0001224608-18-000013.txt : 20180425 0001224608-18-000013.hdr.sgml : 20180425 20180425162618 ACCESSION NUMBER: 0001224608-18-000013 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20180425 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20180425 DATE AS OF CHANGE: 20180425 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CNO Financial Group, Inc. CENTRAL INDEX KEY: 0001224608 STANDARD INDUSTRIAL CLASSIFICATION: ACCIDENT & HEALTH INSURANCE [6321] IRS NUMBER: 753108137 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-31792 FILM NUMBER: 18774673 BUSINESS ADDRESS: STREET 1: 11825 N PENNSYLVANIA ST CITY: CARMEL STATE: IN ZIP: 46032 BUSINESS PHONE: 3178176100 MAIL ADDRESS: STREET 1: 11825 NORTH PENNSYLVANIA STREET CITY: CARMEL STATE: IN ZIP: 46032 FORMER COMPANY: FORMER CONFORMED NAME: CONSECO INC DATE OF NAME CHANGE: 20030326 8-K 1 form8-k03312018earnings.htm 8-K Document




UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): April 25, 2018



CNO Financial Group, Inc.
(Exact Name of Registrant as Specified in Charter)
 
Delaware
001-31792
75-3108137
(State or Other
Jurisdiction of Incorporation)
(Commission File Number)
(I.R.S. Employer
Identification No.)
11825 North Pennsylvania Street
Carmel, Indiana  46032
(Address of Principal Executive Offices) (Zip Code)

(317) 817-6100
(Registrant's telephone number, including area code)


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
 
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
 
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
 
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
 





Item 2.02.
Results of Operations and Financial Condition.

On April 25, 2018, CNO Financial Group, Inc. (the "Company") issued: (i) a press release announcing its financial results for the quarter ended March 31, 2018, a copy of which is attached hereto as Exhibit 99.1 and is incorporated herein by reference; and (ii) additional information related to the Company's financial and operating results for the quarter ended March 31, 2018, a copy of which is attached hereto as Exhibit 99.2 and is incorporated herein by reference.

The information contained under Item 2.02 in this Current Report on Form 8-K (including Exhibits 99.1 and 99.2) is being furnished and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that Section. The information contained in this Current Report on Form 8-K shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in any such filing.

Item 9.01(d).
Financial Statements and Exhibits.

The following materials are furnished as exhibits to this Current Report on Form 8-K:







2




SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
CNO Financial Group, Inc.
 
 
Date: April 25, 2018
 
 
By:
/s/ John R. Kline
 
 
 
John R. Kline
 
 
 
Senior Vice President and
Chief Accounting Officer
 
 
 
 




3
 EX-99.1 2 exhibit991-03312018earnings.htm EXHIBIT 99.1 Exhibit

CNO Financial (1)
April 25, 2018


Exhibit 99.1
logo.jpgFor Immediate Release

CNO Financial Group Reports First Quarter 2018 Results
Carmel, Ind., April 25, 2018 - CNO Financial Group, Inc. (NYSE: CNO) today announced that net income for the first quarter 2018 increased to $84.3 million, or 50 cents per diluted share, compared to $62.3 million, or 36 cents per diluted share, in the first quarter of 2017. CNO also announced that first quarter 2018 net operating income (1) increased to $73.9 million, or 44 cents per diluted share, compared to $59.8 million, or 34 cents per diluted share, in the first quarter of 2017. Net income and net operating earnings in the first quarter of 2018 reflect the positive impact of the lower Federal income tax rate related to the Tax Cuts and Jobs Act of $15.1 million (9 cents per share) and $13.3 million (8 cents per share), respectively.
"CNO again delivered a solid first quarter of earnings, increasing both net income and net operating income over prior year due to our diversified business model," said Gary Bhojwani, chief executive officer. "CNO’s progress in advancing our growth strategy continues to focus on disciplined execution across the firm. We remain encouraged by the strategic initiatives underway to reshape our agent force, extend our geographic footprint and expand the portfolio of insurance and wealth solutions we offer to middle-income customers."


First Quarter 2018 Highlights
•
First-year collected premiums: $331.1 million, down 4% from 1Q17
•
Total collected premiums: $928.1 million, down 1% from 1Q17
•
New annualized premium ("NAP") (2) for life and health products: $78.1 million, down 11% from 1Q17
•
Annuity collected premiums: $251.8 million, down 2% from 1Q17
•
Annuity account values: $8.6 billion, up 4% from 1Q17
•
Policies inforce of 3.5 million (including third party policies inforce), down 1% from 1Q17
•
Net income per diluted share: 50 cents in 1Q18 compared to 36 cents in 1Q17
•
Net operating income (1) per diluted share: 44 cents in 1Q18 compared to 34 cents in 1Q17
•
Book value per common share was $27.59 at March 31, 2018 compared to $29.05 at December 31, 2017
•
Book value per diluted share, excluding accumulated other comprehensive income (loss) (3), increased to $21.94 at March 31, 2018 from $21.43 at December 31, 2017
•
Unrestricted cash and investments held by our holding company were $378 million at March 31, 2018 compared to $397 million at December 31, 2017
•
Paid common stock dividends of $15.4 million in 1Q18; no common stock repurchases
•
Consolidated risk-based capital ratio was estimated at 427% at March 31, 2018, reflecting: (i) estimated statutory operating earnings of $52 million; (ii) insurance company dividends to the holding company of $20.0 million during the first three months of 2018; and (iii) the effect of a tactical shift in our allocations toward investments which had higher capital requirements



CNO Financial (2)
April 25, 2018


Quarterly Segment Operating Results
 
Three months ended
 
March 31,
 
2018
 
2017
 
(Dollars in millions, except per share data)
Adjusted EBIT (4):
 
 
 
Bankers Life
$
89.5

 
$
89.7

Washington National
34.3

 
23.5

Colonial Penn:
 
 
 
Inforce business (5)
11.1

 
14.1

New business (5)
(12.6
)
 
(14.4
)
Total Colonial Penn
(1.5
)
 
(.3
)
Long-term care in run-off
—

 
.4

Adjusted EBIT from business segments
122.3

 
113.3

Corporate Operations, excluding corporate interest expense
(15.5
)
 
(8.9
)
Adjusted EBIT
106.8

 
104.4

Corporate interest expense
(11.9
)
 
(11.5
)
Operating earnings before taxes
94.9

 
92.9

Tax expense on operating income
21.0

 
33.1

Net operating income (1)
73.9

 
59.8

Net realized investment gains (losses) (net of related amortization)
(15.2
)
 
7.9

Fair value changes in embedded derivative liabilities (net of related amortization)
25.1

 
(4.4
)
Other
3.3

 
.3

Non-operating income before taxes
13.2

 
3.8

Income tax expense on non-operating income
2.8

 
1.3

Net non-operating income
10.4

 
2.5

Net income
$
84.3

 
$
62.3

 
 
 
 
Per diluted share:
 
 
 
Net operating income
$
.44

 
$
.34

Net realized investment gains (losses) (net of related amortization and taxes)
(.07
)
 
.03

Fair value changes in embedded derivative liabilities (net of related amortization and taxes)
.12

 
(.01
)
Other
.01

 
—

Net income
$
.50

 
$
.36


-more-



CNO Financial (3)
April 25, 2018


The following table summarizes the financial impact of significant items on our 1Q18 net operating income (dollars in millions, except per share amounts):        
 
Three months ended
 
March 31, 2018*
 
Actual results
 
Significant items
 
Excluding significant items
Net Operating Income (1):
 
 
 
 
 
Bankers Life
$
89.5

 
$
(2.3
)
 
$
87.2

Washington National
34.3

 
—

 
34.3

Colonial Penn
(1.5
)
 
1.1

 
(.4
)
Long-term care in run-off
—

 
—

 
—

Adjusted EBIT from business segments
122.3

 
(1.2
)
 
121.1

Corporate Operations, excluding corporate interest expense
(15.5
)
 
—

 
(15.5
)
Adjusted EBIT (4)
106.8

 
(1.2
)
 
105.6

Corporate interest expense
(11.9
)
 
—

 
(11.9
)
Operating earnings before taxes
94.9

 
(1.2
)
 
93.7

Tax expense on operating income
21.0

 
(.3
)
 
20.7

Net operating income
$
73.9

 
$
(.9
)
 
$
73.0

 
 
 
 
 
 
Net operating income per diluted share
$
.44

 
$
(.01
)
 
$
.43


The significant items in 1Q18 included: (i) the $2.3 million release of long-term care reserves (net of the reduction in insurance intangibles) in the Bankers Life segment due to the impact of policyholder actions following rate increases; and (ii) a $1.1 million out-of-period adjustment in the Colonial Penn segment which increased reserves on closed block payout annuities.

* See page 8 for the table of Net Operating Income Excluding Significant Items for the three months ended March 31, 2017.

Segment Results
Bankers Life markets and distributes a variety of insurance products to middle-income Americans at or near retirement through a dedicated field force of career agents. First-year collected premiums in 1Q18 were $299.5 million, down 4 percent from 1Q17. NAP for life and health products in 1Q18 was $35.7 million, down 14 percent compared to 1Q17. Average producing agents (over the last twelve months) were down 7 percent from 1Q17. Average producing agents in their third year of service or later (over the last twelve months) in 1Q18 were down 2 percent in 1Q18 compared to 1Q17.
Total collected premiums in 1Q18 were $672.5 million, down 2 percent from 1Q17. Annuity collected premiums in 1Q18 were $251.4 million, down 2 percent from 1Q17. Annuity account values, on which spread income is earned, increased 4 percent to $8.2 billion in 1Q18 compared to 1Q17, driven by strong sales and persistency. Total policies inforce (including third party policies inforce) decreased 2 percent and third party policies inforce increased 6 percent from 1Q17.
Pre-tax operating earnings in 1Q18 were comparable to 1Q17. Pre-tax operating earnings in 1Q18 reflected: (i) the $2.3 million release of long-term care reserves (net of the reduction in insurance intangibles); (ii) $9 million of favorable investment earnings from alternative investments, call premiums and prepayments compared to 1Q17; offset by (iii) $9 million of lower margins on the Medicare supplement block of business (reflecting implementation of the Medicare crossover process and favorable claim experience in 1Q17); and (iv) $2 million of unfavorable mortality experience in the life block. Pre-tax operating earnings in 1Q17 reflected: (i) $3.5 million of higher expenses for estimated future state guaranty association assessments, net of premium tax offsets, related to the



