CARMEL, Ind., July 26, 2017 /PRNewswire/ -- CNO Financial
Group, Inc. (NYSE: CNO) today announced net income for the second
quarter of 2017 of $83.4 million, or
48 cents per diluted share, compared
to $59.9 million, or 33 cents per diluted share, in the second quarter
of 2016. CNO also announced second quarter of 2017 net
operating income (1) of $78.6
million, or 45 cents per
diluted share, compared to $63.7
million, or 35 cents per
diluted share, in the second quarter of 2016.
"In the second quarter, we grew the enterprise with meaningful
increases in income and book value per share and returned
significant capital to shareholders while maintaining strength in
our key financial metrics," said Ed
Bonach, CEO of CNO Financial.
"CNO's diverse business model focuses on profitable long-term
growth and continued to demonstrate solid performance this
quarter," added Gary Bhojwani,
President and CEO successor. "We made progress on several key
initiatives to serve our market more broadly and expand our reach,
as demonstrated by steady growth in collected premiums and annuity
account values."
Second Quarter 2017 Highlights
- First-year collected premiums: $352.3
million, up 16% from 2Q16
- Total collected premiums: $925.0
million, up 7% from 2Q16
- New annualized premium ("NAP") (2) for life and health
products: $81.9 million, down 9% from
2Q16
- Annuity collected premiums: $264.5
million, up 28% from 2Q16
- Annuity account values: $8.3
billion, up 4% from 2Q16
- Policies inforce of 3.5 million (including third party policies
inforce), even with 2Q16
- Net income per diluted share: 48
cents in 2Q17 compared to 33
cents in 2Q16
- Net operating income (1) per diluted share: 45 cents in 2Q17 compared to 35 cents in 2Q16
- Book value per common share increased to $28.28 at June 30,
2017 from $25.28 at
June 30, 2016
- Book value per diluted share, excluding accumulated other
comprehensive income (loss) (3), increased to $22.74 at June 30,
2017 from $20.67 at
June 30, 2016
- Unrestricted cash and investments held by our holding company
were $278 million at June 30, 2017 compared to $264 million at December
31, 2016
- Common stock repurchases of $68.9
million and dividends of $15.3
million in 2Q17
Six-month 2017 Highlights
- First-year collected premiums: $697.6
million, up 10% from the first six months of 2016
- Total collected premiums: $1,865.0
million, up 6% from the first six months of 2016
- NAP (2) (9) for life and health products: $169.8 million, down 7% from the first six months
of 2016
- Annuity collected premiums: $522.2
million, up 18% from the first six months of 2016
- Net income per diluted share: 84
cents in the first six months of 2017 compared to
58 cents in the first six months of
2016
- Net operating income (1) per diluted share: 80 cents in the first six months of 2017 compared
to 63 cents in the first six months
of 2016
- Common stock repurchases of $111.9
million and dividends of $29.3
million in the first six months of 2017
- Consolidated risk-based capital ratio was estimated at 458% at
June 30, 2017, reflecting estimated
statutory operating earnings of $166
million and insurance company dividends to the holding
company of $177.0 million during the
first six months of 2017
Quarterly Segment
Operating Results
|
|
|
Three months
ended
|
|
June 30,
|
|
2017
|
|
2016
|
|
(Dollars in
millions,
except per share data)
|
Adjusted EBIT
(4):
|
|
|
|
Bankers
Life
|
$
|
112.6
|
|
|
$
|
93.3
|
Washington
National
|
23.6
|
|
|
21.5
|
Colonial
Penn:
|
|
|
|
Inforce business
(5)
|
17.4
|
|
|
14.1
|
New business
(5)
|
(9.4)
|
|
|
(11.1)
|
Total Colonial
Penn
|
8.0
|
|
|
3.0
|
Long-term care in
run-off
|
1.7
|
|
|
—
|
Adjusted EBIT from
business segments
|
145.9
|
|
|
117.8
|
Corporate Operations,
excluding corporate interest expense
|
(13.2)
|
|
|
(7.0)
|
Adjusted
EBIT
|
132.7
|
|
|
110.8
|
Corporate interest
expense
|
(11.6)
|
|
|
(11.4)
|
Operating earnings
before taxes
|
121.1
|
|
|
99.4
|
Tax expense on
operating income
|
42.5
|
|
|
35.7
|
Net operating income
(1)
|
78.6
|
|
|
63.7
|
Net realized
investment gains (net of related amortization)
|
14.9
|
