EX-99.2 3 exhibit992-09302017investo.htm EXHIBIT 99.2 Exhibit


Exhibit 99.2



logo-sm.jpg
 
 
 
 
 
 
 
 
 
 
 
 
Quarterly Financial Supplement - 3Q2017
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
October 25, 2017
 
 
 
 
 
 
 
 
 
 
 




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
Analyses of income before taxes and selected data:
 
 
 
 
     Bankers Life
 
 
 
7-9
     Washington National
 
 
 
10-12
     Colonial Penn
 
 
 
13-14
     Long-term care in run-off
 
 
 
15-16
     Corporate Operations
 
 
 
16
Premiums collected on insurance products:
 
 
 
 
     Bankers Life
 
 
 
17
     Washington National
 
 
 
18
     Colonial Penn
 
 
 
19
     Long-term care in run-off
 
 
 
19
First-Year Collected Premiums, New Annualized Premiums and Total Policies Inforce
 
 
 
20
Statutory information
 
 
 
21
Notes
 
 
 
22





Page 2



CNO Financial Group, Inc.
 
 
 
 
 
 
 
Consolidated balance sheet (in millions)
Mar-16
Jun-16
Sep-16
Dec-16
Mar-17
Jun-17
Sep-17
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
Investments:
 
 
 
 
 
 
 
  Fixed maturities, available for sale, at fair value
$
20,105.1

$
20,989.8

$
21,822.2

$
21,096.2

$
21,378.4

$
22,071.4

$
22,129.9

  Equity securities at fair value
610.7

541.2

331.3

584.2

587.8

622.6

713.3

  Mortgage loans
1,700.8

1,732.9

1,749.5

1,768.0

1,788.5

1,734.7

1,667.8

  Policy loans
110.1

110.3

110.8

112.0

112.4

112.1

114.6

  Trading securities
285.2

289.3

307.2

363.4

341.1

308.0

294.4

  Investments held by variable interest entities
1,691.0

1,807.8

1,794.4

1,724.3

1,514.5

1,309.6

1,382.5

  Other invested assets
433.4

525.7

607.2

589.5

665.2

722.6

752.1

  Total investments
24,936.3

25,997.0

26,722.6

26,237.6

26,387.9

26,881.0

27,054.6

Cash and cash equivalents - unrestricted
635.7

437.2

706.0

478.9

530.2

548.8

765.9

Cash and cash equivalents held by variable interest entities
190.1

160.0

147.7

189.3

354.5

391.1

105.9

Accrued investment income
247.7

228.7

255.3

239.6

258.2

240.9

268.0

Present value of future profits
432.2

417.5

407.7

401.8

388.8

377.8

368.5

Deferred acquisition costs
954.8

911.3

909.7

1,044.7

1,028.5

1,012.4

1,023.8

Reinsurance receivables
2,839.4

2,820.4

2,290.1

2,260.4

2,241.1

2,217.9

2,195.5

Income tax assets, net
828.8

677.7

606.9

789.7

697.8

594.2

567.4

Assets held in separate accounts
4.6

4.6

4.7

4.7

4.6

4.7

4.8

Other assets
388.4

368.1

370.0

328.5

535.8

573.0

350.2

Total assets
$
31,458.0

$
32,022.5

$
32,420.7

$
31,975.2

$
32,427.4

$
32,841.8

$
32,704.6

Liabilities
 
 
 
 
 
 
 
Liabilities for insurance products:
 
 
 
 
 
 
 
  Policyholder account balances
$
10,772.4

$
10,754.8

$
10,817.2

$
10,912.7

$
10,975.1

$
11,037.3

$
11,113.5

  Future policy benefits
10,768.7

11,127.0

11,354.0

10,953.3

11,057.2

11,271.7

11,374.1

  Liability for policy and contract claims
488.7

489.2

492.4

500.6

498.1

506.3

519.5

  Unearned and advanced premiums
292.0

284.1

278.2

282.5

292.8

282.5

262.4

  Liabilities related to separate accounts
4.6

4.6

4.7

4.7

4.6

4.7

4.8

Other liabilities
788.9

731.0

730.1

611.4

798.0

866.5

789.1

Investment borrowings
1,548.0

1,547.8

1,647.6

1,647.4

1,647.2

1,647.0

1,646.9

Borrowings related to variable interest entities
1,656.6

1,715.8

1,690.2

1,662.8

1,634.2

1,532.6

1,198.2

Notes payable - direct corporate obligations
911.5

912.0

912.5

912.9

913.4

913.9

914.4

Total liabilities
27,231.4

27,566.3

27,926.9

27,488.3

27,820.6

28,062.5

27,822.9

Shareholders' equity
 
 
 
 
 
 
 
Common stock
1.8

1.7

1.7

1.7

1.7

1.7

1.7

Additional paid-in capital
3,304.3

3,251.1

3,206.3

3,212.1

3,177.1

3,116.7

3,094.5

Retained earnings
380.0

425.6

430.3

650.7

698.4

766.4

851.9

Total shareholders' equity before accumulated other comprehensive income
3,686.1

3,678.4

3,638.3

3,864.5

3,877.2

3,884.8

3,948.1

Accumulated other comprehensive income
540.5

777.8

855.5

622.4

729.6

894.5

933.6

Total shareholders' equity
4,226.6

4,456.2

4,493.8

4,486.9

4,606.8

4,779.3

4,881.7

Total liabilities and shareholders' equity
$
31,458.0

$
32,022.5

$
32,420.7

$
31,975.2

$
32,427.4

$
32,841.8

$
32,704.6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mar-16
Jun-16
Sep-16
Dec-16
Mar-17
Jun-17
Sep-17
 
 
 
 
 
 
 
 
Book value per common share
$
23.60

$
25.28

$
25.89

$
25.82

$
26.77

$
28.28

$
29.10

 
 
 
 
 
 
 
 
Book value per common share, excluding accumulated other comprehensive income (1) (2)
$
20.58

$
20.87

$
20.96

$
22.24

$
22.53

$
22.98

$
23.53

 
 
 
 
 
 
 
 
Book value per diluted share (1) (3)
$
20.38

$
20.67

$
20.80

$
22.02

$
22.31

$
22.74

$
23.19

 
 
 
 
 
 
 
 





Page 3



CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
Consolidated statement of operations (in millions)
1Q16
2Q16
3Q16
4Q16
2016
1Q17
2Q17
3Q17
 
 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
 
Insurance policy income
$
644.4

$
653.6

$
649.0

$
654.1

$
2,601.1

$
663.8

$
664.1

$
659.3

Net investment income:
 
 
 
 
 
 
 
 
   General account assets
291.0

295.8

301.7

315.6

1,204.1

312.0

322.4

325.9

Policyholder and other special-purpose portfolios
11.7

27.9

43.1

38.4

121.1

75.2

43.9

52.7

Realized investment gains (losses):
 
 
 
 
 
 
 
 
Net realized investment gains (losses), excluding impairment losses
9.1

33.5

12.8

(7.5
)
47.9

16.3

24.0

34.5

Other-than-temporary impairments:
 
 
 
 
 
 
 
 
Total other-than-temporary impairment losses
(10.0
)
(13.6
)
(1.2
)
(11.1
)
(35.9
)
(8.4
)
(4.2
)
(4.7
)
Change in other-than-temporary impairment losses recognized in accumulated other comprehensive income
—

—

—

3.6

3.6

—

(0.9
)
—

Net impairment losses recognized
(10.0
)
(13.6
)
(1.2
)
(7.5
)
(32.3
)
(8.4
)
(5.1
)
(4.7
)
Loss on dissolution of variable interest entities
—

(7.3
)
—

—

(7.3
)
—

(3.7
)
(0.6
)
Total realized gains (losses)
(0.9
)
12.6

11.6

(15.0
)
8.3

7.9

15.2

29.2

Fee revenue and other income
14.2

14.0

10.5

11.8

50.5

11.8

11.5

12.2

Total revenues
960.4

1,003.9

1,015.9

1,004.9

3,985.1

1,070.7

1,057.1

1,079.3

 
 
 
 
 
 
 
 
 
Benefits and expenses
 
 
 
 
 
 
 
