EX-99.2 3 exhibit992-09302015investo.htm EXHIBIT 99.2 Exhibit


Exhibit 99.2



 
 
 
 
 
 
 
 
 
 
 
 
Quarterly Financial Supplement - 3Q2015
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
October 28, 2015
 
 
 
 
 
 
 
 
 
 
 




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
 
 
 
8-11
     Washington National
 
 
 
12-14
     Colonial Penn
 
 
 
15-16
     Corporate Operations
 
 
 
17
Premiums collected on insurance products:
 
 
 
 
     Bankers Life
 
 
 
18
     Washington National
 
 
 
19
     Colonial Penn
 
 
 
20
New Annualized Premiums and Total Policies In-force
 
 
 
21
Statutory information
 
 
 
22
Amounts related to CLIC prior to being sold
 
 
 
23-24
Notes
 
 
 
25





Page 2



CNO Financial Group, Inc.
 
 
 
 
 
 
 
Consolidated balance sheet (in millions)
Mar-14
Jun-14
Sep-14
Dec-14
Mar-15
Jun-15
Sep-15
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
Investments:
 
 
 
 
 
 
 
  Fixed maturities, available for sale, at fair value
$
20,177.8

$
20,583.3

$
20,610.5

$
20,634.9

$
21,058.4

$
20,224.8

$
20,144.5

  Equity securities at fair value
243.6

237.8

372.8

419.0

427.8

433.3

437.3

  Mortgage loans
1,501.7

1,595.9

1,621.8

1,691.9

1,699.7

1,665.5

1,712.6

  Policy loans
102.6

99.7

106.2

106.9

107.1

108.1

109.5

  Trading securities
235.5

227.4

235.0

244.9

252.3

257.5

257.5

  Investments held by variable interest entities
1,134.1

1,241.1

1,343.0

1,367.1

1,499.8

1,565.6

1,488.1

  Other invested assets
409.5

426.1

394.6

443.6

453.4

435.4

395.6

  Total investments
23,804.8

24,411.3

24,683.9

24,908.3

25,498.5

24,690.2

24,545.1

Cash and cash equivalents - unrestricted
285.4

378.8

452.1

611.6

426.9

453.9

613.8

Cash and cash equivalents held by variable interest entities
140.3

101.8

150.7

68.3

158.5

150.6

106.9

Accrued investment income
259.3

238.2

255.4

242.9

257.2

240.4

260.7

Present value of future profits
527.7

512.3

505.1

489.4

472.4

465.1

454.4

Deferred acquisition costs
740.4

698.9

746.6

770.6

767.2

877.4

909.1

Reinsurance receivables
3,072.8

2,892.9

3,023.0

2,991.1

2,958.0

2,925.0

2,903.3

Income tax assets, net
870.7

730.5

731.1

758.7

669.5

827.8

862.3

Assets held in separate accounts
10.0

9.4

6.9

5.6

5.5

5.4

5.0

Other assets
401.0

421.3

420.2

337.7

381.1

413.2

350.6

Assets of subsidiary being sold
4,346.3

4,518.9

—

—

—

—

—

Total assets
$
34,458.7

$
34,914.3

$
30,975.0

$
31,184.2

$
31,594.8

$
31,049.0

$
31,011.2

Liabilities
 
 
 
 
 
 
 
Liabilities for insurance products:
 
 
 
 
 
 
 
  Policyholder account balances
$
10,625.3

$
10,649.7

$
10,659.2

$
10,707.2

$
10,697.8

$
10,689.3

$
10,728.0

  Future policy benefits
10,138.6

10,372.2

10,519.8

10,835.4

10,962.8

10,588.9

10,691.6

  Liability for policy and contract claims
482.2

463.3

464.4

468.7

474.1

484.5

484.1

  Unearned and advanced premiums
279.5

270.7

270.3

291.8

278.9

268.6

281.4

  Liabilities related to separate accounts
10.0

9.4

6.9

5.6

5.5

5.4

5.0

Other liabilities
727.4

560.7

704.0

587.6

667.1

742.5

739.1

Investment borrowings
1,499.4

1,507.6

1,519.4

1,519.2

1,518.9

1,518.9

1,543.7

Borrowings related to variable interest entities
1,019.4

1,110.8

1,295.0

1,286.1

1,461.3

1,461.7

1,442.3

Notes payable - direct corporate obligations
844.1

827.3

814.0

794.4

774.8

925.0

925.0

Liabilities of subsidiary being sold
4,122.6

4,298.3

—

—

—

—

—

Total liabilities
29,748.5

30,070.0

26,253.0

26,496.0

26,841.2

26,684.8

26,840.2

Shareholders' equity
 
 
 
 
 
 
 
Common stock
2.2

2.1

2.1

2.0

2.0

1.9

1.9

Additional paid-in capital
4,054.7

3,963.9

3,803.7

3,732.4

3,648.1

3,554.9

3,435.8

Retained earnings (accumulated deficit)
(112.9
)
(47.8
)
56.9

128.5

169.3

202.4

222.9

Total shareholders' equity before accumulated other comprehensive income
3,944.0

3,918.2

3,862.7

3,862.9

3,819.4

3,759.2

3,660.6

Accumulated other comprehensive income
766.2

926.1

859.3

825.3

934.2

605.0

510.4

Total shareholders' equity
4,710.2

4,844.3

4,722.0

4,688.2

4,753.6

4,364.2

4,171.0

Total liabilities and shareholders' equity
$
34,458.7

$
34,914.3

$
30,975.0

$
31,184.2

$
31,594.8

$
31,049.0

$
31,011.2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
 
 
 
 
 
 
 
 
Book value per share at period-end (1) (2)
$
17.99

$
18.33

$
18.60

$
19.00

$
19.23

$
19.43

$
19.60

 
 
 
 
 
 
 
 
Book value per diluted share (1) (3)
$
17.52

$
17.85

$
18.39

$
18.75

$
19.05

$
19.21

$
19.38

 
 
 
 
 
 
 
 





Page 3



CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
Consolidated statement of operations (in millions)
1Q14
2Q14
3Q14
4Q14
2014
1Q15
2Q15
3Q15
 
 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
 
Insurance policy income
$
685.9

$
679.0

$
632.1

$
632.7

$
2,629.7

$
636.5

$
640.1

$
640.6

Net investment income:
 
 
 
 
 
 
 
 
   General account assets
348.1

347.4

300.1

305.4

1,301.0

300.1

302.1

298.2

Policyholder and reinsurer accounts and other special-purpose portfolios
20.9

47.2

14.8

43.5

126.4

16.6

11.8

(27.6
)
Realized investment gains (losses):
 
 
 
 
 
 
 
 
Net realized investment gains (losses), excluding impairment losses
35.3

12.4

6.8

9.5

64.0

(1.1
)
(2.2
)
(7.2
)
Other-than-temporary impairments:
 
 
 
 
 
 
 
 
Total other-than-temporary impairment losses
(11.9
)
—

(2.8
)
(12.6
)
(27.3
)
(1.3
)
(7.9
)
(15.4
)
Portion of other-than-temporary impairment losses recognized in accumulated other comprehensive income
—

—

—

—

—

—

—

3.0

Net impairment losses recognized
(11.9
)
—

(2.8
)
(12.6
)
(27.3
)
(1.3
)
(7.9
)
(12.4
)
Gain on dissolution of a variable interest entity
—

—

—

—

—

11.3

—

—

Total realized gains (losses)
23.4

12.4

4.0

(3.1
)
36.7

8.9

(10.1
)
(19.6
)
Fee revenue and other income
6.4

7.0

16.0

21.5

50.9

16.2

15.6

12.9

Total revenues
1,084.7

1,093.0

967.0

1,000.0

4,144.7

978.3

959.5

904.5

 
 
 
 
 
 
 
 
 
Benefits and expenses
 
 
 
 
 
 
 
 
Insurance policy benefits
690.3

691.1

565.5

639.3

2,586.2

606.0

568.3

582.1

Net loss on sale of subsidiary, gain on reinsurance transactions and transition expenses
278.6

(3.8
)
(32.1
)
(2.9
)
239.8

4.5

4.5

—

Interest expense
24.6

24.3

21.9

22.0

92.8

21.5

25.3

23.9

Amortization
66.7

64.9

65.8

50.0

247.4

66.1

73.7

55.8

Loss on extinguishment or modification of debt
—

0.6

—

—

0.6

—

32.8

—

Other operating costs and expenses
194.1

201.5

191.5

215.7

802.8

197.9

182.2

190.3

Total benefits and expenses
1,254.3

978.6

812.6

924.1

3,969.6

896.0

886.8

852.1

 
 
 
 
 
 
 
 
 
Income (loss) before income taxes
(169.6
)
114.4

154.4

75.9

175.1

82.3

72.7

52.4

Income tax expense on period income
39.0

40.3

53.8

26.1

159.2

29.5

25.9

18.6

Valuation allowance for deferred tax assets and other tax items
19.4

(4.0
)
(16.8
)
(34.1
)
(35.5
)
—

—

—

Net income (loss)
$
(228.0
)
$
78.1

$
117.4

$
83.9

$
51.4

$
52.8

$
46.8

$
33.8

 
 
