2Q11
Financial and operating results for the period ended June 30, 2011
Financial and operating results for the period ended June 30, 2011
July 28, 2011
Unless otherwise specified, comparisons in this presentation are between 2Q11 and 2Q10.
Exhibit 99.1
CNO Financial Group
2
Forward-Looking Statements
Cautionary Statement Regarding Forward-Looking Statements. Our statements, trend analyses and other information contained in these
materials relative to markets for CNO Financial’s products and trends in CNO Financial’s operations or financial results, as well as other
statements, contain forward-looking statements within the meaning of the federal securities laws and the Private Securities Litigation Reform
Act of 1995. Forward-looking statements typically are identified by the use of terms such as “anticipate,” “believe,” “plan,” “estimate,” “expect,”
“project,” “intend,” “may,” “will,” “would,” “contemplate,” “possible,” “attempt,” “seek,” “should,” “could,” “goal,” “target,” “on track,” “comfortable
with,” “optimistic” and similar words, although some forward-looking statements are expressed differently. You should consider statements that
contain these words carefully because they describe our expectations, plans, strategies and goals and our beliefs concerning future business
conditions, our results of operations, financial position, and our business outlook or they state other ‘‘forward-looking’’ information based on
currently available information. Assumptions and other important factors that could cause our actual results to differ materially from those
anticipated in our forward-looking statements include, among other things: (i) changes in or sustained low interest rates causing a reduction in
investment income, the margins of our fixed annuity and life insurance businesses and demand for our products; (ii) general economic, market
and political conditions, including the performance and fluctuations of the financial markets which may affect the value of our investments as
well as our ability to raise capital or refinance existing indebtedness and the cost of doing so; (iii) the ultimate outcome of lawsuits filed against
us and other legal and regulatory proceedings to which we are subject; (iv) our ability to make changes to certain non-guaranteed elements of
our life insurance products; (v) our ability to obtain adequate and timely rate increases on our health products, including our long-term care
business; (vi) the receipt of any required regulatory approvals for dividend and surplus debenture interest payments from our insurance
subsidiaries; (vii) mortality, morbidity, the increased cost and usage of health care services, persistency, the adequacy of our previous reserve
estimates and other factors which may affect the profitability of our insurance products; (viii) changes in our assumptions related to deferred
acquisition costs or the present value of future profits; (ix) the recoverability of our deferred tax assets and the effect of potential ownership
changes and tax rate changes on their value; (x) our assumption that the positions we take on our tax return filings, including our position that
our 7.0% convertible senior debentures due 2016 will not be treated as stock for purposes of Section 382 of the Internal Revenue Code of
1986, as amended, and will not trigger an ownership change, will not be successfully challenged by the Internal Revenue Service; (xi) changes
in accounting principles and the interpretation thereof (including changes in principles related to accounting for deferred acquisition costs); (xii)
our ability to continue to satisfy the financial ratio and balance requirements and other covenants of our debt agreements; (xiii) our ability to
achieve anticipated expense reductions and levels of operational efficiencies including improvements in claims adjudication and continued
automation and rationalization of operating systems, (xiv) performance and valuation of our investments, including the impact of realized losses
(including other-than-temporary impairment charges); (xv) our ability to identify products and markets in which we can compete effectively
against competitors with greater market share, higher ratings, greater financial resources and stronger brand recognition; (xvi) our ability to
generate sufficient liquidity to meet our debt service obligations and other cash needs; (xvii) our ability to maintain effective controls over
financial reporting; (xviii) our ability to continue to recruit and retain productive agents and distribution partners and customer response to new
products, distribution channels and marketing initiatives; (xix) our ability to achieve eventual upgrades of the financial strength ratings of CNO
Financial and our insurance company subsidiaries as well as the impact of our ratings on our business, our ability to access capital and the cost
of capital; (xx) the risk factors or uncertainties listed from time to time in our filings with the Securities and Exchange Commission; (xxi)
regulatory changes or actions, including those relating to regulation of the financial affairs of our insurance companies, such as the payment of
dividends and surplus debenture interest to us, regulation of the sale, underwriting and pricing of products, and health care regulation affecting
health insurance products; and (xxii) changes in the Federal income tax laws and regulations which may affect or eliminate the relative tax
advantages of some of our products or affect the value of our deferred tax assets. Other factors and assumptions not identified above are also
relevant to the forward-looking statements, and if they prove incorrect, could also cause actual results to differ materially from those projected.
All forward-looking statements are expressly qualified in their entirety by the foregoing cautionary statements. Our forward-looking statements
speak only as of the date made. We assume no obligation to update or to publicly announce the results of any revisions to any of the forward-
looking statements to reflect actual results, future events or developments, changes in assumptions or changes in other factors affecting the
forward-looking statements.
