EX-99.2 23 exhibit992-04252012investo.htm EXHIBIT 99.2 Exhibit 99.2 - 04.24.2012 investor supplement


Exhibit 99.2







 
 
 
 
 
 
 
 
 
 
 
 
Quarterly Financial Supplement -
 
 
 
 
 
4Q2011 as Restated to Reflect the Adoption of ASU 2010-26
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
April 24, 2012
 
 
 
 
 
 
 
 
 
 
 

Page 1


Table of Contents
 
 
 
Page
 
 
 
 
 
Consolidated balance sheet
 
 
 
3
Consolidated statement of operations
 
 
 
4
Operating results
 
 
 
5
Computation of weighted average shares outstanding
 
 
 
6
EBIT from Business Segments Summarized by In-Force and New Business
 
 
 
7
Analyses of income before taxes and selected data:
 
 
 
 
     Bankers Life
 
 
 
8-10
     Washington National
 
 
 
11-13
     Colonial Penn
 
 
 
14-15
     Other CNO Business
 
 
 
16-18
     Corporate Operations
 
 
 
19
Premiums collected on insurance products:
 
 
 
 
     Bankers Life
 
 
 
20
     Washington National
 
 
 
21
     Colonial Penn
 
 
 
22
     Other CNO Business
 
 
 
23
New annualized premiums
 
 
 
24
Statutory information
 
 
 
25
Notes
 
 
 
26

Page 2


CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
 
 
Consolidated balance sheet (in millions)
 
 
Mar-10
Jun-10
Sep-10
Dec-10
Mar-11
Jun-11
Sep-11
Dec-11
 
 
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
 
Investments:
 
 
 
 
 
 
 
 
 
 
  Fixed maturities, available for sale, at fair value
 
 
$
18,813.8

$
19,935.7

$
21,007.5

$
20,633.9

$
20,852.2

$
21,622.9

$
23,016.7

$
23,516.0

  Equity securities at fair value
 
 
31.1

31.0

41.1

68.1

105.4

129.6

164.3

175.1

  Mortgage loans
 
 
1,936.6

1,948.1

1,825.6

1,761.2

1,751.3

1,752.8

1,648.2

1,602.8

  Policy loans
 
 
294.0

292.9

290.9

284.4

281.6

279.5

279.6

279.7

  Trading securities
 
 
332.0

360.7

389.7

372.6

403.1

83.5

81.8

91.6

  Investments held by variable interest entities
 
 
511.7

478.4

454.8

420.9

401.6

414.0

453.5

496.3

  Securities lending collateral
 
 
147.4

77.6

—

—

—

—

—

—

  Other invested assets
 
 
236.3

167.2

189.5

240.9

272.1

252.2

190.9

202.8

  Total investments
 
 
22,302.9

23,291.6

24,199.1

23,782.0

24,067.3

24,534.5

25,835.0

26,364.3

Cash and cash equivalents - unrestricted
 
 
321.1

323.7

548.8

571.9

424.6

580.2

461.9

436.0

Cash and cash equivalents held by variable interest entities
 
 
24.3

13.5

18.3

26.8

27.1

25.3

19.7

74.4

Accrued investment income
 
 
334.0

323.1

345.3

327.8

336.7

314.3

301.2

288.7

Present value of future profits
 
 
1,133.2

1,077.3

1,028.3

1,008.6

970.1

936.5

714.2

697.7

Deferred acquisition costs
 
 
1,048.5

974.3

899.1

999.6

989.3

975.5

749.6

724.8

Reinsurance receivables
 
 
3,444.1

3,357.2

3,315.7

3,256.3

3,219.0

3,172.5

3,131.3

3,091.1

Income tax assets, net
 
 
1,301.9

1,043.6

806.6

1,127.0

1,090.4

998.4

948.8

891.3

Assets held in separate accounts
 
 
17.0

15.6

16.7

17.5

18.1

17.4

15.4

15.0

Other assets
 
 
367.6

320.0

323.2

277.4

413.0

323.6

289.6

292.2

Total assets
 
 
$
30,294.6

$
30,739.9

$
31,501.1

$
31,394.9

$
31,555.6

$
31,878.2

$
32,466.7

$
32,875.5

Liabilities
 
 
 
 
 
 
 
 
 
 
Liabilities for insurance products:
 
 
 
 
 
 
 
 
 
 
  Interest-sensitive products
 
 
$
13,217.7

$
13,177.8

$
13,217.6

$
13,194.7

$
13,161.3

$
13,152.8

$
13,168.2

$
13,165.5

  Traditional products
 
 
10,137.6

10,199.7

10,253.0

10,307.6

10,357.9

10,424.4

10,444.8

10,482.7

  Claims payable and other policyholder funds
 
 
969.4

946.0

939.4

968.7

979.0

978.0

985.5

1,034.3

  Liabilities related to separate accounts
 
 
17.0

15.6

16.7

17.5

18.1

17.4

15.4

15.0

Other liabilities
 
 
593.6

693.3

843.2

505.3

651.8

712.2

585.2

556.3

Investment borrowings
 
 
454.5

454.2

653.9

1,204.1

1,203.8

1,305.3

1,509.1

1,676.5

Borrowings related to variable interest entities
 
 
495.4

449.7

425.0

386.9

354.4

317.3

405.6

519.9

Securities lending payable
 
 
152.4

82.0

—

—

—

—

—

—

Notes payable - direct corporate obligations
 
 
1,037.2

1,029.4

1,029.8

998.5

949.8

934.5

871.2

857.9

Total liabilities
 
 
27,074.8

27,047.7

27,378.6

27,583.3

27,676.1

27,841.9

27,985.0

28,308.1

Shareholders' equity
 
 
 
 
 
 
 
 
 
 
Common stock
 
 
2.5

2.5

2.5

2.5

2.5

2.5

2.4

2.4

Additional paid-in capital
 
 
4,411.0

4,418.8

4,421.6

4,424.2

4,426.1

4,414.3

4,379.4

4,361.9

Accumulated deficit
 
 
(1,088.6
)
(1,068.5
)
(1,029.9
)
(867.8
)
(822.4
)
(776.0
)
(596.5
)
(532.1
)
Total shareholders' equity before accumulated other comprehensive income (loss)
 
 
3,324.9

3,352.8

3,394.2

3,558.9

3,606.2

3,640.8

3,785.3

3,832.2

Accumulated other comprehensive income (loss)
 
 
(105.1
)
339.4

728.3

252.7

273.3

395.5

696.4

735.2

Total shareholders' equity
 
 
3,219.8

3,692.2

4,122.5

3,811.6

3,879.5

4,036.3

4,481.7

4,567.4

Total liabilities and shareholders' equity
 
 
$
30,294.6

$
30,739.9

$
31,501.1

$
31,394.9

$
31,555.6

$
31,878.2

$
32,466.7

$
32,875.5

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
 
 
 
 
 
 
 
 
 
 
 
Book value per share at period-end (1) (2)
 
 
$
13.25

$
13.36

$
13.52

$
14.17

$
14.34

$
14.60

$
15.56

$
15.88

 
 
 
 
 
 
 
 
 
 
 
Book value per share assuming conversion of convertible securities (1) (3)
 
 
$
12.00

$
11.85

$
12.00

$
12.51

$
12.62

$
12.79

$
13.60

$
13.87

 
 
 
 
 
 
 
 
 
 
 

Page 3


CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
 
 
Consolidated statement of operations (in millions)
1Q10
2Q10
3Q10
4Q10
2010
1Q11
2Q11
3Q11
4Q11
2011
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
 
 
 
Insurance policy income
$
664.6

$
667.9

$
674.5

$
663.0

$
2,670.0

$
667.2

$
679.6

$
673.5

$
670.2

$
2,690.5

Net investment income (loss):
 
 
 
 
 
 
 
 
 
 
   General account assets
315.2

321.1

326.5

332.2

1,295.0

336.1

342.2

338.2

344.2

1,360.7

Policyholder and reinsurer accounts and other special-purpose portfolios
24.0

(22.7
)
43.3

27.3

71.9

37.4

3.1

(54.9
)
7.8

(6.6
)
Realized investment gains (losses):
 
 
 
 
 
 
 
 
 
 
Net realized investment gains, excluding impairment losses
15.4

11.2

28.1

125.3

180.0

18.4

13.0

33.5

31.5

96.4

   Other-than-temporary impairment losses:
 
 
 
 
 
 
 
 
 
 
      Total other-than-temporary impairment losses
(17.7
)
(29.3
)
(22.8
)
(77.0
)
(146.8
)
(13.3
)
(10.1
)
(2.9
)
(13.6
)
(39.9
)
Portion of other-than-temporary impairment losses recognized in accumulated other comprehensive income (loss)
(2.6
)
1.4

(1.7
)
(0.1
)
(3.0
)
—

—

—

5.3

5.3

   Net impairment losses recognized
(20.3
)
(27.9
)
(24.5
)
(77.1
)
(149.8
)
(13.3
)
(10.1
)
(2.9
)
(8.3
)
(34.6
)
Total realized gains (losses)
(4.9
)
(16.7
)
3.6

48.2

30.2

5.1

2.9

30.6

23.2

61.8

Fee revenue and other income
3.5

3.6

4.6

5.1

16.8

3.4

4.2

4.9

5.7

18.2

Total revenues
1,002.4

953.2

1,052.5

1,075.8

4,083.9

1,049.2

1,032.0

992.3

1,051.1

4,124.6

 
 
 
 
 
 
 
 
 
 
 
Benefits and expenses
 
 
 
 
 
 
 
 
 
 
Insurance policy benefits
699.0

651.0

700.0

673.7

2,723.7

683.2

684.4

661.0

670.4

2,699.0

Interest expense
27.5

28.7

28.4

28.6

113.2

29.2

28.9

27.9

28.1

114.1

Amortization
75.2

68.8

89.9

91.1

325.0

94.9

70.6

58.6

73.3

297.4

Loss on extinguishment of debt
1.8

0.9

—

4.1

6.8

1.4

0.6

1.1

0.3

3.4

Other operating costs and expenses
167.8

172.2

173.8

176.5

690.3

170.1

175.7

182.0

176.7

704.5

Total benefits and expenses
971.3

921.6

992.1

974.0

3,859.0

978.8

960.2

930.6

948.8

3,818.4

 
 
 
 
 
 
 
 
 
 
 
Income before income taxes
31.1

31.6

60.4

101.8

224.9

70.4

71.8

61.7

102.3

306.2

Income tax expense on period income
11.3

11.5

21.8

34.7

79.3

25.0

25.4

25.2

37.9

113.5

Valuation allowance for deferred tax assets
—

—

—

(95.0
)
(95.0
)
—

—

(143.0
)
—

(143.0
)
Net income
$
19.8

$
20.1

$
38.6

$
162.1

$
240.6

$
45.4

$
46.4

$
179.5

$
64.4

$
335.7

 
 
 
 
 
 
 
 
 
 
 

Page 4





CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
 
 
Operating results ($ in millions, except per share amounts)
1Q10
2Q10
3Q10
4Q10
2010
1Q11
2Q11
3Q11
4Q11
2011
 