 
 
 
 
 
 
 







Page 4



CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
Operating results ($ in millions, except per share amounts)
1Q14
2Q14
3Q14
4Q14
2014
1Q15
2Q15
3Q15
 
 
 
 
 
 
 
 
 
EBIT (4):
 
 
 
 
 
 
 
 
   Bankers Life
$
84.2

$
87.4

$
111.8

$
103.5

$
386.9

$
82.2

$
86.4

$
79.8

   Washington National
31.1

32.3

27.6

20.2

111.2

28.5

20.1

30.6

   Colonial Penn
(6.2
)
3.8

0.4

2.8

0.8

(5.9
)
4.2

0.6

EBIT from business segments
109.1

123.5

139.8

126.5

498.9

104.8

110.7

111.0

Corporate operations, excluding corporate interest expense
(6.0
)
(3.7
)
(9.1
)
(8.8
)
(27.6
)
(1.3
)
(5.0
)
(11.9
)
EBIT
103.1

119.8

130.7

117.7

471.3

103.5

105.7

99.1

Corporate interest expense
(11.1
)
(11.1
)
(10.9
)
(10.8
)
(43.9
)
(10.5
)
(11.9
)
(11.3
)
Operating earnings before taxes
92.0

108.7

119.8

106.9

427.4

93.0

93.8

87.8

Tax expense on operating income
32.1

37.4

43.2

37.8

150.5

32.9

33.0

31.0

Net operating income (5)
59.9

71.3

76.6

69.1

276.9

60.1

60.8

56.8

Earnings of CLIC prior to being sold (net of taxes)
6.7

8.5

—

—

15.2

—

—

—

Net loss on sale of CLIC and gain on reinsurance transactions (including impact of taxes)
(298.0
)
2.5

22.9

2.9

(269.7
)
—

—

—

Net realized investment gains (losses) (net of related amortization and taxes)
13.6

7.5

2.6

(2.3
)
21.4

(1.4
)
(6.8
)
(12.3
)
Fair value changes in embedded derivative liabilities (net of related amortization and taxes)
(7.2
)
(4.8
)
—

(11.4
)
(23.4
)
(8.3
)
16.8

(10.2
)
Fair value changes related to agent deferred compensation plan (net of taxes)
—

(7.6
)
—

(9.8
)
(17.4
)
—

—

—

Loss on extinguishment or modification of debt (net of taxes)
—

(0.4
)
—

—

(0.4
)
—

(21.3
)
—

Valuation allowance for deferred tax assets and other tax items
—

4.0

16.8

34.1

54.9

—

—

—

Other
(3.0
)
(2.9
)
(1.5
)
1.3

(6.1
)
2.4

(2.7
)
(0.5
)
Net income (loss)
$
(228.0
)
$
78.1

$
117.4

$
83.9

$
51.4

$
52.8

$
46.8

$
33.8

 
 
 
 
 
 
 
 
 
Per diluted share:
 
 
 
 
 
 
 
 
Net operating income
$
.27

$
.32

$
.35

$
.34

$
1.27

$
.30

$
.31

$
.30

Earnings of CLIC prior to being sold (net of taxes)
.03

.04

—

—

.07

—

—

—

Net loss on sale of CLIC and gain on reinsurance transactions (including impact of taxes)
(1.35
)
.01

.11

.01

(1.24
)
—

—

—

Net realized investment gains (losses) (net of related amortization and taxes)
.06

.03

.01

(.01
)
.10

(.01
)
(.03
)
(.07
)
Fair value changes in embedded derivative liabilities (net of related amortization and taxes)
(.03
)
(.02
)
—

(.05
)
(.11
)
(.04
)
.08

(.05
)
Fair value changes related to agent deferred compensation plan (net of taxes)
—

(.03
)
—

(.05
)
(.08
)
—

—

—

Loss on extinguishment or modification of debt (net of taxes)
—

—

—

—

—

—

(.11
)
—

Valuation allowance for deferred tax assets and other tax items
—

.02

.08

.17

.25

—

—

—

Other
(.01
)
(.02
)
(.01
)
—

(.02
)
.01

(.01
)
—

Net income (loss)
$
(1.03
)
$
.35

$
.54

$
.41

$
.24

$
.26

$
.24

$
.18

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 




Page 5




CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
Computation of weighted average shares outstanding
1Q14 (a)
2Q14
3Q14
4Q14
2014
1Q15
2Q15
3Q15
(000s)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
 
 
 
 
 
 
 
Shares outstanding, beginning of period
220,323.8

219,266.9

213,755.2

207,640.1

220,323.8

203,324.5

198,631.9

193,467.7

Weighted average shares issued during the period:
 
 
 
 
 
 
 
 
Shares repurchased
(343.6
)
(2,802.5
)
(3,312.5
)
(3,357.7
)
(8,491.9
)
(3,011.2
)
(2,938.7
)
(3,306.4
)
Stock options exercised and vested restricted and performance stock
393.4

73.8

84.7

16.5

1,273.1

251.2

164.4

100.9

Shares withheld for the payment of taxes on the vesting of restricted stock
(67.1
)
(0.6
)
(2.1
)
(1.3
)
(188.3
)
(73.8
)
(0.4
)
(2.7
)
Weighted average basic shares outstanding during the period
220,306.5

216,537.6

210,525.3

204,297.6

212,916.7

200,490.7

195,857.2

190,259.5

Basic shares outstanding, end of period
219,266.9

213,755.2

207,640.1

203,324.5

203,324.5

198,631.9

193,467.7

186,741.8

Diluted
 
 
 
 
 
 
 
 
Weighted average basic shares outstanding
220,306.5

216,537.6

210,525.3

204,297.6

212,916.7

200,490.7

195,857.2

190,259.5

Common stock equivalent shares related to:
 
 
 
 
 
 
 
 
Stock options, restricted stock and performance units
—

2,390.4

2,447.3

2,645.3

2,505.1

1,783.9

2,215.8

2,105.8

Warrants
—

3,180.0

2,485.6

—

2,232.9

—

—

—

Weighted average diluted shares outstanding during the period
220,306.5

222,108.0

215,458.2

206,942.9

217,654.7

202,274.6

198,073.0

192,365.3

Diluted shares outstanding, end of period
225,106.7

219,536.1

210,046.5

205,969.8

205,969.8

200,489.1

195,711.3

188,918.7

 
 
 
 
 
 
 
 
 

(a)
Equivalent common shares of 5,803.0 were not included in the diluted weighted average shares outstanding due to the net loss recognized in 1Q14.





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
1Q14
2Q14
3Q14
4Q14
2014
1Q15
2Q15
3Q15
 
 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
 
Insurance policy income
$
541.6

$
534.9

$
541.5

$
545.4

$
2,163.4

$
549.8

$
549.7

$
553.1

Net investment income
297.7

320.2

299.5

320.1

1,237.5

295.6

293.9

260.3

Fee revenue and other income
4.7

5.2

6.2

9.6

25.7

5.8

5.8

6.2

Total revenues
844.0

860.3

847.2

875.1

3,426.6

851.2

849.4

819.6

 
 
 
 
 
 
 
 
 
Benefits and expenses
 
 
 
 
 
 
 
 
Insurance policy benefits
532.9

542.5

507.3

553.7

2,136.4

534.4

547.7

509.0

Interest expense
2.3

2.4

2.4

2.5

9.6

2.5

2.6

2.7

Amortization
61.6

58.6

58.8

49.2

228.2

65.0

57.8

55.1

Other operating costs and expenses
80.6

84.6

87.9

94.8

347.9

84.6

84.8

91.7

Total benefits and expenses
677.4

688.1

656.4

700.2

2,722.1

686.5

692.9

658.5

EBIT from In-Force Business
$
166.6

$
172.2

$
190.8

$
174.9

$
704.5

$
164.7

$
156.5

$
161.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EBIT from New Business
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
 
Insurance policy income
$
90.8

$
91.6

$
90.6

$
87.3

$
360.3

$
86.7

$
90.4

$
87.5

Net investment income
6.4

9.7

7.2

14.3

37.6

7.2

5.2

4.9

Fee revenue and other income
1.0

1.1

1.3

2.3

5.7

1.2

1.2

1.3

Total revenues
98.2

102.4

99.1

103.9

403.6

95.1

96.8

93.7

 
 
 
 
 
 
 
 
 
Benefits and expenses
 
 
 
 
 
 
 
 
Insurance policy benefits
58.6

61.4

58.2

62.4

240.6

54.7

54.6

52.6

Interest expense
—

—

—

—

—

—

—

—

Amortization
6.9

6.6

6.8

6.1

26.4

5.5

7.3

6.1

Other operating costs and expenses
90.2

83.1

85.1

83.8

342.2

94.8

80.7

85.1

Total benefits and expenses
155.7

151.1

150.1

152.3

609.2

155.0

142.6

143.8

EBIT from New Business
$
(57.5
)
$
(48.7
)
$
(51.0
)
$
(48.4
)
$
(205.6
)
$
(59.9
)
$
(45.8
)
$
(50.1
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EBIT from In-Force and New Business
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
 
