Strong third quarter production; Record
annuity collected premiums
CARMEL,
Ind., Oct. 31, 2024 /PRNewswire/ -- CNO
Financial Group, Inc. (NYSE: CNO) today reported net income of
$9.3 million, or $0.09 per diluted share, in 3Q24 compared to
$167.3 million, or $1.46 per diluted share, in 3Q23. Non-economic
accounting impacts due to market volatility affected both periods
which reduced net income in 2024 and increased it in 2023. Net
operating income,(1) which excludes these non-economic
accounting impacts, was $119.2 million, or $1.11 per diluted share, in 3Q24 compared to
$101.3 million, or $0.88 per diluted share, in 3Q23.
Significant items(6) positively impacted both net
income and net operating income(1) by $18.8 million, or $0.17 per diluted share, in 3Q24 compared to
$16.9 million, or $0.14 per diluted share, in 3Q23.
"CNO delivered another quarter of excellent net operating income
and sales performance, reflecting continued agent force growth, and
ongoing strength in our underwriting margins and net investment
income," said Gary C. Bhojwani,
chief executive officer. "We posted our ninth consecutive quarter
of sales growth, led by record annuity collected premiums and
strong Medicare and long-term care sales.
"Our sustained sales growth is translating into earnings growth,
with operating earnings per share up 26%. All Growth Scorecard
performance metrics are up once again. As we advance our growth
strategy, we continue to optimize the balance between production,
profitability and capital management."
"CNO has a unique and differentiated position to serve the
middle-income market through our products, distribution
capabilities and proven track record of execution. We enter the
fourth quarter with momentum, supported by favorable demographic
trends, a supportive macroeconomic environment and our strong
financial position."
Third Quarter 2024 Highlights (as compared to
the corresponding period in the prior year unless otherwise
stated)
- Annuity collected premiums up 25%; Policyholder and client
assets up 12%
- Medicare Supplement new annualized premiums
("NAP")(4) up 15%; Medicare Advantage sales up 26%
- Producing agent counts in the Consumer Division and Worksite
Division up 5% and 17%, respectively
- Raising full-year guidance for earnings and cash flow
- Returned $106.8 million to
shareholders
- Book value per share was $25.86;
Book value per diluted share, excluding accumulated other
comprehensive loss,(2) was $35.84
- Return on equity ("ROE") of 11.8%; Operating ROE, as
adjusted,(5) of 11.7%
|
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 net realized
investment gains (losses) from sales and change in the allowance
for credit losses, changes in fair values of embedded derivatives
and market risk benefits 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,
|
|
2024
|
|
|
2023
|
|
%
change
|
|
2024
|
|
|
2023
|
|
%
change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from insurance
products (b)
|
1.21
|
|
|
$
0.76
|
|
59
|
|
$ 129.2
|
|
|
$ 86.8
|
|
49
|
|
Fee income
|
(0.03)
|
|
|
(0.03)
|
|
—
|
|
(2.7)
|
|
|
(2.9)
|
|
(7)
|
|
Investment income not
allocated to product lines (c)
|
0.42
|
|
|
0.33
|
|
27
|
|
45.5
|
|
|
38.4
|
|
18
|
|
Expenses not allocated
to product lines
|
(0.17)
|
|
|
0.07
|
|
n/m
|
|
(18.5)
|
|
|
7.5
|
|
n/m
|
|
Operating earnings
before taxes
|
1.43
|
|
|
1.13
|
|
|
|
153.5
|
|
|
129.8
|
|
|
|
Income tax expense on
operating income
|
(0.32)
|
|
|
(0.25)
|
|
28
|
|
(34.3)
|
|
|
(28.5)
|
|
20
|
|
Net operating income
(1)
|
1.11
|
|
|
0.88
|
|
26
|
|
119.2
|
|
|
101.3
|
|
18
|
|
Net realized investment
losses from sales, impairments
and change in allowance for credit losses
|
(0.10)
|
|
|
(0.17)
|
|
|
|
(11.1)
|
|
|
(20.1)
|
|
|
|
Net change in market
value of investments recognized in earnings
|
0.11
|
|
|
(0.08)
|
|
|
|
12.3
|
|
|
(9.2)
|
|
|
|
Changes in fair value
of embedded derivative liabilities and market risk
benefits
|
(1.19)
|
|
|
0.95
|
|
|
|
(127.1)
|
|
|
109.4
|
|
|
|
Other
|
(0.15)
|
|
|
0.05
|
|
|
|
(16.6)
|
|
|
5.7
|
|
|
|
Non-operating income
(loss) before taxes
|
(1.33)
|
|
|
0.75
|
|
|
|
(142.5)
|
|
|
85.8
|
|
|
|
Income tax benefit
(expense) on non-operating income
|
0.31
|
|
|
(0.17)
|
|
|
|
32.6
|
|
|
(19.8)
|
|
|
|
Net non-operating
income (loss)
|
(1.02)
|
|
|
0.58
|
|
|
|
(109.9)
|
|
|
66.0
|
|
|
|
Net
income
|
$
0.09
|
|
|
$
1.46
|
|
|
|
$
9.3
|
|
|
$
167.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
diluted shares outstanding
|
107.1
|
|
|
114.5
|
|
|
|
|
|
|
|
|
|
|
n/m - not
meaningful
|
|
|
|
|
|
|
|
|
|
|
(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 product lines, less expenses allocated to the insurance
product lines. It excludes the income from our fee income
business, investment income not allocated to product lines, net
expenses not allocated to product lines (primarily holding 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 insurance policy income 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 represents 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, investment borrowings and
financing arrangements; (iv) expenses related to the funding
agreement-backed notes ("FABN") program; and (v) certain expenses
related to benefit plans that are offset by special-purpose
investment income; plus (vi) the impact of annual option
forfeitures related to fixed indexed annuity surrenders.