 
 
 
 
 
 
 
 
 
 
EBIT (4):
 
 
 
 
 
 
 
 
 
 
   Bankers Life
$
40.2

$
50.3

$
84.2

$
62.8

$
237.5

$
62.2

$
72.1

$
79.4

$
77.2

$
290.9

   Washington National
27.0

19.6

26.1

27.7

100.4

24.3

21.8

21.2

28.8

96.1

   Colonial Penn
(4.1
)
2.6

2.2

3.5

4.2

(5.7
)
0.5

(1.3
)
1.8

(4.7
)
   Other CNO Business
(0.9
)
8.8

(23.6
)
6.5

(9.2
)
7.4

5.1

2.8

—

15.3

EBIT from business segments
62.2

81.3

88.9

100.5

332.9

88.2

99.5

102.1

107.8

397.6

Corporate operations, excluding corporate interest expense
(5.0
)
(11.8
)
(12.3
)
(13.7
)
(42.8
)
(0.5
)
(11.3
)
(27.5
)
(8.4
)
(47.7
)
EBIT
57.2

69.5

76.6

86.8

290.1

87.7

88.2

74.6

99.4

349.9

Corporate interest expense
(19.5
)
(19.8
)
(20.0
)
(20.0
)
(79.3
)
(20.6
)
(19.3
)
(18.7
)
(17.7
)
(76.3
)
Income before net realized investment gains (losses), fair value changes in embedded derivative liabilities and taxes
37.7

49.7

56.6

66.8

210.8

67.1

68.9

55.9

81.7

273.6

Tax expense on operating income
13.6

17.8

20.5

22.5

74.4

23.9

24.4

23.1

30.7

102.1

Net operating income (5)
24.1

31.9

36.1

44.3

136.4

43.2

44.5

32.8

51.0

171.5

Net realized investment gains (losses) (net of related amortization and taxes)
(3.1
)
(11.2
)
2.5

25.4

13.6

3.1

2.3

17.3

14.0

36.7

Fair value changes in embedded derivative liabilities (net of related amortization and taxes)
—

—

—

—

—

—

—

(12.9
)
(0.4
)
(13.3
)
Loss on extinguishment of debt, net of income taxes
(1.2
)
(0.6
)
—

(2.6
)
(4.4
)
(0.9
)
(0.4
)
(0.7
)
(0.2
)
(2.2
)
Net income before valuation allowance for deferred tax assets
19.8

20.1

38.6

67.1

145.6

45.4

46.4

36.5

64.4

192.7

Valuation allowance for deferred tax assets
—

—

—

95.0

95.0

—

—

143.0

—

143.0

Net income
$
19.8

$
20.1

$
38.6

$
162.1

$
240.6

$
45.4

$
46.4

$
179.5

$
64.4

$
335.7

 
 
 
 
 
 
 
 
 
 
 
Per diluted share:
 
 
 
 
 
 
 
 
 
 
Net operating income
$
.09

$
.12

$
.13

$
.16

$
.50

$
.15

$
.15

$
.12

$
.18

$
.61

Net realized investment gains (losses), net of related amortization and taxes
(.01
)
(.04
)
.01

.08

.04

.01

.01

.06

.05

.12

Fair value changes in embedded derivative liabilities, net of related amortization and taxes
—

—

—

—

—

—

—

(.04
)
—

(.04
)
Loss on extinguishment of debt
—

—

—

(.01
)
(.01
)
—

—

—

—

(.01
)
Valuation allowance for deferred tax assets
—

—

—

.31

.31

—

—

.47

—

.47

Diluted earnings per share
$
.08

$
.08

$
.14

$
.54

$
.84

$
.16

$
.16

$
.61

$
.23

$
1.15

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Page 5



CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
 
 
Computation of weighted average shares outstanding
1Q10
2Q10
3Q10
4Q10
2010
1Q11
2Q11
3Q11
4Q11
2011
(000s)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
 
 
 
 
 
 
 
 
 
Shares outstanding, beginning of period
250,786.2

250,929.8

251,044.7

251,046.4

250,786.2

251,084.2

251,404.9

249,415.2

243,247.3

251,084.2

Weighted average shares issued during the period:
 
 
 
 
 
 
 
 
 
 
Shares repurchased
—

—

—

—

—

—

(590.3
)
(2,511.6
)
(720.5
)
(3,700.7
)
Shares issued under stock option and restricted stock plans
2.3

67.8

0.1

18.2

240.0

52.6

118.5

61.8

268.6

694.4

Shares withheld for the payment of taxes owed on the vesting of restricted stock
(0.7
)
(3.4
)
—

(0.5
)
(53.5
)
(16.3
)
—

(0.3
)
(6.2
)
(125.9
)
Weighted average basic shares outstanding during the period
250,787.8

250,994.2

251,044.8

251,064.1

250,972.7

251,120.5

250,933.1

246,965.1

242,789.2

247,952.0

Basic shares outstanding, end of period
250,929.8

251,044.7

251,046.4

251,084.2

251,084.2

251,404.9

249,415.2

243,247.3

241,304.5

241,304.5

Diluted
 
 
 
 
 
 
 
 
 
 
Weighted average basic shares outstanding
250,787.8

250,994.2

251,044.8

251,064.1

250,972.7

251,120.5

250,933.1

246,965.1

242,789.2

247,952.0

Common stock equivalent shares related to:
 
 
 
 
 
 
 
 
 
 
  Convertible debentures
39,532.4

49,793.3

53,363.6

53,366.9

49,014.1

53,366.9

53,366.9

53,366.9

53,366.9

53,366.9

  Stock option and restricted stock plans
1,760.3

1,860.6

1,631.2

2,231.1

1,870.8

2,748.3

3,035.8

2,352.9

1,914.6

2,512.9

  Warrants
—

—

—

—

—

262.4

712.4

22.9

—

249.4

Weighted average diluted shares outstanding during the period
292,080.5

302,648.1

306,039.6

306,662.1

301,857.6

307,498.1

308,048.2

302,707.8

298,070.7

304,081.2

Diluted shares outstanding, end of period
296,498.0

306,268.9

306,044.5

306,682.1

306,682.1

307,782.4

306,530.3

298,990.0

296,586.0

296,586.0

 
 
 
 
 
 
 
 
 
 
 


Page 6


EBIT from Business Segments Summarized by In-Force and New Business (6)
 
 
 
 
 
 
 
 
 
 
(in millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EBIT from In-force Business
1Q10
2Q10
3Q10
4Q10
2010
1Q11
2Q11
3Q11
4Q11
2011
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
 
 
 
Insurance policy income
$
583.5

$
581.4

$
588.3

$
574.5

$
2,327.7

$
584.0

$
594.3

$
585.3

$
583.6

$
2,347.2

Net investment income (loss)
317.4

285.4

344.0

345.3

1,292.1

349.8

331.7

283.8

338.7

1,304.0

Fee revenue and other income
1.8

1.5

2.4

2.8

8.5

1.9

2.4

2.7

3.1

10.1

Total revenues
902.7

868.3

934.7

922.6

3,628.3

935.7

928.4

871.8

925.4

3,661.3

 
 
 
 
 
 
 
 
 
 
 
Benefits and expenses
 
 
 
 
 
 
 
 
 
 
Insurance policy benefits
635.7

589.5

632.2

611.1

2,468.5

624.8

626.3

569.4

609.1

2,429.6

Interest expense
5.0

5.0

5.1

5.9

21.0

6.1

6.1

6.7

6.9

25.8

Amortization
69.2

62.9

84.0

75.5

291.6

85.3

61.9

55.5

63.4

266.1

Other operating costs and expenses
97.0

98.4

96.0

99.0

390.4

90.1

95.5

91.8

101.4

378.8

Total benefits and expenses
806.9

755.8

817.3

791.5

3,171.5

806.3

789.8

723.4

780.8

3,100.3

EBIT from In-Force Business
$
95.8

$
112.5

$
117.4

$
131.1

$
456.8

$
129.4

$
138.6

$
148.4

$
144.6

$
561.0

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EBIT from New Business
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
 
 
 
Insurance policy income
$
81.1

$
86.5

$
86.2

$
88.5

$
342.3

$
83.2

$
85.3

$
88.2

$
86.6

$
343.3

Net investment income (loss)
16.2

11.1

17.3

11.5

56.1

11.1

9.1

6.2

10.6

37.0

Fee revenue and other income
1.0

1.5

1.7

1.9

6.1

.9

1.3

1.5

1.9

5.6

Total revenues
98.3

99.1

105.2

101.9

404.5

95.2

95.7

95.9

99.1

385.9

 
 
 
 
 
 
 
 
 
 
 
Benefits and expenses
 
 
 
 
 
 
 
 
 
 
Insurance policy benefits
63.3

61.5

67.8

62.6

255.2

58.4

58.1

57.7

60.8

235.0

Interest expense
—

—

—

—

—

—

—

—

—

—

Amortization
6.1

5.4

6.1

6.5

24.1

9.2

9.3

13.3

8.1

39.9

Other operating costs and expenses
62.5

63.4

59.8

63.4

249.1

68.8

67.4

71.2

67.0

274.4

Total benefits and expenses
131.9

130.3

133.7

132.5

528.4

136.4

134.8

142.2

135.9

549.3

EBIT from New Business
$
(33.6
)
$
(31.2
)
$
(28.5
)
$
(30.6
)
$
(123.9
)
$
(41.2
)
$
(39.1
)
$
(46.3
)
$
(36.8
)
$
(163.4
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EBIT from In-Force and New Business
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
 
 
 
Insurance policy income
$
664.6

$
667.9

$
674.5

$
663.0

$
2,670.0

$
667.2

$
679.6

$
673.5

$
670.2

$
2,690.5

Net investment income (loss)
333.6

296.5

361.3

356.8

1,348.2

360.9

340.8

290.0

349.3

1,341.0

Fee revenue and other income
2.8

3.0

4.1

4.7

14.6

2.8

3.7

4.2

5.0

15.7

Total revenues
1,001.0

967.4

1,039.9

1,024.5

4,032.8

1,030.9

1,024.1

967.7

1,024.5

4,047.2

 
 
 
 
 
 
 
 
 
 
 
Benefits and expenses
 
 
 
 
 
 
 
 
 
 
Insurance policy benefits
699.0

651.0

700.0

673.7

2,723.7

683.2

684.4

627.1

669.9

2,664.6

Interest expense
5.0

5.0

5.1

5.9

21.0

6.1

6.1

6.7

6.9

25.8

Amortization
75.3

68.3

90.1

82.0

315.7

94.5

71.2

68.8

71.5

306.0

Other operating costs and expenses
159.5

161.8

155.8

162.4

639.5

158.9

162.9

163.0

168.4

653.2

Total benefits and expenses
938.8

886.1

951.0

924.0

3,699.9

942.7

924.6

865.6

916.7

3,649.6

EBIT from In-Force and New Business
$
62.2

$
81.3

$
88.9

$
100.5

$
332.9

$
88.2

$
99.5

$
102.1

$
107.8

$
397.6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Page 7




CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
 
 
Bankers Life
 
 
 
