CNO Buys Back Fewer Shares in 4Q (revised) - Analyst Blog
January 26 2012 - 8:59AM
Zacks
CNO Financial Group Inc. (CNO) repurchased
fewer shares in the fourth quarter of 2011 compared to the
preceding quarter. In total, the company repurchased approximately
2.35 million shares in the fourth quarter of 2011, significantly
down from 6.6 million shares in the prior quarter. CNO Financial
spent only $14.1 million in total during the quarter for purchasing
the shares at an average price of $6.02.
The company’s fourth-quarter repurchase brings the total buybacks
under its $100 million share repurchase program to 11.12 million
shares at an average price of $6.28 per share. The total purchase
price for the shares bought back since the commencement of the
repurchase program in May 2011 amounts to $69.8 million.
Although the cash balance has declined moderately, CNO Financial is
expected to strengthen its cash position in future with the help of
a steady cash flow. This in turn should provide the company
flexibility to increase the pace of share buybacks. The company has
been able to maintain a solid cash position over the last few years
due to substantial growth in cash flow from operating and financing
activities.
Concurrently, CNO Financial also announced the prepayment of $14.1
million of the outstanding principal under its senior secured
credit agreement. As per the terms of the agreement, the company is
required to make principal prepayment equal to the amount of
outflow toward certain restricted payments, including share
repurchases, in case its debt-to-total capitalization ratio is over
17.5%.
However, if CNO Financial’s debt-to-total capitalization stays
between 17.5–12.5%, principal prepayment of 50% of such amount has
to be made, while no mandatory principal prepayment is required
when the ratio is below 12.5%.
The senior secured principal prepayment during the fourth quarter
completely covered the repayment scheduled for June 30, 2016 and
also partly covered the repayment scheduled for March 31, 2016. At
present, CNO Financial has no repayment scheduled under the senior
secured credit agreement until September 30, 2012, when it has to
repay $10 million.
The share repurchases and debt prepayment by CNO Financial is
likely to have an incremental effect on the company’s book value
and boost its future earnings per share. Moreover, the principal
prepayment will reduce CNO Financial’s total cost of debt and
debt-to-total capital ratio.
However, the reduced share repurchase did not encourage the
investors. It is likely that they were expecting a higher quantity
of repurchase based on the magnitude of buyback in the third
quarter of 2011. Consequently, on Friday, the shares of CNO
Financial closed at $6.31, down 1.56%, on the New York Stock
Exchange.
The company competes with AFLAC Inc. (AFL) and
Torchmark Corp. (TMK). Currently, CNO Financial
carries a Zacks #3 Rank, which translates into a short-term Hold
rating. Considering the fundamentals of the company, we are also
maintaining our Neutral recommendation on the shares.
(We are reissuing this article to correct a mistake. The
original article, issued January 3, 2012, had erroneously cited
CNO’s lower cash balance as the reason for the reduced buy-backs
during the quarter.)
AFLAC INC (AFL): Free Stock Analysis Report
CNO FINL GRP (CNO): Free Stock Analysis Report
TORCHMARK CORP (TMK): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
AFLAC (NYSE:AFL)
Historical Stock Chart
From May 2024 to Jun 2024
AFLAC (NYSE:AFL)
Historical Stock Chart
From Jun 2023 to Jun 2024