|
|
12.0
|
Fair value changes in
embedded derivative liabilities (net of related
amortization)
|
(5.9)
|
|
|
(16.5)
|
Fair value changes
related to agent deferred compensation plan
|
—
|
|
|
(12.3)
|
Other
|
(1.6)
|
|
|
.1
|
Non-operating income
(loss) before taxes
|
7.4
|
|
|
(16.7)
|
Income tax expense
(benefit):
|
|
|
|
On non-operating
income (loss)
|
2.6
|
|
|
(5.9)
|
Valuation allowance
for deferred tax assets
|
—
|
|
|
(7.0)
|
Net non-operating
income (loss)
|
4.8
|
|
|
(3.8)
|
Net income
|
$
|
83.4
|
|
|
$
|
59.9
|
|
|
|
|
Per diluted
share:
|
|
|
|
Net operating
income
|
$
|
.45
|
|
|
$
|
.35
|
Net realized
investment gains (net of related amortization and taxes)
|
.06
|
|
|
.04
|
Fair value changes in
embedded derivative liabilities (net of related amortization and
taxes)
|
(.02)
|
|
|
(.06)
|
Fair value changes
related to agent deferred compensation plan (net of
taxes)
|
—
|
|
|
(.04)
|
Valuation allowance
for deferred tax assets
|
—
|
|
|
.04
|
Other
|
(.01)
|
|
|
—
|
Net income
|
$
|
.48
|
|
|
$
|
.33
|
The following table summarizes the financial impact of
significant items on our 2Q17 net operating income (dollars in
millions, except per share
amounts):
|
Three months
ended
|
|
June 30,
2017*
|
|
Actual
results
|
|
Significant
items
|
|
Excluding
significant
items
|
Net Operating Income
(1):
|
|
|
|
|
|
Bankers
Life
|
$
|
112.6
|
|
|
$
|
(9.4)
|
|
|
$
|
103.2
|
|
Washington
National
|
23.6
|
|
|
—
|
|
|
23.6
|
|
Colonial
Penn
|
8.0
|
|
|
—
|
|
|
8.0
|
|
Long-term care in
run-off
|
1.7
|
|
|
—
|
|
|
1.7
|
|
Adjusted EBIT from
business segments
|
145.9
|
|
|
(9.4)
|
|
|
136.5
|
|
Corporate Operations,
excluding corporate interest expense
|
(13.2)
|
|
|
—
|
|
|
(13.2)
|
|
Adjusted EBIT
(4)
|
132.7
|
|
|
(9.4)
|
|
|
123.3
|
|
Corporate interest
expense
|
(11.6)
|
|
|
—
|
|
|
(11.6)
|
|
Operating earnings
before taxes
|
121.1
|
|
|
(9.4)
|
|
|
111.7
|
|
Tax expense on
operating income
|
42.5
|
|
|
(3.3)
|
|
|
39.2
|
|
Net operating
income
|
$
|
78.6
|
|
|
$
|
(6.1)
|
|
|
$
|
72.5
|
|
|
|
|
|
|
|
Net operating income
per diluted share
|
$
|
.45
|
|
|
$
|
(.03)
|
|
|
$
|
.42
|
|
The significant items in 2Q17 included the impacts of: (i) lower
persistency (including the results of procedures performed to
identify policies that had terminated prior to June 30, 2017 due to death); and (ii)
policyholder actions following long-term care rate increases.
These items resulted in a release of reserves of $9.4 million, primarily related to the long-term
care business in the Bankers Life segment.
* See page 10 for the table of Net Operating Income
Excluding a Significant Item for the three months ended
June 30, 2016.
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. First-year collected premiums in 2Q17 were
$319.9 million, up 18 percent from
2Q16, primarily reflecting an increase in premiums from annuity
products. NAP for life and health products in 2Q17 was
$40.2 million, down 13 percent
compared to 2Q16. Results for the quarter reflect lower
sales. Average producing agents (over the last twelve months)
were down 6 percent from 2Q16. Average agents in their third
year of service or later (over the last twelve months) in 2Q17 were
essentially flat compared to 2Q16.
Total collected premiums in 2Q17 were $680.6 million, up 8 percent from 2Q16, primarily
reflecting an increase in premiums from annuity products.
Annuity collected premiums in 2Q17 were $264.3 million, up 28 percent from 2Q16.
Annuity account values, on which spread income is earned, increased
5 percent to $8.0 billion in 2Q17
compared to 2Q16, driven by strong sales and persistency.
Total policies inforce (including third party policies inforce)
decreased 1 percent in 2Q17; third party policies inforce increased
5 percent.
Pre-tax operating earnings in 2Q17 compared to 2Q16 were up
$19.3 million, or 21 percent.
Pre-tax operating earnings in 2Q17 reflected higher spread income
on annuities due to growth in the block and favorable margins on
the long-term care block. In addition, 2Q17 earnings
reflected $5.9 million of higher
income from call premiums and prepayments compared to 2Q16.