Insurance policy income
$
632.4

$
626.5

$
632.1

$
632.7

$
2,523.7

$
636.5

$
640.1

$
640.6

Net investment income
304.1

329.9

306.7

334.4

1,275.1

302.8

299.1

265.2

Fee revenue and other income
5.7

6.3

7.5

11.9

31.4

7.0

7.0

7.5

Total revenues
942.2

962.7

946.3

979.0

3,830.2

946.3

946.2

913.3

 
 
 
 
 
 
 
 
 
Benefits and expenses
 
 
 
 
 
 
 
 
Insurance policy benefits
591.5

603.9

565.5

616.1

2,377.0

589.1

602.3

561.6

Interest expense
2.3

2.4

2.4

2.5

9.6

2.5

2.6

2.7

Amortization
68.5

65.2

65.6

55.3

254.6

70.5

65.1

61.2

Other operating costs and expenses
170.8

167.7

173.0

178.6

690.1

179.4

165.5

176.8

Total benefits and expenses
833.1

839.2

806.5

852.5

3,331.3

841.5

835.5

802.3

EBIT from In-Force and New Business
$
109.1

$
123.5

$
139.8

$
126.5

$
498.9

$
104.8

$
110.7

$
111.0

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



Page 7





CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
Bankers Life
 
 
 
 
 
 
 
 
Analysis of income before taxes (in millions)
1Q14
2Q14
3Q14
4Q14
2014
1Q15
2Q15
3Q15
 
 
 
 
 
 
 
 
 
Insurance policy income
$
416.3

$
408.1

$
416.4

$
410.9

$
1,651.7

$
412.7

$
413.9

$
412.5

Net investment income (loss):
 
 
 
 
 
 
 
 
   General account invested assets
219.8

220.5

225.9

229.2

895.4

229.2

230.9

227.4

   Fixed index products
4.6

27.1

5.3

24.9

61.9

(2.7
)
(5.7
)
(31.1
)
Fee revenue and other income
5.3

5.8

7.0

11.2

29.3

6.3

6.5

7.0

   Total revenues
646.0

661.5

654.6

676.2

2,638.3

645.5

645.6

615.8

 
 
 
 
 
 
 
 
 
Insurance policy benefits
365.7

356.0

345.9

360.1

1,427.7

363.4

371.7

370.4

Amounts added to policyholder account balances:
 
 
 
 
 
 
 
 
Cost of interest credited to policyholders
32.9

32.2

31.0

31.1

127.2

30.3

30.0

29.3

Cost of options to fund index credits, net of forfeitures
12.0

12.1

12.2

12.9

49.2

14.3

14.0

16.9

Market value changes credited to policyholders
4.4

27.6

5.8

25.7

63.5

(2.7
)
(5.0
)
(30.5
)
Amortization related to operations
48.2

45.4

47.1

34.0

174.7

51.6

47.7

44.1

Interest expense on investment borrowings
1.9

1.9

2.0

2.1

7.9

2.1

2.1

2.2

Other operating costs and expenses
96.7

98.9

98.8

106.8

401.2

104.3

98.7

103.6

   Total benefits and expenses
561.8

574.1

542.8

572.7

2,251.4

563.3

559.2

536.0

EBIT (4)
$
84.2

$
87.4

$
111.8

$
103.5

$
386.9

$
82.2

$
86.4

$
79.8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Health underwriting margins (in millions)
1Q14
2Q14
3Q14
4Q14
2014
1Q15
2Q15
3Q15
 
 
 
 
 
 
 
 
 
Medicare supplement:
 
 
 
 
 
 
 
 
   Earned premium
$
194.5

$
193.2

$
193.9

$
192.8

$
774.4

$
193.2

$
192.6

$
192.7

   Benefit ratio
67.7
%
69.5
%
66.2
%
70.0
%
68.4
%
67.4
%
68.7
%
71.5
%
Underwriting margin (earned premium less policy benefits)
$
62.9

$
59.0

$
65.4

$
57.8

$
245.1

$
63.1

$
60.2

$
54.8

 
 
 
 
 
 
 
 
 
Long-term care:
 
 
 
 
 
 
 
 
   Earned premium
$
129.1

$
127.4

$
125.5

$
124.0

$
506.0

$
122.6

$
120.5

$
119.0

Benefit ratio before interest income on reserves
131.9
%
131.2
%
123.6
%
131.8
%
129.7
%
137.8
%
140.7
%
141.1
%
   Interest-adjusted benefit ratio
81.0
%
79.2
%
70.5
%
77.8
%
77.2
%
83.0
%
84.6
%
83.8
%
Underwriting margin (earned premium plus interest income on reserves less policy benefits)
$
24.5

$
26.5

$
36.9

$
27.6

$
115.5

$
20.8

$
18.6

$
19.3

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Page 8




CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
Bankers Life
 
 
 
 
 
 
 
 
Average liabilities for insurance products (in millions)
1Q14
2Q14
3Q14
4Q14
2014
1Q15
2Q15
3Q15
 
 
 
 
 
 
 
 
 
Fixed index annuities
$
3,462.8

$
3,575.7

$
3,687.0

$
3,821.2

$
3,636.7

$
3,952.1

$
4,023.6

$
4,112.5

Fixed interest annuities
3,983.1

3,889.6

3,796.5

3,711.0

3,845.0

3,623.5

3,523.9

3,436.8

SPIAs and supplemental contracts:
 
 
 
 
 
 
 
 
Mortality based
203.1

206.5

202.8

198.8

202.8

194.4

190.8

187.9

Deposit based
150.1

148.1

148.3

149.8

149.1

152.3

153.7

153.9

Health:
 
 
 
 
 
 
 
 
Long-term care
4,568.0

4,682.5

4,788.5

4,902.5

4,735.4

5,067.8

4,955.0

4,823.4

Medicare supplement
338.2

330.6

324.2

331.2

331.0

336.9

327.6

325.1

Other health
46.5

47.1

47.9

48.5

47.5

47.7

46.9

47.7

Life:
 
 
 
 
 
 
 
 
   Interest sensitive
533.2

552.5

576.4

596.7

564.7

614.9

635.3

652.3

   Non-interest sensitive
672.4

693.6

870.4

892.0

782.1

911.6

931.1

952.3

Total average liabilities for insurance products, net of reinsurance ceded
$
13,957.4

$
14,126.2

$
14,442.0

$
14,651.7

$
14,294.3

$
14,901.2

$
14,787.9

$
14,691.9

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Annuities - account value rollforwards (in millions)
1Q14
2Q14
3Q14
4Q14
2014
1Q15
2Q15
3Q15
 
 
 
 
 
 
 
 
 
Fixed index annuities
 
 
 
 
 
 
 
 
Balance as of the beginning of the period
$
3,297.9

$
3,401.4

$
3,524.2

$
3,639.1

$
3,297.9

$
3,772.5

$
3,861.3

$
3,969.2

Gross deposits
147.6

166.7

152.1

180.0

646.4

150.3

166.5

192.2

Withdrawals
(84.7
)
(81.0
)
(78.7
)
(79.6
)
(324.0
)
(92.0
)
(85.5
)
(81.7
)
Returns reinvested
40.6

37.1

41.5

33.0

152.2

30.5

26.9

19.8

Balance as of the end of the period
$
3,401.4

$
3,524.2

$
3,639.1

$
3,772.5

$
3,772.5

$
3,861.3

$
3,969.2

$
4,099.5

 
 
 
 
 
 
 
 
 
Fixed interest annuities
 
 
 
 
 
 
 
 
Balance as of the beginning of the period
$
4,013.0

$
3,932.6

$
3,838.9

$
3,746.3

$
4,013.0

$
3,670.8

$
3,574.1

$
3,471.5

Gross deposits
40.3

30.1

25.6

26.7

122.7

20.1

18.9

21.5

Withdrawals
(147.3
)
(149.5
)
(142.7
)
(126.6
)
(566.1
)
(140.2
)
(144.5
)
(116.0
)
Returns reinvested
26.6

25.7

24.5

24.4

101.2

23.4

23.0

22.8

Balance as of the end of the period
$
3,932.6

$
3,838.9

$
3,746.3

$
3,670.8

$
3,670.8

$
3,574.1

$
3,471.5

$
3,399.8

 
 
 
 
 
 
 
 
 
Total annuities
 
 
 
 
 
 
 
 
Balance as of the beginning of the period
$
7,310.9

$
7,334.0

$
7,363.1

$
7,385.4

$
7,310.9

$
7,443.3

$
7,435.4

$
7,440.7

Gross deposits
187.9

196.8

177.7

206.7

769.1

170.4

185.4

213.7

Withdrawals
(232.0
)
(230.5
)
(221.4
)
(206.2
)
(890.1
)
(232.2
)
(230.0
)
(197.7
)
Returns reinvested
67.2