 
Insurance policy benefits
619.0

632.4

609.8

529.3

2,390.5

669.3

634.2

638.1

Loss on reinsurance transaction
—

—

75.4

—

75.4

—

—

—

Interest expense
27.7

28.9

29.4

30.4

116.4

30.8

31.4

30.1

Amortization
62.1

54.8

64.7

71.7

253.3

63.5

59.6

58.2

Loss on extinguishment of borrowings related to a variable interest entity
—

—

—

—

—

—

—

5.5

Other operating costs and expenses
211.1

205.1

187.3

192.8

796.3

210.4

203.4

217.5

Total benefits and expenses
919.9

921.2

966.6

824.2

3,631.9

974.0

928.6

949.4

 
 
 
 
 
 
 
 
 
Income before income taxes
40.5

82.7

49.3

180.7

353.2

96.7

128.5

129.9

Income tax expense on period income
15.0

29.8

16.9

66.1

127.8

34.4

45.1

44.1

Valuation allowance for deferred tax assets and other tax items
(20.0
)
(7.0
)
13.8

(119.6
)
(132.8
)
—

—

(15.0
)
Net income
$
45.5

$
59.9

$
18.6

$
234.2

$
358.2

$
62.3

$
83.4

$
100.8

 
 
 
 
 
 
 
 
 







Page 4



CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
Operating results ($ in millions, except per share amounts)
1Q16
2Q16
3Q16
4Q16
2016
1Q17
2Q17
3Q17
 
 
 
 
 
 
 
 
 
Adjusted EBIT (4):
 
 
 
 
 
 
 
 
   Bankers Life
$
77.6

$
93.3

$
88.1

$
138.9

$
397.9

$
89.7

$
112.6

$
106.9

   Washington National
26.3

21.5

25.2

29.9

102.9

23.5

23.6

27.5

   Colonial Penn
(6.8
)
3.0

0.9

4.6

1.7

(0.3
)
8.0

9.0

   Long-term care in run-off
—

—

—

(3.9
)
(3.9
)
0.4

1.7

(1.0
)
Adjusted EBIT from business segments
97.1

117.8

114.2

169.5

498.6

113.3

145.9

142.4

Corporate operations, excluding corporate interest expense
(8.1
)
(7.0
)
(4.4
)
(23.0
)
(42.5
)
(8.9
)
(13.2
)
(14.9
)
Adjusted EBIT
89.0

110.8

109.8

146.5

456.1

104.4

132.7

127.5

Corporate interest expense
(11.4
)
(11.4
)
(11.5
)
(11.5
)
(45.8
)
(11.5
)
(11.6
)
(11.7
)
Operating earnings before taxes
77.6

99.4

98.3

135.0

410.3

92.9

121.1

115.8

Tax expense on operating income
28.0

35.7

34.0

50.1

147.8

33.1

42.5

39.1

Net operating income (5)
49.6

63.7

64.3

84.9

262.5

59.8

78.6

76.7

Net realized investment gains (losses) (net of related amortization)
(1.0
)
12.0

11.4

(14.8
)
7.6

7.9

14.9

28.5

Fair value changes in embedded derivative liabilities (net of related amortization)
(29.5
)
(16.5
)
9.4

46.2

9.6

(4.4
)
(5.9
)
2.3

Fair value changes and amendment related to agent deferred compensation plan
(6.0
)
(12.3
)
6.3

15.1

3.1

—

—

(13.4
)
Loss on reinsurance transaction
—

—

(75.4
)
—

(75.4
)
—

—

—

Other
(0.6
)
0.1

(0.7
)
(0.8
)
(2.0
)
0.3

(1.6
)
(3.3
)
Non-operating income (loss) before taxes
(37.1
)
(16.7
)
(49.0
)
45.7

(57.1
)
3.8

7.4

14.1

Income tax expense (benefit):
 
 
 
 

 
 
 
On non-operating income (loss)
(13.0
)
(5.9
)
(17.1
)
16.0

(20.0
)
1.3

2.6

5.0

Valuation allowance for deferred tax assets and other tax items
(20.0
)
(7.0
)
13.8

(119.6
)
(132.8
)
—

—

(15.0
)
Net non-operating income (loss)
(4.1
)
(3.8
)
(45.7
)
149.3

95.7

2.5

4.8

24.1

Net income
$
45.5

$
59.9

$
18.6

$
234.2

$
358.2

$
62.3

$
83.4

$
100.8

 
 
 
 
 
 
 
 
 
Per diluted share:
 
 
 
 
 
 
 
 
Net operating income
$
.27

$
.35

$
.37

$
.49

$
1.47

$
.34

$
.45

$
.45

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

.04

.04

(.06
)
.03

.03

.06

.11

Fair value changes in embedded derivative liabilities (net of related amortization and taxes)
(.11
)
(.06
)
.04

.17

.04

(.01
)
(.02
)
.01

Fair value changes and amendment related to agent deferred compensation plan (net of taxes)
(.02
)
(.04
)
.02

.06

.01

—

—

(.05
)
Loss on reinsurance transaction (net of taxes)
—

—

(.28
)
—

(.27
)
—

—

—

Valuation allowance for deferred tax assets and other tax items
.11

.04

(.08
)
.68

.74

—

—

.09

Other
—

—

—

—

(.01
)
—

(.01
)
(.02
)
Net income
$
.25

$
.33

$
.11

$
1.34

$
2.01

$
.36

$
.48

$
.59

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 




Page 5




CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
Computation of weighted average shares outstanding
1Q16
2Q16
3Q16
4Q16
2016
1Q17
2Q17
3Q17
(000s)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
 
 
 
 
 
 
 
Shares outstanding, beginning of period
184,028.5

179,098.4

176,240.6

173,544.0

184,028.5

173,753.6

172,103.8

169,018.9

Weighted average shares issued during the period:
 
 
 
 
 
 
 
 
Shares repurchased
(3,839.6
)
(980.0
)
(2,351.4
)
—

(8,195.5
)
(513.6
)
(1,663.6
)
(341.4
)
Stock options exercised and vested restricted and performance stock
233.9

205.3

359.9

90.0

963.1

213.3

140.1

7.1

Shares withheld for the payment of taxes on the vesting of restricted stock
(72.5
)
(0.7
)
(2.1
)
(0.4
)
(157.6
)
(22.6
)
(23.8
)
(1.0
)
Weighted average basic shares outstanding during the period
180,350.3

178,323.0

174,247.0

173,633.6

176,638.5

173,430.7

170,556.5

168,683.6

Basic shares outstanding, end of period
179,098.4

176,240.6

173,544.0

173,753.6

173,753.6

172,103.8

169,018.9

167,762.3

Diluted
 
 
 
 
 
 
 
 
Weighted average basic shares outstanding
180,350.3

178,323.0

174,247.0

173,633.6

176,638.5

173,430.7

170,556.5

168,683.6

Common stock equivalent shares related to:
 
 
 
 
 
 
 
 
Stock options, restricted stock and performance units
1,777.8

1,943.9

1,476.3

1,538.9

1,684.2

1,634.7

1,795.0

2,298.1

Weighted average diluted shares outstanding during the period
182,128.1

180,266.9

175,723.3

175,172.5

178,322.7

175,065.4

172,351.5

170,981.7

Diluted shares outstanding, end of period
180,902.3

177,985.1

174,893.2

175,475.5

175,475.5

173,818.0

170,859.3

170,237.2

 
 
 
 
 
 
 
 
 










Page 6





CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
Bankers Life
 
 
 
 
 
 
 
 
Analysis of income before taxes (in millions)
1Q16
2Q16
3Q16
4Q16
2016
1Q17
2Q17
3Q17
 
 
 
 
 
 
 
 
 
Insurance policy income
$
413.2

$
419.6

$
413.7

$
412.6

$
1,659.1

$
419.1

$
419.1

$
414.6

Net investment income (loss):
 
 
 
 
 
 
 
 
   General account invested assets
222.0

225.1

229.1

233.3

909.5

231.1

237.7

242.1

   Fixed index products
(7.8
)
2.8

15.6

16.7

27.3

41.8

19.2

28.5

Fee revenue and other income
6.6

7.3

9.6

10.9

34.4

10.6

10.6

11.3

   Total revenues
634.0

654.8

668.0

673.5

2,630.3

702.6

686.6

696.5

 
 
 
 
 
 
 
 
 
Insurance policy benefits
360.2

370.1

368.4

318.7

1,417.4

367.6

357.6

364.7

Amounts added to policyholder account balances:
 
 
 
 
 
 
 