The long-term care interest-adjusted benefit ratio was 66.2
percent in 2Q17, lower than the 2Q16 ratio of 77.9 percent.
The 2Q17 ratio was favorably impacted by $9.4 million of one-time reserve releases
primarily related to lower persistency (including the results of
procedures performed to identify policies that had terminated prior
to June 30, 2017 due to death) and
the impact of policyholder decisions to surrender or reduce
coverage following rate increases. The 2Q16 ratio was
impacted by $5 million of one-time
reserve releases related to policyholder decisions to surrender or
reduce coverage following rate increases. The 2Q17 long-term
care interest-adjusted benefit ratio excluding these favorable
reserve releases was 74.4 percent compared to 82.1 percent in
2Q16. The 2Q17 ratio also reflects no increase to the future
loss reserve, given the outcome of the year-end 2016 actuarial
review, compared to an $8.1 million
increase in 2Q16. We currently expect the long-term care
interest-adjusted benefit ratio to be in the range of 75 percent to
80 percent for the remainder of 2017, excluding the impacts of rate
increase actions. We expect that the rate increases will have
a minor impact on the interest-adjusted benefit ratio for the
remainder of 2017.
Pre-tax operating earnings in 2Q17 reflected a Medicare
supplement benefit ratio of 70.4 percent, lower than the 2Q16 ratio
of 73.0 percent. The favorable earnings impact of the lower
Medicare supplement benefit ratio in 2Q17 was substantially offset
by higher amortization of insurance acquisition costs. We
currently expect the Medicare supplement benefit ratio to be in the
range of 70 percent to 73 percent for the remainder of 2017.
Washington National markets and distributes supplemental
health and life insurance to middle-income consumers through a
wholly-owned subsidiary and independent insurance agencies.
First-year collected premiums in 2Q17 were $19.7 million, essentially flat with 2Q16.
NAP from life and health products in 2Q17 was $25.6 million, up 6 percent from 2Q16, primarily
reflecting higher sales of supplemental health products. The
average number of producing agents (over the last twelve months) in
2Q17 was essentially flat compared to 2Q16.
Total collected premiums from the segment's supplemental health
block were up 4 percent in 2Q17 compared to 2Q16.
Pre-tax operating earnings in 2Q17 compared to 2Q16 were up
$2.1 million, or 10 percent.
Pre-tax operating earnings in 2Q17 primarily reflect higher margins
on the supplemental health block compared to 2Q16. The
supplemental health interest-adjusted benefit ratio was 60.4
percent and 61.6 percent in 2Q17 and 2Q16, respectively. In
addition, 2Q17 earnings reflected $1.6
million of higher investment income from call premiums and
prepayments compared to 2Q16. We continue to expect the
supplemental health interest-adjusted benefit ratio to be in the
range of 58 percent to 61 percent for the remainder of 2017.
Colonial Penn markets primarily graded benefit and
simplified issue life insurance directly to customers through
television advertising, direct mail, the internet and
telemarketing. First-year collected premiums were
$12.7 million and NAP was
$16.1 million in 2Q17 down 8 percent
and 16 percent, respectively, from 2Q16. Such decreases
reflect lower lead volume primarily due to reduced marketing
expenses.
Total collected premiums were up 4 percent in 2Q17 compared to
2Q16, reflecting both recent sales activity and steady
persistency.
The pre-tax operating earnings in 2Q17 were $8.0 million compared to $3.0 million in 2Q16 principally due to favorable
mortality and reduced marketing expenses. Inforce Adjusted
EBIT was $17.4 million, up 23 percent
from 2Q16, primarily reflecting growth in the block and favorable
mortality.
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 currently expect this segment to report
earnings in 2017 in the range of $15 million
to $20 million.
Long-term care in run-off only includes the long-term
care business that was recaptured in September 2016. This
segment recognized pre-tax earnings of $1.7
million in 2Q17. The interest-adjusted benefit ratio
for this long-term care block was 104.6 percent in 2Q17 compared to
128.1 percent in 1Q17, reflecting favorable claim experience in
2Q17. We expect this segment to report normalized earnings
before net realized investment gains (losses) of approximately
breakeven over the long-term. However, this segment's
quarterly results can be volatile given its loss recognition
status.
Corporate Operations includes our investment advisory
subsidiary and corporate expenses.
Pre-tax losses in 2Q17 were $13.2
million compared to $7.0
million of losses in 2Q16 primarily reflecting higher
expenses, partially offset by favorable investment returns.