CNO Financial (4)
April 25, 2018


liquidation of Penn Treaty Network America Insurance Company ("Penn Treaty"); partially offset by (ii) the $1.8 million release of long-term care reserves (net of the reduction in insurance intangibles) due to the impact of policyholder actions following rate increases.
The long-term care interest-adjusted benefit ratio was 70.2 percent in 1Q18, lower than the 1Q17 ratio of 72.5 percent. The 1Q18 and 1Q17 ratios were favorably impacted by $2.6 million and $2.0 million, respectively, of one-time reserve releases related to policyholder decisions to surrender or reduce coverage following rate increases. The long-term care interest-adjusted benefit ratio excluding the favorable reserve releases was 72.6 percent and 74.2 percent in 1Q18 and 1Q17, respectively. We continue to expect the long-term care interest-adjusted benefit ratio to be in the range of 75 percent to 80 percent during the remainder of 2018.
Pre-tax operating earnings in 1Q18 reflected a Medicare supplement benefit ratio of 73.3 percent, higher than the 1Q17 ratio of 70.0 percent. We continue to expect the Medicare supplement benefit ratio to be in the range of 71 percent to 74 percent during the remainder of 2018.
Washington National markets and distributes supplemental health and life insurance to middle-income consumers through a wholly-owned subsidiary and independent insurance agencies. First-year collected premiums in 1Q18 were $19.7 million, down 4 percent from 1Q17. NAP from life and health products in 1Q18 was $23.8 million, down 3 percent from 1Q17. The average number of producing agents (over the last twelve months) in 1Q18 was up 1 percent compared to 1Q17.
Total collected premiums from the segment's supplemental health block were up 3 percent in 1Q18 compared to 1Q17.
Pre-tax operating earnings in 1Q18 compared to 1Q17 were up $10.8 million, or 46 percent. Pre-tax operating earnings in 1Q18 primarily reflect higher margins on the supplemental health block compared to 1Q17, reflecting favorable claims and favorable claim reserve development in 1Q18. Pre-tax operating earnings in 1Q17 reflect $1.3 million of expense for estimated future state guaranty association assessments, net of premium tax offsets, related to Penn Treaty. The supplemental health interest-adjusted benefit ratio was 54.4 percent and 60.6 percent in 1Q18 and 1Q17, respectively. We continue to expect the supplemental health interest-adjusted benefit ratio to be in the range of 58 percent to 61 percent during the remainder of 2018.
Colonial Penn markets primarily graded benefit and simplified issue life insurance directly to customers through television advertising, direct mail, the internet and telemarketing. First-year collected premiums were $11.9 million and NAP was $18.6 million in 1Q18 down 13 percent and 15 percent, respectively, from 1Q17.
Total collected premiums were up 1 percent in 1Q18 compared to 1Q17.
The pre-tax loss in 1Q18 was $1.5 million compared to a loss of $.3 million in 1Q17 reflecting: (i) $2 million of unfavorable mortality experience in the life block; (ii) a $1.1 million out-of-period adjustment which increased reserves on closed block payout annuities; offset by (iii) $2 million of reduced expenses primarily related to lower marketing expense. Inforce Adjusted EBIT was $11.1 million, compared to $14.1 million in 1Q17, primarily reflecting: (i) $2 million of unfavorable mortality experience in the life block; and (ii) a $1.1 million out-of-period adjustment which increased reserves on closed block payout annuities.
Recognizing the accounting standard related to deferred acquisition costs, the amount of our investment in new business during a particular period will have a significant impact on this segment's results. We continue to expect this segment to report earnings in 2018 in the range of $10 million to $20 million.
Long-term care in run-off only includes the long-term care business that was recaptured in September 2016. This segment recognized pre-tax operating earnings in 1Q18 of nil, compared to $.4 million 1Q17. The interest-adjusted benefit ratio for this long-term care block was 117.9 percent in 1Q18 compared to 128.1 percent in 1Q17. We continue to expect this segment to report normalized earnings before net realized investment gains (losses) of approximately breakeven over the long-term. However, this segment's quarterly results can be volatile.
Corporate Operations includes our investment advisory subsidiary and corporate expenses.
Pre-tax losses in 1Q18 were $15.5 million compared to $8.9 million of losses in 1Q17 primarily reflecting: (i) a $9.5 million decrease in earnings from investments backing our Company-owned life insurance which is utilized as



CNO Financial (5)
April 25, 2018


a vehicle to fund Bankers Life's agent deferred compensation plan, reflecting strong returns in 1Q17; partially offset by (ii) lower expenses in 1Q18.
Non-Operating Items
Net realized investment losses in 1Q18 were $15.2 million (net of related amortization) primarily reflecting the $12.5 million unfavorable impact related to the change in the fair value of equity securities which is required to be recognized in the income statement effective January 1, 2018. There were no other-than-temporary impairment losses recognized in 1Q18. Net realized investment gains in 1Q17 were $7.9 million (net of related amortization) including other-than-temporary impairment losses of $8.4 million recorded in earnings.
During 1Q18 and 1Q17, we recognized an increase (decrease) in earnings of $25.1 million and $(4.4) million, respectively, resulting from changes in the estimated fair value of embedded derivative liabilities related to our fixed index annuities, net of related amortization. Such amounts include the impacts of changes in market interest rates used to determine the derivative's estimated fair value.
Statutory (based on non-GAAP measures) and GAAP Capital Information
Our consolidated statutory risk-based capital ratio was estimated at 427% at March 31, 2018, reflecting: (i) estimated 1Q18 statutory operating earnings of $52 million; (ii) the payment of insurance company dividends to the holding company of $20.0 million; and (iii) the effect of a tactical shift in our allocations toward investments which had higher capital requirements (decreasing the risk-based capital ratio by approximately 20 percentage points during 1Q18).
During 1Q18, dividends paid on common stock totaled $15.4 million. There were no common stock repurchases in 1Q18.
Unrestricted cash and investments held by our holding company were $378 million at March 31, 2018, compared to $397 million at December 31, 2017.
Book value per common share was $27.59 and $29.05 at March 31, 2018 and December 31, 2017, respectively. Book value per diluted share, excluding accumulated other comprehensive income (loss) (3), increased to $21.94 at March 31, 2018, compared to $21.43 at December 31, 2017.
The debt-to-capital ratio was 16.5 percent and 15.9 percent at March 31, 2018 and December 31, 2017, respectively. Our debt-to-total capital ratio, excluding accumulated other comprehensive income (6) was 19.7 percent at March 31, 2018 compared to 20.1 percent at December 31, 2017.
Conference Call
The Company will host a conference call to discuss results on April 26, 2018 at 11:00 a.m. Eastern Time. The webcast can be accessed through the Investors section of the company's website: http://ir.CNOinc.com. Participants should go to the website at least 15 minutes before the event to register and download any necessary audio software. During the call, we will be referring to a presentation that will be available the morning of the call at the Investors section of the company's website.
About CNO Financial Group
CNO Financial Group, Inc. (NYSE: CNO) is a holding company.  Our insurance subsidiaries - principally Bankers Life and Casualty Company, Colonial Penn Life Insurance Company and Washington National Insurance Company - primarily serve middle-income pre-retiree and retired Americans by helping them protect against financial adversity and provide for a more secure retirement.  For more information, visit CNO online at www.CNOinc.com.




CNO Financial (6)
April 25, 2018


CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Dollars in millions)
(unaudited)
 
March 31,
2018
 
December 31, 2017
ASSETS
 
 
 
Investments:
 
 
 
Fixed maturities, available for sale, at fair value (amortized cost: March 31, 2018 - $20,820.9; December 31, 2017 - $20,702.1)
$
22,375.5

 
$
22,910.9

Equity securities at fair value (cost: March 31, 2018 - $504.4; December 31, 2017 - $420.0)
498.7

 
440.6

Mortgage loans
1,601.2

 
1,650.6

Policy loans
116.0

 
116.0

Trading securities
289.6

 
284.6

Investments held by variable interest entities
1,583.9

 
1,526.9

Other invested assets
951.1

 
924.5

Total investments
27,416.0

 
27,854.1

Cash and cash equivalents - unrestricted
610.8

 
578.4

Cash and cash equivalents held by variable interest entities
115.6

 
178.9

Accrued investment income
268.1

 
245.9

Present value of future profits
350.4

 
359.6

Deferred acquisition costs
1,083.6

 
1,026.8

Reinsurance receivables
2,153.5

 
2,175.2

Income tax assets, net
450.4

 
366.9

Assets held in separate accounts
4.7

 
5.0

Other assets
356.0

 
319.5

Total assets
$
32,809.1

 
$
33,110.3

LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
Liabilities:
 

 
 

Liabilities for insurance products:
 

 
 

Policyholder account balances
$
11,254.5

 
$
11,220.7

Future policy benefits
11,312.2

 
11,521.3

Liability for policy and contract claims
509.1

 
530.3

Unearned and advanced premiums
270.3

 
261.7

Liabilities related to separate accounts
4.7

 
5.0

Other liabilities
869.0

 
751.8

Investment borrowings
1,646.5

 
1,646.7

Borrowings related to variable interest entities
1,410.5

 
1,410.7

Notes payable – direct corporate obligations
915.1

 
914.6

Total liabilities
28,191.9

 
28,262.8

Commitments and Contingencies
 
 
 
Shareholders' equity:
 

 
 

Common stock ($0.01 par value, 8,000,000,000 shares authorized, shares issued and outstanding:  March 31, 2018 – 167,354,255; December 31, 2017 – 166,857,931)
1.6

 
1.7

Additional paid-in capital
3,075.6

 
3,073.3

Accumulated other comprehensive income
894.3

 
1,212.1

Retained earnings
645.7

 
560.4

Total shareholders' equity
4,617.2

 
4,847.5

Total liabilities and shareholders' equity
$
32,809.1

 
$
33,110.3






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CNO Financial (7)
April 25, 2018



CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in millions, except per share data)
(unaudited)
 
Three months ended
 
March 31,
 
2018
 
2017
Revenues:
 
 
 
Insurance policy income
$
659.9

 
$
663.8

Net investment income:
 
 
 
General account assets
329.1

 
312.0

Policyholder and other special-purpose portfolios
12.8

 
75.2

Realized investment gains (losses):
 
 
 
Net realized investment gains, excluding impairment losses
(15.2
)
 
16.3

Impairment losses recognized (a)
—

 
(8.4
)
Total realized gains (losses)
(15.2
)
 
7.9

Fee revenue and other income
21.2

 
11.8

Total revenues
1,007.8

 
1,070.7

Benefits and expenses:
 
 
 
Insurance policy benefits
586.6

 
669.3

Interest expense
33.6

 
30.8

Amortization
71.9

 
63.5

Other operating costs and expenses
207.6

 
210.4

Total benefits and expenses
899.7

 
974.0

Income before income taxes
108.1

 
96.7

Income tax expense on period income
23.8

 
34.4

Net income
$
84.3

 
$
62.3

Earnings per common share:
 
 
 
Basic:
 
 
 
Weighted average shares outstanding
167,060,000

 
173,431,000

Net income
$
.50

 
$
.36

Diluted:
 
 
 
Weighted average shares outstanding
169,677,000

 
175,065,000

Net income
$
.50

 
$
.36


______________
(a)
No portion of the other-than-temporary impairments recognized in the periods was included in accumulated other comprehensive income.