 
Cost of interest credited to policyholders
28.1

27.5

27.7

27.5

110.8

26.5

26.5

26.3

Cost of options to fund index credits, net of forfeitures
16.9

16.6

15.7

16.9

66.1

14.9

16.2

16.0

Market value changes credited to policyholders
(8.2
)
2.6

15.3

16.6

26.3

42.2

19.0

30.2

Amortization related to operations
51.5

40.0

43.8

41.2

176.5

46.3

41.3

38.7

Interest expense on investment borrowings
2.9

3.0

3.5

3.8

13.2

4.2

4.8

5.3

Other operating costs and expenses
105.0

101.7

105.5

109.9

422.1

111.2

108.6

108.4

   Total benefits and expenses
556.4

561.5

579.9

534.6

2,232.4

612.9

574.0

589.6

Adjusted EBIT (4)
$
77.6

$
93.3

$
88.1

$
138.9

$
397.9

$
89.7

$
112.6

$
106.9

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Health underwriting margins (in millions)
1Q16
2Q16
3Q16
4Q16
2016
1Q17
2Q17
3Q17
 
 
 
 
 
 
 
 
 
Medicare supplement:
 
 
 
 
 
 
 
 
   Earned premium
$
192.7

$
193.5

$
193.7

$
193.0

$
772.9

$
196.0

$
194.3

$
194.5

   Benefit ratio
71.1
%
73.0
%
72.5
%
71.2
%
71.9
%
70.0
%
70.4
%
72.0
%
Underwriting margin (earned premium less policy benefits)
$
55.7

$
52.3

$
53.2

$
55.5

$
216.7

$
58.8

$
57.4

$
54.5

 
 
 
 
 
 
 
 
 
Long-term care:
 
 
 
 
 
 
 
 
   Earned premium
$
118.5

$
118.3

$
116.6

$
117.8

$
471.2

$
115.6

$
113.7

$
112.7

Benefit ratio before interest income on reserves
132.9
%
134.7
%
137.7
%
134.7
%
135.0
%
132.6
%
126.9
%
134.2
%
   Interest-adjusted benefit ratio
75.3
%
77.9
%
77.7
%
76.0
%
76.7
%
72.5
%
66.2
%
72.9
%
Underwriting margin (earned premium plus interest income on reserves less policy benefits)
$
29.3

$
26.2

$
26.0

$
28.3

$
109.8

$
31.8

$
38.4

$
30.5

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Page 7




CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
Bankers Life
 
 
 
 
 
 
 
 
Average liabilities for insurance products (in millions)
1Q16
2Q16
3Q16
4Q16
2016
1Q17
2Q17
3Q17
 
 
 
 
 
 
 
 
 
Fixed index annuities
$
4,327.5

$
4,461.1

$
4,597.1

$
4,725.6

$
4,527.8

$
4,871.4

$
5,050.7

$
5,222.5

Fixed interest annuities
3,297.5

3,221.1

3,149.7

3,084.4

3,188.2

3,012.3

2,934.9

2,860.5

SPIAs and supplemental contracts:
 
 
 
 
 
 
 
 
Mortality based
181.4

177.1

172.7

168.3

174.9

164.9

162.2

159.2

Deposit based
155.3

153.8

152.9

152.6

153.7

151.6

149.8

148.1

Health:
 
 
 
 
 
 
 
 
Long-term care
4,814.2

4,980.8

5,161.2

5,036.0

4,998.0

4,866.1

4,946.6

5,038.4

Medicare supplement
339.3

335.4

333.0

339.5

336.8

343.4

337.0

329.8

Other health
48.7

49.7

50.8

52.1

50.3

54.1

55.4

56.5

Life:
 
 
 
 
 
 
 
 
   Interest sensitive
689.2

706.6

722.7

740.0

714.6

757.3

772.1

785.6

   Non-interest sensitive
989.7

1,009.6

1,027.9

1,044.8

1,018.0

1,062.2

1,081.0

1,099.1

Total average liabilities for insurance products, net of reinsurance ceded
$
14,842.8

$
15,095.2

$
15,368.0

$
15,343.3

$
15,162.3

$
15,283.3

$
15,489.7

$
15,699.7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Annuities - account value rollforwards (in millions)
1Q16
2Q16
3Q16
4Q16
2016
1Q17
2Q17
3Q17
 
 
 
 
 
 
 
 
 
Fixed index annuities
 
 
 
 
 
 
 
 
Balance as of the beginning of the period
$
4,220.2

$
4,325.5

$
4,410.5

$
4,558.3

$
4,220.2

$
4,740.2

$
4,896.3

$
5,061.4

Gross deposits
199.9

179.3

218.3

270.5

868.0

235.3

247.2

222.6

Withdrawals
(97.4
)
(96.2
)
(87.0
)
(98.9
)
(379.5
)
(112.0
)
(114.1
)
(96.1
)
Returns reinvested
2.8

1.9

16.5

10.3

31.5

32.8

32.0

34.8

Balance as of the end of the period
$
4,325.5

$
4,410.5

$
4,558.3

$
4,740.2

$
4,740.2

$
4,896.3

$
5,061.4

$
5,222.7

 
 
 
 
 
 
 
 
 
Fixed interest annuities
 
 
 
 
 
 
 
 
Balance as of the beginning of the period
$
3,331.9

$
3,260.6

$
3,178.9

$
3,117.6

$
3,331.9

$
3,048.3

$
2,973.4

$
2,893.3

Gross deposits
30.7

24.5

20.8

12.1

88.1

18.6

15.2

12.3

Withdrawals
(123.2
)
(126.8
)
(102.8
)
(101.8
)
(454.6
)
(112.9
)
(114.4
)
(100.0
)
Returns reinvested
21.2

20.6

20.7

20.4

82.9

19.4

19.1

18.9

Balance as of the end of the period
$
3,260.6

$
3,178.9

$
3,117.6

$
3,048.3

$
3,048.3

$
2,973.4

$
2,893.3

$
2,824.5

 
 
 
 
 
 
 
 
 
Total annuities
 
 
 
 
 
 
 
 
Balance as of the beginning of the period
$
7,552.1

$
7,586.1

$
7,589.4

$
7,675.9

$
7,552.1

$
7,788.5

$
7,869.7

$
7,954.7

Gross deposits
230.6

203.8

239.1

282.6

956.1

253.9

262.4

234.9

Withdrawals
(220.6
)
(223.0
)
(189.8
)
(200.7
)
(834.1
)
(224.9
)
(228.5
)
(196.1
)
Returns reinvested
24.0

22.5

37.2

30.7

114.4

52.2

51.1

53.7

Balance as of the end of the period
$
7,586.1

$
7,589.4

$
7,675.9

$
7,788.5

$
7,788.5

$
7,869.7

$
7,954.7

$
8,047.2

 
 
 
 
 
 
 
 
 


Page 8




CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
Bankers Life
 
 
 
 
 
 
 
 
Present value of future profits (in millions)
1Q16
2Q16
3Q16
4Q16
2016
1Q17
2Q17
3Q17
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
114.9

$
106.2

$
101.8

$
98.2

$
114.9

$
95.5

$
91.3

$
87.3

Amortization related to operations
(9.9
)
(8.1
)
(7.6
)
(8.8
)
(34.4
)
(7.9
)
(7.3
)
(6.7
)
Amortization related to net realized investment (gains) losses
—

—

—

—

—

—

—

—

Amounts related to changes in unrealized investment gains (losses) on fixed maturities, available for sale
1.2

3.7

4.0

6.1

15.0

3.7

3.3

3.5

Balance, end of period
$
106.2

$
101.8

$
98.2

$
95.5

$
95.5

$
91.3

$
87.3

$
84.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deferred acquisition costs (in millions)
1Q16
2Q16
3Q16
4Q16
2016
1Q17
2Q17
3Q17
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
718.2

$
582.4

$
533.5

$
525.2

$
718.2

$
646.2

$
621.8

$
604.1

Deferred acquisition expenses
40.3

36.9

40.6

44.9

162.7

41.7

43.0

38.1

Amortization related to operations
(41.6
)
(31.9
)
(36.2
)
(32.4
)
(142.1
)
(38.4
)
(34.0
)
(32.0
)
Amortization related to net realized investment (gains) losses
0.1

(0.5
)
(0.2
)
0.2

(0.4
)
—

(0.3
)
(0.7
)
Amortization related to fair value changes in embedded derivative liabilities
7.6

