CNO Financial Group, Inc. · NYSE:CNO
CNO Financial — Q4 2016 Earnings Presentation
43 slides from CNO Financial's earnings presentation, Feb 8, 2017
Slide 1: 4Q16 Financial and Operating Results
4Q16 Financial and operating results for the period ended December 31, 2016 February 8, 2017 Unless otherwise specified, comparisons in this presentation are between 4Q16 and 4Q15. Exhibit 99.1
Slide 2: Forward-Looking Statements
CNO Financial Group | Fourth Quarter 2016 Earnings | February 8, 2017 2 Forward-Looking Statements Certain statements made in this presentation should be considered forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These include statements about future re
Slide 3: Non-GAAP Measures
CNO Financial Group | Fourth Quarter 2016 Earnings | February 8, 2017 3 Non-GAAP Measures This presentation contains the following financial measures that differ from the comparable measures under Generally Accepted Accounting Principles (GAAP): operating earnings measures; book value, excluding acc
Slide 4: | February 8, 2017
CNO Financial Group | Fourth Quarter 2016 Earnings | February 8, 2017 4
Slide 5: 2016 Year in Review
CNO Financial Group | Fourth Quarter 2016 Earnings | February 8, 2017 5 2016 Year in Review Continued to grow and diversify the franchise − Majority of growth metrics up year-over-year Solid financial results − Meaningful increases in net income and EPS − Book value per diluted share up 10% from
Slide 6: 4Q16 Sales and Distribution Results: Bankers Life
CNO Financial Group | Fourth Quarter 2016 Earnings | February 8, 2017 6 4Q15 1Q16 2Q16 3Q16 4Q16 $290.6 $294.5 $270.4 $304.8 $342.1 $363.9 $366.2 $357.8 $361.1 $369.5 4Q15 $654.5 1Q16 $660.7 2Q16 $628.2 3Q16 $665.9 4Q16 $711.6 First Year Premium Renewal Premium 4Q15 $69.1 1Q16 $60.3 2Q16 $58.5 3Q16
Slide 7: 4Q16 Sales and Distribution Results: Washington National
CNO Financial Group | Fourth Quarter 2016 Earnings | February 8, 2017 7 $20.0 $20.1 $19.8 $19.0 $19.3 $125.7 $129.0 $130.3 $129.8 $131.0 $17.9 $16.4 $15.1 $14.6 $14.9 4Q15 $163.6 1Q16 $165.5 2Q16 $165.2 3Q16 $163.4 4Q16 $165.2 First Year Premium Renewal Premium Medicare Supplement Run-off Premium 4Q
Slide 8: 4Q16 Sales and Distribution Results: Colonial Penn
CNO Financial Group | Fourth Quarter 2016 Earnings | February 8, 2017 8 $12.9 $14.0 $13.8 $13.8 $13.2 $53.1 $56.1 $55.8 $56.9 $56.6 4Q15 $66.0 1Q16 $70.1 2Q16 $69.6 3Q16 $70.7 4Q16 $69.8 First Year Premium Renewal Premium 4Q16 Sales and Distribution Results Colonial Penn ($ millions) Collected Premi
Slide 9: 4Q16 Consolidated Earnings Highlights
CNO Financial Group | Fourth Quarter 2016 Earnings | February 8, 2017 9 4Q16 Consolidated Earnings Highlights ($ millions, except per share data) * A non-GAAP measure. See the Appendix for a reconciliation to the corresponding GAAP measure. 4Q16 Financial Results Net Operating Income* $97.0 $84.9 Ne
Slide 10: 4Q16 Capital & Liquidity Highlights
CNO Financial Group | Fourth Quarter 2016 Earnings | February 8, 2017 10 4Q16 Capital & Liquidity Highlights Independent audit of recaptured reinsurance assets complete Estimated consolidated risk-based capital of 459%, up 10 points versus prior year Leverage* of 19.1% Book value per diluted
Slide 11: Segment Earnings
CNO Financial Group | Fourth Quarter 2016 Earnings | February 8, 2017 11 $(4.9) $(5.1) $(7.0) $(4.4) $(17.5) $6.7 $(6.8) $3.0 $0.9 $7.1 $89.1 $69.9 $88.8 $82.9 $90.7 $31.3 $26.3 $21.5 $25.2 $29.9 4Q15 1Q16 2Q16 3Q16 4Q16 Corporate CP LTC in run-off BL WN $(1.3) ($ millions) * A non-GAAP measure. See
Slide 12: Health Margins 4Q16 Highlights & Outlook
CNO Financial Group | Fourth Quarter 2016 Earnings | February 8, 2017 12 $138 $139 $141 $141 $144 57.5% 57.7% 61.6% 59.8% 57.0% 4Q15 1Q16 2Q16 3Q16 4Q16 Earned Premium Reported Benefit Ratio Adjusted Benefit Ratio** ($ millions) * Interest-adjusted benefit ratio (IABR); a non-GAAP measure. Refer to
Slide 13: Investment Results
CNO Financial Group | Fourth Quarter 2016 Earnings | February 8, 2017 13 $48.5 $93.1 $8.7 $13.2 $20.3 $18.3 $10.0 $13.6 $1.2 $7.5 Investment Results ($ millions) Earned Yield*: 5.72% 5.47% 5.52% 5.59% 5.58% New Money Rate: 5.17% 4.90% 5.50% 5.29% 5.02% Average Invested Assets and Cash Realized Gains
Slide 14: Bankers LTC - Testing Margin & Sensitivities
CNO Financial Group | Fourth Quarter 2016 Earnings | February 8, 2017 14 Bankers LTC - Testing Margin & Sensitivities Key Variable Sensitivity Test* LRT Margin Impact Lapse Rate +/- 10% +/- $65mm Morbidity +/- 1% -/+ $60mm Mortality +/- 1% +/- $25mm Ultimate New Money Rate +/- 50 bps +/- $50mm $3.4