 
 
 
 
 
 
 
Analysis of income before taxes (in millions)
1Q10
2Q10
3Q10
4Q10
2010
1Q11
2Q11
3Q11
4Q11
2011
 
 
 
 
 
 
 
 
 
 
 
Insurance policy income
$
396.2

$
400.7

$
405.1

$
394.2

$
1,596.2

$
400.0

$
409.6

$
404.6

$
398.2

$
1,612.4

Net investment income (loss):
 
 
 
 
 
 
 
 
 
 
   General account invested assets
172.2

177.0

182.4

187.7

719.3

191.3

196.5

194.3

198.2

780.3

   Fixed index products
12.1

(15.3
)
21.9

13.9

32.6

18.3

0.4

(36.3
)
3.6

(14.0
)
   Other special-purpose portfolios
1.6

(1.2
)
4.2

2.4

7.0

—

—

—

—

—

Net realized investment gains (losses)
(3.0
)
(10.3
)
18.3

57.1

62.1

6.6

(1.8
)
26.5

16.6

47.9

Fee revenue and other income
2.3

2.7

3.6

4.2

12.8

2.3

3.3

3.6

4.6

13.8

   Total revenues
581.4

553.6

635.5

659.5

2,430.0

618.5

608.0

592.7

621.2

2,440.4

 
 
 
 
 
 
 
 
 
 
 
Insurance policy benefits
350.6

344.2

341.8

339.9

1,376.5

337.6

351.3

333.6

339.2

1,361.7

Insurance policy benefits - fair value changes in embedded derivative liabilities
—

—

—

—

—

—

—

30.7

0.5

31.2

Amounts added to policyholder account balances:
 
 
 
 
 
 
 
 
 
 
Annuity products and interest-sensitive life products other than fixed index products
43.8

44.1

43.3

44.1

175.3

40.8

40.5

40.0

39.9

161.2

Fixed index products
22.1

(5.6
)
17.0

22.0

55.5

26.4

17.1

(13.0
)
16.7

47.2

Amortization related to operations
48.7

50.8

55.6

52.8

207.9

68.5

46.9

44.1

46.8

206.3

Amortization related to net realized investment gains (losses)
0.5

(0.5
)
1.1

6.9

8.0

0.8

(0.3
)
3.0

1.7

5.2

Amortization related to fair value changes in embedded derivative liabilities
—

—

—

—

—

—

—

(11.5
)
0.1

(11.4
)
Interest expense on investment borrowings
—

—

—

1.0

1.0

1.2

1.1

1.2

1.3

4.8

Other operating costs and expenses
79.0

80.1

75.3

79.8

314.2

75.2

80.8

80.9

83.5

320.4

   Total benefits and expenses
544.7

513.1

534.1

546.5

2,138.4

550.5

537.4

509.0

529.7

2,126.6

   Income before income taxes
$
36.7

$
40.5

$
101.4

$
113.0

$
291.6

$
68.0

$
70.6

$
83.7

$
91.5

$
313.8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Health underwriting margins (in millions)
1Q10
2Q10
3Q10
4Q10
2010
1Q11
2Q11
3Q11
4Q11
2011
 
 
 
 
 
 
 
 
 
 
 
Medicare supplement:
 
 
 
 
 
 
 
 
 
 
   Earned premium
$
178.8

$
178.5

$
178.2

$
177.4

$
712.9

$
181.0

$
179.5

$
179.2

$
178.6

$
718.3

   Benefit ratio
72.8
%
70.7
%
69.5
%
70.7
%
70.9
%
67.2
%
69.8
%
68.4
%
70.5
%
69.0
%
Underwriting margin (earned premium less policy benefits)
$
48.6

$
52.3

$
54.4

$
52.0

$
207.3

$
59.3

$
54.2

$
56.7

$
52.7

$
222.9

 
 
 
 
 
 
 
 
 
 
 
PDP:
 
 
 
 
 
 
 
 
 
 
   Earned premium
$
18.0

$
19.7

$
19.3

$
10.8

$
67.8

$
14.4

$
16.7

$
12.9

$
10.5

$
54.5

   Benefit ratio
88.7
%
89.8
%
64.4
%
60.7
%
77.7
%
89.5
%
88.6
%
76.1
%
72.6
%
82.8
%
Underwriting margin (earned premium less policy benefits)
$
2.0

$
2.0

$
6.9

$
4.2

$
15.1

$
1.5

$
1.9

$
3.1

$
2.9

$
9.4

 
 
 
 
 
 
 
 
 
 
 
PFFS:
 
 
 
 
 
 
 
 
 
 
   Earned premium
$
(0.1
)
$
(0.3
)
$
(0.4
)
$
0.2

$
(0.6
)
$
—

$
3.6

$
—

$
—

$
3.6

   Benefit ratio
N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

Underwriting margin (earned premium less policy benefits)
$
5.0

$
4.0

$
6.5

$
2.0

$
17.5

$
0.7

$
3.7

$
0.5

$
0.3

$
5.2

 
 
 
 
 
 
 
 
 
 
 
Long-term care:
 
 
 
 
 
 
 
 
 
 
   Earned premium
$
149.1

$
144.6

$
146.8

$
145.4

$
585.9

$
144.4

$
143.4

$
142.0

$
141.1

$
570.9

   Benefit ratio before interest income on reserves
114.4
%
113.0
%
114.2
%
113.3
%
113.7
%
113.4
%
115.0
%
109.7
%
112.1
%
112.6
%
   Interest-adjusted benefit ratio
75.2
%
71.9
%
73.2
%
71.5
%
73.0
%
70.8
%
71.6
%
65.5
%
67.3
%
68.8
%
Underwriting margin (earned premium plus interest income on reserves less policy benefits)
$
36.9

$
40.6

$
39.4

$
41.5

$
158.4

$
42.2

$
40.7

$
49.1

$
46.1

$
178.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Page 8



CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
 
 
Bankers Life
 
 
 
 
 
 
 
 
 
 
Average liabilities for insurance products (in millions) (continued)
1Q10
2Q10
3Q10
4Q10
2010
1Q11
2Q11
3Q11
4Q11
2011
 
 
 
 
 
 
 
 
 
 
 
Annuities:
 
 
 
 
 
 
 
 
 
 
   Mortality based
$
251.8

$
250.7

$
249.4

$
248.5

$
250.1

$
245.9

$
243.1

$
240.0

$
236.7

$
241.4

   Fixed index
1,685.0

1,769.7

1,871.3

2,008.3

1,833.6

2,147.7

2,268.3

2,412.9

2,573.0

2,350.5

   Deposit based
4,905.3

4,905.5

4,905.2

4,882.8

4,899.7

4,832.4

4,793.2

4,750.5

4,699.6

4,768.9

Medicare supplement and other supplemental health
4,275.6

4,337.4

4,376.8

4,431.4

4,355.3

4,489.6

4,529.9

4,564.0

4,606.8

4,547.6

Life:
 
 
 
 
 
 
 
 
 
 
   Interest sensitive
407.8

412.2

414.0

417.6

412.9

420.5

425.2

431.8

437.1

428.6

   Non-interest sensitive
331.4

346.9

363.4

379.5

355.3

397.8

416.8

437.7

460.5

428.2

Total average liabilities for insurance products, net of reinsurance ceded
$
11,856.9

$
12,022.4

$
12,180.1

$
12,368.1

$
12,106.9

$
12,533.9

$
12,676.5

$
12,836.9

$
13,013.7

$
12,765.2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Present value of future profits (in millions)
1Q10
2Q10
3Q10
4Q10
2010
1Q11
2Q11
3Q11
4Q11
2011
 
 
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
569.5

$
539.1

$
495.3

$
465.7

$
569.5

$
467.2

$
442.7

$
422.0

$
208.9

$
467.2

Amortization related to operations
(22.5
)
(21.5
)
(19.1
)
(16.9
)
(80.0
)
(24.6
)
(16.9
)
(14.3
)
(14.2
)
(70.0
)
Amortization related to net realized investment (gains) losses
—

—

(0.1
)
(0.4
)
(0.5
)
(0.1
)
0.1

(0.2
)
(0.2
)
(0.4
)
Adjustment related to unrealized (gain) or loss on fixed maturities, available for sale
(7.9
)
(22.3
)
(10.4
)
18.8

(21.8
)
0.2

(3.9
)
(198.6
)
7.3

(195.0
)
Balance, end of period
$
539.1

$
495.3

$
465.7

$
467.2

$
467.2

$
442.7

$
422.0

$
208.9

$
201.8

$
201.8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deferred acquisition costs (in millions)
1Q10
2Q10
3Q10
4Q10
2010
1Q11
2Q11
3Q11
4Q11
2011
 
 
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
707.0

$
694.9

$
632.6

$
572.0

$
707.0

$
662.3

$
657.7

$
648.2

$
442.2

$
662.3

Deferred acquisition expenses
39.3

43.6

44.0

44.0

170.9

40.4

40.2

45.8

39.9

166.3

Amortization related to operations
(26.2
)
(29.3
)
(36.5
)
(35.9
)
(127.9
)
(43.9
)
(30.0
)
(29.8
)
(32.6
)
(136.3
)
Amortization related to net realized investment (gains) losses
(0.5
)
0.5

(1.0
)
(6.5
)
(7.5
)
(0.7
)
0.2

(2.8
)
(1.5
)
(4.8
)
Amortization related to fair value changes in embedded derivative liabilities
—

—

—

—

—

—

—

11.5

(0.1
)
11.4

Adjustment related to unrealized (gain) or loss on fixed maturities, available for sale
(24.7
)
(77.1
)
(67.1
)
88.7

(80.2
)
(0.4
)
(19.9
)
(230.7
)
(29.2
)
(280.2
)
Balance, end of period
$
694.9

$
632.6

$
572.0

$
662.3

$
662.3

$
657.7

$
648.2

$
442.2

$
418.7

$
418.7

 
 
 
 
 
 
 
 
 
 
 

Page 9


 
 
 
 
 
 
 
 
 
 
 
Bankers Life Segment EBIT Summarized by In-Force and New Business (6)
 
 
 
 
 
 
 
 
 
 
(in millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
 
 
EBIT from In-force Business
1Q10
2Q10
3Q10
4Q10
2010
1Q11
2Q11
3Q11
4Q11
2011
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
 
 
 
Insurance policy income
$
336.9

$
336.2

$
340.5

$
327.6

$
1,341.2

$
338.8

$
346.3

$
339.0

$
334.8

$
1,358.9

Net investment income (loss)
169.7

149.4

191.2

192.5

702.8

198.5

187.8

151.8

191.2

729.3

Fee revenue and other income
1.3

1.2

1.9

2.3

6.7

1.4

2.0

2.1

2.7

8.2

Total revenues
507.9

486.8

533.6

522.4

2,050.7

538.7

536.1

492.9

528.7

2,096.4

 
 
 
 
 
 
 
 
 
 
 
Benefits and expenses
 
 
 
 
 
 
 
 
 