4.2

(2.3
)
(10.8
)
(1.3
)
1.0

1.3

(0.5
)
Amounts related to changes in unrealized investment gains (losses) on fixed maturities, available for sale
(142.2
)
(57.6
)
(10.2
)
119.1

(90.9
)
(28.7
)
(27.7
)
(0.5
)
Balance, end of period
$
582.4

$
533.5

$
525.2

$
646.2

$
646.2

$
621.8

$
604.1

$
608.5

 
 
 
 
 
 
 
 
 





Page 9




CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
Washington National
 
 
 
 
 
 
 
 
Analysis of income before taxes (in millions)
1Q16
2Q16
3Q16
4Q16
2016
1Q17
2Q17
3Q17
 
 
 
 
 
 
 
 
 
Insurance policy income
$
162.1

$
163.5

$
164.4

$
165.8

$
655.8

$
167.1

$
167.5

$
167.4

Net investment income (loss):
 
 
 
 
 
 
 
 
   General account invested assets
61.7

62.6

66.0

65.9

256.2

63.4

64.8

65.5

Fixed index products
(1.2
)
—

1.5

1.6

1.9

2.6

1.2

2.0

Trading account income related to policyholder accounts
0.1

1.0

(0.4
)
0.5

1.2

1.4

0.5

0.5

Fee revenue and other income
0.3

0.3

0.4

0.3

1.3

0.3

0.2

0.3

   Total revenues
223.0

227.4

231.9

234.1

916.4

234.8

234.2

235.7

 
 
 
 
 
 
 
 
 
Insurance policy benefits
129.1

137.8

138.7

132.6

538.2

137.8

139.9

138.0

Amounts added to policyholder account balances:
 
 
 
 
 
 
 
 
Cost of interest credited to policyholders
3.5

3.5

3.3

3.5

13.8

3.3

3.2

3.2

Cost of options to fund index credits, net of forfeitures
1.7

1.5

1.2

1.4

5.8

1.0

1.0

1.2

Market value changes credited to policyholders
(0.8
)
1.2

1.3

2.2

3.9

4.6

1.2

2.3

Amortization related to operations
15.1

15.1

14.3

14.6

59.1

14.3

15.3

14.3

Interest expense on investment borrowings
0.8

0.8

0.9

1.2

3.7

1.3

1.5

1.7

Other operating costs and expenses
47.3

46.0

47.0

48.7

189.0

49.0

48.5

47.5

   Total benefits and expenses
196.7

205.9

206.7

204.2

813.5

211.3

210.6

208.2

Adjusted EBIT (4)
$
26.3

$
21.5

$
25.2

$
29.9

$
102.9

$
23.5

$
23.6

$
27.5

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Health underwriting margins (in millions)
1Q16
2Q16
3Q16
4Q16
2016
1Q17
2Q17
3Q17
 
 
 
 
 
 
 
 
 
Medicare supplement:
 
 
 
 
 
 
 
 
Earned premium
$
16.3

$
15.8

$
15.4

$
15.0

$
62.5

$
14.3

$
13.7

$
13.3

Benefit ratio
65.1
%
74.0
%
69.5
%
64.8
%
68.4
%
66.8
%
70.4
%
68.1
%
Underwriting margin (earned premium less policy benefits)
$
5.7

$
4.1

$
4.7

$
5.3

$
19.8

$
4.8

$
4.0

$
4.2

 
 
 
 
 
 
 
 
 
Supplemental health and other:
 
 
 
 
 
 
 
 
Earned premium
$
139.2

$
140.9

$
141.4

$
144.0

$
565.5

$
145.6

$
146.3

$
147.2

Benefit ratio before interest income on reserves
81.2
%
85.7
%
84.0
%
81.0
%
83.0
%
84.6
%
84.5
%
83.2
%
Interest-adjusted benefit ratio
57.7
%
61.6
%
59.8
%
57.0
%
59.0
%
60.6
%
60.4
%
59.0
%
Underwriting margin (earned premium plus interest income on reserves less policy benefits)
$
58.9

$
54.0

$
56.9

$
62.0

$
231.8

$
57.3

$
57.9

$
60.4

 
 
 
 
 
 
 
 
 



Page 10



CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
Washington National
 
 
 
 
 
 
 
 
Average liabilities for insurance products (in millions)
1Q16
2Q16
3Q16
4Q16
2016
1Q17
2Q17
3Q17
 
 
 
 
 
 
 
 
 
Fixed index annuities
$
363.5

$
355.7

$
346.0

$
335.5

$
350.2

$
326.1

$
317.8

$
309.9

Fixed interest annuities
111.2

108.5

105.6

102.6

107.0

100.8

99.2

96.6

SPIAs and supplemental contracts:
 
 
 
 
 
 
 
 
Mortality based
248.5

250.9

251.9

243.2

248.6

233.5

232.3

231.8

Deposit based
265.5

266.8

267.1

269.6

267.2

271.9

269.4

267.8

Separate Accounts
4.7

4.6

4.7

4.7

4.7

4.6

4.6

4.8

Health:
 
 
 
 
 
 
 
 
Supplemental health
2,558.0

2,587.5

2,621.7

2,650.3

2,604.4

2,680.2

2,715.8

2,749.9

Medicare supplement
29.5

28.4

27.8

27.5

28.3

26.9

25.4

23.9

Other health
14.3

14.3

14.1

13.9

14.1

13.8

13.8

13.4

Life:
 
 
 
 
 
 
 
 
Interest sensitive
150.5

150.6

150.3

149.7

150.3

149.2

149.0

148.9

Non-interest sensitive
182.3

180.5

178.9

177.5

179.8

175.3

173.2

174.1

Total average liabilities for insurance products, net of reinsurance ceded
$
3,928.0

$
3,947.8

$
3,968.1

$
3,974.5

$
3,954.6

$
3,982.3

$
4,000.5

$
4,021.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Annuities - account value rollforwards (in millions)
1Q16
2Q16
3Q16
4Q16
2016
1Q17
2Q17
3Q17
 
 
 
 
 
 
 
 
 
Fixed index annuities
 
 
 
 
 
 
 
 
Balance as of the beginning of the period
$
354.0

$
345.9

$
334.5

$
324.0

$
354.0

$
313.4

$
304.8

$
296.2

Gross deposits
0.2

0.3

0.2

0.5

1.2

0.2

0.2

0.1

Withdrawals
(9.2
)
(12.6
)
(12.9
)
(13.0
)
(47.7
)
(11.6
)
(12.3
)
(9.0
)
Returns reinvested
0.9

0.9

2.2

1.9

5.9

2.8

3.5

3.7

Balance as of the end of the period
$
345.9

$
334.5

$
324.0

$
313.4

$
313.4

$
304.8

$
296.2

$
291.0

 
 
 
 
 
 
 
 
 
Fixed interest annuities
 
 
 
 
 
 
 
 
Balance as of the beginning of the period
$
111.4

$
108.3

$
105.9

$
103.1

$
111.4

$
100.3

$
99.7

$
97.2

Gross deposits
0.1

0.1

0.1

—

0.3

0.1

—

—

Withdrawals
(4.2
)
(4.3
)
(3.3
)
(4.2
)
(16.0
)
(2.9
)
(3.7
)
(3.8
)
Returns reinvested
1.0

1.8

0.4

1.4

4.6

2.2

1.2

1.3

Balance as of the end of the period
$
108.3

$
105.9

$
103.1

$
100.3

$
100.3

$
99.7

$
97.2

$
94.7

 
 
 
 
 
 
 
 
 
Total annuities
 
 
 
 
 
 
 
 
Balance as of the beginning of the period
$
465.4

$
454.2

$
440.4

$
427.1

$
465.4

$
413.7

$
404.5

$
393.4

Gross deposits
0.3

0.4

0.3

0.5

1.5

0.3

0.2

0.1

Withdrawals
(13.4
)
(16.9
)
(16.2
)
(17.2
)
(63.7
)
(14.5
)
(16.0
)
(12.8
)
Returns reinvested
1.9

2.7

2.6

3.3

10.5

5.0

4.7

5.0

Balance as of the end of the period
$
454.2

$
440.4

$
427.1

$
413.7

$
413.7

$
404.5

$
393.4

$
385.7

 
 
 
 
 
 
 
 
 





Page 11



CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
Washington National
 
 
 