materials relative to markets for CNO Financial’s products and trends in CNO Financial’s operations or financial results, as well as other
statements, contain forward-looking statements within the meaning of the federal securities laws and the Private Securities Litigation Reform
Act of 1995. Forward-looking statements typically are identified by the use of terms such as “anticipate,” “believe,” “plan,” “estimate,” “expect,”
“project,” “intend,” “may,” “will,” “would,” “contemplate,” “possible,” “attempt,” “seek,” “should,” “could,” “goal,” “target,” “on track,” “comfortable
with,” “optimistic” and similar words, although some forward-looking statements are expressed differently. You should consider statements that
contain these words carefully because they describe our expectations, plans, strategies and goals and our beliefs concerning future business
conditions, our results of operations, financial position, and our business outlook or they state other ‘‘forward-looking’’ information based on
currently available information. Assumptions and other important factors that could cause our actual results to differ materially from those
anticipated in our forward-looking statements include, among other things: (i) changes in or sustained low interest rates causing a reduction in
investment income, the margins of our fixed annuity and life insurance businesses and demand for our products; (ii) general economic, market
and political conditions, including the performance and fluctuations of the financial markets which may affect the value of our investments as
well as our ability to raise capital or refinance existing indebtedness and the cost of doing so; (iii) the ultimate outcome of lawsuits filed against
us and other legal and regulatory proceedings to which we are subject; (iv) our ability to make changes to certain non-guaranteed elements of
our life insurance products; (v) our ability to obtain adequate and timely rate increases on our health products, including our long-term care
business; (vi) the receipt of any required regulatory approvals for dividend and surplus debenture interest payments from our insurance
subsidiaries; (vii) mortality, morbidity, the increased cost and usage of health care services, persistency, the adequacy of our previous reserve
estimates and other factors which may affect the profitability of our insurance products; (viii) changes in our assumptions related to deferred
acquisition costs or the present value of future profits; (ix) the recoverability of our deferred tax assets and the effect of potential ownership
changes and tax rate changes on their value; (x) our assumption that the positions we take on our tax return filings, including our position that
our 7.0% convertible senior debentures due 2016 will not be treated as stock for purposes of Section 382 of the Internal Revenue Code of
1986, as amended, and will not trigger an ownership change, will not be successfully challenged by the Internal Revenue Service; (xi) changes
in accounting principles and the interpretation thereof (including changes in principles related to accounting for deferred acquisition costs); (xii)
our ability to continue to satisfy the financial ratio and balance requirements and other covenants of our debt agreements; (xiii) our ability to
achieve anticipated expense reductions and levels of operational efficiencies including improvements in claims adjudication and continued
automation and rationalization of operating systems, (xiv) performance and valuation of our investments, including the impact of realized losses
(including other-than-temporary impairment charges); (xv) our ability to identify products and markets in which we can compete effectively
against competitors with greater market share, higher ratings, greater financial resources and stronger brand recognition; (xvi) our ability to
generate sufficient liquidity to meet our debt service obligations and other cash needs; (xvii) our ability to maintain effective controls over
financial reporting; (xviii) our ability to continue to recruit and retain productive agents and distribution partners and customer response to new
products, distribution channels and marketing initiatives; (xix) our ability to achieve eventual upgrades of the financial strength ratings of CNO
Financial and our insurance company subsidiaries as well as the impact of our ratings on our business, our ability to access capital and the cost
of capital; (xx) the risk factors or uncertainties listed from time to time in our filings with the Securities and Exchange Commission; (xxi)
regulatory changes or actions, including those relating to regulation of the financial affairs of our insurance companies, such as the payment of
dividends and surplus debenture interest to us, regulation of the sale, underwriting and pricing of products, and health care regulation affecting
health insurance products; and (xxii) changes in the Federal income tax laws and regulations which may affect or eliminate the relative tax
advantages of some of our products or affect the value of our deferred tax assets. Other factors and assumptions not identified above are also
relevant to the forward-looking statements, and if they prove incorrect, could also cause actual results to differ materially from those projected.
All forward-looking statements are expressly qualified in their entirety by the foregoing cautionary statements. Our forward-looking statements
speak only as of the date made. We assume no obligation to update or to publicly announce the results of any revisions to any of the forward-
looking statements to reflect actual results, future events or developments, changes in assumptions or changes in other factors affecting the
forward-looking statements.
CNO Financial Group
3
Non-GAAP Measures
This presentation contains the following financial measures that differ from the
comparable measures under Generally Accepted Accounting Principles (GAAP):
operating earnings measures; book value, excluding accumulated other comprehensive
income (loss) per share; operating return measures; earnings before net realized
investment gains (losses) and corporate interest and taxes; debt to capital ratios,
excluding accumulated other comprehensive income (loss); and interest-adjusted benefit
ratios. Reconciliations between those non-GAAP measures and the comparable GAAP
measures are included in the Appendix, or on the page such measure is presented.
comparable measures under Generally Accepted Accounting Principles (GAAP):
operating earnings measures; book value, excluding accumulated other comprehensive
income (loss) per share; operating return measures; earnings before net realized
investment gains (losses) and corporate interest and taxes; debt to capital ratios,
excluding accumulated other comprehensive income (loss); and interest-adjusted benefit
ratios. 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 these 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.
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, www.CNOinc.com.
with the Securities and Exchange Commission that are available in the “Investors - SEC
Filings” section of CNO’s website, www.CNOinc.com.
CNO Financial Group
4
CNO Financial Group
5
2Q11: Summary
CNO
§ Net income of $59.5 million, compared to $33.1 million
§ Net operating income* up 28% to $57.5 million, or 20 cents per diluted
share
share
§ Consolidated RBC at 351%, up 10 percentage points from 3/31/11
– Statutory earnings of $78.7 million were offset by $78 million of dividend
payments to our holding company
payments to our holding company
– Increase reflects improved asset quality
§ Holding company cash and investments at $234 million, up $65
million from 3/31/11
million from 3/31/11
– Primarily reflecting the aforementioned dividend payments
– Partially offset by $16.2 million for share repurchases and $16.2 million of
commensurate prepayment of debt
commensurate prepayment of debt
§ Debt to total capital ratio at 18.7%, down from 20.0% at 12/31/10
§ Core sales** down 3% from prior year, up 7% from 1Q11
*Management believes that an analysis of net income applicable to common stock before: (1) loss on extinguishment of debt, net of income taxes; (2) net realized investment
gains or losses, net of related amortization and income taxes; (3) increases or decreases in the valuation allowance related to deferred tax assets; and (4) 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 income 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 such items can be affected by events that are unrelated to the company’s underlying
fundamentals. The table on page X reconciles the non-GAAP measure to the corresponding GAAP measure.
gains or losses, net of related amortization and income taxes; (3) increases or decreases in the valuation allowance related to deferred tax assets; and (4) 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 income 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 such items can be affected by events that are unrelated to the company’s underlying
fundamentals. The table on page X reconciles the non-GAAP measure to the corresponding GAAP measure.