Non-Operating Items
Net realized investment gains in
2Q17 were $14.9 million (net of
related amortization) including other-than-temporary impairment
losses of $5.1 million which were
recorded in earnings. Net realized investment gains in 2Q16
were $12.0 million (net of related
amortization) including total other-than-temporary impairment
losses of $13.6 million recorded in
earnings and a $7.3 million loss on
the dissolution of a variable interest entity.
During 2Q17 and 2Q16, we recognized decreases in earnings of
$5.9 million and $16.5 million, respectively, resulting from
changes in the estimated fair value of embedded derivative
liabilities related to our fixed index annuities, net of related
amortization. Such amount includes the impacts of changes in
market interest rates used to determine the derivative's estimated
fair value.
During 2Q16, we recognized a decrease in earnings of
$12.3 million, 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 2Q16, we reduced the valuation allowance for deferred tax
assets by $7.0 million due to the
utilization of capital loss carryforwards.
Statutory (based on non-GAAP measures) and GAAP Capital
Information
Our consolidated statutory risk-based capital
ratio was estimated at 458% at June 30,
2017, reflecting estimated 2Q17 statutory operating earnings
of $95 million and the payment of
insurance company dividends to the holding company of $48.6 million during 2Q17 and $177.0 million during the first six months of
2017.
During the second quarter of 2017, we repurchased $68.9 million of common stock under our
securities repurchase program (including $3.0 million of repurchases settled in
3Q17). We repurchased 3.3 million common shares at an average
cost of $20.61 per share.
During the first six months of 2017, we repurchased 5.4 million
common shares at a total cost of $111.9
million. CNO anticipates repurchasing common stock in
the range of $200 million to $275
million in 2017, absent compelling alternatives. As of
June 30, 2017, we had 169.0 million
shares outstanding and had authority to repurchase up to an
additional $440.8 million of our
common stock. During 2Q17, dividends paid on common stock
totaled $15.3 million.
Unrestricted cash and investments held by our holding company
were $278 million at June 30, 2017, compared to $264 million at December
31, 2016, reflecting dividends from subsidiaries, partially
offset by common stock repurchases and dividend payments.
Book value per common share was $28.28 and $25.82
at June 30, 2017 and December 31, 2016, respectively. Book value
per diluted share, excluding accumulated other comprehensive income
(loss) (3), increased to $22.74 at
June 30, 2017, compared to
$22.02 at December 31, 2016.
The debt-to-capital ratio was 16.1 percent and 16.9 percent at
June 30, 2017 and December 31, 2016, respectively. Our
debt-to-total capital ratio, excluding accumulated other
comprehensive income (6) was 19.0 percent at June 30, 2017 compared to 19.1 percent at
December 31, 2016.
Conference Call
The Company will host a conference
call to discuss results on July 27,
2017 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)
|
|
|
|
|
|
June 30,
2017
|
|
December 31,
2016
|
ASSETS
|
|
|
|
Investments:
|
|
|
|
Fixed maturities,
available for sale, at fair value (amortized cost:
June 30, 2017 - $20,128.9; December 31, 2016 -
$19,803.1)
|
$
|
22,071.4
|
|
|
$
|
21,096.2
|
|
Equity securities at
fair value (cost: June 30, 2017 - $598.2; December 31, 2016 -
$580.7)
|
622.6
|
|
|
584.2
|
|
Mortgage
loans
|
1,734.7
|
|
|
1,768.0
|
|
Policy
loans
|
112.1
|
|
|
112.0
|
|
Trading
securities
|
308.0
|
|
|
363.4
|
|
Investments held by
variable interest entities
|
1,309.6
|
|
|
1,724.3
|
|
Other invested
assets
|
722.6
|
|
|
589.5
|
|
Total