Slide 15: Bankers LTC - Testing Margins
CNO Financial Group | Fourth Quarter 2016 Earnings | February 8, 2017 15 Bankers LTC - Testing Margins $320 million of aggregate margin, however, the block has multiple product and issue year cohorts Four distinct product coverage categories: − Nursing Home − Comprehensive − Home Health Care − S
Slide 16: LTC in Run-off - Testing Margin & Sensitivities
CNO Financial Group | Fourth Quarter 2016 Earnings | February 8, 2017 16 LTC in Run-off – Testing Margin & Sensitivities Key Variable Sensitivity Test* LRT Margin Impact** Lapse Rate +/- 10% +/- $5mm Morbidity +/- 1% -/+ $7mm Mortality +/- 1% +/- $3mm Ultimate New Money Rate +/- 50 bps +/- $9mm $0.4
Slide 17: Go Forward Priorities & Opportunities
CNO Financial Group | Fourth Quarter 2016 Earnings | February 8, 2017 17 Go Forward Priorities & Opportunities Continue franchise growth and diversification − New products and services − Enhanced customer experience − Refine and leverage data Reduce relative LTC exposure We are uniquely position
Slide 18: Questions and Answers
CNO Financial Group | Fourth Quarter 2016 Earnings | February 8, 2017 18 Questions and Answers
Slide 19: Appendix
CNO Financial Group | Fourth Quarter 2016 Earnings | February 8, 2017 19 Appendix
Slide 20: 2016 GAAP Loss Recognition Testing Results
CNO Financial Group | Fourth Quarter 2016 Earnings | February 9, 2017 20 2016 GAAP Loss Recognition Testing Results • Margins increased by approximately $200 million to $4.0 billion primarily driven by new business • Testing margins steady at 22% of net GAAP liabilities • Earned rate assumption impa
Slide 21: CNO Earnings Seasonality
CNO Financial Group | Fourth Quarter 2016 Earnings | February 8, 2017 21 CNO Earnings Seasonality Medicare supplement amortization elevated in 1st quarter due to roll-off of policyholders as a result of open enrollment Higher marketing spend in 1st & 3rd quarters Mortality tends to be more sev
Slide 22: Producing Agent Counts
CNO Financial Group | Fourth Quarter 2016 Earnings | February 8, 2017 22 Producing Agent Counts 1st Yr 2nd Yr 3rd Yr + Total Qtr Avg (3) 1st Yr 2nd Yr 3rd Yr + Total Qtr Avg (3) 12/31/2016 1,859 495 1,913 4,267 4,323 479 134 369 982 974 9/30/2016 1,953 521 1,863 4,337 4,436 458 144 372 974 953 6/30/
Slide 23: 4Q16 Holding Company Liquidity
CNO Financial Group | Fourth Quarter 2016 Earnings | February 8, 2017 23 4Q16 Holding Company Liquidity ($ millions) 4Q16 2016 Cash and Investments Balance - Beginning $189.3 $382.2 Sources Net Dividends from Insurance Subsidiaries 98.5 74.3 Dividends from Non-insurance Subsidiaries 5.5 16.5 Interes
Slide 24: Bankers LTC - Key Points of Differentiation
CNO Financial Group | Fourth Quarter 2016 Earnings | February 8, 2017 24 Bankers LTC – Key Points of Differentiation Sold primarily to middle-income individuals at/near retirement ‒ Results in higher average issue age (~67) and higher average attained age (~77) ‒ Assets and liabilities matched ‒ L
Slide 25: Tax Asset Summary
CNO Financial Group | Fourth Quarter 2016 Earnings | February 8, 2017 25 Non- Life(1) $883 Loss Carryforwards Valuation Allowance Tax Asset Summary ($ millions) Loss Carryforwards at Year-end Details v Life NOLs fully utilized at end of 2016 – cash flows will be reduced by about $15 million beginn
Slide 26: 4Q15 Significant Items
CNO Financial Group | Fourth Quarter 2016 Earnings | February 8, 2017 26 The table below summarizes the financial impact of significant items on our 4Q15 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results (dollars
Slide 27: 1Q16 Significant Items
CNO Financial Group | Fourth Quarter 2016 Earnings | February 8, 2017 27 The table below summarizes the financial impact of significant items on our 1Q16 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results (dollars
Slide 28: 2Q16 Significant Items
CNO Financial Group | Fourth Quarter 2016 Earnings | February 8, 2017 28 The table below summarizes the financial impact of significant items on our 2Q16 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results (dollars
Slide 29: 3Q16 Significant Items
CNO Financial Group | Fourth Quarter 2016 Earnings | February 8, 2017 29 The table below summarizes the financial impact of significant items on our 3Q16 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results (dollars
Slide 30: 4Q16 Significant Items
CNO Financial Group | Fourth Quarter 2016 Earnings | February 8, 2017 30 The table below summarizes the financial impact of significant items on our 4Q16 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results (dollars