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CNO Financial (8)
April 25, 2018


CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
NET OPERATING INCOME EXCLUDING SIGNIFICANT ITEMS*
(Dollars in millions, except per share data)

 
Three months ended
 
March 31, 2017*
 
Actual results
 
Significant items
 
Excluding significant items
Net Operating Income (1):
 
 
 
 
 
Bankers Life
$
89.7

 
$
1.7

 
$
91.4

Washington National
23.5

 
1.3

 
24.8

Colonial Penn
(.3
)
 
—

 
(.3
)
Long-term care in run-off
.4

 
—

 
.4

Adjusted EBIT from business segments
113.3

 
3.0

 
116.3

Corporate Operations, excluding corporate interest expense
(8.9
)
 
—

 
(8.9
)
Adjusted EBIT (4)
104.4

 
3.0

 
107.4

Corporate interest expense
(11.5
)
 
—

 
(11.5
)
Operating earnings before taxes
92.9

 
3.0

 
95.9

Tax expense on operating income
33.1

 
1.1

 
34.2

Net operating income
$
59.8

 
$
1.9

 
$
61.7

 
 
 
 
 
 
Net operating income per diluted share
$
.34

 
$
.01

 
$
.35


* This table summarizes the financial impact of significant items (as described in the segment results section of
this press release) on our 1Q17 net operating income.


























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CNO Financial (9)
April 25, 2018


CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
FIRST-YEAR COLLECTED PREMIUMS
(Dollars in millions)
 
Three months ended
 
March 31,
 
2018
 
2017
Bankers Life:
 
 
 
Medicare supplement
$
15.4

 
$
17.5

Long-term care
3.7

 
4.2

Supplemental health
1.1

 
1.4

Other health
.2

 
.2

Life
29.2

 
31.9

Annuity
249.9

 
255.9

Total
299.5

 
311.1

Washington National:
 
 
 
Supplemental health and other health
18.4

 
19.1

Life
1.3

 
1.4

Total
19.7

 
20.5

Colonial Penn:
 
 
 
Life
11.9

 
13.7

Total
11.9

 
13.7

Total first-year collected premiums from segments
$
331.1

 
$
345.3



TOTAL COLLECTED PREMIUMS
(Dollars in millions)
 
Three months ended
 
March 31,
 
2018
 
2017
Bankers Life:
 
 
 
Medicare supplement
$
188.3

 
$
191.7

Long-term care
110.3

 
117.0

Supplemental health
5.8

 
5.7

Other health
1.5

 
1.6

Life
115.2

 
114.3

Annuity
251.4

 
257.5

Total
672.5

 
687.8

Washington National:
 
 
 
Supplemental health and other health
155.7

 
150.6

Medicare supplement
12.5

 
14.4

Life
7.6

 
7.9

Annuity
.4

 
.2

Total
176.2

 
173.1

Colonial Penn:
 
 
 
Life
74.8

 
74.0

Medicare supplement and other health
.5

 
.5

Total
75.3

 
74.5

Long-term care in run-off:
 
 
 
Long-term care
4.1

 
4.6

Total
4.1

 
4.6

Total collected premiums from segments
$
928.1

 
$
940.0


-more-



CNO Financial (10)
April 25, 2018


CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
NEW ANNUALIZED PREMIUMS FOR LIFE AND HEALTH PRODUCTS (2)
(Dollars in millions)
 
Three months ended
 
March 31,
 
2018
 
2017
Bankers Life:
 
 
 
Medicare supplement
$
12.9

 
$
16.1

Long-term care
5.0

 
5.7

Supplemental health and other health
1.3

 
1.7

Life
16.5

 
18.0

Total
35.7

 
41.5

Washington National:
 
 
 
Supplemental health
22.0

 
22.9

Life
1.8

 
1.7

Total
23.8

 
24.6

Colonial Penn:
 
 
 
Life
18.6

 
21.8

Total
18.6

 
21.8

Total new annualized premiums
$
78.1

 
$
87.9


ANNUITY ACCOUNT VALUES
(Dollars in millions)

 
March 31,
 
2018
 
2017
Bankers Life
$
8,221.2

 
$
7,869.7

Washington National
368.1

 
404.5

Total
$
8,589.3

 
$
8,274.2


-more-




CNO Financial (11)
April 25, 2018


CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
BENEFIT RATIOS ON MAJOR HEALTH LINES OF BUSINESS

 
Three months ended
 
March 31,
 
2018
 
2017
Bankers Life:
 
 
 
Medicare supplement:
 
 
 
Earned premium
$193 million

 
$196 million

Benefit ratio (7)
73.3
%
 
70.0
%
Long-term care:
 
 
 
Earned premium
$110 million

 
$116 million

Benefit ratio (7)
133.4
%
 
132.6
%
Interest-adjusted benefit ratio (a non-GAAP measure) (8)
70.2
%
 
72.5
%
Washington National:
 
 
 
Medicare supplement:
 
 
 
Earned premium
$13 million

 
$14 million

Benefit ratio (7)
66.5
%
 
66.8
%
Supplemental health:
 
 
 
Earned premium
$151 million

 
$146 million

Benefit ratio (7)
78.3
%
 
84.6
%
Interest-adjusted benefit ratio (a non-GAAP measure) (8)
54.4
%
 
60.6
%
Long-term care in run-off:
 
 
 
Long-term care:
 
 
 
Earned premium
$4 million

 
$5 million

Benefit ratio (7)
293.1
%
 
286.5
%
Interest-adjusted benefit ratio (a non-GAAP measure) (8)
117.9
%
 
128.1
%

-more-



CNO Financial (12)
April 25, 2018


NOTES
(1)
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 related to the agent deferred compensation plan, net of taxes, (iv) changes in the valuation allowance for deferred tax assets and other tax items; and (v) 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. Net realized investment gains or losses include: (i) gains or losses on the sales of investments; (ii) other-than-temporary impairments recognized through net income; and (iii) changes in fair value of certain fixed maturity investments with embedded derivatives. A reconciliation of Net operating income to Net income applicable to common stock is provided in the table on page 2. Additional information concerning this non-GAAP measure is included in our periodic filings with the Securities and Exchange Commission that are available in the "Investors - SEC Filings" section of CNO's website, www.CNOinc.com.
(2)
Measured by new annualized premium for life and health products, which includes 10% of single premium whole life deposits and 100% of all other premiums (excluding annuities). Medicare Advantage sales are not comparable to other sales and are therefore excluded in all periods.
(3)
Book value per diluted share reflects the potential dilution that could occur if outstanding stock options were exercised, restricted stock and performance units were vested and convertible securities were converted. The dilution from options, restricted shares and performance units is calculated using the treasury stock method. Under this method, we assume the proceeds from the exercise of the options (or the unrecognized compensation expense with respect to restricted stock and performance units) will be used to purchase shares of our common stock at the closing market price on the last day of the period. The dilution from convertible securities is calculated assuming the securities were converted on the last day of the period. In addition, the calculation of this non-GAAP measure differs from the corresponding GAAP measure because accumulated other comprehensive income (loss) has been excluded from the value of capital used to determine this measure. Management believes this non-GAAP measure is useful because it removes the volatility that arises from changes in the unrealized appreciation (depreciation) of our investments.
(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 related to the agent deferred compensation plan, 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. A reconciliation of Adjusted EBIT to Net Income applicable to common stock is provided in the table on page 2.
(5)
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.
(6)
The calculation of this non-GAAP measure differs from the corresponding GAAP measure because accumulated other comprehensive income (loss) has been excluded from the value of capital used to determine this measure. Management believes this non-GAAP measure is useful because it removes the volatility that arises from changes in the unrealized appreciation (depreciation) of our investments.
(7)
The benefit ratio is calculated by dividing the related product's insurance policy benefits by insurance policy income.
(8)
The interest-adjusted benefit ratio (a non-GAAP measure) is calculated by dividing the product's insurance policy benefits less imputed interest income on the accumulated assets backing the insurance liabilities by insurance policy income. Interest income is an important factor in measuring the performance of longer duration health products. The net cash flows generally cause an accumulation of amounts in the early years of a policy (accounted for as reserve increases), which will be paid out as benefits in later policy years (accounted for as reserve decreases). Accordingly, as the policies age, the benefit ratio will typically increase, but the increase in the change in reserve will be partially offset by the imputed interest income earned on the accumulated assets. The interest-adjusted benefit ratio reflects the effects of such interest income offset (which is equal to the tabular interest on the related insurance liabilities). Since interest income is an important factor in measuring the performance of these products, management believes a benefit ratio, which includes the effect of interest income, is useful in analyzing product performance. Additional information concerning this non-GAAP measure is included in our periodic filings with the Securities and Exchange Commission that are available in the "Investors - SEC Filings" section of CNO Financial's website, www.CNOinc.com.

Cautionary Statement Regarding Forward-Looking Statements. Our statements, trend analyses and other information contained in this press release relative to markets for CNO Financial's products and trends in CNO Financial's operations or financial results, as well as other statements, contain forward-looking statements within the meaning of the federal securities laws and the Private Securities Litigation Reform Act of 1995. Forward-looking statements typically are identified by the use of terms such as "anticipate," "believe," "plan," "estimate," "expect," "project," "intend," "may," "will," "would," "contemplate," "possible," "attempt," "seek," "should," "could," "goal," "target," "on



CNO Financial (13)
April 25, 2018


track," "comfortable with," "optimistic," "guidance," "outlook" and similar words, although some forward-looking statements are expressed differently. You should consider statements that contain these words carefully because they describe our expectations, plans, strategies and goals and our beliefs concerning future business conditions, our results of operations, financial position, and our business outlook or they state other ''forward-looking'' information based on currently available information. Assumptions and other important factors that could cause our actual results to differ materially from those anticipated in our forward-looking statements include, among other things: (i) changes in or sustained low interest rates causing reductions in investment income, the margins of our fixed annuity and life insurance businesses, and sales of, and demand for, our products; (ii) expectations of lower future investment earnings may cause us to accelerate amortization, write down the balance of insurance acquisition costs or establish additional liabilities for insurance products; (iii) general economic, market and political conditions and uncertainties, including the performance and fluctuations of the financial markets which may affect the value of our investments as well as our ability to raise capital or refinance existing indebtedness and the cost of doing so; (iv) the ultimate outcome of lawsuits filed against us and other legal and regulatory proceedings to which we are subject; (v) our ability to make anticipated changes to certain non-guaranteed elements of our life insurance products; (vi) our ability to obtain adequate and timely rate increases on our health products, including our long-term care business; (vii) the receipt of any required regulatory approvals for dividend and surplus debenture interest payments from our insurance subsidiaries; (viii) mortality, morbidity, the increased cost and usage of health care services, persistency, the adequacy of our previous reserve estimates and other factors which may affect the profitability of our insurance products; (ix) changes in our assumptions related to deferred acquisition costs or the present value of future profits; (x) the recoverability of our deferred tax assets and the effect of potential ownership changes and tax rate changes on their value; (xi) changes to our estimates of the impact of comprehensive federal tax legislation related to the Tax Cuts and Jobs Act; (xii) our assumption that the positions we take on our tax return filings will not be successfully challenged by the Internal Revenue Service; (xiii) changes in accounting principles and the interpretation thereof; (xiv) our ability to continue to satisfy the financial ratio and balance requirements and other covenants of our debt agreements; (xv) our ability to achieve anticipated expense reductions and levels of operational efficiencies including improvements in claims adjudication and continued automation and rationalization of operating systems; (xvi) performance and valuation of our investments, including the impact of realized losses (including other-than-temporary impairment charges); (xvii) our ability to identify products and markets in which we can compete effectively against competitors with greater market share, higher ratings, greater financial resources and stronger brand recognition; (xviii) our ability to generate sufficient liquidity to meet our debt service obligations and other cash needs; (xix) changes in capital deployment opportunities; (xx) our ability to maintain effective controls over financial reporting; (xxi) our ability to continue to recruit and retain productive agents and distribution partners; (xxii) customer response to new products, distribution channels and marketing initiatives; (xxiii) our ability to achieve additional upgrades of the financial strength ratings of CNO Financial and our insurance company subsidiaries as well as the impact of our ratings on our business, our ability to access capital and the cost of capital; (xxiv) regulatory changes or actions, including: those relating to regulation of the financial affairs of our insurance companies, such as the calculation of risk-based capital and minimum capital requirements, and payment of dividends and surplus debenture interest to us; regulation of the sale, underwriting and pricing of products; and health care regulation affecting health insurance products; (xxv) changes in the Federal income tax laws and regulations which may affect or eliminate the relative tax advantages of some of our products or affect the value of our deferred tax assets; (xxvi) availability and effectiveness of reinsurance arrangements, as well as the impact of any defaults or failure of reinsurers to perform; (xxvii) the amount we may need to pay to a reinsurer and the earnings charge we may incur in connection with a long-term care reinsurance transaction; (xxviii) the performance of third party service providers and potential difficulties arising from outsourcing arrangements; (xxix) the growth rate of sales, collected premiums, annuity deposits and assets; (xxx) interruption in telecommunication, information technology or other operational systems or failure to maintain the security, confidentiality or privacy of sensitive data on such systems; (xxxi) events of terrorism, cyber attacks, natural disasters or other catastrophic events, including losses from a disease pandemic; (xxxii) ineffectiveness of risk management policies and procedures in identifying, monitoring and managing risks; and (xxxiii) the risk factors or uncertainties listed from time to time in our filings with the Securities and Exchange Commission. Other factors and assumptions not identified above are also relevant to the forward-looking statements, and if they prove incorrect, could also cause actual results to differ materially from those projected. All written or oral forward-looking statements attributable to us are expressly qualified in their entirety by the foregoing cautionary statement. Our forward-looking statements speak only as of the date made. We assume no obligation to update or to publicly announce the results of any revisions to any of the forward-looking statements to reflect actual results, future events or developments, changes in assumptions or changes in other factors affecting the forward-looking statements.

