CARMEL, Ind., Oct. 27, 2021 /PRNewswire/ -- CNO Financial
Group, Inc. (NYSE: CNO) today announced that for the quarter ending
September 30, 2021, net income was
$99.8 million, or $0.77 per diluted share, compared to a net income
of $129.2 million, or $0.91 per diluted share, in 3Q20. Net operating
income (1) in 3Q21 was $92.8 million,
or $0.72 per diluted share, compared
to $112.6 million, or $0.79 per diluted share, in 3Q20.
"CNO reported another successful quarter," said Gary C. Bhojwani, chief executive officer. "We
continue to benefit from the outstanding work and customer
commitment of our associates and agents. Our results reflect the
consistent execution of our strategy, particularly within our
direct-to-consumer business. Earnings continued to benefit from
deferral of care within our health lines and very strong
alternative investment performance. We approach the end of the year
on solid footing and remain well-positioned to serve our clients
and communities, and generate value for our
shareholders."
Third Quarter 2021 Highlights
- Earnings per diluted share of $0.77 in 3Q21, down $0.14 compared to 3Q20
- Operating (1) EPS of $0.72 in
3Q21, down $0.07 compared to 3Q20,
consistent with the reduced net favorable impacts from
COVID-19
- Favorable COVID-19 impact on insurance product margins of
$18.0 million after-tax, or
$0.14 per diluted share, in 3Q21,
down $15 million, or $0.09 per diluted share, compared to 3Q20
- Direct-to-consumer life insurance new annualized premiums (NAP)
(4) up 13% from 3Q20, up 38% from 3Q19
- Annuity collected premiums up 17% from 3Q20, up 2% from
3Q19
- Returned $131.3 million to
shareholders in the form of share repurchases ($115.0 million) and dividends ($16.3 million); reduced weighted average share
count by 9% since 3Q20
- Book value per share was $42.11,
up 15% from 3Q20; book value per diluted share, excluding
accumulated other comprehensive income (2), was $26.03, up 11% from 3Q20
- Return on equity (ROE) of 8.4%; operating ROE, as adjusted (6),
of 11.5%
|
FINANCIAL
SUMMARY
|
|
Quarter
End
|
|
(Amounts in millions,
except per share data)
|
|
(Unaudited)
|
|
|
Net operating income,
a non-GAAP(a) financial measure, is used consistently by
CNO's management to evaluate the operating performance of the
Company and is a measure commonly used in the life insurance
industry. It differs from net income primarily because it
excludes certain non-operating items such as realized investment
gains (losses), changes in fair values of embedded derivatives,
equity securities and the liability for a deferred compensation
plan, and certain significant and unusual items included in net
income. Management believes an analysis of net operating
income is important in understanding the profitability and
operating trends of the Company's business. Net income is the
most directly comparable GAAP measure.
|
|
|
Per diluted
share
|
|
|
|
|
|
|
|
|
Quarter
ended
|
|
Quarter
ended
|
|
September
30,
|
|
September
30,
|
|
2021
|
|
|
2020
|
|
%
change
|
|
2021
|
|
|
2020
|
|
%
change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from insurance
products (b)
|
$
|
0.64
|
|
|
|
$
|
0.81
|
|
|
(21)
|
|
|
$
|
83.1
|
|
|
|
$
|
114.5
|
|
|
(27)
|
|
|
Fee income
|
0.02
|
|
|
|
—
|
|
|
—
|
|
|
2.6
|
|
|
|
0.8
|
|
|
225
|
|
|
Investment income not
allocated to product lines (c)
|
0.40
|
|
|
|
0.31
|
|
|
29
|
|
|
50.9
|
|
|
|
43.7
|
|
|
16
|
|
|
Expenses not
allocated to product lines
|
(0.13)
|
|
|
|
(0.10)
|
|
|
(30)
|
|
|
(17.3)
|
|
|
|
(13.7)
|
|
|
(26)
|
|
|
Operating earnings
before taxes
|
0.93
|
|
|
|
1.02
|
|
|
|
|
119.3
|
|
|
|
145.3
|
|
|
|
|
Income tax expense on
operating income
|
(0.21)
|
|
|
|
(0.23)
|
|
|
(9)
|
|
|
(26.5)
|
|
|
|
(32.7)
|
|
|
(19)
|
|
|
Net operating
income (1)
|
0.72
|
|
|
|
0.79
|
|
|
(9)
|
|
|
92.8
|
|
|
|
112.6
|
|
|
(18)
|
|
|
Net realized
investment gains from sales, impairments
and change in allowance for credit losses (net of related
amortization)
|
0.02
|
|
|
|
0.05
|
|
|
|
|
2.2
|
|
|
|
7.7
|
|
|
|
|
Net change in market
value of investments recognized
in earnings
|
(0.04)
|
|
|
|
0.06
|
|
|
|
|
(4.6)
|
|
|
|
8.5
|
|
|
|
|
Fair value changes in
embedded derivative liabilities
(net of related amortization)
|
0.09
|
|
|
|
(0.01)
|
|
|
|
|
10.9
|
|
|
|
(1.6)
|
|
|
|
|
Other
|
—
|
|
|
|
0.05
|
|
|
|
|
0.2
|
|
|
|
6.5
|
|
|
|
|
Non-operating income
before taxes
|
0.07
|
|
|
|
0.15
|
|
|
|
|
8.7
|
|
|
|
21.1
|
|
|
|
|
Income tax expense on
non-operating income
|
(0.02)
|
|
|
|
(0.03)
|
|
|
|
|
(1.7)
|
|
|
|
(4.5)
|
|
|
|
|
Net non-operating
income
|
0.05
|
|
|
|
0.12
|
|
|
|
|
7.0
|
|
|
|
16.6
|
|
|
|
|
Net
income
|
$
|
0.77
|
|
|
|
$
|
0.91
|
|
|
|
|
$
|
99.8
|
|
|
|
$
|
129.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
diluted shares outstanding
|
129.0
|
|
|
|
141.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
GAAP is defined as
accounting principles generally accepted in the United States of
America.
|
|
(b)
|
Income from insurance
products is the sum of the insurance margins of the annuity, health
and life segments, less allocated insurance administrative
expenses. It excludes the fee income segment, excess
investment income, parent company expenses and income taxes.
Insurance margin is management's measure of the profitability of
its annuity, health and life segments' performance and consists of
premiums plus allocated investment income less insurance policy
benefits, interest credited, commissions, advertising expense and
amortization of acquisition costs.
|
|
(c)
|
Investment income not
allocated to product lines is defined as net investment income
less: (i) equity returns credited to policyholder account balances;
(ii) the investment income allocated to our product lines; (iii)
interest expense on notes payable and investment borrowings; and
(iv) certain expenses related to benefit plans that are offset by
special-purpose investment income.
|
|
FINANCIAL SUMMARY
(continued)
|
|
Management vs.
GAAP Measures
|
|
(Dollars in millions,
except per share data)
|
|
(Unaudited)
|
|
|
Shareholders' equity,
excluding accumulated other comprehensive income, and book value
per share, excluding accumulated other comprehensive income, are
non-GAAP measures that are utilized by management to view the
business without the effect of accumulated other comprehensive
income which is primarily attributable to fluctuations in interest
rates associated with fixed maturities, available for sale.
