CNO 8-K
CNO Financial Group, Inc. (CNO)
8-K
2022-05-02
For: 2022-05-02
View Original
Added on
April 11, 2026
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 2, 2022
(Exact Name of Registrant as Specified in Charter)
| (State or Other Jurisdiction of Incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||||||
(Address of Principal Executive Offices) (Zip Code)
(317 ) 817-6100
(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |||||
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |||||
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |||||
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |||||
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 2.02. | Results of Operations and Financial Condition. | ||||
On May 2, 2022, CNO Financial Group, Inc. ("CNO" or the "Company") issued: (i) a press release announcing its financial results for the quarter ended March 31, 2022, a copy of which is attached hereto as Exhibit 99.1 and is incorporated herein by reference; (ii) the Quarterly Financial Supplement for March 31, 2022, a copy of which is attached hereto as Exhibit 99.2 and is incorporated herein by reference; and (iii) additional financial information related to its financial and operating results for the quarter ended March 31, 2022, a copy of which is attached hereto as Exhibit 99.3 and is incorporated herein by reference.
The information contained under Item 2.02 in this Current Report on Form 8-K (including Exhibits 99.1, 99.2 and 99.3) is being furnished and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that Section. The information contained in this Current Report on Form 8-K shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in any such filing.
| Item 9.01(d). | Financial Statements and Exhibits. | ||||
The following materials are furnished as exhibits to this Current Report on Form 8-K:
| 99.1 | |||||
| 99.2 | |||||
| 99.3 | |||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). | ||||
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| CNO Financial Group, Inc. | |||||||||||
| Date: May 2, 2022 | |||||||||||
| By: | /s/ John R. Kline | ||||||||||
| John R. Kline | |||||||||||
Senior Vice President and Chief Accounting Officer | |||||||||||
3
Exhibit 99.1
NewsFor Immediate Release
CNO Financial Group Reports First Quarter 2022 Results
Solid production, agent productivity and capital return; $100 million in share repurchases
Carmel, Ind., May 2, 2022 - CNO Financial Group, Inc. (NYSE: CNO) today announced that for the quarter ended March 31, 2022, net income was $112.3 million, or $0.93 per diluted share, compared to $147.4 million, or $1.08 per diluted share, in 1Q21. Net operating income (1) in 1Q22 was $51.1 million, or $0.42 per diluted share, compared to $75.2 million, or $0.55 per diluted share, in 1Q21.
"Our results in the first quarter continued to demonstrate the strength and resilience of our business," said Gary C. Bhojwani, chief executive officer. "From a production standpoint, we generated increases in four of our five growth scorecard metrics and delivered sharp improvement in agent productivity, while returning significant capital to our shareholders."
"Earnings were pressured by market volatility in the quarter and we saw several factors begin to normalize, including moderation in our alternative investment returns and a trend back toward pre-pandemic claims levels in certain of our healthcare products. Adjusting for these factors and an increase in non-deferrable advertising expense, our underlying margins and earnings remained stable."
"While economic uncertainty is likely to persist, CNO is well-positioned to navigate prevailing market conditions and capitalize on the growth opportunities in front of us."
First Quarter 2022 Highlights
•Earnings per diluted share of $0.93 in 1Q22, compared to $1.08 in 1Q21
•Operating (1) EPS of $0.42 in 1Q22, compared to $0.55 in 1Q21
•Pre-tax operating earnings of $68.0 million in 1Q22, compared to $96.9 million (or $104.7 million excluding significant items) in 1Q21, reflecting:
–$15 million decrease from moderating variable investment income returns
–$10 million unfavorable impact to fixed income annuity margin from market volatility
–$6 million decrease in net favorable COVID benefits
–$6 million increase in non-deferrable advertising spend
•Total new annualized premiums (NAP) (4) up 2% from 1Q21
•Direct-to-consumer life insurance NAP (4) up 16% from 1Q21
•Annuity collected premiums up 13% from 1Q21
•Returned $116.1 million to shareholders in the form of share repurchases ($100.0 million) and dividends ($16.1 million); reduced weighted average share count by 11% since 1Q21
•Book value per share was $31.48, down 14% from 1Q21; book value per diluted share, excluding accumulated other comprehensive income (2), was $27.70, up 12% from 1Q21
•Return on equity (ROE) of 8.1%; operating ROE, as adjusted (6), of 11.2%
FINANCIAL SUMMARY
Quarter End
(Amounts in millions, except per share data)
(Unaudited)
Net operating income, a non-GAAP(a) financial measure, is used consistently by CNO’s management to evaluate the operating performance of the Company and is a measure commonly used in the life insurance industry. It differs from net income primarily because it excludes certain non-operating items such as net investment gains (losses), changes in fair values of embedded derivatives and the liability for a deferred compensation plan, and certain significant and unusual items included in net income. Management believes an analysis of net operating income is important in understanding the profitability and operating trends of the Company’s business. Net income is the most directly comparable GAAP measure.
| Per diluted share | |||||||||||||||||||||||||||||||||||||||||
| Quarter ended | Quarter ended | ||||||||||||||||||||||||||||||||||||||||
| March 31, | March 31, | ||||||||||||||||||||||||||||||||||||||||
| 2022 | 2021 | % change | 2022 | 2021 | % change | ||||||||||||||||||||||||||||||||||||
Income from insurance products (b) | $ | 0.37 | $ | 0.50 | (26) | $ | 44.4 | $ | 68.6 | (35) | |||||||||||||||||||||||||||||||
| Fee income | 0.08 | 0.05 | 60 | 9.9 | 7.3 | 36 | |||||||||||||||||||||||||||||||||||
Investment income not allocated to product lines (c) | 0.23 | 0.32 | (28) | 28.5 | 43.0 | (34) | |||||||||||||||||||||||||||||||||||
| Expenses not allocated to product lines | (0.12) | (0.16) | (25) | (14.8) | (22.0) | (33) | |||||||||||||||||||||||||||||||||||
| Operating earnings before taxes | 0.56 | 0.71 | 68.0 | 96.9 | |||||||||||||||||||||||||||||||||||||
| Income tax expense on operating income | (0.14) | (0.16) | (13) | (16.9) | (21.7) | (22) | |||||||||||||||||||||||||||||||||||
| Net operating income (1) | 0.42 | 0.55 | (24) | 51.1 | 75.2 | (32) | |||||||||||||||||||||||||||||||||||
| Net realized investment gains from sales, impairments and change in allowance for credit losses (net of related amortization) | (0.06) | 0.03 | (7.1) | 3.6 | |||||||||||||||||||||||||||||||||||||
| Net change in market value of investments recognized in earnings | (0.21) | (0.05) | (25.5) | (6.4) | |||||||||||||||||||||||||||||||||||||
| Fair value changes in embedded derivative liabilities (net of related amortization) | 0.75 | 0.60 | 90.8 | 82.1 | |||||||||||||||||||||||||||||||||||||
| Other | 0.19 | 0.10 | 23.1 | 13.8 | |||||||||||||||||||||||||||||||||||||
| Non-operating income before taxes | 0.67 | 0.68 | 81.3 | 93.1 | |||||||||||||||||||||||||||||||||||||
| Income tax expense on non-operating income | (0.16) | (0.15) | (20.1) | (20.9) | |||||||||||||||||||||||||||||||||||||
| Net non-operating income | 0.51 | 0.53 | 61.2 | 72.2 | |||||||||||||||||||||||||||||||||||||
| Net income | $ | 0.93 | $ | 1.08 | $ | 112.3 | $ | 147.4 | |||||||||||||||||||||||||||||||||
| Weighted average diluted shares outstanding | 121.0 | 136.7 | |||||||||||||||||||||||||||||||||||||||
(a) GAAP is defined as accounting principles generally accepted in the United States of America.
(b) Income from insurance products is the sum of the insurance margins of the annuity, health and life segments, less allocated insurance administrative expenses. It excludes the fee income segment, excess investment income, parent company expenses and income taxes. Insurance margin is management’s measure of the profitability of its annuity, health and life segments’ performance and consists of premiums plus allocated investment income less insurance policy benefits, interest credited, commissions, advertising expense and amortization of acquisition costs.
(c) Investment income not allocated to product lines is defined as net investment income less: (i) equity returns credited to policyholder account balances; (ii) the investment income allocated to our product lines; (iii) interest expense on notes payable and investment borrowings; and (iv) certain expenses related to benefit plans that are offset by special-purpose investment income.
2
FINANCIAL SUMMARY (continued)
Management vs. GAAP Measures
(Dollars in millions, except per share data)
(Unaudited)
Shareholders’ equity, excluding accumulated other comprehensive income, and book value per share, excluding accumulated other comprehensive income, are non-GAAP measures that are utilized by management to view the business without the effect of accumulated other comprehensive income which is primarily attributable to fluctuations in interest rates associated with fixed maturities, available for sale. Management views the business in this manner because the Company has the ability and generally, the intent, to hold investments to maturity and meaningful trends can be more easily identified without the fluctuations. In addition, shareholders' equity excludes net operating loss carryforwards in our non-GAAP return on equity measures as such assets are not discounted and, accordingly, will not provide a return to shareholders until after it is realized as a reduction to taxes that would otherwise be paid. Management believes that excluding this value from the equity component of this measure enhances the understanding of the effect these non-discounted assets have on operating returns.
______________________________________________________________________________________________________
| Quarter ended | |||||||||||
| March 31, | |||||||||||
| 2022 | 2021 | ||||||||||
Trailing twelve months return on equity (a) | 8.1 | % | 9.6 | % | |||||||
| Trailing twelve months operating return on equity, excluding accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-GAAP financial measure) (6) | 11.2 | % | 12.3 | % | |||||||
| Trailing twelve months operating return, excluding significant items, on equity, excluding accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-GAAP financial measure) (6) | 10.7 | % | 11.7 | % | |||||||
| Shareholders’ equity | $ | 3,690.9 | $ | 4,860.7 | |||||||
| Accumulated other comprehensive income | (380.5) | (1,518.1) | |||||||||
| Shareholders’ equity, excluding accumulated other comprehensive income | 3,310.4 | 3,342.6 | |||||||||
| Net operating loss carryforwards | (238.2) | (323.1) | |||||||||
| Shareholders' equity, excluding accumulated other comprehensive income and net operating loss carryforwards | $ | 3,072.2 | $ | 3,019.5 | |||||||
| Book value per diluted share | $ | 30.89 | $ | 36.11 | |||||||
| Accumulated other comprehensive income | (3.19) | (11.28) | |||||||||
| Book value per diluted share, excluding accumulated other comprehensive income (a non-GAAP financial measure) (2) | $ | 27.70 | $ | 24.83 | |||||||
(a) Calculated using average shareholders’ equity for the measurement period.
3
INSURANCE OPERATIONS
Annuity products accounted for 24 percent of the Company’s margin for the quarter.
Annuity premiums collected increased 13 percent and annuity account values increased 8 percent in 1Q22 compared to 1Q21.
Health products accounted for 66 percent of the Company’s insurance margin for the quarter and 65 percent of insurance policy income.
Life products accounted for 10 percent of the Company’s insurance margin for the quarter and 34 percent of insurance policy income.
Sales of health products were down 3 percent and sales of life products were up 5 percent in 1Q22 compared to 1Q21.
ANNUITY COLLECTED PREMIUMS
(Dollars in millions)
(Unaudited)
| Quarter ended March 31, | |||||||||||||||||
| 2022 | 2021 | % change | |||||||||||||||
| Annuity collected premiums | $ | 368.6 | $ | 325.4 | 13 | ||||||||||||
INSURANCE POLICY INCOME
(Dollars in millions)
(Unaudited)
| Quarter ended March 31, | |||||||||||||||||
| 2022 | 2021 | % change | |||||||||||||||
| Annuity | $ | 5.0 | $ | 5.4 | (7) | ||||||||||||
| Health | 406.7 | 416.5 | (2) | ||||||||||||||
| Life | 213.3 | 210.5 | 1 | ||||||||||||||
| Total insurance policy income | $ | 625.0 | $ | 632.4 | (1) | ||||||||||||
SALES MEASURED AS NEW ANNUALIZED PREMIUMS FOR
LIFE AND HEALTH PRODUCTS
(Dollars in millions)
(Unaudited)
| Quarter ended March 31, | |||||||||||||||||
| 2022 | 2021 | % change | |||||||||||||||
| Health | $ | 34.8 | $ | 35.7 | (3) | ||||||||||||
| Life | 55.8 | 53.0 | 5 | ||||||||||||||
| Total new annualized premiums (4) | $ | 90.6 | $ | 88.7 | 2 | ||||||||||||
4
INSURANCE MARGIN
(Amounts in millions, except per share data)
(Unaudited)
Insurance margin is management’s measure of profitability of its annuity, health and life segments’ performance and consists of premiums plus allocated investment income less insurance policy benefits, interest credited, commissions, advertising expense and amortization of acquisition costs. Income from insurance products is the sum of the insurance margins of the annuity, health and life segments, less allocated insurance administrative expenses. It excludes the fee income segment, investment income not allocated to product lines, expenses not allocated to product lines and income taxes. Management believes this information helps provide a better understanding of the business and a more meaningful analysis of our operations. Insurance income, a non-GAAP measure, is a component of net operating income, which is reconciled to net income in the Financial Summary section above.
| Quarter ended | ||||||||||||||||||||||||||||||||
| March 31, 2022 | % of insurance policy income | March 31, 2021 | % of insurance policy income | % change | ||||||||||||||||||||||||||||
| Margin | ||||||||||||||||||||||||||||||||
| Annuity interest margin | $ | 44.6 | $ | 57.9 | (23) | |||||||||||||||||||||||||||
| Life insurance interest margin | 1.5 | 1.9 | (21) | |||||||||||||||||||||||||||||
| Total interest-sensitive margin | 46.1 | 59.8 | (23) | |||||||||||||||||||||||||||||
| Insurance margin | ||||||||||||||||||||||||||||||||
| Health | 124.8 | 31 | 124.7 | 30 | — | |||||||||||||||||||||||||||
| Life (a) | 18.3 | 9 | 25.2 | 12 | (27) | |||||||||||||||||||||||||||
| Total other insurance margin | 143.1 | 23 | 149.9 | 24 | (5) | |||||||||||||||||||||||||||
| Total insurance margin | 189.2 | 209.7 | ||||||||||||||||||||||||||||||
| Allocated expenses | (144.8) | (141.1) | ||||||||||||||||||||||||||||||
| Income from insurance products | $ | 44.4 | $ | 68.6 | ||||||||||||||||||||||||||||
| Per diluted share | $ | 0.37 | $ | 0.50 | ||||||||||||||||||||||||||||
| Weighted average diluted shares | 121.0 | 136.7 | ||||||||||||||||||||||||||||||
(a) Net of $29.3 million and $23.3 million of non-deferred television advertising expense related to our direct distribution channel in the 2022 and 2021 periods, respectively.
Total allocated expenses were $144.8 million, up 3 percent from the year-ago quarter.
Total insurance margins were favorably impacted by approximately $16 million and $22 million in the quarters ended March 31, 2022 and 2021, respectively, due to the estimated impacts of COVID-19.
5
ANNUITY RESULTS BY PRODUCT TYPE
(Dollars in millions)
(Unaudited)
| Annuity margin | |||||||||||
| Quarter ended | |||||||||||
| March 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Fixed index annuities | $ | 33.2 | $ | 48.3 | |||||||
| Fixed interest annuities | 8.1 | 8.8 | |||||||||
| Other annuities | 3.3 | 0.8 | |||||||||
| Total | $ | 44.6 | $ | 57.9 | |||||||
| Annuity collected premiums | |||||||||||
| Quarter ended | |||||||||||
| March 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Annuity collected premiums | $ | 368.6 | $ | 325.4 | |||||||
| Average net insurance liabilities (5) | |||||||||||
| Quarter ended | |||||||||||
| March 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Fixed index annuities | $ | 8,268.4 | $ | 7,464.8 | |||||||
| Fixed interest annuities | 1,761.9 | 1,951.6 | |||||||||
| Other annuities | 488.0 | 512.2 | |||||||||
| Total | $ | 10,518.3 | $ | 9,928.6 | |||||||
Margin/average net insurance liabilities (a) | |||||||||||
| Quarter ended | |||||||||||
| March 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Fixed index annuities | 1.61 | % | 2.59 | % | |||||||
| Fixed interest annuities | 1.84 | % | 1.80 | % | |||||||
| Other annuities | 2.70 | % | 0.62 | % | |||||||
| Total | 1.70 | % | 2.33 | % | |||||||
(a) Defined as annualized quarterly annuity margin divided by average net insurance liabilities (5).
Total annuity margins were favorably impacted by approximately nil and $1 million in the quarters ended March 31, 2022 and 2021, respectively, due to the estimated impacts of COVID-19.
6
HEALTH INSURANCE RESULTS BY PRODUCT TYPE
(Dollars in millions)
(Unaudited)
| Health margin | |||||||||||||||||||||||||||||
| Quarter ended | |||||||||||||||||||||||||||||
| March 31, | |||||||||||||||||||||||||||||
| 2022 | 2021 | ||||||||||||||||||||||||||||
| Amount | % of insurance policy income | Amount | % of insurance policy income | % change | |||||||||||||||||||||||||
| Supplemental health and other health | $ | 57.2 | 33 | $ | 50.4 | 30 | 13 | ||||||||||||||||||||||
| Medicare supplement | 36.2 | 22 | 38.2 | 21 | (5) | ||||||||||||||||||||||||
| Long-term care | 31.4 | 47 | 36.1 | 55 | (13) | ||||||||||||||||||||||||
| Total | $ | 124.8 | 31 | $ | 124.7 | 30 | — | ||||||||||||||||||||||
| Health insurance policy income | |||||||||||||||||
| Quarter ended | |||||||||||||||||
| March 31, | |||||||||||||||||
| 2022 | 2021 | % change | |||||||||||||||
| Supplemental health and other health | $ | 173.5 | $ | 169.8 | 2 | ||||||||||||
| Medicare supplement | 166.8 | 181.0 | (8) | ||||||||||||||
| Long-term care | 66.4 | 65.7 | 1 | ||||||||||||||
| Total | $ | 406.7 | $ | 416.5 | (2) | ||||||||||||
| Health NAP (4) | |||||||||||||||||
| Quarter ended | |||||||||||||||||
| March 31, | |||||||||||||||||
| 2022 | 2021 | % change | |||||||||||||||
| Supplemental health and other health | $ | 21.5 | $ | 21.1 | 2 | ||||||||||||
| Medicare supplement | 6.5 | 8.2 | (21) | ||||||||||||||
| Long-term care | 6.8 | 6.4 | 6 | ||||||||||||||
| Total | $ | 34.8 | $ | 35.7 | (3) | ||||||||||||
Total health margins were favorably impacted by approximately $32 million and $40 million in the quarters ended March 31, 2022 and 2021, respectively, due to the estimated impacts of COVID-19.
7
LIFE INSURANCE RESULTS BY PRODUCT TYPE
(Dollars in millions)
(Unaudited)
| Life margin | |||||||||||||||||||||||||||||
| Quarter ended | |||||||||||||||||||||||||||||
| March 31, | |||||||||||||||||||||||||||||
| 2022 | 2021 | ||||||||||||||||||||||||||||
| Amount | % of insurance policy income | Amount | % of insurance policy income | % change | |||||||||||||||||||||||||
| Life insurance interest margin | $ | 1.5 | $ | 1.9 | (21) | ||||||||||||||||||||||||
| Life insurance margin: | |||||||||||||||||||||||||||||
| Traditional life | 2.9 | 2 | 12.9 | 8 | (78) | ||||||||||||||||||||||||
| Interest sensitive life | 15.4 | 36 | 12.3 | 30 | 25 | ||||||||||||||||||||||||
| Subtotal | 18.3 | 9 | 25.2 | 12 | (27) | ||||||||||||||||||||||||
| Total margin | $ | 19.8 | $ | 27.1 | (27) | ||||||||||||||||||||||||
| Life insurance policy income | |||||||||||||||||
| Quarter ended | |||||||||||||||||
| March 31, | |||||||||||||||||
| 2022 | 2021 | % change | |||||||||||||||
| Traditional life | $ | 170.2 | $ | 169.7 | — | ||||||||||||
| Interest sensitive life | 43.1 | 40.8 | 6 | ||||||||||||||
| Total | $ | 213.3 | $ | 210.5 | 1 | ||||||||||||
| Life NAP (4) | |||||||||||||||||
| Quarter ended | |||||||||||||||||
| March 31, | |||||||||||||||||
| 2022 | 2021 | % change | |||||||||||||||
| Traditional life | $ | 48.2 | $ | 45.9 | 5 | ||||||||||||
| Interest sensitive life | 7.6 | 7.1 | 7 | ||||||||||||||
| Total | $ | 55.8 | $ | 53.0 | 5 | ||||||||||||
| Average net insurance liabilities (5) and interest margin | |||||||||||||||||
| Quarter ended | |||||||||||||||||
| March 31, | |||||||||||||||||
| 2022 | 2021 | % change | |||||||||||||||
| Interest sensitive life products | $ | 1,011.9 | $ | 954.7 | 6 | ||||||||||||
| Interest margin/average net insurance liabilities (5) | 0.59 | % | 0.80 | % | (26) | ||||||||||||
Total life margins were unfavorably impacted by approximately $16 million and $19 million in the quarters ended March 31, 2022 and 2021, respectively, due to the estimated impacts of COVID-19.
8
QUARTERLY AVERAGE EXCLUSIVE PRODUCING AGENTS
| Average Exclusive Producing Agent Count | |||||||||||||||||
| Quarter ended | |||||||||||||||||
| March 31, | % | ||||||||||||||||
| 2022 | 2021 | change | |||||||||||||||
| Consumer | |||||||||||||||||
| Field agents (a) (c) | 3,939 | 4,389 | (10) | ||||||||||||||
| Tele-sales agents | 217 | 258 | (16) | ||||||||||||||
| Total agents | 4,156 | 4,647 | (11) | ||||||||||||||
| Registered agents (b) (c) | 663 | 646 | 3 | ||||||||||||||
Worksite (a) (c) | 208 | 241 | (14) | ||||||||||||||
____________________
(a) Producing agents represent the monthly average of exclusive agents that have submitted at least one policy in the month.
(b) Registered agents are dually licensed as insurance agents and financial representatives who can buy and sell
securities for clients, and/or investment advisors who can provide ongoing investment advice for clients.
(c) Agent counts represent the average of the last 3 months.