For further information: (News Media) Beth Hengeveld +1.312.396.7467 or (Investors) Adam Auvil +1.317.817.6310


- # # # -



 EX-99.2 3 exhibit992-03312018investo.htm EXHIBIT 99.2 Exhibit


Exhibit 99.2



logo-sm.jpg
 
 
 
 
 
 
 
 
 
 
 
 
Quarterly Financial Supplement - 1Q2018
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
April 25, 2018
 
 
 
 
 
 
 
 
 
 
 




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
     Corporate Operations
 
 
 
15
Premiums collected on insurance products:
 
 
 
 
     Bankers Life
 
 
 
16
     Washington National
 
 
 
17
     Colonial Penn
 
 
 
18
     Long-term care in run-off
 
 
 
18
First-Year Collected Premiums, New Annualized Premiums and Total Policies Inforce
 
 
 
19
Statutory information
 
 
 
20
Notes
 
 
 
21





Page 2



CNO Financial Group, Inc.
 
 
 
 
 
Consolidated balance sheet (in millions)
Mar-17
Jun-17
Sep-17
Dec-17
Mar-18
 
 
 
 
 
 
Assets
 
 
 
 
 
Investments:
 
 
 
 
 
  Fixed maturities, available for sale, at fair value
$
21,378.4

$
22,071.4

$
22,129.9

$
22,910.9

$
22,375.5

  Equity securities at fair value
587.8

622.6

713.3

440.6

498.7

  Mortgage loans
1,788.5

1,734.7

1,667.8

1,650.6

1,601.2

  Policy loans
112.4

112.1

114.6

116.0

116.0

  Trading securities
341.1

308.0

294.4

284.6

289.6

  Investments held by variable interest entities
1,514.5

1,309.6

1,382.5

1,526.9

1,583.9

  Other invested assets
665.2

722.6

752.1

924.5

951.1

  Total investments
26,387.9

26,881.0

27,054.6

27,854.1

27,416.0

Cash and cash equivalents - unrestricted
530.2

548.8

765.9

578.4

610.8

Cash and cash equivalents held by variable interest entities
354.5

391.1

105.9

178.9

115.6

Accrued investment income
258.2

240.9

268.0

245.9

268.1

Present value of future profits
388.8

377.8

368.5

359.6

350.4

Deferred acquisition costs
1,028.5

1,012.4

1,023.8

1,026.8

1,083.6

Reinsurance receivables
2,241.1

2,217.9

2,195.5

2,175.2

2,153.5

Income tax assets, net
697.8

594.2

567.4

366.9

450.4

Assets held in separate accounts
4.6

4.7

4.8

5.0

4.7

Other assets
535.8

573.0

350.2

319.5

356.0

Total assets
$
32,427.4

$
32,841.8

$
32,704.6

$
33,110.3

$
32,809.1

Liabilities
 
 
 
 
 
Liabilities for insurance products:
 
 
 
 
 
  Policyholder account balances
$
10,975.1

$
11,037.3

$
11,113.5

$
11,220.7

$
11,254.5

  Future policy benefits
11,057.2

11,271.7

11,374.1

11,521.3

11,312.2

  Liability for policy and contract claims
498.1

506.3

519.5

530.3

509.1

  Unearned and advanced premiums
292.8

282.5

262.4

261.7

270.3

  Liabilities related to separate accounts
4.6

4.7

4.8

5.0

4.7

Other liabilities
798.0

866.5

789.1

751.8

869.0

Investment borrowings
1,647.2

1,647.0

1,646.9

1,646.7

1,646.5

Borrowings related to variable interest entities
1,634.2

1,532.6

1,198.2

1,410.7

1,410.5

Notes payable - direct corporate obligations
913.4

913.9

914.4

914.6

915.1

Total liabilities
27,820.6

28,062.5

27,822.9

28,262.8

28,191.9

Shareholders' equity
 
 
 
 
 
Common stock
1.7

1.7

1.7

1.7

1.6

Additional paid-in capital
3,177.1

3,116.7

3,094.5

3,073.3

3,075.6

Retained earnings
698.4

766.4

851.9

560.4

645.7

Total shareholders' equity before accumulated other comprehensive income
3,877.2

3,884.8

3,948.1

3,635.4

3,722.9

Accumulated other comprehensive income
729.6

894.5

933.6

1,212.1

894.3

Total shareholders' equity
4,606.8

4,779.3

4,881.7

4,847.5

4,617.2

Total liabilities and shareholders' equity
$
32,427.4

$
32,841.8

$
32,704.6

$
33,110.3

$
32,809.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mar-17
Jun-17
Sep-17
Dec-17
Mar-18
 
 
 
 
 
 
Book value per common share
$
26.77

$
28.28

$
29.10

$
29.05

$
27.59

 
 
 
 
 
 
Book value per common share, excluding accumulated other comprehensive income (1) (2)
$
22.53

$
22.98

$
23.53

$
21.79

$
22.25

 
 
 
 
 
 
Book value per diluted share (1) (3)
$
22.31

$
22.74

$
23.19

$
21.43

$
21.94

 
 
 
 
 
 





Page 3



CNO Financial Group, Inc.
 
 
 
 
 
 
Consolidated statement of operations (in millions)
1Q17
2Q17
3Q17
4Q17
2017
1Q18
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
Insurance policy income
$
663.8

$
664.1

$
659.3

$
660.1

$
2,647.3

$
659.9

Net investment income:
 
 
 
 
 
 
   General account assets
312.0

322.4

325.9

325.1

1,285.4

329.1

Policyholder and other special-purpose portfolios
75.2

43.9

52.7

94.1

265.9

12.8

Realized investment gains (losses):
 
 
 
 
 
 
Net realized investment gains (losses), excluding impairment losses
16.3

24.0

34.5

2.6

77.4

(15.2
)
Other-than-temporary impairments:
 
 
 
 
 
 
Total other-than-temporary impairment losses
(8.4
)
(4.2
)
(4.7
)
(4.6
)
(21.9
)
—

Change in other-than-temporary impairment losses recognized in accumulated other comprehensive income
—

(0.9
)
—

—

(0.9
)
—

Net impairment losses recognized
(8.4
)
(5.1
)
(4.7
)
(4.6
)
(22.8
)
—

Loss on dissolution of variable interest entities
—

(3.7
)
(0.6
)
—

(4.3
)
—

Total realized gains (losses)
7.9

15.2

29.2

(2.0
)
50.3

(15.2
)
Fee revenue and other income
11.8

11.5

12.2

12.8

48.3

21.2

Total revenues
1,070.7

1,057.1

1,079.3

1,090.1

4,297.2

1,007.8

 
 
 
 
 
 
 
Benefits and expenses
 
 
 
 
 
 
Insurance policy benefits
669.3

634.2

638.1

661.1

2,602.7

586.6

Interest expense
30.8

31.4

30.1

31.4

123.7

33.6

Amortization
63.5

59.6

58.2

58.0

239.3

71.9

Loss on extinguishment of borrowings related to variable interest entities
—

—

5.5

4.0

9.5

—

Other operating costs and expenses
210.4

203.4

217.5

210.2

841.5

207.6

Total benefits and expenses
974.0

928.6

949.4

964.7

3,816.7

899.7

 
 
 
 
 
 
 
Income before income taxes
96.7

128.5

129.9

125.4

480.5

108.1

Income tax expense on period income
34.4

45.1

44.1

39.2

162.8

23.8

Valuation allowance for deferred tax assets and other tax items
—

—

(15.0
)
157.1

142.1

—

Net income (loss)
$
62.3

$
83.4

$
100.8

$
(70.9
)
$
175.6

$
84.3

 
 
 
 
 
 
 







Page 4



CNO Financial Group, Inc.
 