**Excludes PFFS and PDP.
CNO Financial Group
6
2Q11 Summary of Results
CNO
($ millions, except per-share amounts)
CNO Financial Group
7
Quarterly Earnings
CNO
*Management believes that an analysis of earnings before net realized investment gains (losses), corporate interest, loss on extinguishment
of debt, fair value changes due to fluctuations in the interest rates used to discount embedded derivative liabilities related to our fixed index
annuities and taxes (“EBIT,” a non-GAAP financial measure) provides a clearer comparison of the operating results of the company quarter-
over-quarter because it excludes: (1) corporate interest expense; (2) loss on extinguishment of debt; (3) net realized investment gains
(losses); and (4) fair value changes due to fluctuations in the interest rates used to discount embedded derivative liabilities related to our fixed
index annuities that are unrelated to the company’s underlying fundamentals. The table above provides a reconciliation of EBIT to net income.
of debt, fair value changes due to fluctuations in the interest rates used to discount embedded derivative liabilities related to our fixed index
annuities and taxes (“EBIT,” a non-GAAP financial measure) provides a clearer comparison of the operating results of the company quarter-
over-quarter because it excludes: (1) corporate interest expense; (2) loss on extinguishment of debt; (3) net realized investment gains
(losses); and (4) fair value changes due to fluctuations in the interest rates used to discount embedded derivative liabilities related to our fixed
index annuities that are unrelated to the company’s underlying fundamentals. The table above provides a reconciliation of EBIT to net income.
($ millions)
CNO Financial Group
8
Operating ROE
CNO
Operating ROE*, Trailing 4 Quarters
*Operating return excludes loss on extinguishment of debt, net realized investment gains (losses), fair value changes due to
fluctuations in the interest rates used to discount embedded derivative liabilities related to our fixed index annuities and change in
valuation allowance related to deferred tax assets. Equity excludes accumulated other comprehensive income (loss) and the value of
net operating loss carryforwards. See Appendix for a reconciliation to the corresponding GAAP measure.
fluctuations in the interest rates used to discount embedded derivative liabilities related to our fixed index annuities and change in
valuation allowance related to deferred tax assets. Equity excludes accumulated other comprehensive income (loss) and the value of
net operating loss carryforwards. See Appendix for a reconciliation to the corresponding GAAP measure.
|
Average common shareholders’ equity,
excluding AOCI/L and net operating loss carryforwards, trailing 4 quarters: |
$2,808.3
|
$2,942.8
|
$3,048.5
|
$3,129.7
|
$3,217.4
|
($ millions)
§ Increased ROE despite a
15% increase in average
equity
15% increase in average
equity
CNO Financial Group
9
Operating EPS* (Diluted)
§ Increased EPS due to higher
earnings
earnings
* Operating earnings per share exclude loss on extinguishment of debt, net realized investment gains (losses), fair value changes due
to fluctuations in the interest rates used to discount embedded derivative liabilities related to our fixed index annuities and valuation
allowance related to deferred tax assets. See Appendix for a reconciliation to the corresponding GAAP measure.
to fluctuations in the interest rates used to discount embedded derivative liabilities related to our fixed index annuities and valuation
allowance related to deferred tax assets. See Appendix for a reconciliation to the corresponding GAAP measure.
** Includes the dilutive impact from convertible debentures. See the appendix for additional details.
|
Weighted average diluted shares (in millions)**:
|
302.6
|
306.0
|
306.7
|
307.5
|
308.0
|
CNO Financial Group
10
Book Value
CNO
*See Appendix for a reconciliation to the corresponding GAAP measure.
($ millions, except per-share amounts)
Book value per diluted share (excluding AOCI/L) as of June 30, 2011 was $14.58
CNO Financial Group
11
CNO Financial Group
12
CNO Financial Group
13
Financial Strength
§ RBC increased to 351% in 2Q11
– Positive impact reflects increase from
Statutory income (+20 pts) and reduction in
NAIC 5 and 6 securities (+7 pts)
Statutory income (+20 pts) and reduction in
NAIC 5 and 6 securities (+7 pts)
– Partially offset by dividends paid up to the
holding company (-17 pts)
holding company (-17 pts)
*Risk-Based Capital (“RBC”) requirements provide a tool for insurance regulators to
determine the levels of statutory capital and surplus an insurer must maintain in relation
to its insurance and investment risks. The RBC ratio is the ratio of the statutory
consolidated adjusted capital of our insurance subsidiaries to RBC.
determine the levels of statutory capital and surplus an insurer must maintain in relation
to its insurance and investment risks. The RBC ratio is the ratio of the statutory
consolidated adjusted capital of our insurance subsidiaries to RBC.
Consolidated RBC Ratio*
Liquidity
($ millions)
|
21.3%
|
21.2%
|
20.0%
|
19.2%
|
18.7%
|
|
Debt to Total Capital Ratio**
|
**as defined in our Senior Secured Credit Agreement. See appendix for reconciliation
to GAAP measure.
to GAAP measure.
§ Unrestricted cash and investments held at the
holding company increased $65 million during
2Q11 including:
holding company increased $65 million during
2Q11 including:
– The dividend payments from our insurance
subsidiaries
subsidiaries
– Partially offset by $16.2 million for share
repurchases and $16.2 million of
commensurate prepayment of debt
repurchases and $16.2 million of
commensurate prepayment of debt
CNO Financial Group
14
§ Earnings of $84.7 million, up 32%
– Results in 2Q11 were favorably impacted by:
• Increase in annuity income due to growth in the block, reflecting
continued favorable persistency
continued favorable persistency
• Bond prepayment income
• Additional spread earned on investments purchased with the proceeds
of borrowings from the Federal Home Loan Bank
of borrowings from the Federal Home Loan Bank
– Pre-tax operating earnings in 2Q11 included:
• Bond prepayment income of $6.0 million
• $3.7 million of earnings from the PFFS business assumed through our
reinsurance agreements with Coventry (the last of which expired on
January 1, 2010) due to premium adjustments received in 2Q11
reinsurance agreements with Coventry (the last of which expired on
January 1, 2010) due to premium adjustments received in 2Q11
2Q Summary
Bankers Life
CNO Financial Group
15
Sales and Distribution Results
§ Mixed sales results
– Down 6%; up 9% vs. 1Q11
• Life sales up 8%; up 12% vs. 1Q11
• Annuity sales down 8%; up 16% vs. 1Q11
• Med supp sales down 11%; up 2% vs. 1Q11
• LTC sales down 17%; up 6% vs. 1Q11
Bankers Life
Quarterly NAP*
*PFFS and PDP sales are not comparable and are excluded from NAP in all periods; in addition, we no longer assume any of the risks on
PFFS contracts through reinsurance.