investments
|
26,881.0
|
|
|
26,237.6
|
|
Cash and cash
equivalents - unrestricted
|
548.8
|
|
|
478.9
|
|
Cash and cash
equivalents held by variable interest entities
|
391.1
|
|
|
189.3
|
|
Accrued investment
income
|
240.9
|
|
|
239.6
|
|
Present value of
future profits
|
377.8
|
|
|
401.8
|
|
Deferred acquisition
costs
|
1,012.4
|
|
|
1,044.7
|
|
Reinsurance
receivables
|
2,217.9
|
|
|
2,260.4
|
|
Income tax assets,
net
|
594.2
|
|
|
789.7
|
|
Assets held in
separate accounts
|
4.7
|
|
|
4.7
|
|
Other
assets
|
573.0
|
|
|
328.5
|
|
Total
assets
|
$
|
32,841.8
|
|
|
$
|
31,975.2
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
Liabilities:
|
|
|
|
Liabilities for
insurance products:
|
|
|
|
Policyholder account
balances
|
$
|
11,037.3
|
|
|
$
|
10,912.7
|
|
Future policy
benefits
|
11,271.7
|
|
|
10,953.3
|
|
Liability for policy
and contract claims
|
506.3
|
|
|
500.6
|
|
Unearned and advanced
premiums
|
282.5
|
|
|
282.5
|
|
Liabilities related
to separate accounts
|
4.7
|
|
|
4.7
|
|
Other
liabilities
|
866.5
|
|
|
611.4
|
|
Investment
borrowings
|
1,647.0
|
|
|
1,647.4
|
|
Borrowings related to
variable interest entities
|
1,532.6
|
|
|
1,662.8
|
|
Notes payable –
direct corporate obligations
|
913.9
|
|
|
912.9
|
|
Total
liabilities
|
28,062.5
|
|
|
27,488.3
|
|
Commitments and
Contingencies
|
|
|
|
Shareholders'
equity:
|
|
|
|
Common stock ($0.01
par value, 8,000,000,000 shares authorized, shares issued and
outstanding: June 30, 2017 – 169,018,890; December 31,
2016 – 173,753,614)
|
1.7
|
|
|
1.7
|
|
Additional paid-in
capital
|
3,116.7
|
|
|
3,212.1
|
|
Accumulated other
comprehensive income
|
894.5
|
|
|
622.4
|
|
Retained
earnings
|
766.4
|
|
|
650.7
|
|
Total shareholders'
equity
|
4,779.3
|
|
|
4,486.9
|
|
Total liabilities and
shareholders' equity
|
$
|
32,841.8
|
|
|
$
|
31,975.2
|
|
CNO FINANCIAL
GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENT OF OPERATIONS
(Dollars in millions,
except per share data)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
Six months
ended
|
|
June 30,
|
|
June 30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Revenues:
|
|
|
|
|
|
|
|
Insurance policy
income
|
$
|
664.1
|
|
|
$
|
653.6
|
|
|
$
|
1,327.9
|
|
|
$
|
1,298.0
|
Net investment
income:
|
|
|
|
|
|
|
|
General account
assets
|
322.4
|
|
|
295.8
|
|
|
634.4
|
|
|
586.8
|
Policyholder and
other special-purpose portfolios
|
43.9
|
|
|
27.9
|
|
|
119.1
|
|
|
39.6
|
Realized investment
gains (losses):
|
|
|
|
|
|
|
|
Net realized
investment gains, excluding impairment losses
|
24.0
|
|
|
33.5
|
|
|
40.3
|
|
|
42.6
|
Other-than-temporary
impairments:
|
|
|
|
|
|
|
|
Total
other-than-temporary impairment losses
|
(4.2)
|
|
|
(13.6)
|
|
|
(12.6)
|
|
|
(23.6)
|
Change in
other-than-temporary impairment losses
recognized in accumulated other comprehensive income
|
(.9)
|
|
|
—
|
|
|
(.9)
|
|
|
—
|
Net impairment losses
recognized
|
(5.1)
|
|
|
(13.6)
|
|
|
(13.5)
|
|
|
(23.6)
|
Loss on dissolution
of a variable interest entity
|
(3.7)
|
|
|
(7.3)
|
|
|
(3.7)
|
|
|
(7.3)
|
Total realized
gains
|
15.2
|
|
|
12.6
|
|
|
23.1
|
|
|
11.7
|
Fee revenue and other
income
|
11.5
|
|
|
14.0
|
|
|
23.3
|
|
|
28.2
|
Total
revenues
|
1,057.1
|
|
|
1,003.9
|
|
|
2,127.8
|
|
|
1,964.3
|
Benefits and
expenses:
|
|
|
|
|
|
|
|
Insurance policy
benefits
|
634.2
|
|
|
632.4
|
|
|
1,303.5
|
|
|
1,251.4
|
Interest
expense
|
31.4
|
|
|
28.9
|
|
|
62.2
|
|
|
56.6
|
Amortization
|
59.6
|
|
|
54.8
|
|
|
123.1
|
|
|
116.9
|
Other operating costs
and expenses
|
203.4
|
|
|
205.1
|
|
|
413.8
|
|
|
416.2
|
Total benefits and
expenses
|
928.6
|
|
|
921.2
|
|
|
1,902.6
|
|
|
1,841.1
|
Income before income
taxes
|
128.5
|
|
|
82.7
|
|
|
225.2
|
|
|
123.2
|
Income tax expense
(benefit):
|
|
|
|
|
|
|
|
Tax expense on period
income