 
 
 
 
 
Operating results ($ in millions, except per share amounts)
1Q17
2Q17
3Q17
4Q17
2017
1Q18
 
 
 
 
 
 
 
Adjusted EBIT (4):
 
 
 
 
 
 
   Bankers Life
$
89.7

$
112.6

$
106.9

$
109.7

$
418.9

$
89.5

   Washington National
23.5

23.6

27.5

23.7

98.3

34.3

   Colonial Penn
(0.3
)
8.0

9.0

5.9

22.6

(1.5
)
   Long-term care in run-off
0.4

1.7

(1.0
)
0.6

1.7

—

Adjusted EBIT from business segments
113.3

145.9

142.4

139.9

541.5

122.3

Corporate operations, excluding corporate interest expense
(8.9
)
(13.2
)
(14.9
)
(3.3
)
(40.3
)
(15.5
)
Adjusted EBIT
104.4

132.7

127.5

136.6

501.2

106.8

Corporate interest expense
(11.5
)
(11.6
)
(11.7
)
(11.7
)
(46.5
)
(11.9
)
Operating earnings before taxes
92.9

121.1

115.8

124.9

454.7

94.9

Tax expense on operating income
33.1

42.5

39.1

39.1

153.8

21.0

Net operating income (5)
59.8

78.6

76.7

85.8

300.9

73.9

Net realized investment gains (losses) (net of related amortization)
7.9

14.9

28.5

(2.0
)
49.3

(15.2
)
Fair value changes in embedded derivative liabilities (net of related amortization)
(4.4
)
(5.9
)
2.3

5.5

(2.5
)
25.1

Fair value changes related to agent deferred compensation plan
—

—

(13.4
)
1.2

(12.2
)
—

Other
0.3

(1.6
)
(3.3
)
(4.2
)
(8.8
)
3.3

Non-operating income before taxes
3.8

7.4

14.1

0.5

25.8

13.2

Income tax expense (benefit):
 
 
 
 

 
On non-operating income
1.3

2.6

5.0

0.1

9.0

2.8

Valuation allowance for deferred tax assets and other tax items
—

—

(15.0
)
157.1

142.1

—

Net non-operating income (loss)
2.5

4.8

24.1

(156.7
)
(125.3
)
10.4

Net income (loss)
$
62.3

$
83.4

$
100.8

$
(70.9
)
$
175.6

$
84.3

 
 
 
 
 
 
 
Per diluted share:
 
 
 
 
 
 
Net operating income
$
.34

$
.45

$
.45

$
.51

$
1.75

$
.44

Net realized investment gains (losses) (net of related amortization and taxes)
.03

.06

.11

(.01
)
.19

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

.02

(.01
)
.12

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

—

(.05
)
.01

(.05
)
—

Valuation allowance for deferred tax assets and other tax items
—

—

.09

(.94
)
(.83
)
—

Other
—

(.01
)
(.02
)
(.01
)
(.03
)
.01

Net income (loss)
$
.36

$
.48

$
.59

$
(.42
)
$
1.02

$
.50

 
 
 
 
 
 
 
 
 
 
 
 
 
 




Page 5




CNO Financial Group, Inc.
 
 
 
 
 
 
Computation of weighted average shares outstanding
1Q17
2Q17
3Q17
4Q17 (a)
2017
1Q18
(000s)
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
 
 
 
 
 
Shares outstanding, beginning of period
173,753.6

172,103.8

169,018.9

167,762.3

173,753.6

166,857.9

Weighted average shares issued during the period:
 
 
 
 
 
 
Shares repurchased
(513.6
)
(1,663.6
)
(341.4
)
(438.3
)
(4,293.0
)
—

Stock options exercised and vested restricted and performance stock
213.3

140.1

7.1

104.2

642.5

307.6

Shares withheld for the payment of taxes on the vesting of restricted stock
(22.6
)
(23.8
)
(1.0
)
(0.5
)
(78.5
)
(105.9
)
Weighted average basic shares outstanding during the period
173,430.7

170,556.5

168,683.6

167,427.7

170,024.6

167,059.6

Basic shares outstanding, end of period
172,103.8

169,018.9

167,762.3

166,857.9

166,857.9

167,354.3

Diluted
 
 
 
 
 
 
Weighted average basic shares outstanding
173,430.7

170,556.5

168,683.6

167,427.7

170,024.6

167,059.6

Common stock equivalent shares related to:
 
 
 
 
 
 
Stock options, restricted stock and performance units
1,634.7

1,795.0

2,298.1

—

2,119.6

2,617.8

Weighted average diluted shares outstanding during the period
175,065.4

172,351.5

170,981.7

167,427.7

172,144.2

169,677.4

Diluted shares outstanding, end of period
173,818.0

170,859.3

170,237.2

169,654.3

169,654.3

169,705.4

 
 
 
 
 
 
 

(a) Equivalent common shares of 2,750.3 were not included in the diluted weighted average share outstanding
due to the net loss recognized in 4Q17.









Page 6





CNO Financial Group, Inc.
 
 
 
 
 
 
Bankers Life
 
 
 
 
 
 
Analysis of income before taxes (in millions)
1Q17
2Q17
3Q17
4Q17
2017
1Q18
 
 
 
 
 
 
 
Insurance policy income
$
419.1

$
419.1

$
414.6

$
413.8

$
1,666.6

$
410.7

Net investment income (loss):
 
 
 
 
 
 
   General account invested assets
231.1

237.7

242.1

242.9

953.8

243.1

   Fixed index products
41.8

19.2

28.5

64.0

153.5

(5.2
)
Fee revenue and other income
10.6

10.6

11.3

11.6

44.1

19.6

   Total revenues
702.6

686.6

696.5

732.3

2,818.0

668.2

 
 
 
 
 
 
 
Insurance policy benefits
367.6

357.6

364.7

358.6

1,448.5

373.7

Amounts added to policyholder account balances:
 
 
 
 
 
 
Cost of interest credited to policyholders
26.5

26.5

26.3

25.7

105.0

24.9

Cost of options to fund index credits, net of forfeitures
14.9

16.2

16.0

16.6

63.7

17.1

Market value changes credited to policyholders
42.2

19.0

30.2

63.2

154.6

(4.6
)
Amortization related to operations
46.3

41.3

38.7

37.3

163.6

47.0

Interest expense on investment borrowings
4.2

4.8

5.3

5.5

19.8

6.1

Other operating costs and expenses
111.2

108.6

108.4

115.7

443.9

114.5

   Total benefits and expenses
612.9

574.0

589.6

622.6

2,399.1

578.7

Adjusted EBIT (4)
$
89.7

$
112.6

$
106.9

$
109.7

$
418.9

$
89.5

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Health underwriting margins (in millions)
1Q17
2Q17
3Q17
4Q17
2017
1Q18
 
 
 
 
 
 
 
Medicare supplement:
 
 
 
 
 
 
   Earned premium
$
196.0

$
194.3

$
194.5

$
193.2

$
778.0

$
192.6

   Benefit ratio
70.0
%
70.4
%
72.0
%
70.7
%
70.8
%
73.3
%
Underwriting margin (earned premium less policy benefits)
$
58.8

$
57.4

$
54.5

$
56.7

$
227.4

$
51.4

 
 
 
 
 
 
 
Long-term care:
 
 
 
 
 
 
   Earned premium
$
115.6

$
113.7

$
112.7

$
111.1

$
453.1

$
109.5

Benefit ratio before interest income on reserves
132.6
%
126.9
%
134.2
%
135.3
%
132.3
%
133.4
%
   Interest-adjusted benefit ratio
72.5
%
66.2
%
72.9
%
73.1
%
71.2
%
70.2
%
Underwriting margin (earned premium plus interest income on reserves less policy benefits)
$
31.8

$
38.4

$
30.5

$
29.9

$
130.6

$
32.6

 
 
 
 
 
 
 
 
 
 
 
 
 
 


Page 7




CNO Financial Group, Inc.
 
 
 
 
 
 
Bankers Life
 
 
 
 
 
 
Average liabilities for insurance products (in millions)
1Q17
2Q17
3Q17
4Q17
2017
1Q18
 
 
 
 
 
 
 
Fixed index annuities
$
4,871.4

$
5,050.7

$
5,222.5

$
5,413.6

$
5,139.6

$
5,564.6

Fixed interest annuities
3,012.3

2,934.9

2,860.5

2,790.1

2,899.5

2,713.7

SPIAs and supplemental contracts:
 
 
 
 
 
 
Mortality based
164.9

162.2

159.2

155.8

160.5

152.4

Deposit based
151.6

149.8

148.1

146.7

149.0

144.9

Health:
 
 
 
 
 
 
Long-term care
4,866.1

4,946.6

5,038.4

5,098.6

4,987.4

5,056.1

Medicare supplement
343.4

337.0

329.8

329.5

334.9

324.6

Other health
54.1

55.4

56.5

57.8

55.9

58.8

Life:
 
 
 
 
 
 
   Interest sensitive
757.3

772.1

785.6

797.8

778.2

808.5

   Non-interest sensitive
1,062.2

1,081.0

1,099.1

1,117.2

1,089.9

1,134.7

Total average liabilities for insurance products, net of reinsurance ceded
$
15,283.3

$
15,489.7

$
15,699.7

$
15,907.1

$
15,594.9

$
15,958.3

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Annuities - account value rollforwards (in millions)
1Q17
2Q17
3Q17
4Q17
2017
1Q18
 
 
 
 
 
 
 
Fixed index annuities
 
 
 
 
 
 
Balance as of the beginning of the period
$
4,740.2

$
4,896.3

$
5,061.4

$
5,222.7

$
4,740.2

$
5,410.7

Gross deposits
235.3

247.2

222.6

259.6

964.7

235.4

Withdrawals
(112.0
)
(114.1
)
(96.1
)
(122.9
)
(445.1
)
(138.5
)
Returns reinvested
32.8

32.0

34.8

51.3

150.9

42.0

Balance as of the end of the period
$
4,896.3

$
5,061.4

$
5,222.7

$
5,410.7

$
5,410.7

$
5,549.6

 
 
 
 
 
 
 
Fixed interest annuities
 
 
 
 
 
 
Balance as of the beginning of the period
$
3,048.3

$
2,973.4

$
2,893.3

$
2,824.5

$
3,048.3

$
2,752.6

Gross deposits
18.6

15.2

12.3

11.2

57.3

14.2

Withdrawals
(112.9
)
(114.4
)
(100.0
)
(101.4
)
(428.7
)
(112.7
)
Returns reinvested
19.4

19.1

18.9

18.3

75.7

17.5

Balance as of the end of the period
$
2,973.4

$
2,893.3

$
2,824.5

$
2,752.6

$
2,752.6

$
2,671.6

 
 
 
 
 
 
 
Total annuities
 
 
 
 
 
 
Balance as of the beginning of the period
$
7,788.5

$
7,869.7

$
7,954.7

$
8,047.2

$
7,788.5

$
8,163.3

Gross deposits
253.9

262.4

234.9

270.8

1,022.0

249.6

Withdrawals
(224.9
)
(228.5
)
(196.1
)
(224.3
)
(873.8
)
(251.2
)
Returns reinvested
52.2

51.1

53.7

69.6

226.6

59.5

Balance as of the end of the period
$
7,869.7

$
7,954.7

$
8,047.2

$
8,163.3

$
8,163.3

$
8,221.2

 
 
 
 
 
 
 


Page 8




CNO Financial Group, Inc.
 
 
 
 
 
 
Bankers Life
 
 
 
 
 
 
Present value of future profits (in millions)
1Q17
2Q17
3Q17
4Q17
2017
1Q18
 
 
 
 
 
 
 
Balance, beginning of period
$
95.5

$
91.3

$
87.3

$
84.1

$
95.5

$
81.1

Amortization related to operations
(7.9
)
(7.3
)
(6.7
)
(6.9
)
(28.8
)
(7.2
)
Amortization related to net realized investment (gains) losses
—

—

—

—

—

—

Amounts related to changes in unrealized investment gains (losses) on fixed maturities, available for sale
3.7

3.3

3.5

3.9

14.4

3.9

Balance, end of period
$
91.3

$
87.3

$
84.1

$
81.1

$
81.1

$
77.8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deferred acquisition costs (in millions)
1Q17
2Q17
3Q17
4Q17
2017
1Q18
 
 
 
 
 
 
 
Balance, beginning of period
$
646.2

$
621.8

$
604.1

$
608.5

$
646.2

$
606.5

Deferred acquisition expenses
41.7

43.0

38.1

34.5

157.3

40.2

Amortization related to operations
(38.4
)
(34.0
)
(32.0
)
(30.4
)
(134.8
)
(39.8
)
Amortization related to net realized investment (gains) losses
—

(0.3
)
(0.7
)
—

(1.0
)
—

Amortization related to fair value changes in embedded derivative liabilities
1.0

1.3

(0.5
)
(1.1
)
0.7

(5.3
)
Amounts related to changes in unrealized investment gains (losses) on fixed maturities, available for sale
(28.7
)
(27.7
)
(0.5
)
(5.0
)
(61.9
)
50.0

Balance, end of period
$
621.8

$
604.1

$
608.5

$
606.5

$
606.5

$
651.6

 
 
 
 
 
 
 





Page 9




CNO Financial Group, Inc.
 