 
Insurance policy benefits
363.7

331.7

344.6

353.8

1,393.8

356.9

361.3

313.7

346.1

1,378.0

Interest expense
—

—

—

1.0

1.0

1.2

1.1

1.2

1.3

4.8

Amortization
43.6

46.2

50.3

47.1

187.2

60.1

38.5

31.6

39.7

169.9

Other operating costs and expenses
39.8

37.1

34.3

35.3

146.5

33.8

36.6

34.8

38.9

144.1

Total benefits and expenses
447.1

415.0

429.2

437.2

1,728.5

452.0

437.5

381.3

426.0

1,696.8

EBIT from In-Force Business
$
60.8

$
71.8

$
104.4

$
85.2

$
322.2

$
86.7

$
98.6

$
111.6

$
102.7

$
399.6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EBIT from New Business
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
 
 
 
Insurance policy income
$
59.3

$
64.5

$
64.6

$
66.6

$
255.0

$
61.2

$
63.3

$
65.6

$
63.4

$
253.5

Net investment income (loss)
16.2

11.1

17.3

11.5

56.1

11.1

9.1

6.2

10.6

37.0

Fee revenue and other income
1.0

1.5

1.7

1.9

6.1

.9

1.3

1.5

1.9

5.6

Total revenues
76.5

77.1

83.6

80.0

317.2

73.2

73.7

73.3

75.9

296.1

 
 
 
 
 
 
 
 
 
 
 
Benefits and expenses
 
 
 
 
 
 
 
 
 
 
Insurance policy benefits
52.8

51.0

57.5

52.2

213.5

47.9

47.6

46.9

49.7

192.1

Interest expense
—

—

—

—

—

—

—

—

—

—

Amortization
5.1

4.6

5.3

5.7

20.7

8.4

8.4

12.5

7.1

36.4

Other operating costs and expenses
39.2

43.0

41.0

44.5

167.7

41.4

44.2

46.1

44.6

176.3

Total benefits and expenses
97.1

98.6

103.8

102.4

401.9

97.7

100.2

105.5

101.4

404.8

EBIT from New Business
$
(20.6
)
$
(21.5
)
$
(20.2
)
$
(22.4
)
$
(84.7
)
$
(24.5
)
$
(26.5
)
$
(32.2
)
$
(25.5
)
$
(108.7
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EBIT from In-Force and New Business
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
 
 
 
Insurance policy income
$
396.2

$
400.7

$
405.1

$
394.2

$
1,596.2

$
400.0

$
409.6

$
404.6

$
398.2

$
1,612.4

Net investment income (loss)
185.9

160.5

208.5

204.0

758.9

209.6

196.9

158.0

201.8

766.3

Fee revenue and other income
2.3

2.7

3.6

4.2

12.8

2.3

3.3

3.6

4.6

13.8

Total revenues
584.4

563.9

617.2

602.4

2,367.9

611.9

609.8

566.2

604.6

2,392.5

 
 
 
 
 
 
 
 
 
 
 
Benefits and expenses
 
 
 
 
 
 
 
 
 
 
Insurance policy benefits
416.5

382.7

402.1

406.0

1,607.3

404.8

408.9

360.6

395.8

1,570.1

Interest expense
—

—

—

1.0

1.0

1.2

1.1

1.2

1.3

4.8

Amortization
48.7

50.8

55.6

52.8

207.9

68.5

46.9

44.1

46.8

206.3

Other operating costs and expenses
79.0

80.1

75.3

79.8

314.2

75.2

80.8

80.9

83.5

320.4

Total benefits and expenses
544.2

513.6

533.0

539.6

2,130.4

549.7

537.7

486.8

527.4

2,101.6

EBIT from In-Force and New Business
$
40.2

$
50.3

$
84.2

$
62.8

$
237.5

$
62.2

$
72.1

$
79.4

$
77.2

$
290.9

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Page 10



CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
 
 
Washington National
 
 
 
 
 
 
 
 
 
 
Analysis of income before taxes (in millions)
1Q10
2Q10
3Q10
4Q10
2010
1Q11
2Q11
3Q11
4Q11
2011
 
 
 
 
 
 
 
 
 
 
 
Insurance policy income
$
145.4

$
144.7

$
144.9

$
146.0

$
581.0

$
145.4

$
146.6

$
145.9

$
147.2

$
585.1

Net investment income (loss):
 
 
 
 
 
 
 
 
 
 
   General account invested assets
45.5

45.8

46.2

46.7

184.2

46.3

46.7

47.3

49.1

189.4

Trading account income related to reinsurer accounts
0.8

1.1

1.6

(1.0
)
2.5

0.3

0.7

2.6

0.2

3.8

Change in value of embedded derivatives related to modified coinsurance agreements
(0.9
)
(1.0
)
(1.4
)
2.0

(1.3
)
(0.3
)
(0.7
)
(2.6
)
(0.1
)
(3.7
)
Net realized investment gains (losses)
(1.2
)
—

(2.3
)
(3.9
)
(7.4
)
(0.5
)
(0.5
)
1.6

1.4

2.0

Fee revenue and other income
0.3

0.2

0.3

0.3

1.1

0.3

0.2

0.4

0.1

1.0

   Total revenues
189.9

190.8

189.3

190.1

760.1

191.5

193.0

195.2

197.9

777.6

 
 
 
 
 
 
 
 
 
 
 
Insurance policy benefits
112.5

116.7

112.4

109.0

450.6

112.2

118.3

119.0

115.0

464.5

Amortization related to operations
12.1

10.8

11.8

11.9

46.6

13.4

11.4

10.8

9.3

44.9

Interest expense on investment borrowings
—

—

—

—

—

—

—

0.2

0.5

0.7

Other operating costs and expenses
39.5

43.7

41.3

45.4

169.9

42.1

42.0

42.4

42.9

169.4

   Total benefits and expenses
164.1

171.2

165.5

166.3

667.1

167.7

171.7

172.4

167.7

679.5

   Income before income taxes
$
25.8

$
19.6

$
23.8

$
23.8

$
93.0

$
23.8

$
21.3

$
22.8

$
30.2

$
98.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Health underwriting margins (in millions)
1Q10
2Q10
3Q10
4Q10
2010
1Q11
2Q11
3Q11
4Q11
2011
 
 
 
 
 
 
 
 
 
 
 
Medicare supplement:
 
 
 
 
 
 
 
 
 
 
Earned premium
$
41.6

$
40.2

$
39.1

$
37.5

$
158.4

$
35.5

$
34.9

$
33.5

$
32.6

$
136.5

Benefit ratio
65.7
%
65.8
%
67.0
%
70.9
%
67.3
%
66.3
%
71.1
%
69.9
%
66.7
%
68.5
%
Underwriting margin (earned premium less policy benefits)
$
14.2

$
13.8

$
12.9

$
10.9

$
51.8

$
12.0

$
10.1

$
10.1

$
10.8

$
43.0

 
 
 
 
 
 
 
 
 
 
 
Supplemental health:
 
 
 
 
 
 
 
 
 
 
Earned premium
$
98.0

$
99.1

$
100.6

$
103.1

$
400.8

$
104.7

$
106.9

$
107.6

$
110.0

$
429.2

Benefit ratio before interest income on reserves
82.3
%
83.2
%
81.3
%
75.0
%
80.4
%
78.7
%
82.7
%
82.4
%
76.3
%
80.0
%
Interest-adjusted benefit ratio
49.4
%
52.0
%
50.5
%
45.0
%
49.2
%
49.1
%
54.1
%
53.9
%
48.3
%
51.3
%
Underwriting margin (earned premium plus interest income on reserves less policy benefits)
$
49.6

$
47.6

$
49.7

$
56.8

$
203.7

$
53.3

$
49.1

$
49.6

$
56.6

$
208.6

 
 
 
 
 
 
 
 
 
 
 





Page 11


CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
 
 
Washington National
 
 
 
 
 
 
 
 
 
 
Average liabilities for insurance products (in millions) (continued)
1Q10
2Q10
3Q10
4Q10
2010
1Q11
2Q11
3Q11
4Q11
2011
 
 
 
 
 
 
 
 
 
 
 
Medicare supplement and other supplemental health
$
2,530.1

$
2,485.5

$
2,432.4

$
2,432.5

$
2,470.1

$
2,434.6

$
2,437.1

$
2,436.9

$
2,436.1

$
2,436.2

Non-interest sensitive life
206.8

206.5

207.8

205.7

206.7

205.2

202.2

198.7

199.6

201.4
Total average liabilities for insurance products, net of reinsurance ceded
$
2,736.9

$
2,692.0

$
2,640.2

$
2,638.2

$
2,676.8

$
2,639.8

$
2,639.3

$
2,635.6

$
2,635.7

$
2,637.6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Present value of future profits (in millions)
1Q10
2Q10
3Q10
4Q10
2010
1Q11
2Q11
3Q11
4Q11
2011
 
 
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
455.1

$
447.6

$
440.7

$
433.8

$
455.1

$
426.9

$
418.5

$
411.5

$
406.0

$
426.9

  Amortization related to operations
(7.5
)
(6.9
)
(6.9
)
(6.9
)
(28.2
)
(8.4
)
(7.0
)
(5.5
)
(4.0
)
(24.9
)
Balance, end of period
$
447.6

$
440.7

$
433.8

$
426.9

$
426.9

$
418.5

$
411.5

$
406.0

$
402.0

$
402.0

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deferred acquisition costs (in millions)
1Q10
2Q10
3Q10
4Q10
2010
1Q11
2Q11
3Q11
4Q11
2011
 
 
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
104.1

$
108.3

$
113.0

$
122.2

$
104.1

$
126.8

$
130.4

$
135.0

$
138.7

$
126.8

  Deferred acquisition expenses
8.8

8.6

14.1

9.6

41.1

8.6

9.0

9.0

8.9

35.5

  Amortization related to operations
(4.6
)
(3.9
)
(4.9
)
(5.0
)
(18.4
)
(5.0
)
(4.4
)
(5.3
)
(5.3
)
(20.0
)
Balance, end of period
$
108.3

$
113.0

$
122.2

$
126.8

$
126.8

$
130.4

$
135.0

$
138.7

$
142.3

$
142.3

 
 
 
 
 
 
 
 
 
 
 


Page 12


 
 
 
 
 
 
 
 
 
 
 
Washington National Segment EBIT Summarized by In-Force and New Business (6)
 
 
 
 
 
 
 
 
 
 
(in millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
 
 
EBIT from In-force Business
1Q10
2Q10
3Q10
4Q10
2010
1Q11
2Q11
3Q11
4Q11
2011
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
 
 
 
Insurance policy income
$
131.4

$
130.9

$
131.4

$
132.3

$
526.0

$
131.9

$
133.5

$
132.1

$
133.2

$
530.7

Net investment income (loss)
45.4

45.9

46.4

47.7

185.4

46.3

46.7

47.3

49.2

189.5

Fee revenue and other income
0.3

0.2

0.3

0.3

1.1

0.3

0.2

0.4

0.1

1.0

Total revenues
177.1

177.0

178.1

180.3

712.5

178.5

180.4

179.8

182.5

721.2

 
 
 
 
 
 
 
 
 
 