 
 
 
 
 
Present value of future profits (in millions)
1Q16
2Q16
3Q16
4Q16
2016
1Q17
2Q17
3Q17
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
290.2

$
283.4

$
274.1

$
269.0

$
290.2

$
266.8

$
259.1

$
253.2

Amortization related to operations
(6.5
)
(6.3
)
(5.2
)
(5.4
)
(23.4
)
(5.3
)
(5.7
)
(5.1
)
Amounts related to changes in unrealized investment gains (losses) on fixed maturities, available for sale
(0.3
)
(3.0
)
0.1

3.2

—

(2.4
)
(0.2
)
0.2

Balance, end of period
$
283.4

$
274.1

$
269.0

$
266.8

$
266.8

$
259.1

$
253.2

$
248.3

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deferred acquisition costs (in millions)
1Q16
2Q16
3Q16
4Q16
2016
1Q17
2Q17
3Q17
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
280.0

$
282.3

$
284.7

$
287.8

$
280.0

$
299.9

$
304.1

$
302.3

Deferred acquisition expenses
14.3

14.0

13.8

13.5

55.6

14.6

14.1

13.7

Amortization related to operations
(8.6
)
(8.8
)
(9.1
)
(9.2
)
(35.7
)
(9.0
)
(9.6
)
(9.2
)
Amortization related to net realized investment (gains) losses
(0.2
)
(0.1
)
—

—

(0.3
)
—

—

—

Amortization related to fair value changes in embedded derivative liabilities
0.9

0.4

(0.4
)
(1.3
)
(0.4
)
0.1

—

(0.1
)
Amounts related to changes in unrealized investment gains (losses) on fixed maturities, available for sale
(4.1
)
(3.1
)
(1.2
)
9.1

0.7

(1.5
)
(6.3
)
0.3

Balance, end of period
$
282.3

$
284.7

$
287.8

$
299.9

$
299.9

$
304.1

$
302.3

$
307.0

 
 
 
 
 
 
 
 
 


Page 12



CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
Colonial Penn
 
 
 
 
 
 
 
 
Analysis of income (loss) before taxes (in millions)
1Q16
2Q16
3Q16
4Q16
2016
1Q17
2Q17
3Q17
 
 
 
 
 
 
 
 
 
Insurance policy income
$
69.1

$
70.5

$
70.9

$
70.9

$
281.4

$
73.0

$
73.0

$
73.1

Net investment income on general account invested assets
11.0

10.9

11.1

11.2

44.2

10.9

11.2

11.0

Fee revenue and other income
0.4

0.2

0.2

0.3

1.1

0.2

0.4

0.3

   Total revenues
80.5

81.6

82.2

82.4

326.7

84.1

84.6

84.4

 
 
 
 
 
 
 
 
 
Insurance policy benefits
50.4

50.3

50.1

50.4

201.2

52.6

50.2

47.5

Amounts added to annuity and interest-sensitive life product account balances
0.1

0.2

0.2

0.2

0.7

0.1

0.2

0.2

Amortization related to operations
3.9

3.7

3.7

4.0

15.3

4.0

4.0

3.9

Interest expense on investment borrowings
0.1

0.2

0.1

0.2

0.6

0.2

0.2

0.3

Other operating costs and expenses
32.8

24.2

27.2

23.0

107.2

27.5

22.0

23.5

   Total benefits and expenses
87.3

78.6

81.3

77.8

325.0

84.4

76.6

75.4

Adjusted EBIT (4)
$
(6.8
)
$
3.0

$
0.9

$
4.6

$
1.7

$
(0.3
)
$
8.0

$
9.0

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average liabilities for insurance products (in millions)
1Q16
2Q16
3Q16
4Q16
2016
1Q17
2Q17
3Q17
 
 
 
 
 
 
 
 
 
SPIAs - mortality based
$
71.2

$
74.3

$
76.1

$
74.8

$
74.1

$
72.6

$
72.7

$
73.6

Health:
 
 
 
 
 
 
 
 
Medicare supplement
6.8

6.6

6.4

6.2

6.5

6.0

5.7

5.6

Other health
4.3

4.3

4.2

4.2

4.2

4.1

4.1

4.1

Life:
 
 
 
 
 
 
 
 
   Interest sensitive
16.2

16.2

16.3

16.0

16.2

15.8

15.6

15.4

   Non-interest sensitive
680.6

684.7

691.9

700.3

689.4

708.0

714.9

720.1

Total average liabilities for insurance products, net of reinsurance ceded
$
779.1

$
786.1

$
794.9

$
801.5

$
790.4

$
806.5

$
813.0

$
818.8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Present value of future profits (in millions)
1Q16
2Q16
3Q16
4Q16
2016
1Q17
2Q17
3Q17
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
43.9

$
42.6

$
41.6

$
40.5

$
43.9

$
39.5

$
38.4

$
37.3

   Amortization related to operations
(1.3
)
(1.0
)
(1.1
)
(1.0
)
(4.4
)
(1.1
)
(1.1
)
(1.2
)
Amounts related to changes in unrealized investment gains (losses) on fixed maturities, available for sale
—

—

—

—

—

—

—

—

Balance, end of period
$
42.6

$
41.6

$
40.5

$
39.5

$
39.5

$
38.4

$
37.3

$
36.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deferred acquisition costs (in millions)
1Q16
2Q16
3Q16
4Q16
2016
1Q17
2Q17
3Q17
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
85.1

$
90.1

$
93.1

$
96.7

$
85.1

$
98.6

$
102.6

$
106.0

Deferred acquisition expenses
7.6

5.7

6.2

4.9

24.4

6.9

6.3

5.0

Amortization related to operations
(2.6
)
(2.7
)
(2.6
)
(3.0
)
(10.9
)
(2.9
)
(2.9
)
(2.7
)
Balance, end of period
$
90.1

$
93.1

$
96.7

$
98.6

$
98.6

$
102.6

$
106.0

$
108.3

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



Page 13



Colonial Penn Segment Adjusted EBIT
 
 
 
 
 
 
 
 
Summarized by Inforce and New Business (6)
 
 
 
 
 
 
 
 
(in millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
Adjusted EBIT from Inforce Business
1Q16
2Q16
3Q16
4Q16
2016
1Q17
2Q17
3Q17
 
 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
 
Insurance policy income
$
55.3

$
56.5

$
57.2

$
57.5

$
226.5

$
59.6

$
60.2

$
61.0

Net investment income
11.0

10.9

11.1

11.2

44.2

10.9

11.2

11.0

Fee revenue and other income
0.4

0.2

0.2

0.3

1.1

0.2

0.4

0.3

Total revenues
66.7

67.6

68.5

69.0

271.8

70.7

71.8

72.3

 
 
 
 
 
 
 
 
 
Benefits and expenses
 
 
 
 
 
 
 
 
Insurance policy benefits
42.1

42.0

41.9

42.5

168.5

44.6

42.6

40.3

Interest expense
0.1

0.2

0.1

0.2

0.6

0.2

0.2

0.3

Amortization
3.7

3.5

3.5

3.8

14.5

3.8

3.8

3.7

Other operating costs and expenses
8.1

7.8

8.8

9.1

33.8

8.0

7.8

8.2

Total benefits and expenses
54.0

53.5

54.3

55.6

217.4

56.6

54.4

52.5

Adjusted EBIT from Inforce Business
$
12.7

$
14.1

$
14.2

$
13.4

$
54.4

$
14.1

$
17.4

$
19.8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBIT from New Business
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
 
Insurance policy income
$
13.8

$
14.0

$
13.7

$
13.4

$
54.9

$
13.4

$
12.8

$
12.1

Net investment income
—

—

—

—

—

—

—

—

Fee revenue and other income
—

—

—

—

—

—

—

—

Total revenues
13.8

14.0

13.7

13.4

54.9

13.4

12.8

12.1

 
 
 
 
 
 
 
 
 
Benefits and expenses
 
 
 
 
 
 
 
 
Insurance policy benefits
8.4

8.5

8.4

8.1

33.4

8.1

7.8

7.4

Interest expense
—

—

—

—

—

—

—

—

Amortization
0.2

0.2

0.2

0.2

0.8

0.2

0.2

0.2

Other operating costs and expenses
24.7

16.4

18.4

13.9

73.4

19.5

14.2

15.3

Total benefits and expenses
33.3

25.1

27.0

22.2

107.6

27.8

22.2

22.9

Adjusted EBIT from New Business
$
(19.5
)
$
(11.1
)
$
(13.3
)
$
(8.8
)
$
(52.7
)
$
(14.4
)
$
(9.4
)
$
(10.8
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBIT from Inforce and New Business
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
 