PFFS contracts through reinsurance.
($ millions)
|
Med supp policies issued (in thousands):
|
12.6
|
10.2
|
19.7
|
11.4
|
11.8
|
§ Recruiting has been successful
– New agent contracts up 9% over 1Q11
– Agent force growth up 6% over 1Q11
§ Branch expansion on schedule; opened 10 of 15 locations
CNO Financial Group
16
Medicare Supplement Update
Bankers Life
§ Industry and Competition
– Competitors continue to take rate increases in most markets
– Bankers plans to take no pricing actions this year, as product is
performing to profit expectations
performing to profit expectations
– Began filing more competitive four-tier structure, offering gender-specific
and preferred rates, available in most states by fourth quarter 2011
and preferred rates, available in most states by fourth quarter 2011
§ Sales Highlights
– YTD 8% decline in sales compared to 2010, although issued policy
count has remained flat, reflecting shift to lower-premium Plan N
count has remained flat, reflecting shift to lower-premium Plan N
– Compared to 1Q2011, NAP up 2% and issued policies up 3%
– Continued reduction in policies returned during “free look” period,
indicative of improved competitive position
indicative of improved competitive position
CNO Financial Group
17
Bankers Life
§ Stable financial results
– Interest adjusted benefit ratio over the past several quarters in the 70-
75% range, reflecting ongoing claims management improvements and
successfully gaining approval for rate increases where necessary
75% range, reflecting ongoing claims management improvements and
successfully gaining approval for rate increases where necessary
§ Rate increase activity continues
– Filed for increases on inflationary plans sold between 1992 and 2003
• 3rd rate increase on these polices (approximately half of this block)
– Filed for 2nd increase on most plans sold between 2002 and 2005
– Expect to implement rate increases of $37 million
• Approximately $15.6 million of approvals received as of 6/30/11
– Although State approvals are becoming more challenging than in prior
rounds, still projecting to receive most approvals within 24 months;
reflective of
rounds, still projecting to receive most approvals within 24 months;
reflective of
• Relatively homogeneous block of products
• Experience in rate increase approval process
LTC Update
CNO Financial Group
18
Quarterly Earnings
Management believes that an analysis of income before: (i) net realized investment gains (losses), net of related amortization; and (ii) fair value changes due to fluctuations in the
interest rates used to discount embedded derivative liabilities related to our fixed index annuities, net of related amortization (a non-GAAP financial measure), is important to
evaluate the financial performance of our business, and is a measure commonly used in the life insurance industry. Management uses this measure to evaluate performance
because these items can be affected by events that are unrelated to a company’s underlying fundamentals. The table on Page 7 reconciles the non-GAAP measure to the
corresponding GAAP measure. See Appendix for a reconciliation of the return on equity measure to the corresponding GAAP measure.
interest rates used to discount embedded derivative liabilities related to our fixed index annuities, net of related amortization (a non-GAAP financial measure), is important to
evaluate the financial performance of our business, and is a measure commonly used in the life insurance industry. Management uses this measure to evaluate performance
because these items can be affected by events that are unrelated to a company’s underlying fundamentals. The table on Page 7 reconciles the non-GAAP measure to the
corresponding GAAP measure. See Appendix for a reconciliation of the return on equity measure to the corresponding GAAP measure.
Bankers Life
($ millions)
* Implemented segment operating return on allocated capital calculations beginning in 3Q10
CNO Financial Group
19
2Q Summary
Washington National
§ Earnings of $22.7 million, up 8%, consistent with our expectations
§ Core product sales (supplemental health and life) up 3%
– Up 14% from 1Q11
§ Solid recruiting results for the PMA and WNIC Independent
channels
channels
CNO Financial Group
20
Washington National
2Q10 NAP
2Q11 NAP
2Q11 Sales Results
($ millions)
§ Supplemental health sales up 2%
§ Up 14% vs. 1Q11
§ Life sales up 23%
§ Up 15% vs. 1Q11
CNO Financial Group
21
Ongoing Growth Initiatives
Washington National
§ PMA
– Increasing agent recruiting capacity
– Training agents to cross-sell life insurance with their supplemental health
sales
sales
– Developing more sales leaders to support larger agent force and
geographic expansion
geographic expansion
§ WNIC Independent
– Increasing IMO recruiting capacity
– Expanding geographic coverage with more wholesaling “feet-on-the-
street”
street”
• Added two worksite-experienced field directors in 2010
• Plan to add two more in 2011
CNO Financial Group
22
Quarterly Earnings
Washington National
Management believes that an analysis of income (loss) before net realized investment gains (losses), net of related amortization (a non-GAAP financial measure), is
important to evaluate the financial performance of our business, and is a measure commonly used in the life insurance industry. Management uses this measure to evaluate
performance because realized gains or losses can be affected by events that are unrelated to a company’s underlying fundamentals. The table on Page 7 reconciles the non-
GAAP measure to the corresponding GAAP measure.
important to evaluate the financial performance of our business, and is a measure commonly used in the life insurance industry. Management uses this measure to evaluate
performance because realized gains or losses can be affected by events that are unrelated to a company’s underlying fundamentals. The table on Page 7 reconciles the non-
GAAP measure to the corresponding GAAP measure.