 
Benefits and expenses
 
 
 
 
 
 
 
 
 
 
Insurance policy benefits
106.5

110.9

106.8

103.3

427.5

106.6

112.9

113.3

109.2

442.0

Interest expense
—

—

—

—

—

—

—

0.2

0.5

0.7

Amortization
11.2

10.2

11.3

11.3

44.0

12.7

10.6

10.2

8.6

42.1

Other operating costs and expenses
31.8

34.8

33.3

35.8

135.7

31.9

32.1

33.7

32.1

129.8

Total benefits and expenses
149.5

155.9

151.4

150.4

607.2

151.2

155.6

157.4

150.4

614.6

EBIT from In-Force Business
$
27.6

$
21.1

$
26.7

$
29.9

$
105.3

$
27.3

$
24.8

$
22.4

$
32.1

$
106.6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EBIT from New Business
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
 
 
 
Insurance policy income
$
14.0

$
13.8

$
13.5

$
13.7

$
55.0

$
13.5

$
13.1

$
13.8

$
14.0

$
54.4

Net investment income (loss)
—

—

—

—

—

—

—

—

—

—

Fee revenue and other income
—

—

—

—

—

—

—

—

—

—

Total revenues
14.0

13.8

13.5

13.7

55.0

13.5

13.1

13.8

14.0

54.4

 
 
 
 
 
 
 
 
 
 
 
Benefits and expenses
 
 
 
 
 
 
 
 
 
 
Insurance policy benefits
6.0

5.8

5.6

5.7

23.1

5.6

5.4

5.7

5.8

22.5

Interest expense
—

—

—

—

—

—

—

—

—

—

Amortization
0.9

0.6

0.5

0.6

2.6

0.7

0.8

0.6

0.7

2.8

Other operating costs and expenses
7.7

8.9

8.0

9.6

34.2

10.2

9.9

8.7

10.8

39.6

Total benefits and expenses
14.6

15.3

14.1

15.9

59.9

16.5

16.1

15.0

17.3

64.9

EBIT from New Business
$
(0.6
)
$
(1.5
)
$
(0.6
)
$
(2.2
)
$
(4.9
)
$
(3.0
)
$
(3.0
)
$
(1.2
)
$
(3.3
)
$
(10.5
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EBIT from In-Force and New Business
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
 
 
 
Insurance policy income
$
145.4

$
144.7

$
144.9

$
146.0

$
581.0

$
145.4

$
146.6

$
145.9

$
147.2

$
585.1

Net investment income (loss)
45.4

45.9

46.4

47.7

185.4

46.3

46.7

47.3

49.2

189.5

Fee revenue and other income
0.3

0.2

0.3

0.3

1.1

0.3

0.2

0.4

0.1

1.0

Total revenues
191.1

190.8

191.6

194.0

767.5

192.0

193.5

193.6

196.5

775.6

 
 
 
 
 
 
 
 
 
 
 
Benefits and expenses
 
 
 
 
 
 
 
 
 
 
Insurance policy benefits
112.5

116.7

112.4

109.0

450.6

112.2

118.3

119.0

115.0

464.5

Interest expense
—

—

—

—

—

—

—

0.2

0.5

0.7

Amortization
12.1

10.8

11.8

11.9

46.6

13.4

11.4

10.8

9.3

44.9

Other operating costs and expenses
39.5

43.7

41.3

45.4

169.9

42.1

42.0

42.4

42.9

169.4

Total benefits and expenses
164.1

171.2

165.5

166.3

667.1

167.7

171.7

172.4

167.7

679.5

EBIT from In-Force and New Business
$
27.0

$
19.6

$
26.1

$
27.7

$
100.4

$
24.3

$
21.8

$
21.2

$
28.8

$
96.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Page 13


CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
 
 
Colonial Penn
 
 
 
 
 
 
 
 
 
 
Analysis of income (loss) before taxes (in millions)
1Q10
2Q10
3Q10
4Q10
2010
1Q11
2Q11
3Q11
4Q11
2011
 
 
 
 
 
 
 
 
 
 
 
Insurance policy income
$
48.2

$
49.3

$
48.8

$
48.6

$
194.9

$
50.3

$
50.9

$
50.8

$
51.0

$
203.0

Net investment income on general account invested assets
9.7

9.7

9.9

10.0

39.3

10.3

10.5

10.1

10.2

41.1
Net realized investment gains
0.5

—

2.0

4.1

6.6

1.1

0.2

3.5

1.0

5.8
Fee revenue and other income
0.2

0.1

0.2

0.2

0.7

0.2

0.2

0.2

0.3

0.9
   Total revenues
58.6

59.1

60.9

62.9

241.5

61.9

61.8

64.6

62.5

250.8
 
 
 
 
 
 
 
 
 
 
 
Insurance policy benefits
36.4

35.2

36.1

36.1

143.8

38.5

37.8

35.7

37.2

149.2
Amounts added to annuity and interest-sensitive life product account balances
0.3

0.2

0.3

0.2

1.0

0.2

0.2

0.3

0.2

0.9
Amortization related to operations
3.4

3.3

2.9

2.9

12.5

4.0

3.5

3.5

4.0

15.0

Other operating costs and expenses
22.1

17.8

17.4

16.1

73.4

23.8

19.6

22.9

18.3

84.6
   Total benefits and expenses
62.2

56.5

56.7

55.3

230.7

66.5

61.1

62.4

59.7

249.7
   Income (loss) before income taxes
$
(3.6
)
$
2.6

$
4.2

$
7.6

$
10.8

$
(4.6
)
$
0.7

$
2.2

$
2.8

$
1.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average liabilities for insurance products (in millions)
1Q10
2Q10
3Q10
4Q10
2010
1Q11
2Q11
3Q11
4Q11
2011
 
 
 
 
 
 
 
 
 
 
 
Annuities - mortality based
$
79.9

$
79.3

$
79.2

$
79.2

$
79.4

$
78.5

$
77.8

$
77.3

$
77.1

$
77.7

Supplemental health
18.3

17.7

17.5

17.1

17.6

16.6

16.3

16.1

15.8

16.2
Life:
 
 
 
 
 
 
 
 
 
 
   Interest sensitive
21.9

21.6

21.1

20.7

21.3

20.7

20.5

20.2

20.1

20.3
   Non-interest sensitive
576.6

578.2

580.3

583.6

579.7

586.7

588.7

590.2

593.4

589.8
Total average liabilities for insurance products, net of reinsurance ceded
$
696.7

$
696.8

$
698.1

$
700.6

$
698.0

$
702.5

$
703.3

$
703.8

$
706.4

$
704.0

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Present value of future profits (in millions)
1Q10
2Q10
3Q10
4Q10
2010
1Q11
2Q11
3Q11
4Q11
2011
 
 
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
92.4

$
89.4

$
86.6

$
84.0

$
92.4

$
81.7

$
79.1

$
76.9

$
74.9

$
81.7

  Amortization related to operations
(3.0
)
(2.8
)
(2.6
)
(2.3
)
(10.7
)
(2.6
)
(2.2
)
(2.0
)
(2.3
)
(9.1
)
Balance, end of period
$
89.4

$
86.6

$
84.0

$
81.7

$
81.7

$
79.1

$
76.9

$
74.9

$
72.6

$
72.6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deferred acquisition costs (in millions)
1Q10
2Q10
3Q10
4Q10
2010
1Q11
2Q11
3Q11
4Q11
2011
 
 
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
44.1

$
45.9

$
46.9

$
48.0

$
44.1

$
48.5

$
49.4

$
50.4

$
51.2

$
48.5

  Deferred acquisition expenses
2.2

1.5

1.4

1.1

6.2

2.3

2.3

2.3

2.0

8.9

  Amortization related to operations
(0.4
)
(0.5
)
(0.3
)
(0.6
)
(1.8
)
(1.4
)
(1.3
)
(1.5
)
(1.7
)
(5.9
)
Balance, end of period
$
45.9

$
46.9

$
48.0

$
48.5

$
48.5

$
49.4

$
50.4

$
51.2

$
51.5

$
51.5

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Page 14


 
 
 
 
 
 
 
 
 
 
 
Colonial Penn Segment EBIT Summarized by In-Force and New Business (6)
 
 
 
 
 
 
 
 
 
 
(in millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
 
 
EBIT from In-force Business
1Q10
2Q10
3Q10
4Q10
2010
1Q11
2Q11
3Q11
4Q11
2011
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
 
 
 
Insurance policy income
$
40.4

$
41.1

$
40.7

$
40.4

$
162.6

$
41.8

$
42.0

$
42.0

$
41.8

$
167.6

Net investment income (loss)
9.7

9.7

9.9

10.0

39.3

10.3

10.5

10.1

10.2

41.1

Fee revenue and other income
0.2

0.1

0.2

0.2

0.7

0.2

0.2

0.2

0.3

0.9

Total revenues
50.3

50.9

50.8

50.6

202.6

52.3

52.7

52.3

52.3

209.6

 
 
 
 
 
 
 
 
 
 
 
Benefits and expenses
 
 
 
 
 
 
 
 
 
 
Insurance policy benefits
32.2

30.7

31.7

31.6

126.2

33.8

32.9

30.9

32.1

129.7

Amortization
3.3

3.1

2.6

2.7

11.7

3.9

3.4

3.3

3.7

14.3

Other operating costs and expenses
6.5

6.3

6.6

6.8

26.2

6.6

6.3

6.5

6.7

26.1

Total benefits and expenses
42.0

40.1

40.9

41.1

164.1

44.3

42.6

40.7

42.5

170.1

EBIT from In-Force Business
$
8.3

$
10.8

$
9.9

$
9.5

$
38.5

$
8.0

$
10.1

$
11.6

$
9.8

$
39.5

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EBIT from New Business
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
 
 
 
Insurance policy income
$
7.8

$
8.2

$
8.1

$
8.2

$
32.3

$
8.5

$
8.9

$
8.8

$
9.2

$
35.4

Net investment income (loss)
—

—

—

—

—

—

—

—

—

—

Fee revenue and other income
—

—

—

—

—

—

—

—

—

—

Total revenues
7.8

8.2

8.1

8.2

32.3

8.5

8.9

8.8

9.2

35.4

 
 
 
 
 
 
 
 
 
 
 
Benefits and expenses
 
 
 
 
 
 
 
 
 
 
Insurance policy benefits
4.5

4.7

4.7

4.7

18.6

4.9

5.1

5.1

5.3

20.4

Amortization
0.1

0.2

0.3

0.2

0.8

0.1

0.1

0.2

0.3

0.7

Other operating costs and expenses
15.6

11.5

10.8

9.3

47.2

17.2

13.3

16.4

11.6

58.5

Total benefits and expenses
20.2

16.4

15.8

14.2

66.6

22.2

18.5

21.7

17.2

79.6

EBIT from New Business
$
(12.4
)
$
(8.2
)
$
(7.7
)
$
(6.0
)
$
(34.3
)
$
(13.7
)
$
(9.6
)
$
(12.9
)
$
(8.0
)
$
(44.2
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EBIT from In-Force and New Business
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
 
 
 
