7
|
|
|
432.3
|
|
Cash and cash
equivalents held by variable interest entities
|
190.1
|
|
|
364.4
|
|
Accrued investment
income
|
247.7
|
|
|
237.0
|
|
Present value of
future profits
|
432.2
|
|
|
449.0
|
|
Deferred acquisition
costs
|
954.8
|
|
|
1,083.3
|
|
Reinsurance
receivables
|
2,839.4
|
|
|
2,859.3
|
|
Income tax assets,
net
|
828.8
|
|
|
898.8
|
|
Assets held in
separate accounts
|
4.6
|
|
|
4.7
|
|
Other
assets
|
388.4
|
|
|
309.2
|
|
Total
assets
|
$
|
31,458.0
|
|
|
$
|
31,125.1
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
Liabilities:
|
|
|
|
Liabilities for
insurance products:
|
|
|
|
Policyholder account
balances
|
$
|
10,772.4
|
|
|
$
|
10,762.3
|
|
Future policy benefits
|
10,768.7
|
|
|
10,602.1
|
|
Liability for policy and contract
claims
|
488.7
|
|
|
487.8
|
|
Unearned and advanced
premiums
|
292.0
|
|
|
286.3
|
|
Liabilities related to separate
accounts
|
4.6
|
|
|
4.7
|
|
Other
liabilities
|
788.9
|
|
|
707.8
|
|
Investment
borrowings
|
1,548.0
|
|
|
1,548.1
|
|
Borrowings related to
variable interest entities
|
1,656.6
|
|
|
1,676.4
|
|
Notes payable –
direct corporate obligations
|
911.5
|
|
|
911.1
|
|
Total
liabilities
|
27,231.4
|
|
|
26,986.6
|
|
Commitments and
Contingencies
|
|
|
|
Shareholders'
equity:
|
|
|
|
Common stock ($0.01
par value, 8,000,000,000 shares authorized, shares issued and
outstanding: March 31, 2016 – 179,098,447; December 31,
2015 – 184,028,511)
|
1.8
|
|
|
1.8
|
|
Additional paid-in
capital
|
3,304.3
|
|
|
3,386.8
|
|
Accumulated other
comprehensive income
|
540.5
|
|
|
402.8
|
|
Retained
earnings
|
380.0
|
|
|
347.1
|
|
Total
shareholders' equity
|
4,226.6
|
|
|
4,138.5
|
|
Total
liabilities and shareholders' equity
|
$
|
31,458.0
|
|
|
$
|
31,125.1
|
|
CNO FINANCIAL
GROUP, INC. AND SUBSIDIARIES
|
CONSOLIDATED
STATEMENT OF OPERATIONS
|
(Dollars in millions,
except per share data)
|
(unaudited)
|
|
|
Three months
ended
|
|
March 31,
|
|
2016
|
|
2015
|
Revenues:
|
|
|
|
Insurance policy
income
|
$
|
644.4
|
|
|
$
|
636.5
|
|
Net investment
income:
|
|
|
|
General
account assets
|
291.0
|
|
|
300.1
|
|
Policyholder and other special-purpose
portfolios
|
11.7
|
|
|
16.6
|
|
Realized investment
gains (losses):
|
|
|
|
Net
realized investment gains (losses), excluding impairment
losses
|
9.1
|
|
|
(1.1)
|
|
Impairment losses recognized
(a)
|
(10.0)
|
|
|
(1.3)
|
|
Gain on
dissolution of a variable interest entity
|
—
|
|
|
11.3
|
|
Total realized gains
(losses)
|
(.9)
|
|
|
8.9
|
|
Fee revenue and other
income
|
14.2
|
|
|
16.2
|
|
Total
revenues
|
960.4
|
|
|
978.3
|
|
Benefits and
expenses:
|
|
|
|
Insurance policy
benefits
|
619.0
|
|
|
606.0
|
|
Transition
expenses
|
—
|
|
|
4.5
|
|
Interest
expense
|
27.7
|
|
|
21.5
|
|
Amortization
|
62.1
|
|
|
66.1
|
|
Other operating costs
and expenses
|
211.1
|
|
|
197.9
|
|
Total benefits and
expenses
|
919.9
|
|
|
896.0
|
|
Income
before income taxes
|
40.5
|
|
|
82.3
|
|
Income tax
expense:
|
|
|
|
Tax expense on period