62.8

66.0

57.4

253.4

53.9

49.9

42.6

Balance as of the end of the period
$
7,334.0

$
7,363.1

$
7,385.4

$
7,443.3

$
7,443.3

$
7,435.4

$
7,440.7

$
7,499.3

 
 
 
 
 
 
 
 
 


Page 9




CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
Bankers Life
 
 
 
 
 
 
 
 
Present value of future profits (in millions)
1Q14
2Q14
3Q14
4Q14
2014
1Q15
2Q15
3Q15
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
263.2

$
137.7

$
132.1

$
132.7

$
263.2

$
128.4

$
122.0

$
118.6

Amortization related to operations
(11.4
)
(10.5
)
(9.1
)
(9.1
)
(40.1
)
(10.5
)
(10.1
)
(8.3
)
Amortization related to net realized investment (gains) losses
—

—

—

—

—

—

—

—

Effect of reinsurance transaction
—

—

5.0

—

5.0

—

—

—

Adjustment related to unrealized (gain) or loss on fixed maturities, available for sale
(114.1
)
4.9

4.7

4.8

(99.7
)
4.1

6.7

4.5

Balance, end of period
$
137.7

$
132.1

$
132.7

$
128.4

$
128.4

$
122.0

$
118.6

$
114.8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deferred acquisition costs (in millions)
1Q14
2Q14
3Q14
4Q14
2014
1Q15
2Q15
3Q15
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
627.8

$
440.8

$
397.6

$
437.6

$
627.8

$
456.6

$
445.1

$
536.3

Deferred acquisition expenses
39.6

41.8

42.3

48.7

172.4

39.4

41.2

41.8

Amortization related to operations
(36.8
)
(34.9
)
(38.0
)
(24.9
)
(134.6
)
(41.1
)
(37.6
)
(35.8
)
Amortization related to net realized investment (gains) losses
—

(0.1
)
—

(0.4
)
(0.5
)
0.2

(0.2
)
0.6

Amortization related to fair value changes in embedded derivative liabilities
3.8

2.3

0.1

5.2

11.4

3.6

(7.4
)
4.5

Effect of reinsurance transaction
—

—

24.0

—

24.0

—

—

—

Adjustment related to unrealized (gain) or loss on fixed maturities, available for sale
(193.6
)
(52.3
)
11.6

(9.6
)
(243.9
)
(13.6
)
95.2

10.3

Balance, end of period
$
440.8

$
397.6

$
437.6

$
456.6

$
456.6

$
445.1

$
536.3

$
557.7

 
 
 
 
 
 
 
 
 


Page 10




Bankers Life Segment EBIT
 
 
 
 
 
 
 
 
Summarized by In-Force and New Business (6)
 
 
 
 
 
 
 
 
(in millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
EBIT from In-Force Business
1Q14
2Q14
3Q14
4Q14
2014
1Q15
2Q15
3Q15
 
 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
 
Insurance policy income
$
354.2

$
346.2

$
355.8

$
354.8

$
1,411.0

$
357.9

$
356.4

$
358.0

Net investment income (loss)
218.0

237.9

224.0

239.8

919.7

219.3

220.0

191.4

Fee revenue and other income
4.3

4.7

5.7

8.9

23.6

5.1

5.3

5.7

Total revenues
576.5

588.8

585.5

603.5

2,354.3

582.3

581.7

555.1

 
 
 
 
 
 
 
 
 
Benefits and expenses
 
 
 
 
 
 
 
 
Insurance policy benefits
370.1

380.7

351.1

382.4

1,484.3

365.9

372.0

349.4

Interest expense
1.9

1.9

2.0

2.1

7.9

2.1

2.1

2.2

Amortization
42.5

40.0

41.6

29.2

153.3

47.5

41.9

39.5

Other operating costs and expenses
39.6

41.9

45.0

50.3

176.8

44.5

44.2

50.5

Total benefits and expenses
454.1

464.5

439.7

464.0

1,822.3

460.0

460.2

441.6

EBIT from In-Force Business
$
122.4

$
124.3

$
145.8

$
139.5

$
532.0

$
122.3

$
121.5

$
113.5

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EBIT from New Business
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
 
Insurance policy income
$
62.1

$
61.9

$
60.6

$
56.1

$
240.7

$
54.8

$
57.5

$
54.5

Net investment income (loss)
6.4

9.7

7.2

14.3

37.6

7.2

5.2

4.9

Fee revenue and other income
1.0

1.1

1.3

2.3

5.7

1.2

1.2

1.3

Total revenues
69.5

72.7

69.1

72.7

284.0

63.2

63.9

60.7

 
 
 
 
 
 
 
 
 
Benefits and expenses
 
 
 
 
 
 
 
 
Insurance policy benefits
44.9

47.2

43.8

47.4

183.3

39.4

38.7

36.7

Interest expense
—

—

—

—

—

—

—

—

Amortization
5.7

5.4

5.5

4.8

21.4

4.1

5.8

4.6

Other operating costs and expenses
57.1

57.0

53.8

56.5

224.4

59.8

54.5

53.1

Total benefits and expenses
107.7

109.6

103.1

108.7

429.1

103.3

99.0

94.4

EBIT from New Business
$
(38.2
)
$
(36.9
)
$
(34.0
)
$
(36.0
)
$
(145.1
)
$
(40.1
)
$
(35.1
)
$
(33.7
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EBIT from In-Force and New Business
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
 
Insurance policy income
$
416.3

$
408.1

$
416.4

$
410.9

$
1,651.7

$
412.7

$
413.9

$
412.5

Net investment income (loss)
224.4

247.6

231.2

254.1

957.3

226.5

225.2

196.3

Fee revenue and other income
5.3

5.8

7.0

11.2

29.3

6.3

6.5

7.0

Total revenues
646.0

661.5

654.6

676.2

2,638.3

645.5

645.6

615.8

 
 
 
 
 
 
 
 
 
Benefits and expenses
 
 
 
 
 
 
 
 
Insurance policy benefits
415.0

427.9

394.9

429.8

1,667.6

405.3

410.7

386.1

Interest expense
1.9

1.9

2.0

2.1

7.9

2.1

2.1

2.2

Amortization
48.2

45.4

47.1

34.0

174.7

51.6

47.7

44.1

Other operating costs and expenses
96.7

98.9

98.8

106.8

401.2

104.3

98.7

103.6

Total benefits and expenses
561.8

574.1

542.8

572.7

2,251.4

563.3

559.2

536.0

EBIT from In-Force and New Business
$
84.2

$
87.4

$
111.8

$
103.5

$
386.9

$
82.2

$
86.4

$
79.8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Page 11




CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
Washington National
 
 
 
 
 
 
 
 
Analysis of income before taxes (in millions)
1Q14
2Q14
3Q14
4Q14
2014
1Q15
2Q15
3Q15
 
 
 
 
 
 
 
 
 
Insurance policy income
$
155.6

$
156.7

$
154.0

$
159.7

$
626.0

$
159.5

$
159.6

$
162.1

Net investment income (loss):
 
 
 
 
 
 
 
 
   General account invested assets
68.2

67.6

64.8

65.9

266.5

64.6

63.3

63.7

Fixed index products
0.9

2.8

0.3

2.3

6.3

0.6

(0.2
)
(3.2
)
Trading account income related to reinsurer accounts
1.6

(0.2
)
—

—

1.4

—

—

—

Change in value of embedded derivatives related to modified coinsurance agreements
(1.6
)
0.2

—

—

(1.4
)
—

—

—

Trading account income related to policyholder accounts
(0.1
)
1.4

0.1

1.9

3.3

0.4

—

(2.1
)
Fee revenue and other income
0.2

0.2

0.3

0.4

1.1

0.4

0.3

0.3

   Total revenues
224.8

228.7

219.5

230.2

903.2

225.5

223.0

220.8

 
 
 
 
 
 
 
 
 
Insurance policy benefits
126.0

123.3

124.1

132.3

505.7

129.0

138.9

130.2

Amounts added to policyholder account balances:
 
 
 
 
 
 
 
 
Cost of interest credited to policyholders
3.4

4.0

3.6

3.9

14.9

3.7

3.7

3.6

Cost of options to fund index credits, net of forfeitures
1.5

1.4

1.3

1.4

5.6

1.5

1.5

1.5

Market value changes credited to policyholders
0.9

4.1

0.5

4.5

10.0

1.0

(0.3
)
(5.5
)
Amortization related to operations
16.3

16.0

14.8

17.5

64.6

15.3

13.7

13.5

Interest expense on investment borrowings
0.4

0.5

0.4

0.4

1.7

0.4

0.5

0.5

Other operating costs and expenses
45.2

47.1

47.2

50.0

189.5

46.1

44.9

46.4

   Total benefits and expenses
193.7

196.4

191.9

210.0

792.0

197.0

202.9

190.2

EBIT (4)
$
31.1

$
32.3

$
27.6

$
20.2

$
111.2

$
28.5

$
20.1

$
30.6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Health underwriting margins (in millions)
1Q14
2Q14
3Q14
4Q14
2014
1Q15
2Q15
3Q15
 