INVESTMENTS
INVESTMENT INCOME NOT ALLOCATED TO PRODUCT LINES
(Dollars in millions, except per share data)
Management uses investment income not allocated to product lines as the measure to evaluate the performance of the investment segment. It is defined as net investment income less the investment income allocated to our product segments and interest expense on debt. We also view investment income not allocated to product lines per diluted share as an important and useful measure to evaluate performance of the investment segment as it takes into consideration our share repurchase program.
| Quarter ended March 31, | |||||||||||||||||
| 2022 | 2021 | % change | |||||||||||||||
| Net investment income | $ | 208.2 | $ | 338.2 | (38) | ||||||||||||
| Allocated to product lines: | |||||||||||||||||
| Annuity | (115.1) | (115.7) | (1) | ||||||||||||||
| Health | (71.8) | (71.5) | — | ||||||||||||||
| Life | (36.3) | (35.8) | 1 | ||||||||||||||
| Equity returns credited to policyholder account balances | 71.9 | (42.5) | (269) | ||||||||||||||
| Amounts allocated to product lines and credited to policyholder account balances | (151.3) | (265.5) | (43) | ||||||||||||||
| Amount related to variable interest entities and other non-operating items | (7.2) | (7.8) | (8) | ||||||||||||||
| Interest expense on corporate debt | (15.7) | (15.5) | 1 | ||||||||||||||
| Interest expense on investment borrowings from the Federal Home Loan Bank program | (2.4) | (2.7) | (11) | ||||||||||||||
| Expenses related to funding agreement-backed note program | (7.3) | — | n/m | ||||||||||||||
| Less amounts credited to deferred compensation plans (offsetting investment income) | 4.2 | (3.7) | (214) | ||||||||||||||
| Total adjustments | (28.4) | (29.7) | |||||||||||||||
| Investment income not allocated to product lines | $ | 28.5 | $ | 43.0 | (34) | ||||||||||||
| Per diluted share | $ | 0.23 | $ | 0.32 | |||||||||||||
9
INVESTMENT PORTFOLIO
(Dollars in millions)
The composition of the investment portfolio at March 31, 2022 is as follows:
| $ | % of total | ||||||||||
| Fixed maturities, available for sale, at fair value | $ | 23,479.4 | 86 | ||||||||
| Equity securities at fair value | 91.0 | — | |||||||||
| Mortgage loans | 1,213.3 | 4 | |||||||||
| Policy loans | 119.5 | 1 | |||||||||
| Trading securities | 223.0 | 1 | |||||||||
| Investments held by variable interest entities | 1,180.8 | 4 | |||||||||
| Other invested assets | 1,121.8 | 4 | |||||||||
| Total investment portfolio | $ | 27,428.8 | 100 | ||||||||
Fixed maturities, available for sale, at amortized cost by asset class as of March 31, 2022 are as follows:
| Investment grade | Below investment grade | Total | |||||||||||||||
| Corporate securities | $ | 13,110.8 | $ | 821.8 | $ | 13,932.6 | |||||||||||
| United States Treasury securities and obligations of the United States government and agencies | 168.0 | — | 168.0 | ||||||||||||||
| States and political subdivisions | 2,634.4 | 11.6 | 2,646.0 | ||||||||||||||
| Foreign governments | 78.2 | — | 78.2 | ||||||||||||||
| Asset-backed securities | 1,034.6 | 155.1 | 1,189.7 | ||||||||||||||
| Agency residential mortgage-backed securities | 33.9 | — | 33.9 | ||||||||||||||
| Non-agency residential mortgage-backed securities | 1,163.9 | 662.7 | (a) | 1,826.6 | |||||||||||||
| Collateralized loan obligations | 681.8 | 7.4 | 689.2 | ||||||||||||||
| Commercial mortgage-backed securities | 2,341.3 | 83.8 | 2,425.1 | ||||||||||||||
| Total | $ | 21,246.9 | $ | 1,742.4 | $ | 22,989.3 | |||||||||||
____________________
(a) Certain structured securities rated below investment grade by Nationally Recognized Statistical Rating Organizations may be assigned a NAIC 1 or NAIC 2 designation based on the cost basis of the security relative to estimated recoverable amounts as determined by the National Association of Insurance Commissioners (NAIC).
The fair value of CNO’s available for sale fixed maturity portfolio was $23.5 billion compared with an amortized cost of $23.0 billion. Net unrealized gains were comprised of gross unrealized gains of $1.2 billion and gross unrealized losses of $647 million. The allowance for credit losses was $36.6 million at March 31, 2022.
At both amortized cost and fair value, 92 percent of fixed maturities, available for sale, were rated “investment grade”.
10
Non-Operating Items
Net investment losses in 1Q22 were $7.1 million (net of related amortization) including the unfavorable change in the allowance for credit losses of $30.7 million which was recorded in earnings. Net investment gains in 1Q21 were $3.6 million (net of related amortization) including the favorable change in the allowance for credit losses of $9.6 million which was recorded in earnings.
During 1Q22 and 1Q21, we recognized a decrease in earnings of $25.5 million and $6.4 million, respectively, due to the net change in market value of investments recognized in earnings.
During 1Q22 and 1Q21, we recognized an increase in earnings of $90.8 million and $82.1 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 amounts include the impacts of changes in market interest rates used to determine the derivative's estimated fair value.
In 1Q22 and 1Q21, other non-operating items included an increase in earnings of $22.7 million and $13.2 million, respectively, for the mark-to-market change in the agent deferred compensation plan liability which was impacted by changes in the underlying actuarial assumptions used to value the liability. We recognize the mark-to-market change in the estimated value of this liability through earnings as assumptions change.
Statutory (based on non-GAAP measures) and GAAP Capital Information
Our consolidated statutory risk-based capital ratio was estimated at 365% at March 31, 2022, reflecting estimated 1Q22 statutory operating income of $30 million and the payment of insurance company dividends to the holding company of $69.6 million during 1Q22.
During the first quarter of 2022, we repurchased $100.0 million of common stock under our securities repurchase program. We repurchased 4.1 million common shares at an average cost of $24.65 per share. As of March 31, 2022, we had 117.2 million shares outstanding and had authority to repurchase up to an additional $266.9 million of our common stock. During 1Q22, dividends paid on common stock totaled $16.1 million.
Unrestricted cash and investments held by our holding company were $192 million at March 31, 2022, compared to $249 million at December 31, 2021.
Book value per common share was $31.48 at March 31, 2022 compared to $43.69 at December 31, 2021. Book value per diluted share, excluding accumulated other comprehensive income (2), was $27.70 at March 31, 2022, compared to $26.86 at December 31, 2021.
The debt-to-capital ratio was 23.6 percent and 17.8 percent at March 31, 2022 and December 31, 2021, respectively. Our debt-to-total capital ratio, excluding accumulated other comprehensive income (3) was 25.6 percent at both March 31, 2022 and December 31, 2021.
Return on equity for the trailing four quarters ended March 31, 2022 and 2021, was 8.1% and 9.6%, respectively. Operating return, excluding significant items, on equity, excluding accumulated other comprehensive income and net operating loss carryforwards (6) for the trailing four quarters ended March 31, 2022 and 2021, was 10.7% and 11.7%, respectively.
In this news release, CNO includes non-GAAP measures to enhance investors’ understanding of management’s view of the business. The non-GAAP measures are not a substitute for GAAP, but rather a supplement to increase transparency by providing broader perspective. CNO’s definitions of non-GAAP measures may differ from other companies’ definitions. More detailed information including various GAAP and non-GAAP measurements are located at CNOinc.com in the Investors section under SEC Filings.
11
CAUTION REGARDING FORWARD-LOOKING STATEMENTS:
This press release may contain forward-looking statements within the meaning of federal securities laws. These prospective statements reflect management’s current expectations, but are not guarantees of future performance. Accordingly, please refer to CNO’s cautionary statement regarding forward-looking statements, and the business environment in which the Company operates, contained in the Company’s Form 10-K for the year ended December 31, 2021 and any subsequent Form 10-Q or Form 10-K on file with the Securities and Exchange Commission and on the Company’s website at CNOinc.com in the Investors section. CNO specifically disclaims any obligation to update or revise any forward-looking statement because of new information, future developments or otherwise.
EARNINGS RELEASE CONFERENCE CALL WEBCAST:
The Company will host a conference call to discuss results on May 3, 2022 at 11:00 a.m. Eastern Time. During the call, we will be referring to a presentation that will be available at the Investors section of the company's website.
To participate by dial-in, please register at http://www.directeventreg.com/registration/event/7976502. Upon registering, you will be provided with call details and a registrant ID used to track attendance on the conference call. Reminders will also be sent to registered participants via email.
For those investors who prefer to listen to the call online, we will be broadcasting the call live via webcast. The event can be accessed through the Investors section of the company's website: ir.CNOinc.com. Participants should go to the website at least 15 minutes before the event to register and download any necessary audio software.
ABOUT CNO FINANCIAL GROUP
CNO Financial Group, Inc. (NYSE: CNO) secures the future of middle-income America. CNO provides life and health insurance, annuities, financial services, and workforce benefits solutions through our family of brands, including Bankers Life, Colonial Penn and Washington National. Our customers work hard to save for the future, and we help protect their health, income and retirement needs with 3.2 million policies and $35 billion in total assets. Our 3,400 associates, 4,400 exclusive agents and 4,700 independent partner agents guide individuals, families and businesses through a lifetime of financial decisions. For more information, visit CNOinc.com.
12
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Dollars in millions)
(unaudited)
| March 31, 2022 | December 31, 2021 | ||||||||||
| ASSETS | |||||||||||
| Investments: | |||||||||||
| Fixed maturities, available for sale, at fair value (net of allowance for credit losses: March 31, 2022 - $36.6 and December 31, 2021 - $7.6; amortized cost: March 31, 2022 - $22,989.3 and December 31, 2021 - $21,867.6) | $ | 23,479.4 | $ | 24,805.4 | |||||||
| Equity securities at fair value | 91.0 | 131.1 | |||||||||
| Mortgage loans (net of allowance for credit losses: March 31, 2022 - $5.1 and December 31, 2021 - $5.6) | 1,213.3 | 1,218.6 | |||||||||
| Policy loans | 119.5 | 120.2 | |||||||||
| Trading securities | 223.0 | 227.2 | |||||||||
| Investments held by variable interest entities (net of allowance for credit losses: March 31, 2022 - $5.9 and December 31, 2021 - $3.7; amortized cost: March 31, 2022 - $1,198.9 and December 31, 2021 - $1,206.8) | 1,180.8 | 1,199.6 | |||||||||
| Other invested assets | 1,121.8 | 1,224.0 | |||||||||
| Total investments | 27,428.8 | 28,926.1 | |||||||||
| Cash and cash equivalents - unrestricted | 546.0 | 632.1 | |||||||||
| Cash and cash equivalents held by variable interest entities | 48.0 | 99.6 | |||||||||
| Accrued investment income | 227.9 | 216.4 | |||||||||
| Present value of future profits | 222.8 | 222.6 | |||||||||
| Deferred acquisition costs | 1,487.6 | 1,112.0 | |||||||||
| Reinsurance receivables (net of allowance for credit losses: March 31, 2022 - $3.0 and December 31, 2021 - $3.0) | 4,298.2 | 4,354.3 | |||||||||
| Income tax assets, net | 534.2 | 118.3 | |||||||||
| Assets held in separate accounts | 3.6 | 3.9 | |||||||||
| Other assets | 671.0 | 519.1 | |||||||||
| Total assets | $ | 35,468.1 | $ | 36,204.4 | |||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||||
| Liabilities: | |||||||||||
| Liabilities for insurance products: | |||||||||||
| Policyholder account liabilities | $ | 14,546.3 | $ | 13,689.7 | |||||||
| Future policy benefits | 11,646.5 | 11,670.7 | |||||||||
| Liability for policy and contract claims | 507.3 | 501.8 | |||||||||
| Unearned and advanced premiums | 250.0 | 246.7 | |||||||||
| Liabilities related to separate accounts | 3.6 | 3.9 | |||||||||
| Other liabilities | 912.3 | 830.9 | |||||||||
| Investment borrowings | 1,640.5 | 1,715.8 | |||||||||
| Borrowings related to variable interest entities | 1,133.1 | 1,147.9 | |||||||||
| Notes payable – direct corporate obligations | 1,137.6 | 1,137.3 | |||||||||
| Total liabilities | 31,777.2 | 30,944.7 | |||||||||
| Commitments and Contingencies | |||||||||||
| Shareholders' equity: | |||||||||||
| Common stock ($0.01 par value, 8,000,000,000 shares authorized, shares issued and outstanding: March 31, 2022 – 117,241,006; December 31, 2021 – 120,377,152) | 1.2 | 1.2 | |||||||||
| Additional paid-in capital | 2,085.7 | 2,184.2 | |||||||||
| Accumulated other comprehensive income | 380.5 | 1,947.1 | |||||||||
| Retained earnings | 1,223.5 | 1,127.2 | |||||||||
| Total shareholders' equity | 3,690.9 | 5,259.7 | |||||||||
| Total liabilities and shareholders' equity | $ | 35,468.1 | $ | 36,204.4 | |||||||
13
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in millions, except per share data)
(unaudited)
| Three months ended | |||||||||||
| March 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Revenues: | |||||||||||
| Insurance policy income | $ | 625.0 | $ | 632.4 | |||||||
| Net investment income: | |||||||||||
| General account assets | 277.5 | 282.7 | |||||||||
| Policyholder and other special-purpose portfolios | (69.3) | 55.5 | |||||||||
| Investment gains (losses): | |||||||||||
| Realized investment gains (losses) | 18.8 | (6.0) | |||||||||
| Other investment gains (losses) | (51.5) | 3.2 | |||||||||
| Total investment losses | (32.7) | (2.8) | |||||||||
| Fee revenue and other income | 42.4 | 38.2 | |||||||||
| Total revenues | 842.9 | 1,006.0 | |||||||||
| Benefits and expenses: | |||||||||||
| Insurance policy benefits | 346.7 | 459.1 | |||||||||
| Interest expense | 23.8 | 24.1 | |||||||||
| Amortization | 103.9 | 99.7 | |||||||||
| Other operating costs and expenses | 219.2 | 233.1 | |||||||||
| Total benefits and expenses | 693.6 | 816.0 | |||||||||
| Income before income taxes | 149.3 | 190.0 | |||||||||
| Income tax expense on period income | 37.0 | 42.6 | |||||||||
| Net income | $ | 112.3 | $ | 147.4 | |||||||
| Earnings per common share: | |||||||||||
| Basic: | |||||||||||
| Weighted average shares outstanding | 118,622,000 | 134,140,000 | |||||||||
| Net income | $ | .95 | $ | 1.10 | |||||||
| Diluted: | |||||||||||
| Weighted average shares outstanding | 121,002,000 | 136,653,000 | |||||||||
| Net income | $ | .93 | $ | 1.08 | |||||||
14
NOTES
(1)Management believes that an analysis of Net income applicable to common stock before: (i) net realized investment gains or losses from sales, impairments and the change in allowance for credit losses, net of related amortization and taxes; (ii) net change in market value of investments recognized in earnings, net of taxes; (iii) 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; (iv) fair value changes related to the agent deferred compensation plan, net of taxes; (v) loss on extinguishment of debt, net of taxes; (vi) changes in the valuation allowance for deferred tax assets and other tax items; and (viii) 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. 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, CNOinc.com.
(2)Book value per diluted share reflects the potential dilution that could occur if outstanding stock options were exercised and restricted stock and performance units were vested. 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. 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.
(3)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)Measured by new annualized premiums for life and health products, which includes 10% of single premium whole life deposits and 100% of all other premiums (excluding annuities). Sales of third-party products are excluded.
(5)Net insurance liabilities are equal to total insurance liabilities less: (i) amounts related to reinsured business; (ii) deferred acquisition costs; (iii) present value of future profits; and (iv) the value of unexpired options credited to insurance liabilities.
(6)The following summarizes the calculations of: (i) operating return on equity, excluding accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-GAAP financial measure); (ii) operating return, excluding significant items, on equity, excluding accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-GAAP financial measure); and (iii) return on equity are as follows (dollars in millions):
| Trailing twelve months ended | |||||||||||||||||
| 1Q22 | 1Q21 | ||||||||||||||||
| Net operating income | $ | 341.5 | $ | 353.2 | |||||||||||||
| Net operating income, excluding significant items | $ | 327.1 | $ | 335.2 | |||||||||||||
| Net income | $ | 405.9 | $ | 470.4 | |||||||||||||
| Average common equity, excluding accumulated other | |||||||||||||||||
| comprehensive income (loss) and net operating loss | |||||||||||||||||
| carryforwards (a non-GAAP financial measure) | $ | 3,046.7 | $ | 2,876.5 | |||||||||||||
| Average common shareholders' equity | $ | 5,023.1 | $ | 4,903.1 | |||||||||||||
| Operating return on equity, excluding accumulated other | |||||||||||||||||
| comprehensive income (loss) and net operating loss | |||||||||||||||||
| carryforwards (a non-GAAP financial measure) | 11.2 | % | 12.3 | % | |||||||||||||
| Operating return, excluding significant items, on equity, excluding | |||||||||||||||||
| accumulated other comprehensive income (loss) and net | |||||||||||||||||
| operating loss carryforwards (a non-GAAP financial measure) | 10.7 | % | 11.7 | % | |||||||||||||
| Return on equity | 8.1 | % | 9.6 | % | |||||||||||||
15
The following summarizes: (i) operating earnings; (ii) significant items; (iii) operating earnings, excluding significant items; and (iv) net income (loss) (dollars in millions):
| Net operating | ||||||||||||||||||||||||||||||||||||||
| Net operating | income, | |||||||||||||||||||||||||||||||||||||
| income, | excluding | Net | ||||||||||||||||||||||||||||||||||||
| excluding | significant | income - | ||||||||||||||||||||||||||||||||||||
| Net operating | Significant | significant | items - trailing | Net | trailing | |||||||||||||||||||||||||||||||||
| income | items | items (a) | four quarters | income | four quarters | |||||||||||||||||||||||||||||||||
| 2Q20 | $ | 79.4 | $ | (17.7) | (b) | $ | 61.7 | $ | 285.9 | $ | 82.0 | $ | 380.8 | |||||||||||||||||||||||||
| 3Q20 | 112.6 | — | 112.6 | 329.3 | 129.2 | 468.0 | ||||||||||||||||||||||||||||||||
| 4Q20 | 86.0 | (6.4) | (c) | 79.6 | 338.2 | 111.8 | 301.8 | |||||||||||||||||||||||||||||||
| 1Q21 | 75.2 | 6.1 | (d) | 81.3 | 335.2 | 147.4 | 470.4 | |||||||||||||||||||||||||||||||
| 2Q21 | 89.1 | 3.5 | (e) | 92.6 | 366.1 | 78.0 | 466.4 | |||||||||||||||||||||||||||||||
| 3Q21 | 92.8 | 2.3 | (f) | 95.1 | 348.6 | 99.8 | 437.0 | |||||||||||||||||||||||||||||||
| 4Q21 | 108.5 | (20.2) | (g) | 88.3 | 357.3 | 115.8 | 441.0 | |||||||||||||||||||||||||||||||
| 1Q22 | 51.1 | — | 51.1 | 327.1 | 112.3 | 405.9 | ||||||||||||||||||||||||||||||||
| (a) See note (7) for additional information. | ||||||||||||||||||||||||||||||||||||||
| (b) Comprised of: (i) $45.9 million of net favorable adjustments arising from our review of actuarial assumptions; (ii) $23.5 million unfavorable impact related to regulatory matters; and (iii) an increase in tax expense of $4.7 million. | ||||||||||||||||||||||||||||||||||||||
| (c) Comprised of: (i) $11.8 million of net favorable adjustments arising from our review of actuarial assumptions; (ii) $3.7 million unfavorable impact related to asset impairments; and (iii) an increase in tax expense of $1.7 million. | ||||||||||||||||||||||||||||||||||||||
| (d) Comprised of: (i) $5.3 million from legal and regulatory matters; (ii) $2.5 million of transaction expenses related to the previously announced acquisition of DirectPath, LLC; and (iii) a decrease in tax expense of $1.7 million. | ||||||||||||||||||||||||||||||||||||||
| (e) Comprised of: (i) $4.5 million from legal and regulatory matters; and (ii) a decrease in tax expense of $1.0 million. | ||||||||||||||||||||||||||||||||||||||
| (f) Comprised of: (i) $3.0 million from legal and regulatory matters; and (ii) a decrease in tax expense of $.7 million. | ||||||||||||||||||||||||||||||||||||||
| (g) Comprised of: (i) $25.9 million of net favorable adjustments arising from our review of actuarial assumptions; and (ii) an increase in tax expense of $5.7 million. | ||||||||||||||||||||||||||||||||||||||
A reconciliation of pre-tax operating earnings (a non-GAAP financial measure) to net income is as follows (dollars in millions):
| Twelve months ended | |||||||||||||||||
| 1Q22 | 1Q21 | ||||||||||||||||
| Pre-tax operating earnings (a non-GAAP financial measure) | $ | 441.7 | $ | 455.2 | |||||||||||||
| Income tax expense | (100.2) | (102.0) | |||||||||||||||
| Net operating income | 341.5 | 353.2 | |||||||||||||||
| Non-operating items: | |||||||||||||||||
| Net realized investment gains (losses) from sales, impairments and change in allowance for credit losses, net of related amortization | 24.1 | 36.2 | |||||||||||||||
| Net change in market value of investments recognized in earnings | (36.5) | 39.3 | |||||||||||||||
| Fair value changes in embedded derivative liabilities, net of related amortization | 75.9 | 69.7 | |||||||||||||||
| Fair value changes related to the agent deferred compensation plan | 18.4 | (3.1) | |||||||||||||||
| Other | 3.4 | 8.0 | |||||||||||||||
| Non-operating income (loss) before taxes | 85.3 | 150.1 | |||||||||||||||
| Income tax expense on non-operating income | (20.9) | (32.9) | |||||||||||||||
| Net non-operating income | 64.4 | 117.2 | |||||||||||||||
| Net income | $ | 405.9 | $ | 470.4 | |||||||||||||
16
A reconciliation of consolidated capital, excluding accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-GAAP financial measure) to common shareholders’ equity, is as follows (dollars in millions):
| 1Q20 | 2Q20 | 3Q20 | 4Q20 | ||||||||||||||||||||||||||
| Consolidated capital, excluding accumulated other comprehensive | |||||||||||||||||||||||||||||
| income (loss) and net operating loss carryforwards | |||||||||||||||||||||||||||||
| (a non-GAAP financial measure) | $ | 2,701.2 | $ | 2,784.2 | $ | 2,905.1 | $ | 2,956.2 | |||||||||||||||||||||
| Net operating loss carryforwards | 469.4 | 426.8 | 377.2 | 341.9 | |||||||||||||||||||||||||
| Accumulated other comprehensive income | 595.2 | 1,520.2 | 1,801.6 | 2,186.1 | |||||||||||||||||||||||||
| Common shareholders' equity | $ | 3,765.8 | $ | 4,731.2 | $ | 5,083.9 | $ | 5,484.2 | |||||||||||||||||||||
| 1Q21 | 2Q21 | 3Q21 | 4Q21 | ||||||||||||||||||||||||||
| Consolidated capital, excluding accumulated other comprehensive | |||||||||||||||||||||||||||||
| income (loss) and net operating loss carryforwards | |||||||||||||||||||||||||||||
| (a non-GAAP financial measure) | $ | 3,019.5 | $ | 3,035.6 | $ | 3,036.3 | $ | 3,068.9 | |||||||||||||||||||||
| Net operating loss carryforwards | 323.1 | 292.9 | 266.9 | 243.7 | |||||||||||||||||||||||||
| Accumulated other comprehensive income | 1,518.1 | 1,995.5 | 1,929.7 | 1,947.1 | |||||||||||||||||||||||||
| Common shareholders' equity | $ | 4,860.7 | $ | 5,324.0 | $ | 5,232.9 | $ | 5,259.7 | |||||||||||||||||||||
| 1Q22 | |||||||||||||||||||||||||||||
| Consolidated capital, excluding accumulated other comprehensive | |||||||||||||||||||||||||||||
| income (loss) and net operating loss carryforwards | |||||||||||||||||||||||||||||
| (a non-GAAP financial measure) | $ | 3,072.2 | |||||||||||||||||||||||||||
| Net operating loss carryforwards | 238.2 | ||||||||||||||||||||||||||||
| Accumulated other comprehensive income | 380.5 | ||||||||||||||||||||||||||||
| Common shareholders' equity | $ | 3,690.9 | |||||||||||||||||||||||||||
A reconciliation of consolidated capital, excluding accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-GAAP financial measure) to common shareholders’ equity, is as follows (dollars in millions):
| Trailing four quarter average | |||||||||||||||||
| 1Q22 | 1Q21 | ||||||||||||||||
| Consolidated capital, excluding accumulated other comprehensive | |||||||||||||||||
| income (loss) and net operating loss carryforwards | |||||||||||||||||
| (a non-GAAP financial measure) | $ | 3,046.7 | $ | 2,876.5 | |||||||||||||
| Net operating loss carryforwards | 271.0 | 385.5 | |||||||||||||||
| Accumulated other comprehensive income | 1,705.4 | 1,641.1 | |||||||||||||||
| Common shareholders' equity | $ | 5,023.1 | $ | 4,903.1 | |||||||||||||
17
(7) The tables below summarize the financial impact of significant items on our net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results (dollars in millions, except per share data).
| Three months ended | ||||||||||||||||||||
| December 31, 2021 | ||||||||||||||||||||
| Actual results | Significant items | Excluding significant items | ||||||||||||||||||
| Insurance product margin | ||||||||||||||||||||
| Annuity margin | $ | 93.9 | $ | (26.9) | (a) | $ | 67.0 | |||||||||||||
| Health margin | 129.5 | — | 129.5 | |||||||||||||||||
| Life margin | 30.4 | 1.0 | (a) | 31.4 | ||||||||||||||||
| Total insurance product margin | 253.8 | (25.9) | 227.9 | |||||||||||||||||
| Allocated expenses | (143.3) | — | (143.3) | |||||||||||||||||
| Income from insurance products | 110.5 | (25.9) | 84.6 | |||||||||||||||||
| Fee income | 2.9 | — | 2.9 | |||||||||||||||||
| Investment income not allocated to product lines | 42.8 | — | 42.8 | |||||||||||||||||
| Expenses not allocated to product lines | (17.4) | — | (17.4) | |||||||||||||||||
| Operating earnings before taxes | 138.8 | (25.9) | 112.9 | |||||||||||||||||
| Income tax (expense) benefit on operating income | (30.3) | 5.7 | (24.6) | |||||||||||||||||
| Net operating income | $ | 108.5 | $ | (20.2) | $ | 88.3 | ||||||||||||||
| Net operating income per diluted share | $ | 0.87 | $ | (0.16) | $ | 0.71 | ||||||||||||||
___________
(a)Adjustments arising from our comprehensive annual actuarial review of assumptions.
| Three months ended | ||||||||||||||||||||
| September 30, 2021 | ||||||||||||||||||||
| Actual results | Significant items | Excluding significant items | ||||||||||||||||||
| Insurance product margin | ||||||||||||||||||||
| Annuity margin | $ | 52.5 | $ | — | $ | 52.5 | ||||||||||||||
| Health margin | 117.9 | — | 117.9 | |||||||||||||||||
| Life margin | 53.2 | — | 53.2 | |||||||||||||||||
| Total insurance product margin | 223.6 | — | 223.6 | |||||||||||||||||
| Allocated expenses | (140.5) | — | (140.5) | |||||||||||||||||
| Income from insurance products | 83.1 | — | 83.1 | |||||||||||||||||
| Fee income | 2.6 | — | 2.6 | |||||||||||||||||
| Investment income not allocated to product lines | 50.9 | — | 50.9 | |||||||||||||||||
| Expenses not allocated to product lines | (17.3) | 3.0 | (a) | (14.3) | ||||||||||||||||
| Operating earnings before taxes | 119.3 | 3.0 | 122.3 | |||||||||||||||||
| Income tax (expense) benefit on operating income | (26.5) | (0.7) | (27.2) | |||||||||||||||||
| Net operating income | $ | 92.8 | $ | 2.3 | $ | 95.1 | ||||||||||||||
| Net operating income per diluted share | $ | 0.72 | $ | 0.02 | $ | 0.74 | ||||||||||||||
___________
(a)Comprised of $3.0 million from legal and regulatory matters.