income
|
15.0
|
|
|
29.5
|
|
Valuation allowance
for deferred tax assets
|
(20.0)
|
|
|
—
|
|
Net income
|
$
|
45.5
|
|
|
$
|
52.8
|
|
Earnings per common
share:
|
|
|
|
Basic:
|
|
|
|
Weighted average
shares outstanding
|
180,350,000
|
|
|
200,491,000
|
|
Net income
|
$
|
.25
|
|
|
$
|
.26
|
|
Diluted:
|
|
|
|
Weighted average
shares outstanding
|
182,128,000
|
|
|
202,275,000
|
|
Net income
|
$
|
.25
|
|
|
$
|
.26
|
|
______________
(a) No portion of the other-than-temporary impairments
recognized in the periods was included in accumulated other
comprehensive income.
CNO FINANCIAL
GROUP, INC. AND SUBSIDIARIES
|
EBIT FROM BUSINESS
SEGMENTS
|
SUMMARIZED BY
IN-FORCE AND NEW BUSINESS (6)
|
(Dollars in
millions)
|
|
|
Three months
ended
|
|
March 31,
|
|
2016
|
|
2015
|
EBIT (3) from
In-force and New Business
|
|
|
|
Bankers
Life:
|
|
|
|
In-Force
Business
|
$
|
118.4
|
|
|
$
|
122.3
|
|
New
Business
|
(40.8)
|
|
|
(40.1)
|
|
Total
|
$
|
77.6
|
|
|
$
|
82.2
|
|
|
|
|
|
Washington
National (7):
|
|
|
|
In-Force
Business
|
$
|
31.3
|
|
|
$
|
34.9
|
|
New
Business
|
(5.0)
|
|
|
(6.4)
|
|
Total
|
$
|
26.3
|
|
|
$
|
28.5
|
|
|
|
|
|
Colonial
Penn:
|
|
|
|
In-Force
Business
|
$
|
12.7
|
|
|
$
|
10.6
|
|
New
Business
|
(19.5)
|
|
|
(16.5)
|
|
Total
|
$
|
(6.8)
|
|
|
$
|
(5.9)
|
|
|
|
|
|
Total Business
segments:
|
|
|
|
In-Force
Business
|
$
|
162.4
|
|
|
$
|
167.8
|
|
New
Business
|
(65.3)
|
|
|
(63.0)
|
|
Total
EBIT from business segments
|
$
|
97.1
|
|
|
$
|
104.8
|
|
CNO FINANCIAL
GROUP, INC. AND SUBSIDIARIES
|
NET OPERATING
INCOME EXCLUDING A SIGNIFICANT ITEM*
|
(Dollars in millions,
except per share data)
|
|
|
Three months
ended
|
|
March 31,
2015*
|
|
Actual
results
|
|
Significant
item
|
|
Excluding
significant
item
|
Net Operating Income
(1):
|
|
|
|
|
|
Bankers
Life
|
$
|
82.2
|
|
|
$
|
—
|
|
|
$
|
82.2
|
|
Washington
National
|
28.5
|
|
|
—
|
|
|
28.5
|
|
Colonial
Penn
|
(5.9)
|
|
|
—
|
|
|
(5.9)
|
|
EBIT from business
segments
|
104.8
|
|
|
—
|
|
|
104.8
|
|
Corporate Operations,
excluding corporate interest expense
|
(1.3)
|
|
|
—
|
|
|
(1.3)
|
|
EBIT (3)
|
103.5
|
|
|
—
|
|
|
103.5
|
|
Corporate interest
expense
|
(10.5)
|
|
|
—
|
|
|
(10.5)
|
|
Operating earnings
before taxes
|
93.0
|
|
|
—
|
|
|
93.0
|
|
Tax expense on
operating income
|
32.9
|
|
|
—
|
|
|
32.9
|
|
Net
operating income
|
$
|
60.1
|
|
|
$
|
—
|
|
|
$
|
60.1
|
|
|
|
|
|
|
|
Net operating income
per diluted share
|
$
|
.30
|
|
|
$
|
—
|
|
|
$
|
.30
|
|
* We had previously included one significant item in our 1Q15
net operating income analysis which represented the $1.9 million after tax impact of unfavorable
supplemental health reserve developments in the Washington National
segment related to claims incurred in prior periods. After a
comprehensive review of claims conducted in 2Q15, it was ultimately
determined that the claims liability at March 31, 2015 for supplemental health claims
incurred in 1Q15 was deficient by a similar amount.