Management views the business in this manner because the Company
has the ability and generally, the intent, to hold investments to
maturity and meaningful trends can be more easily identified
without the fluctuations.
|
|
|
Quarter
ended
|
|
September
30,
|
|
2021
|
|
2020
|
|
|
|
|
|
Trailing twelve
months return on equity (a)
|
8.4
|
%
|
|
10.4
|
%
|
|
Trailing twelve
months operating return on equity, excluding accumulated other
comprehensive income (loss) and net operating loss carryforwards (a
non-GAAP financial measure) (6)
|
11.5
|
%
|
|
12.9
|
%
|
|
Trailing twelve
months operating return, excluding significant items, on equity,
excluding accumulated other comprehensive income (loss) and net
operating loss carryforwards (a non-GAAP financial measure)
(6)
|
11.6
|
%
|
|
11.9
|
%
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity
|
$
|
5,232.9
|
|
|
$
|
5,083.9
|
|
|
Accumulated other
comprehensive income
|
(1,929.7)
|
|
|
(1,801.6)
|
|
|
|
|
|
|
Shareholders' equity,
excluding accumulated other comprehensive income
|
3,303.2
|
|
|
3,282.3
|
|
|
Net operating loss
carryforwards
|
(266.9)
|
|
|
(377.2)
|
|
|
Shareholders' equity,
excluding accumulated other comprehensive income and net operating
loss carryforwards
|
$
|
3,036.3
|
|
|
$
|
2,905.1
|
|
|
|
|
|
|
Book value per
diluted share
|
$
|
41.23
|
|
|
$
|
36.32
|
|
|
Accumulated other
comprehensive income
|
(15.20)
|
|
|
(12.87)
|
|
|
|
|
|
|
Book value per
diluted share, excluding accumulated other comprehensive income (a
non-GAAP financial measure) (2)
|
$
|
26.03
|
|
|
$
|
23.45
|
|
|
|
|
(a)
|
Calculated using
average shareholders' equity for the measurement period.
|
|
INSURANCE
OPERATIONS
|
|
|
Annuity products
accounted for 23 percent of the Company's margin for the
quarter.
|
|
|
Annuity premiums
collected increased 17 percent and annuity account values increased
7 percent in 3Q21 compared to 3Q20.
|
|
|
Health products
accounted for 53 percent of the Company's insurance margin for the
quarter and 66 percent of insurance policy income.
|
|
|
Life products
accounted for 24 percent of the Company's insurance margin for the
quarter and 33 percent of insurance policy income.
|
|
|
Sales of health
products were down 1 percent and sales of life products were up 2
percent in 3Q21 compared to 3Q20.
|
|
|
ANNUITY COLLECTED
PREMIUMS
|
|
(Dollars in
millions)
|
|
(Unaudited)
|
|
|
Quarter ended
September 30,
|
|
|
|
2021
|
|
2020
|
|
%
change
|
|
Annuity collected
premiums
|
$
|
333.3
|
|
|
$
|
285.1
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INSURANCE POLICY
INCOME
|
|
(Dollars in
millions)
|
|
(Unaudited)
|
|
|
Quarter ended
September 30,
|
|
|
|
2021
|
|
2020
|
|
%
change
|
|
Annuity
|
$
|
5.8
|
|
|
$
|
4.3
|
|
|
35
|
|
|
Health
|
414.4
|
|
|
421.4
|
|
|
(2)
|
|
|
Life
|
210.4
|
|
|
202.6
|
|
|
4
|
|
|
Total insurance
policy income
|
$
|
630.6
|
|
|
$
|
628.3
|
|
|
—
|
|
|
|
SALES MEASURED AS
NEW ANNUALIZED PREMIUMS FOR
|
|
LIFE AND HEALTH
PRODUCTS
|
|
(Dollars in
millions)
|
|
(Unaudited)
|
|
|
Quarter ended
September 30,
|
|
|
|
2021
|
|
2020
|
|
%
change
|
|
Health
|
$
|
39.2
|
|
|
$
|
39.4
|
|
|
(1)
|
|
|
Life
|
45.4
|
|
|
44.3
|
|
|
2
|
|
|
Total new
annualized premiums (4)
|
$
|
84.6
|
|
|
$
|
83.7
|
|
|
1
|
|
|
INSURANCE
MARGIN
|
|
(Amounts in millions,
except per share data)
|
|
(Unaudited)
|
|
|
Insurance margin is
management's measure of profitability of its annuity, health and
life segments' performance and consists of premiums plus allocated
investment income less insurance policy benefits, interest
credited, commissions, advertising expense and amortization of
acquisition costs. Income from insurance products is the sum of the
insurance margins of the annuity, health and life segments, less
allocated insurance administrative expenses. It excludes the
fee income segment, investment income not allocated to product
lines, expenses not allocated to product lines and income taxes.
Management believes this information helps provide a better
understanding of the business and a more meaningful analysis of our
operations. Insurance income, a non-GAAP measure, is a component of
net operating income, which is reconciled to net income in the
Financial Summary section above.
|
|
|
Quarter
ended
|
|
September
30,
2021
|
|
% of
insurance
policy
income
|
|
|
September
30,
2020
|
|
% of
insurance
policy
income
|
|
%
change
|
|
Margin
|
|
|
|
|
|
|
|
|
|
|
|
Annuity interest
margin
|
$
|
52.5
|
|
|
|
|
|
$
|
45.3
|
|
|
|
|
16
|
|
|
Life insurance
interest margin
|
1.7
|
|
|
|
|
|
0.7
|
|
|
|
|
143
|
|
|
Total
interest-sensitive margin
|
54.2
|
|
|
|
|
|
46.0
|
|
|
|
|
18
|
|
|
Insurance
margin
|
|
|
|
|
|
|
|
|
|
|
|
Health
|
117.9
|
|
|
28
|
|
|
|
152.2
|
|
|
36
|
|
|
(23)
|
|
|
Life (a)
|
51.5
|
|
|
24
|
|
|
|
46.6
|
|
|
23
|
|
|
11
|
|
|
Total other insurance
margin
|
169.4
|
|
|
27
|
|
|
|
198.8
|
|
|
32
|
|
|
(15)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total insurance
margin
|
223.6
|
|
|
|
|
|
244.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocated
expenses
|
(140.5)
|
|
|
|
|
|
(130.3)
|
|
|
|
|
|
|
Income from
insurance products
|
$
|
83.1
|
|
|
|
|
|
$
|
114.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per diluted
share
|
$
|
0.64
|
|
|
|
|
|
$
|
0.81
|
|
|
|
|
|
|
Weighted average
diluted shares
|
129.0
|
|
|
|
|
|
141.7
|
|
|
|
|
|
|
|
|
(a)
|
Net of $19.7 million
and $14.2 million of non-deferred television advertising expense
related to our direct distribution channel in the 2021 and 2020
periods, respectively.
|
|
|
Total allocated
expenses were $140.5 million, up 8 percent from the year-ago
quarter.
|
|
ANNUITY RESULTS BY
PRODUCT TYPE
|
|
(Dollars in
millions)
|
|
(Unaudited)
|
|
|
Annuity
margin
|
|
Quarter
ended
|
|
September
30,
|
|
2021
|
|
2020
|
|
Fixed index
annuities
|
$
|
42.4
|
|
|
$
|
36.6
|
|
|
Fixed interest
annuities
|
8.6
|
|
|
9.2
|
|
|
Other
annuities
|
1.5
|
|
|
(0.5)
|
|
|
Total
|
$
|
52.5
|
|
|
$
|
45.3
|
|
|
|
Annuity collected
premiums
|
|
Quarter
ended
|
|
September
30,
|
|
2021
|
|
2020
|
|
Annuity collected
premiums
|
$
|
333.3
|
|
|
$
|
285.1
|
|
|
|
|
|
|
|
|
|
|
|
Average net
insurance liabilities (5)
|
|
Quarter
ended
|
|
September
30,
|
|
2021
|
|
2020
|
|
Fixed index
annuities
|
$
|
7,881.9
|
|
|
$
|
7,173.9
|
|
|
Fixed interest
annuities
|
1,856.3
|
|
|
2,041.6
|
|
|
Other
annuities
|
501.6
|
|
|
524.0
|
|
|
Total
|
$
|
10,239.8
|
|
|
$
|
9,739.5
|
|
|
|
|
|
Margin/average net
insurance liabilities (a)
|
|
Quarter
ended
|
|
September
30,
|
|
|
2021
|
|
|
2020
|
|
Fixed index
annuities
|
|
2.15
|
%
|
|
|
2.04
|
%
|
|
Fixed interest
annuities
|
|
1.85
|
%
|
|
|
1.80
|
%
|
|
Other
annuities
|
|
1.20
|
%
|
|
|
(0.38)
|
%
|
|
Total
|
|
2.05
|
%
|
|
|
1.86
|
%
|
|
|
(a) Defined as annualized quarterly annuity margin
divided by average net insurance liabilities (5).