($ millions)
* Implemented segment operating return on allocated capital calculations beginning in 3Q10
CNO Financial Group
23
§ Earnings of $7.6 million, flat compared to 2Q10
§ Sales growth continues, NAP up 5%
– Down 6% from 1Q11
2Q Summary
Colonial Penn
CNO Financial Group
24
Quarterly Earnings
Colonial Penn
Management believes that an analysis of income before net realized investment gains (losses), net of related amortization (a non-GAAP financial measure), is important to
evaluate the financial performance of our business, and is a measure commonly used in the life insurance industry. Management uses this measure to evaluate
performance because realized gains or losses can be affected by events that are unrelated to a company’s underlying fundamentals. The table on Page 7 reconciles the non
-GAAP measure to the corresponding GAAP measure. See Appendix for a reconciliation of the return on equity measure to the corresponding GAAP measure.
evaluate the financial performance of our business, and is a measure commonly used in the life insurance industry. Management uses this measure to evaluate
performance because realized gains or losses can be affected by events that are unrelated to a company’s underlying fundamentals. The table on Page 7 reconciles the non
-GAAP measure to the corresponding GAAP measure. See Appendix for a reconciliation of the return on equity measure to the corresponding GAAP measure.
($ millions)
* Implemented segment operating return on allocated capital calculations beginning in 3Q10
CNO Financial Group
25
§ New COO role will focus on optimizing growth initiatives across the
segments and achieving operational efficiencies to support that
growth
segments and achieving operational efficiencies to support that
growth
§ Currently evaluating initiatives in each segment for 2012 that will
generate additional growth with returns at or above our new
business target of 12%
generate additional growth with returns at or above our new
business target of 12%
§ Organic growth is a priority for excess capital deployment
§ We will continue to provide updates on these initiatives
Plans to Invest in Organic Growth
CNO Financial Group
26
§ Earnings of $4.8 million, compared to $8.8 million
– Results in this block are expected to fluctuate from period to period and
the results in 2Q11 were within our range of expectations
the results in 2Q11 were within our range of expectations
2Q Summary
Other CNO Business
CNO Financial Group
27
Quarterly Earnings (Losses)
Other CNO Business
($ millions)
Management believes that an analysis of income before: (i) net realized investment gains (losses), net of related amortization; and (ii) fair
value changes due to fluctuations in the interest rates used to discount embedded derivative liabilities related to our fixed index annuities, net
of related amortization (a non-GAAP financial measure), is important to evaluate the financial performance of our business, and is a measure
commonly used in the life insurance industry. Management uses this measure to evaluate performance because these items can be affected
by events that are unrelated to a company’s underlying fundamentals. The table on Page 7 reconciles the non-GAAP measure to the
corresponding GAAP measure. See Appendix for a reconciliation of the return on equity measure to the corresponding GAAP measure.
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 (a non-GAAP financial measure), is important to evaluate the financial performance of our business, and is a measure
commonly used in the life insurance industry. Management uses this measure to evaluate performance because these items can be affected
by events that are unrelated to a company’s underlying fundamentals. The table on Page 7 reconciles the non-GAAP measure to the
corresponding GAAP measure. See Appendix for a reconciliation of the return on equity measure to the corresponding GAAP measure.
CNO Financial Group
28
Excess Capital
Consolidated RBC Ratio
Liquidity
($ millions)
Approximately $243 million in excess
of management target
of management target
$134 million in excess of
management target
management target
Management Target = 300%
Management Target = $100
Approximately $377 million total excess capital as of 6/30/11
CNO
CNO Financial Group
29
Excess Capital Utilization Opportunities
§ Debt Prepayment
§ Share Buybacks
§ Investing in Business for Additional Growth
– Growth and expansion of distribution channels
– Recapture reinsurance blocks
§ Build Holding Company Investment Portfolio
– Utilize non-life operating loss carryforward
CNO
CNO Financial Group
30
2Q11 Share Repurchase & Debt Prepayment
§ Purchased 2.2 million shares during 2Q 2011 for $16.2 million
§ Average cost per share of $7.35
§ 0.9% of outstanding shares at March 31, 2011
§ Principal prepayment of $16.2 million made on Senior Secured Credit Facility
on June 30, 2011
on June 30, 2011
– Payment reduced scheduled principal amount due on September 30, 2016
§ Resulted in a 0.2% decrease in debt to total capital as defined in our Senior
Secured Credit Agreement
Secured Credit Agreement
§ Next scheduled principal payment under the facility of $10 million is not due
until September 30, 2012
until September 30, 2012
CNO
CNO Financial Group
31
GAAP Balances for Deferred Tax Asset as of 6/30/11:
Loss Carryforwards - Gross1 vs. Net2
Loss Carryforwards - Gross1 vs. Net2
($ millions)
1. Gross loss carryforward equals the total life (including state operating loss carryforwards), non-life, and capital loss carryforwards multiplied by a 35% tax rate
2. Net loss carryforward equals the gross loss carryforward net of the allowance
Totals
Gross Loss Carryforwards
Net Loss Carryforwards
Valuation Allowance
CNO
Valuation Allowance Analysis:
• June 30, 2011 - Considers the
cumulative losses we have incurred
over the last 3 years
cumulative losses we have incurred
over the last 3 years
• September 30, 2011 - We expect to
no longer be in a 3 year cumulative
loss position
no longer be in a 3 year cumulative
loss position
CNO Financial Group
32
Net Investment Income
CNO
§ Relatively stable yield progression despite
tight investment environment
tight investment environment
§ Increase in investment income primarily
due to growth in assets
due to growth in assets
§ 2010 portfolio yield increase (excluding
FHLB) due primarily to new money
investments
FHLB) due primarily to new money
investments
§ 2Q 2011 investment income and earned
yield increases due to expanded FHLB
floating rate program plus non-recurring
income from calls and prepayments
yield increases due to expanded FHLB
floating rate program plus non-recurring
income from calls and prepayments
General Account Investment Income
|
Earned Yield:
|
5.83%
|
5.86%
|
5.77%
|
5.79%
|
5.87%
|
($ millions)
|
Earned Yield (excluding floating rate FHLB):
|
5.83%
|
5.87%
|
5.84%
|
5.90%
|
5.97%
|
|
New Money Rate (excluding floating rate FHLB):
|
6.26%
|
6.00%
|
5.96%
|
5.60%
|
5.24%
|
CNO Financial Group
33
Realized Gains/Losses Recognized
through Net Income
CNO
($ millions)
CNO Financial Group
34
*Includes debt and equity securities classified as available for sale. Excludes investments from variable interest entities which we
consolidate under GAAP.
consolidate under GAAP.