 
 
 
 
 
 
 
 
Medicare supplement:
 
 
 
 
 
 
 
 
Earned premium
$
23.1

$
22.1

$
21.3

$
20.6

$
87.1

$
19.4

$
18.3

$
18.4

Benefit ratio
63.9
%
61.7
%
65.8
%
62.0
%
63.3
%
63.2
%
64.6
%
68.7
%
Underwriting margin (earned premium less policy benefits)
$
8.3

$
8.5

$
7.3

$
7.8

$
31.9

$
7.1

$
6.5

$
5.8

 
 
 
 
 
 
 
 
 
Supplemental health and other:
 
 
 
 
 
 
 
 
Earned premium
$
125.8

$
126.8

$
125.8

$
132.1

$
510.5

$
132.8

$
134.4

$
136.6

Benefit ratio before interest income on reserves
78.9
%
80.3
%
81.9
%
79.1
%
80.1
%
82.4
%
90.3
%
81.7
%
Interest-adjusted benefit ratio
53.0
%
54.8
%
56.0
%
54.4
%
54.6
%
57.6
%
65.7
%
57.4
%
Underwriting margin (earned premium plus interest income on reserves less policy benefits)
$
59.1

$
57.4

$
55.2

$
60.3

$
232.0

$
56.2

$
46.1

$
58.2

 
 
 
 
 
 
 
 
 



Page 12



CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
Washington National
 
 
 
 
 
 
 
 
Average liabilities for insurance products (in millions)
1Q14
2Q14
3Q14
4Q14
2014
1Q15
2Q15
3Q15
 
 
 
 
 
 
 
 
 
Fixed index annuities
$
433.7

$
426.3

$
417.4

$
408.7

$
421.5

$
401.0

$
391.9

$
380.8

Fixed interest annuities
134.4

131.4

128.6

126.5

130.2

124.9

121.4

116.6

SPIAs and supplemental contracts:
 
 
 
 
 
 
 
 
Mortality based
245.5

242.9

240.2

253.1

245.4

267.5

261.7

254.3

Deposit based
249.5

252.3

254.1

254.4

252.6

257.3

259.9

261.4

Separate Accounts
10.2

9.7

8.1

6.2

8.5

5.5

5.4

5.2

Health:
 
 
 
 
 
 
 
 
Supplemental health
2,265.3

2,415.7

2,428.8

2,441.7

2,387.9

2,455.3

2,478.6

2,508.2

Medicare supplement
36.8

36.0

34.1

33.9

35.2

33.5

30.9

29.6

Other health
11.1

16.8

16.0

15.7

14.9

15.1

14.9

14.9

Life:
 
 
 
 
 
 
 
 
Interest sensitive
165.8

160.3

156.5

155.0

159.4

153.5

152.2

151.2

Non-interest sensitive
194.2

192.6

191.2

189.8

192.0

188.4

186.5

184.9

Total average liabilities for insurance products, net of reinsurance ceded
$
3,746.5

$
3,884.0

$
3,875.0

$
3,885.0

$
3,847.6

$
3,902.0

$
3,903.4

$
3,907.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Present value of future profits (in millions)
1Q14
2Q14
3Q14
4Q14
2014
1Q15
2Q15
3Q15
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
344.3

$
336.2

$
328.1

$
322.0

$
344.3

$
314.2

$
304.9

$
301.9

Amortization related to operations
(7.9
)
(7.6
)
(6.2
)
(6.9
)
(28.6
)
(7.0
)
(6.6
)
(5.9
)
Adjustment related to unrealized (gain) or loss on fixed maturities, available for sale
(0.2
)
(0.5
)
0.1

(0.9
)
(1.5
)
(2.3
)
3.6

—

Balance, end of period
$
336.2

$
328.1

$
322.0

$
314.2

$
314.2

$
304.9

$
301.9

$
296.0

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deferred acquisition costs (in millions)
1Q14
2Q14
3Q14
4Q14
2014
1Q15
2Q15
3Q15
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
232.2

$
230.8

$
230.9

$
237.0

$
232.2

$
240.2

$
245.4

$
260.8

Deferred acquisition expenses
13.2

13.8

13.8

13.5

54.3

13.7

15.2

14.7

Amortization related to operations
(8.4
)
(8.4
)
(8.6
)
(10.6
)
(36.0
)
(8.3
)
(7.1
)
(7.6
)
Amortization related to net realized investment (gains) losses
(0.4
)
—

(0.1
)
—

(0.5
)
—

(0.1
)
—

Amortization related to fair value changes in embedded derivative liabilities
0.4

0.4

(0.2
)
0.5

1.1

0.6

(0.9
)
0.3

Adjustment related to unrealized (gain) or loss on fixed maturities, available for sale
(6.2
)
(5.7
)
1.2

(0.2
)
(10.9
)
(0.8
)
8.3

0.4

Balance, end of period
$
230.8

$
230.9

$
237.0

$
240.2

$
240.2

$
245.4

$
260.8

$
268.6

 
 
 
 
 
 
 
 
 



Page 13



Washington National Segment EBIT Summarized by In-Force and New Business (6)
 
 
 
 
 
 
 
 
(in millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
EBIT from In-Force Business
1Q14
2Q14
3Q14
4Q14
2014
1Q15
2Q15
3Q15
 
 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
 
Insurance policy income
$
138.1

$
138.5

$
135.5

$
140.0

$
552.1

$
140.0

$
139.7

$
142.1

Net investment income (loss)
69.0

71.8

65.2

70.1

276.1

65.6

63.1

58.4

Fee revenue and other income
0.2

0.2

0.3

0.4

1.1

0.4

0.3

0.3

Total revenues
207.3

210.5

201.0

210.5

829.3

206.0

203.1

200.8

 
 
 
 
 
 
 
 
 
Benefits and expenses
 
 
 
 
 
 
 
 
Insurance policy benefits
124.5

125.2

121.7

133.8

505.2

127.0

135.4

121.4

Interest expense
0.4

0.5

0.4

0.4

1.7

0.4

0.5

0.5

Amortization
15.2

14.9

13.6

16.3

60.0

14.1

12.4

12.2

Other operating costs and expenses
33.3

35.1

35.2

35.9

139.5

32.7

33.1

34.0

Total benefits and expenses
173.4

175.7

170.9

186.4

706.4

174.2

181.4

168.1

EBIT from In-Force Business
$
33.9

$
34.8

$
30.1

$
24.1

$
122.9

$
31.8

$
21.7

$
32.7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EBIT from New Business
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
 
Insurance policy income
$
17.5

$
18.2

$
18.5

$
19.7

$
73.9

$
19.5

$
19.9

$
20.0

Net investment income (loss)
—

—

—

—

—

—

—

—

Fee revenue and other income
—

—

—

—

—

—

—

—

Total revenues
17.5

18.2

18.5

19.7

73.9

19.5

19.9

20.0

 
 
 
 
 
 
 
 
 
Benefits and expenses
 
 
 
 
 
 
 
 
Insurance policy benefits
7.3

7.6

7.8

8.3

31.0

8.2

8.4

8.4

Interest expense
—

—

—

—

—

—

—

—

Amortization
1.1

1.1

1.2

1.2

4.6

1.2

1.3

1.3

Other operating costs and expenses
11.9

12.0

12.0

14.1

50.0

13.4

11.8

12.4

Total benefits and expenses
20.3

20.7

21.0

23.6

85.6

22.8

21.5

22.1

EBIT from New Business
$
(2.8
)
$
(2.5
)
$
(2.5
)
$
(3.9
)
$
(11.7
)
$
(3.3
)
$
(1.6
)
$
(2.1
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EBIT from In-Force and New Business
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
 
Insurance policy income
$
155.6

$
156.7

$
154.0

$
159.7

$
626.0

$
159.5

$
159.6

$
162.1

Net investment income (loss)
69.0

71.8

65.2

70.1

276.1

65.6

63.1

58.4

Fee revenue and other income
0.2

0.2

0.3

0.4

1.1

0.4

0.3

0.3

Total revenues
224.8

228.7

219.5

230.2

903.2

225.5

223.0

220.8

 
 
 
 
 
 
 
 
 
Benefits and expenses
 
 
 
 
 
 
 
 
Insurance policy benefits
131.8

132.8

129.5

142.1

536.2

135.2

143.8

129.8

Interest expense
0.4

0.5

0.4

0.4

1.7

0.4

0.5

0.5

Amortization
16.3

16.0

14.8

17.5

64.6

15.3

13.7

13.5

Other operating costs and expenses
45.2

47.1

47.2

50.0

189.5

46.1

44.9

46.4

Total benefits and expenses
193.7

196.4

191.9

210.0

792.0

197.0

202.9

190.2

EBIT from In-Force and New Business
$
31.1

$
32.3

$
27.6

$
20.2

$
111.2

$
28.5

$
20.1

$
30.6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



Page 14



CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
Colonial Penn
 
 
 
 
 
 
 