Slide 31: Quarterly Earnings
CNO Financial Group | Fourth Quarter 2016 Earnings | February 8, 2017 31 Quarterly Earnings *Management believes that an analysis of earnings before net realized investment gains (losses), fair value changes in embedded derivative liabilities, fair value changes and amendment related to the agent de
Slide 32: Non-GAAP Measures Additional Information
CNO Financial Group | Fourth Quarter 2016 Earnings | February 8, 2017 32 The following provides additional information regarding certain non-GAAP measures used in this presentation. A non-GAAP measure is a numerical measure of a company’s performance, financial position, or cash flows that excludes
Slide 33: Information Related to Certain Non-GAAP Financial Measures
CNO Financial Group | Fourth Quarter 2016 Earnings | February 8, 2017 33 Information Related to Certain Non-GAAP Financial Measures A reconciliation of net income applicable to common stock to net operating income (and related per-share amounts) is as follows (dollars in millions, except per-share a
Slide 34: Information Related to Certain Non-GAAP Financial Measures
CNO Financial Group | Fourth Quarter 2016 Earnings | February 8, 2017 34 4Q15 1Q16 2Q16 3Q16 4Q16 Operating income 97.0$ 49.6$ 63.7$ 64.3$ 84.9$ Weighted average shares outstanding for basic earnings per share 185,608 180,350 178,323 174,247 173,634 Effect of dilutive securities on weighted average
Slide 35: Book value per diluted share
CNO Financial Group | Fourth Quarter 2016 Earnings | February 8, 2017 35 Book value per diluted share Book value per diluted share reflects the potential dilution that could occur if outstanding stock options were exercised, restricted stock and performance units were vested and convertible securiti
Slide 36: Information Related to Certain Non-GAAP Financial Measures
CNO Financial Group | Fourth Quarter 2016 Earnings | February 8, 2017 36 Information Related to Certain Non-GAAP Financial Measures 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 accumulat
Slide 37: Operating return measures
CNO Financial Group | Fourth Quarter 2016 Earnings | February 8, 2017 37 Information Related to Certain Non-GAAP Financial Measures Operating return measures Management believes that an analysis of net income applicable to common stock before net realized investment gains or losses, fair value chang
Slide 38: Information Related to Certain Non-GAAP Financial Measures
CNO Financial Group | Fourth Quarter 2016 Earnings | February 8, 2017 38 Information Related to Certain Non-GAAP Financial Measures The calculations of: (i) operating return on equity, excluding accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-GAAP financial
Slide 39: Information Related to Certain Non-GAAP Financial Measures
CNO Financial Group | Fourth Quarter 2016 Earnings | February 8, 2017 39 Information Related to Certain Non-GAAP Financial Measures The following summarizes: (i) operating earnings; (ii) significant items; (iii) operating earnings, excluding significant items; and (iv) net income (dollars in million
Slide 40: Information Related to Certain Non-GAAP Financial Measures
CNO Financial Group | Fourth Quarter 2016 Earnings | February 8, 2017 40 Information Related to Certain Non-GAAP Financial Measures A reconciliation of pretax operating earnings (a non-GAAP financial measure) to net income is as follows (dollars in millions): 4Q15 1Q16 2Q16 3Q16 4Q16 Pretax operatin
Slide 41: Information Related to Certain Non-GAAP Financial Measures
CNO Financial Group | Fourth Quarter 2016 Earnings | February 8, 2017 41 Information Related to Certain Non-GAAP Financial Measures A reconciliation of consolidated capital, excluding accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-GAAP financial measure) to
Slide 42: Information Related to Certain Non-GAAP Financial Measures
CNO Financial Group | Fourth Quarter 2016 Earnings | February 8, 2017 42 Information Related to Certain Non-GAAP Financial Measures A reconciliation of consolidated capital, excluding accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-GAAP financial measure) to
Slide 43: Debt to capital ratio, excluding AOCI
CNO Financial Group | Fourth Quarter 2016 Earnings | February 8, 2017 43 Information Related to Certain Non-GAAP Financial Measures 4Q15 1Q16 2Q16 3Q16 4Q16 Corporate notes payable 911.1$ 911.5$ 912.0$ 912.5$ 912.9$ Total shareholders' equity 4,138.5 4,226.6 4,456.2 4,493.8 4,486.9 Total capital 5,0