Insurance policy income
$
69.1

$
70.5

$
70.9

$
70.9

$
281.4

$
73.0

$
73.0

$
73.1

Net investment income
11.0

10.9

11.1

11.2

44.2

10.9

11.2

11.0

Fee revenue and other income
0.4

0.2

0.2

0.3

1.1

0.2

0.4

0.3

Total revenues
80.5

81.6

82.2

82.4

326.7

84.1

84.6

84.4

 
 
 
 
 
 
 
 
 
Benefits and expenses
 
 
 
 
 
 
 
 
Insurance policy benefits
50.5

50.5

50.3

50.6

201.9

52.7

50.4

47.7

Interest expense
0.1

0.2

0.1

0.2

0.6

0.2

0.2

0.3

Amortization
3.9

3.7

3.7

4.0

15.3

4.0

4.0

3.9

Other operating costs and expenses
32.8

24.2

27.2

23.0

107.2

27.5

22.0

23.5

Total benefits and expenses
87.3

78.6

81.3

77.8

325.0

84.4

76.6

75.4

Adjusted EBIT from Inforce and New Business
$
(6.8
)
$
3.0

$
0.9

$
4.6

$
1.7

$
(0.3
)
$
8.0

$
9.0

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Page 14



CNO Financial Group, Inc.
 
 
 
 
 
Long-term care in run-off
 
 
 
 
 
Analysis of income (loss) before taxes (in millions)
4Q16
2016
1Q17
2Q17
3Q17
 
 
 
 
 
 
Insurance policy income
$
4.8

$
4.8

$
4.6

$
4.5

$
4.2

Net investment income on general account invested assets
9.4

9.4

9.7

10.0

6.8

   Total revenues
14.2

14.2

14.3

14.5

11.0

 
 
 
 
 
 
Insurance policy benefits
17.6

17.6

13.2

12.0

11.4

Other operating costs and expenses
0.5

0.5

0.7

0.8

0.6

   Total benefits and expenses
18.1

18.1

13.9

12.8

12.0

Adjusted EBIT (4)
$
(3.9
)
$
(3.9
)
$
0.4

$
1.7

$
(1.0
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Health underwriting margins (in millions)
4Q16
2016
1Q17
2Q17
3Q17
Long-term care:
 
 
 
 
 
   Earned premium
$
4.8

$
4.8

$
4.6

$
4.5

$
4.2

Benefit ratio before interest income on reserves
365.8
%
365.8
%
286.5
%
268.2
%
274.3
%
   Interest-adjusted benefit ratio
213.5
%
213.5
%
128.1
%
104.6
%
99.4
%
Underwriting margin (earned premium plus interest income on reserves less policy benefits)
$
(5.5
)
$
(5.5
)
$
(1.3
)
$
(0.2
)
$
0.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average liabilities for insurance products (in millions)
4Q16
2016
1Q17
2Q17
3Q17
Health:
 
 
 
 
 
Long-term care
$
553.6

$
138.4

$
560.7

$
573.2

$
579.6

Total average liabilities for insurance products
$
553.6

$
138.4

$
560.7

$
573.2

$
579.6

 
 
 
 
 
 


Page 15



CNO Financial Group, Inc.
 
 
 
 
 
Long-term care in run-off
 
 
 
 
 


As previously disclosed, we terminated certain reinsurance agreements and recaptured the long-term care block in this segment in September 2016. Certain investments received in the recapture were subject to an independent third party audit by a forensic accounting firm in late June 2016. The scope of such audit was expanded in September 2016.

In addition to the investments subject to the independent audits, we received approximately $380 million in other investments and cash balances in the recapture. A substantial portion of these investments have been sold or redeemed since the recapture. The activity since the date of the recapture with respect to the assets received in the recapture is summarized below (dollars in millions):

 
 
 
 
 
 
Investments not included in scope of audit
 
 
 
 
Investments included in initial scope of audit
 
Investments included in additional scope of audit
 
Cash, fixed maturities and other invested assets
 
Total investments
September 30, 2016 values
 
$
62.2

 
$
62.6

 
$
379.8

 
$
504.6

Net cash flows (1)
 
(13.5
)
 
(11.6
)
 
(359.5
)
 
(384.6
)
Realized losses and impairments (2)
 
.4

 
(1.7
)
 
(4.0
)
 
(5.3
)
Other activity (6)
 
3.9

 
1.9

 
.6

 
6.4

December 31, 2016 values
 
53.0

 
51.2

 
16.9

 
121.1

Net cash flows (1)
 
(16.7
)
 
(5.5
)
 
(8.7
)
 
(30.9
)
Realized losses and impairments (3)
 
3.2

 
(4.5
)
 
1.0

 
(.3
)
Other activity (6)
 
(1.8
)
 
1.3

 
(1.4
)
 
(1.9
)
March 31, 2017 values
 
37.7

 
42.5

 
7.8

 
88.0

Net cash flows (1)
 
0.5

 
(14.4
)
 
—

 
(13.9
)
Realized losses and impairments (4)
 
(3.1
)
 
4.5

 
—

 
1.4

Other activity (6)
 
(0.6
)
 
(0.4
)
 
0.3

 
(0.7
)
June 30, 2017
 
34.5

 
32.2

 
8.1

 
74.8

Net cash flows (1)
 
(33.5
)
 
(9.1
)
 
(1.3
)
 
(43.9
)
Realized losses and impairments (5)
 
7.0

 
(0.6
)
 
0.3

 
6.7

Other activity (6)
 
(0.9
)
 
(0.3
)
 
(3.0
)
 
(4.2
)
September 30, 2017
 
$
7.1

 
$
22.2

 
$
4.1

 
$
33.4

________________
(1)
Net cash inflows from sales and redemptions of investments during the period.
(2)
Includes $4.6 million of impairment charges and $.7 million of net realized losses recognized on the sale of transferred investments.
(3)
Includes $8.4 million of impairment charges and $8.1 million of net realized gains recognized on the sale of transferred investments.
(4)
Includes $3.7 million of impairment charges and $5.1 million of net realized gains recognized on the sale of transferred investments.
(5)
Includes $4.7 million of impairment charges and $11.4 million of net realized gains recognized on the sale of transferred investments.
(6)
Includes amortization of discount and premium and changes in estimated fair values of investments during the period.



CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
Corporate Operations
 
 
 
 
 
 
 
 
Analysis of loss before taxes (in millions)
1Q16
2Q16
3Q16
4Q16
2016
1Q17
2Q17
3Q17
 
 
 
 
 
 
 
 
 
Net investment income (loss):
 
 
 
 
 
 
 
 
   General investment portfolio
$
1.3

$
1.6

$
1.5

$
0.4

$
4.8

$
0.9

$
1.4

$
1.4

   Other special-purpose portfolios
2.7

4.3

5.2

(0.4
)
11.8

9.5

6.0

5.6

Fee revenue and other income
2.5

2.6

2.5

2.4

10.0

2.4

2.3

1.8

Other operating costs and expenses
(14.6
)
(15.5
)
(13.6
)
(25.4
)
(69.1
)
(21.7
)
(22.9
)
(23.7
)
Corporate operations, excluding corporate interest expense
(8.1
)
(7.0
)
(4.4
)
(23.0
)
(42.5
)
(8.9
)
(13.2
)
(14.9
)
Interest expense on corporate debt
(11.4
)
(11.4
)
(11.5
)
(11.5
)
(45.8
)
(11.5
)
(11.6
)
(11.7
)
Operating loss before taxes
$
(19.5
)
$
(18.4
)
$
(15.9
)
$
(34.5
)
$
(88.3
)
$
(20.4
)
$
(24.8
)
$
(26.6
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 







Page 16



CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
Bankers Life
 
 
 
 
 
 
 
 
Premiums collected on insurance products (in millions)
1Q16
2Q16
3Q16
4Q16
2016
1Q17
2Q17
3Q17
 
 
 
 
 
 
 
 
 
Annuities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed index (first-year)
$
199.9

$
179.6

$
218.1

$
270.5

$
868.1

$
235.3

$
247.2

$
222.6

 
 