18
| Three months ended | ||||||||||||||||||||
| June 30, 2021 | ||||||||||||||||||||
| Actual results | Significant items | Excluding significant items | ||||||||||||||||||
| Insurance product margin | ||||||||||||||||||||
| Annuity margin | $ | 66.0 | $ | — | $ | 66.0 | ||||||||||||||
| Health margin | 120.9 | — | 120.9 | |||||||||||||||||
| Life margin | 39.7 | — | 39.7 | |||||||||||||||||
| Total insurance product margin | 226.6 | — | 226.6 | |||||||||||||||||
| Allocated expenses | (141.6) | — | (141.6) | |||||||||||||||||
| Income from insurance products | 85.0 | — | 85.0 | |||||||||||||||||
| Fee income | 6.6 | — | 6.6 | |||||||||||||||||
| Investment income not allocated to product lines | 47.8 | — | 47.8 | |||||||||||||||||
| Expenses not allocated to product lines | (23.8) | 4.5 | (a) | (19.3) | ||||||||||||||||
| Operating earnings before taxes | 115.6 | 4.5 | 120.1 | |||||||||||||||||
| Income tax (expense) benefit on operating income | (26.5) | (1.0) | (27.5) | |||||||||||||||||
| Net operating income | $ | 89.1 | $ | 3.5 | $ | 92.6 | ||||||||||||||
| Net operating income per diluted share | $ | 0.66 | $ | 0.03 | $ | 0.69 | ||||||||||||||
___________
(a)Comprised of $4.5 million from legal and regulatory matters.
| Three months ended | ||||||||||||||||||||
| March 31, 2021 | ||||||||||||||||||||
| Actual results | Significant items | Excluding significant items | ||||||||||||||||||
| Insurance product margin | ||||||||||||||||||||
| Annuity margin | $ | 57.9 | $ | — | $ | 57.9 | ||||||||||||||
| Health margin | 124.7 | — | 124.7 | |||||||||||||||||
| Life margin | 27.1 | — | 27.1 | |||||||||||||||||
| Total insurance product margin | 209.7 | — | 209.7 | |||||||||||||||||
| Allocated expenses | (141.1) | — | (141.1) | |||||||||||||||||
| Income from insurance products | 68.6 | — | 68.6 | |||||||||||||||||
| Fee income | 7.3 | — | 7.3 | |||||||||||||||||
| Investment income not allocated to product lines | 43.0 | — | 43.0 | |||||||||||||||||
| Expenses not allocated to product lines | (22.0) | 7.8 | (a) | (14.2) | ||||||||||||||||
| Operating earnings before taxes | 96.9 | 7.8 | 104.7 | |||||||||||||||||
| Income tax (expense) benefit on operating income | (21.7) | (1.7) | (23.4) | |||||||||||||||||
| Net operating income | $ | 75.2 | $ | 6.1 | $ | 81.3 | ||||||||||||||
| Net operating income per diluted share | $ | 0.55 | $ | 0.04 | $ | 0.59 | ||||||||||||||
___________
(a)Comprised of: (i) $5.3 million from legal and regulatory matters; and (ii) $2.5 million of transaction expenses related to the previously announced acquisition of DirectPath, LLC. The legal and regulatory matters primarily consist of an increase to our liability for claims and interest pursuant to the Global Resolution Agreement, as we have now processed and verified most of the claims provided by the third party auditor allowing us to more accurately estimate the ultimate liability.
19
| Three months ended | ||||||||||||||||||||
| December 31, 2020 | ||||||||||||||||||||
| Actual results | Significant items | Excluding significant items | ||||||||||||||||||
| Insurance product margin | ||||||||||||||||||||
| Annuity margin | $ | 68.1 | $ | (16.1) | (a) | $ | 52.0 | |||||||||||||
| Health margin | 125.2 | — | 125.2 | |||||||||||||||||
| Life margin | 37.3 | 4.3 | (a) | 41.6 | ||||||||||||||||
| Total insurance product margin | 230.6 | (11.8) | 218.8 | |||||||||||||||||
| Allocated expenses | (162.7) | — | (162.7) | |||||||||||||||||
| Income from insurance products | 67.9 | (11.8) | 56.1 | |||||||||||||||||
| Fee income | 2.9 | — | 2.9 | |||||||||||||||||
| Investment income not allocated to product lines | 57.8 | — | 57.8 | |||||||||||||||||
| Expenses not allocated to product lines | (17.8) | 3.7 | (b) | (14.1) | ||||||||||||||||
| Operating earnings before taxes | 110.8 | (8.1) | 102.7 | |||||||||||||||||
| Income tax (expense) benefit on operating income | (24.8) | 1.7 | (23.1) | |||||||||||||||||
| Net operating income | $ | 86.0 | $ | (6.4) | $ | 79.6 | ||||||||||||||
| Net operating income per diluted share | $ | 0.61 | $ | (0.04) | $ | 0.57 | ||||||||||||||
___________
(a)Adjustments arising from our comprehensive annual actuarial review of assumptions.
(b)Unfavorable impact related to asset impairments.
| Three months ended | ||||||||||||||||||||
| June 30, 2020 | ||||||||||||||||||||
| Actual results | Significant items | Excluding significant items | ||||||||||||||||||
| Insurance product margin | ||||||||||||||||||||
| Annuity margin | $ | 123.8 | $ | 40.0 | (a) | $ | 72.3 | |||||||||||||
| (91.5) | (a) | |||||||||||||||||||
| Health margin | 95.5 | — | 95.5 | |||||||||||||||||
| Life margin | 36.1 | 5.6 | (a) | 41.7 | ||||||||||||||||
| Total insurance product margin | 255.4 | (45.9) | 209.5 | |||||||||||||||||
| Allocated expenses | (128.1) | — | (128.1) | |||||||||||||||||
| Income from insurance products | 127.3 | (45.9) | 81.4 | |||||||||||||||||
| Fee income | 5.2 | — | 5.2 | |||||||||||||||||
| Investment income not allocated to product lines | 8.2 | — | 8.2 | |||||||||||||||||
| Expenses not allocated to product lines | (38.5) | 23.5 | (b) | (15.0) | ||||||||||||||||
| Operating earnings before taxes | 102.2 | (22.4) | 79.8 | |||||||||||||||||
| Income tax (expense) benefit on operating income | (22.8) | 4.7 | (18.1) | |||||||||||||||||
| Net operating income | $ | 79.4 | $ | (17.7) | $ | 61.7 | ||||||||||||||
| Net operating income per diluted share | $ | 0.55 | $ | (0.12) | $ | 0.43 | ||||||||||||||
___________
(a)Given our expectation that interest rates will remain low for the long-term, we performed an actuarial unlocking exercise in the second quarter of 2020 to reflect our assumption that average new money rates will remain flat at 4 percent forever. This change and the related impacts to persistency assumptions had a $45.6 million unfavorable impact on pre-tax earnings. As part of the actuarial unlocking exercise, we also changed our assumptions related to the future option costs we incur in providing benefits on fixed index annuities which had a favorable impact on pre-tax earnings of $91.5 million. The impact of these changes in assumptions is summarized below (dollars in millions):
20
| Line of business | |||||||||||||||||||||||
| Fixed index annuities | Fixed interest annuities | Interest- sensitive life | Total | ||||||||||||||||||||
| Favorable (unfavorable) | |||||||||||||||||||||||
| Impacts of an average new money rate assumption of 4 percent | |||||||||||||||||||||||
| Insurance policy benefits | $ | (5.0) | $ | — | $ | (7.4) | $ | (12.4) | |||||||||||||||
| Amortization | (25.6) | (9.4) | 1.8 | (33.2) | |||||||||||||||||||
| Subtotal | (30.6) | (9.4) | (5.6) | (45.6) | |||||||||||||||||||
| Impacts of changes in future option costs | |||||||||||||||||||||||
| Insurance policy benefits | 104.8 | — | — | 104.8 | |||||||||||||||||||
| Amortization | (13.3) | — | — | (13.3) | |||||||||||||||||||
| Subtotal | 91.5 | — | — | 91.5 | |||||||||||||||||||
| Impact on pre-tax income | $ | 60.9 | $ | (9.4) | $ | (5.6) | $ | 45.9 | |||||||||||||||
This actuarial unlocking exercise did not replace our comprehensive annual review of all assumptions for our insurance products, which we completed in the fourth quarter of 2020.
(b)We increased our liability for claims and interest pursuant to the previously disclosed Global Resolution Agreement entered into in November 2018. Pursuant to this agreement, a third-party auditor is acting on behalf of 42 states and the District of Columbia for the purpose of identifying deceased insureds and contract holders where benefits are payable pursuant to unclaimed property laws. The third-party auditor has provided information that we have processed and verified allowing us to more accurately estimate the ultimate liability pursuant to this agreement.
For further information:
CNO News Media
Valerie Dolenga
CNO Investor Relations
Jennifer Childe
21
Exhibit 99.2
| Quarterly Financial Supplement - 1Q2022 | |||||||||||||||||
| May 2, 2022 | |||||||||||||||||
Page 1
| Table of Contents | Page | |||||||||||||
| Consolidated balance sheet | 3 | |||||||||||||
| Consolidated statement of operations | 4 | |||||||||||||
| Financial summary | 5 | |||||||||||||
| Insurance operations | 6 | |||||||||||||
| Margin from insurance products | 7-9 | |||||||||||||
| Estimated impacts of COVID-19 on insurance product margins | 10 | |||||||||||||
| Collected premiums from annuity and interest sensitive life products and insurance policy income | 11 | |||||||||||||
| Health and life new annualized premiums | 12 | |||||||||||||
| Computation of weighted average shares outstanding | 13 | |||||||||||||
| Annuities - account value rollforwards | 14 | |||||||||||||
| Statutory information | 15 | |||||||||||||
| Investment income not allocated to product lines and investment income allocated to product lines | 16-19 | |||||||||||||
| Other investment data | 19 | |||||||||||||
| Significant items | 20-24 | |||||||||||||
| Notes | 25 | |||||||||||||
Page 2
CNO FINANCIAL GROUP, INC.
CONSOLIDATED BALANCE SHEET
(Dollars in millions)
(Unaudited)
| Mar-21 | Jun-21 | Sep-21 | Dec-21 | Mar-22 | |||||||||||||||||||||||||
| Assets | |||||||||||||||||||||||||||||
| Investments: | |||||||||||||||||||||||||||||
| Fixed maturities, available for sale, at fair value | $ | 22,610.4 | $ | 23,806.6 | $ | 24,142.0 | $ | 24,805.4 | $ | 23,479.4 | |||||||||||||||||||
| Equity securities at fair value | 164.4 | 149.3 | 146.4 | 131.1 | 91.0 | ||||||||||||||||||||||||
| Mortgage loans | 1,297.7 | 1,276.9 | 1,211.0 | 1,218.6 | 1,213.3 | ||||||||||||||||||||||||
| Policy loans | 121.0 | 120.3 | 119.7 | 120.2 | 119.5 | ||||||||||||||||||||||||
| Trading securities | 242.6 | 247.0 | 243.6 | 227.2 | 223.0 | ||||||||||||||||||||||||
| Investments held by variable interest entities | 1,224.0 | 1,233.5 | 1,221.3 | 1,199.6 | 1,180.8 | ||||||||||||||||||||||||
| Other invested assets | 1,195.1 | 1,226.0 | 1,172.6 | 1,224.0 | 1,121.8 | ||||||||||||||||||||||||
| Total investments | 26,855.2 | 28,059.6 | 28,256.6 | 28,926.1 | 27,428.8 | ||||||||||||||||||||||||
| Cash and cash equivalents - unrestricted | 662.9 | 652.5 | 742.1 | 632.1 | 546.0 | ||||||||||||||||||||||||
| Cash and cash equivalents held by variable interest entities | 76.0 | 62.3 | 70.5 | 99.6 | 48.0 | ||||||||||||||||||||||||
| Accrued investment income | 216.8 | 210.7 | 218.1 | 216.4 | 227.9 | ||||||||||||||||||||||||
| Present value of future profits | 241.3 | 235.2 | 229.0 | 222.6 | 222.8 | ||||||||||||||||||||||||
| Deferred acquisition costs | 1,168.4 | 1,051.4 | 1,082.7 | 1,112.0 | 1,487.6 | ||||||||||||||||||||||||
| Reinsurance receivables | 4,509.3 | 4,460.9 | 4,409.7 | 4,354.3 | 4,298.2 | ||||||||||||||||||||||||
| Income tax assets, net | 358.2 | 218.6 | 145.7 | 118.3 | 534.2 | ||||||||||||||||||||||||
| Assets held in separate accounts | 4.3 | 4.5 | 4.5 | 3.9 | 3.6 | ||||||||||||||||||||||||
| Other assets | 567.1 | 564.0 | 554.8 | 519.1 | 671.0 | ||||||||||||||||||||||||
| Total assets | $ | 34,659.5 | $ | 35,519.7 | $ | 35,713.7 | $ | 36,204.4 | $ | 35,468.1 | |||||||||||||||||||
| Liabilities | |||||||||||||||||||||||||||||
| Liabilities for insurance products: | |||||||||||||||||||||||||||||
| Policyholder account liabilities | $ | 12,571.3 | $ | 12,840.8 | $ | 12,992.0 | $ | 13,689.7 | $ | 14,546.3 | |||||||||||||||||||
| Future policy benefits | 11,546.6 | 11,689.8 | 11,699.7 | 11,670.7 | 11,646.5 | ||||||||||||||||||||||||
| Liability for policy and contract claims | 558.7 | 528.3 | 512.3 | 501.8 | 507.3 | ||||||||||||||||||||||||
| Unearned and advanced premiums | 262.4 | 255.8 | 247.5 | 246.7 | 250.0 | ||||||||||||||||||||||||
| Liabilities related to separate accounts | 4.3 | 4.5 | 4.5 | 3.9 | 3.6 | ||||||||||||||||||||||||
| Other liabilities | 925.2 | 946.5 | 995.3 | 830.9 | 912.3 | ||||||||||||||||||||||||
| Investment borrowings | 1,642.0 | 1,641.5 | 1,741.1 | 1,715.8 | 1,640.5 | ||||||||||||||||||||||||
| Borrowings related to variable interest entities | 1,151.7 | 1,151.6 | 1,151.4 | 1,147.9 | 1,133.1 | ||||||||||||||||||||||||
| Notes payable - direct corporate obligations | 1,136.6 | 1,136.9 | 1,137.0 | 1,137.3 | 1,137.6 | ||||||||||||||||||||||||
| Total liabilities | 29,798.8 | 30,195.7 | 30,480.8 | 30,944.7 | 31,777.2 | ||||||||||||||||||||||||
| Shareholders' equity | |||||||||||||||||||||||||||||
| Common stock | 1.3 | 1.3 | 1.2 | 1.2 | 1.2 | ||||||||||||||||||||||||
| Additional paid-in capital | 2,457.8 | 2,383.0 | 2,274.6 | 2,184.2 | 2,085.7 | ||||||||||||||||||||||||
| Retained earnings | 883.5 | 944.2 | 1,027.4 | 1,127.2 | 1,223.5 | ||||||||||||||||||||||||
| Total shareholders' equity before accumulated other comprehensive income | 3,342.6 | 3,328.5 | 3,303.2 | 3,312.6 | 3,310.4 | ||||||||||||||||||||||||
| Accumulated other comprehensive income | 1,518.1 | 1,995.5 | 1,929.7 | 1,947.1 | 380.5 | ||||||||||||||||||||||||
| Total shareholders' equity | 4,860.7 | 5,324.0 | 5,232.9 | 5,259.7 | 3,690.9 | ||||||||||||||||||||||||
| Total liabilities and shareholders' equity | $ | 34,659.5 | $ | 35,519.7 | $ | 35,713.7 | $ | 36,204.4 | $ | 35,468.1 | |||||||||||||||||||
| Mar-21 | Jun-21 | Sep-21 | Dec-21 | Mar-22 | |||||||||||||||||||||||||
| Book value per common share | $ | 36.75 | $ | 41.24 | $ | 42.11 | $ | 43.69 | $ | 31.48 | |||||||||||||||||||
| Book value per common share, excluding accumulated other comprehensive income (1) (2) | $ | 25.27 | $ | 25.78 | $ | 26.58 | $ | 27.52 | $ | 28.24 | |||||||||||||||||||
| Book value per diluted share (1) (3) | $ | 24.83 | $ | 25.30 | $ | 26.03 | $ | 26.86 | $ | 27.70 | |||||||||||||||||||
Page 3
CNO FINANCIAL GROUP, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in millions)
(Unaudited)
| 1Q | 2Q | 3Q | 4Q | YTD | 1Q | ||||||||||||||||||||||||||||||
| 2021 | 2021 | 2021 | 2021 | 2021 | 2022 | ||||||||||||||||||||||||||||||
| Revenues | |||||||||||||||||||||||||||||||||||
| Insurance policy income | $ | 632.4 | $ | 630.5 | $ | 630.6 | $ | 629.9 | $ | 2,523.4 | $ | 625.0 | |||||||||||||||||||||||
| Net investment income: | |||||||||||||||||||||||||||||||||||
| General account assets | 282.7 | 282.1 | 289.5 | 285.9 | 1,140.2 | 277.5 | |||||||||||||||||||||||||||||
| Policyholder and other special-purpose portfolios | 55.5 | 97.1 | 18.7 | 109.2 | 280.5 | (69.3) | |||||||||||||||||||||||||||||
| Investment gains (losses): | |||||||||||||||||||||||||||||||||||
| Realized investment gains (losses) | (6.0) | 17.1 | 3.7 | 6.5 | 21.3 | 18.8 | |||||||||||||||||||||||||||||
| Other investment gains (losses) | 3.2 | 14.2 | (6.0) | (13.6) | (2.2) | (51.5) | |||||||||||||||||||||||||||||
| Total investment gains (losses) | (2.8) | 31.3 | (2.3) | (7.1) | 19.1 | (32.7) | |||||||||||||||||||||||||||||
| Fee revenue and other income | 38.2 | 32.1 | 31.8 | 56.9 | 159.0 | 42.4 | |||||||||||||||||||||||||||||
| Total revenues | 1,006.0 | 1,073.1 | 968.3 | 1,074.8 | 4,122.2 | 842.9 | |||||||||||||||||||||||||||||
| Benefits and expenses | |||||||||||||||||||||||||||||||||||
| Insurance policy benefits | 459.1 | 657.4 | 524.8 | 549.4 | 2,190.7 | 346.7 | |||||||||||||||||||||||||||||
| Interest expense | 24.1 | 24.0 | 23.7 | 23.6 | 95.4 | 23.8 | |||||||||||||||||||||||||||||
| Amortization | 99.7 | 42.6 | 57.9 | 80.9 | 281.1 | 103.9 | |||||||||||||||||||||||||||||
| Other operating costs and expenses | 233.1 | 247.5 | 233.9 | 272.8 | 987.3 | 219.2 | |||||||||||||||||||||||||||||
| Total benefits and expenses | 816.0 | 971.5 | 840.3 | 926.7 | 3,554.5 | 693.6 | |||||||||||||||||||||||||||||
| Income before income taxes | 190.0 | 101.6 | 128.0 | 148.1 | 567.7 | 149.3 | |||||||||||||||||||||||||||||
| Income tax expense on period income | 42.6 | 23.6 | 28.2 | 32.3 | 126.7 | 37.0 | |||||||||||||||||||||||||||||
| Net income | $ | 147.4 | $ | 78.0 | $ | 99.8 | $ | 115.8 | $ | 441.0 | $ | 112.3 | |||||||||||||||||||||||
Page 4
CNO FINANCIAL GROUP, INC.
FINANCIAL SUMMARY
(Dollars in millions, except per share data)
(Unaudited)
| 1Q | 2Q | 3Q | 4Q | YTD | 1Q | ||||||||||||||||||||||||||||||
| 2021 | 2021 | 2021 | 2021 | 2021 | 2022 | ||||||||||||||||||||||||||||||
| Insurance product margin (4) | |||||||||||||||||||||||||||||||||||
| Annuity margin | $ | 57.9 | $ | 66.0 | $ | 52.5 | $ | 93.9 | $ | 270.3 | $ | 44.6 | |||||||||||||||||||||||
| Health margin | 124.7 | 120.9 | 117.9 | 129.5 | 493.0 | 124.8 | |||||||||||||||||||||||||||||
| Life margin | 27.1 | 39.7 | 53.2 | 30.4 | 150.4 | 19.8 | |||||||||||||||||||||||||||||
| Total insurance product margin | 209.7 | 226.6 | 223.6 | 253.8 | 913.7 | 189.2 | |||||||||||||||||||||||||||||
| Allocated expenses | (141.1) | (141.6) | (140.5) | (143.3) | (566.5) | (144.8) | |||||||||||||||||||||||||||||
| Income from insurance products (5) | 68.6 | 85.0 | 83.1 | 110.5 | 347.2 | 44.4 | |||||||||||||||||||||||||||||
| Fee income | 7.3 | 6.6 | 2.6 | 2.9 | 19.4 | 9.9 | |||||||||||||||||||||||||||||
| Investment income not allocated to product lines (9) | 43.0 | 47.8 | 50.9 | 42.8 | 184.5 | 28.5 | |||||||||||||||||||||||||||||
| Expenses not allocated to product lines | (22.0) | (23.8) | (17.3) | (17.4) | (80.5) | (14.8) | |||||||||||||||||||||||||||||
| Operating earnings before taxes | 96.9 | 115.6 | 119.3 | 138.8 | 470.6 | 68.0 | |||||||||||||||||||||||||||||
| Income tax expense on operating income | (21.7) | (26.5) | (26.5) | (30.3) | (105.0) | (16.9) | |||||||||||||||||||||||||||||
| Net operating income (10) | 75.2 | 89.1 | 92.8 | 108.5 | 365.6 | 51.1 | |||||||||||||||||||||||||||||
| Net realized investment gains (losses) from sales, impairments and change in allowance for credit losses (net of related amortization) | 3.6 | 24.3 | 2.2 | 4.7 | 34.8 | (7.1) | |||||||||||||||||||||||||||||
| Net change in market value of investments recognized in earnings | (6.4) | 5.7 | (4.6) | (12.1) | (17.4) | (25.5) | |||||||||||||||||||||||||||||
| Fair value changes related to agent deferred compensation plan | 13.2 | — | — | (4.3) | 8.9 | 22.7 | |||||||||||||||||||||||||||||
| Fair value changes in embedded derivative liabilities (net of related amortization) | 82.1 | (44.9) | 10.9 | 19.1 | 67.2 | 90.8 | |||||||||||||||||||||||||||||
| Other | 0.6 | 0.9 | 0.2 | 1.9 | 3.6 | 0.4 | |||||||||||||||||||||||||||||
| Net non-operating income (loss) before taxes | 93.1 | (14.0) | 8.7 | 9.3 | 97.1 | 81.3 | |||||||||||||||||||||||||||||
| Income tax (expense) benefit on non-operating income (loss) | (20.9) | 2.9 | (1.7) | (2.0) | (21.7) | (20.1) | |||||||||||||||||||||||||||||
| Net non-operating income (loss) | 72.2 | (11.1) | 7.0 | 7.3 | 75.4 | 61.2 | |||||||||||||||||||||||||||||
| Net income | $ | 147.4 | $ | 78.0 | $ | 99.8 | $ | 115.8 | $ | 441.0 | $ | 112.3 | |||||||||||||||||||||||
| Per diluted share | |||||||||||||||||||||||||||||||||||
| Net operating income | $ | 0.55 | $ | 0.66 | $ | 0.72 | $ | 0.87 | $ | 2.79 | $ | 0.42 | |||||||||||||||||||||||
| Net non-operating income (loss) | 0.53 | (0.08) | 0.05 | 0.06 | 0.57 | 0.51 | |||||||||||||||||||||||||||||
| Net income | $ | 1.08 | $ | 0.58 | $ | 0.77 | $ | 0.93 | $ | 3.36 | $ | 0.93 | |||||||||||||||||||||||
Page 5
CNO FINANCIAL GROUP, INC.