|
|
HEALTH INSURANCE
RESULTS BY PRODUCT TYPE
|
|
(Dollars in
millions)
|
|
(Unaudited)
|
|
|
Health
margin
|
|
Quarter
ended
|
|
September
30,
|
|
2021
|
|
2020
|
|
|
|
Amount
|
|
% of
insurance
policy
income
|
|
Amount
|
|
|
% of
insurance
policy
income
|
|
%
change
|
|
Supplemental
health and other health
|
$
|
50.9
|
|
|
30
|
|
|
$
|
51.1
|
|
|
|
30
|
|
|
—
|
|
|
Medicare
supplement
|
37.3
|
|
|
21
|
|
|
71.7
|
|
|
|
39
|
|
|
(48)
|
|
|
Long-term
care
|
29.7
|
|
|
45
|
|
|
29.4
|
|
|
|
44
|
|
|
1
|
|
|
Total
|
$
|
117.9
|
|
|
28
|
|
|
$
|
152.2
|
|
|
|
36
|
|
|
(23)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health insurance
policy income
|
|
Quarter
ended
|
|
|
|
September
30,
|
|
|
|
2021
|
|
2020
|
|
%
change
|
|
Supplemental
health and other health
|
$
|
171.2
|
|
|
$
|
169.2
|
|
|
1
|
|
|
Medicare
supplement
|
177.4
|
|
|
186.1
|
|
|
(5)
|
|
|
Long-term
care
|
65.8
|
|
|
66.1
|
|
|
—
|
|
|
Total
|
$
|
414.4
|
|
|
$
|
421.4
|
|
|
(2)
|
|
|
|
Health NAP
(4)
|
|
Quarter
ended
|
|
|
|
September
30,
|
|
|
|
2021
|
|
2020
|
|
%
change
|
|
Supplemental
health and other health
|
$
|
22.4
|
|
|
$
|
21.3
|
|
|
5
|
|
|
Medicare
supplement
|
8.0
|
|
|
11.0
|
|
|
(27)
|
|
|
Long-term
care
|
8.8
|
|
|
7.1
|
|
|
24
|
|
|
Total
|
$
|
39.2
|
|
|
$
|
39.4
|
|
|
(1)
|
|
|
LIFE INSURANCE
RESULTS BY PRODUCT TYPE
|
|
(Dollars in
millions)
|
|
(Unaudited)
|
|
|
Life
margin
|
|
Quarter
ended
|
|
|
|
September
30,
|
|
|
|
2021
|
|
2020
|
|
|
|
Amount
|
|
% of
insurance
policy
income
|
|
Amount
|
|
|
% of
insurance
policy
income
|
|
%
change
|
|
Life insurance
interest margin
|
$
|
1.7
|
|
|
|
|
$
|
0.7
|
|
|
|
|
|
143
|
|
|
Life insurance
margin:
|
|
|
|
|
|
|
|
|
|
|
|
Traditional
life
|
33.2
|
|
|
20
|
|
|
29.4
|
|
|
|
18
|
|
|
13
|
|
|
Interest sensitive
life
|
18.3
|
|
|
43
|
|
|
17.2
|
|
|
|
43
|
|
|
6
|
|
|
Subtotal
|
51.5
|
|
|
24
|
|
|
46.6
|
|
|
|
23
|
|
|
11
|
|
|
Total
margin
|
$
|
53.2
|
|
|
|
|
$
|
47.3
|
|
|
|
|
|
12
|
|
|
|
Life insurance
policy income
|
|
Quarter
ended
|
|
|
|
September
30,
|
|
|
|
2021
|
|
2020
|
|
%
change
|
|
Traditional
life
|
$
|
168.1
|
|
|
$
|
162.5
|
|
|
3
|
|
|
Interest sensitive
life
|
42.3
|
|
|
40.1
|
|
|
5
|
|
|
Total
|
$
|
210.4
|
|
|
$
|
202.6
|
|
|
4
|
|
|
|
Life NAP
(4)
|
|
Quarter
ended
|
|
|
|
September
30,
|
|
|
|
2021
|
|
2020
|
|
%
change
|
|
Traditional
life
|
$
|
38.2
|
|
|
$
|
37.7
|
|
|
1
|
|
|
Interest sensitive
life
|
7.2
|
|
|
6.6
|
|
|
9
|
|
|
Total
|
$
|
45.4
|
|
|
$
|
44.3
|
|
|
2
|
|
|
|
|
|
Average net
insurance liabilities (5) and interest margin
|
|
|
|
Quarter
ended
|
|
|
|
September
30,
|
|
|
|
2021
|
|
2020
|
|
%
change
|
|
Interest sensitive
life products
|
$
|
983.8
|
|
|
$
|
926.7
|
|
|
6
|
|
|
Interest
margin/average net insurance liabilities (5)
|
0.69
|
%
|
|
0.30
|
%
|
|
130
|
|
|
QUARTERLY AVERAGE
EXCLUSIVE PRODUCING AGENTS
|
|
|
Average Exclusive
Producing Agent Count
|
|
Quarter
ended
|
|
|
|
September
30,
|
|
%
|
|
2021
|
|
2020
|
|
change
|
|
Consumer
|
|
|
|
|
|
|
Field agents (a)
(c)
|
4,168
|
|
|
4,448
|
|
|
(6)
|
|
|
Tele-sales
agents
|
235
|
|
|
239
|
|
|
(2)
|
|
|
Total
agents
|
4,403
|
|
|
4,687
|
|
|
(6)
|
|
|
Registered agents (b)
(c)
|
646
|
|
|
618
|
|
|
5
|
|
|
Worksite (a) (c)
|
229
|
|
|
242
|
|
|
(5)
|
|
|
|
|
____________________
|
|
(a)
|
Producing agents are
exclusive agents that have submitted at least one policy in the
month.
|
|
(b)
|
Registered agents are
dually licensed as insurance agents and financial representatives
who
can buy and sell securities for clients, and/or investment advisors
who can provide ongoing
investment advice for clients.
|
|
(c)
|
Agent counts
represent the average of the last 3 months.
|
|
INVESTMENTS
|
|
INVESTMENT INCOME
NOT ALLOCATED TO PRODUCT LINES
|
|
(Dollars in millions,
except per share data)
|
|
|
Management uses
investment income not allocated to product lines as the measure to
evaluate the performance of the investment segment. It is
defined as net investment income less the investment income
allocated to our product segments and interest expense on
debt. We also view investment income not allocated to product
lines per diluted share as an important and useful measure to
evaluate performance of the investment segment as it takes into
consideration our share repurchase program.
|
|
|
Quarter ended
September 30,
|
|
|
|
2021
|
|
2020
|
|
%
change
|
|
Net investment
income
|
$
|
308.2
|
|
|
$
|
343.5
|
|
|
(10)
|
|
|
Allocated to product
lines:
|
|
|
|
|
|
|
Annuity
|
(115.5)
|
|
|
(115.6)
|
|
|
—
|
|
|
Health
|
(72.2)
|
|
|
(70.9)
|
|
|
2
|
|
|
Life
|
(36.4)
|
|
|
(35.2)
|
|
|
3
|
|
|
Equity returns
credited to policyholder account balances
|
(7.2)
|
|
|
(46.0)
|
|
|
(84)
|
|
|
Amounts allocated
to product lines and credited to policyholder account
balances
|
(231.3)
|
|
|
(267.7)
|
|
|
(14)
|
|
|
Amount related to
variable interest entities and other non-operating items
|
(7.1)
|
|
|
(9.8)
|
|
|
(28)
|
|
|
Interest expense on
corporate debt
|
(15.6)
|
|
|
(13.6)
|
|
|
15
|
|
|
Interest expense on
investment borrowings
|
(2.3)
|
|
|
(3.4)
|
|
|
(32)
|
|
|
Less amounts credited
to deferred compensation plans (offsetting investment
income)
|
(1.0)
|
|
|
(5.3)
|
|
|
(81)
|
|
|
Total
adjustments
|
(26.0)
|
|
|
(32.1)
|
|
|
|
|
Investment income
not allocated to product lines
|
$
|
50.9
|
|
|
$
|
43.7
|
|
|
16
|
|
|
|
|
|
|
|
|
Per diluted
share
|
$
|
0.40
|
|
|
$
|
0.31
|
|
|
|
|
INVESTMENT
PORTFOLIO
|
|
(Dollars in
millions)
|
|
|
The composition of
the investment portfolio at September 30, 2021 is as
follows:
|
|
|
$
|
|
% of
total
|
|
Fixed maturities,
available for sale, at fair value
|
$
|
24,142.0
|
|
|
86
|
|
|
Equity securities at
fair value
|
146.4
|
|
|
1
|
|
|
Mortgage
loans
|
1,211.0
|
|
|
4
|
|
|
Policy
loans
|
119.7
|
|
|
—
|
|
|
Trading
securities
|
243.6
|
|
|
1
|
|
|
Investments held by
variable interest entities
|
1,221.3
|
|
|
4
|
|
|
Other invested
assets
|
1,172.6
|
|
|
4
|
|
|
Total investment
portfolio
|
$
|
28,256.6
|
|
|
100
|
|
|
Fixed maturities,
available for sale, at amortized cost by asset class as of
September 30, 2021 are as follows:
|
|
|
Investment
grade
|
|
Below
investment
grade
|
|
Total
|
|
Corporate
securities
|
$
|
12,231.6
|
|
|
$
|
777.9
|
|
|
$
|
13,009.5
|
|
|
United States
Treasury securities and obligations of the
United States government and agencies
|
165.3
|
|
|
—
|
|
|
165.3
|
|
|
States and political
subdivisions
|
2,527.0
|
|
|
12.5
|
|
|
2,539.5
|
|
|
Foreign
governments
|
83.0
|
|
|
—
|
|
|
83.0
|
|
|
Asset-backed
securities
|
887.5
|
|
|
101.3
|
|
|
988.8
|
|
|
Agency residential
mortgage-backed securities
|
40.7
|
|
|
—
|
|
|
40.7
|
|
|
Non-agency
residential mortgage-backed securities
|
940.4
|
|
|
820.6
|
|
(a)
|
1,761.0
|
|
|
Collateralized loan
obligations
|
509.3
|
|
|
13.1
|
|
|
522.4
|
|
|
Commercial
mortgage-backed securities
|
1,951.3
|
|
|
89.5
|
|
|
2,040.8
|
|
|
|
|
|
|
|
|
Total
|
$
|
19,336.1
|
|
|
$
|
1,814.9
|
|
|
$
|
21,151.0
|
|
|
|
____________________
|
|
(a)
|
Certain structured
securities rated below investment grade by Nationally Recognized
Statistical Rating Organizations may
be assigned a NAIC 1 or NAIC 2 designation based on the cost basis
of the security relative to estimated recoverable amounts
as determined by the National Association of Insurance
Commissioners (NAIC).