CNO Financial Group
35
2Q11 Impairments
CNO
($ millions)
CNO Financial Group
36
Commercial Mortgage Loans at 6/30/11
By Vintage
CNO
By Property Type
§ Average trailing debt service coverage ratio (DSCR) stable at approximately 1.41
§ As of 6/30/11, 2 delinquent loans ($11.6mm unpaid balance)
CNO Financial Group
37
Asset Allocation at 6/30/11*
CNO
*Excludes investments from variable interest entities which we consolidate under GAAP (the related liabilities are non-recourse to CNO).
($ millions)
CNO Financial Group
38
Investment Quality: Fixed Maturities*
CNO
§ 92% investment grade
|
% of Bonds which are Investment Grade:
|
92%
|
92%
|
91%
|
90%
|
92%
|
*Excludes investments from variable interest entities which we consolidate under GAAP (the related liabilities are non-recourse to CNO).
CNO Financial Group
39
Holding Company Investments at 6/30/11
CNO
($ millions)
|
Cash and Money Market
|
$130.9
|
|
Fixed Income (net)
|
17.6
|
|
Equities
|
12.9
|
|
Alternatives*
|
72.6
|
|
TOTAL
|
$234.0
|
Target Allocation
Current Investments
* Includes $25 Paulson investment made 7/1/2011; excluded
from cash and money market
from cash and money market
CNO Financial Group
40
European Debt by Select Countries
CNO
($ millions)
CNO Financial Group
41
Summary
§ Core business continues to perform well
– Solid earnings continued in 2Q
– Key measures of financial strength continue to improve
§ CEO transition and new COO role
§ Capital generation creates unique opportunities
– Generating significant amounts of excess capital
– Moving more excess capital to holding company to generate more non-
life income and utilize operating loss carryforwards
life income and utilize operating loss carryforwards
– Repurchased 2.2 million shares during 2Q and made related debt
prepayment of $16.2 million
prepayment of $16.2 million
§ Continue emphasis on profitable organic growth
– 2011 first year baby boomers begin turning 65
– Adding 15 new locations for Bankers Life in 2011
– Created COO role to focus on growth initiatives
CNO
CNO Financial Group
42
Questions and Answers
CNO Financial Group
43
Appendix
CNO Financial Group
44
Covenant Metrics
Interest Coverage Ratio
Statutory Surplus ($ millions)
* Excludes Accumulated Other Comprehensive Income (Loss), as defined by the senior credit facility
** Not applicable to periods prior to 3/31/11
$1,200
CNO
225%
Covenants levels per
agreement
agreement
2.0x
**
**
**
CNO Financial Group
45
2Q11 Holding Company Liquidity
CNO
($ millions)
CNO Financial Group
46
2011 - 2018
2011 - 2018
Term Loan
Sr. Health Note
Convertible
9% Notes
Sr. Health Note
Convertible Debentures
Sr. Credit Facility
(1) Conversion price is $5.49. CNO can force conversion after 6/30/13 if CNO stock trades above $7.69 for 20 or more days in a consecutive 30 day trading
period. On 6/30/2011, CNO’s stock closed at $7.91.
period. On 6/30/2011, CNO’s stock closed at $7.91.
(1)
Maturity Profile Prior to 4Q10 Refinancing
Current Maturity Profile
($ millions)
$74
CNO
Debt Maturity Profile
CNO Financial Group
47
Operating Return on Allocated Capital Computation*
Adjusted operating earnings for the purpose of calculating operating return on allocated
capital is determined as follows:
capital is determined as follows:
Allocated capital is calculated as follows:
* A non-GAAP financial measure. Refer to the Appendix for a reconciliation to the corresponding GAAP measure.
Operating Return on Allocated Capital: 12.7% 9.3% 7.3% -3.0% -3.1% 6.5%
($ millions)
CNO Financial Group
48
Alt-A at 6/30/11
CNO
§ 1.3% of total invested assets
§ 98% NAIC 1 classification
§ Collateral performing better than overall Alt-A collateral universe in terms of delinquency and
accumulated loss trends
accumulated loss trends
§ All securities evaluated using market-consistent estimates of future collateral performance
§ Substantial proportion of investments purchased at discounts reflective of current market
expectations for cash flows from collateral
expectations for cash flows from collateral
§ Credit migration consistent with expectations for seasoning effect on collateral and credit support
*Market value.
($ millions)
CNO Financial Group
49
Prime Jumbo at 6/30/11
CNO
§ 4.0% of total invested assets
§ 99.2% NAIC 1 classification
§ Substantial proportion of investments purchased at discounts reflective of current market
expectations for cash flows from collateral
expectations for cash flows from collateral
§ All securities evaluated using market-consistent estimates of collateral performance
§ Credit support remains substantial relative to anticipated cumulative losses
§ Collateral performing within expectations
*Market value.