 
 
 
 
 
 
 
Other fixed interest (first-year)
31.9

25.5

25.4

12.9

95.7

20.6

15.1

12.9

Other fixed interest (renewal)
1.8

1.3

1.6

1.5

6.2

1.6

2.0

1.0

  Subtotal - other fixed interest annuities
33.7

26.8

27.0

14.4

101.9

22.2

17.1

13.9

 
 
 
 
 
 
 
 
 
      Total annuities
233.6

206.4

245.1

284.9

970.0

257.5

264.3

236.5

 
 
 
 
 
 
 
 
 
Health
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Medicare supplement (first-year)
18.4

19.1

18.8

19.3

75.6

17.5

17.6

16.8

Medicare supplement (renewal)
168.5

159.9

163.4

171.9

663.7

174.2

162.1

160.4

  Subtotal - Medicare supplement
186.9

179.0

182.2

191.2

739.3

191.7

179.7

177.2

 
 
 
 
 
 
 
 
 
Long-term care (first-year)
4.4

4.4

4.4

4.2

17.4

4.2

4.1

3.8

Long-term care (renewal)
115.2

113.6

111.9

110.5

451.2

112.8

108.0

103.5

  Subtotal - long-term care
119.6

118.0

116.3

114.7

468.6

117.0

112.1

107.3

 
 
 
 
 
 
 
 
 
Supplemental health (first-year)
1.3

1.4

1.4

1.4

5.5

1.4

1.3

1.1

Supplemental health (renewal)
3.7

3.9

4.0

4.1

15.7

4.3

4.3

4.4

  Subtotal - supplemental health
5.0

5.3

5.4

5.5

21.2

5.7

5.6

5.5

 
 
 
 
 
 
 
 
 
Other health (first-year)
—

—

—

0.1

0.1

0.2

0.2

0.2

Other health (renewal)
1.6

1.6

1.5

1.4

6.1

1.4

1.3

1.3

  Subtotal - other health
1.6

1.6

1.5

1.5

6.2

1.6

1.5

1.5

 
 
 
 
 
 
 
 
 
    Total health
313.1

303.9

305.4

312.9

1,235.3

316.0

298.9

291.5

 
 
 
 
 
 
 
 
 
Life insurance
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Traditional (first-year)
20.8

22.2

18.8

17.0

78.8

20.2

22.1

19.8

Traditional (renewal)
50.2

52.0

52.3

52.8

207.3

54.1

54.3

53.9

  Subtotal - traditional
71.0

74.2

71.1

69.8

286.1

74.3

76.4

73.7

 
 
 
 
 
 
 
 
 
Interest-sensitive (first-year)
17.8

18.2

17.9

16.7

70.6

11.7

12.3

11.0

Interest-sensitive (renewal)
25.2

25.5

26.4

27.3

104.4

28.3

28.7

29.0

  Subtotal - interest-sensitive
43.0

43.7

44.3

44.0

175.0

40.0

41.0

40.0

 
 
 
 
 
 
 
 
 
    Total life insurance
114.0

117.9

115.4

113.8

461.1

114.3

117.4

113.7

 
 
 
 
 
 
 
 
 
Collections on insurance products
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total first-year premium collections on insurance products
294.5

270.4

304.8

342.1

1,211.8

311.1

319.9

288.2

Total renewal premium collections on insurance products
366.2

357.8

361.1

369.5

1,454.6

376.7

360.7

353.5

 
 
 
 
 
 
 
 
 
    Total collections on insurance products
$
660.7

$
628.2

$
665.9

$
711.6

$
2,666.4

$
687.8

$
680.6

$
641.7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



Page 17



CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
Washington National
 
 
 
 
 
 
 
 
Premiums collected on insurance products (in millions)
1Q16
2Q16
3Q16
4Q16
2016
1Q17
2Q17
3Q17
 
 
 
 
 
 
 
 
 
Health
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Medicare supplement (renewal)
$
16.4

$
15.1

$
14.6

$
14.9

$
61.0

$
14.4

$
12.6

$
11.7

 
 
 
 
 
 
 
 
 
Supplemental health (first-year)
18.5

18.3

17.7

17.7

72.2

19.0

18.4

17.8

Supplemental health (renewal)
122.6

123.5

123.3

123.9

493.3

131.1

128.6

127.0

  Subtotal - supplemental health
141.1

141.8

141.0

141.6

565.5

150.1

147.0

144.8

 
 
 
 
 
 
 
 
 
Other health (first-year)
—

0.1

0.1

—

0.2

0.1

—

0.1

Other health (renewal)
0.5

0.3

0.4

0.5

1.7

0.4

0.4

0.3

  Subtotal - other health
0.5

0.4

0.5

0.5

1.9

0.5

0.4

0.4

 
 
 
 
 
 
 
 
 
    Total health
158.0

157.3

156.1

157.0

628.4

165.0

160.0

156.9

 
 
 
 
 
 
 
 
 
Life insurance
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Traditional (first-year)
0.2

0.2

0.2

0.3

0.9

0.2

0.2

0.1

Traditional (renewal)
2.6

2.8

2.6

2.5

10.5

2.6

2.6

2.5

  Subtotal - traditional
2.8

3.0

2.8

2.8

11.4

2.8

2.8

2.6

 
 
 
 
 
 
 
 
 
Interest-sensitive (first-year)
1.4

1.2

1.0

1.1

4.7

1.2

1.1

0.9

Interest-sensitive (renewal)
3.0

3.2

3.3

3.8

13.3

3.9

3.4

3.6

  Subtotal - interest-sensitive
4.4

4.4

4.3

4.9

18.0

5.1

4.5

4.5

 
 
 
 
 
 
 
 
 
    Total life insurance
7.2

7.4

7.1

7.7

29.4

7.9

7.3

7.1

 
 
 
 
 
 
 
 
 
Annuities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed index (first-year)
—

—

—

0.2

0.2

—

—

—

Fixed index (renewal)
0.2

0.4

0.2

0.2

1.0

0.2

0.1

0.1

  Subtotal - fixed index annuities
0.2

0.4

0.2

0.4

1.2

0.2

0.1

0.1

 
 
 
 
 
 
 
 
 
Other fixed interest (renewal)
0.1

0.1

—

0.1

0.3

—

0.1

0.1

 
 
 
 
 
 
 
 
 
      Total annuities
0.3

0.5

0.2

0.5

1.5

0.2

0.2

0.2

 
 
 
 
 
 
 
 
 
Collections on insurance products
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total first-year premium collections on insurance products
20.1

19.8

19.0

19.3

78.2

20.5

19.7

18.9

Total renewal premium collections on insurance products
145.4

145.4

144.4

145.9

581.1

152.6

147.8

145.3

 
 
 
 
 
 
 
 
 
    Total collections on insurance products
$
165.5

$
165.2

$
163.4

$
165.2

$
659.3

$
173.1

$
167.5

$
164.2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



Page 18



CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
Colonial Penn
 
 
 
 
 
 
 
 
Premiums collected on insurance products (in millions)
1Q16
2Q16
3Q16
4Q16
2016
1Q17
2Q17
3Q17
 
 
 
 
 
 
 
 
 
Life insurance
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Traditional (first-year)
$
14.0

$
13.8

$
13.8

$
13.2

$
54.8

$
13.7

$
12.7

$
12.1

Traditional (renewal)
55.4

55.1

56.2

56.0

222.7

60.2

59.2

60.0

  Subtotal - traditional
69.4

68.9

70.0

69.2

277.5

73.9

71.9

72.1

 
 
 
 
 
 
 
 
 
Interest-sensitive (all renewal)
0.1

0.1

0.1

—

0.3

0.1

—

0.1

 
 
 
 
 
 
 
 
 
    Total life insurance
69.5

69.0

70.1

69.2

277.8

74.0

71.9

72.2

 
 
 
 
 
 
 
 
 
Health (all renewal)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Medicare supplement
0.5

0.6

0.6

0.6

2.3

0.5

0.5

0.4

 
 
 
 
 
 
 
 
 
Other health
0.1

—

—

—

0.1

—

0.1

—

 
 
 
 
 
 
 
 
 
    Total health
0.6

0.6

0.6

0.6

2.4

0.5

0.6

0.4

 
 
 
 
 
 
 
 
 
Collections on insurance products
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total first-year premium collections on insurance products
14.0