|
|
|
The fair value of
CNO's available for sale fixed maturity portfolio was $24.1 billion
compared with an amortized cost of $21.2 billion. Net
unrealized gains were comprised of gross unrealized gains of $3.0
billion and gross unrealized losses of $32 million. The
allowance for credit losses was $5.4 million at September 30,
2021.
|
|
|
At amortized cost and
fair value, 91 percent and 92 percent of fixed maturities,
available for sale, were rated "investment grade",
respectively.
|
|
|
Acquisitions of fixed
maturity investments during the quarter totaled $1.5 billion.
Comparable information for acquisitions of fixed maturity
investments is as follows:
|
|
|
Fixed maturity
acquisitions
|
|
Quarter
ended
|
|
September
30,
|
|
2021
|
|
2020
|
|
Total fixed maturity
acquisitions (dollars in millions)
|
$
|
1,512.5
|
|
|
$
|
1,208.7
|
|
|
Annual effective
yield
|
3.09
|
|
|
3.26
|
|
|
Average
rating
|
BBB+
|
|
|
BBB+
|
|
|
Average life (in
years)
|
8.4
|
|
|
5.8
|
|
Non-Operating Items
Net realized investment gains in 3Q21 were $2.2 million (net of related amortization)
including the unfavorable change in the allowance for credit losses
of $1.4 million which was recorded in
earnings. Net realized investment gains in 3Q20 were
$7.7 million (net of related
amortization) including the favorable change in the allowance for
credit losses of $8.1 million which
was recorded in earnings.
During 3Q21 and 3Q20, we recognized an increase (decrease) in
earnings of ($4.6) million and
$8.5 million, respectively, due to
the net change in market value of investments recognized in
earnings.
During 3Q21 and 3Q20, we recognized an increase (decrease) in
earnings of $10.9 million and
($1.6) 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 388% at September 30,
2021, reflecting estimated 3Q21 statutory operating income
of $86 million (and $201 million in the first nine months of 2021)
and the payment of insurance company dividends to the holding
company of $148.7 million during 3Q21
(and $328.3 million in the first nine
months of 2021).
During the third quarter of 2021, we repurchased $115.0 million of common stock under our
securities repurchase program. We repurchased 4.9 million
common shares at an average cost of $23.42 per share. As of September 30, 2021, we had 124.3 million shares
outstanding and had authority to repurchase up to an additional
$466.9 million of our common
stock. During 3Q21, dividends paid on common stock totaled
$16.3 million.
Unrestricted cash and investments held by our holding company
were $366 million at September 30, 2021, compared to $388 million at December
31, 2020.
Book value per common share was $42.11 at September 30,
2021 compared to $40.54 at
December 31, 2020. Book value per diluted share,
excluding accumulated other comprehensive income (2), was
$26.03 at September 30, 2021, compared to $23.95 at December
31, 2020.
The debt-to-capital ratio was 17.8 percent and 17.2 percent at
September 30, 2021 and December 31, 2020, respectively. Our
debt-to-total capital ratio, excluding accumulated other
comprehensive income (3) was 25.6 percent at both September 30, 2021 and December 31,
2020.
Return on equity for the trailing four quarters ended
September 30, 2021 and 2020, was 8.4%
and 10.4%, respectively. Operating return, excluding
significant items, on equity, excluding accumulated other
comprehensive income and net operating loss carryforwards (6) for
the trailing four quarters ended September
30, 2021 and 2020, was 11.6% and 11.9%, respectively.
In this news release, CNO includes non-GAAP measures to enhance
investors' understanding of management's view of the
business. The non-GAAP measures are not a substitute for
GAAP, but rather a supplement to increase transparency by providing
broader perspective. CNO's definitions of non-GAAP measures
may differ from other companies' definitions. More detailed
information including various GAAP and non-GAAP measurements are
located at CNOinc.com in the Investors section under SEC
Filings.
CAUTION REGARDING FORWARD-LOOKING STATEMENTS:
This press release may contain forward-looking statements within
the meaning of federal securities laws. These prospective
statements reflect management's current expectations, but are not
guarantees of future performance. Accordingly, please refer
to CNO's cautionary statement regarding forward-looking statements,
and the business environment in which the Company operates,
contained in the Company's Form 10-K for the year ended
December 31, 2020 and any subsequent
Form 10-Q on file with the Securities and Exchange Commission and
on the Company's website at CNOinc.com in the Investors section.
CNO specifically disclaims any obligation to update or revise
any forward-looking statement because of new information, future
developments or otherwise.
EARNINGS RELEASE CONFERENCE CALL WEBCAST:
The Company will host a conference call to discuss results on
October 28, 2021 at 11:00 a.m. Eastern Time. During the call,
we will be referring to a presentation that will be available at
the Investors section of the company's website.
To participate by dial-in, please register at
http://www.directeventreg.com/registration/event/1989231. Upon
registering, you will be provided with call details and a
registrant ID used to track attendance on the conference call.
Reminders will also be sent to registered participants via
email.
For those investors who prefer to listen to the call online, we
will be broadcasting the call live via webcast. The event can
be accessed through the Investors section of the company's website:
ir.CNOinc.com. Participants should go to the website at least
15 minutes before the event to register and download any necessary
audio software.
ABOUT CNO FINANCIAL GROUP
CNO Financial Group, Inc. (NYSE: CNO) secures the future of
middle-income America. CNO provides life and health
insurance, annuities, financial services, and workforce benefits
solutions through our family of brands, including Bankers Life,
Colonial Penn and Washington National. Our customers work
hard to save for the future, and we help protect their health,
income and retirement needs with 3.2 million policies and
$35 billion in total assets. Our
3,400 associates, 4,600 exclusive agents and 4,000 independent
partner agents guide individuals, families and businesses through a
lifetime of financial decisions. For more information, visit
CNOinc.com.