 
Analysis of income (loss) before taxes (in millions)
1Q14
2Q14
3Q14
4Q14
2014
1Q15
2Q15
3Q15
 
 
 
 
 
 
 
 
 
Insurance policy income
$
60.5

$
61.7

$
61.7

$
62.1

$
246.0

$
64.3

$
66.6

$
66.0

Net investment income on general account invested assets
10.7

10.5

10.3

10.2

41.7

10.7

10.8

10.5

Fee revenue and other income
0.2

0.3

0.2

0.3

1.0

0.3

0.2

0.2

   Total revenues
71.4

72.5

72.2

72.6

288.7

75.3

77.6

76.7

 
 
 
 
 
 
 
 
 
Insurance policy benefits
44.5

43.1

40.9

44.0

172.5

48.3

47.8

45.5

Amounts added to annuity and interest-sensitive life product account balances
0.2

0.1

0.2

0.2

0.7

0.3

—

0.2

Amortization related to operations
4.0

3.8

3.7

3.8

15.3

3.6

3.7

3.6

Other operating costs and expenses
28.9

21.7

27.0

21.8

99.4

29.0

21.9

26.8

   Total benefits and expenses
77.6

68.7

71.8

69.8

287.9

81.2

73.4

76.1

EBIT (4)
$
(6.2
)
$
3.8

$
0.4

$
2.8

$
0.8

$
(5.9
)
$
4.2

$
0.6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average liabilities for insurance products (in millions)
1Q14
2Q14
3Q14
4Q14
2014
1Q15
2Q15
3Q15
 
 
 
 
 
 
 
 
 
SPIAs - mortality based
$
69.4

$
68.8

$
68.3

$
72.1

$
69.6

$
76.2

$
74.1

$
71.7

Health:
 
 
 
 
 
 
 
 
Medicare supplement
8.6

8.3

8.1

8.2

8.3

8.5

8.0

7.2

Other health
4.5

4.5

4.5

4.5

4.5

4.5

4.5

4.4

Life:
 
 
 
 
 
 
 
 
   Interest sensitive
17.1

17.1

17.1

16.8

17.0

16.6

16.5

16.4

   Non-interest sensitive
644.5

648.2

651.1

655.3

649.8

661.5

667.5

673.5

Total average liabilities for insurance products, net of reinsurance ceded
$
744.1

$
746.9

$
749.1

$
756.9

$
749.2

$
767.3

$
770.6

$
773.2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Present value of future profits (in millions)
1Q14
2Q14
3Q14
4Q14
2014
1Q15
2Q15
3Q15
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
55.7

$
53.8

$
52.1

$
50.4

$
55.7

$
46.8

$
45.5

$
44.6

   Amortization related to operations
(1.9
)
(1.7
)
(1.7
)
(1.6
)
(6.9
)
(1.4
)
(1.4
)
(1.2
)
Adjustment related to unrealized (gain) or loss on fixed maturities, available for sale
—

—

—

(2.0
)
(2.0
)
0.1

0.5

0.2

Balance, end of period
$
53.8

$
52.1

$
50.4

$
46.8

$
46.8

$
45.5

$
44.6

$
43.6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deferred acquisition costs (in millions)
1Q14
2Q14
3Q14
4Q14
2014
1Q15
2Q15
3Q15
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
67.4

$
68.8

$
70.4

$
72.0

$
67.4

$
73.8

$
76.7

$
80.3

  Deferred acquisition expenses
3.5

3.7

3.6

4.0

14.8

5.1

5.9

4.9

  Amortization related to operations
(2.1
)
(2.1
)
(2.0
)
(2.2
)
(8.4
)
(2.2
)
(2.3
)
(2.4
)
Balance, end of period
$
68.8

$
70.4

$
72.0

$
73.8

$
73.8

$
76.7

$
80.3

$
82.8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



Page 15



Colonial Penn Segment EBIT
 
 
 
 
 
 
 
 
Summarized by In-Force and New Business (6)
 
 
 
 
 
 
 
 
(in millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
EBIT from In-Force Business
1Q14
2Q14
3Q14
4Q14
2014
1Q15
2Q15
3Q15
 
 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
 
Insurance policy income
$
49.3

$
50.2

$
50.2

$
50.6

$
200.3

$
51.9

$
53.6

$
53.0

Net investment income (loss)
10.7

10.5

10.3

10.2

41.7

10.7

10.8

10.5

Fee revenue and other income
0.2

0.3

0.2

0.3

1.0

0.3

0.2

0.2

Total revenues
60.2

61.0

60.7

61.1

243.0

62.9

64.6

63.7

 
 
 
 
 
 
 
 
 
Benefits and expenses
 
 
 
 
 
 
 
 
Insurance policy benefits
38.3

36.6

34.5

37.5

146.9

41.5

40.3

38.2

Amortization
3.9

3.7

3.6

3.7

14.9

3.4

3.5

3.4

Other operating costs and expenses
7.7

7.6

7.7

8.6

31.6

7.4

7.5

7.2

Total benefits and expenses
49.9

47.9

45.8

49.8

193.4

52.3

51.3

48.8

EBIT from In-Force Business
$
10.3

$
13.1

$
14.9

$
11.3

$
49.6

$
10.6

$
13.3

$
14.9

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EBIT from New Business
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
 
Insurance policy income
$
11.2

$
11.5

$
11.5

$
11.5

$
45.7

$
12.4

$
13.0

$
13.0

Net investment income (loss)
—

—

—

—

—

—

—

—

Fee revenue and other income
—

—

—

—

—

—

—

—

Total revenues
11.2

11.5

11.5

11.5

45.7

12.4

13.0

13.0

 
 
 
 
 
 
 
 
 
Benefits and expenses
 
 
 
 
 
 
 
 
Insurance policy benefits
6.4

6.6

6.6

6.7

26.3

7.1

7.5

7.5

Amortization
0.1

0.1

0.1

0.1

0.4

0.2

0.2

0.2

Other operating costs and expenses
21.2

14.1

19.3

13.2

67.8

21.6

14.4

19.6

Total benefits and expenses
27.7

20.8

26.0

20.0

94.5

28.9

22.1

27.3

EBIT from New Business
$
(16.5
)
$
(9.3
)
$
(14.5
)
$
(8.5
)
$
(48.8
)
$
(16.5
)
$
(9.1
)
$
(14.3
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EBIT from In-Force and New Business
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
 
Insurance policy income
$
60.5

$
61.7

$
61.7

$
62.1

$
246.0

$
64.3

$
66.6

$
66.0

Net investment income (loss)
10.7

10.5

10.3

10.2

41.7

10.7

10.8

10.5

Fee revenue and other income
0.2

0.3

0.2

0.3

1.0

0.3

0.2

0.2

Total revenues
71.4

72.5

72.2

72.6

288.7

75.3

77.6

76.7

 
 
 
 
 
 
 
 
 
Benefits and expenses
 
 
 
 
 
 
 
 
Insurance policy benefits
44.7

43.2

41.1

44.2

173.2

48.6

47.8

45.7

Amortization
4.0

3.8

3.7

3.8

15.3

3.6

3.7

3.6

Other operating costs and expenses
28.9

21.7

27.0

21.8

99.4

29.0

21.9

26.8

Total benefits and expenses
77.6

68.7

71.8

69.8

287.9

81.2

73.4

76.1

EBIT from In-Force and New Business
$
(6.2
)
$
3.8

$
0.4

$
2.8

$
0.8

$
(5.9
)
$
4.2

$
0.6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



Page 16



CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
Corporate Operations
 
 
 
 
 
 
 
 
Analysis of loss before taxes (in millions)
1Q14
2Q14
3Q14
4Q14
2014
1Q15
2Q15
3Q15
 
 
 
 
 
 
 
 
 
Net investment income (loss):
 
 
 
 
 
 
 
 
   General investment portfolio
$
1.8

$
1.7

$
2.2

$
2.8

$
8.5

$
1.8

$
1.4

$
1.6

   Other special-purpose portfolios
5.2

4.0

(3.2
)
0.4

6.4

4.9

1.4

(7.7
)
Fee revenue and other income
1.4

1.3

1.9

2.1

6.7

1.9

2.2

2.1

Interest expense on investment borrowings
—

—

—

(0.1
)
(0.1
)
—

(0.1
)
(0.1
)
Other operating costs and expenses
(14.4
)
(10.7
)
(10.0
)
(14.0
)
(49.1
)
(9.9
)
(9.9
)
(7.8
)
Corporate operations, excluding corporate interest expense
(6.0
)
(3.7
)
(9.1
)
(8.8
)
(27.6
)
(1.3
)
(5.0
)
(11.9
)
Interest expense on corporate debt
(11.1
)
(11.1
)
(10.9
)
(10.8
)
(43.9
)
(10.5
)
(11.9
)
(11.3
)
Operating loss before taxes
$
(17.1
)
$
(14.8
)
$
(20.0
)
$
(19.6
)
$
(71.5
)
$
(11.8
)
$
(16.9
)
$
(23.2
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
















Page 17



CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
Bankers Life
 
 
 
 
 