Insurance policy income
$
48.2

$
49.3

$
48.8

$
48.6

$
194.9

$
50.3

$
50.9

$
50.8

$
51.0

$
203.0

Net investment income (loss)
9.7

9.7

9.9

10.0

39.3

10.3

10.5

10.1

10.2

41.1

Fee revenue and other income
0.2

0.1

0.2

0.2

0.7

0.2

0.2

0.2

0.3

0.9

Total revenues
58.1

59.1

58.9

58.8

234.9

60.8

61.6

61.1

61.5

245.0

 
 
 
 
 
 
 
 
 
 
 
Benefits and expenses
 
 
 
 
 
 
 
 
 
 
Insurance policy benefits
36.7

35.4

36.4

36.3

144.8

38.7

38.0

36.0

37.4

150.1

Amortization
3.4

3.3

2.9

2.9

12.5

4.0

3.5

3.5

4.0

15.0

Other operating costs and expenses
22.1

17.8

17.4

16.1

73.4

23.8

19.6

22.9

18.3

84.6

Total benefits and expenses
62.2

56.5

56.7

55.3

230.7

66.5

61.1

62.4

59.7

249.7

EBIT from In-Force and New Business
$
(4.1
)
$
2.6

$
2.2

$
3.5

$
4.2

$
(5.7
)
$
0.5

$
(1.3
)
$
1.8

$
(4.7
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Page 15


CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
 
 
Other CNO Business
 
 
 
 
 
 
 
 
 
 
Analysis of income (loss) before taxes (in millions)
1Q10
2Q10
3Q10
4Q10
2010
1Q11
2Q11
3Q11
4Q11
2011
 
 
 
 
 
 
 
 
 
 
 
Insurance policy income
$
74.8

$
73.2

$
75.7

$
74.2

$
297.9

$
71.5

$
72.5

$
72.2

$
73.8

$
290.0

Net investment income (loss):
 
 
 
 
 
 
 
 
 
 
   General account invested assets
87.8

88.5

88.0

87.8

352.1

88.2

87.6

85.4

85.7

346.9

   Fixed index products
3.9

(6.5
)
6.2

6.2

9.8

5.0

(0.9
)
(8.4
)
0.9

(3.4
)
Trading account income related to policyholder accounts
0.9

(1.6
)
2.3

1.1

2.7

1.5

—

(2.4
)
1.5

0.6

Net realized investment gains (losses)
0.1

(5.0
)
(13.0
)
(9.7
)
(27.6
)
(1.0
)
1.1

3.0

3.0

6.1

   Total revenues
167.5

148.6

159.2

159.6

634.9

165.2

160.3

149.8

164.9

640.2

 
 
 
 
 
 
 
 
 
 
 
Insurance policy benefits
90.3

84.3

110.4

82.6

367.6

88.8

85.9

86.7

88.7

350.1

Insurance policy benefits - fair value changes in embedded derivative liabilities
—

—

—

—

—

—

—

3.2

—

3.2

Amounts added to policyholder account balances:
 
 
 
 
 
 
 
 
 
 
Annuity products and interest-sensitive life products other than fixed index products
32.4

31.4

32.4

31.4

127.6

31.6

30.3

28.9

29.6

120.4

   Fixed index products
10.6

0.5

6.3

8.4

25.8

7.1

3.0

(4.1
)
3.4

9.4

Amortization related to operations
11.1

3.4

19.8

14.4

48.7

8.6

9.4

10.4

11.4

39.8

Amortization related to net realized investment gains (losses)
(0.6
)
1.0

(1.3
)
2.2

1.3

(0.4
)
(0.3
)
0.9

—

0.2

Amortization related to fair value changes in embedded derivative liabilities
—

—

—

—

—

—

—

(2.6
)
—

(2.6
)
Interest expense on investment borrowings
5.0

5.0

5.1

4.9

20.0

4.9

5.0

5.3

5.1

20.3

Other operating costs and expenses
18.9

20.2

21.8

21.1

82.0

17.8

20.5

16.8

23.7

78.8

   Total benefits and expenses
167.7

145.8

194.5

165.0

673.0

158.4

153.8

145.5

161.9

619.6

   Income (loss) before income taxes
$
(0.2
)
$
2.8

$
(35.3
)
$
(5.4
)
$
(38.1
)
$
6.8

$
6.5

$
4.3

$
3.0

$
20.6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Health underwriting margins (in millions)
1Q10
2Q10
3Q10
4Q10
2010
1Q11
2Q11
3Q11
4Q11
2011
 
 
 
 
 
 
 
 
 
 
 
Long-term care:
 
 
 
 
 
 
 
 
 
 
   Earned premium
$
7.7

$
7.5

$
7.5

$
7.2

$
29.9

$
7.3

$
7.0

$
6.9

$
6.4

$
27.6

   Benefit ratio before interest income on reserves
187.2
%
212.9
%
201.7
%
243.0
%
210.8
%
235.7
%
205.8
%
227.5
%
237.1
%
226.4
%
   Interest-adjusted benefit ratio
96.8
%
128.0
%
116.9
%
155.1
%
123.8
%
148.0
%
106.4
%
126.1
%
127.8
%
127.3
%
Underwriting margin (earned premium plus interest income on reserves less policy benefits)
$
0.2

$
(2.1
)
$
(1.2
)
$
(4.0
)
$
(7.1
)
$
(3.5
)
$
(0.5
)
$
(1.8
)
$
(1.9
)
$
(7.7
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



Page 16


CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
 
 
Other CNO Business
 
 
 
 
 
 
 
 
 
 
Average liabilities for insurance products (in millions) (continued)
1Q10
2Q10
3Q10
4Q10
2010
1Q11
2Q11
3Q11
4Q11
2011
 
 
 
 
 
 
 
 
 
 
 
Annuities:
 
 
 
 
 
 
 
 
 
 
   Mortality based
$
212.0

$
210.9

$
209.8

$
209.2

$
210.5

$
207.8

$
205.9

$
218.9

$
231.9

$
216.1

   Fixed index
743.6

728.1

705.5

678.0

713.8

652.1

632.1

607.6

577.9

617.4

   Deposit based
620.0

659.6

705.0

698.8

670.9

692.0

687.4

666.5

645.0

672.7

   Separate accounts
17.1

16.3

16.2

17.1

16.7

17.8

17.7

16.4

15.2

16.8

Other health
480.9

480.1

479.4

479.8

480.0

481.8

481.9

481.3

481.4

481.6

Life:
 
 
 
 
 
 
 
 
 
 
   Interest sensitive
2,607.2

2,593.7

2,581.0

2,560.1

2,585.5

2,527.4

2,506.1

2,484.6

2,456.6

2,493.7

   Non-interest sensitive
844.9

839.9

831.2

820.5

834.1

805.6

790.9

780.6

774.0

787.8

Total average liabilities for insurance products, net of reinsurance ceded
$
5,525.7

$
5,528.6

$
5,528.1

$
5,463.5

$
5,511.5

$
5,384.5

$
5,322.0

$
5,255.9

$
5,182.0

$
5,286.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Present value of future profits (in millions)
1Q10
2Q10
3Q10
4Q10
2010
1Q11
2Q11
3Q11
4Q11
2011
 
 
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
58.9

$
57.1

$
54.7

$
44.8

$
58.9

$
32.8

$
29.8

$
26.1

$
24.4

$
32.8

Amortization related to operations
(1.3
)
(1.6
)
(9.7
)
(7.1
)
(19.7
)
(2.4
)
(2.2
)
(1.1
)
(3.6
)
(9.3
)
Amortization related to net realized investment (gains) losses
—

—

0.1

—

0.1

—

—

—

—

—

Adjustment related to unrealized (gain) or loss on fixed maturities, available for sale
(0.5
)
(0.8
)
(0.3
)
(4.9
)
(6.5
)
(0.6
)
(1.5
)
(0.6
)
0.5

(2.2
)
Balance, end of period
$
57.1

$
54.7

$
44.8

$
32.8

$
32.8

$
29.8

$
26.1

$
24.4

$
21.3

$
21.3

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deferred acquisition costs (in millions)
1Q10
2Q10
3Q10
4Q10
2010
1Q11
2Q11
3Q11
4Q11
2011
 
 
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
207.8

$
199.4

$
181.8

$
156.9

$
207.8

$
162.0

$
151.8

$
141.9

$
117.5

$
162.0

Deferred acquisition expenses
7.9

2.1

1.7

1.9

13.6

1.9

1.9

1.2

1.0

6.0

Other adjustments
—

(3.9
)
(6.8
)
—

(10.7
)
—

—

—

—

—

Amortization related to operations
(9.8
)
(1.8
)
(10.1
)
(7.3
)
(29.0
)
(6.2
)
(7.2
)
(9.3
)
(7.8
)
(30.5
)
Amortization related to net realized investment (gains) losses
0.6

(1.0
)
1.2

(2.2
)
(1.4
)
0.4

0.3

(0.9
)
—

(0.2
)
Amortization related to fair value changes in embedded derivative liabilities
—

—

—

—

—

—

—

2.6

—

2.6

Adjustment related to unrealized (gain) or loss on fixed maturities, available for sale
(7.1
)
(13.0
)
(10.9
)
12.7

(18.3
)
(6.3
)
(4.9
)
(18.0
)
1.6

(27.6
)
Balance, end of period
$
199.4

$
181.8

$
156.9

$
162.0

$
162.0

$
151.8

$
141.9

$
117.5

$
112.3

$
112.3

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Page 17


 
 
 
 
 
 
 
 
 
 
 
Other CNO Business Segment EBIT Summarized by In-Force and New Business (6)
 
 
 
 
 
 
 
 
 
 
(in millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
 
 
EBIT from In-force Business
1Q10
2Q10
3Q10
4Q10
2010
1Q11
2Q11
3Q11
4Q11
2011
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
 
 
 
Insurance policy income
$
74.8

$
73.2

$
75.7

$
74.2

$
297.9

$
71.5

$
72.5

$
72.2

$
73.8

$
290.0

Net investment income (loss)
92.6

80.4

96.5

95.1

364.6

94.7

86.7

74.6

88.1

344.1

Fee revenue and other income
—

—

—

—

—

—

—

—

—

—

Total revenues
167.4

153.6

172.2

169.3

662.5

166.2

159.2

146.8

161.9

634.1

 
 
 
 
 
 
 
 
 
 
 
Benefits and expenses
 
 
 
 
 
 
 
 
 
 
Insurance policy benefits
133.3

116.2

149.1

122.4

521.0

127.5

119.2

111.5

121.7

479.9

Interest expense
5.0

5.0

5.1

4.9

20.0

4.9

5.0

5.3

5.1

20.3

Amortization
11.1

3.4

19.8

14.4

48.7

8.6

9.4

10.4

11.4

39.8

Other operating costs and expenses
18.9

20.2

21.8

21.1

82.0

17.8

20.5

16.8

23.7

78.8

Total benefits and expenses
168.3

144.8

195.8

162.8

671.7

158.8

154.1

144.0

161.9

618.8

EBIT from In-Force Business
$
(.9
)
$
8.8

$
(23.6
)
$
6.5

$
(9.2
)
$
7.4

$
5.1

$
2.8

$
—

$
15.3

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EBIT from New Business
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
 
