CARMEL, Ind., Jan. 12, 2017 /PRNewswire/ -- CNO Financial
Group, Inc. (NYSE: CNO) announced today that its subsidiaries,
Washington National Insurance Company (WNIC) and Bankers Conseco
Life Insurance Company (BCLIC), have concluded the independent
audit of the assets recaptured in conjunction with the termination
of the reinsurance agreements with Beechwood Re, Ltd. (BRe). In
addition, CNO announced that it has successfully repositioned a
significant portion of the recaptured assets. CNO expects to
recognize pre-tax non-operating net realized losses totaling
$5 million (1) in the quarter ended
December 31, 2016 related to the
transferred investments (including the impacts of the audit
findings and repositioning of the assets).
As previously disclosed, certain irregularities discovered
regarding the relationship between BRe and Platinum Partners LP
(Platinum), and questions concerning the valuation and
appropriateness of the collateral deposited in reinsurance trust
accounts by BRe, caused CNO to commence an independent audit on two
subsets of investments with an estimated value of $125 million as of September 30, 2016. The audit of these
investments was completed in the fourth quarter of 2016, and
confirmed that the assets included in the initial scope of the
audit bore some connection to Platinum or to parties that have had
past or present associations with Platinum. The audit also
concluded that, based upon information obtained, the assets
included in the additional scope of the audit do not appear to have
clear connections to Platinum or to parties that have had past or
present associations with Platinum.
In addition, CNO and the auditor confirmed that many of the
values that had been assigned to these investments by BRe, and
summarized in reports by its valuation firm, were inaccurate due to
the use of flawed methodologies and procedures. We recognized a
$75.4 million pre-tax loss related to
the termination of the reinsurance agreements in the quarter ended
September 30, 2016 (including
adjustments to certain of the values that had been assigned by BRe
to the investments transferred to WNIC and BCLIC).
In connection with the termination of the reinsurance
agreements, investments made by BRe with an estimated value of
$505 million previously held in
collateral trust accounts supporting the reinsured block were
transferred to WNIC and BCLIC. In the quarter ended December 31, 2016, approximately 75 percent of
these investments have been sold or redeemed, with the proceeds
invested primarily in investment-grade securities to support the
recaptured block of business.
A summary of the preliminary values for the remaining
investments that were included in the independent audit as of
December 31, 2016 is included in
today's Form 8-K.
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.
Note:
(1) Amount is preliminary
and subject to change pending completion of our year-end financial
reporting close including consideration of additional developments
and information discovered through the date we file our 2016 Form
10-K, that could impact our preliminary year-end estimates of fair
value.
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.
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SOURCE CNO Financial Group, Inc.