Accordingly, we are no longer reporting this as a significant
item.
CNO FINANCIAL
GROUP, INC. AND SUBSIDIARIES
|
COLLECTED
PREMIUMS
|
(Dollars in
millions)
|
|
|
Three months
ended
|
|
March 31,
|
|
2016
|
|
2015
|
Bankers
Life:
|
|
|
|
Medicare
supplement
|
$
|
186.9
|
|
|
$
|
180.3
|
|
Long-term
care
|
119.6
|
|
|
118.1
|
|
Other
health
|
1.6
|
|
|
1.8
|
|
Supplemental
health
|
5.0
|
|
|
4.4
|
|
Life
|
114.0
|
|
|
107.9
|
|
Annuity
|
233.6
|
|
|
171.7
|
|
Total
|
660.7
|
|
|
584.2
|
|
Washington
National:
|
|
|
|
Supplemental health
and other health
|
141.6
|
|
|
133.2
|
|
Medicare
supplement
|
16.4
|
|
|
18.2
|
|
Life
|
7.2
|
|
|
6.9
|
|
Annuity
|
.3
|
|
|
.4
|
|
Total
|
165.5
|
|
|
158.7
|
|
Colonial
Penn:
|
|
|
|
Life
|
69.5
|
|
|
64.4
|
|
Medicare supplement
and other health
|
.6
|
|
|
.7
|
|
Total
|
70.1
|
|
|
65.1
|
|
Total collected
premiums from segments
|
$
|
896.3
|
|
|
$
|
808.0
|
|
NEW ANNUALIZED
PREMIUMS (2)
|
(Dollars in
millions)
|
|
|
Three months
ended
|
|
March 31,
|
|
2016
|
|
2015
|
Bankers
Life:
|
|
|
|
Medicare
supplement
|
$
|
16.4
|
|
|
$
|
17.7
|
|
Long-term
care
|
6.1
|
|
|
5.3
|
|
Supplemental
health
|
1.5
|
|
|
2.0
|
|
Life
|
22.4
|
|
|
26.4
|
|
Annuity
|
13.9
|
|
|
10.2
|
|
Total
|
60.3
|
|
|
61.6
|
|
Washington
National:
|
|
|
|
Supplemental
health
|
22.0
|
|
|
21.4
|
|
Life
|
1.4
|
|
|
1.2
|
|
Total
|
23.4
|
|
|
22.6
|
|
Colonial
Penn:
|
|
|
|
Life
|
24.1
|
|
|
21.1
|
|
Total
|
24.1
|
|
|
21.1
|
|
Total
new annualized premiums
|
$
|
107.8
|
|
|
$
|
105.3
|
|
CNO FINANCIAL
GROUP, INC. AND SUBSIDIARIES
|
BENEFIT RATIOS ON
MAJOR HEALTH LINES OF BUSINESS
|
|
|
Three months
ended
|
|
March 31,
|
|
2016
|
|
2015
|
Bankers
Life:
|
|
|
|
Medicare
Supplement:
|
|
|
|
Earned
premium
|
$193
million
|
|
$193
million
|
Benefit ratio
(8)
|
71.1%
|
|
67.4%
|
Long-Term
Care:
|
|
|
|
Earned
premium
|
$118
million
|
|
$123
million
|
Benefit ratio
(8)
|
132.9%
|
|
137.8%
|
Interest-adjusted
benefit ratio (a non-GAAP measure) (9)
|
75.3%
|
|
83.0%
|
Washington
National:
|
|
|
|
Medicare
Supplement:
|
|
|
|
Earned
premium
|
$16
million
|
|
$19
million
|
Benefit ratio
(8)
|
65.1%
|
|
63.2%
|
Supplemental
health:
|
|
|
|
Earned
premium
|
$139
million
|
|
$133
million
|
Benefit ratio
(8)
|
81.2%
|
|
82.4%
|
Interest-adjusted
benefit ratio (a non-GAAP measure) (9)
|
57.7%
|
|
57.6%
|
NOTES
(1)
|
Management believes
that an analysis of Net income applicable to common stock before:
(i) net realized investment gains or losses, net of related
amortization and taxes; (ii) fair value changes due to fluctuations
in the interest rates used to discount embedded derivative
liabilities related to our fixed index annuities, net of related
amortization and taxes; (iii) fair value changes related to the
agent deferred compensation plan, net of taxes, (iv) loss on
extinguishment of debt, net of taxes; (v) changes in the valuation
allowance for deferred tax assets; and (vi) other non-operating
items consisting primarily of equity in earnings of certain