|
45.1
|
|
|
29.8
|
|
|
79.5
|
|
|
44.8
|
Valuation allowance
for deferred tax assets
|
—
|
|
|
(7.0)
|
|
|
—
|
|
|
(27.0)
|
Net income
|
$
|
83.4
|
|
|
$
|
59.9
|
|
|
$
|
145.7
|
|
|
$
|
105.4
|
Earnings per common
share:
|
|
|
|
|
|
|
|
Basic:
|
|
|
|
|
|
|
|
Weighted average
shares outstanding
|
170,556,000
|
|
|
178,323,000
|
|
|
171,994,000
|
|
|
179,337,000
|
Net income
|
$
|
.49
|
|
|
$
|
.34
|
|
|
$
|
.85
|
|
|
$
|
.59
|
Diluted:
|
|
|
|
|
|
|
|
Weighted average
shares outstanding
|
172,352,000
|
|
|
180,267,000
|
|
|
173,708,000
|
|
|
181,198,000
|
Net income
|
$
|
.48
|
|
|
$
|
.33
|
|
|
$
|
.84
|
|
|
$
|
.58
|
CNO FINANCIAL
GROUP, INC. AND SUBSIDIARIES
SEGMENT OPERATING
RESULTS
(Dollars in millions,
except per share data)
|
|
|
|
Six months
ended
|
|
June 30,
|
|
2017
|
|
2016
|
Adjusted EBIT
(4):
|
|
|
|
Bankers
Life
|
$
|
202.3
|
|
|
$
|
170.9
|
Washington
National
|
47.1
|
|
|
47.8
|
Colonial
Penn:
|
|
|
|
Inforce business
(5)
|
31.5
|
|
|
26.8
|
New business
(5)
|
(23.8)
|
|
|
(30.6)
|
Total Colonial
Penn
|
7.7
|
|
|
(3.8)
|
Long-term care in
run-off
|
2.1
|
|
|
—
|
Adjusted EBIT from
business segments
|
259.2
|
|
|
214.9
|
Corporate Operations,
excluding corporate interest expense
|
(22.1)
|
|
|
(15.1)
|
Adjusted
EBIT
|
237.1
|
|
|
199.8
|
Corporate interest
expense
|
(23.1)
|
|
|
(22.8)
|
Operating earnings
before taxes
|
214.0
|
|
|
177.0
|
Tax expense on
operating income
|
75.6
|
|
|
63.7
|
Net operating income
(1)
|
138.4
|
|
|
113.3
|
Net realized
investment gains (net of related amortization)
|
22.8
|
|
|
11.0
|
Fair value changes in
embedded derivative liabilities (net of related
amortization)
|
(10.3)
|
|
|
(46.0)
|
Fair value changes
related to agent deferred compensation plan
|
—
|
|
|
(18.3)
|
Other
|
(1.3)
|
|
|
(.5)
|
Non-operating income
(loss) before taxes
|
11.2
|
|
|
(53.8)
|
Income tax expense
(benefit):
|
|
|
|
On non-operating
income (loss)
|
3.9
|
|
|
(18.9)
|
Valuation allowance
for deferred tax assets
|
—
|
|
|
(27.0)
|
Net non-operating
income (loss)
|
7.3
|
|
|
(7.9)
|
Net income
|
$
|
145.7
|
|
|
$
|
105.4
|
|
|
|
|
Per diluted
share:
|
|
|
|
Net operating
income
|
$
|
.80
|
|
|
$
|
.63
|
Net realized
investment gains (net of related amortization and taxes)
|
.09
|
|
|
.04
|
Fair value changes in
embedded derivative liabilities (net of related amortization and
taxes)
|
(.04)
|
|
|
(.17)
|
Fair value changes
related to agent deferred compensation plan (net of
taxes)
|
—
|
|
|
(.07)
|
Valuation allowance
for deferred tax assets
|
—
|
|
|
.15
|
Other
|
(.01)
|
|
|
—
|
Net income
|
$
|
.84
|
|
|
$
|
.58
|
CNO FINANCIAL
GROUP, INC. AND SUBSIDIARIES
NET OPERATING
INCOME EXCLUDING A SIGNIFICANT ITEM*
(Dollars in millions,
except per share data)
|
|
|
|
Three months
ended
|
|
June 30,
2016*
|
|
Actual
results
|
|
Significant
item
|
|
Excluding
significant
item
|
Net Operating Income
(1):
|
|
|
|
|
|
Bankers
Life
|
$
|
93.3
|
|
|
$
|
(4.5)
|
|
|
$
|
88.8
|
|
Washington
National
|
21.5
|
|
|
—
|
|
|
21.5
|
|
Colonial
Penn
|
3.0
|
|
|
—
|
|
|
3.0
|
|
Adjusted EBIT from
business segments
|
117.8
|
|
|
(4.5)
|
|
|
113.3
|
|
Corporate Operations,
excluding corporate interest expense
|
(7.0)
|
|
|
—
|
|
|
(7.0)
|
|
Adjusted EBIT
(4)
|
110.8
|
|
|
(4.5)
|
|
|
106.3
|
|
Corporate interest
expense
|
(11.4)
|
|
|
—
|
|
|
(11.4)
|
|
Operating earnings
before taxes
|
99.4
|
|
|
(4.5)
|
|
|
94.9
|
|
Tax expense on
operating income
|
35.7
|
|
|
(1.6)
|
|
|
34.1
|
|
Net operating
income
|
$
|
63.7
|
|
|
$
|
(2.9)
|
|
|
$
|
60.8
|
|
|
|
|
|
|
|
Net operating income
per diluted share
|
$
|
.35
|
|
|
$
|
(.01)
|
|
|
$
|
.34
|
|
* This table summarizes the financial impact of a significant
item (as described in the segment results section of this press
release) on our 2Q16 net operating income.