 
 
 
 
 
Washington National
 
 
 
 
 
 
Analysis of income before taxes (in millions)
1Q17
2Q17
3Q17
4Q17
2017
1Q18
 
 
 
 
 
 
 
Insurance policy income
$
167.1

$
167.5

$
167.4

$
169.4

$
671.4

$
171.0

Net investment income (loss):
 
 
 
 
 
 
   General account invested assets
63.4

64.8

65.5

63.8

257.5

65.4

Fixed index products
2.6

1.2

2.0

3.2

9.0

(0.4
)
Trading account income related to policyholder accounts
1.4

0.5

0.5

1.3

3.7

0.4

Fee revenue and other income
0.3

0.2

0.3

0.2

1.0

0.2

   Total revenues
234.8

234.2

235.7

237.9

942.6

236.6

 
 
 
 
 
 
 
Insurance policy benefits
137.8

139.9

138.0

135.0

550.7

134.1

Amounts added to policyholder account balances:
 
 
 
 
 
 
Cost of interest credited to policyholders
3.3

3.2

3.2

3.2

12.9

3.1

Cost of options to fund index credits, net of forfeitures
1.0

1.0

1.2

1.2

4.4

0.9

Market value changes credited to policyholders
4.6

1.2

2.3

5.0

13.1

(0.4
)
Amortization related to operations
14.3

15.3

14.3

14.9

58.8

14.5

Interest expense on investment borrowings
1.3

1.5

1.7

1.8

6.3

2.1

Other operating costs and expenses
49.0

48.5

47.5

53.1

198.1

48.0

   Total benefits and expenses
211.3

210.6

208.2

214.2

844.3

202.3

Adjusted EBIT (4)
$
23.5

$
23.6

$
27.5

$
23.7

$
98.3

$
34.3

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Health underwriting margins (in millions)
1Q17
2Q17
3Q17
4Q17
2017
1Q18
 
 
 
 
 
 
 
Medicare supplement:
 
 
 
 
 
 
Earned premium
$
14.3

$
13.7

$
13.3

$
13.1

$
54.4

$
12.6

Benefit ratio
66.8
%
70.4
%
68.1
%
67.0
%
68.1
%
66.5
%
Underwriting margin (earned premium less policy benefits)
$
4.8

$
4.0

$
4.2

$
4.4

$
17.4

$
4.2

 
 
 
 
 
 
 
Supplemental health and other:
 
 
 
 
 
 
Earned premium
$
145.6

$
146.3

$
147.2

$
149.4

$
588.5

$
151.3

Benefit ratio before interest income on reserves
84.6
%
84.5
%
83.2
%
80.7
%
83.2
%
78.3
%
Interest-adjusted benefit ratio
60.6
%
60.4
%
59.0
%
56.6
%
59.1
%
54.4
%
Underwriting margin (earned premium plus interest income on reserves less policy benefits)
$
57.3

$
57.9

$
60.4

$
64.8

$
240.4

$
69.0

 
 
 
 
 
 
 



Page 10



CNO Financial Group, Inc.
 
 
 
 
 
 
Washington National
 
 
 
 
 
 
Average liabilities for insurance products (in millions)
1Q17
2Q17
3Q17
4Q17
2017
1Q18
 
 
 
 
 
 
 
Fixed index annuities
$
326.1

$
317.8

$
309.9

$
303.2

$
314.2

$
295.4

Fixed interest annuities
100.8

99.2

96.6

95.1

97.9

93.8

SPIAs and supplemental contracts:
 
 
 
 
 
 
Mortality based
233.5

232.3

231.8

230.7

232.1

226.9

Deposit based
271.9

269.4

267.8

269.0

269.5

269.8

Separate Accounts
4.6

4.6

4.8

4.9

4.7

4.8

Health:
 
 
 
 
 
 
Supplemental health
2,680.2

2,715.8

2,749.9

2,782.0

2,732.0

2,814.7

Medicare supplement
26.9

25.4

23.9

23.0

24.8

22.1

Other health
13.8

13.8

13.4

13.0

13.5

12.5

Life:
 
 
 
 
 
 
Interest sensitive
149.2

149.0

148.9

149.6

149.2

149.5

Non-interest sensitive
175.3

173.2

174.1

177.4

175.0

174.4

Total average liabilities for insurance products, net of reinsurance ceded
$
3,982.3

$
4,000.5

$
4,021.1

$
4,047.9

$
4,012.9

$
4,063.9

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Annuities - account value rollforwards (in millions)
1Q17
2Q17
3Q17
4Q17
2017
1Q18
 
 
 
 
 
 
 
Fixed index annuities
 
 
 
 
 
 
Balance as of the beginning of the period
$
313.4

$
304.8

$
296.2

$
291.0

$
313.4

$
284.0

Gross deposits
0.2

0.2

0.1

0.2

0.7

0.3

Withdrawals
(11.6
)
(12.3
)
(9.0
)
(10.5
)
(43.4
)
(10.7
)
Returns reinvested
2.8

3.5

3.7

3.3

13.3

2.5

Balance as of the end of the period
$
304.8

$
296.2

$
291.0

$
284.0

$
284.0

$
276.1

 
 
 
 
 
 
 
Fixed interest annuities
 
 
 
 
 
 
Balance as of the beginning of the period
$
100.3

$
99.7

$
97.2

$
94.7

$
100.3

$
94.2

Gross deposits
0.1

—

—

0.1

0.2

0.1

Withdrawals
(2.9
)
(3.7
)
(3.8
)
(2.6
)
(13.0
)
(3.4
)
Returns reinvested
2.2

1.2

1.3

2.0

6.7

1.1

Balance as of the end of the period
$
99.7

$
97.2

$
94.7

$
94.2

$
94.2

$
92.0

 
 
 
 
 
 
 
Total annuities
 
 
 
 
 
 
Balance as of the beginning of the period
$
413.7

$
404.5

$
393.4

$
385.7

$
413.7

$
378.2

Gross deposits
0.3

0.2

0.1

0.3

0.9

0.4

Withdrawals
(14.5
)
(16.0
)
(12.8
)
(13.1
)
(56.4
)
(14.1
)
Returns reinvested
5.0

4.7

5.0

5.3

20.0

3.6

Balance as of the end of the period
$
404.5

$
393.4

$
385.7

$
378.2

$
378.2

$
368.1

 
 
 
 
 
 
 





Page 11



CNO Financial Group, Inc.
 
 
 
 
 
 
Washington National
 
 
 
 
 
 
Present value of future profits (in millions)
1Q17
2Q17
3Q17
4Q17
2017
1Q18
 
 
 
 
 
 
 
Balance, beginning of period
$
266.8

$
259.1

$
253.2

$
248.3

$
266.8

$
243.7

Amortization related to operations
(5.3
)
(5.7
)
(5.1
)
(4.8
)
(20.9
)
(5.2
)
Amounts related to changes in unrealized investment gains (losses) on fixed maturities, available for sale
(2.4
)
(0.2
)
0.2

0.2

(2.2
)
0.4

Balance, end of period
$
259.1

$
253.2

$
248.3

$
243.7

$
243.7

$
238.9

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deferred acquisition costs (in millions)
1Q17
2Q17
3Q17
4Q17
2017
1Q18
 
 
 
 
 
 
 
Balance, beginning of period
$
299.9

$
304.1

$
302.3

$
307.0

$
299.9

$
310.8

Deferred acquisition expenses
14.6

14.1

13.7

13.9

56.3

14.2

Amortization related to operations
(9.0
)
(9.6
)
(9.2
)
(10.1
)
(37.9
)
(9.3
)
Amortization related to net realized investment (gains) losses
—

—

—

—

—

—

Amortization related to fair value changes in embedded derivative liabilities
0.1

—

(0.1
)
(0.3
)
(0.3
)
(0.5
)
Amounts related to changes in unrealized investment gains (losses) on fixed maturities, available for sale
(1.5
)
(6.3
)
0.3

0.3

(7.2
)
5.0

Balance, end of period
$
304.1

$
302.3

$
307.0

$
310.8

$
310.8

$
320.2

 
 
 
 
 
 
 


Page 12



CNO Financial Group, Inc.
 
 
 
 
 
 
Colonial Penn
 
 
 
 
 
 
Analysis of income (loss) before taxes (in millions)
1Q17
2Q17
3Q17
4Q17
2017
1Q18
 
 
 
 
 
 
 
Insurance policy income
$
73.0

$
73.0

$
73.1

$
72.7

$
291.8

$
74.1

Net investment income on general account invested assets
10.9

11.2

11.0

11.3

44.4

11.0

Fee revenue and other income
0.2

0.4

0.3

0.4

1.3

0.5

   Total revenues
84.1

84.6

84.4

84.4

337.5

85.6

 
 
 
 
 
 
 
Insurance policy benefits
52.6

50.2

47.5

48.7

199.0

56.5

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

0.2

0.2

0.1

0.6

0.2

Amortization related to operations
4.0

4.0

3.9

4.4

16.3

4.6

Interest expense on investment borrowings
0.2

0.2

0.3

0.2

0.9

0.3

Other operating costs and expenses
27.5

22.0

23.5

25.1

98.1

25.5

   Total benefits and expenses
84.4

76.6

75.4

78.5

314.9

87.1

Adjusted EBIT (4)
$
(0.3
)
$
8.0

$
9.0

$
5.9

$
22.6

$
(1.5
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average liabilities for insurance products (in millions)
1Q17
2Q17
3Q17
4Q17
2017
1Q18
 
 
 
 
 
 
 
SPIAs - mortality based
$
72.6

$
72.7

$
73.6

$
73.1

$
73.0

$
71.8

Health:
 
 
 
 
 
 
Medicare supplement
6.0

5.7

5.6

5.5

5.7

5.3

Other health
4.1

4.1

4.1

4.0

4.1

3.9

Life:
 
 
 
 
 
 
   Interest sensitive
15.8

15.6

15.4

15.3

15.5

15.2

   Non-interest sensitive
708.0

714.9

720.1

726.9

717.5

732.7

Total average liabilities for insurance products, net of reinsurance ceded
$
806.5

$
813.0

$
818.8

$
824.8

$
815.8

$
828.9

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Present value of future profits (in millions)
1Q17
2Q17
3Q17
4Q17
2017
1Q18
 
 
 
 
 
 
 