 
 
Insurance policy income
$
—

$
—

$
—

$
—

$
—

$
—

$
—

$
—

$
—

$
—

Net investment income (loss)
—

—

—

—

—

—

—

—

—

—

Fee revenue and other income
—

—

—

—

—

—

—

—

—

—

Total revenues
—

—

—

—

—

—

—

—

—

—

 
 
 
 
 
 
 
 
 
 
 
Benefits and expenses
 
 
 
 
 
 
 
 
 
 
Insurance policy benefits
—

—

—

—

—

—

—

—

—

—

Interest expense
—

—

—

—

—

—

—

—

—

—

Amortization
—

—

—

—

—

—

—

—

—

—

Other operating costs and expenses
—

—

—

—

—

—

—

—

—

—

Total benefits and expenses
—

—

—

—

—

—

—

—

—

—

EBIT from New Business
$
—

$
—

$
—

$
—

$
—

$
—

$
—

$
—

$
—

$
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EBIT from In-Force and New Business
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
 
 
 
Insurance policy income
$
74.8

$
73.2

$
75.7

$
74.2

$
297.9

$
71.5

$
72.5

$
72.2

$
73.8

$
290.0

Net investment income (loss)
92.6

80.4

96.5

95.1

364.6

94.7

86.7

74.6

88.1

344.1

Fee revenue and other income
—

—

—

—

—

—

—

—

—

—

Total revenues
167.4

153.6

172.2

169.3

662.5

166.2

159.2

146.8

161.9

634.1

 
 
 
 
 
 
 
 
 
 
 
Benefits and expenses
 
 
 
 
 
 
 
 
 
 
Insurance policy benefits
133.3

116.2

149.1

122.4

521.0

127.5

119.2

111.5

121.7

479.9

Interest expense
5.0

5.0

5.1

4.9

20.0

4.9

5.0

5.3

5.1

20.3

Amortization
11.1

3.4

19.8

14.4

48.7

8.6

9.4

10.4

11.4

39.8

Other operating costs and expenses
18.9

20.2

21.8

21.1

82.0

17.8

20.5

16.8

23.7

78.8

Total benefits and expenses
168.3

144.8

195.8

162.8

671.7

158.8

154.1

144.0

161.9

618.8

EBIT from In-Force and New Business
$
(.9
)
$
8.8

$
(23.6
)
$
6.5

$
(9.2
)
$
7.4

$
5.1

$
2.8

$
—

$
15.3

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Page 18


CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
 
 
Corporate Operations
 
 
 
 
 
 
 
 
 
 
Analysis of loss before taxes (in millions)
1Q10
2Q10
3Q10
4Q10
2010
1Q11
2Q11
3Q11
4Q11
2011
 
 
 
 
 
 
 
 
 
 
 
Net investment income (loss):
 
 
 
 

 
 
 
 
 
   General account invested assets
$
—

$
0.1

$
—

$
—

$
0.1

$
—

$
0.9

$
1.1

$
1.0

$
3.0

   Other special-purpose portfolios
0.2

(3.2
)
3.4

(1.9
)
(1.5
)
8.2

(0.1
)
(13.7
)
(3.1
)
(8.7
)
Fee revenue and other income
0.5

0.4

0.4

0.3

1.6

0.4

0.2

0.3

0.4

1.3

Net operating results of variable interest entities
2.4

1.1

1.9

1.8

7.2

2.0

0.2

3.8

1.5

7.5

Interest expense on investment borrowings
—

—

—

—

—

—

—

(0.1
)
(0.1
)
(0.2
)
Other operating costs and expenses
(8.1
)
(10.2
)
(18.0
)
(13.9
)
(50.2
)
(11.1
)
(12.5
)
(18.9
)
(8.1
)
(50.6
)
Corporate operations, excluding corporate interest expense
(5.0
)
(11.8
)
(12.3
)
(13.7
)
(42.8
)
(0.5
)
(11.3
)
(27.5
)
(8.4
)
(47.7
)
Interest expense on corporate debt
(19.5
)
(19.8
)
(20.0
)
(20.0
)
(79.3
)
(20.6
)
(19.3
)
(18.7
)
(17.7
)
(76.3
)
Loss before income taxes
$
(24.5
)
$
(31.6
)
$
(32.3
)
$
(33.7
)
$
(122.1
)
$
(21.1
)
$
(30.6
)
$
(46.2
)
$
(26.1
)
$
(124.0
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Page 19


CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
 
 
Bankers Life
 
 
 
 
 
 
 
 
 
 
Premiums collected on insurance products (in millions)
1Q10
2Q10
3Q10
4Q10
2010
1Q11
2Q11
3Q11
4Q11
2011
 
 
 
 
 
 
 
 
 
 
 
Annuities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed index (first-year)
$
104.0

$
146.9

$
146.3

$
180.5

$
577.7

$
148.2

$
163.9

$
208.0

$
188.3

$
708.4

 
 
 
 
 
 
 
 
 
 
 
Other fixed rate (first-year)
119.1

133.1

118.4

52.9

423.5

73.1

94.1

55.1

50.6

272.9

Other fixed rate (renewal)
1.1

1.1

1.1

1.0

4.3

0.9

1.1

1.0

1.2

4.2

  Subtotal - other fixed rate annuities
120.2

134.2

119.5

53.9

427.8

74.0

95.2

56.1

51.8

277.1

 
 
 
 
 
 
 
 
 
 
 
      Total annuities
224.2

281.1

265.8

234.4

1,005.5

222.2

259.1

264.1

240.1

985.5

 
 
 
 
 
 
 
 
 
 
 
Health
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Medicare supplement (first-year)
27.2

29.4

29.3

30.5

116.4

25.1

24.7

24.5

27.0

101.3

Medicare supplement (renewal)
149.4

139.4

140.8

151.8

581.4

153.7

144.3

146.8

155.1

599.9

  Subtotal - Medicare supplement
176.6

168.8

170.1

182.3

697.8

178.8

169.0

171.3

182.1

701.2

 
 
 
 
 
 
 
 
 
 
 
Long-term care (first-year)
4.8

5.5

5.7

6.2

22.2

6.1

6.0

5.9

5.5

23.5

Long-term care (renewal)
144.7

141.1

139.3

137.3

562.4

138.8

136.9

131.9

130.8

538.4

  Subtotal - long-term care
149.5

146.6

145.0

143.5

584.6

144.9

142.9

137.8

136.3

561.9

 
 
 
 
 
 
 
 
 
 
 
PDP and PFFS (first-year)
1.4

0.7

0.6

1.0

3.7

0.4

0.2

0.6

0.6

1.8

PDP and PFFS (renewal)
16.7

13.4

15.0

17.6

62.7

10.6

14.4

15.6

14.1

54.7

  Subtotal - PDP and PFFS
18.1

14.1

15.6

18.6

66.4

11.0

14.6

16.2

14.7

56.5

 
 
 
 
 
 
 
 
 
 
 
Other health (first-year)
0.6

0.5

0.5

0.5

2.1

0.4

0.3

0.4

0.5

1.6

Other health (renewal)
2.3

2.4

2.2

2.3

9.2

2.5

2.3

2.3

2.3

9.4

  Subtotal - other health
2.9

2.9

2.7

2.8

11.3

2.9

2.6

2.7

2.8

11.0

 
 
 
 
 
 
 
 
 
 
 
    Total health
347.1

332.4

333.4

347.2

1,360.1

337.6

329.1

328.0

335.9

1,330.6

 
 
 
 
 
 
 
 
 
 
 
Life insurance
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
First-year
20.2

24.8

25.8

26.9

97.7

24.7

29.4

30.9

30.8

115.8

Renewal
26.3

27.3

29.0

29.3

111.9

31.7

32.6

34.6

35.3

134.2

 
 
 
 
 
 
 
 
 
 
 
    Total life insurance
46.5

52.1

54.8

56.2

209.6

56.4

62.0

65.5

66.1

250.0

 
 
 
 
 
 
 
 
 
 
 
Collections on insurance products
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total first-year premium collections on insurance products
277.3

340.9

326.6

298.5

1,243.3

278.0

318.6

325.4

303.3

1,225.3

Total renewal premium collections on insurance products
340.5

324.7

327.4

339.3

1,331.9

338.2

331.6

332.2

338.8

1,340.8

 
 
 
 
 
 
 
 
 
 
 
    Total collections on insurance products
$
617.8

$
665.6

$
654.0

$
637.8

$
2,575.2

$
616.2

$
650.2

$
657.6

$
642.1

$
2,566.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 




Page 20


CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
 
 
Washington National
 
 
 
 
 
 
 
 
 
 
Premiums collected on insurance products (in millions)
1Q10
2Q10
3Q10
4Q10
2010
1Q11
2Q11
3Q11
4Q11
2011
 
 
 
 
 
 
 
 
 
 
 
Health
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Medicare supplement (first-year)
$
1.2

$
1.1

$
0.7

$
0.8

$
3.8

$
0.6

$
0.5

$
0.4

$
0.4

$
1.9

Medicare supplement (renewal)
39.5

37.6

37.2

36.7

151.0

34.7

32.6

31.5

31.4

130.2

  Subtotal - Medicare supplement
40.7

38.7

37.9

37.5

154.8

35.3

33.1

31.9

31.8

132.1

 
 
 
 
 
 
 
 
 
 
 
Supplemental health (first-year)
12.5

13.1

13.0

13.4

52.0

13.2

13.7

13.2

14.0

54.1

Supplemental health (renewal)
87.1

87.1

88.5

90.8

353.5

93.7

95.2

95.2

96.0

380.1

  Subtotal - supplemental health
99.6

100.2

101.5

104.2

405.5

106.9

108.9

108.4

110.0

434.2

Other health (all renewal)
1.1

1.0

1.3

1.2

4.6

1.0

0.8

0.9

0.8

3.5

 
 
 
 
 
 
 
 
 
 
 
    Total health
141.4

139.9

140.7

142.9

564.9

143.2

142.8

141.2

142.6

569.8

 
 
 
 
 
 
 
 
 
 
 
Life insurance
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
First-year
0.2

0.1

0.1

0.4

0.8

0.4

0.3

0.4

0.1

1.2

Renewal
4.2

3.7

3.7

3.8

15.4

3.9

3.6

3.7

3.6

14.8

 
 
 
 
 
 
 
 
 
 
 
    Total life insurance
4.4

3.8

3.8

4.2

16.2

4.3

3.9

4.1

3.7

16.0

 
 
 
 
 
 
 
 
 
 
 
Collections on insurance products
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total first-year premium collections on insurance products
13.9

14.3

13.8

14.6

56.6

14.2

14.5

14.0

14.5

57.2

Total renewal premium collections on insurance products
131.9

129.4

130.7

132.5

524.5

133.3

132.2

131.3

131.8

528.6

 
 
 
 
 
 
 
 
 
 