Insurance Operations
(Dollars in millions)
(Unaudited)
| 1Q | 2Q | 3Q | 4Q | YTD | 1Q | ||||||||||||||||||||||||||||||
| 2021 | 2021 | 2021 | 2021 | 2021 | 2022 | ||||||||||||||||||||||||||||||
| Insurance product margin (4) | |||||||||||||||||||||||||||||||||||
| Annuity: | |||||||||||||||||||||||||||||||||||
| Insurance policy income | $ | 5.4 | $ | 4.3 | $ | 5.8 | $ | 4.1 | $ | 19.6 | $ | 5.0 | |||||||||||||||||||||||
| Net investment income (5) (6) | 115.7 | 114.9 | 115.5 | 116.3 | 462.4 | 115.1 | |||||||||||||||||||||||||||||
| Insurance policy benefits | (6.2) | (1.3) | (16.2) | 38.2 | 14.5 | (17.8) | |||||||||||||||||||||||||||||
| Interest credited (6) | (38.7) | (36.9) | (38.1) | (35.4) | (149.1) | (41.3) | |||||||||||||||||||||||||||||
| Amortization and non-deferred commissions | (18.3) | (15.0) | (14.5) | (29.3) | (77.1) | (16.4) | |||||||||||||||||||||||||||||
| Annuity margin | 57.9 | 66.0 | 52.5 | 93.9 | 270.3 | 44.6 | |||||||||||||||||||||||||||||
| Health: | |||||||||||||||||||||||||||||||||||
| Insurance policy income | 416.5 | 415.4 | 414.4 | 415.2 | 1,661.5 | 406.7 | |||||||||||||||||||||||||||||
| Net investment income (5) | 71.5 | 71.6 | 72.2 | 72.4 | 287.7 | 71.8 | |||||||||||||||||||||||||||||
| Insurance policy benefits | (306.6) | (323.3) | (325.4) | (311.0) | (1,266.3) | (301.3) | |||||||||||||||||||||||||||||
| Amortization and non-deferred commissions | (56.7) | (42.8) | (43.3) | (47.1) | (189.9) | (52.4) | |||||||||||||||||||||||||||||
| Health margin | 124.7 | 120.9 | 117.9 | 129.5 | 493.0 | 124.8 | |||||||||||||||||||||||||||||
| Life: | |||||||||||||||||||||||||||||||||||
| Insurance policy income | 210.5 | 210.8 | 210.4 | 210.6 | 842.3 | 213.3 | |||||||||||||||||||||||||||||
| Net investment income (5) (7) | 35.8 | 36.1 | 36.4 | 36.4 | 144.7 | 36.3 | |||||||||||||||||||||||||||||
| Insurance policy benefits | (163.6) | (149.5) | (141.3) | (159.1) | (613.5) | (163.6) | |||||||||||||||||||||||||||||
| Interest credited (7) | (10.6) | (11.0) | (11.1) | (11.7) | (44.4) | (11.6) | |||||||||||||||||||||||||||||
| Amortization and non-deferred commissions | (21.7) | (21.8) | (21.4) | (24.0) | (88.9) | (25.3) | |||||||||||||||||||||||||||||
| Advertising expense | (23.3) | (24.9) | (19.8) | (21.8) | (89.8) | (29.3) | |||||||||||||||||||||||||||||
| Life margin | 27.1 | 39.7 | 53.2 | 30.4 | 150.4 | 19.8 | |||||||||||||||||||||||||||||
| Total insurance product margin | 209.7 | 226.6 | 223.6 | 253.8 | 913.7 | 189.2 | |||||||||||||||||||||||||||||
| Allocated expenses: | |||||||||||||||||||||||||||||||||||
| Branch office expenses | (18.5) | (16.2) | (14.8) | (13.0) | (62.5) | (18.1) | |||||||||||||||||||||||||||||
| Other allocated expenses | (122.6) | (125.4) | (125.7) | (130.3) | (504.0) | (126.7) | |||||||||||||||||||||||||||||
| Income from insurance products (8) | 68.6 | 85.0 | 83.1 | 110.5 | 347.2 | 44.4 | |||||||||||||||||||||||||||||
| Fee income | 7.3 | 6.6 | 2.6 | 2.9 | 19.4 | 9.9 | |||||||||||||||||||||||||||||
| Investment income not allocated to product lines (9) | 43.0 | 47.8 | 50.9 | 42.8 | 184.5 | 28.5 | |||||||||||||||||||||||||||||
| Expenses not allocated to product lines | (22.0) | (23.8) | (17.3) | (17.4) | (80.5) | (14.8) | |||||||||||||||||||||||||||||
| Operating earnings before taxes | 96.9 | 115.6 | 119.3 | 138.8 | 470.6 | 68.0 | |||||||||||||||||||||||||||||
| Income tax expense on operating income | (21.7) | (26.5) | (26.5) | (30.3) | (105.0) | (16.9) | |||||||||||||||||||||||||||||
| Net operating income (10) | $ | 75.2 | $ | 89.1 | $ | 92.8 | $ | 108.5 | $ | 365.6 | $ | 51.1 | |||||||||||||||||||||||
Page 6
CNO FINANCIAL GROUP, INC.
Margin from Annuity Products
(Dollars in millions)
(Unaudited)
| 1Q | 2Q | 3Q | 4Q | YTD | 1Q | ||||||||||||||||||||||||||||||
| 2021 | 2021 | 2021 | 2021 | 2021 | 2022 | ||||||||||||||||||||||||||||||
| Annuity margin (4): | |||||||||||||||||||||||||||||||||||
| Fixed index annuities | |||||||||||||||||||||||||||||||||||
| Insurance policy income | $ | 3.0 | $ | 3.3 | $ | 3.3 | $ | 3.2 | $ | 12.8 | $ | 3.0 | |||||||||||||||||||||||
| Net investment income (5) (6) | 84.9 | 84.9 | 86.3 | 87.8 | 343.9 | 87.7 | |||||||||||||||||||||||||||||
| Insurance policy benefits | 1.6 | 3.8 | (9.8) | 38.1 | 33.7 | (13.7) | |||||||||||||||||||||||||||||
| Interest credited (6) | (24.9) | (23.4) | (24.8) | (22.6) | (95.7) | (29.3) | |||||||||||||||||||||||||||||
| Amortization and non-deferred commissions | (16.3) | (13.3) | (12.6) | (29.1) | (71.3) | (14.5) | |||||||||||||||||||||||||||||
| Margin from fixed index annuities | $ | 48.3 | $ | 55.3 | $ | 42.4 | $ | 77.4 | $ | 223.4 | $ | 33.2 | |||||||||||||||||||||||
| Average net insurance liabilities (11) | $ | 7,464.8 | $ | 7,643.4 | $ | 7,881.9 | $ | 8,096.7 | $ | 7,771.8 | $ | 8,268.4 | |||||||||||||||||||||||
| Margin/average net insurance liabilities (12) | 2.59 | % | 2.89 | % | 2.15 | % | 3.82 | % | 2.87 | % | 1.61 | % | |||||||||||||||||||||||
| Fixed interest annuities | |||||||||||||||||||||||||||||||||||
| Insurance policy income | $ | 0.2 | $ | 0.1 | $ | 0.3 | $ | 0.2 | $ | 0.8 | $ | 0.1 | |||||||||||||||||||||||
| Net investment income (5) | 24.4 | 23.7 | 23.0 | 22.5 | 93.6 | 21.5 | |||||||||||||||||||||||||||||
| Insurance policy benefits | (0.7) | 0.2 | (0.2) | (0.4) | (1.1) | (0.3) | |||||||||||||||||||||||||||||
| Interest credited | (13.2) | (12.8) | (12.7) | (12.2) | (50.9) | (11.4) | |||||||||||||||||||||||||||||
| Amortization and non-deferred commissions | (1.9) | (1.7) | (1.8) | — | (5.4) | (1.8) | |||||||||||||||||||||||||||||
| Margin from fixed interest annuities | $ | 8.8 | $ | 9.5 | $ | 8.6 | $ | 10.1 | $ | 37.0 | $ | 8.1 | |||||||||||||||||||||||
| Average net insurance liabilities (11) | $ | 1,951.6 | $ | 1,899.5 | $ | 1,856.3 | $ | 1,813.3 | $ | 1,880.1 | $ | 1,761.9 | |||||||||||||||||||||||
| Margin/average net insurance liabilities (12) | 1.80 | % | 2.00 | % | 1.85 | % | 2.23 | % | 1.97 | % | 1.84 | % | |||||||||||||||||||||||
| Other annuities | |||||||||||||||||||||||||||||||||||
| Insurance policy income | $ | 2.2 | $ | 0.9 | $ | 2.2 | $ | 0.7 | $ | 6.0 | $ | 1.9 | |||||||||||||||||||||||
| Net investment income (5) | 6.4 | 6.3 | 6.2 | 6.0 | 24.9 | 5.9 | |||||||||||||||||||||||||||||
| Insurance policy benefits | (7.1) | (5.3) | (6.2) | 0.5 | (18.1) | (3.8) | |||||||||||||||||||||||||||||
| Interest credited | (0.6) | (0.7) | (0.6) | (0.6) | (2.5) | (0.6) | |||||||||||||||||||||||||||||
| Amortization and non-deferred commissions | (0.1) | — | (0.1) | (0.2) | (0.4) | (0.1) | |||||||||||||||||||||||||||||
| Margin from other annuities | $ | 0.8 | $ | 1.2 | $ | 1.5 | $ | 6.4 | $ | 9.9 | $ | 3.3 | |||||||||||||||||||||||
| Average net insurance liabilities (11) | $ | 512.2 | $ | 506.8 | $ | 501.6 | $ | 495.8 | $ | 504.1 | $ | 488.0 | |||||||||||||||||||||||
| Margin/average net insurance liabilities (12) | 0.62 | % | 0.95 | % | 1.20 | % | 5.16 | % | 1.96 | % | 2.70 | % | |||||||||||||||||||||||
| Total annuity margin | $ | 57.9 | $ | 66.0 | $ | 52.5 | $ | 93.9 | $ | 270.3 | $ | 44.6 | |||||||||||||||||||||||
| Average net insurance liabilities (11) | $ | 9,928.6 | $ | 10,049.7 | $ | 10,239.8 | $ | 10,405.8 | $ | 10,156.0 | $ | 10,518.3 | |||||||||||||||||||||||
| Margin/average net insurance liabilities (12) | 2.33 | % | 2.63 | % | 2.05 | % | 3.61 | % | 2.66 | % | 1.70 | % | |||||||||||||||||||||||
Page 7
CNO FINANCIAL GROUP, INC.
Margin from Health Products
(Dollars in millions)
(Unaudited)
| 1Q | 2Q | 3Q | 4Q | YTD | 1Q | ||||||||||||||||||||||||||||||
| 2021 | 2021 | 2021 | 2021 | 2021 | 2022 | ||||||||||||||||||||||||||||||
| Health margin (4): | |||||||||||||||||||||||||||||||||||
| Supplemental health | |||||||||||||||||||||||||||||||||||
| Insurance policy income | $ | 169.8 | $ | 170.0 | $ | 171.2 | $ | 172.8 | $ | 683.8 | $ | 173.5 | |||||||||||||||||||||||
| Net investment income (5) | 36.1 | 36.3 | 36.9 | 37.3 | 146.6 | 37.5 | |||||||||||||||||||||||||||||
| Insurance policy benefits | (126.3) | (130.9) | (127.8) | (124.7) | (509.7) | (124.4) | |||||||||||||||||||||||||||||
| Amortization and non-deferred commissions | (29.2) | (27.9) | (29.4) | (31.4) | (117.9) | (29.4) | |||||||||||||||||||||||||||||
| Margin from supplemental health | $ | 50.4 | $ | 47.5 | $ | 50.9 | $ | 54.0 | $ | 202.8 | $ | 57.2 | |||||||||||||||||||||||
| Margin/insurance policy income | 30 | % | 28 | % | 30 | % | 31 | % | 30 | % | 33 | % | |||||||||||||||||||||||
| Medicare supplement | |||||||||||||||||||||||||||||||||||
| Insurance policy income | $ | 181.0 | $ | 179.7 | $ | 177.4 | $ | 176.0 | $ | 714.1 | $ | 166.8 | |||||||||||||||||||||||
| Net investment income (5) | 1.3 | 1.3 | 1.3 | 1.2 | 5.1 | 1.3 | |||||||||||||||||||||||||||||
| Insurance policy benefits | (120.0) | (123.0) | (129.7) | (120.8) | (493.5) | (110.2) | |||||||||||||||||||||||||||||
| Amortization and non-deferred commissions | (24.1) | (12.3) | (11.7) | (13.6) | (61.7) | (21.7) | |||||||||||||||||||||||||||||
| Margin from Medicare supplement | $ | 38.2 | $ | 45.7 | $ | 37.3 | $ | 42.8 | $ | 164.0 | $ | 36.2 | |||||||||||||||||||||||
| Margin/insurance policy income | 21 | % | 25 | % | 21 | % | 24 | % | 23 | % | 22 | % | |||||||||||||||||||||||
| Long-term care | |||||||||||||||||||||||||||||||||||
| Insurance policy income | $ | 65.7 | $ | 65.7 | $ | 65.8 | $ | 66.4 | $ | 263.6 | $ | 66.4 | |||||||||||||||||||||||
| Net investment income (5) | 34.1 | 34.0 | 34.0 | 33.9 | 136.0 | 33.0 | |||||||||||||||||||||||||||||
| Insurance policy benefits | (60.3) | (69.4) | (67.9) | (65.5) | (263.1) | (66.7) | |||||||||||||||||||||||||||||
| Amortization and non-deferred commissions | (3.4) | (2.6) | (2.2) | (2.1) | (10.3) | (1.3) | |||||||||||||||||||||||||||||
| Margin from long-term care | $ | 36.1 | $ | 27.7 | $ | 29.7 | $ | 32.7 | $ | 126.2 | $ | 31.4 | |||||||||||||||||||||||
| Margin/insurance policy income | 55 | % | 42 | % | 45 | % | 49 | % | 48 | % | 47 | % | |||||||||||||||||||||||
| Total health margin | $ | 124.7 | $ | 120.9 | $ | 117.9 | $ | 129.5 | $ | 493.0 | $ | 124.8 | |||||||||||||||||||||||
| Margin/insurance policy income | 30 | % | 29 | % | 28 | % | 31 | % | 30 | % | 31 | % | |||||||||||||||||||||||
Page 8
CNO FINANCIAL GROUP, INC.
Margin from Life Products
(Dollars in millions)
(Unaudited)
| 1Q | 2Q | 3Q | 4Q | YTD | 1Q | ||||||||||||||||||||||||||||||
| 2021 | 2021 | 2021 | 2021 | 2021 | 2022 | ||||||||||||||||||||||||||||||
| Life margin (4): | |||||||||||||||||||||||||||||||||||
| Interest sensitive life | |||||||||||||||||||||||||||||||||||
| Insurance policy income | $ | 40.8 | $ | 41.4 | $ | 42.3 | $ | 42.6 | $ | 167.1 | $ | 43.1 | |||||||||||||||||||||||
| Net investment income (5) (7) | 12.4 | 12.4 | 12.6 | 12.8 | 50.2 | 13.0 | |||||||||||||||||||||||||||||
| Insurance policy benefits | (22.7) | (20.0) | (17.4) | (22.5) | (82.6) | (21.2) | |||||||||||||||||||||||||||||
| Interest credited (7) | (10.5) | (10.8) | (10.9) | (11.5) | (43.7) | (11.5) | |||||||||||||||||||||||||||||
| Amortization and non-deferred commissions | (5.8) | (6.2) | (6.6) | (6.7) | (25.3) | (6.5) | |||||||||||||||||||||||||||||
| Margin from interest sensitive life | $ | 14.2 | $ | 16.8 | $ | 20.0 | $ | 14.7 | $ | 65.7 | $ | 16.9 | |||||||||||||||||||||||
| Average net insurance liabilities (11) | $ | 954.7 | $ | 970.0 | $ | 983.8 | $ | 996.9 | $ | 976.4 | $ | 1,011.9 | |||||||||||||||||||||||
| Interest margin | $ | 1.9 | $ | 1.6 | $ | 1.7 | $ | 1.3 | $ | 6.5 | $ | 1.5 | |||||||||||||||||||||||
| Interest margin/average net insurance liabilities (12) | 0.80 | % | 0.66 | % | 0.69 | % | 0.52 | % | 0.67 | % | 0.59 | % | |||||||||||||||||||||||
| Underwriting margin | $ | 12.3 | $ | 15.2 | $ | 18.3 | $ | 13.4 | $ | 59.2 | $ | 15.4 | |||||||||||||||||||||||
| Underwriting margin/insurance policy income | 30 | % | 37 | % | 43 | % | 31 | % | 35 | % | 36 | % | |||||||||||||||||||||||
| Traditional life | |||||||||||||||||||||||||||||||||||
| Insurance policy income | $ | 169.7 | $ | 169.4 | $ | 168.1 | $ | 168.0 | $ | 675.2 | $ | 170.2 | |||||||||||||||||||||||
| Net investment income (5) | 23.4 | 23.7 | 23.8 | 23.6 | 94.5 | 23.3 | |||||||||||||||||||||||||||||
| Insurance policy benefits | (140.9) | (129.5) | (123.9) | (136.6) | (530.9) | (142.4) | |||||||||||||||||||||||||||||
| Interest credited | (0.1) | (0.2) | (0.2) | (0.2) | (0.7) | (0.1) | |||||||||||||||||||||||||||||
| Amortization and non-deferred commissions | (15.9) | (15.5) | (14.9) | (17.3) | (63.6) | (18.8) | |||||||||||||||||||||||||||||
| Advertising expense | (23.3) | (25.0) | (19.7) | (21.8) | (89.8) | (29.3) | |||||||||||||||||||||||||||||
| Margin from traditional life | $ | 12.9 | $ | 22.9 | $ | 33.2 | $ | 15.7 | $ | 84.7 | $ | 2.9 | |||||||||||||||||||||||
| Margin/insurance policy income | 8 | % | 14 | % | 20 | % | 9 | % | 13 | % | 2 | % | |||||||||||||||||||||||
| Margin excluding advertising expense/insurance policy income | 21 | % | 28 | % | 31 | % | 22 | % | 26 | % | 19 | % | |||||||||||||||||||||||
| Total life margin | $ | 27.1 | $ | 39.7 | $ | 53.2 | $ | 30.4 | $ | 150.4 | $ | 19.8 | |||||||||||||||||||||||
Page 9
CNO FINANCIAL GROUP, INC.
Estimated Impacts of COVID-19 on Insurance Product Margins
(Dollars in millions)
(Unaudited)
| 1Q | 2Q | 3Q | 4Q | YTD | 1Q | ||||||||||||||||||||||||||||||
| 2021 | 2021 | 2021 | 2021 | 2021 | 2022 | ||||||||||||||||||||||||||||||
| Favorable (Unfavorable) | |||||||||||||||||||||||||||||||||||
| Insurance product: | |||||||||||||||||||||||||||||||||||
| Annuities | $ | 1 | $ | 2 | $ | 1 | $ | 1 | $ | 5 | $ | — | |||||||||||||||||||||||
| Supplemental health | 6 | 2 | 8 | 10 | 26 | 9 | |||||||||||||||||||||||||||||
| Medicare supplement | 9 | 11 | 3 | 9 | 32 | 7 | |||||||||||||||||||||||||||||
| Long-term care | 25 | 17 | 14 | 16 | 72 | 16 | |||||||||||||||||||||||||||||
| Total health products | 40 | 30 | 25 | 35 | 130 | 32 | |||||||||||||||||||||||||||||
| Interest sensitive life | (7) | (4) | (1) | (4) | (16) | (3) | |||||||||||||||||||||||||||||
| Traditional life | (12) | (7) | (2) | (16) | (37) | (13) | |||||||||||||||||||||||||||||
| Total life | (19) | (11) | (3) | (20) | (53) | (16) | |||||||||||||||||||||||||||||
| Total | $ | 22 | $ | 21 | $ | 23 | $ | 16 | $ | 82 | $ | 16 | |||||||||||||||||||||||
Page 10
CNO FINANCIAL GROUP, INC.
Collected Premiums From Annuity and Interest Sensitive Life Products
and Insurance Policy Income
(Dollars in millions)
(Unaudited)
| 1Q | 2Q | 3Q | 4Q | YTD | 1Q | ||||||||||||||||||||||||||||||
| 2021 | 2021 | 2021 | 2021 | 2021 | 2022 | ||||||||||||||||||||||||||||||
| Collected premiums from annuity and interest-sensitive life products: | |||||||||||||||||||||||||||||||||||
| Annuities | $ | 325.4 | $ | 344.3 | $ | 333.3 | $ | 397.4 | $ | 1,400.4 | $ | 368.6 | |||||||||||||||||||||||
| Interest-sensitive life | 54.5 | 54.6 | 54.4 | 55.9 | 219.4 | 56.6 | |||||||||||||||||||||||||||||
| Total collected premiums from annuity and interest-sensitive life products | $ | 379.9 | $ | 398.9 | $ | 387.7 | $ | 453.3 | $ | 1,619.8 | $ | 425.2 | |||||||||||||||||||||||
| Insurance policy income: | |||||||||||||||||||||||||||||||||||
| Annuity products | |||||||||||||||||||||||||||||||||||
| Fixed index annuities | $ | 3.0 | $ | 3.3 | $ | 3.3 | $ | 3.2 | $ | 12.8 | $ | 3.0 | |||||||||||||||||||||||
| Fixed interest annuities | 0.2 | 0.1 | 0.3 | 0.2 | 0.8 | 0.1 | |||||||||||||||||||||||||||||
| Other annuities | 2.2 | 0.9 | 2.2 | 0.7 | 6.0 | 1.9 | |||||||||||||||||||||||||||||
| Total annuity insurance policy income | 5.4 | 4.3 | 5.8 | 4.1 | 19.6 | 5.0 | |||||||||||||||||||||||||||||
| Health products | |||||||||||||||||||||||||||||||||||
| Supplemental health | 169.8 | 170.0 | 171.2 | 172.8 | 683.8 | 173.5 | |||||||||||||||||||||||||||||
| Medicare supplement | 181.0 | 179.7 | 177.4 | 176.0 | 714.1 | 166.8 | |||||||||||||||||||||||||||||
| Long-term care | 65.7 | 65.7 | 65.8 | 66.4 | 263.6 | 66.4 | |||||||||||||||||||||||||||||
| Total health insurance policy income | 416.5 | 415.4 | 414.4 | 415.2 | 1,661.5 | 406.7 | |||||||||||||||||||||||||||||
| Life products | |||||||||||||||||||||||||||||||||||
| Interest-sensitive life | 40.8 | 41.4 | 42.3 | 42.6 | 167.1 | 43.1 | |||||||||||||||||||||||||||||
| Traditional life | 169.7 | 169.4 | 168.1 | 168.0 | 675.2 | 170.2 | |||||||||||||||||||||||||||||
| Total life insurance policy income | 210.5 | 210.8 | 210.4 | 210.6 | 842.3 | 213.3 | |||||||||||||||||||||||||||||
| Total insurance policy income | $ | 632.4 | $ | 630.5 | $ | 630.6 | $ | 629.9 | $ | 2,523.4 | $ | 625.0 | |||||||||||||||||||||||
Page 11
CNO FINANCIAL GROUP, INC.