Balance, beginning of period
$
39.5

$
38.4

$
37.3

$
36.1

$
39.5

$
34.8

   Amortization related to operations
(1.1
)
(1.1
)
(1.2
)
(1.3
)
(4.7
)
(1.1
)
Amounts related to changes in unrealized investment gains (losses) on fixed maturities, available for sale
—

—

—

—

—

—

Balance, end of period
$
38.4

$
37.3

$
36.1

$
34.8

$
34.8

$
33.7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deferred acquisition costs (in millions)
1Q17
2Q17
3Q17
4Q17
2017
1Q18
 
 
 
 
 
 
 
Balance, beginning of period
$
98.6

$
102.6

$
106.0

$
108.3

$
98.6

$
109.5

Deferred acquisition expenses
6.9

6.3

5.0

4.3

22.5

5.8

Amortization related to operations
(2.9
)
(2.9
)
(2.7
)
(3.1
)
(11.6
)
(3.5
)
Balance, end of period
$
102.6

$
106.0

$
108.3

$
109.5

$
109.5

$
111.8

 
 
 
 
 
 
 
 
 
 
 
 
 
 



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
1Q17
2Q17
3Q17
4Q17
2017
1Q18
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
Insurance policy income
$
59.6

$
60.2

$
61.0

$
61.0

$
241.8

$
62.5

Net investment income
10.9

11.2

11.0

11.3

44.4

11.0

Fee revenue and other income
0.2

0.4

0.3

0.4

1.3

0.5

Total revenues
70.7

71.8

72.3

72.7

287.5

74.0

 
 
 
 
 
 
 
Benefits and expenses
 
 
 
 
 
 
Insurance policy benefits
44.6

42.6

40.3

41.7

169.2

49.7

Interest expense
0.2

0.2

0.3

0.2

0.9

0.3

Amortization
3.8

3.8

3.7

4.3

15.6

4.4

Other operating costs and expenses
8.0

7.8

8.2

9.0

33.0

8.5

Total benefits and expenses
56.6

54.4

52.5

55.2

218.7

62.9

Adjusted EBIT from Inforce Business
$
14.1

$
17.4

$
19.8

$
17.5

$
68.8

$
11.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBIT from New Business
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
Insurance policy income
$
13.4

$
12.8

$
12.1

$
11.7

$
50.0

$
11.6

Net investment income
—

—

—

—

—

—

Fee revenue and other income
—

—

—

—

—

—

Total revenues
13.4

12.8

12.1

11.7

50.0

11.6

 
 
 
 
 
 
 
Benefits and expenses
 
 
 
 
 
 
Insurance policy benefits
8.1

7.8

7.4

7.1

30.4

7.0

Interest expense
—

—

—

—

—

—

Amortization
0.2

0.2

0.2

0.1

0.7

0.2

Other operating costs and expenses
19.5

14.2

15.3

16.1

65.1

17.0

Total benefits and expenses
27.8

22.2

22.9

23.3

96.2

24.2

Adjusted EBIT from New Business
$
(14.4
)
$
(9.4
)
$
(10.8
)
$
(11.6
)
$
(46.2
)
$
(12.6
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBIT from Inforce and New Business
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
Insurance policy income
$
73.0

$
73.0

$
73.1

$
72.7

$
291.8

$
74.1

Net investment income
10.9

11.2

11.0

11.3

44.4

11.0

Fee revenue and other income
0.2

0.4

0.3

0.4

1.3

0.5

Total revenues
84.1

84.6

84.4

84.4

337.5

85.6

 
 
 
 
 
 
 
Benefits and expenses
 
 
 
 
 
 
Insurance policy benefits
52.7

50.4

47.7

48.8

199.6

56.7

Interest expense
0.2

0.2

0.3

0.2

0.9

0.3

Amortization
4.0

4.0

3.9

4.4

16.3

4.6

Other operating costs and expenses
27.5

22.0

23.5

25.1

98.1

25.5

Total benefits and expenses
84.4

76.6

75.4

78.5

314.9

87.1

Adjusted EBIT from Inforce and New Business
$
(0.3
)
$
8.0

$
9.0

$
5.9

$
22.6

$
(1.5
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Page 14



CNO Financial Group, Inc.
 
 
 
 
 
 
Long-term care in run-off
 
 
 
 
 
 
Analysis of income (loss) before taxes (in millions)
1Q17
2Q17
3Q17
4Q17
2017
1Q18
 
 
 
 
 
 
 
Insurance policy income
$
4.6

$
4.5

$
4.2

$
4.2

$
17.5

$
4.1

Net investment income on general account invested assets
9.7

10.0

6.8

8.1

34.6

8.4

   Total revenues
14.3

14.5

11.0

12.3

52.1

12.5

 
 
 
 
 
 
 
Insurance policy benefits
13.2

12.0

11.4

10.7

47.3

12.0

Other operating costs and expenses
0.7

0.8

0.6

1.0

3.1

0.5

   Total benefits and expenses
13.9

12.8

12.0

11.7

50.4

12.5

Adjusted EBIT (4)
$
0.4

$
1.7

$
(1.0
)
$
0.6

$
1.7

$
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Health underwriting margins (in millions)
1Q17
2Q17
3Q17
4Q17
2017
1Q18
Long-term care:
 
 
 
 
 
 
   Earned premium
$
4.6

$
4.5

$
4.2

$
4.2

$
17.5

$
4.1

Benefit ratio before interest income on reserves
286.5
%
268.2
%
274.3
%
251.7
%
270.5
%
293.1
%
   Interest-adjusted benefit ratio
128.1
%
104.6
%
99.4
%
82.2
%
104.1
%
117.9
%
Underwriting margin (earned premium plus interest income on reserves less policy benefits)
$
(1.3
)
$
(0.2
)
$
0.1

$
0.7

$
(0.7
)
$
(0.7
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average liabilities for insurance products (in millions)
1Q17
2Q17
3Q17
4Q17
2017
1Q18
Health:
 
 
 
 
 
 
Long-term care
$
560.7

$
573.2

$
579.6

$
576.2

$
572.4

$
562.3

Total average liabilities for insurance products
$
560.7

$
573.2

$
579.6

$
576.2

$
572.4

$
562.3

 
 
 
 
 
 
 



CNO Financial Group, Inc.
 
 
 
 
 
 
Corporate Operations
 
 
 
 
 
 
Analysis of loss before taxes (in millions)
1Q17
2Q17
3Q17
4Q17
2017
1Q18
 
 
 
 
 
 
 
Net investment income (loss):
 
 
 
 
 
 
   General investment portfolio
$
0.9

$
1.4

$
1.4

$
1.9

$
5.6

$
2.2

   Other special-purpose portfolios
9.5

6.0

5.6

8.8

29.9

(1.0
)
Fee revenue and other income
2.4

2.3

1.8

2.0

8.5

1.8

Other operating costs and expenses
(21.7
)
(22.9
)
(23.7
)
(16.0
)
(84.3
)
(18.5
)
Corporate operations, excluding corporate interest expense
(8.9
)
(13.2
)
(14.9
)
(3.3
)
(40.3
)
(15.5
)
Interest expense on corporate debt
(11.5
)
(11.6
)
(11.7
)
(11.7
)
(46.5
)
(11.9
)
Operating loss before taxes
$
(20.4
)
$
(24.8
)
$
(26.6
)
$
(15.0
)
$
(86.8
)
$
(27.4
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 







Page 15



CNO Financial Group, Inc.
 
 
 
 
 
 
Bankers Life
 
 
 
 
 
 
Premiums collected on insurance products (in millions)
1Q17
2Q17
3Q17
4Q17
2017
1Q18
 
 
 
 
 
 
 
Annuities
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed index (first-year)
$
235.3

$
247.2

$
222.6

$
259.6

$
964.7

$
235.4

 
 
 
 
 
 
 
Other fixed interest (first-year)
20.6

15.1

12.9

11.2

59.8

14.5

Other fixed interest (renewal)
1.6

2.0

1.0

1.5

6.1

1.5

  Subtotal - other fixed interest annuities
22.2

17.1

13.9

12.7

65.9

16.0

 
 
 
 
 
 
 
      Total annuities
257.5

264.3

236.5

272.3

1,030.6

251.4

 
 
 
 
 
 
 
Health
 
 
 
 
 
 
 
 
 
 
 
 
 
Medicare supplement (first-year)
17.5

17.6

16.8

17.4

69.3

15.4

Medicare supplement (renewal)
174.2

162.1

160.4

173.4

670.1

172.9

  Subtotal - Medicare supplement
191.7

179.7

177.2

190.8

739.4

188.3

 
 
 
 
 
 
 
Long-term care (first-year)
4.2

4.1

3.8

3.9

16.0

3.7

Long-term care (renewal)
112.8

108.0

103.5

105.0

429.3

106.6

  Subtotal - long-term care
117.0

112.1

107.3

108.9

445.3

110.3

 
 
 
 
 
 
 
Supplemental health (first-year)
1.4

1.3

1.1

1.2

5.0

1.1

Supplemental health (renewal)
4.3

4.3

4.4

4.6

17.6

4.7

  Subtotal - supplemental health
5.7

5.6

5.5

5.8

22.6

5.8

 
 
 
 
 
 
 
Other health (first-year)
0.2

0.2

0.2

0.2

0.8

0.2

Other health (renewal)
1.4

1.3

1.3

1.3

5.3

1.3

  Subtotal - other health
1.6

1.5

1.5

1.5

6.1

1.5

 
 
 
 
 
 
 
    Total health
316.0

298.9

291.5

307.0

1,213.4

305.9

 
 
 
 
 
 
 
Life insurance
 
 
 
 
 
 
 
 
 
 
 
 
 
Traditional (first-year)
20.2

22.1

19.8

20.5

82.6

18.5

Traditional (renewal)
54.1

54.3

53.9

55.0

217.3

55.7

  Subtotal - traditional
74.3

76.4

73.7

75.5

299.9

74.2

 
 
 
 
 
 
 
Interest-sensitive (first-year)
11.7

12.3

11.0

12.4

47.4

10.7

Interest-sensitive (renewal)
28.3

28.7

29.0

29.1

115.1

30.3

  Subtotal - interest-sensitive
40.0

41.0

40.0

41.5

162.5

41.0

 
 
 
 
 
 
 
    Total life insurance
114.3

117.4

113.7

117.0

462.4

115.2

 
 
 
 
 
 
 
Collections on insurance products
 
 
 
 
 
 
 
 
 
 
 
 
 
Total first-year premium collections on insurance products
311.1

319.9

288.2

326.4

1,245.6

299.5

Total renewal premium collections on insurance products
376.7

360.7

353.5

369.9

1,460.8

373.0

 
 
 
 
 
 
 
    Total collections on insurance products
$
687.8

$
680.6

$
641.7

$
696.3

$
2,706.4

$
672.5

 
 
 
 
 
 
 
 
 
 
 
 
 
 



Page 16



CNO Financial Group, Inc.
 