13.8

13.8

13.2

54.8

13.7

12.7

12.1

Total renewal premium collections on insurance products
56.1

55.8

56.9

56.6

225.4

60.8

59.8

60.5

 
 
 
 
 
 
 
 
 
    Total collections on insurance products
$
70.1

$
69.6

$
70.7

$
69.8

$
280.2

$
74.5

$
72.5

$
72.6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
Long-term care in run-off
 
 
 
 
 
 
 
 
Premiums collected on insurance products (in millions)
1Q16
2Q16
3Q16
4Q16
2016
1Q17
2Q17
3Q17
 
 
 
 
 
 
 
 
 
Long-term care (renewal)
—

—

—

4.7

4.7

4.6

4.4

3.9

 
 
 
 
 
 
 
 
 
    Total collections on insurance products
$
—

$
—

$
—

$
4.7

$
4.7

$
4.6

$
4.4

$
3.9

 
 
 
 
 
 
 
 
 



Page 19



CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
First-year collected premiums (in millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Bankers Life
1Q16
2Q16
3Q16
4Q16
2016
1Q17
2Q17
3Q17
 
 
 
 
 
 
 
 
 
Medicare supplement
$
18.4

$
19.1

$
18.8

$
19.3

$
75.6

$
17.5

$
17.6

$
16.8

Long-term care
4.4

4.4

4.4

4.2

17.4

4.2

4.1

3.8

Supplemental health and other health
1.3

1.4

1.4

1.5

5.6

1.6

1.5

1.3

Life
38.6

40.4

36.7

33.7

149.4

31.9

34.4

30.8

Annuity
231.8

205.1

243.5

283.4

963.8

255.9

262.3

235.5

   Subtotal Bankers Life
294.5

270.4

304.8

342.1

1,211.8

311.1

319.9

288.2

 
 
 
 
 
 
 
 
 
Washington National
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Supplemental health and other health
18.5

18.4

17.8

17.7

72.4

19.1

18.4

17.9

Life
1.6

1.4

1.2

1.4

5.6

1.4

1.3

1.0

Annuity
—

—

—

0.2

0.2

—

—

—

   Subtotal Washington National
20.1

19.8

19.0

19.3

78.2

20.5

19.7

18.9

 
 
 
 
 
 
 
 
 
Colonial Penn
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Life
14.0

13.8

13.8

13.2

54.8

13.7

12.7

12.1

 
 
 
 
 
 
 
 
 
Total first-year collected premiums
$
328.6

$
304.0

$
337.6

$
374.6

$
1,344.8

$
345.3

$
352.3

$
319.2

 
 
 
 
 
 
 
 
 

CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
Life and Health New Annualized Premiums ("NAP") (in millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Bankers Life
1Q16
2Q16
3Q16
4Q16
2016
1Q17
2Q17
3Q17
 
 
 
 
 
 
 
 
 
Medicare supplement
$
16.4

$
16.7

$
15.9

$
23.9

$
72.9

$
16.1

$
15.4

$
14.4

Long-term care
6.1

6.0

5.2

5.5

22.8

5.7

5.2

4.6

Supplemental health and other health
1.5

1.7

1.7

1.6

6.5

1.7

1.4

1.3

Life
22.4

21.8

19.8

17.0

81.0

18.0

18.2

16.3

   Subtotal Bankers Life
46.4

46.2

42.6

48.0

183.2

41.5

40.2

36.6

 
 
 
 
 
 
 
 
 
Washington National
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Supplemental health
22.0

22.4

22.9

25.2

92.5

22.9

23.9

22.8

Life
1.4

1.8

1.7

1.8

6.7

1.7

1.7

2.0

   Subtotal Washington National
23.4

24.2

24.6

27.0

99.2

24.6

25.6

24.8

 
 
 
 
 
 
 
 
 
Colonial Penn
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Life
24.1

19.2

18.4

14.7

76.4

21.8

16.1

16.0

 
 
 
 
 
 
 
 
 
Total NAP
$
93.9

$
89.6

$
85.6

$
89.7

$
358.8

$
87.9

$
81.9

$
77.4

 
 
 
 
 
 
 
 
 

CNO Financial Group, Inc.
 
 
 
 
 
 
 
Total Policies Inforce
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
Policies inforce:
 
 
 
 
 
 
 
Bankers Life
1,531,842

1,533,894

1,531,204

1,526,344

1,519,474

1,515,445

1,510,160

Washington National
958,833

961,003

959,867

961,689

964,642

964,519

963,141

Colonial Penn
851,138

851,789

852,305

846,372

853,307

849,353

845,135

Long-term care in run-off
—

—

10,480

10,260

10,068

9,769

9,473

Total policies inforce
3,341,813

3,346,686

3,353,856

3,344,665

3,347,491

3,339,086

3,327,909

Third party policies inforce sold by
 
 
 
 
 
 
 
Bankers Life agents
147,838

148,718

149,255

160,548

154,005

156,308

155,430

Total policies inforce and third party policies
 
 
 
 
 
 
 
inforce sold by Bankers Life agents
3,489,651

3,495,404

3,503,111

3,505,213

3,501,496

3,495,394

3,483,339

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Page 20



CNO Financial Group, Inc.
 
 
 
 
 
 
 
 
Statutory information - consolidated basis (7) (in millions)
1Q16
2Q16
3Q16
4Q16
2016
1Q17
2Q17
3Q17 (a)
 
 
 
 
 
 
 
 
 
Net gain (loss) from operations before interest expense and federal income taxes
$
91.4

$
101.5

$
(11.0
)
$
83.0

$
264.9

$
93.9

$
93.8

$
106.2

Interest expense on surplus debentures held by parent company
12.1

12.1

12.3

19.5

56.0

12.0

12.2

20.4

 
 
 
 
 
 
 
 
 
Net gain (loss) from operations before federal income taxes
79.3

89.4

(23.3
)
63.5

208.9

81.9

81.6

85.8

Federal income tax expense (benefit)
(0.6
)
(5.0
)
(10.7
)
(61.1
)
(77.4
)
11.3

(13.8
)
(5.1
)
 
 
 
 
 
 
 
 
 
Net gain (loss) from operations before net realized capital losses
79.9

94.4

(12.6
)
124.6

286.3

70.6

95.4

90.9

Net realized capital gains (losses)
(10.5
)
(8.6
)
(0.4
)
(10.2
)
(29.7
)
(8.6
)
(0.8
)
0.6

 
 
 
 
 
 
 
 
 
Net income (loss)
$
69.4

$
85.8

$
(13.0
)
$
114.4

$
256.6

$
62.0

$
94.6

$
91.5

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Capital and surplus
$
1,717.4

$
1,763.4

$
1,914.5

$
1,956.8

$
1,956.8

$
1,904.7

$
1,968.0

$
1,920.7

Asset valuation reserve (AVR)
201.7

214.1

241.5

253.3

253.3

258.0

248.8

258.3

 
 
 
 
 
 
 
 
 
  Capital, surplus and AVR
1,919.1

1,977.5

2,156.0

2,210.1

2,210.1

2,162.7

2,216.8

2,179.0

 
 
 
 
 
 
 
 
 
Interest maintenance reserve (IMR)
491.6

501.5

496.5

486.9

486.9

481.8

482.4

493.2

 
 
 
 
 
 
 
 
 
  Total statutory capital, surplus, AVR & IMR
$
2,410.7

$
2,479.0

$
2,652.5

$
2,697.0

$
2,697.0

$
2,644.5

$
2,699.2

$
2,672.2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


(a)  Such amounts are preliminary as the statutory basis financial statements of our insurance subsidiaries for 3Q17 will
be filed with the respective insurance regulators on or about November 15, 2017.



















Page 21



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 were exercised and restricted stock and performance units were vested. The dilution from options, restricted shares and performance units is calculated using the treasury stock method. Under this method, we assume the proceeds from the exercise of the options (or the unrecognized compensation expense with respect to restricted stock and performance units) will be used to purchase shares of our common stock at the closing market price on the last day of the period.

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

(6) Management believes that an analysis of Adjusted EBIT for Colonial Penn, separated between inforce and new business provides increased clarity for this segment as the vast majority of the costs to generate new business in this segment are not deferrable and Adjusted EBIT will fluctuate based on management's decisions on how much marketing costs to incur in each period. Adjusted 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. Adjusted EBIT from inforce 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 inforce 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 22