Health and Life
New Annualized Premiums ("NAP")
(Dollars in millions)
(Unaudited)
| 1Q | 2Q | 3Q | 4Q | YTD | 1Q | ||||||||||||||||||||||||||||||
| 2021 | 2021 | 2021 | 2021 | 2021 | 2022 | ||||||||||||||||||||||||||||||
| Consumer Division | |||||||||||||||||||||||||||||||||||
| Health products: | |||||||||||||||||||||||||||||||||||
| Supplemental health | $ | 14.4 | $ | 20.1 | $ | 15.8 | $ | 19.6 | $ | 69.9 | $ | 15.5 | |||||||||||||||||||||||
| Medicare supplement | 8.2 | 8.8 | 8.0 | 9.1 | 34.1 | 6.5 | |||||||||||||||||||||||||||||
| Long-term care | 6.4 | 7.0 | 8.8 | 10.5 | 32.7 | 6.8 | |||||||||||||||||||||||||||||
| Total Consumer Division health NAP | 29.0 | 35.9 | 32.6 | 39.2 | 136.7 | 28.8 | |||||||||||||||||||||||||||||
| Life products: | |||||||||||||||||||||||||||||||||||
| Interest sensitive life | 5.9 | 6.5 | 5.4 | 6.1 | 23.9 | 5.1 | |||||||||||||||||||||||||||||
| Traditional life | 45.9 | 43.9 | 38.2 | 31.2 | 159.2 | 48.2 | |||||||||||||||||||||||||||||
| Total Consumer Division life NAP | 51.8 | 50.4 | 43.6 | 37.3 | 183.1 | 53.3 | |||||||||||||||||||||||||||||
| Total Consumer Division health and life NAP | $ | 80.8 | $ | 86.3 | $ | 76.2 | $ | 76.5 | $ | 319.8 | $ | 82.1 | |||||||||||||||||||||||
| Worksite Division | |||||||||||||||||||||||||||||||||||
| Health products: | |||||||||||||||||||||||||||||||||||
| Supplemental health | $ | 6.7 | $ | 5.6 | $ | 6.6 | $ | 8.5 | $ | 27.4 | $ | 6.0 | |||||||||||||||||||||||
| Life products: | |||||||||||||||||||||||||||||||||||
| Interest sensitive life | 1.2 | 1.9 | 1.8 | 2.5 | 7.4 | 2.5 | |||||||||||||||||||||||||||||
| Total Worksite Division health and life NAP | $ | 7.9 | $ | 7.5 | $ | 8.4 | $ | 11.0 | $ | 34.8 | $ | 8.5 | |||||||||||||||||||||||
| Total NAP (both divisions) | |||||||||||||||||||||||||||||||||||
| Health products: | |||||||||||||||||||||||||||||||||||
| Supplemental health | $ | 21.1 | $ | 25.7 | $ | 22.4 | $ | 28.1 | $ | 97.3 | $ | 21.5 | |||||||||||||||||||||||
| Medicare supplement | 8.2 | 8.8 | 8.0 | 9.1 | 34.1 | 6.5 | |||||||||||||||||||||||||||||
| Long-term care | 6.4 | 7.0 | 8.8 | 10.5 | 32.7 | 6.8 | |||||||||||||||||||||||||||||
| Total health NAP | 35.7 | 41.5 | 39.2 | 47.7 | 164.1 | 34.8 | |||||||||||||||||||||||||||||
| Life products: | |||||||||||||||||||||||||||||||||||
| Interest sensitive life | 7.1 | 8.4 | 7.2 | 8.6 | 31.3 | 7.6 | |||||||||||||||||||||||||||||
| Traditional life | 45.9 | 43.9 | 38.2 | 31.2 | 159.2 | 48.2 | |||||||||||||||||||||||||||||
| Total life NAP | 53.0 | 52.3 | 45.4 | 39.8 | 190.5 | 55.8 | |||||||||||||||||||||||||||||
| Total NAP | $ | 88.7 | $ | 93.8 | $ | 84.6 | $ | 87.5 | $ | 354.6 | $ | 90.6 | |||||||||||||||||||||||
Page 12
CNO FINANCIAL GROUP, INC.
Computation of Weighted Average Shares Outstanding
(Shares in thousands)
| 1Q | 2Q | 3Q | 4Q | YTD | 1Q | ||||||||||||||||||||||||||||||
| 2021 | 2021 | 2021 | 2021 | 2021 | 2022 | ||||||||||||||||||||||||||||||
| Basic | |||||||||||||||||||||||||||||||||||
| Shares outstanding, beginning of period | 135,279.1 | 132,268.3 | 129,105.0 | 124,269.9 | 135,279.1 | 120,377.2 | |||||||||||||||||||||||||||||
| Weighted average shares issued during the period: | |||||||||||||||||||||||||||||||||||
| Shares repurchased | (1,471.5) | (1,436.5) | (2,706.6) | (2,382.9) | (8,054.5) | (2,098.0) | |||||||||||||||||||||||||||||
| Amounts related to employee benefit plans | 384.3 | 191.1 | 32.2 | 131.1 | 1,350.4 | 488.5 | |||||||||||||||||||||||||||||
| Shares withheld for the payment of the exercise price and taxes related to employee benefit plans | (52.2) | (7.0) | (1.3) | (1.5) | (174.6) | (145.5) | |||||||||||||||||||||||||||||
| Weighted average basic shares outstanding during the period | 134,139.7 | 131,015.9 | 126,429.3 | 122,016.6 | 128,400.4 | 118,622.2 | |||||||||||||||||||||||||||||
| Basic shares outstanding, end of period | 132,268.3 | 129,105.0 | 124,269.9 | 120,377.2 | 120,377.2 | 117,241.0 | |||||||||||||||||||||||||||||
| Diluted | |||||||||||||||||||||||||||||||||||
| Weighted average basic shares outstanding | 134,139.7 | 131,015.9 | 126,429.3 | 122,016.6 | 128,400.4 | 118,622.2 | |||||||||||||||||||||||||||||
| Common stock equivalent shares related to: | |||||||||||||||||||||||||||||||||||
| Employee benefit plans | 2,513.6 | 2,797.8 | 2,588.7 | 3,003.0 | 2,725.8 | 2,379.9 | |||||||||||||||||||||||||||||
| Weighted average diluted shares outstanding during the period | 136,653.3 | 133,813.7 | 129,018.0 | 125,019.6 | 131,126.2 | 121,002.1 | |||||||||||||||||||||||||||||
| Diluted shares outstanding, end of period | 134,624.5 | 131,549.3 | 126,917.6 | 123,330.7 | 123,330.7 | 119,502.6 | |||||||||||||||||||||||||||||
Page 13
CNO FINANCIAL GROUP, INC.
Annuities - Account Value Rollforwards
(Dollars in millions)
(Unaudited)
| 1Q | 2Q | 3Q | 4Q | YTD | 1Q | |||||||||||||||||||||||||||||||||
| 2021 | 2021 | 2021 | 2021 | 2021 | 2022 | |||||||||||||||||||||||||||||||||
| Fixed index annuities | ||||||||||||||||||||||||||||||||||||||
| Balance as of the beginning of the period | $ | 7,761.4 | $ | 7,943.2 | $ | 8,180.2 | $ | 8,403.0 | $ | 7,761.4 | $ | 8,681.0 | ||||||||||||||||||||||||||
| Gross deposits | 314.6 | 328.8 | 320.1 | 384.6 | 1,348.1 | 354.7 | ||||||||||||||||||||||||||||||||
| Withdrawals | (193.1) | (174.2) | (179.0) | (197.9) | (744.2) | (204.0) | ||||||||||||||||||||||||||||||||
| Returns reinvested | 60.3 | 82.4 | 81.7 | 91.3 | 315.7 | 70.2 | ||||||||||||||||||||||||||||||||
| Balance as of the end of the period | $ | 7,943.2 | $ | 8,180.2 | $ | 8,403.0 | $ | 8,681.0 | $ | 8,681.0 | $ | 8,901.9 | ||||||||||||||||||||||||||
| Fixed interest annuities | ||||||||||||||||||||||||||||||||||||||
| Balance as of the beginning of the period | $ | 1,998.9 | $ | 1,943.2 | $ | 1,891.8 | $ | 1,854.2 | $ | 1,998.9 | $ | 1,806.1 | ||||||||||||||||||||||||||
| Gross deposits | 9.3 | 14.4 | 10.2 | 11.6 | 45.5 | 11.6 | ||||||||||||||||||||||||||||||||
| Withdrawals | (78.2) | (78.2) | (60.6) | (72.0) | (289.0) | (77.6) | ||||||||||||||||||||||||||||||||
| Returns reinvested | 13.2 | 12.4 | 12.8 | 12.3 | 50.7 | 11.8 | ||||||||||||||||||||||||||||||||
| Balance as of the end of the period | $ | 1,943.2 | $ | 1,891.8 | $ | 1,854.2 | $ | 1,806.1 | $ | 1,806.1 | $ | 1,751.9 | ||||||||||||||||||||||||||
| Total annuities | ||||||||||||||||||||||||||||||||||||||
| Balance as of the beginning of the period | $ | 9,760.3 | $ | 9,886.4 | $ | 10,072.0 | $ | 10,257.2 | $ | 9,760.3 | $ | 10,487.1 | ||||||||||||||||||||||||||
| Gross deposits | 323.9 | 343.2 | 330.3 | 396.2 | 1,393.6 | 366.3 | ||||||||||||||||||||||||||||||||
| Withdrawals | (271.3) | (252.4) | (239.6) | (269.9) | (1,033.2) | (281.6) | ||||||||||||||||||||||||||||||||
| Returns reinvested | 73.5 | 94.8 | 94.5 | 103.6 | 366.4 | 82.0 | ||||||||||||||||||||||||||||||||
| Balance as of the end of the period | $ | 9,886.4 | $ | 10,072.0 | $ | 10,257.2 | $ | 10,487.1 | $ | 10,487.1 | $ | 10,653.8 | ||||||||||||||||||||||||||
Page 14
CNO FINANCIAL GROUP, INC.
Statutory Information - Consolidated Basis (13)
(Dollars in millions)
(Unaudited)
| 1Q | 2Q | 3Q | 4Q | YTD | 1Q | ||||||||||||||||||||||||||||||
| 2021 | 2021 | 2021 | 2021 | 2021 | 2022 (a) | ||||||||||||||||||||||||||||||
| Net gain from operations before interest expense and federal income taxes | $ | 53.6 | $ | 85.1 | $ | 96.1 | $ | 87.4 | $ | 322.2 | $ | 26.7 | |||||||||||||||||||||||
| Interest expense on surplus debentures held by parent company | 12.0 | 12.2 | 19.0 | 12.2 | 55.4 | 12.0 | |||||||||||||||||||||||||||||
| Net gain from operations before federal income taxes | 41.6 | 72.9 | 77.1 | 75.2 | 266.8 | 14.7 | |||||||||||||||||||||||||||||
| Federal income tax expense (benefit) | 1.8 | (2.2) | (9.0) | (12.5) | (21.9) | (15.8) | |||||||||||||||||||||||||||||
| Net gain from operations before net realized capital gains (losses) | 39.8 | 75.1 | 86.1 | 87.7 | 288.7 | 30.5 | |||||||||||||||||||||||||||||
| Net realized capital gains (losses) | (0.6) | (1.5) | (1.3) | (7.8) | (11.2) | — | |||||||||||||||||||||||||||||
| Net income | $ | 39.2 | $ | 73.6 | $ | 84.8 | $ | 79.9 | $ | 277.5 | $ | 30.5 | |||||||||||||||||||||||
| Capital and surplus | $ | 1,781.8 | $ | 1,782.8 | $ | 1,715.7 | $ | 1,799.6 | $ | 1,799.6 | $ | 1,738.0 | |||||||||||||||||||||||
| Asset valuation reserve (AVR) | 327.5 | 330.4 | 334.8 | 332.5 | 332.5 | 319.5 | |||||||||||||||||||||||||||||
| Capital, surplus and AVR | 2,109.3 | 2,113.2 | 2,050.5 | 2,132.1 | 2,132.1 | 2,057.5 | |||||||||||||||||||||||||||||
| Interest maintenance reserve (IMR) | 401.5 | 411.9 | 409.0 | 407.9 | 407.9 | 422.4 | |||||||||||||||||||||||||||||
| Total statutory capital, surplus, AVR & IMR | $ | 2,510.8 | $ | 2,525.1 | $ | 2,459.5 | $ | 2,540.0 | $ | 2,540.0 | $ | 2,479.9 | |||||||||||||||||||||||
| Risk-based capital ratio | 407 | % | 409 | % | 388 | % | 386 | % | 386 | % | 365 | % | |||||||||||||||||||||||
___________
(a) Such amounts are preliminary as the statutory basis financial statements of our insurance subsidiaries for 1Q22 will
be filed with the respective insurance regulators on or about May 13, 2022.
Page 15
CNO FINANCIAL GROUP, INC.
Investment Income Not Allocated to Product Lines (9)
(Dollars in millions)
(Unaudited)
| 1Q | 2Q | 3Q | 4Q | YTD | 1Q | |||||||||||||||||||||||||||||||||
| 2021 | 2021 | 2021 | 2021 | 2021 | 2022 | |||||||||||||||||||||||||||||||||
| Net investment income | $ | 338.2 | $ | 379.2 | $ | 308.2 | $ | 395.1 | $ | 1,420.7 | $ | 208.2 | ||||||||||||||||||||||||||
| Allocated to product lines: | ||||||||||||||||||||||||||||||||||||||
| Annuity | (115.7) | (114.9) | (115.5) | (116.3) | (462.4) | (115.1) | ||||||||||||||||||||||||||||||||
| Health | (71.5) | (71.6) | (72.2) | (72.4) | (287.7) | (71.8) | ||||||||||||||||||||||||||||||||
| Life | (35.8) | (36.1) | (36.4) | (36.4) | (144.7) | (36.3) | ||||||||||||||||||||||||||||||||
| Equity returns credited to policyholder account balances | (42.5) | (76.1) | (7.2) | (94.0) | (219.8) | 71.9 | ||||||||||||||||||||||||||||||||
| Amounts allocated to product lines and credited to policyholder account balances | (265.5) | (298.7) | (231.3) | (319.1) | (1,114.6) | (151.3) | ||||||||||||||||||||||||||||||||
| Amount related to variable interest entities and other non-operating items | (7.8) | (8.0) | (7.1) | (7.6) | (30.5) | (7.2) | ||||||||||||||||||||||||||||||||
| Interest expense on debt | (15.5) | (15.6) | (15.6) | (15.7) | (62.4) | (15.7) | ||||||||||||||||||||||||||||||||
| Interest expense on investment borrowings from the Federal Home Loan Bank ("FHLB") program | (2.7) | (2.5) | (2.3) | (2.3) | (9.8) | (2.4) | ||||||||||||||||||||||||||||||||
| Expenses related to FABN program (a) | — | — | — | (2.3) | (2.3) | (7.3) | ||||||||||||||||||||||||||||||||
| Less amounts credited to deferred compensation plans (offsetting investment income) | (3.7) | (6.6) | (1.0) | (5.3) | (16.6) | 4.2 | ||||||||||||||||||||||||||||||||
| Total adjustments | (29.7) | (32.7) | (26.0) | (33.2) | (121.6) | (28.4) | ||||||||||||||||||||||||||||||||
| Investment income not allocated to product lines | $ | 43.0 | $ | 47.8 | $ | 50.9 | $ | 42.8 | $ | 184.5 | $ | 28.5 | ||||||||||||||||||||||||||
___________
(a) Comprised of interest credited and amortization of deferred acquisition costs.
Page 16
CNO FINANCIAL GROUP, INC.
Investment Income Not Allocated to Product Lines (9)
(Dollars in millions)
(Unaudited)
| 1Q | 2Q | 3Q | 4Q | YTD | 1Q | |||||||||||||||||||||||||||||||||
| 2021 | 2021 | 2021 | 2021 | 2021 | 2022 | |||||||||||||||||||||||||||||||||
| Investment income not allocated: | ||||||||||||||||||||||||||||||||||||||
| Excluding variable components: | ||||||||||||||||||||||||||||||||||||||
| From general account assets | $ | 24.6 | $ | 24.9 | $ | 23.1 | $ | 22.4 | $ | 95.0 | $ | 25.4 | ||||||||||||||||||||||||||
| Other investment income | — | 0.1 | 0.1 | 0.1 | 0.3 | 0.1 | ||||||||||||||||||||||||||||||||
| Spread income: | ||||||||||||||||||||||||||||||||||||||
| FHLB program: | ||||||||||||||||||||||||||||||||||||||
| Investment income on matched assets | 10.3 | 10.4 | 10.3 | 10.6 | 41.6 | 11.7 | ||||||||||||||||||||||||||||||||
| Interest expense | (2.7) | (2.5) | (2.3) | (2.3) | (9.8) | (2.4) | ||||||||||||||||||||||||||||||||
| Net spread income on FHLB program | 7.6 | 7.9 | 8.0 | 8.3 | 31.8 | 9.3 | ||||||||||||||||||||||||||||||||
| FABN program: | ||||||||||||||||||||||||||||||||||||||
| Investment income on matched assets | — | — | — | 3.3 | 3.3 | 10.1 | ||||||||||||||||||||||||||||||||
| Expenses (b) | — | — | — | (2.3) | (2.3) | (7.3) | ||||||||||||||||||||||||||||||||
| Net spread income on FABN program | — | — | — | 1.0 | 1.0 | 2.8 | ||||||||||||||||||||||||||||||||
| Interest expense on corporate debt | (15.5) | (15.6) | (15.6) | (15.7) | (62.4) | (15.7) | ||||||||||||||||||||||||||||||||
| Total excluding variable components | 16.7 | 17.3 | 15.6 | 16.1 | 65.7 | 21.9 | ||||||||||||||||||||||||||||||||
| Variable components: | ||||||||||||||||||||||||||||||||||||||
| Net income from Corporate Owned Life Insurance ("COLI") supporting agent deferred compensation plan: | ||||||||||||||||||||||||||||||||||||||
| Change in value of COLI investments | (3.9) | 2.1 | (0.1) | (0.8) | (2.7) | (3.4) | ||||||||||||||||||||||||||||||||
| Increase in liability for agent deferred compensation plan | (1.6) | (1.5) | (1.6) | (1.6) | (6.3) | (1.5) | ||||||||||||||||||||||||||||||||
| Net COLI income (loss) | (5.5) | 0.6 | (1.7) | (2.4) | (9.0) | (4.9) | ||||||||||||||||||||||||||||||||
| Other variable components: | ||||||||||||||||||||||||||||||||||||||
| Alternative investment income: | ||||||||||||||||||||||||||||||||||||||
| Total | 34.1 | 29.0 | 32.3 | 22.2 | 117.6 | 11.3 | ||||||||||||||||||||||||||||||||
| Allocated to product lines | (7.9) | (7.8) | (7.6) | (7.4) | (30.7) | (7.4) | ||||||||||||||||||||||||||||||||
| Excess alternative investment income | 26.2 | 21.2 | 24.7 | 14.8 | 86.9 | 3.9 | ||||||||||||||||||||||||||||||||
| Prepayment and call income | 1.7 | 4.9 | 10.2 | 11.6 | 28.4 | 5.2 | ||||||||||||||||||||||||||||||||
| Trading account | 2.0 | 2.4 | 1.4 | 1.4 | 7.2 | 2.7 | ||||||||||||||||||||||||||||||||
| Hedge variance related to fixed index products | 1.1 | (0.1) | 0.2 | (0.1) | 1.1 | (1.0) | ||||||||||||||||||||||||||||||||
| Other (a) | 0.8 | 1.5 | 0.5 | 1.4 | 4.2 | 0.7 | ||||||||||||||||||||||||||||||||
| Total variable components | 26.3 | 30.5 | 35.3 | 26.7 | 118.8 | 6.6 | ||||||||||||||||||||||||||||||||
| Total investment income not allocated to product lines | $ | 43.0 | $ | 47.8 | $ | 50.9 | $ | 42.8 | $ | 184.5 | $ | 28.5 | ||||||||||||||||||||||||||
___________
(a) Includes impacts of changes in projected cash flows and other investment income.
(b) Comprised of interest credited and amortization of deferred acquisition costs.
Page 17
CNO FINANCIAL GROUP, INC.