($ millions)
CNO Financial Group
50
CMBS at 6/30/11
CNO
($ millions)
CNO Financial Group
51
CMBS at 6/30/11
CNO
§ 6.0% of invested assets
§ 99.5% NAIC 1 classification
§ Collateral performing materially better than overall CMBS collateral universe in terms of delinquency
and cumulative loss
and cumulative loss
§ All securities evaluated using market-consistent estimates of collateral performance
§ Substantial credit support inherent in structures relative to expected cumulative losses
§ Collateral performing within expectations
*% of market value
($ millions)
CNO Financial Group
52
Commercial Mortgage Loans at 6/30/11
CNO
Pacific
10.8%
Mountain
10.1%
West North
Central
Central
13.7%
West South
Central
Central
6.2%
East North
Central
Central
15.5%
East South
Central
Central
3.1%
New England
8.4%
Middle
Atlantic
Atlantic
8.3%
South
Atlantic
Atlantic
23.9%
CNO Financial Group
53
Commercial Mortgage Loans at 6/30/11
Remaining Principal
Balance
Balance
By Maturity
CNO
($ millions)
CNO Financial Group
54
Premiums Collected
CNO
§ Trailing 4 quarters down 6%
– Stable results at Bankers Life
(excluding PFFS), Washington
National, and Colonial Penn
(excluding PFFS), Washington
National, and Colonial Penn
– Decline at OCB primarily due
to continued run-off of inforce
blocks, as expected
to continued run-off of inforce
blocks, as expected
CP
Washington
National
National
Collected Premiums -Trailing 4 Quarters
2Q10
$3,819.6
BLC Other
3Q10
$3,651.1
BLC PFFS
4Q10
$3,590.1
1Q11
$3,586.7
OCB
($ millions)
2Q11
$3,578.6
CNO Financial Group
55
Premiums Collected - Med Supp
§ First-year premiums down 16%
Med Supp - First-Year Premiums
Bankers Life
($ millions)
Policies issued and not included in NAP (net of chargebacks, in thousands):
|
PFFS policies issued:
|
-0.4
|
0.1
|
0.4
|
9.7
|
1.7
|
|
PDP policies issued:
|
0.3
|
1.0
|
0.4
|
8.1
|
7.5
|
|
Med Supp First-Year Prems.-Tr. 4 Qtrs:
|
$107.5
|
$114.1
|
$116.4
|
$114.3
|
$109.6
|
|
Med Supp Total Premiums-Quarterly:
|
$168.8
|
$170.1
|
$182.3
|
$178.8
|
$169.0
|
|
Med Supp NAP-Quarterly:
|
$21.0
|
$16.0
|
$31.8
|
$18.3
|
$18.6
|
|
Med Supp NAP-Trailing 4 Quarters:
|
$117.1
|
$113.2
|
$88.2
|
$87.1
|
$84.7
|
CNO Financial Group
56
Premiums Collected - LTC
§ Net first-year premiums up 9%,
reflecting reduction in new
business reinsurance
reflecting reduction in new
business reinsurance
First-Year Prems.-Tr. 4 Qtrs: $19.1 $21.9 $22.2 $23.5 $24.0
Total Premiums-Quarterly: $146.6 $145.0 $143.5 $144.9 $142.9
Long-Term Care - First-Year Premiums*
NAP-Quarterly: $8.7 $7.2 $6.7 $6.9 $7.3
NAP-Trailing 4 Quarters: $35.4 $32.8 $31.2 $29.5 $28.1
*Includes $3.7 million in 2Q10, $2.8 million in 3Q10, $2.0 million in 4Q10, $1.5 million in 1Q11, and $1.4 million in 2Q11 of premiums
ceded under business reinsurance agreement.
ceded under business reinsurance agreement.
2Q11
(Direct)
$7.4
2Q10
(Direct)
$9.2
3Q10
(Direct)
$8.5
4Q10
(Direct)
$8.2
1Q11
(Direct)
$7.6
Bankers Life
($ millions)
CNO Financial Group
57
Premiums Collected - Life
§ First-year premiums up 19%
First-Year Prems.-Tr. 4 Qtrs: $91.4 $93.8 $97.7 $102.2 $106.8
Total Premiums-Quarterly: $52.1 $54.8 $56.2 $56.4 $62.0
Life - First-Year Premiums
NAP-Quarterly: $17.3 $16.3 $15.9 $16.6 $18.6
NAP-Trailing 4 Quarters: $62.6 $63.1 $65.3 $66.1 $67.4
SPWL
Non-
SPWL
1Q11
$24.7
$12.4
$12.4
2Q10
$24.8
$11.9
$13.9
3Q10
$25.8
$12.3
$14.6
4Q10
$26.9
$11.0
$15.1
Bankers Life
($ millions)
2Q11
$29.4
$13.7
$14.3
CNO Financial Group
58
Premiums Collected - Annuity
§ First-year premiums down 8%
First-Year Prems.-Tr. 4 Qtrs: $984.4 $965.1 $1,001.2 $999.4 $977.4
Total Premiums-Quarterly: $281.1 $265.8 $234.4 $222.2 $259.1
Annuity - First-Year Premiums
Bankers Life
($ millions)
CNO Financial Group
59
Premiums Collected -
Supplemental Health
Washington National
§ First-year premiums up 5%
First-Year Prems.-Tr. 4 Qtrs: $49.7 $50.9 $52.0 $52.7 $53.3
Total Premiums-Quarterly: $100.2 $101.5 $104.2 $106.5 $108.5
Supplemental Health - First-Year Premiums
NAP-Quarterly: $17.5 $18.0 $17.5 $15.7 $17.9
NAP-Trailing 4 Quarters: $63.4 $65.3 $67.6 $68.7 $69.1
($ millions)
CNO Financial Group
60
Premiums Collected - Life
Colonial Penn
§ First-year premiums up 6%
First-Year Prems.-Tr. 4 Qtrs: $31.4 $31.6 $32.3 $33.1 $33.6
Total Premiums-Quarterly: $46.7 $46.9 $46.8 $49.4 $48.5
Life - First-Year Premiums
NAP-Quarterly: $12.2 $11.5 $9.5 $13.6 $12.8
NAP-Trailing 4 Quarters: $44.3 $45.2 $46.3 $46.8 $47.4
($ millions)
CNO Financial Group
61
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.