|
CNO FINANCIAL
GROUP, INC. AND SUBSIDIARIES
|
|
CONSOLIDATED
BALANCE SHEET
|
|
(Dollars in
millions)
|
|
(unaudited)
|
|
|
September
30,
2021
|
|
December
31,
2020
|
|
ASSETS
|
|
|
|
|
Investments:
|
|
|
|
|
Fixed maturities,
available for sale, at fair value (net of allowance for credit
losses: September 30, 2021 - $5.4 and December 31, 2020 -
$2.2; amortized cost: September 30, 2021 - $21,151.0 and
December 31, 2020 - $19,921.1)
|
$
|
24,142.0
|
|
|
$
|
23,383.6
|
|
|
Equity securities at
fair value
|
146.4
|
|
|
151.2
|
|
|
Mortgage loans (net of
allowance for credit losses: September 30, 2021 - $7.3 and
December 31, 2020 - $11.8)
|
1,211.0
|
|
|
1,358.7
|
|
|
Policy
loans
|
119.7
|
|
|
123.0
|
|
|
Trading
securities
|
243.6
|
|
|
232.0
|
|
|
Investments held by
variable interest entities (net of allowance for credit losses:
September 30, 2021 - $2.5 and December 31, 2020 - $15.1;
amortized cost: September 30, 2021 - $1,225.3 and
December 31, 2020 - $1,211.3)
|
1,221.3
|
|
|
1,189.4
|
|
|
Other invested
assets
|
1,172.6
|
|
|
1,146.4
|
|
|
Total
investments
|
28,256.6
|
|
|
27,584.3
|
|
|
Cash and cash
equivalents - unrestricted
|
742.1
|
|
|
937.8
|
|
|
Cash and cash
equivalents held by variable interest entities
|
70.5
|
|
|
54.1
|
|
|
Accrued investment
income
|
218.1
|
|
|
205.8
|
|
|
Present value of
future profits
|
229.0
|
|
|
249.4
|
|
|
Deferred acquisition
costs
|
1,082.7
|
|
|
1,027.8
|
|
|
Reinsurance
receivables (net of allowance for credit losses: September 30,
2021 - $4.0 and December 31, 2020 - $4.0)
|
4,409.7
|
|
|
4,584.3
|
|
|
Income tax assets,
net
|
145.7
|
|
|
199.4
|
|
|
Assets held in
separate accounts
|
4.5
|
|
|
4.2
|
|
|
Other
assets
|
554.8
|
|
|
492.8
|
|
|
Total
assets
|
$
|
35,713.7
|
|
|
$
|
35,339.9
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
|
Liabilities:
|
|
|
|
|
Liabilities for
insurance products:
|
|
|
|
|
Policyholder
account liabilities
|
$
|
12,992.0
|
|
|
$
|
12,540.6
|
|
|
Future policy
benefits
|
11,699.7
|
|
|
11,744.2
|
|
|
Liability for
policy and contract claims
|
512.3
|
|
|
561.8
|
|
|
Unearned and
advanced premiums
|
247.5
|
|
|
252.6
|
|
|
Liabilities
related to separate accounts
|
4.5
|
|
|
4.2
|
|
|
Other
liabilities
|
995.3
|
|
|
821.8
|
|
|
Investment
borrowings
|
1,741.1
|
|
|
1,642.5
|
|
|
Borrowings related to
variable interest entities
|
1,151.4
|
|
|
1,151.8
|
|
|
Notes payable – direct
corporate obligations
|
1,137.0
|
|
|
1,136.2
|
|
|
Total
liabilities
|
30,480.8
|
|
|
29,855.7
|
|
|
Commitments and
Contingencies
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
|
Common stock ($0.01 par
value, 8,000,000,000 shares authorized, shares issued and
outstanding: September 30, 2021 – 124,269,869;
December 31, 2020 – 135,279,119)
|
1.2
|
|
|
1.3
|
|
|
Additional paid-in
capital
|
2,274.6
|
|
|
2,544.5
|
|
|
Accumulated other
comprehensive income
|
1,929.7
|
|
|
2,186.1
|
|
|
Retained
earnings
|
1,027.4
|
|
|
752.3
|
|
|
Total
shareholders' equity
|
5,232.9
|
|
|
5,484.2
|
|
|
Total
liabilities and shareholders' equity
|
$
|
35,713.7
|
|
|
$
|
35,339.9
|
|
|
CNO FINANCIAL
GROUP, INC. AND SUBSIDIARIES
|
|
CONSOLIDATED
STATEMENT OF OPERATIONS
|
|
(Dollars in millions,
except per share data)
|
|
(unaudited)
|
|
|
Three months
ended
|
|
Nine months
ended
|
|
September
30,
|
|
September
30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Revenues:
|
|
|
|
|
|
|
|
|
Insurance policy
income
|
$
|
630.6
|
|
|
$
|
628.3
|
|
|
$
|
1,893.5
|
|
|
$
|
1,882.3
|
|
|
Net investment
income:
|
|
|
|
|
|
|
|
|
General account
assets
|
289.5
|
|
|
276.9
|
|
|
854.3
|
|
|
788.9
|
|
|
Policyholder
and other special-purpose portfolios
|
18.7
|
|
|
66.6
|
|
|
171.3
|
|
|
43.0
|
|
|
Realized investment
gains (losses):
|
|
|
|
|
|
|
|
|
Net realized
investment gains (losses)
|
(.9)
|
|
|
8.2
|
|
|
12.3
|
|
|
(24.0)
|
|
|
Change in
allowance for credit losses and other-than-temporary
impairment losses
|
(1.4)
|
|
|
8.1
|
|
|
13.9
|
|
|
(31.4)
|
|
|
Total realized gains
(losses)
|
(2.3)
|
|
|
16.3
|
|
|
26.2
|
|
|
(55.4)
|
|
|
Fee revenue and other
income
|
31.8
|
|
|
25.4
|
|
|
102.1
|
|
|
86.1
|
|
|
Total
revenues
|
968.3
|
|
|
1,013.5
|
|
|
3,047.4
|
|
|
2,744.9
|
|
|
Benefits and
expenses:
|
|
|
|
|
|
|
|
|
Insurance policy
benefits
|
524.8
|
|
|
560.7
|
|
|
1,641.3
|
|
|
1,591.8
|
|
|
Interest
expense
|
23.7
|
|
|
23.7
|
|
|
71.8
|
|
|
85.5
|
|
|
Amortization
|
57.9
|
|
|
53.5
|
|
|
200.2
|
|
|
192.2
|
|
|
Other operating costs
and expenses
|
233.9
|
|
|
209.2
|
|
|
714.5
|
|
|
674.6
|
|
|
Total benefits and
expenses
|
840.3
|
|
|
847.1
|
|
|
2,627.8
|
|
|
2,544.1
|
|
|
Income before income
taxes
|
128.0
|
|
|
166.4
|
|
|
419.6
|
|
|
200.8
|
|
|
Income tax expense
(benefit):
|
|
|
|
|
|
|
|
|
Tax expense on period
income
|
28.2
|
|
|
37.2
|
|
|
94.4
|
|
|
44.8
|
|
|
Valuation allowance
for deferred tax assets and other tax items
|
—
|
|
|
—
|
|
|
—
|
|
|
(34.0)
|
|
|
Net income
|
$
|
99.8
|
|
|
$
|
129.2
|
|
|
$
|
325.2
|
|
|
$
|
190.0
|
|
|
Earnings per common
share:
|
|
|
|
|
|
|
|
|
Basic:
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding
|
126,429,000
|
|
|
140,900,000
|
|
|
130,528,000
|
|
|
143,384,000
|
|
|
Net income
|
$
|
.79
|
|
|
$
|
.92
|
|
|
$
|
2.49
|
|
|
$
|
1.33
|
|
|
Diluted:
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding
|
129,018,000
|
|
|
141,730,000
|
|
|
133,162,000
|
|
|
144,090,000
|
|
|
Net income
|
$
|
.77
|
|
|
$
|
.91
|
|
|
$
|
2.44
|
|
|
$
|
1.32
|
|
|
NOTES
|
|
(1)
|
Management believes
that an analysis of Net income applicable to common stock before:
(i) net realized investment gains or losses from sales, impairments
and the change in allowance for credit losses, net of related
amortization and taxes; (ii) net change in market value of
investments recognized in earnings, net of taxes; (iii) fair value
changes due to fluctuations in the interest rates used to discount
embedded derivative liabilities related to our fixed index
annuities, net of related amortization and taxes; (iv) fair value
changes related to the agent deferred compensation plan, net of
taxes; (v) loss on extinguishment of debt, net of taxes; (vi)
changes in the valuation allowance for deferred tax assets and
other tax items; and (viii) 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. 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,
CNOinc.com.
|
|
(2)
|
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. 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.
|
|
(3)
|
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)
|
Measured by new
annualized premiums for life and health products, which includes
10% of single premium whole life deposits and 100% of all other
premiums (excluding annuities). Sales of third-party products
are excluded.
|
|
(5)
|
Net insurance
liabilities are equal to total insurance liabilities less: (i)
amounts related to reinsured business; (ii) deferred acquisition
costs; (iii) present value of future profits; and (iv) the value of
unexpired options credited to insurance liabilities.