non-strategic investments and earnings attributable to variable
interest entities, net of taxes ("Net operating income," a non-GAAP
financial measure) is important to evaluate the financial
performance of the company, and is a key measure commonly used in
the life insurance industry. Management uses this measure to
evaluate performance because the items excluded from net operating
income can be affected by events that are unrelated to the
company's underlying fundamentals. Net realized investment
gains or losses include: (i) gains or losses on the sales of
investments; (ii) other-than-temporary impairments recognized
through net income; and (iii) changes in fair value of certain
fixed maturity investments with embedded derivatives. A
reconciliation of Net operating income to Net income applicable to
common stock is provided in the table on page 2. Additional
information concerning this non-GAAP measure is included in our
periodic filings with the Securities and Exchange Commission that
are available in the "Investors - SEC Filings" section of CNO's
website, www.CNOinc.com.
|
(2)
|
Measured by new
annualized premium, which includes 6% of annuity and 10% of single
premium whole life deposits and 100% of all other premiums.
Medicare Advantage sales are not comparable to other sales and are
therefore excluded in all periods.
|
(3)
|
Management believes
that an analysis of earnings before net realized investment gains
(losses), fair value changes due to fluctuations in the interest
rates used to discount embedded derivative liabilities related to
our fixed index annuities, fair value changes related to the agent
deferred compensation plan, loss on extinguishment of debt, other
non-operating items, corporate interest expense and taxes ("EBIT,"
a non-GAAP financial measure) provides a clearer comparison of the
operating results of the company quarter-over-quarter because these
items are unrelated to the company's underlying fundamentals.
A reconciliation of EBIT to Net Income applicable to common stock
is provided in the table on page 2.
|
(4)
|
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, restricted shares and
performance units is calculated using the treasury stock
method. Under this method, we assume the proceeds from the
exercise of the options (or the unrecognized compensation expense
with respect to restricted stock and performance units) will be
used to purchase shares of our common stock at the closing market
price on the last day of the period. The dilution from
convertible securities is calculated assuming the securities were
converted on the last day of the period. In addition, the
calculation of this non-GAAP measure differs from the corresponding
GAAP measure because accumulated other comprehensive income (loss)
has been excluded from the value of capital used to determine this
measure. Management believes this non-GAAP measure is useful
because it removes the volatility that arises from changes in the
unrealized appreciation (depreciation) of our investments.