CNO FINANCIAL
GROUP, INC. AND SUBSIDIARIES
FIRST-YEAR
COLLECTED PREMIUMS
(Dollars in
millions)
|
|
|
|
|
|
|
|
Three months
ended
|
|
June 30,
|
|
2017
|
|
2016
|
Bankers
Life:
|
|
|
|
Medicare
supplement
|
$
|
17.6
|
|
$
|
19.1
|
Long-term
care
|
4.1
|
|
4.4
|
Supplemental
health
|
1.3
|
|
1.4
|
Other
health
|
.2
|
|
—
|
Life
|
34.4
|
|
40.4
|
Annuity
|
262.3
|
|
205.1
|
Total
|
319.9
|
|
270.4
|
Washington
National:
|
|
|
|
Supplemental health
and other health
|
18.4
|
|
18.4
|
Life
|
1.3
|
|
1.4
|
Annuity
|
—
|
|
—
|
Total
|
19.7
|
|
19.8
|
Colonial
Penn:
|
|
|
|
Life
|
12.7
|
|
13.8
|
Total
|
12.7
|
|
13.8
|
Total first-year
collected premiums from segments
|
$
|
352.3
|
|
$
|
304.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL COLLECTED
PREMIUMS
(Dollars in
millions)
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
June 30,
|
|
2017
|
|
2016
|
Bankers
Life:
|
|
|
|
|
|
Medicare
supplement
|
$
|
179.7
|
|
$
|
179.0
|
Long-term
care
|
112.1
|
|
118.0
|
Supplemental
health
|
5.6
|
|
5.3
|
Other
health
|
1.5
|
|
1.6
|
Life
|
117.4
|
|
117.9
|
Annuity
|
264.3
|
|
206.4
|
Total
|
680.6
|
|
628.2
|
Washington
National:
|
|
|
|
Supplemental health
and other health
|
147.4
|
|
142.2
|
Medicare
supplement
|
12.6
|
|
15.1
|
Life
|
7.3
|
|
7.4
|
Annuity
|
.2
|
|
.5
|
Total
|
167.5
|
|
165.2
|
Colonial
Penn:
|
|
|
|
Life
|
71.9
|
|
69.0
|
Medicare supplement
and other health
|
.6
|
|
.6
|
Total
|
72.5
|
|
69.6
|
Long-term care in
run-off:
|
|
|
|
|
|
Long-term
care
|
4.4
|
|
N/A
|
Total
|
4.4
|
|
N/A
|
Total collected
premiums from segments
|
$
|
925.0
|
|
$
|
863.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CNO FINANCIAL
GROUP, INC. AND SUBSIDIARIES
NEW ANNUALIZED
PREMIUMS FOR LIFE AND HEALTH PRODUCTS (2)
(Dollars in
millions)
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
June 30,
|
|
2017
|
|
2016
|
Bankers
Life:
|
|
|
|
|
|
Medicare
supplement
|
$
|
15.4
|
|
$
|
16.7
|
Long-term
care
|
5.2
|
|
6.0
|
Supplemental health
and other health
|
1.4
|
|
1.7
|
Life
|
18.2
|
|
21.8
|
Total
|
40.2
|
|
46.2
|
Washington
National:
|
|
|
|
|
Supplemental
health
|
23.9
|
|
22.4
|
Life
|
1.7
|
|
1.8
|
Total
|
25.6
|
|
24.2
|
Colonial
Penn:
|
|
|
|
Life
|
16.1
|
|
19.2
|
Total
|
16.1
|
|
19.2
|
Total new annualized
premiums
|
$
|
81.9
|
|
$
|
89.6
|
|
|
|
|
|
|
|
ANNUITY ACCOUNT
VALUES
(Dollars in
millions)
|
|
|
|
|
|
|
|
|
June 30,
|
|
2017
|
|
2016
|
Bankers
Life
|
$
|
7,954.7
|
|
$
|
7,589.4
|
Washington
National
|
|
393.4
|
|
|
440.4
|
Total
|
$
|
8,348.1
|
|
$
|
8,029.8
|
CNO FINANCIAL
GROUP, INC. AND SUBSIDIARIES
BENEFIT RATIOS ON
MAJOR HEALTH LINES OF BUSINESS
|
|
|
|
Three months
ended
|
|
June 30,
|
|
2017
|
|
2016
|
Bankers
Life:
|
|
|
|
Medicare
supplement:
|
|
|
|
Earned
premium
|
$194
million
|
|
$194
million
|
Benefit ratio
(7)
|
70.4
|
%
|
|
73.0
|
%
|
Long-term
care:
|
|
|
|
Earned
premium
|
$114
million
|
|
$118
million
|
Benefit ratio
(7)
|
126.9
|
%
|
|
134.7
|
%
|
Interest-adjusted
benefit ratio (a non-GAAP measure) (8)
|
66.2
|
%
|
|
77.9
|
%
|
Washington
National:
|
|
|
|
Medicare
supplement:
|
|
|
|
Earned
premium
|
$14
million
|
|
$16
million
|
Benefit ratio
(7)
|
70.4
|
%
|
|
74.0
|
%
|
Supplemental
health:
|
|
|
|
Earned
premium
|
$146
million
|
|
$141
million
|
Benefit ratio
(7)
|
84.5
|
%
|
|
85.7
|
%
|
Interest-adjusted
benefit ratio (a non-GAAP measure) (8)
|
60.4
|
%
|
|
61.6
|
%
|
Long-term care in
run-off:
|
|
|
|
Long-term
care:
|
|
|
|
Earned
premium
|
$4 million
|
|
N/A
|
Benefit ratio
(7)
|
268.2
|
%
|
|
N/A
|
Interest-adjusted