 
    Total collections on insurance products
$
145.8

$
143.7

$
144.5

$
147.1

$
581.1

$
147.5

$
146.7

$
145.3

$
146.3

$
585.8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



Page 21


CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
 
 
Colonial Penn
 
 
 
 
 
 
 
 
 
 
Premiums collected on insurance products (in millions)
1Q10
2Q10
3Q10
4Q10
2010
1Q11
2Q11
3Q11
4Q11
2011
 
 
 
 
 
 
 
 
 
 
 
Life insurance
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
First-year
$
7.9

$
8.1

$
8.1

$
8.2

$
32.3

$
8.7

$
8.6

$
8.9

$
9.2

$
35.4

Renewal
39.4

38.6

38.8

38.6

155.4

40.7

39.9

40.3

40.1

161.0

 
 
 
 
 
 
 
 
 
 
 
    Total life insurance
47.3

46.7

46.9

46.8

187.7

49.4

48.5

49.2

49.3

196.4

 
 
 
 
 
 
 
 
 
 
 
Health (all renewal)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Medicare supplement
1.5

1.6

1.4

1.5

6.0

1.3

1.4

1.3

1.2

5.2

 
 
 
 
 
 
 
 
 
 
 
Other health
0.1

0.1

0.1

0.1

0.4

0.2

0.1

0.1

0.1

0.5

 
 
 
 
 
 
 
 
 
 
 
    Total health
1.6

1.7

1.5

1.6

6.4

1.5

1.5

1.4

1.3

5.7

 
 
 
 
 
 
 
 
 
 
 
Collections on insurance products
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total first-year premium collections on insurance products
7.9

8.1

8.1

8.2

32.3

8.7

8.6

8.9

9.2

35.4

Total renewal premium collections on insurance products
41.0

40.3

40.3

40.2

161.8

42.2

41.4

41.7

41.4

166.7

 
 
 
 
 
 
 
 
 
 
 
    Total collections on insurance products
$
48.9

$
48.4

$
48.4

$
48.4

$
194.1

$
50.9

$
50.0

$
50.6

$
50.6

$
202.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



Page 22


CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
 
 
Other CNO Business
 
 
 
 
 
 
 
 
 
 
Premiums collected on insurance products (in millions)
1Q10
2Q10
3Q10
4Q10
2010
1Q11
2Q11
3Q11
4Q11
2011
 
 
 
 
 
 
 
 
 
 
 
Annuities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed index (first-year)
$
3.5

$
2.0

$
2.4

$
2.4

$
10.3

$
2.7

$
2.7

$
2.2

$
1.9

$
9.5

Fixed index (renewal)
1.2

1.5

0.9

1.0

4.6

0.9

1.4

0.8

0.8

3.9

  Subtotal - fixed index annuities
4.7

3.5

3.3

3.4

14.9

3.6

4.1

3.0

2.7

13.4

 
 
 
 
 
 
 
 
 
 
 
Other fixed rate (first-year)
0.2

0.5

0.2

—

0.9

0.4

1.6

0.1

—

2.1

Other fixed rate (renewal)
0.2

0.2

0.1

0.1

0.6

0.2

0.2

0.2

0.3

0.9

  Subtotal - other fixed rate annuities
0.4

0.7

0.3

0.1

1.5

0.6

1.8

0.3

0.3

3.0

 
 
 
 
 
 
 
 
 
 
 
      Total annuities
5.1

4.2

3.6

3.5

16.4

4.2

5.9

3.3

3.0

16.4

 
 
 
 
 
 
 
 
 
 
 
Health
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Long-term care (all renewal)
7.7

7.5

7.1

6.9

29.2

7.4

7.0

6.5

6.1

27.0

Other health (all renewal)
0.7

0.7

0.5

0.6

2.5

0.2

0.2

0.2

0.2

0.8

 
 
 
 
 
 
 
 
 
 
 
    Total health
8.4

8.2

7.6

7.5

31.7

7.6

7.2

6.7

6.3

27.8

 
 
 
 
 
 
 
 
 
 
 
Life insurance
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
First-year
0.6

0.7

0.6

0.4

2.3

0.4

0.9

0.3

0.5

2.1

Renewal
49.6

46.2

47.2

46.3

189.3

46.0

48.0

43.7

39.6

177.3

 
 
 
 
 
 
 
 
 
 
 
    Total life insurance
50.2

46.9

47.8

46.7

191.6

46.4

48.9

44.0

40.1

179.4

 
 
 
 
 
 
 
 
 
 
 
Collections on insurance products
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total first-year premium collections on insurance products
4.3

3.2

3.2

2.8

13.5

3.5

5.2

2.6

2.4

13.7

Total renewal premium collections on insurance products
59.4

56.1

55.8

54.9

226.2

54.7

56.8

51.4

47.0

209.9

 
 
 
 
 
 
 
 
 
 
 
    Total collections on insurance products
$
63.7

$
59.3

$
59.0

$
57.7

$
239.7

$
58.2

$
62.0

$
54.0

$
49.4

$
223.6

 
 
 
 
 
 
 
 
 
 
 

Page 23





CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
 
 
New Annualized Premiums ("NAP") (in millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Bankers Life
1Q10
2Q10
3Q10
4Q10
2010
1Q11
2Q11
3Q11
4Q11
2011
 
 
 
 
 
 
 
 
 
 
 
Medicare supplement
$
19.4

$
21.0

$
16.0

$
31.8

$
88.2

$
18.3

$
18.6

$
19.4

$
31.5

$
87.8

Life
15.8

17.3

16.3

15.9

65.3

16.6

18.6

18.2

17.0

70.4

Long-term care
8.6

8.7

7.2

6.7

31.2

6.9

7.3

7.3

7.0

28.5

Annuity
13.7

17.0

15.8

14.2

60.7

13.4

15.6

15.9

14.3

59.2

   Subtotal Bankers Life
57.5

64.0

55.3

68.6

245.4

55.2

60.1

60.8

69.8

245.9

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Washington National
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Supplemental health
14.6

17.5

18.0

17.5

67.6

15.7

17.9

18.6

18.9

71.1

Medicare supplement
1.1

0.7

0.4

0.8

3.0

0.5

0.4

0.3

0.3

1.5

Life
0.7

0.7

0.8

0.7

2.9

0.8

0.8

0.9

1.8

4.3

Annuity
0.3

0.2

0.2

0.2

0.9

0.2

0.3

0.2

0.2

0.9

   Subtotal Washington National
16.7

19.1

19.4

19.2

74.4

17.2

19.4

20.0

21.2

77.8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Colonial Penn
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Graded Life
13.1

12.2

11.5

9.5

46.3

13.6

12.8

12.7

12.3

51.4

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total NAP
$
87.3

$
95.3

$
86.2

$
97.3

$
366.1

$
86.0

$
92.3

$
93.5

$
103.3

$
375.1

 
 
 
 
 
 
 
 
 
 
 


Page 24


CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
 
 
Statutory information - consolidated basis (7) (in millions)
1Q10
2Q10
3Q10
4Q10
2010
1Q11
2Q11
3Q11
4Q11
2011
 
 
 
 
 
 
 
 
 
 
 
Net gain from operations before interest expense and federal income taxes
$
55.6

$
66.0

$
97.3

$
109.1

$
328.0

$
114.0

$
92.9

$
91.9

$
132.8

$
431.6

Interest expense on surplus debentures held by parent company
12.0

12.2

12.2

12.3

48.7

12.0

12.2

22.7

12.3

59.2
 
 
 
 
 
 
 
 
 
 
 
Net gain from operations before federal income taxes
43.6

53.8

85.1

96.8

279.3

102.0

80.7

69.2

120.5

372.4
Federal income tax expense (benefit)
4.3

7.6

1.6

4.3

17.8

0.6

2.0

3.7

3.0

9.3
 
 
 
 
 
 
 
 
 
 
 
Net gain from operations before net realized capital gains (losses)
39.3

46.2

83.5

92.5

261.5

101.4

78.7

65.5

117.5

363.1
Net realized capital gains (losses)
(13.5
)
(10.2
)
(10.3
)
(45.6
)
(79.6
)
(15.0
)
2.4

10.5

5.8

3.7
 
 
 
 
 
 
 
 
 
 
 
Net income
$
25.8

$
36.0

$
73.2

$
46.9

$
181.9

$
86.4

$
81.1

$
76.0

$
123.3

$
366.8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Capital and surplus
$
1,418.5

$
1,434.7

$
1,443.1

$
1,525.1

$
1,525.1

$
1,567.4

$
1,551.5

$
1,553.1

$
1,578.1

$
1,578.1

Asset valuation reserve (AVR)
46.0

61.9

78.6

71.3

71.3

97.7

116.5

143.2

168.4

168.4
 
 
 
 
 
 
 
 
 
 
 
  Capital, surplus and AVR
1,464.5

1,496.6

1,521.7

1,596.4

1,596.4

1,665.1

1,668.0

1,696.3

1,746.5

1,746.5

 
 
 
 
 
 
 
 
 
 
 
Interest maintenance reserve (IMR)
308.6

319.5

343.9

428.1

428.1

448.3

475.8

507.1

552.0

552.0

 
 
 
 
 
 
 
 
 
 
 
  Total statutory capital, surplus, AVR & IMR
$
1,773.1

$
1,816.1

$
1,865.6

$
2,024.5

$
2,024.5

$
2,113.4

$
2,143.8

$
2,203.4

$
2,298.5

$
2,298.5

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 




Page 25


Notes

(1) Excludes accumulated other comprehensive income (loss).

(2) Shareholders' equity divided by common shares outstanding.

(3) Assumes conversion of all convertible securities.

(4) Management believes that an analysis of earnings before net realized investment gains (losses), fair value changes due to fluctuations in the interest rates used to discount embedded derivative liabilities related to our fixed index annuities, corporate interest expense, loss on extinguishment of debt and taxes (“EBIT,” a non-GAAP financial measure) provides a clearer comparison of the operating results of the company quarter-over-quarter because these items are unrelated to the company's underlying fundamentals.

(5) Management believes that an analysis of Net income applicable to common stock before: (i) loss on extinguishment of debt, net of income taxes; (ii) net realized investment gains or losses, net of related amortization and income taxes; and (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 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 the items excluded from net operating income can be affected by events that are unrelated to the company's underlying fundamentals. The impact of fair value changes in embedded derivative liabilities caused by interest rate fluctuations was insignificant in prior periods. Prior to June 30, 2011, certain of our trading securities were held to offset the income statement volatility caused by the effect of interest rate fluctuations on the value of embedded derivatives related to our fixed index annuity products. During 2Q2011, these securities were sold.

(6) Management believes that an analysis of EBIT, separated between in-force and new business provides increased clarity around the value drivers of our business, particularly since the new business results are significantly impacted by the rate of sales, mix of business and the distribution channel through which new sales are made. EBIT from new business includes pre-tax revenues and expenses associated with new sales of our insurance products during the first year after the sale is completed. EBIT from in-force business includes all pre-tax revenues and expenses associated with sales of insurance products that were completed more than one year before the end of the reporting period. The allocation of certain revenues and expenses between new and in-force business is based on estimates, which we believe are reasonable.

(7) 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.

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