The corresponding GAAP measures for book value per common share
were $23.60 and $22.49 at March 31, 2016 and December 31, 2015,
respectively.
|
(5)
|
The calculation of
this non-GAAP measure differs from the corresponding GAAP measure
because accumulated other comprehensive income (loss) has been
excluded from the value of capital used to determine this
measure. Management believes this non-GAAP measure is useful
because it removes the volatility that arises from changes in the
unrealized appreciation (depreciation) of our investments.
The corresponding GAAP measures for debt-to-total capital were
17.7% and 18.0% at March 31, 2016 and December 31, 2015,
respectively.
|
(6)
|
Management believes
that an analysis of EBIT, separated between in-force and new
business provides increased clarity around the value drivers of our
business, particularly since the new business results are
significantly impacted by the rate of sales, mix of business and
the distribution channel through which new sales are made.
EBIT from new business includes pre-tax revenues and expenses
associated with new sales of our insurance products during the
first year after the sale is completed. EBIT from in-force
business includes all pre-tax revenues and expenses associated with
sales of insurance products that were completed more than one year
before the end of the reporting period. The allocation of
certain revenues and expenses between new and in-force business is
based on estimates, which we believe are reasonable.
|
(7)
|
Adjustments between
insurance policy benefits allocated to new and in-force business in
the Washington National segment were made to 2015 reported amounts
to conform to our current method. This change had no impact
on total insurance policy benefits.
|
(8)
|
The benefit ratio is
calculated by dividing the related product's insurance policy
benefits by insurance policy income.
|
(9)
|
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 backing the insurance liabilities by
insurance policy income. Interest income is an important
factor in measuring the performance of longer duration health
products. The net cash flows generally cause an accumulation
of amounts in the early years of a policy (accounted for as reserve
increases), which will be paid out as benefits in later policy
years (accounted for as reserve decreases). Accordingly, as
the policies age, the benefit ratio will typically increase, but
the increase in the change in reserve will be partially offset by
the imputed interest income earned on the accumulated assets.
The interest-adjusted benefit ratio reflects the effects of such
interest income offset (which is equal to the tabular interest on
the related insurance liabilities). Since interest income is
an important factor in measuring the performance of these products,
management believes a benefit ratio, which includes the effect of
interest income, is useful in analyzing product performance.
Additional information concerning this non-GAAP measure is
included in our periodic filings with the Securities and Exchange
Commission that are available in the "Investors - SEC Filings"
section of CNO Financial's website, www.CNOinc.com.
|
Cautionary Statement Regarding Forward-Looking
Statements. Our statements, trend analyses
and other information contained in this press release relative to
markets for CNO Financial's products and trends in CNO Financial's
operations or financial results, as well as other statements,
contain forward-looking statements within the meaning of the
federal securities laws and the Private Securities Litigation
Reform Act of 1995. Forward-looking statements typically are
identified by the use of terms such as "anticipate," "believe,"
"plan," "estimate," "expect," "project," "intend," "may," "will,"
"would," "contemplate," "possible," "attempt," "seek," "should,"
"could," "goal," "target," "on track," "comfortable with,"
"optimistic," "guidance," "outlook" and similar words, although
some forward-looking statements are expressed differently. You
should consider statements that contain these words carefully
because they describe our expectations, plans, strategies and goals
and our beliefs concerning future business conditions, our results
of operations, financial position, and our business outlook or they
state other ''forward-looking'' information based on currently
available information. Assumptions and other important factors that
could cause our actual results to differ materially from those
anticipated in our forward-looking statements include, among other
things: (i) changes in or sustained low interest rates causing
reductions in investment income, the margins of our fixed annuity
and life insurance businesses, and sales of, and demand for, our
products; (ii) expectations of lower future investment earnings may
cause us to accelerate amortization, write down the balance of
insurance acquisition costs or establish additional liabilities for
insurance products; (iii) general economic, market and political