 
 
 
Premiums collected on insurance products (in millions)
1Q14
2Q14
3Q14
4Q14
2014
1Q15
2Q15
3Q15
 
 
 
 
 
 
 
 
 
Annuities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed index (first-year)
$
147.3

$
166.6

$
152.2

$
180.1

$
646.2

$
150.2

$
166.4

$
192.2

 
 
 
 
 
 
 
 
 
Other fixed interest (first-year)
41.4

32.2

27.3

28.2

129.1

20.0

18.6

23.0

Other fixed interest (renewal)
1.8

2.0

2.0

1.2

7.0

1.5

2.1

1.3

  Subtotal - other fixed interest annuities
43.2

34.2

29.3

29.4

136.1

21.5

20.7

24.3

 
 
 
 
 
 
 
 
 
      Total annuities
190.5

200.8

181.5

209.5

782.3

171.7

187.1

216.5

 
 
 
 
 
 
 
 
 
Health
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Medicare supplement (first-year)
21.2

22.3

21.9

23.2

88.6

19.4

20.0

20.3

Medicare supplement (renewal)
158.2

155.5

162.6

178.4

654.7

160.9

156.3

169.9

  Subtotal - Medicare supplement
179.4

177.8

184.5

201.6

743.3

180.3

176.3

190.2

 
 
 
 
 
 
 
 
 
Long-term care (first-year)
4.4

4.2

4.0

4.2

16.8

4.0

4.0

4.4

Long-term care (renewal)
119.3

122.0

120.0

122.5

483.8

114.1

115.6

117.6

  Subtotal - long-term care
123.7

126.2

124.0

126.7

500.6

118.1

119.6

122.0

 
 
 
 
 
 
 
 
 
PDP (renewal)
6.8

—

—

—

6.8

—

—

—

 
 
 
 
 
 
 
 
 
Supplemental health (first-year)
2.1

2.0

1.7

1.8

7.6

1.5

1.6

1.6

Supplemental health (renewal)
1.5

2.0

2.4

2.8

8.7

2.9

3.2

3.5

  Subtotal - supplemental health
3.6

4.0

4.1

4.6

16.3

4.4

4.8

5.1

 
 
 
 
 
 
 
 
 
Other health (first-year)
0.2

0.2

0.2

0.1

0.7

—

0.1

—

Other health (renewal)
1.8

1.9

1.8

1.9

7.4

1.8

1.7

1.8

  Subtotal - other health
2.0

2.1

2.0

2.0

8.1

1.8

1.8

1.8

 
 
 
 
 
 
 
 
 
    Total health
315.5

310.1

314.6

334.9

1,275.1

304.6

302.5

319.1

 
 
 
 
 
 
 
 
 
Life insurance
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
First-year
38.2

39.2

40.9

38.7

157.0

35.0

38.2

36.2

Renewal
55.8

62.3

73.0

76.8

267.9

72.9

76.1

76.9

 
 
 
 
 
 
 
 
 
    Total life insurance
94.0

101.5

113.9

115.5

424.9

107.9

114.3

113.1

 
 
 
 
 
 
 
 
 
Collections on insurance products
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total first-year premium collections on insurance products
254.8

266.7

248.2

276.3

1,046.0

230.1

248.9

277.7

Total renewal premium collections on insurance products
345.2

345.7

361.8

383.6

1,436.3

354.1

355.0

371.0

 
 
 
 
 
 
 
 
 
    Total collections on insurance products
$
600.0

$
612.4

$
610.0

$
659.9

$
2,482.3

$
584.2

$
603.9

$
648.7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



Page 18



CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
Washington National
 
 
 
 
 
 
 
 
Premiums collected on insurance products (in millions)
1Q14
2Q14
3Q14
4Q14
2014
1Q15
2Q15
3Q15
 
 
 
 
 
 
 
 
 
Health
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Medicare supplement (renewal)
$
21.1

$
21.7

$
20.3

$
22.1

$
85.2

$
18.2

$
17.1

$
19.4

 
 
 
 
 
 
 
 
 
Supplemental health (first-year)
16.7

18.5

18.5

19.1

72.8

18.2

19.1

19.1

Supplemental health (renewal)
109.2

110.6

108.6

114.2

442.6

114.5

117.0

119.5

  Subtotal - supplemental health
125.9

129.1

127.1

133.3

515.4

132.7

136.1

138.6

 
 
 
 
 
 
 
 
 
Other health (first-year)
—

0.1

—

0.1

0.2

—

0.1

—

Other health (renewal)
0.6

0.5

0.6

0.5

2.2

0.5

0.5

0.4

  Subtotal - other health
0.6

0.6

0.6

0.6

2.4

0.5

0.6

0.4

 
 
 
 
 
 
 
 
 
    Total health
147.6

151.4

148.0

156.0

603.0

151.4

153.8

158.4

 
 
 
 
 
 
 
 
 
Life insurance
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
First-year
1.1

1.5

0.9

0.9

4.4

1.0

1.5

1.1

Renewal
5.4

4.9

5.4

5.8

21.5

5.9

5.5

5.6

 
 
 
 
 
 
 
 
 
    Total life insurance
6.5

6.4

6.3

6.7

25.9

6.9

7.0

6.7

 
 
 
 
 
 
 
 
 
Annuities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed index (first-year)
0.1

—

0.1

—

0.2

—

0.1

—

Fixed index (renewal)
0.4

0.4

0.7

0.3

1.8

0.3

0.8

0.2

  Subtotal - fixed index annuities
0.5

0.4

0.8

0.3

2.0

0.3

0.9

0.2

 
 
 
 
 
 
 
 
 
Other fixed interest (renewal)
0.1

0.2

0.1

0.2

0.6

0.1

0.2

0.2

 
 
 
 
 
 
 
 
 
      Total annuities
0.6

0.6

0.9

0.5

2.6

0.4

1.1

0.4

 
 
 
 
 
 
 
 
 
Collections on insurance products
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total first-year premium collections on insurance products
17.9

20.1

19.5

20.1

77.6

19.2

20.8

20.2

Total renewal premium collections on insurance products
136.8

138.3

135.7

143.1

553.9

139.5

141.1

145.3

 
 
 
 
 
 
 
 
 
    Total collections on insurance products
$
154.7

$
158.4

$
155.2

$
163.2

$
631.5

$
158.7

$
161.9

$
165.5

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



Page 19



CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
Colonial Penn
 
 
 
 
 
 
 
 
Premiums collected on insurance products (in millions)
1Q14
2Q14
3Q14
4Q14
2014
1Q15
2Q15
3Q15
 
 
 
 
 
 
 
 
 
Life insurance
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
First-year
$
11.3

$
11.3

$
11.6

$
11.5

$
45.7

$
12.6

$
12.8

$
13.2

Renewal
48.8

48.7

49.5

49.0

196.0

51.8

51.5

52.8

 
 
 
 
 
 
 
 
 
    Total life insurance
60.1

60.0

61.1

60.5

241.7

64.4

64.3

66.0

 
 
 
 
 
 
 
 
 
Health (all renewal)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Medicare supplement
0.8

0.8

0.8

0.8

3.2

0.7

0.7

0.6

 
 
 
 
 
 
 
 
 
Other health
0.1

0.1

—

—

0.2

—

0.1

0.1

 
 
 
 
 
 
 
 
 
    Total health
0.9

0.9

0.8

0.8

3.4

0.7

0.8

0.7

 
 
 
 
 
 
 
 
 
Collections on insurance products
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total first-year premium collections on insurance products
11.3

11.3

11.6

11.5

45.7

12.6

12.8

13.2

Total renewal premium collections on insurance products
49.7

49.6

50.3

49.8

199.4

52.5

52.3

53.5

 
 
 
 
 
 
 
 
 
    Total collections on insurance products
$
61.0

$
60.9

$
61.9

$
61.3

$
245.1

$
65.1

$
65.1

$
66.7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 






Page 20






CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
New Annualized Premiums ("NAP") (in millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Bankers Life
1Q14
2Q14
3Q14
4Q14
2014
1Q15
2Q15
3Q15
 
 
 
 
 
 
 
 
 
Medicare supplement
$
19.0

$
17.6

$
17.0

$
28.6

$
82.2

$
17.7

$
16.3

$
16.8

Long-term care
4.6

4.7

5.6

5.8

20.7

5.3

5.6

6.0

Supplemental health
2.2

1.8

1.7

1.8

7.5

2.0

1.9

1.4

Life
26.0

27.1

26.7

24.9

104.7

26.4

26.4

22.8

Annuity
11.3

11.9

10.8

12.5

46.5

10.2

11.1

12.9

   Subtotal Bankers Life
63.1

63.1

61.8

73.6

261.6

61.6

61.3

59.9

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Washington National
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Supplemental health
21.3

23.9

24.0

24.1

93.3

21.4

23.9

23.8

Life
0.7

1.3

1.6

2.2

5.8

1.2

1.8

2.0

Annuity
—

0.1

—

—

0.1

—

—

—

   Subtotal Washington National
22.0

25.3

25.6

26.3

99.2

22.6

25.7

25.8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Colonial Penn
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Life
16.8

16.5

16.4

14.9

64.6

21.1

18.5

18.9

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total NAP
$
101.9

$
104.9

$
103.8

$
114.8

$
425.4

$
105.3

$
105.5

$
104.6

 
 
 
 
 
 
 
 
 

CNO Financial Group, Inc.
 