 
 
 
 
 
Washington National
 
 
 
 
 
 
Premiums collected on insurance products (in millions)
1Q17
2Q17
3Q17
4Q17
2017
1Q18
 
 
 
 
 
 
 
Health
 
 
 
 
 
 
 
 
 
 
 
 
 
Medicare supplement (renewal)
$
14.4

$
12.6

$
11.7

$
12.9

$
51.6

$
12.5

 
 
 
 
 
 
 
Supplemental health (first-year)
19.0

18.4

17.8

18.0

73.2

18.3

Supplemental health (renewal)
131.1

128.6

127.0

129.2

515.9

136.9

  Subtotal - supplemental health
150.1

147.0

144.8

147.2

589.1

155.2

 
 
 
 
 
 
 
Other health (first-year)
0.1

—

0.1

0.1

0.3

0.1

Other health (renewal)
0.4

0.4

0.3

0.4

1.5

0.4

  Subtotal - other health
0.5

0.4

0.4

0.5

1.8

0.5

 
 
 
 
 
 
 
    Total health
165.0

160.0

156.9

160.6

642.5

168.2

 
 
 
 
 
 
 
Life insurance
 
 
 
 
 
 
 
 
 
 
 
 
 
Traditional (first-year)
0.2

0.2

0.1

0.2

0.7

0.1

Traditional (renewal)
2.6

2.6

2.5

2.5

10.2

2.5

  Subtotal - traditional
2.8

2.8

2.6

2.7

10.9

2.6

 
 
 
 
 
 
 
Interest-sensitive (first-year)
1.2

1.1

0.9

1.0

4.2

1.2

Interest-sensitive (renewal)
3.9

3.4

3.6

4.0

14.9

3.8

  Subtotal - interest-sensitive
5.1

4.5

4.5

5.0

19.1

5.0

 
 
 
 
 
 
 
    Total life insurance
7.9

7.3

7.1

7.7

30.0

7.6

 
 
 
 
 
 
 
Annuities
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed index (renewal)
0.2

0.1

0.1

0.2

0.6

0.3

 
 
 
 
 
 
 
Other fixed interest (renewal)
—

0.1

0.1

0.1

0.3

0.1

 
 
 
 
 
 
 
      Total annuities
0.2

0.2

0.2

0.3

0.9

0.4

 
 
 
 
 
 
 
Collections on insurance products
 
 
 
 
 
 
 
 
 
 
 
 
 
Total first-year premium collections on insurance products
20.5

19.7

18.9

19.3

78.4

19.7

Total renewal premium collections on insurance products
152.6

147.8

145.3

149.3

595.0

156.5

 
 
 
 
 
 
 
    Total collections on insurance products
$
173.1

$
167.5

$
164.2

$
168.6

$
673.4

$
176.2

 
 
 
 
 
 
 
 
 
 
 
 
 
 



Page 17



CNO Financial Group, Inc.
 
 
 
 
 
 
Colonial Penn
 
 
 
 
 
 
Premiums collected on insurance products (in millions)
1Q17
2Q17
3Q17
4Q17
2017
1Q18
 
 
 
 
 
 
 
Life insurance
 
 
 
 
 
 
 
 
 
 
 
 
 
Traditional (first-year)
$
13.7

$
12.7

$
12.1

$
11.6

$
50.1

$
11.9

Traditional (renewal)
60.2

59.2

60.0

59.9

239.3

62.9

  Subtotal - traditional
73.9

71.9

72.1

71.5

289.4

74.8

 
 
 
 
 
 
 
Interest-sensitive (all renewal)
0.1

—

0.1

—

0.2

—

 
 
 
 
 
 
 
    Total life insurance
74.0

71.9

72.2

71.5

289.6

74.8

 
 
 
 
 
 
 
Health (all renewal)
 
 
 
 
 
 
 
 
 
 
 
 
 
Medicare supplement
0.5

0.5

0.4

0.5

1.9

0.4

 
 
 
 
 
 
 
Other health
—

0.1

—

—

0.1

0.1

 
 
 
 
 
 
 
    Total health
0.5

0.6

0.4

0.5

2.0

0.5

 
 
 
 
 
 
 
Collections on insurance products
 
 
 
 
 
 
 
 
 
 
 
 
 
Total first-year premium collections on insurance products
13.7

12.7

12.1

11.6

50.1

11.9

Total renewal premium collections on insurance products
60.8

59.8

60.5

60.4

241.5

63.4

 
 
 
 
 
 
 
    Total collections on insurance products
$
74.5

$
72.5

$
72.6

$
72.0

$
291.6

$
75.3

 
 
 
 
 
 
 
 
 
 
 
 
 
 



CNO Financial Group, Inc.
 
 
 
 
 
 
Long-term care in run-off
 
 
 
 
 
 
Premiums collected on insurance products (in millions)
1Q17
2Q17
3Q17
4Q17
2017
1Q18
 
 
 
 
 
 
 
Long-term care (renewal)
$
4.6

$
4.4

$
3.9

$
4.0

$
16.9

$
4.1

 
 
 
 
 
 
 
    Total collections on insurance products
$
4.6

$
4.4

$
3.9

$
4.0

$
16.9

$
4.1

 
 
 
 
 
 
 



Page 18



CNO Financial Group, Inc.
 
 
 
 
 
 
First-year collected premiums (in millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Bankers Life
1Q17
2Q17
3Q17
4Q17
2017
1Q18
 
 
 
 
 
 
 
Medicare supplement
$
17.5

$
17.6

$
16.8

$
17.4

$
69.3

$
15.4

Long-term care
4.2

4.1

3.8

3.9

16.0

3.7

Supplemental health and other health
1.6

1.5

1.3

1.4

5.8

1.3

Life
31.9

34.4

30.8

32.9

130.0

29.2

Annuity
255.9

262.3

235.5

270.8

1,024.5

249.9

   Subtotal Bankers Life
311.1

319.9

288.2

326.4

1,245.6

299.5

 
 
 
 
 
 
 
Washington National
 
 
 
 
 
 
 
 
 
 
 
 
 
Supplemental health and other health
19.1

18.4

17.9

18.1

73.5

18.4

Life
1.4

1.3

1.0

1.2

4.9

1.3

Annuity
—

—

—

—

—

—

   Subtotal Washington National
20.5

19.7

18.9

19.3

78.4

19.7

 
 
 
 
 
 
 
Colonial Penn
 
 
 
 
 
 
 
 
 
 
 
 
 
Life
13.7

12.7

12.1

11.6

50.1

11.9

 
 
 
 
 
 
 
Total first-year collected premiums
$
345.3

$
352.3

$
319.2

$
357.3

$
1,374.1

$
331.1

 
 
 
 
 
 
 

CNO Financial Group, Inc.
 
 
 
 
 
 
Life and Health New Annualized Premiums ("NAP") (in millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Bankers Life
1Q17
2Q17
3Q17
4Q17
2017
1Q18
 
 
 
 
 
 
 
Medicare supplement
$
16.1

$
15.4

$
14.4

$
20.0

$
65.9

$
12.9

Long-term care
5.7

5.2

4.6

5.1

20.6

5.0

Supplemental health and other health
1.7

1.4

1.3

1.9

6.3

1.3

Life
18.0

18.2

16.3

16.5

69.0

16.5

   Subtotal Bankers Life
41.5

40.2

36.6

43.5

161.8

35.7

 
 
 
 
 
 
 
Washington National
 
 
 
 
 
 
 
 
 
 
 
 
 
Supplemental health
22.9

23.9

22.8

24.8

94.4

22.0

Life
1.7

1.7

2.0

2.3

7.7

1.8

   Subtotal Washington National
24.6

25.6

24.8

27.1

102.1

23.8

 
 
 
 
 
 
 
Colonial Penn
 
 
 
 
 
 
 
 
 
 
 
 
 
Life
21.8

16.1

16.0

14.8

68.7

18.6

 
 
 
 
 
 
 
Total NAP
$
87.9

$
81.9

$
77.4

$
85.4

$
332.6

$
78.1

 
 
 
 
 
 
 

CNO Financial Group, Inc.
 
 
 
 
 
Total Policies Inforce
 
 
 
 
 
 
 
 
 
 
 
 
1Q17
2Q17
3Q17
4Q17
1Q18
Policies inforce:
 
 
 
 
 
Bankers Life
1,519,474

1,515,445

1,510,160

1,500,573

1,485,235

Washington National
964,642

964,519

963,141

964,138

969,525

Colonial Penn
853,307

849,353

845,135

840,979

841,944

Long-term care in run-off
10,068

9,769

9,473

9,265

9,044

Total policies inforce
3,347,491

3,339,086

3,327,909

3,314,955

3,305,748

Third party policies inforce sold by
 
 
 
 
 
Bankers Life agents
154,005

156,308

155,430

171,421

162,784

Total policies inforce and third party policies
 
 
 
 
 
inforce sold by Bankers Life agents
3,501,496

3,495,394

3,483,339

3,486,376

3,468,532

 
 
 
 
 
 
 
 
 
 
 
 

Page 19



CNO Financial Group, Inc.
 
 
 
 
 
 
Statutory information - consolidated basis (7) (in millions)
1Q17
2Q17
3Q17
4Q17
2017
1Q18 (a)
 
 
 
 
 
 
 
Net gain from operations before interest expense and federal income taxes
$
93.9

$
93.8

$
106.2

$
117.4

$
411.3

$
65.1

Interest expense on surplus debentures held by parent company
12.0

12.2

20.4

12.2

56.8

12.0

 
 
 
 
 
 
 
Net gain from operations before federal income taxes
81.9

81.6

85.8

105.2

354.5

53.1

Federal income tax expense (benefit)
11.3

(13.8
)
(5.1
)
(0.1
)
(7.7
)
1.6

 
 
 
 
 
 
 
Net gain from operations before net realized capital gains (losses)
70.6

95.4

90.9

105.3

362.2

51.5

Net realized capital gains (losses)
(8.6
)
(0.8
)
0.6

(1.1
)
(9.9
)
3.7

 
 
 
 
 
 
 
Net income
$
62.0

$
94.6

$
91.5

$
104.2

$
352.3

$
55.2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Capital and surplus
$
1,904.7

$
1,968.0

$
1,920.7

$
1,904.4

$
1,904.4

$
1,918.9

Asset valuation reserve (AVR)
258.0

248.8

258.3

246.8

246.8

264.7

 
 
 
 
 
 
 
  Capital, surplus and AVR
2,162.7

2,216.8

2,179.0

2,151.2

2,151.2

2,183.6

 
 
 
 
 
 
 
Interest maintenance reserve (IMR)
481.8

482.4

493.2

487.0

487.0

479.4

 
 
 
 
 
 
 
  Total statutory capital, surplus, AVR & IMR
$
2,644.5

$
2,699.2

$
2,672.2

$
2,638.2

$
2,638.2

$
2,663.0

 
 
 
 
 
 
 
 
 
 
 
 
 
 


(a)  Such amounts are preliminary as the statutory basis financial statements of our insurance subsidiaries for 1Q18
will be filed with the respective insurance regulators on or about May 15, 2018.




















Page 20



Notes

(1) Excludes accumulated other comprehensive income. Management believes this non-GAAP measure is useful because it removes the volatility that arises from changes in the unrealized appreciation (depreciation) of our investments.

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

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

(4) 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 related to the agent deferred compensation plan, 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 related to the agent deferred compensation plan, net of taxes; (iv) changes in the valuation allowance for deferred tax assets and other tax items; and (v) 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 21

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