|
|
(6)
|
The following
summarizes the calculations of: (i) operating return on equity,
excluding accumulated other comprehensive income (loss) and net
operating loss carryforwards (a non-GAAP financial measure); (ii)
operating return, excluding significant items, on equity, excluding
accumulated other comprehensive income (loss) and net operating
loss carryforwards (a non-GAAP financial measure); and (iii) return
on equity are as follows (dollars in millions):
|
|
|
|
Trailing twelve
months ended
|
|
|
|
3Q21
|
|
3Q20
|
|
Net operating
income
|
$
|
343.1
|
|
|
$
|
354.9
|
|
|
|
|
|
|
|
|
Net operating income,
excluding significant items
|
$
|
348.6
|
|
|
$
|
329.3
|
|
|
|
|
|
|
|
|
Net income
|
$
|
437.0
|
|
|
$
|
468.0
|
|
|
|
|
|
|
|
|
Average common
equity, excluding accumulated other
|
|
|
|
|
comprehensive income
(loss) and net operating loss
|
|
|
|
|
carryforwards (a
non-GAAP financial measure)
|
$
|
2,995.5
|
|
|
$
|
2,760.6
|
|
|
|
|
|
|
|
|
Average common
shareholders' equity
|
$
|
5,206.8
|
|
|
$
|
4,498.2
|
|
|
|
|
|
|
|
|
Operating return on
equity, excluding accumulated other
|
|
|
|
|
comprehensive income
(loss) and net operating loss
|
|
|
|
|
carryforwards (a
non-GAAP financial measure)
|
11.5
|
%
|
|
12.9
|
%
|
|
|
|
|
|
|
|
Operating return,
excluding significant items, on equity, excluding
|
|
|
|
|
accumulated other
comprehensive income (loss) and net
|
|
|
|
|
operating loss
carryforwards (a non-GAAP financial measure)
|
11.6
|
%
|
|
11.9
|
%
|
|
|
|
|
|
|
|
Return on
equity
|
8.4
|
%
|
|
10.4
|
%
|
|
The following
summarizes: (i) operating earnings; (ii) significant items; (iii)
operating earnings, excluding significant items; and (iv) net
income (loss) (dollars in millions):
|
|
|
|
|
|
|
|
|
|
Net
operating
|
|
|
|
|
|
|
|
|
|
|
Net
operating
|
|
income,
|
|
|
|
|
|
|
|
|
|
|
income,
|
|
excluding
|
|
|
|
Net
|
|
|
|
|
|
|
excluding
|
|
significant
|
|
|
|
income (loss)
-
|
|
|
Net
operating
|
|
Significant
|
|
significant
|
|
items -
trailing
|
|
Net
|
|
trailing
|
|
|
income
|
|
items
|
|
items (a)
|
|
four
quarters
|
|
income
(loss)
|
|
four
quarters
|
|
4Q19
|
|
$
|
78.6
|
|
|
$
|
(7.9)
|
|
(b)
|
$
|
70.7
|
|
|
$
|
282.1
|
|
|
$
|
278.0
|
|
|
$
|
409.4
|
|
|
1Q20
|
|
84.3
|
|
|
—
|
|
|
84.3
|
|
|
300.6
|
|
|
(21.2)
|
|
|
336.4
|
|
|
2Q20
|
|
79.4
|
|
|
(17.7)
|
|
(c)
|
61.7
|
|
|
285.9
|
|
|
82.0
|
|
|
380.8
|
|
|
3Q20
|
|
112.6
|
|
|
—
|
|
|
112.6
|
|
|
329.3
|
|
|
129.2
|
|
|
468.0
|
|
|
4Q20
|
|
86.0
|
|
|
(6.4)
|
|
(d)
|
79.6
|
|
|
338.2
|
|
|
111.8
|
|
|
301.8
|
|
|
1Q21
|
|
75.2
|
|
|
6.1
|
|
(e)
|
81.3
|
|
|
335.2
|
|
|
147.4
|
|
|
470.4
|
|
|
2Q21
|
|
89.1
|
|
|
3.5
|
|
(f)
|
92.6
|
|
|
366.1
|
|
|
78.0
|
|
|
466.4
|
|
|
3Q21
|
|
92.8
|
|
|
2.3
|
|
(g)
|
95.1
|
|
|
348.6
|
|
|
99.8
|
|
|
437.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) See note
(7) for additional information.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(b) Comprised
of: (i) $10.0 million of unfavorable adjustments arising from our
comprehensive annual actuarial review of assumptions;
(ii)
$20.0 million of the net favorable
impact from legal and regulatory matters; and (iii) an increase in
tax expense of $2.1 million.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(c) Comprised
of: (i) $45.9 million of net favorable adjustments arising from our
review of actuarial assumptions; (ii) $23.5 million
unfavorable impact related to
regulatory matters; and (iii) an increase in tax expense of $4.7
million.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(d) Comprised
of: (i) $11.8 million of net favorable adjustments arising from our
review of actuarial assumptions; (ii) $3.7 million
unfavorable
impact related to asset impairments;
and (iii) an increase in tax expense of $1.7 million.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(e) Comprised
of: (i) $5.3 million from legal and regulatory matters; (ii) $2.5
million of transaction expenses related to the previously
announced acquisition of DirectPath,
LLC; and (iii) a decrease in tax expense of $1.7
million.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(f) Comprised
of: (i) $4.5 million from legal and regulatory matters; and (ii) a
decrease in tax expense of $1.0 million.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(g) Comprised
of: (i) $3.0 million from legal and regulatory matters; and (ii) a
decrease in tax expense of $.7 million.
|
|
A reconciliation of
pre-tax operating earnings (a non-GAAP financial measure) to net
income (loss) is as follows (dollars in millions):
|
|
|
|
|
Twelve months
ended
|
|
|
|
3Q21
|
|
3Q20
|
|
Pre-tax operating
earnings (a non-GAAP financial measure)
|
$
|
442.6
|
|
|
$
|
453.3
|
|
|
Income tax
expense
|
(99.5)
|
|
|
(98.4)
|
|
|
Net operating
income
|
343.1
|
|
|
354.9
|
|
|
Non-operating
items:
|
|
|
|
|
Net realized
investment gains (losses) from sales, impairments and change in
allowance for
credit losses, net of related amortization
|
42.7
|
|
|
(36.6)
|
|
|
Net change in market
value of investments recognized in earnings
|
.7
|
|
|
(11.3)
|
|
|
Fair value changes in
embedded derivative liabilities, net of related
amortization
|
64.4
|
|
|
(82.0)
|
|
|
Fair value changes
related to the agent deferred compensation plan
|
10.1
|
|
|
(10.7)
|
|
|
Other
|
2.6
|
|
|
(4.5)
|
|
|
Non-operating income
(loss) before taxes
|
120.5
|
|
|
(145.1)
|
|
|
Income tax (expense)
benefit:
|
|
|
|
|
On
non-operating income (loss)
|
(26.6)
|
|
|
30.5
|
|
|
Valuation allowance for deferred tax assets and other tax
items
|
—
|
|
|
227.7
|
|
|
Net non-operating
income
|
93.9
|
|
|
113.1
|
|
|
Net income
|
$
|
437.0
|
|
|
$
|
468.0
|
|
|
|
|
|
|
|
|
A reconciliation of
consolidated capital, excluding accumulated other comprehensive
income (loss) and net operating loss carryforwards (a non-GAAP
financial measure) to common shareholders' equity, is as follows
(dollars in millions):
|
|
|
|
|
1Q19
|
|
2Q19
|
|
3Q19
|
|
4Q19
|
|
Consolidated capital,
excluding accumulated other comprehensive
|
|
|
|
|
|
|
|
|
income (loss) and net
operating loss carryforwards
|
|
|
|
|
|
|
|
|
(a non-GAAP financial
measure)
|
$
|
2,703.4
|
|
|
$
|
2,702.9
|
|
|
$
|
2,685.0
|
|
|
$
|
2,761.9
|
|
|
Net operating loss
carryforwards
|
479.6
|
|
|
451.1
|
|
|
425.4
|
|
|
542.6
|
|
|
Accumulated other
comprehensive income
|
654.9
|
|
|
1,098.2
|
|
|
1,442.9
|
|
|
1,372.5
|
|
|
Common shareholders'
equity
|
$
|
3,837.9
|
|
|
$
|
4,252.2
|
|
|
$
|
4,553.3
|
|
|
$
|
4,677.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1Q20
|
|
2Q20
|
|
3Q20
|
|
4Q20
|
|
Consolidated capital,
excluding accumulated other comprehensive
|
|
|
|
|
|
|
|
|
income (loss) and net
operating loss carryforwards
|
|
|
|
|
|
|
|
|
(a non-GAAP financial
measure)
|
$
|
2,701.2
|
|
|
$
|
2,784.2
|
|
|
$
|
2,905.1
|
|
|
$
|
2,956.2
|
|
|
Net operating loss
carryforwards
|
469.4
|
|
|
426.8
|
|
|
377.2
|
|
|
341.9
|
|
|
Accumulated other
comprehensive income
|
595.2
|
|
|
1,520.2
|
|
|
1,801.6
|
|
|
2,186.1
|
|
|
Common shareholders'
equity
|
$
|
3,765.8
|
|
|
$
|
4,731.2
|
|
|
$
|
5,083.9
|
|
|
$
|
5,484.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1Q21
|
|
2Q21
|
|
3Q21
|
|
|
|
Consolidated capital,
excluding accumulated other comprehensive
|
|
|
|
|
|
|
|
|
income (loss) and net
operating loss carryforwards
|
|
|
|
|
|
|
|
|
(a non-GAAP financial
measure)
|
$
|
3,019.5
|
|
|
$
|
3,035.6
|
|
|
$
|
3,036.3
|
|
|
|
|
Net operating loss
carryforwards
|
323.1
|
|
|
292.9
|
|
|
266.9
|
|
|
|
|
Accumulated other
comprehensive income
|
1,518.1
|
|
|
1,995.5
|
|
|
1,929.7
|
|
|
|
|
Common shareholders'
equity
|
$
|
4,860.7
|
|
|
$
|
5,324.0
|
|
|
$
|
5,232.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A reconciliation of
consolidated capital, excluding accumulated other comprehensive
income (loss) and net operating loss carryforwards (a non-GAAP
financial measure) to common shareholders' equity, is as follows
(dollars in millions):
|
|
|
|
|
Trailing four quarter
average
|
|
|
|
3Q21
|
|
3Q20
|
|
Consolidated capital,
excluding accumulated other comprehensive
|
|
|
|
|
income (loss) and net
operating loss carryforwards
|
|
|
|
|
(a non-GAAP financial
measure)
|
$
|
2,995.5
|
|
|
$
|
2,760.6
|
|
|
Net operating loss
carryforwards
|
320.0
|
|
|
460.0
|
|
|
Accumulated other
comprehensive income
|
1,891.3
|
|
|
1,277.6
|
|
|
Common shareholders'
equity
|
$
|
5,206.8
|
|
|
$
|
4,498.2
|
|
|
|
|
(7)
|
The tables below
summarize the financial impact of significant items on our net
operating income. Management believes that identifying the
impact of these items enhances the understanding of our operating
results (dollars in millions, except per share data).