Investment Income Allocated to Product Lines (5)
(Dollars in millions)
(Unaudited)
| 1Q | 2Q | 3Q | 4Q | YTD | 1Q | |||||||||||||||||||||||||||||||||
| 2021 | 2021 | 2021 | 2021 | 2021 | 2022 | |||||||||||||||||||||||||||||||||
Average net insurance liabilities (11) | ||||||||||||||||||||||||||||||||||||||
| Annuity: | ||||||||||||||||||||||||||||||||||||||
| Fixed index annuities | $ | 7,464.8 | $ | 7,643.4 | $ | 7,881.9 | $ | 8,096.7 | $ | 7,771.8 | $ | 8,268.4 | ||||||||||||||||||||||||||
| Fixed interest annuities | 1,951.6 | 1,899.5 | 1,856.3 | 1,813.3 | 1,880.1 | 1,761.9 | ||||||||||||||||||||||||||||||||
| Other annuities | 512.2 | 506.8 | 501.6 | 495.8 | 504.1 | 488.0 | ||||||||||||||||||||||||||||||||
| Total annuity average net insurance liabilities (11) | 9,928.6 | 10,049.7 | 10,239.8 | 10,405.8 | 10,156.0 | 10,518.3 | ||||||||||||||||||||||||||||||||
| Health: | ||||||||||||||||||||||||||||||||||||||
| Supplemental health | 3,073.9 | 3,117.7 | 3,157.8 | 3,193.2 | 3,135.6 | 3,229.8 | ||||||||||||||||||||||||||||||||
| Medicare supplement | 122.5 | 123.1 | 120.6 | 123.8 | 122.5 | 126.3 | ||||||||||||||||||||||||||||||||
| Long-term care | 2,492.1 | 2,498.3 | 2,503.1 | 2,511.4 | 2,501.2 | 2,515.8 | ||||||||||||||||||||||||||||||||
| Total health average net insurance liabilities (11) | 5,688.5 | 5,739.1 | 5,781.5 | 5,828.4 | 5,759.3 | 5,871.9 | ||||||||||||||||||||||||||||||||
| Life: | ||||||||||||||||||||||||||||||||||||||
| Interest sensitive | 954.7 | 970.0 | 983.8 | 996.9 | 976.4 | 1,011.9 | ||||||||||||||||||||||||||||||||
| Traditional | 1,956.5 | 1,975.4 | 1,998.4 | 2,011.0 | 1,985.3 | 2,025.6 | ||||||||||||||||||||||||||||||||
| Total life average net insurance liabilities (11) | 2,911.2 | 2,945.4 | 2,982.2 | 3,007.9 | 2,961.7 | 3,037.5 | ||||||||||||||||||||||||||||||||
| Total average net insurance liabilities (11) | $ | 18,528.3 | $ | 18,734.2 | $ | 19,003.5 | $ | 19,242.1 | $ | 18,877.0 | $ | 19,427.7 | ||||||||||||||||||||||||||
| Average yield on allocated investments | ||||||||||||||||||||||||||||||||||||||
| Annuity: | ||||||||||||||||||||||||||||||||||||||
| Fixed index annuities | 4.55 | % | 4.44 | % | 4.38 | % | 4.34 | % | 4.42 | % | 4.24 | % | ||||||||||||||||||||||||||
| Fixed interest annuities | 5.00 | % | 4.99 | % | 4.96 | % | 4.96 | % | 4.98 | % | 4.88 | % | ||||||||||||||||||||||||||
| Other annuities | 5.00 | % | 4.97 | % | 4.94 | % | 4.84 | % | 4.94 | % | 4.84 | % | ||||||||||||||||||||||||||
| Average yield on investments allocated to annuities | 4.66 | % | 4.57 | % | 4.51 | % | 4.47 | % | 4.55 | % | 4.38 | % | ||||||||||||||||||||||||||
| Health: | ||||||||||||||||||||||||||||||||||||||
| Supplemental health | 4.70 | % | 4.66 | % | 4.67 | % | 4.67 | % | 4.68 | % | 4.64 | % | ||||||||||||||||||||||||||
| Medicare supplement | 4.30 | % | 4.24 | % | 4.20 | % | 4.20 | % | 4.24 | % | 4.11 | % | ||||||||||||||||||||||||||
| Long-term care | 5.47 | % | 5.44 | % | 5.43 | % | 5.40 | % | 5.44 | % | 5.25 | % | ||||||||||||||||||||||||||
| Average yield on investments allocated to health products | 5.03 | % | 4.99 | % | 5.00 | % | 4.97 | % | 5.00 | % | 4.89 | % | ||||||||||||||||||||||||||
| Life: | ||||||||||||||||||||||||||||||||||||||
| Interest sensitive | 5.20 | % | 5.11 | % | 5.12 | % | 5.14 | % | 5.14 | % | 5.14 | % | ||||||||||||||||||||||||||
| Traditional | 4.78 | % | 4.80 | % | 4.76 | % | 4.69 | % | 4.76 | % | 4.60 | % | ||||||||||||||||||||||||||
| Average yield on investments allocated to life products | 4.92 | % | 4.90 | % | 4.88 | % | 4.84 | % | 4.89 | % | 4.78 | % | ||||||||||||||||||||||||||
| Total average yield | 4.81 | % | 4.75 | % | 4.72 | % | 4.68 | % | 4.74 | % | 4.60 | % | ||||||||||||||||||||||||||
| Allocated investment income | ||||||||||||||||||||||||||||||||||||||
| Annuity: | ||||||||||||||||||||||||||||||||||||||
| Fixed index annuities | $ | 84.9 | $ | 84.9 | $ | 86.3 | $ | 87.8 | $ | 343.9 | $ | 87.7 | ||||||||||||||||||||||||||
| Fixed interest annuities | 24.4 | 23.7 | 23.0 | 22.5 | 93.6 | 21.5 | ||||||||||||||||||||||||||||||||
| Other annuities | 6.4 | 6.3 | 6.2 | 6.0 | 24.9 | 5.9 | ||||||||||||||||||||||||||||||||
| Total investment income allocated to annuities | 115.7 | 114.9 | 115.5 | 116.3 | 462.4 | 115.1 | ||||||||||||||||||||||||||||||||
| Health: | ||||||||||||||||||||||||||||||||||||||
| Supplemental health | 36.1 | 36.3 | 36.9 | 37.3 | 146.6 | 37.5 | ||||||||||||||||||||||||||||||||
| Medicare supplement | 1.3 | 1.3 | 1.3 | 1.2 | 5.1 | 1.3 | ||||||||||||||||||||||||||||||||
| Long-term care | 34.1 | 34.0 | 34.0 | 33.9 | 136.0 | 33.0 | ||||||||||||||||||||||||||||||||
| Total investment income allocated to health products | 71.5 | 71.6 | 72.2 | 72.4 | 287.7 | 71.8 | ||||||||||||||||||||||||||||||||
| Life: | ||||||||||||||||||||||||||||||||||||||
| Interest sensitive | 12.4 | 12.4 | 12.6 | 12.8 | 50.2 | 13.0 | ||||||||||||||||||||||||||||||||
| Traditional | 23.4 | 23.7 | 23.8 | 23.6 | 94.5 | 23.3 | ||||||||||||||||||||||||||||||||
| Total investment income allocated to life products | 35.8 | 36.1 | 36.4 | 36.4 | 144.7 | 36.3 | ||||||||||||||||||||||||||||||||
| Total allocated investment income | $ | 223.0 | $ | 222.6 | $ | 224.1 | $ | 225.1 | $ | 894.8 | $ | 223.2 | ||||||||||||||||||||||||||
Page 18
CNO FINANCIAL GROUP, INC.
Investment Income Not Allocated to Product Lines (9)
(Dollars in millions)
(Unaudited)
| 1Q | 2Q | 3Q | 4Q | YTD | 1Q | |||||||||||||||||||||||||||||||||
| 2021 | 2021 | 2021 | 2021 | 2021 | 2022 | |||||||||||||||||||||||||||||||||
| General account assets investment income | $ | 282.7 | $ | 282.1 | $ | 289.5 | $ | 285.9 | $ | 1,140.2 | $ | 277.5 | ||||||||||||||||||||||||||
| Policyholder and other special purpose portfolio investment income | 55.5 | 97.1 | 18.7 | 109.2 | 280.5 | (69.3) | ||||||||||||||||||||||||||||||||
| Less equity returns credited to policyholders: | ||||||||||||||||||||||||||||||||||||||
| Annuity | (37.7) | (68.3) | (6.3) | (83.2) | (195.5) | 64.3 | ||||||||||||||||||||||||||||||||
| Life | (4.8) | (7.8) | (0.9) | (10.8) | (24.3) | 7.6 | ||||||||||||||||||||||||||||||||
| Less amount related to variable interest entities | (7.8) | (8.0) | (7.1) | (7.6) | (30.5) | (7.2) | ||||||||||||||||||||||||||||||||
| Less amounts credited to deferred compensation plans | (3.7) | (6.6) | (1.0) | (5.3) | (16.6) | 4.2 | ||||||||||||||||||||||||||||||||
| Other special purpose portfolio investment income | 1.5 | 6.4 | 3.4 | 2.3 | 13.6 | (0.4) | ||||||||||||||||||||||||||||||||
| Adjusted net investment income | 284.2 | 288.5 | 292.9 | 288.2 | 1,153.8 | 277.1 | ||||||||||||||||||||||||||||||||
| Less amounts allocated to product lines | ||||||||||||||||||||||||||||||||||||||
| Annuity | (115.7) | (114.9) | (115.5) | (116.3) | (462.4) | (115.1) | ||||||||||||||||||||||||||||||||
| Health | (71.5) | (71.6) | (72.2) | (72.4) | (287.7) | (71.8) | ||||||||||||||||||||||||||||||||
| Life | (35.8) | (36.1) | (36.4) | (36.4) | (144.7) | (36.3) | ||||||||||||||||||||||||||||||||
| Total investment income allocated to product lines | (223.0) | (222.6) | (224.1) | (225.1) | (894.8) | (223.2) | ||||||||||||||||||||||||||||||||
| Less interest expense on investment borrowings from FHLB program | (2.7) | (2.5) | (2.3) | (2.3) | (9.8) | (2.4) | ||||||||||||||||||||||||||||||||
| Less expenses related to FABN program | — | — | — | (2.3) | (2.3) | (7.3) | ||||||||||||||||||||||||||||||||
| Less interest expense on debt | (15.5) | (15.6) | (15.6) | (15.7) | (62.4) | (15.7) | ||||||||||||||||||||||||||||||||
| Investment income not allocated to product lines | $ | 43.0 | $ | 47.8 | $ | 50.9 | $ | 42.8 | $ | 184.5 | $ | 28.5 | ||||||||||||||||||||||||||
Other Investment Data
| 1Q | 2Q | 3Q | 4Q | 1Q | ||||||||||||||||||||||||||||
| 2021 | 2021 | 2021 | 2021 | 2022 | ||||||||||||||||||||||||||||
| Average invested assets and cash | $ | 23,418.7 | $ | 23,585.3 | $ | 23,936.9 | $ | 24,696.3 | $ | 25,791.7 | ||||||||||||||||||||||
| Net investment income from general account investments | 282.7 | 282.1 | 289.5 | 285.9 | 277.5 | |||||||||||||||||||||||||||
| New money rate (14) | 3.57 | % | 3.38 | % | 3.55 | % | 3.67 | % | 3.73 | % | ||||||||||||||||||||||
| Book yield | 4.76 | % | 4.71 | % | 4.63 | % | 4.59 | % | 4.53 | % | ||||||||||||||||||||||
| Earned yield | 5.03 | % | 4.97 | % | 5.03 | % | 4.83 | % | 4.50 | % | ||||||||||||||||||||||
| Pre-pay/call/make-whole income | $ | 1.7 | $ | 4.9 | $ | 10.2 | $ | 11.6 | $ | 5.2 | ||||||||||||||||||||||
| Alternative investment income | 34.1 | 29.0 | 32.3 | 22.2 | 11.3 | |||||||||||||||||||||||||||
| Impairments | 0.5 | — | — | 2.4 | — | |||||||||||||||||||||||||||
Page 19
CNO FINANCIAL GROUP, INC.
4Q21 Significant Items
(Dollars in millions, except per share amounts)
(Unaudited)
The table below summarizes the financial impact of significant items on our 4Q21 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results.
| Three months ended | ||||||||||||||||||||
| December 31, 2021 | ||||||||||||||||||||
| Actual results | Significant items | Excluding significant items | ||||||||||||||||||
| Insurance product margin (4) | ||||||||||||||||||||
| Annuity margin | $ | 93.9 | $ | (26.9) | (a) | $ | 67.0 | |||||||||||||
| Health margin | 129.5 | — | 129.5 | |||||||||||||||||
| Life margin | 30.4 | 1.0 | (a) | 31.4 | ||||||||||||||||
| Total insurance product margin | 253.8 | (25.9) | 227.9 | |||||||||||||||||
| Allocated expenses | (143.3) | — | (143.3) | |||||||||||||||||
| Income from insurance products (5) | 110.5 | (25.9) | 84.6 | |||||||||||||||||
| Fee income | 2.9 | — | 2.9 | |||||||||||||||||
| Investment income not allocated to product lines (9) | 42.8 | — | 42.8 | |||||||||||||||||
| Expenses not allocated to product lines | (17.4) | — | (17.4) | |||||||||||||||||
| Operating earnings before taxes | 138.8 | (25.9) | 112.9 | |||||||||||||||||
| Income tax (expense) benefit on operating income | (30.3) | 5.7 | (24.6) | |||||||||||||||||
| Net operating income (10) | $ | 108.5 | $ | (20.2) | $ | 88.3 | ||||||||||||||
| Net operating income per diluted share | $ | 0.87 | $ | (0.16) | $ | 0.71 | ||||||||||||||
___________
(a)Adjustments arising from our comprehensive annual actuarial review of assumptions.
CNO FINANCIAL GROUP, INC.
3Q21 Significant Items
(Dollars in millions, except per share amounts)
(Unaudited)
The table below summarizes the financial impact of significant items on our 3Q21 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results.
| Three months ended | ||||||||||||||||||||
| September 30, 2021 | ||||||||||||||||||||
| Actual results | Significant items | Excluding significant items | ||||||||||||||||||
| Insurance product margin (4) | ||||||||||||||||||||
| Annuity margin | $ | 52.5 | $ | — | $ | 52.5 | ||||||||||||||
| Health margin | 117.9 | — | 117.9 | |||||||||||||||||
| Life margin | 53.2 | — | 53.2 | |||||||||||||||||
| Total insurance product margin | 223.6 | — | 223.6 | |||||||||||||||||
| Allocated expenses | (140.5) | — | (140.5) | |||||||||||||||||
| Income from insurance products (5) | 83.1 | — | 83.1 | |||||||||||||||||
| Fee income | 2.6 | — | 2.6 | |||||||||||||||||
| Investment income not allocated to product lines (9) | 50.9 | — | 50.9 | |||||||||||||||||
| Expenses not allocated to product lines | (17.3) | 3.0 | (a) | (14.3) | ||||||||||||||||
| Operating earnings before taxes | 119.3 | 3.0 | 122.3 | |||||||||||||||||
| Income tax (expense) benefit on operating income | (26.5) | (0.7) | (27.2) | |||||||||||||||||
| Net operating income (10) | $ | 92.8 | $ | 2.3 | $ | 95.1 | ||||||||||||||
| Net operating income per diluted share | $ | 0.72 | $ | 0.02 | $ | 0.74 | ||||||||||||||
___________
(a)Comprised of $3.0 million from legal and regulatory matters.
Page 20
CNO FINANCIAL GROUP, INC.
2Q21 Significant Items
(Dollars in millions, except per share amounts)
(Unaudited)
The table below summarizes the financial impact of significant items on our 2Q21 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results.
| Three months ended | ||||||||||||||||||||
| June 30, 2021 | ||||||||||||||||||||
| Actual results | Significant items | Excluding significant items | ||||||||||||||||||
| Insurance product margin (4) | ||||||||||||||||||||
| Annuity margin | $ | 66.0 | $ | — | $ | 66.0 | ||||||||||||||
| Health margin | 120.9 | — | 120.9 | |||||||||||||||||
| Life margin | 39.7 | — | 39.7 | |||||||||||||||||
| Total insurance product margin | 226.6 | — | 226.6 | |||||||||||||||||
| Allocated expenses | (141.6) | — | (141.6) | |||||||||||||||||
| Income from insurance products (5) | 85.0 | — | 85.0 | |||||||||||||||||
| Fee income | 6.6 | — | 6.6 | |||||||||||||||||
| Investment income not allocated to product lines (9) | 47.8 | — | 47.8 | |||||||||||||||||
| Expenses not allocated to product lines | (23.8) | 4.5 | (a) | (19.3) | ||||||||||||||||
| Operating earnings before taxes | 115.6 | 4.5 | 120.1 | |||||||||||||||||
| Income tax (expense) benefit on operating income | (26.5) | (1.0) | (27.5) | |||||||||||||||||
| Net operating income (10) | $ | 89.1 | $ | 3.5 | $ | 92.6 | ||||||||||||||
| Net operating income per diluted share | $ | 0.66 | $ | 0.03 | $ | 0.69 | ||||||||||||||
___________
(a)Comprised of $4.5 million from legal and regulatory matters.
Page 21
CNO FINANCIAL GROUP, INC.
1Q21 Significant Items
(Dollars in millions, except per share amounts)
(Unaudited)
The table below summarizes the financial impact of significant items on our 1Q21 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results.
| Three months ended | ||||||||||||||||||||
| March 31, 2021 | ||||||||||||||||||||
| Actual results | Significant items | Excluding significant items | ||||||||||||||||||
| Insurance product margin (4) | ||||||||||||||||||||
| Annuity margin | $ | 57.9 | $ | — | $ | 57.9 | ||||||||||||||
| Health margin | 124.7 | — | 124.7 | |||||||||||||||||
| Life margin | 27.1 | — | 27.1 | |||||||||||||||||
| Total insurance product margin | 209.7 | — | 209.7 | |||||||||||||||||
| Allocated expenses | (141.1) | — | (141.1) | |||||||||||||||||
| Income from insurance products (5) | 68.6 | — | 68.6 | |||||||||||||||||
| Fee income | 7.3 | — | 7.3 | |||||||||||||||||
| Investment income not allocated to product lines (9) | 43.0 | — | 43.0 | |||||||||||||||||
| Expenses not allocated to product lines | (22.0) | 7.8 | (a) | (14.2) | ||||||||||||||||
| Operating earnings before taxes | 96.9 | 7.8 | 104.7 | |||||||||||||||||
| Income tax (expense) benefit on operating income | (21.7) | (1.7) | (23.4) | |||||||||||||||||
| Net operating income (10) | $ | 75.2 | $ | 6.1 | $ | 81.3 | ||||||||||||||
| Net operating income per diluted share | $ | 0.55 | $ | 0.04 | $ | 0.59 | ||||||||||||||
___________
(a)Comprised of: (i) $5.3 million from legal and regulatory matters; and (ii) $2.5 million of transaction expenses related to the previously announced acquisition of DirectPath, LLC. The legal and regulatory matters primarily consist of an increase to our liability for claims and interest pursuant to the Global Resolution Agreement, as we have now processed and verified most of the claims provided by the third party auditor allowing us to more accurately estimate the ultimate liability.
Page 22
CNO FINANCIAL GROUP, INC.
4Q20 Significant Items
(Dollars in millions, except per share amounts)
(Unaudited)
The table below summarizes the financial impact of significant items on our 4Q20 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results.
| Three months ended | ||||||||||||||||||||
| December 31, 2020 | ||||||||||||||||||||
| Actual results | Significant items | Excluding significant items | ||||||||||||||||||
| Insurance product margin (4) | ||||||||||||||||||||
| Annuity margin | $ | 68.1 | $ | (16.1) | (a) | $ | 52.0 | |||||||||||||
| Health margin | 125.2 | — | 125.2 | |||||||||||||||||
| Life margin | 37.3 | 4.3 | (a) | 41.6 | ||||||||||||||||
| Total insurance product margin | 230.6 | (11.8) | 218.8 | |||||||||||||||||
| Allocated expenses | (162.7) | — | (162.7) | |||||||||||||||||
| Income from insurance products (5) | 67.9 | (11.8) | 56.1 | |||||||||||||||||
| Fee income | 2.9 | — | 2.9 | |||||||||||||||||
| Investment income not allocated to product lines (9) | 57.8 | — | 57.8 | |||||||||||||||||
| Expenses not allocated to product lines | (17.8) | 3.7 | (b) | (14.1) | ||||||||||||||||
| Operating earnings before taxes | 110.8 | (8.1) | 102.7 | |||||||||||||||||
| Income tax (expense) benefit on operating income | (24.8) | 1.7 | (23.1) | |||||||||||||||||
| Net operating income (10) | $ | 86.0 | $ | (6.4) | $ | 79.6 | ||||||||||||||
| Net operating income per diluted share | $ | 0.61 | $ | (0.04) | $ | 0.57 | ||||||||||||||
___________
(a)Adjustments arising from our comprehensive annual actuarial review of assumptions.
(b)Unfavorable impact related to asset impairments.
Page 23
CNO FINANCIAL GROUP, INC.
2Q20 Significant Items
(Dollars in millions, except per share amounts)
(Unaudited)
The table below summarizes the financial impact of significant items on our 2Q20 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results.
| Three months ended | ||||||||||||||||||||
| June 30, 2020 | ||||||||||||||||||||
| Actual results | Significant items | Excluding significant items | ||||||||||||||||||
| Insurance product margin (4) | ||||||||||||||||||||
| Annuity margin | $ | 123.8 | $ | 40.0 | (a) | $ | 72.3 | |||||||||||||
| (91.5) | (a) | |||||||||||||||||||
| Health margin | 95.5 | — | 95.5 | |||||||||||||||||
| Life margin | 36.1 | 5.6 | (a) | 41.7 | ||||||||||||||||
| Total insurance product margin | 255.4 | (45.9) | 209.5 | |||||||||||||||||
| Allocated expenses | (128.1) | — | (128.1) | |||||||||||||||||
| Income from insurance products (5) | 127.3 | (45.9) | 81.4 | |||||||||||||||||
| Fee income | 5.2 | — | 5.2 | |||||||||||||||||
| Investment income not allocated to product lines (9) | 8.2 | — | 8.2 | |||||||||||||||||
| Expenses not allocated to product lines | (38.5) | 23.5 | (b) | (15.0) | ||||||||||||||||
| Operating earnings before taxes | 102.2 | (22.4) | 79.8 | |||||||||||||||||
| Income tax (expense) benefit on operating income | (22.8) | 4.7 | (18.1) | |||||||||||||||||
| Net operating income (10) | $ | 79.4 | $ | (17.7) | $ | 61.7 | ||||||||||||||
| Net operating income per diluted share | $ | 0.55 | $ | (0.12) | $ | 0.43 | ||||||||||||||
___________
(a)Given our expectation that interest rates will remain low for the long-term, we performed an actuarial unlocking exercise in the second quarter of 2020 to reflect our assumption that average new money rates will remain flat at 4 percent forever. This change and the related impacts to persistency assumptions had a $45.6 million unfavorable impact on pre-tax earnings. As part of the actuarial unlocking exercise, we also changed our assumptions related to the future option costs we incur in providing benefits on fixed index annuities which had a favorable impact on pre-tax earnings of $91.5 million. The impact of these changes in assumptions is summarized below (dollars in millions):
| Line of business | |||||||||||||||||||||||
| Fixed index annuities | Fixed interest annuities | Interest- sensitive life | Total | ||||||||||||||||||||
| Favorable (unfavorable) | |||||||||||||||||||||||
| Impacts of an average new money rate assumption of 4 percent | |||||||||||||||||||||||
| Insurance policy benefits | $ | (5.0) | $ | — | $ | (7.4) | $ | (12.4) | |||||||||||||||
| Amortization | (25.6) | (9.4) | 1.8 | (33.2) | |||||||||||||||||||
| Subtotal | (30.6) | (9.4) | (5.6) | (45.6) | |||||||||||||||||||
| Impacts of changes in future option costs | |||||||||||||||||||||||
| Insurance policy benefits | 104.8 | — | — | 104.8 | |||||||||||||||||||
| Amortization | (13.3) | — | — | (13.3) | |||||||||||||||||||
| Subtotal | 91.5 | — | — | 91.5 | |||||||||||||||||||
| Impact on pre-tax income | $ | 60.9 | $ | (9.4) | $ | (5.6) | $ | 45.9 | |||||||||||||||
This actuarial unlocking exercise did not replace our comprehensive annual review of all assumptions for our insurance products, which we completed in the fourth quarter of 2020.
(b)We increased our liability for claims and interest pursuant to the previously disclosed Global Resolution Agreement entered into in November 2018. Pursuant to this agreement, a third-party auditor is acting on behalf of 41 states and the District of Columbia for the purpose of identifying deceased insureds and contract holders where benefits are payable pursuant to unclaimed property laws. The third-party auditor has provided information that we have processed and verified allowing us to more accurately estimate the ultimate liability pursuant to this agreement.
Page 24
Notes
(1)Excludes accumulated other comprehensive income. 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.
(2)Shareholders' equity divided by common shares outstanding.
(3)Book value per diluted share reflects the potential dilution that could occur if outstanding stock options were exercised and restricted stock and performance units were vested. 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.
(4)Insurance margin is management’s measure of profitability of its annuity, health and life product lines’ performance and consists of premiums plus allocated investment income less insurance policy benefits, interest credited, commissions, advertising expense and amortization of acquisition costs. Income from insurance products is the sum of the insurance margins of the annuity, health and life product lines, less expenses allocated to the insurance lines. It excludes the income from our fee income business, net expenses not allocated to product lines (primarily holding company expenses) and income taxes. Management believes this information helps provide a better understanding of the business and a more meaningful analysis of results of our insurance product lines. Income from insurance products, a non-GAAP measure, is a component of net operating income, which is reconciled to net income on page 5 of this Quarterly Financial Supplement.
(5)Investment income is allocated to the product lines using the book yield of investments backing the block of business, which is applied to the average net insurance liabilities for the block in each period. See note (11) for definition of net insurance liabilities.
(6)Excludes the change in market values of the underlying options supporting the fixed index annuity products and corresponding amount credited to policyholder account liabilities. Such amounts were $37.7 million, $68.3 million, $6.3 million, $83.2 million and $(64.3) million in 1Q21, 2Q21, 3Q21, 4Q21 and 1Q22, respectively.
(7)Excludes the change in market values of the underlying options supporting the fixed index life products and corresponding amount credited to policyholder account liabilities. Such amounts were $4.8 million, $7.8 million, $.9 million, $10.8 million and $(7.6) million in 1Q21, 2Q21, 3Q21, 4Q21 and 1Q22, respectively.
(8)Income from insurance products is the sum of the insurance margins of the annuity, health and life product lines, less expenses allocated to the insurance lines. It excludes the income from our fee income business, investment income not allocated to product lines, net expenses not allocated to product lines (primarily holding company expenses) and income taxes. Management believes this information helps provide a better understanding of the business and a more meaningful analysis of results of our insurance product lines. Income from insurance products, a non-GAAP measure, is a component of net operating income, which is reconciled to net income on page 5 of this Quarterly Financial Supplement.