conditions, including the performance and fluctuations of the
financial markets which may affect the value of our investments as
well as our ability to raise capital or refinance existing
indebtedness and the cost of doing so; (iv) the ultimate outcome of
lawsuits filed against us and other legal and regulatory
proceedings to which we are subject; (v) our ability to make
anticipated changes to certain non-guaranteed elements of our life
insurance products; (vi) our ability to obtain adequate and timely
rate increases on our health products, including our long-term care
business; (vii) the receipt of any required regulatory approvals
for dividend and surplus debenture interest payments from our
insurance subsidiaries; (viii) mortality, morbidity, the increased
cost and usage of health care services, persistency, the adequacy
of our previous reserve estimates and other factors which may
affect the profitability of our insurance products; (ix) changes in
our assumptions related to deferred acquisition costs or the
present value of future profits; (x) the recoverability of our
deferred tax assets and the effect of potential ownership changes
and tax rate changes on their value; (xi) our assumption that the
positions we take on our tax return filings will not be
successfully challenged by the Internal Revenue Service; (xii)
changes in accounting principles and the interpretation thereof;
(xiii) our ability to continue to satisfy the financial ratio and
balance requirements and other covenants of our debt agreements;
(xiv) our ability to achieve anticipated expense reductions and
levels of operational efficiencies including improvements in claims
adjudication and continued automation and rationalization of
operating systems, (xv) performance and valuation of our
investments, including the impact of realized losses (including
other-than-temporary impairment charges); (xvi) our ability to
identify products and markets in which we can compete effectively
against competitors with greater market share, higher ratings,
greater financial resources and stronger brand recognition; (xvii)
our ability to generate sufficient liquidity to meet our debt
service obligations and other cash needs; (xviii) our ability to
maintain effective controls over financial reporting; (xix) our
ability to continue to recruit and retain productive agents and
distribution partners; (xx) customer response to new products,
distribution channels and marketing initiatives; (xxi) our ability
to achieve additional upgrades of the financial strength ratings of
CNO Financial and our insurance company subsidiaries as well as the
impact of our ratings on our business, our ability to access
capital and the cost of capital; (xxii) regulatory changes or
actions, including those relating to regulation of the financial
affairs of our insurance companies, such as the payment of
dividends and surplus debenture interest to us, regulation of the
sale, underwriting and pricing of products, and health care
regulation affecting health insurance products; (xxiii) changes in
the Federal income tax laws and regulations which may affect or
eliminate the relative tax advantages of some of our products or
affect the value of our deferred tax assets; (xxiv) availability
and effectiveness of reinsurance arrangements, as well as any
defaults or failure of reinsurers to perform; (xxv) the performance
of third party service providers and potential difficulties arising
from outsourcing arrangements; (xxvi) the growth rate of sales,
collected premiums, annuity deposits and assets; (xxvii)
interruption in telecommunication, information technology or other
operational systems or failure to maintain the security,
confidentiality or privacy of sensitive data on such systems;
(xxviii) events of terrorism, cyber attacks, natural disasters or
other catastrophic events, including losses from a disease
pandemic; (xxix) ineffectiveness of risk management policies and
procedures in identifying, monitoring and managing risks; and (xxx)
the risk factors or uncertainties listed from time to time in our
filings with the Securities and Exchange Commission. Other factors
and assumptions not identified above are also relevant to the
forward-looking statements, and if they prove incorrect, could also
cause actual results to differ materially from those projected. All
written or oral forward-looking statements attributable to us are
expressly qualified in their entirety by the foregoing cautionary
statement. Our forward-looking statements speak only as of the date
made. We assume no obligation to update or to publicly announce the
results of any revisions to any of the forward-looking statements
to reflect actual results, future events or developments, changes
in assumptions or changes in other factors affecting the forward
looking statements.
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/cno-financial-group-reports-first-quarter-2016-results-300258653.html
SOURCE CNO Financial Group, Inc.