|
|
|
Three months
ended
|
|
|
September 30,
2021
|
|
|
Actual
results
|
|
Significant
items
|
|
Excluding
significant
items
|
|
Insurance product
margin
|
|
|
|
|
|
|
|
Annuity
margin
|
|
$
|
52.5
|
|
|
$
|
—
|
|
|
$
|
52.5
|
|
|
Health
margin
|
|
117.9
|
|
|
—
|
|
|
117.9
|
|
|
Life margin
|
|
53.2
|
|
|
—
|
|
|
53.2
|
|
|
Total insurance
product margin
|
|
223.6
|
|
|
—
|
|
|
223.6
|
|
|
Allocated
expenses
|
|
(140.5)
|
|
|
—
|
|
|
(140.5)
|
|
|
Income from insurance
products
|
|
83.1
|
|
|
—
|
|
|
83.1
|
|
|
Fee income
|
|
2.6
|
|
|
—
|
|
|
2.6
|
|
|
Investment income not
allocated to product lines
|
|
50.9
|
|
|
—
|
|
|
50.9
|
|
|
Expenses not
allocated to product lines
|
|
(17.3)
|
|
|
3.0
|
|
(a)
|
(14.3)
|
|
|
Operating earnings
before taxes
|
|
119.3
|
|
|
3.0
|
|
|
122.3
|
|
|
Income tax (expense)
benefit on operating income
|
|
(26.5)
|
|
|
(0.7)
|
|
|
(27.2)
|
|
|
Net operating
income
|
|
$
|
92.8
|
|
|
$
|
2.3
|
|
|
$
|
95.1
|
|
|
|
|
|
|
|
|
|
Net operating income
per diluted share
|
|
$
|
0.72
|
|
|
$
|
0.02
|
|
|
$
|
0.74
|
|
|
|
___________
|
|
(a)
|
Comprised of $3.0
million from legal and regulatory matters.
|
|
|
Three months
ended
|
|
|
June 30,
2021
|
|
|
Actual
results
|
|
Significant
items
|
|
Excluding
significant
items
|
|
Insurance product
margin
|
|
|
|
|
|
|
|
Annuity
margin
|
|
$
|
66.0
|
|
|
$
|
—
|
|
|
$
|
66.0
|
|
|
Health
margin
|
|
120.9
|
|
|
—
|
|
|
120.9
|
|
|
Life margin
|
|
39.7
|
|
|
—
|
|
|
39.7
|
|
|
Total insurance
product margin
|
|
226.6
|
|
|
—
|
|
|
226.6
|
|
|
Allocated
expenses
|
|
(141.6)
|
|
|
—
|
|
|
(141.6)
|
|
|
Income from insurance
products
|
|
85.0
|
|
|
—
|
|
|
85.0
|
|
|
Fee income
|
|
6.6
|
|
|
—
|
|
|
6.6
|
|
|
Investment income not
allocated to product lines
|
|
47.8
|
|
|
—
|
|
|
47.8
|
|
|
Expenses not
allocated to product lines
|
|
(23.8)
|
|
|
4.5
|
|
(a)
|
(19.3)
|
|
|
Operating earnings
before taxes
|
|
115.6
|
|
|
4.5
|
|
|
120.1
|
|
|
Income tax (expense)
benefit on operating income
|
|
(26.5)
|
|
|
(1.0)
|
|
|
(27.5)
|
|
|
Net operating
income
|
|
$
|
89.1
|
|
|
$
|
3.5
|
|
|
$
|
92.6
|
|
|
|
|
|
|
|
|
|
Net operating income
per diluted share
|
|
$
|
0.66
|
|
|
$
|
0.03
|
|
|
$
|
0.69
|
|
|
|
___________
|
|
(a)
|
Comprised of $4.5
million from legal and regulatory matters.
|
|
|
Three months
ended
|
|
|
March 31,
2021
|
|
|
Actual
results
|
|
Significant
items
|
|
Excluding
significant
items
|
|
Insurance product
margin
|
|
|
|
|
|
|
|
Annuity
margin
|
|
$
|
57.9
|
|
|
$
|
—
|
|
|
$
|
57.9
|
|
|
Health
margin
|
|
124.7
|
|
|
—
|
|
|
124.7
|
|
|
Life margin
|
|
27.1
|
|
|
—
|
|
|
27.1
|
|
|
Total insurance
product margin
|
|
209.7
|
|
|
—
|
|
|
209.7
|
|
|
Allocated
expenses
|
|
(141.1)
|
|
|
—
|
|
|
(141.1)
|
|
|
Income from insurance
products
|
|
68.6
|
|
|
—
|
|
|
68.6
|
|
|
Fee income
|
|
7.3
|
|
|
—
|
|
|
7.3
|
|
|
Investment income not
allocated to product lines
|
|
43.0
|
|
|
—
|
|
|
43.0
|
|
|
Expenses not
allocated to product lines
|
|
(22.0)
|
|
|
7.8
|
|
(a)
|
(14.2)
|
|
|
Operating earnings
before taxes
|
|
96.9
|
|
|
7.8
|
|
|
104.7
|
|
|
Income tax (expense)
benefit on operating income
|
|
(21.7)
|
|
|
(1.7)
|
|
|
(23.4)
|
|
|
Net operating
income
|
|
$
|
75.2
|
|
|
$
|
6.1
|
|
|
$
|
81.3
|
|
|
|
|
|
|
|
|
|
Net operating income
per diluted share
|
|
$
|
0.55
|
|
|
$
|
0.04
|
|
|
$
|
0.59
|
|
|
|
___________
|
|
(a)
|
Comprised of: (i)
$5.3 million from legal and regulatory matters; and (ii) $2.5
million of transaction expenses related to the previously announced
acquisition of DirectPath, LLC. The legal and regulatory matters
primarily consist of an increase to our liability for claims and
interest pursuant to the Global Resolution Agreement, as we have
now processed and verified most of the claims provided by the third
party auditor allowing us to more accurately estimate the ultimate
liability.