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 loss on
extinguishment of debt, net realized gains or losses, fair value changes due to fluctuations in the interest rates
used to discount embedded derivative liabilities related to our fixed index annuities and increases or
decreases to our valuation allowance for deferred tax assets (“net operating income,” a non-GAAP financial
measure) is important to evaluate the performance of the Company and is a key measure commonly used in
the life insurance industry. Management uses this measure to evaluate performance because these items are
unrelated to the Company’s continuing operations.
Management believes that an analysis of net income applicable to common stock before loss on
extinguishment of debt, net realized gains or losses, fair value changes due to fluctuations in the interest rates
used to discount embedded derivative liabilities related to our fixed index annuities and increases or
decreases to our valuation allowance for deferred tax assets (“net operating income,” a non-GAAP financial
measure) is important to evaluate the performance of the Company and is a key measure commonly used in
the life insurance industry. Management uses this measure to evaluate performance because these items are
unrelated to the Company’s continuing operations.
CNO Financial Group
62
Information Related to Certain Non-GAAP Financial Measures
A reconciliation of net income applicable to common stock to net operating income (and related per-share amounts) is as follows
(dollars in millions, except per-share amounts):
(dollars in millions, except per-share amounts):
CNO Financial Group
63
A reconciliation of operating income and shares used to calculate basic and diluted operations earnings per share is as follows (dollars in
millions, except per-share amounts, and shares in thousands):
millions, except per-share amounts, and shares in thousands):
Information Related to Certain Non-GAAP Financial Measures
CNO Financial Group
64
Information Related to Certain Non-GAAP Financial Measures
Book value, excluding accumulated other comprehensive income (loss), per share
This non-GAAP financial measure differs from book value per share because accumulated other comprehensive income (loss) has been
excluded from the book value used to determine the 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.
This non-GAAP financial measure differs from book value per share because accumulated other comprehensive income (loss) has been
excluded from the book value used to determine the 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 from book value per share to book value per share, excluding accumulated other comprehensive income (loss) is as follows
(dollars in millions, except per share amounts):
(dollars in millions, except per share amounts):
CNO Financial Group
65
Information Related to Certain Non-GAAP Financial Measures
Operating return measures
Management believes that an analysis of return before loss on extinguishment of debt, net realized gains or losses, fair value changes due to
fluctuations in the interest rates used to discount embedded derivative liabilities related to our fixed index annuities and increases or decreases
to our valuation allowance for deferred tax assets (“net operating income,” a non-GAAP financial measure) is important to evaluate the
performance of the Company and is a key measure commonly used in the life insurance industry. Management uses this measure to evaluate
performance because these items are unrelated to the Company’s continued operations.
fluctuations in the interest rates used to discount embedded derivative liabilities related to our fixed index annuities and increases or decreases
to our valuation allowance for deferred tax assets (“net operating income,” a non-GAAP financial measure) is important to evaluate the
performance of the Company and is a key measure commonly used in the life insurance industry. Management uses this measure to evaluate
performance because these items are unrelated to the Company’s continued operations.
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.
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.
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.
All references to return on allocated capital measures assume a capital allocation based on a 275% targeted risk-based capital at the segment
level. Additionally, corporate debt has been allocated to the segments.
level. Additionally, corporate debt has been allocated to the segments.
CNO Financial Group
66
Information Related to Certain Non-GAAP Financial Measures
The calculations of: (i) operating return on allocated capital, excluding accumulated other comprehensive income (loss) and net operating
loss carryforwards (a non-GAAP financial measure); and (ii) return on equity, for the twelve months ended June 30, 2011, are as follows
(dollars in millions):
loss carryforwards (a non-GAAP financial measure); and (ii) return on equity, for the twelve months ended June 30, 2011, are as follows
(dollars in millions):
(Continued on next page)
CNO Financial Group
67
Information Related to Certain Non-GAAP Financial Measures
A reconciliation of pretax operating earnings (a non-GAAP financial measure) to segment operating return (loss) and consolidated net income
(loss) for the twelve months ended June 30, 2011, is as follows (dollars in millions):
(loss) for the twelve months ended June 30, 2011, is as follows (dollars in millions):
(Continued on next page)
CNO Financial Group
68
Information Related to Certain Non-GAAP Financial Measures
A reconciliation of average allocated capital (for the purpose of determining return on allocated capital), excluding accumulated other
comprehensive income (loss) and net operating loss carryforwards (a non-GAAP financial measure) to average common shareholders’ equity, is
as follows (dollars in millions):
comprehensive income (loss) and net operating loss carryforwards (a non-GAAP financial measure) to average common shareholders’ equity, is
as follows (dollars in millions):
(Continued on next page)
(Continued from previous page)
CNO Financial Group
69
Information Related to Certain Non-GAAP Financial Measures
A reconciliation of consolidated capital, excluding accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-
GAAP financial measure) to common shareholders’ equity, is as follows (dollars in millions):
GAAP financial measure) to common shareholders’ equity, is as follows (dollars in millions):
(Continued from previous page)
CNO Financial Group
70
Information Related to Certain Non-GAAP Financial Measures
A reconciliation of the debt to capital ratio to debt to capital, as defined in our Senior Secured Agreement is as follows (dollars in millions)
Debt to capital ratio, excluding accumulated other comprehensive income (loss)
This non-GAAP financial measure 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. In addition, debt is defined as par value plus accrued interest and certain
other items. Management believes this non-GAAP financial measure is useful as the level of such ratio impacts certain provisions in our Senior
Secured Credit Agreement.
excluded from the value of capital used to determine this measure. In addition, debt is defined as par value plus accrued interest and certain
other items. Management believes this non-GAAP financial measure is useful as the level of such ratio impacts certain provisions in our Senior
Secured Credit Agreement.