(9)Investment income not allocated to product lines is defined as net investment income less: (i) equity returns credited to policyholder account balances; (ii) the investment income allocated to our product lines; (iii) interest expense on notes payable and investment borrowings; and (iv) certain expenses related to benefit plans that are offset by special-purpose investment income. Investment income not allocated to product lines includes investment income on investments in excess of average net insurance liabilities, investments held by our holding companies, the spread we earn from our Federal Home Loan Bank investment borrowing and FABN programs and variable components of investment income (including call and prepayment income, adjustments to returns on structured securities due to cash flow changes, income from company-owned life insurance ("COLI") and variations in income from alternative investments), net of interest expense.
(10)Management believes that an analysis of Net income applicable to common stock before: (i) net realized investment gains or losses from sales, impairments and change in allowance for credit losses, net of related amortization and taxes; (ii) net change in market value of investments recognized in earnings, net of taxes; (iii) 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; (iv) fair value changes related to the agent deferred compensation plan, net of taxes; (v) loss related to reinsurance transaction, net of taxes; (vi) loss on extinguishment of debt, net of taxes; (vii) changes in the valuation allowance for deferred tax assets and other tax items; and (viii) 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.
(11)Net insurance liabilities are equal to total insurance liabilities less: (i) amounts related to reinsured business; (ii) deferred acquisition costs; (iii) present value of future profits; and (iv) the value of unexpired options credited to insurance liabilities.
(12)Margin/average net insurance liabilities for quarterly periods is calculated by annualizing the quarters' margin divided by the average net insurance liabilities.
(13)Based on statutory accounting practices prescribed or permitted by regulatory authorities for CNO Financial's insurance subsidiaries after appropriate elimination of intercompany accounts among such subsidiaries. Such accounting practices differ from GAAP.
(14)The new money rate is for the investments purchased during the period to support our insurance products and capital. It excludes the new money rate on investments purchased with investment borrowings under our Federal Home Loan Bank program and investments purchased by the variable interest entities.
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CNO Financial Group 1 First Quarter 2022 Financial and operating results for the period ended March 31, 2022 May 2, 2022 Unless otherwise specified, comparisons in this presentation are between 1Q21 and 1Q22. Exhibit 99.3
CNO Financial Group 2 Important Legal Information 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 results of operations and capital plans. We caution investors that these forward-looking statements are not guarantees of future performance, and actual results may differ materially. Investors should consider the important risks and uncertainties that may cause actual results to differ, including those included in our press release issued on May 2, 2022, our Quarterly Reports on Form 10-Q, our Annual Report on Form 10-K and other filings we make with the Securities and Exchange Commission. We assume no obligation to update this presentation, which speaks as of today’s date. Forward-Looking Statements This presentation contains financial measures that differ from the comparable measures under Generally Accepted Accounting Principles (GAAP). Reconciliations between those non-GAAP measures and the comparable GAAP measures are included in the Appendix, or on the page such measure is presented. While management believes the measures are useful to enhance understanding and comparability of our financial results, these non-GAAP measures should not be considered substitutes for the most directly comparable GAAP measures. Additional information concerning non-GAAP measures 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, CNOinc.com. Non-GAAP Measures
CNO Financial Group 3
CNO Financial Group 4 Solid sales metrics; stable underlying earnings; capital efficient Quarter in Review Strong Operational Performance Significant capital return; shares outstanding down 11% At targeted overall capital level Advancing strategic initiatives in Consumer and Worksite divisions 1 A non-GAAP measure. See the Appendix for a reconciliation to the corresponding GAAP measure. Building on Track Record of Execution Robust sales growth; continued improvement in agent productivity New agent recruiting momentum COVID benefits moderating; alternatives returns normalizing Solid underlying margins and earnings
CNO Financial Group 5 2022 1Q 2Q 3Q 4Q FY 1Q Y/Y New Annualized Premiums 1 Life $53.0 $52.3 $45.4 $39.8 $190.5 $55.8 5.3% Health 35.7 41.5 39.2 47.7 164.1 34.8 -2.5% Total Life and Health $88.7 $93.8 $84.6 $87.5 $354.6 $90.6 2.1% Collected Premiums Life Life - single premium WL $17.5 $12.6 $10.7 $11.9 $52.7 $10.4 -40.6% Life - all other 209.0 210.8 211.5 211.8 843.1 216.3 3.5% Total Life 226.5 223.4 222.2 223.7 895.8 226.7 0.1% Health 424.7 410.6 407.3 416.9 1,659.5 408.9 -3.7% Total Life and Health $651.2 $634.0 $629.5 $640.6 $2,555.3 $635.6 -2.4% Annuity Collected Premiums $325.4 $344.3 $333.3 $397.4 $1,400.4 $368.6 13.3% Client Assets in BD and Advisory 2 $2,444.6 $2,636.0 $2,693.1 $2,898.5 $2,898.5 $2,835.1 16.0% Fee Revenue 3 $32.3 $31.1 $28.0 $56.2 $147.6 $40.3 24.8% % Change2021 Four of five metrics up year-over-year Growth Scorecard E xp a n d to th e R ig h t D ri ve G ro w th (dollars in millions) 1 Measured as 100% of new life and health annualized premiums, except for single premium whole life deposits, which are measured at 10% of annualized premium. 2 Client assets include cash and securities in brokerage, broker/dealer customer account assets custodied directly at fund companies and insurance carriers, and assets under management in advisory accounts. Prior periods have been restated to conform with current presentation. 3 Represents fee revenue from the sales of third-party insurance products; services provided by WBD; fee revenue earned by DirectPath; fees generated by our broker- dealer and registered investment advisor.
CNO Financial Group 6 Solid execution; continued strong D2C momentum Consumer Division Update First Quarter HighlightsKey Initiatives Expand reach Maintain growth momentum Optimize distribution Total Life sales up 3%; D2C Life sales up 16% Annuity collected premiums up 13% Supplemental Health NAP up 8%; Long-Term Care up 6% Continued third-party sales momentum Agent productivity strength; new agent recruiting momentum Registered agent1 count up 3% Enhanced distribution through third parties Steady growth in client assets in brokerage and advisory 1 Registered agents are dually licensed as insurance agents and financial representatives who can buy and sell securities for clients, and/or investment advisors who can provide ongoing investment advice for clients.
CNO Financial Group 7 Sales gaining momentum; strong agent productivity Worksite Division Update First Quarter Highlights Life and Health insurance sales up 8% Stable employer base and premium collection Continued strong fee revenue growth Continued DirectPath / WBD synergies Launch of hybrid enrollment technology platform Key Initiatives Expand reach Productivity gains across all cohorts Stable veteran agent retention Agent referral program driving recruiting momentum Restore growth Optimize distribution
CNO Financial Group 8 Agent pilots, technology- driven customer experience enhancements Hybrid distribution Worksite B2B marketing, lead generation Share repurchases: $100 million in 1Q22 Dividends: $16 million in 1Q22 Highly selective M&A CNO Ventures; strategic minority investments largely in InsurTech LTC reinsurance (2018), Web Benefits Design (2019), DirectPath (2021) Opportunistic transactions Return capital to shareholders Organic investments to sustain and grow the core businesses Disciplined and opportunistic approach to maximize shareholder value Excess Capital Allocation Strategy
CNO Financial Group 9 Financial Highlights Solid underlying earnings Earnings ResultsFirst Quarter 2022 Net operating income1 $75.2 $51.1 Net operating income excluding significant items1 $81.3 $51.1 Net income $147.4 $112.3 Weighted average shares outstanding (in millions) 136.7 121.0 (dollars in millions, except where noted) 1Q22 Operating EPS1 excl. significant items of $0.42 vs. $0.59 in 1Q21 1Q22 Pre-tax operating income excl. significant items of $68 million vs. $105 million in 1Q21, reflecting: Moderating variable investment income: down $15 million YoY Unfavorable market impacts on annuities: down $10 million YoY Reduced net favorable COVID impacts: down $6 million YoY Higher non-deferrable advertising spend: up $6 million YoY Fee income up 36% Effective tax rate up 240 bps 1Q22 total expenses, excl. significant items, up 3% YoY $100 million share repurchases Weighted average share count down 11% Operating ROE1, as adjusted, of 11.2%; 10.7% excl. significant items 1 A non-GAAP measure. See the Appendix for a reconciliation to the corresponding GAAP measure. 2 Excluding significant items. $0.55 $0.42 $1.08 $0.93 1Q21 1Q22 $0.42 $2.36 $2.72 $0.59 Net operating earnings per share1 Net income per share Excluding significant items
CNO Financial Group 10 1Q 2022 Highlights1 Insurance Product Margin (dollars in millions) Continued net COVID benefit; stable underlying margins Insurance Product Margin Excluding Significant Items1 Total margin down $20 million, or 10% $6 million decline in net favorable COVID impact $10 million unfavorable impact to fixed indexed annuities from market impacts $6 million increase in non-deferred life advertising expense Annuity margin down $13 million, or 23% $1 million decline in favorable COVID impacts Health margin flat $8 million decline in favorable COVID impacts Life margin down $7 million, or 27% $3 million improvement in unfavorable COVID impact 1 Excludes $26.9 million favorable annuity unlocking/$1.0 million unfavorable life unlocking in 4Q21. See the Appendix for a reconciliation to the corresponding GAAP measure. $57.9 $66.0 $52.5 $67.0 $44.6 $27.1 $39.7 $53.2 $31.4 $19.8 $124.7 $120.9 $117.9 $129.5 $124.8 1Q21 2Q21 3Q21 4Q21 1Q22 Annuity Health Life Total Margin $209.7 $226.6 $223.6 $227.9 $189.2 2.33% 2.63% 2.05% 2.58% 1.70% Margin / average net insurance liabilities Margin / insurance policy income 30% 29% 28% 31% 31% ISL: Interest margin / average net insurance liabilities 0.80% 0.66% 0.69% 0.52% 0.59% ISL: Underwriting margin / insurance policy income 30% 37% 43% 34% 36% Trad: Margin / insurance policy income 8% 14% 20% 9% 2% Trad: Margin ex. Adv. Exp. / insurance policy income 21% 28% 31% 22% 19%
CNO Financial Group 11 $- $50.0 $100.0 $150.0 $200.0 1Q 2021 1Q 2022 Investment Income Not Allocated to Product Lines $- $100.0 $200.0 $300.0 $400.0 1Q 2021 1Q 2022 Total Net Investment Income1 Annuity Health Life Not Allocated $- $100.0 $200.0 $300.0 $400.0 1Q 2021 1Q 2022 Investment Income Allocated to Product Lines Annuity Health Life Investment Results Average yield on allocated investments of 4.60% vs. 4.68% in 4Q21 and 4.81% in 1Q21 New money rate of 3.73%, up from 3.67% in 4Q21 Reflects up in quality approach 1 Reflects sum of allocated and non-allocated investment income. Refer to pages 16-19 of the financial supplement for more information on the components of net investment income. $223.0 $223.2 $251.7$266.0 $28.5 $43.0 Average invested assets up 10% YoY Earned yield of 4.50% vs. 4.83% in 4Q21. “BBB” allocation reduced by 250 bps in the last 12 months. “A” allocation increased by 310 bps in the last 12 months. Moderated Private Equity returns (dollars in millions) Stable Core NII: moderating alternative returns; up-in-quality positioning
CNO Financial Group 12 High quality, stable core returns with variable upside Portfolio Composition $27 billion of Invested Assets Highlights (Fair Value as of 3/31/2022) General Approach Positioned for stable performance across credit cycles Focus on quality - margin against adverse development Calibrated, lower than average allocation to most higher risk categories – specific boundaries as the amount of high-risk assets we will own Low impairments through multiple cycles Embedded asset liability management High degree of liquidity 66% of portfolio in corporate and government bonds Reflects up-in-quality positioning over past 18 months Strong credit risk profile 95% rated NAIC 1 or 2 Portfolio average rating A Significant credit enhancement in structured products Diversified commercial and residential mortgages with favorable performance metrics and strong operating characteristics. No commercial mortgage loan delinquencies. Alternative investments emphasizing current cash flows and comparatively predictable results IG Corporates, 49.6% HY Corporates, 3.6% EM, 2.1% Municipals, 10.3% ABS, 4.5% Non-Agency RMBS, 7.5% CMBS, 9.9% CML, 4.7% CDOs, 2.7% CLO Equity, 0.4% Alternatives, 2.5% Policy Loans, 0.4% Other, 1.8%
CNO Financial Group 13 1Q free cash flow reflects impact from market volatility, FABN issuance Cash Flow Profile 1 A non-GAAP measure. See the Appendix for a reconciliation to the corresponding GAAP measure. 2 Cash flows exclude acquisitions, dividend payments, stock repurchases, and financing transactions. (dollars in millions) 1Q21 1Q22 1Q21 1Q22 Net Operating Income1 75.2$ 51.1$ 353.2$ 341.5$ Holding Company Cash Flows: Dividends from Subsidiaries 83.1$ 69.6$ 335.1$ 335.5$ Management Fees 31.7 33.2 113.6 119.3 Surplus Debenture Interest 12.0 12.0 57.2 55.4 Earnings on Corporate Investments 2.1 2.1 19.6 7.7 Other 12.0 (14.0) 69.4 10.6 Holding Company Sources of Cash2 140.9 102.9 594.9 528.5 Holding Company Expenses and Other (21.5) (27.4) (92.8) (79.0) Tax Payments (16.1) (13.6) (37.9) (50.5) Interest Payments (2.1) (2.1) (55.1) (60.8) Excess Cash Flow to Holding Company2 101.2 59.8 409.1 338.2 Net Proceeds from New Debt - - 146.4 - Share Repurchases (97.8) (100.0) (277.8) (404.6) Dividend Payments to Stockholders (16.3) (16.1) (67.1) (65.4) Acquisition (51.1) - (51.1) - Net Change in Holding Company Cash and Investments (64.0) (56.3) 159.5 (131.8) Non-Cash Changes in Investment Balances - - (3.5) - Cash and Investments, Beginning of Period 388.1 248.6 168.1 324.1 Cash and Investments, End of Period 324.1$ 192.3$ 324.1$ 192.3$ Trailing Twelve MonthsFor the Quarter
CNO Financial Group 14 1 The ratio of the combined capital of the insurance companies to the minimum amount of capital appropriate to support the overall business operations, as determined based on the methodology developed by the National Association of Insurance Commissioners. 2 Excluding accumulated other comprehensive income (a non-GAAP measure). See the Appendix for a reconciliation to the corresponding GAAP measure. Debt to Capital2 Consolidated Risk Based Capital (RBC) Ratio1 Target leverage of 25.0 - 28.0% Debt covenant ceiling of 35% Debt capacity within limit of target leverage $150 million Target consolidated RBC ratio of approximately 375% RBC variability can be expected in periods of market volatility Will manage back up to 375% over time Holding Company Liquidity Minimum targeted holding company liquidity of $150 million Liquidity bolstered by $250 million undrawn revolver No outstanding debt maturities until 2025 411% 386% 365% 2020 2021 1Q 2022 $388.1 $248.6 $192.3 2020 2021 1Q 2022 25.6% 25.6% 25.6% 2020 2021 1Q 2022 Capital and Liquidity Overview Balanced approach to capital structure; strong liquidity (dollars in millions)
CNO Financial Group 15 Continued positive momentum Free cash flow expected to be lower than 2021 reflecting diminishing COVID impacts and alternative investment returns, capital strain from new business, and the ramp up of the FABN program Free cash flow conversion rate to remain strong Manage to 375% RBC and $150 million holdco liquidity COVID-related ⁃ Continued net favorable COVID impacts, tapering over the course of the year Investment income ⁃ Allocated to products: relatively flat as asset growth is mostly offset by declining yield ⁃ Not allocated to products: lower than 2021 as alternative yields continue to moderate Fee income ⁃ Trending up vs. full year 2021 ⁃ Seasonally weaker sequentially in 2Q and 3Q, trending up in 4Q Expenses (excluding significant items) ⁃ Expected to be modestly higher vs. 2021 as operating efficiencies are offset by investments in growth Effective Tax rate ⁃ 24-25%, trending up vs. 2021 due to state income tax impacts 2022 Outlook Sales Earnings Free Cash Flow / Excess Capital
CNO Financial Group 16 Balance sheet impacts at transition in line with expectations Long Duration Targeted Improvements Expect shareholders equity ex. AOCI to be reduced by $100 - $200 million primarily from negative margin in older LTC blocks ⁃ Debt leverage ex. AOCI to increase by 60 - 120 basis points Expect AOCI balance to be reduced by $1.8 - $2.2 billion from the mark-to-market on the impacted liabilities ⁃ AOCI balance to be approximately zero Balance Sheet as of January 1, 2021 ($ millions) As Reported LDTI Adj Range Low LDTI Adj Range High As Adjusted Range Low As Adjusted Range High Common Stock 1$ -$ -$ 1$ 1$ Additional Paid in Capital 2,545 - - 2,545 2,545 Retained Earnings 752 (100) (200) 652 552 Total Shareholders' Equity Before AOCI 3,298 (100) (200) 3,198 3,098 AOCI 2,186 (1,800) (2,200) 386 (14) Total Shareholders' Equity 5,484$ (1,900)$ (2,400)$ 3,584$ 3,084$ Debt 1,136$ 1,136$ 1,136$ Total Capital ex AOCI 4,434$ 4,334$ 4,234$ Total Capital 6,620$ 4,720$ 4,220$ Debt / Total Capital ex AOCI 25.6% 26.2% 26.8% Debt / Total Capital 17.2% 24.1% 26.9%
CNO Financial Group 17 Delivering on our Commitments Turnaround / De-risking Pivot to Growth Optimize Long-term Value Pre 2017 2017 – 2019 2020 – ? Ongoing Reinsured life block (2009) Recapitalized company (2012) Initiated dividend (2012) Sold Legacy Life Insurance Block (2014) Migrated ratings upwards–within non-investment grade ratings classes Completed Senior Leadership additions Reinsured LTC block Achieved investment grade credit ratings Up-in-quality portfolio repositioning Sustainable momentum in recruiting and sales Benefiting from diverse business model and strong retention Balancing capital return with investments in growth Up-in-quality investment positioning Successfully pivoting to new sales approaches Accelerating integration of D2C and exclusive agents Expanding D2C offerings Reimagining future workplace Optimize customer-centric business alignment Expand omnichannel delivery model Extract potential from Worksite business Enhance growth, margin and ROE profile Maximize distributable cash flow Accelerate pace of capital deployment Leverage technology COVID-19
CNO Financial Group 18 Investment Highlights Sustainable growth initiatives in place Favorable demographic tailwinds Well-positioned in underserved senior middle-income market Highly differentiated business model Strong balance sheet; robust free cash flow generation
CNO Financial Group 19 Questions and Answers
CNO Financial Group 20 Appendix 1: Quarter in Review Strong Operational Performance Broker-Dealer/Registered Investment Advisor Slide 21 Exclusive Agent Counts Slide 22 Building on Strong Track Record of Execution New Money Rate Walk Slide 23 New Money Summary Slide 24 Long-Term Care Insurance Slide 25 Tax Asset Summary Slide 26
CNO Financial Group 21 Account values up 16% YoY; $2.8 billion in client assets Broker-Dealer/Registered Investment Advisor 1 Client assets include cash and securities in brokerage, broker/dealer customer account assets custodied directly at fund companies and insurance carriers, and assets under management in advisory accounts. Prior periods have been restated to conform with current presentation. Bankers Life is the marketing brand of various affiliated companies of CNO Financial Group including, Bankers Life and Casualty Company, Bankers Life Securities, Inc., and Bankers Life Advisory Services, Inc. Non-affiliated insurance products are offered through Bankers Life General Agency, Inc. (dba BL General Insurance Agency, Inc., AK, AL, CA, NV, PA). Agents who are financial advisors are registered with Bankers Life Securities, Inc. Securities and variable annuity products and services are offered by Bankers Life Securities, Inc. Member FINRA/SIPC, (dba BL Securities, Inc., AL, GA, IA, IL, MI, NV, PA). Advisory products and services are offered by Bankers Life Advisory Services, Inc. SEC Registered Investment Adviser (dba BL Advisory Services, Inc., AL, GA, IA, MT, NV, PA). Home Office: 111 East Wacker Drive, Suite 1900, Chicago, IL 60601 (dollars in millions) 2022 1Q 2Q 3Q 4Q 1Q Net New Client Assets in Brokerage (12.4)$ 2.2$ (23.0)$ 9.0$ (35.2)$ Brokerage and Advisory1 Advisory 74.2 69.9 66.0 67.5 76.1 Total 61.8$ 72.1$ 43.0$ 76.5$ 40.9$ Client Assets in Brokerage and Brokerage 1,560.3$ 1,635.3$ 1,639.0$ 1,734.0$ 1,675.2$ Advisory1 at end of period Advisory 884.3 1,000.7 1,054.1 1,164.5 1,159.9 Total 2,444.6$ 2,636.0$ 2,693.1$ 2,898.5$ 2,835.1$ 2021
CNO Financial Group 22 Labor market conditions impacting producing agent counts; veteran agent retention strong Exclusive Agent Counts 1 Producing agents represent the monthly average of exclusive agents that have submitted at least one policy in the month. 2 Registered agents are dually licensed as insurance agents and financial representatives who can buy and sell securities for clients, and/or investment advisors who can provide ongoing investment advice for clients. 3 Agent and representative counts represent the average of the last 3 months. 2022 % Change Consumer 1Q 2Q 3Q 4Q 1Q Y/Y Producing Field Agents1,3 4,389 4,360 4,168 4,008 3,939 -10.3% Producing Tele-Sales Agents1,3 258 247 235 220 217 -15.9% Total Producing Agents1,3 4,647 4,607 4,403 4,228 4,156 -10.6% Registered Agents2,3 646 639 646 655 663 2.6% Worksite Producing Field Agents1,3 241 258 229 227 208 -13.7% 2021
CNO Financial Group 23 Higher market yields balanced by up-in-quality trend, shorter duration requirements New Money Rate Walk 3.67% 3.73% -0.27%
CNO Financial Group 24 Strategically harvesting rising market yields, while sliding up-in-quality / down the curve. New Money Summary First Quarter General Account New Money Purchases
CNO Financial Group 25 New sales (~$30 million annually) focused on short duration products 99% of new sales for policies with 2 years or less in benefits Average benefit period of 11 months New business 25% reinsured since 2008 Reserve assumptions informed by historical experience No morbidity improvement No mortality improvement Minimal future rate increases New money rates reflect a low for long environment Favorable economic profile 2021 Loss Recognition Testing margin increased to $376 million or ~15% of Net GAAP Liabilities driven by margin from new business Statutory reserves ~$221 million higher than LTC Net GAAP Liabilities, which are currently ~$2.51 billion Total LTC is just 12% of overall CNO insurance liabilities Potential adverse impact from severe stress scenarios is significantly reduced Average maximum benefit at issuance is $143 per day for inforce block Long-Term Care Insurance Highly differentiated inforce block; prudently managed
CNO Financial Group 26 Non-Life NOLs $237 DTAs related to tax strategy $171 Value of NOLs and deferred tax assets (DTAs) related to tax strategy Details Total estimated economic value of tax assets related to our NOLs and tax strategy of approximately $245 million @ 10% discount rate ($2.02 on a per share basis). Life NOLs have been fully utilized. Non- life NOLs are expected to offset 100% of non-life taxable income and 35% of life taxable income through 2023. $408 (dollars in millions) $408 million/$3.42 per diluted share value of NOLs and DTAs related to tax strategy Tax Asset Summary as of March 31, 2022
CNO Financial Group 27 Appendix 2: Financial Exhibits Non-GAAP Financial Measures Slides 28 - 46
CNO Financial Group 28 Insurance product margin Annuity 93.9$ (26.9)$ (1) 67.0$ Health 129.5 - 129.5 Life 30.4 1.0 (1) 31.4 Total insurance product margin 253.8 (25.9) 227.9 Allocated expenses (143.3) - (143.3) Income from insurance products 110.5 (25.9) 84.6 Fee income 2.9 - 2.9 Investment income not allocated to product lines 42.8 - 42.8 Expenses not allocated to product lines (17.4) - (17.4) Operating earnings before taxes 138.8 (25.9) 112.9 Income tax expense on operating income (30.3) 5.7 (24.6) Net operating income (2) 108.5$ (20.2)$ 88.3 Net operating income per diluted share (2) 0.87$ (0.16)$ 0.71$ Three months ended December 31, 2021 Actual results Significant items Excluding significant items (dollars in millions, except per-share amounts) (1) Adjustments arising from our comprehensive annual actuarial review of assumptions. (2) A non-GAAP measure. See pages 35 and 37 for a reconciliation to the corresponding GAAP measure. The table below summarizes the financial impact of significant items on our 4Q21 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results. 4Q21 Significant Items