|
|
|
Three months
ended
|
|
|
December 31,
2020
|
|
|
Actual
results
|
|
Significant
items
|
|
Excluding
significant
items
|
|
Insurance product
margin
|
|
|
|
|
|
|
|
Annuity
margin
|
|
$
|
68.1
|
|
|
$
|
(16.1)
|
|
(a)
|
$
|
52.0
|
|
|
Health
margin
|
|
125.2
|
|
|
—
|
|
|
125.2
|
|
|
Life margin
|
|
37.3
|
|
|
4.3
|
|
(a)
|
41.6
|
|
|
Total insurance
product margin
|
|
230.6
|
|
|
(11.8)
|
|
|
218.8
|
|
|
Allocated
expenses
|
|
(162.7)
|
|
|
—
|
|
|
(162.7)
|
|
|
Income from insurance
products
|
|
67.9
|
|
|
(11.8)
|
|
|
56.1
|
|
|
Fee income
|
|
2.9
|
|
|
—
|
|
|
2.9
|
|
|
Investment income not
allocated to product lines
|
|
57.8
|
|
|
—
|
|
|
57.8
|
|
|
Expenses not
allocated to product lines
|
|
(17.8)
|
|
|
3.7
|
|
(b)
|
(14.1)
|
|
|
Operating earnings
before taxes
|
|
110.8
|
|
|
(8.1)
|
|
|
102.7
|
|
|
Income tax (expense)
benefit on operating income
|
|
(24.8)
|
|
|
1.7
|
|
|
(23.1)
|
|
|
Net operating
income
|
|
$
|
86.0
|
|
|
$
|
(6.4)
|
|
|
$
|
79.6
|
|
|
|
|
|
|
|
|
|
Net operating income
per diluted share
|
|
$
|
0.61
|
|
|
$
|
(0.04)
|
|
|
$
|
0.57
|
|
|
|
___________
|
|
(a)
|
Adjustments arising
from our comprehensive annual actuarial review of
assumptions.
|
|
(b)
|
Unfavorable impact
related to asset impairments.
|
|
|
Three months
ended
|
|
|
June 30,
2020
|
|
|
Actual
results
|
|
Significant
items
|
|
Excluding
significant
items
|
|
Insurance product
margin
|
|
|
|
|
|
|
|
Annuity
margin
|
|
$
|
123.8
|
|
|
$
|
40.0
|
|
(a)
|
$
|
72.3
|
|
|
|
|
|
(91.5)
|
|
(a)
|
|
|
Health
margin
|
|
95.5
|
|
|
—
|
|
|
95.5
|
|
|
Life margin
|
|
36.1
|
|
|
5.6
|
|
(a)
|
41.7
|
|
|
Total insurance
product margin
|
|
255.4
|
|
|
(45.9)
|
|
|
209.5
|
|
|
Allocated
expenses
|
|
(128.1)
|
|
|
—
|
|
|
(128.1)
|
|
|
Income from insurance
products
|
|
127.3
|
|
|
(45.9)
|
|
|
81.4
|
|
|
Fee income
|
|
5.2
|
|
|
—
|
|
|
5.2
|
|
|
Investment income not
allocated to product lines
|
|
8.2
|
|
|
—
|
|
|
8.2
|
|
|
Expenses not
allocated to product lines
|
|
(38.5)
|
|
|
23.5
|
|
(b)
|
(15.0)
|
|
|
Operating earnings
before taxes
|
|
102.2
|
|
|
(22.4)
|
|
|
79.8
|
|
|
Income tax (expense)
benefit on operating income
|
|
(22.8)
|
|
|
4.7
|
|
|
(18.1)
|
|
|
Net operating
income
|
|
$
|
79.4
|
|
|
$
|
(17.7)
|
|
|
$
|
61.7
|
|
|
|
|
|
|
|
|
|
Net operating income
per diluted share
|
|
$
|
0.55
|
|
|
$
|
(0.12)
|
|
|
$
|
0.43
|
|
|
|
___________
|
|
(a)
|
Given our expectation
that interest rates will remain low for the long-term, we performed
an actuarial unlocking exercise in the second quarter of 2020 to
reflect our assumption that average new money rates will remain
flat at 4 percent forever. This change and the related
impacts to persistency assumptions had a $45.6 million unfavorable
impact on pre-tax earnings. As part of the actuarial
unlocking exercise, we also changed our assumptions related to the
future option costs we incur in providing benefits on fixed index
annuities which had a favorable impact on pre-tax earnings of $91.5
million. The impact of these changes in assumptions is
summarized below (dollars in millions):
|
|
Line of
business
|
|
|
|
Fixed index
annuities
|
|
Fixed interest
annuities
|
|
Interest-
sensitive life
|
|
Total
|
|
Favorable
(unfavorable)
|
|
Impacts of an average
new money rate assumption of 4 percent
|
|
|
|
|
|
|
|
|
Insurance policy
benefits
|
$
|
(5.0)
|
|
|
$
|
—
|
|
|
$
|
(7.4)
|
|
|
$
|
(12.4)
|
|
|
Amortization
|
(25.6)
|
|
|
(9.4)
|
|
|
1.8
|
|
|
(33.2)
|
|
|
Subtotal
|
(30.6)
|
|
|
(9.4)
|
|
|
(5.6)
|
|
|
(45.6)
|
|
|
Impacts of changes in
future option costs
|
|
|
|
|
|
|
|
|
Insurance policy
benefits
|
104.8
|
|
|
—
|
|
|
—
|
|
|
104.8
|
|
|
Amortization
|
(13.3)
|
|
|
—
|
|
|
—
|
|
|
(13.3)
|
|
|
Subtotal
|
91.5
|
|
|
—
|
|
|
—
|
|
|
91.5
|
|
|
Impact on pre-tax
income
|
$
|
60.9
|
|
|
$
|
(9.4)
|
|
|
$
|
(5.6)
|
|
|
$
|
45.9
|
|
|
|
This actuarial
unlocking exercise did not replace our comprehensive annual review
of all assumptions for our insurance products, which we completed
in the fourth quarter of 2020.
|
|
|
(b)
|
We increased our
liability for claims and interest pursuant to the previously
disclosed Global Resolution Agreement entered into in November
2018. Pursuant to this agreement, a third-party auditor is
acting on behalf of 41 states and the District of Columbia for the
purpose of identifying deceased insureds and contract holders where
benefits are payable pursuant to unclaimed property laws. The
third-party auditor has provided information that we have processed
and verified allowing us to more accurately estimate the ultimate
liability pursuant to this agreement (dollars in millions, except
per share data).
|
|
|
Three months
ended
|
|
|
December 31,
2019
|
|
|
Actual
results
|
|
Significant
items
|
|
Excluding
significant
items
|
|
Insurance product
margin (4)
|
|
|
|
|
|
|
|
Annuity
margin
|
|
$
|
60.5
|
|
|
$
|
0.3
|
|
(a)
|
$
|
60.8
|
|
|
Health
margin
|
|
93.0
|
|
|
—
|
|
|
93.0
|
|
|
Life margin
|
|
46.7
|
|
|
9.7
|
|
(a)
|
56.4
|
|
|
Total insurance
product margin
|
|
200.2
|
|
|
10.0
|
|
|
210.2
|
|
|
Allocated
expenses
|
|
(140.6)
|
|
|
—
|
|
|
(140.6)
|
|
|
Income from insurance
products (5)
|
|
59.6
|
|
|
10.0
|
|
|
69.6
|
|
|
Fee income
|
|
11.7
|
|
|
—
|
|
|
11.7
|
|
|
Investment income not
allocated to product lines (9)
|
|
26.2
|
|
|
—
|
|
|
26.2
|
|
|
Expenses not
allocated to product lines
|
|
2.8
|
|
|
(20.0)
|
|
(b)
|
(17.2)
|
|
|
Operating earnings
before taxes
|
|
100.3
|
|
|
(10.0)
|
|
|
90.3
|
|
|
Income tax (expense)
benefit on operating income
|
|
(21.7)
|
|
|
2.1
|
|
|
(19.6)
|
|
|
Net operating
income (10)
|
|
$
|
78.6
|
|
|
$
|
(7.9)
|
|
|
$
|
70.7
|
|
|
|
|
|
|
|
|
|
Net operating income
per diluted share
|
|
$
|
0.52
|
|
|
$
|
(0.05)
|
|
|
$
|
0.47
|
|
|
|
___________
|
|
(a)
|
Adjustments arising
from our comprehensive annual actuarial review of
assumptions.
|
|
(b)
|
$20.0 million of the
net favorable impact from legal and regulatory matters.
|
View original
content:https://www.prnewswire.com/news-releases/cno-financial-group-reports-third-quarter-2021-results-301410185.html
SOURCE CNO Financial Group, Inc.