benefit ratio (a non-GAAP measure) (8)
|
104.6
|
%
|
|
N/A
|
|
|
|
|
|
|
|
|
|
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) changes in the
valuation allowance for deferred tax assets; and (v) other
non-operating items consisting primarily of 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 tables on pages 2 and 9.
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 for life and health products, which includes 10%
of single premium whole life deposits and 100% of all other
premiums (excluding annuities). Medicare Advantage sales are
not comparable to other sales and are therefore excluded in all
periods.
|
(3)
|
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.
|
(4)
|
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, other non-operating items, corporate
interest expense and taxes ("Adjusted 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
Adjusted EBIT to Net Income applicable to common stock is provided
in the tables on pages 2 and 9.
|
(5)
|
Management believes
that an analysis of Adjusted EBIT for Colonial Penn, separated
between inforce and new business, provides increased clarity for
this segment as the vast majority of the costs to generate new
business in this segment are not deferrable and Adjusted EBIT will
fluctuate based on management's decisions on how much marketing
costs to incur in each period. Adjusted 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. Adjusted EBIT from inforce 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 inforce business is based on
estimates, which we believe are reasonable.
|
(6)
|
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.
|
(7)
|
The benefit ratio is
calculated by dividing the related product's insurance policy
benefits by insurance policy income.
|
(8)
|
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.
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(9)
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The NAP for Bankers
Life's Medicare supplement, long-term care, supplemental health and
other health, and life policies in 1Q17 have been revised as we
determined that the previously disclosed amounts were overstated by
$1.6 million, $1.2 million, $.2 million and $.4 million,
respectively.
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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 and uncertainties, 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 the impact of any defaults or failure of reinsurers to
perform; (xxv) the amount we may need to pay to a reinsurer and the
earnings charge we may incur in connection with a long-term care
reinsurance transaction; (xxvi) the performance of third party
service providers and potential difficulties arising from
outsourcing arrangements; (xxvii) the growth rate of sales,
collected premiums, annuity deposits and assets; (xxviii)
interruption in telecommunication, information technology or other
operational systems or failure to maintain the security,
confidentiality or privacy of sensitive data on such systems;
(xxix) events of terrorism, cyber attacks, natural disasters or
other catastrophic events, including losses from a disease
pandemic; (xxx) ineffectiveness of risk management policies and
procedures in identifying, monitoring and managing risks; and
(xxxi) 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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content:http://www.prnewswire.com/news-releases/cno-financial-group-reports-second-quarter-2017-results-300494754.html
SOURCE CNO Financial Group, Inc.