 
 
 
 
 
 
Total Policies In-force
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
Policies in-force:
 
 
 
 
 
 
 
Bankers Life
1,505,867

1,513,411

1,517,067

1,517,315

1,521,456

1,528,943

1,532,396

Washington National
950,585

951,602

952,399

952,944

953,224

954,310

955,066

Colonial Penn
823,393

826,493

827,284

825,100

835,555

839,377

842,035

Total policies in-force
3,279,845

3,291,506

3,296,750

3,295,359

3,310,235

3,322,630

3,329,497

Third party policies in-force sold by
 
 
 
 
 
 
 
Bankers Life agents
125,122

123,607

125,885

136,852

134,829

136,604

138,479

Total policies in-force and third party policies
 
 
 
 
 
 
 
in-force sold by Bankers Life agents
3,404,967

3,415,113

3,422,635

3,432,211

3,445,064

3,459,234

3,467,976

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
    

Page 21



CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
Statutory information - consolidated basis (7) (in millions)
1Q14
2Q14
3Q14
4Q14
2014
1Q15
2Q15
3Q15 (a)
 
 
 
 
 
 
 
 
 
Net gain from operations before interest expense and federal income taxes
$
104.3

$
147.1

$
88.8

$
110.3

$
450.5

$
91.8

$
104.5

$
74.3

Interest expense on surplus debentures held by parent company
12.0

12.1

26.9

12.3

63.3

12.0

12.2

24.1

 
 
 
 
 
 
 
 
 
Net gain from operations before federal income taxes
92.3

135.0

61.9

98.0

387.2

79.8

92.3

50.2

Federal income tax expense
0.1

2.3

1.8

0.5

4.7

1.0

1.3

(6.4
)
 
 
 
 
 
 
 
 
 
Net gain from operations before net realized capital gains (losses)
92.2

132.7

60.1

97.5

382.5

78.8

91.0

56.6

Net realized capital gains (losses)
(8.9
)
3.8

(3.3
)
(9.8
)
(18.2
)
(5.9
)
(1.0
)
(14.0
)
 
 
 
 
 
 
 
 
 
Net income
$
83.3

$
136.5

$
56.8

$
87.7

$
364.3

$
72.9

$
90.0

$
42.6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Capital and surplus
$
1,769.8

$
1,827.9

$
1,601.4

$
1,654.4

$
1,654.4

$
1,651.5

$
1,702.9

$
1,684.7

Asset valuation reserve (AVR)
227.8

229.2

204.9

203.1

203.1

219.1

219.8

204.2

 
 
 
 
 
 
 
 
 
  Capital, surplus and AVR
1,997.6

2,057.1

1,806.3

1,857.5

1,857.5

1,870.6

1,922.7

1,888.9

 
 
 
 
 
 
 
 
 
Interest maintenance reserve (IMR)
593.1

590.6

509.5

504.1

504.1

495.2

489.8

480.8

 
 
 
 
 
 
 
 
 
  Total statutory capital, surplus, AVR & IMR
$
2,590.7

$
2,647.7

$
2,315.8

$
2,361.6

$
2,361.6

$
2,365.8

$
2,412.5

$
2,369.7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


(a)  Such amounts are preliminary as the statutory basis financial statements of our insurance subsidiaries for 3Q15 will
be filed with the respective insurance regulators on or about November 13, 2015.



The statutory information above includes CLIC in periods prior to 3Q14.


Page 22




CNO Financial Group, Inc.
 
 
Amounts related to CLIC prior to being sold
 
 
Analysis of income (loss) before taxes (in millions)
1Q14
2Q14
 
 
 
Insurance policy income
$
53.5

$
52.5

Net investment income (loss):
 
 
   General account invested assets
51.0

49.7

   Fixed index products
(0.1
)
1.4

   Total revenues
104.4

103.6

 
 
 
Insurance policy benefits
61.7

54.1

Amounts added to policyholder account balances:
 
 
Cost of interest credited to policyholders
21.6

21.6

Cost of options to fund index credits, net of forfeitures
0.4

0.4

Market value changes credited to policyholders
(0.1
)
1.0

Amortization related to operations
2.0

2.3

Interest expense on investment borrowings
4.7

4.4

Other operating costs and expenses
5.8

7.5

   Total benefits and expenses
96.1

91.3

Income before net realized investment gains and income taxes
8.3

12.3

Net realized investment gains
2.1

0.7

Amortization related to net realized investment gains
—

—

Net realized investment gains, net of related amortization
2.1

0.7

Income before income taxes
10.4

13.0

Income tax expense on period income
3.7

4.5

Net income
$
6.7

$
8.5

 
 
 
 
 
 




Page 23



CNO Financial Group, Inc.
 
 
Amounts related to CLIC prior to being sold
 
 
Average liabilities for insurance products (in millions)
1Q14
2Q14
 
 
 
Fixed index annuities
$
0.8

$
0.8

Fixed interest annuities
143.9

142.9

SPIAs and supplemental contracts:
 
 
Mortality based
37.7

36.9

Deposit based
96.7

94.4

Health:
 
 
Supplemental health
136.3

—

Medicare supplement
1.9

—

Other health
6.8

—

Life:
 
 
   Interest sensitive
2,253.8

2,233.3

   Non-interest sensitive
421.2

415.4

Total average liabilities for insurance products, net of reinsurance ceded
$
3,099.1

$
2,923.7

 
 
 
 
 
 
 
 
 
Present value of future profits (in millions)
1Q14
2Q14
 
 
 
Balance, beginning of period
$
16.1

$
15.8

Amortization related to operations
(0.3
)
(0.3
)
 Amortization related to net realized investment (gains) losses
—

—

Adjustment related to unrealized (gain) or loss on fixed maturities, available for sale
—

—

Balance, end of period
$
15.8

$
15.5

 
 
 
 
 
 
 
 
 
Deferred acquisition costs (in millions)
1Q14
2Q14
 
 
 
Balance, beginning of period
$
40.7

$
39.0

Deferred acquisition expenses
0.4

0.9

Amortization related to operations
(1.7
)
(2.0
)
Amortization related to net realized investment (gains) losses
—

—

Adjustment related to unrealized (gain) or loss on fixed maturities, available for sale
(0.4
)
(0.3
)
Balance, end of period
$
39.0

$
37.6

 
 
 
 
 
 
Premiums collected on insurance products (in millions)
1Q14
2Q14
 
 
 
Annuities
 
 
 
 
 
Other fixed interest (all renewal)
$
—

$
0.2

 
 
 
Life insurance
 
 
 
 
 
First-year
—

—

Renewal
36.2

34.8

 
 
 
    Total life insurance
36.2

34.8

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

—

Total renewal premium collections on insurance products
36.2

35.0

 
 
 
    Total collections on insurance products
$
36.2

$
35.0

 
 
 


Page 24



Notes

(1) Excludes accumulated other comprehensive income.

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

(3) Book value per diluted share reflects the potential dilution that could occur if outstanding stock options and warrants were exercised, restricted stock and performance units were vested and convertible securities were converted. The dilution from options, warrants, restricted shares and performance units is calculated using the treasury stock method. Under this method, we assume the proceeds from the exercise of the options and warrants (or the unrecognized compensation expense with respect to restricted stock and performance units) will be used to purchase shares of our common stock at the closing market price on the last day of the period. The dilution from convertible securities is calculated assuming the securities were converted on the last day of the period.

(4) Management believes that an analysis of earnings before the net loss on the sale of CLIC and gain (loss) on reinsurance transactions, the earnings of CLIC prior to being sold, 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, fair value changes related to the agent deferred compensation plan, loss on extinguishment or modification of debt, other non-operating items, corporate interest expense 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) the net loss on the sale of CLIC and gain (loss) on reinsurance transactions, including impact of taxes; (ii) the earnings of CLIC prior to being sold, net of taxes; (iii) net realized investment gains or losses, net of related amortization and taxes; (iv) fair value changes due to fluctuations in the interest rates used to discount embedded derivative liabilities related to our fixed index annuities, net of related amortization and taxes; (v) fair value changes related to the agent deferred compensation plan, net of taxes; (vi) loss on extinguishment or modification of debt, net of taxes; (vii) changes in the valuation allowance for deferred tax assets and other tax items; and (viii) other non-operating items consisting primarily of equity in earnings of certain non-strategic investments and earnings attributable to variable interest entities, net of taxes (“Net operating income,” a non-GAAP financial measure) is important to evaluate the financial performance of the company, and is a key measure commonly used in the life insurance industry. Management uses this measure to evaluate performance because the items excluded from net operating income can be affected by events that are unrelated to the company's underlying fundamentals.

(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.



Page 25