CNO Financial Group 29 Insurance product margin Annuity 52.5$ -$ 52.5$ Health 117.9 - 117.9 Life 53.2 - 53.2 Total insurance product margin 223.6 - 223.6 Allocated expenses (140.5) - (140.5) Income from insurance products 83.1 - 83.1 Fee income 2.6 - 2.6 Investment income not allocated to product lines 50.9 - 50.9 Expenses not allocated to product lines (17.3) 3.0 (1) (14.3) Operating earnings before taxes 119.3 3.0 122.3 Income tax expense on operating income (26.5) (0.7) (27.2) Net operating income (2) 92.8$ 2.3$ 95.1 Net operating income per diluted share (2) 0.72$ 0.02$ 0.74$ Three months ended September 30, 2021 Actual results Significant items Excluding significant items (1) Comprised of $3.0 million from legal and regulatory matters. (2) A non-GAAP measure. See pages 35 and 37 for a reconciliation to the corresponding GAAP measure. The table below summarizes the financial impact of significant items on our 3Q21 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results. 3Q21 Significant Items (dollars in millions, except per-share amounts)
CNO Financial Group 30 Insurance product margin Annuity 66.0$ -$ 66.0$ Health 120.9 - 120.9 Life 39.7 - 39.7 Total insurance product margin 226.6 - 226.6 Allocated expenses (141.6) - (141.6) Income from insurance products 85.0 - 85.0 Fee income 6.6 - 6.6 Investment income not allocated to product lines 47.8 - 47.8 Expenses not allocated to product lines (23.8) 4.5 (1) (19.3) Operating earnings before taxes 115.6 4.5 120.1 Income tax expense on operating income (26.5) (1.0) (27.5) Net operating income (2) 89.1$ 3.5$ 92.6 Net operating income per diluted share (2) 0.66$ 0.03$ 0.69$ Three months ended June 30, 2021 Actual results Significant items Excluding significant items (1) Comprised of $4.5 million from legal and regulatory matters. (2) A non-GAAP measure. See pages 35 and 37 for a reconciliation to the corresponding GAAP measure. The table below summarizes the financial impact of significant items on our 2Q21 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results. 2Q21 Significant Items (dollars in millions, except per-share amounts)
CNO Financial Group 31 Insurance product margin Annuity 57.9$ -$ 57.9$ Health 124.7 - 124.7 Life 27.1 - 27.1 Total insurance product margin 209.7 - 209.7 Allocated expenses (141.1) - (141.1) Income from insurance products 68.6 - 68.6 Fee income 7.3 - 7.3 Investment income not allocated to product lines 43.0 - 43.0 Expenses not allocated to product lines (22.0) 7.8 (1) (14.2) Operating earnings before taxes 96.9 7.8 104.7 Income tax expense on operating income (21.7) (1.7) (23.4) Net operating income (2) 75.2$ 6.1$ 81.3 Net operating income per diluted share (2) 0.55$ 0.04$ 0.59$ Three months ended March 31, 2021 Actual results Significant items Excluding significant items (1) Comprised of: (i) $5.3 million from legal and regulatory matters; and (ii) $2.5 million of transaction expenses related to the previously announced acquisition of DirectPath, LLC. The legal and regulatory matters primarily consist of an increase to our liability for claims and interest pursuant to the Global Resolution Agreement, as we have now processed and verified most of the claims provided by the third-party auditor allowing us to more accurately estimate the ultimate liability. (2) A non-GAAP measure. See pages 35 and 37 for a reconciliation to the corresponding GAAP measure. The table below summarizes the financial impact of significant items on our 1Q21 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results. 1Q21 Significant Items (dollars in millions, except per-share amounts)
CNO Financial Group 32 Insurance product margin Annuity 68.1$ (16.1)$ (1) 52.0$ Health 125.2 - 125.2 Life 37.3 4.3 (1) 41.6 Total insurance product margin 230.6 (11.8) 218.8 Allocated expenses (162.7) - (162.7) Income from insurance products 67.9 (11.8) 56.1 Fee income 2.9 - 2.9 Investment income not allocated to product lines 57.8 - 57.8 Expenses not allocated to product lines (17.8) 3.7 (2) (14.1) Operating earnings before taxes 110.8 (8.1) 102.7 Income tax expense on operating income (24.8) 1.7 (23.1) Net operating income (3) 86.0$ (6.4)$ 79.6$ Net operating income per diluted share (3) 0.61$ (0.04)$ 0.57$ Three months ended December 31, 2020 Actual results Significant items Excluding significant items (1) Adjustments arising from our comprehensive annual actuarial review of assumptions. (2) Unfavorable impact related to asset impairments. (3) A non-GAAP measure. See pages 35 and 37 for a reconciliation to the corresponding GAAP measure. The table below summarizes the financial impact of significant items on our 4Q20 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results. 4Q20 Significant Items (dollars in millions, except per-share amounts)
CNO Financial Group 33 Insurance product margin Annuity 123.8$ 40.0$ (1) 72.3$ (91.5) (1) Health 95.5 - 95.5 Life 36.1 5.6 (1) 41.7 Total insurance product margin 255.4 (45.9) 209.5 Allocated expenses (128.1) - (128.1) Income from insurance products 127.3 (45.9) 81.4 Fee income 5.2 - 5.2 Investment income not allocated to product lines 8.2 - 8.2 Expenses not allocated to product lines (38.5) 23.5 (2) (15.0) Operating earnings before taxes 102.2 (22.4) 79.8 Income tax expense on operating income (22.8) 4.7 (18.1) Net operating income (3) 79.4$ (17.7)$ 61.7$ Net operating income per diluted share (3) $0.55 (0.12)$ 0.43$ Three months ended June 30, 2020 Actual results Significant items Excluding significant items The footnotes to the above table are on the following page. The table below summarizes the financial impact of significant items on our 2Q20 net operating income. Management believes that identifying the impact of these items enhances the understanding of our operating results. 2Q20 Significant Items (dollars in millions, except per-share amounts)
CNO Financial Group 34 (Continued from the previous page) (1) Given our expectation that interest rates will remain low for the long-term, we performed an actuarial unlocking exercise in the second quarter of 2020 to reflect our assumption that average new money rates will remain flat at 4 percent forever. This change and the related impacts to persistency assumptions had a $45.6 million unfavorable impact on pre-tax earnings. As part of the actuarial unlocking exercise, we also changed our assumptions related to the future option costs we incur in providing benefits on fixed index annuities which had a favorable impact on pre-tax earnings of $91.5 million. The impact of these changes in assumptions is summarized below (dollars in millions): This actuarial unlocking exercise did not replace our comprehensive annual review of all assumptions for our insurance products, which we completed in the fourth quarter of 2020. (2) We increased our liability for claims and interest pursuant to the previously disclosed Global Resolution Agreement entered into in November 2018. Pursuant to this agreement, a third-party auditor is acting on behalf of 42 states and the District of Columbia for the purpose of identifying deceased insureds and contract holders where benefits are payable pursuant to unclaimed property laws. The third-party auditor has provided information that we have processed and verified allowing us to more accurately estimate the ultimate liability pursuant to this agreement. (3) A non-GAAP measure. See pages 35 and 37 for a reconciliation to the corresponding GAAP measure. Line of business Fixed index annuities Fixed interest annuities Interest- sensitive life Total Favorable (unfavorable) Impacts of an average new money rate assumption of 4 percent Insurance policy benefits $ (5.0) $ — $ (7.4) $ (12.4) Amortization (25.6) (9.4) 1.8 (33.2) Subtotal (30.6) (9.4) (5.6) (45.6) Impacts of changes in future option costs Insurance policy benefits 104.8 — — 104.8 Amortization (13.3) — — (13.3) Subtotal 91.5 — — 91.5 Impact on pre-tax income $ 60.9 $ (9.4) $ (5.6) $ 45.9 2Q20 Significant Items
CNO Financial Group 35 (dollars in millions) * Management believes that an analysis of Net income applicable to common stock before: (i) net realized investment gains or losses from sales, impairments and the change in allowance for credit losses, net of related amortization and taxes; (ii) net change in market value of investments recognized in earnings, net of taxes; (iii) 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; (iv) fair value changes related to the agent deferred compensation plan, net of taxes; (v) loss on extinguishment of debt, net of taxes; (vi) changes in the valuation allowance for deferred tax assets and other tax items; and (vii) 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. A reconciliation of Net operating income to Net income applicable to common stock is provided in the above table. Quarterly Earnings 1Q21 2Q21 3Q21 4Q21 1Q22 Insurance product margin Annuity 57.9$ 66.0$ 52.5$ 93.9$ 44.6$ Health 124.7 120.9 117.9 129.5 124.8 Life 27.1 39.7 53.2 30.4 19.8 Total insurance product margin 209.7 226.6 223.6 253.8 189.2 Allocated expenses (141.1) (141.6) (140.5) (143.3) (144.8) Income from insurance products 68.6 85.0 83.1 110.5 44.4 Fee income 7.3 6.6 2.6 2.9 9.9 Investment income not allocated to product lines 43.0 47.8 50.9 42.8 28.5 Expenses not allocated to product lines (22.0) (23.8) (17.3) (17.4) (14.8) Operating earnings before taxes 96.9 115.6 119.3 138.8 68.0 Income tax expense on operating income (21.7) (26.5) (26.5) (30.3) (16.9) Net operating income* 75.2 89.1 92.8 108.5 51.1 Net realized investment gains (losses) from sales, impairments and change in allowance for credit losses (net of related amortization) 3.6 24.3 2.2 4.7 (7.1) Net change in market value of investments recognized in earnings (6.4) 5.7 (4.6) (12.1) (25.5) Fair value changes in embedded derivative liabilities (net of related amortization) 82.1 (44.9) 10.9 19.1 90.8 Fair value changes related to agent deferred compensation plan 13.2 - - (4.3) 22.7 Other 0.6 0.9 0.2 1.9 0.4 Non-operating income (loss) before taxes 93.1 (14.0) 8.7 9.3 81.3 Income tax (expense) benefit on non-operating income (20.9) 2.9 (1.7) (2.0) (20.1) Net non-operating income (loss) 72.2 (11.1) 7.0 7.3 61.2 Net income 147.4$ 78.0$ 99.8$ 115.8$ 112.3$
CNO Financial Group 36 Information Related to Certain Non-GAAP Financial Measures 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 or includes amounts that are normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. While management believes these measures are useful to enhance understanding and comparability of our financial results, these non-GAAP measures should not be considered as substitutes for the most directly comparable GAAP measures. Additional information concerning non-GAAP measures 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. Operating earnings measures Management believes that an analysis of net income applicable to common stock before net realized investment gains or losses from sales, impairments and change in allowance for credit losses, net change in market value of investments recognized in earnings, 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, changes in the valuation allowance for deferred tax assets and other tax items and other non- operating items consisting primarily of earnings attributable to variable interest entities (“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.
CNO Financial Group 37 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 amounts) Information Related to Certain Non-GAAP Financial Measures 1Q21 2Q21 3Q21 4Q21 1Q22 Net income applicable to common stock 147.4$ 78.0$ 99.8$ 115.8$ 112.3$ Non-operating items: Net realized investment (gains) losses from sales and impairments, net of related amortization (3.6) (24.3) (2.2) (4.7) 7.1 Net change in market value of investments recognized in earnings 6.4 (5.7) 4.6 12.1 25.5 Fair value changes in embedded derivative liabilities, net of related amortization (82.1) 44.9 (10.9) (19.1) (90.8) Fair value changes related to the agent deferred compensation plan (13.2) - - 4.3 (22.7) Other (0.6) (0.9) (0.2) (1.9) (0.4) Non-operating (income) loss before taxes (93.1) 14.0 (8.7) (9.3) (81.3) Income tax (expense) benefit on non-operating (income) loss (20.9) 2.9 (1.7) (2.0) (20.1) Net non-operating (income) loss (72.2) 11.1 (7.0) (7.3) (61.2) Net operating income (a non-GAAP financial measure) 75.2$ 89.1$ 92.8$ 108.5$ 51.1$ Per diluted share: Net income 1.08$ 0.58$ 0.77$ 0.93$ 0.93$ Net realized investment (gains) losses from sales and impairments (net of related amortization and taxes) (0.02) (0.14) (0.02) (0.03) 0.04 Net change in market value of investments recognized in earnings (net of taxes) 0.04 (0.03) 0.03 0.07 0.16 Fair value changes in embedded derivative liabilities (net of related amortization and taxes) (0.47) 0.26 (0.06) (0.12) (0.57) Fair value changes related to the agent deferred compensation plan (net of taxes) (0.08) - - 0.03 (0.14) Other - (0.01) - (0.01) - Net operating income (a non-GAAP financial measure) 0.55$ 0.66$ 0.72$ 0.87$ 0.42$
CNO Financial Group 38 A reconciliation of operating income and shares used to calculate basic and diluted operating earnings per share is as follows: (dollars in millions, except per-share amounts, and shares in thousands) Information Related to Certain Non-GAAP Financial Measures 1Q21 2Q21 3Q21 4Q21 1Q22 Operating income 75.2$ 89.1$ 92.8$ 108.5$ 51.1$ Weighted average shares outstanding for basic earnings per share 134,140 131,016 126,429 122,017 118,622 Effect of dilutive securities on weighted average shares: Stock options, restricted stock and performance units 2,513 2,798 2,589 3,003 2,380 Weighted average shares outstanding for diluted earnings per share 136,653 133,814 129,018 125,020 121,002 Net operating income per diluted share 0.55$ 0.66$ 0.72$ 0.87$ 0.42$
CNO Financial Group 39 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 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. 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. A reconciliation from book value per share to book value per diluted share, excluding accumulated other comprehensive income (loss) is as follows: (dollars in millions, except per-share amounts) Information Related to Certain Non-GAAP Financial Measures 1Q21 2Q21 3Q21 4Q21 1Q22 Total shareholders' equity 4,860.7$ 5,324.0$ 5,232.9$ 5,259.7$ 3,690.9$ Shares outstanding for the period 132,268,255 129,105,039 124,269,869 120,377,152 117,241,006 Book value per share 36.75$ 41.24$ 42.11$ 43.69$ 31.48$ Total shareholders' equity 4,860.7$ 5,324.0$ 5,232.9$ 5,259.7$ 3,690.9$ Less accumulated other comprehensive income (1,518.1) (1,995.5) (1,929.7) (1,947.1) (380.5) Adjusted shareholders' equity excluding AOCI 3,342.6$ 3,328.5$ 3,303.2$ 3,312.6$ 3,310.4$ Shares outstanding for the period 132,268,255 129,105,039 124,269,869 120,377,152 117,241,006 Dilutive common stock equivalents related to: Stock options, restricted stock and performance units 2,356,263 2,444,309 2,647,710 2,953,586 2,261,617 Diluted shares outstanding 134,624,518 131,549,348 126,917,579 123,330,738 119,502,623 Book value per diluted share (a non-GAAP measure) 24.83$ 25.30$ 26.03$ 26.86$ 27.70$
CNO Financial Group 40 Operating return measures Management believes that an analysis of net income applicable to common stock before net realized investment gains or losses from sales, impairments and change in allowance for credit losses, net change in market value of investments recognized in earnings, 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, changes in the valuation allowance for deferred tax assets and other tax items, loss on extinguishment of debt and other non-operating items consisting primarily of earnings attributable to variable interest entities (“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. Management also believes that an operating return, excluding significant items, is important as the impact of these items enhances the understanding of our operating results. This non-GAAP financial measure also differs from return on equity because accumulated other comprehensive income (loss) has been excluded from the value of equity used to determine this ratio. Management believes this non-GAAP financial measure is useful because it removes the volatility that arises from changes in accumulated other comprehensive income (loss). Such volatility is often caused by changes in the estimated fair value of our investment portfolio resulting from changes in general market interest rates rather than the business decisions made by management. In addition, our equity includes the value of significant net operating loss carryforwards (included in income tax assets). In accordance with GAAP, these assets are not discounted, and accordingly will not provide a return to shareholders (until after it is realized as a reduction to taxes that would otherwise be paid). Management believes that excluding this value from the equity component of this measure enhances the understanding of the effect these non-discounted assets have on operating returns and the comparability of these measures from period-to-period. Operating return measures are used in measuring the performance of our business units and are used as a basis for incentive compensation. Information Related to Certain Non-GAAP Financial Measures
CNO Financial Group 41 The calculations of: (i) operating return on equity, excluding accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-GAAP financial measure); (ii) operating return, excluding significant item, on equity, excluding accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-GAAP financial measure); and (iii) return on equity are as follows: (dollars in millions) (Continued on next page) Information Related to Certain Non-GAAP Financial Measures 1Q21 2Q21 3Q21 4Q21 1Q22 Operating income 353.2$ 362.9$ 343.1$ 365.6$ 341.5$ Operating income, excluding significant items 335.2$ 366.1$ 348.6$ 357.3$ 327.1$ Net income 470.4$ 466.4$ 437.0$ 441.0$ 405.9$ Average common equity, excluding accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-GAAP financial measure) 2,876.5$ 2,947.7$ 2,995.5$ 3,026.0$ 3,046.7$ Average common shareholders' equity 4,903.1$ 5,114.1$ 5,206.8$ 5,197.4$ 5,023.1$ Operating return on equity, excluding accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-GAAP financial measure) 12.3% 12.3% 11.5% 12.1% 11.2% Operating return, excluding significant items, on equity, excluding accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-GAAP financial measure) 11.7% 12.4% 11.6% 11.8% 10.7% Return on equity 9.6% 9.1% 8.4% 8.5% 8.1% Trailing Twelve Months Ended
CNO Financial Group 42 The following summarizes: (i) operating earnings; (ii) significant items; (iii) operating earnings, excluding significant items; and (iv) net income: (dollars in millions) (a) The significant items have been discussed in prior press releases. (Continued on next page) Information Related to Certain Non-GAAP Financial Measures Net operating income Significant items (a) Net operating income, excluding significant items Net operating income, excluding significant items - trailing four quarters Net income Net income - trailing four quarters 2Q20 79.4$ (17.7)$ 61.7$ 285.9$ 82.0$ 380.8$ 3Q20 112.6 - 112.6 329.3 129.2 468.0 4Q20 86.0 (6.4) 79.6 338.2 111.8 301.8 1Q21 75.2 6.1 81.3 335.2 147.4 470.4 2Q21 89.1 3.5 92.6 366.1 78.0 466.4 3Q21 92.8 2.3 95.1 348.6 99.8 437.0 4Q21 108.5 (20.2) 88.3 357.3 115.8 441.0 1Q22 51.1 - 51.1 327.1 112.3 405.9
CNO Financial Group 43 The calculations of: (i) operating return on equity, excluding accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-GAAP financial measure); (ii) operating return, excluding significant item, on equity, excluding accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-GAAP financial measure); and (iii) return on equity are as follows: (dollars in millions) (Continued on next page) Information Related to Certain Non-GAAP Financial Measures 1Q21 2Q21 3Q21 4Q21 1Q22 Pre-tax operating earnings (a non-GAAP financial measure) 455.2$ 468.6$ 442.6$ 470.6$ 441.7$ Income tax expense (102.0) (105.7) (99.5) (105.0) (100.2) Operating return 353.2 362.9 343.1 365.6 341.5 Non-operating items: Net realized investment gains (losses) from sales and impairments, net of related amortization 36.2 48.2 42.7 34.8 24.1 Net change in market value of investments recognized in earnings 39.3 13.8 0.7 (17.4) (36.5) Fair value changes in embedded derivative liabilities, net of related amortization 69.7 51.9 64.4 67.2 75.9 Fair value changes and amendment related to the agent deferred compensation plan (3.1) 10.1 10.1 8.9 18.4 Other 8.0 8.9 2.6 3.6 3.4 Non-operating income before taxes 150.1 132.9 120.5 97.1 85.3 Income tax expense on non-operating income (32.9) (29.4) (26.6) (21.7) (20.9) Net non-operating income 117.2 103.5 93.9 75.4 64.4 Net income 470.4$ 466.4$ 437.0$ 441.0$ 405.9$ Twelve Months Ended
CNO Financial Group 44 A reconciliation of consolidated capital, excluding accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-GAAP financial measure) to common shareholders’ equity, is as follows: (dollars in millions) Information Related to Certain Non-GAAP Financial Measures 1Q19 2Q19 3Q19 4Q19 Consolidated capital, excluding accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-GAAP financial measure) 2,703.4$ 2,702.9$ 2,685.0$ 2,761.9$ Net operating loss carryforwards 479.6 451.1 425.4 542.6 Accumulated other comprehensive income 654.9 1,098.2 1,442.9 1,372.5 Common shareholders' equity 3,837.9$ 4,252.2$ 4,553.3$ 4,677.0$ 1Q20 2Q20 3Q20 4Q20 Consolidated capital, excluding accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-GAAP financial measure) 2,701.2$ 2,784.2$ 2,905.1$ 2,956.2$ Net operating loss carryforwards 469.4 426.8 377.2 341.9 Accumulated other comprehensive income 595.2 1,520.2 1,801.6 2,186.1 Common shareholders' equity 3,765.8$ 4,731.2$ 5,083.9$ 5,484.2$ 1Q21 2Q21 3Q21 4Q21 Consolidated capital, excluding accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-GAAP financial measure) 3,019.5$ 3,035.6$ 3,036.3$ 3,068.9$ Net operating loss carryforwards 323.1 292.9 266.9 243.7 Accumulated other comprehensive income 1,518.1 1,995.5 1,929.7 1,947.1 Common shareholders' equity 4,860.7$ 5,324.0$ 5,232.9$ 5,259.7$ 1Q22 Consolidated capital, excluding accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-GAAP financial measure) 3,072.2$ Net operating loss carryforwards 238.2 Accumulated other comprehensive income 380.5 Common shareholders' equity 3,690.9$
CNO Financial Group 45 A reconciliation of consolidated capital, excluding accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-GAAP financial measure) to common shareholders’ equity, is as follows: (dollars in millions) Information Related to Certain Non-GAAP Financial Measures 1Q21 2Q21 3Q21 4Q21 1Q22 Consolidated capital, excluding accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-GAAP financial measure) 2,876.5$ 2,947.7$ 2,995.5$ 3,026.0$ 3,046.7$ Net operating loss carryforwards 385.5 350.5 320.0 293.9 271.0 Accumulated other comprehensive income 1,641.1 1,815.9 1,891.3 1,877.5 1,705.4 Common shareholders' equity 4,903.1$ 5,114.1$ 5,206.8$ 5,197.4$ 5,023.1$ Trailing Four Quarter Average
CNO Financial Group 46 Debt to capital ratio, excluding accumulated other comprehensive income (loss) The debt to capital ratio, excluding accumulated other comprehensive income (loss), differs from the debt to capital ratio because accumulated other comprehensive income (loss) has been excluded from the value of capital used to determine this measure. Management believes this non-GAAP financial measure is useful because it removes the volatility that arises from changes in accumulated other comprehensive income (loss). Such volatility is often caused by changes in the estimated fair value of our investment portfolio resulting from changes in general market interest rates rather than the business decisions made by management. A reconciliation of these ratios is as follows: (dollars in millions) Information Related to Certain Non-GAAP Financial Measures 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 Corporate notes payable 1,136.2$ 1,136.6$ 1,136.9$ 1,137.0$ 1,137.3$ 1,137.6$ Total shareholders' equity 5,484.2 4,860.7 5,324.0 5,232.9 5,259.7 3,690.9 Total capital 6,620.4$ 5,997.3$ 6,460.9$ 6,369.9$ 6,397.0$ 4,828.5$ Corporate debt to capital 17.2% 19.0% 17.6% 17.8% 17.8% 23.6% Corporate notes payable 1,136.2$ 1,136.6$ 1,136.9$ 1,137.0$ 1,137.3$ 1,137.6$ Total shareholders' equity 5,484.2 4,860.7 5,324.0 5,232.9 5,259.7 3,690.9 Less accumulated other comprehensive income (2,186.1) (1,518.1) (1,995.5) (1,929.7) (1,947.1) (380.5) Total capital 4,434.3$ 4,479.2$ 4,465.4$ 4,440.2$ 4,449.9$ 4,448.0$ Debt to total capital ratio, excluding AOCI (a non-GAAP financial measure) 25.6% 25.4% 25.5% 25.6% 25.6% 25.6%