|
|
FINANCIAL SUMMARY
(continued)
Management vs. GAAP
Measures
(Dollars in millions,
except per share data)
(Unaudited)
|
|
|
Shareholders' equity,
excluding accumulated other comprehensive income (loss), and book
value per share, excluding accumulated other comprehensive income
(loss), are non-GAAP measures that are utilized by management to
view the business without the effect of accumulated other
comprehensive income (loss) 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. In
addition, shareholders' equity excludes net operating loss
carryforwards in our non-GAAP return on equity measures as such
assets are not discounted and, accordingly, will not provide a
return to shareholders until after it is realized as a reduction to
taxes that would otherwise be paid. Management believes that
excluding this value from the equity component of this measure
enhances the understanding of the effect these non-discounted
assets have on operating returns.
|
|
|
Quarter
ended
|
|
September
30,
|
|
2024
|
|
2023
|
|
|
|
|
|
Trailing twelve months
return on equity (a)
|
11.8 %
|
|
14.5 %
|
|
Trailing twelve months
operating return on equity as adjusted to exclude accumulated other
comprehensive
income (loss) and net operating loss carryforwards (a non-GAAP
financial measure) (5)
|
11.7 %
|
|
8.5 %
|
|
Trailing twelve months
operating return, excluding significant items, on equity as
adjusted to exclude
accumulated other comprehensive income (loss) and net operating
loss carryforwards (a non-GAAP
financial measure) (5)
|
10.5 %
|
|
8.0 %
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity
|
$ 2,687.8
|
|
$
1,890.1
|
|
Accumulated other
comprehensive loss
|
1,116.0
|
|
1,956.7
|
|
|
|
|
|
Shareholders' equity,
excluding accumulated other comprehensive loss
|
3,803.8
|
|
3,846.8
|
|
Net operating loss
carryforwards
|
(273.9)
|
|
(102.6)
|
|
Shareholders' equity,
excluding accumulated other comprehensive loss and net operating
loss carryforwards
|
$ 3,529.9
|
|
$
3,744.2
|
|
|
|
|
|
Book value per diluted
share
|
$
25.32
|
|
$
16.58
|
|
Accumulated other
comprehensive loss
|
10.52
|
|
17.17
|
|
|
|
|
|
Book value per diluted
share, excluding accumulated other comprehensive loss (a non-GAAP
financial measure) (2)
|
$
35.84
|
|
$
33.75
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Calculated using
average shareholders' equity for the measurement period.
|
Non-Operating Items
Net investment losses in 3Q24 were
$11.1 million, including the
favorable change in the allowance for credit losses of $11.6 million. Net investment losses in 3Q23 were
$20.1 million, including the
unfavorable change in the allowance for credit losses of
$2.3 million.
During 3Q24 and 3Q23, we recognized an increase (decrease) in
earnings of $12.3 million and
$(9.2) million, respectively, due to
the net change in market value of investments.
During 3Q24 and 3Q23, we recognized an increase (decrease) in
earnings of $(127.1) million and
$109.4 million, respectively,
resulting from changes in the estimated fair value of embedded
derivative liabilities and market risk benefits related to our
fixed indexed annuities. Such amounts include the impacts of
changes in market interest rates and equity impacts used to
determine the estimated fair values of the embedded derivatives and
market risk benefits. In addition, 3Q24 includes the impacts to the
fair value of the embedded derivative and market risk benefits
resulting from our comprehensive annual actuarial review.
Other non-operating items in 3Q24 included a charge of
$8.3 million primarily related to a
5% workforce reduction and transition costs for outsourcing certain
operations activities. In addition, other non-operating items
included an increase (decrease) in earnings of $(3.5) million and $6.8
million in 3Q24 and 3Q23, respectively, for the
mark-to-market change in the agent deferred compensation plan
liability which was impacted by changes in the underlying actuarial
assumptions used to value the liability. We recognize the
mark-to-market change in the estimated value of this liability
through earnings as assumptions change.
|
INVESTMENT
PORTFOLIO
(Dollars in
millions)
|
|
|
Fixed maturities,
available for sale, at amortized cost by asset class as of
September 30, 2024 are as follows:
|
|
|
Investment
grade
|
|
Below
investment
grade
|
|
Total
|
|
Corporate
securities
|
$ 13,083.3
|
|
$
641.9
|
|
$ 13,725.2
|
|
Certificates of
deposit
|
470.0
|
|
—
|
|
470.0
|
|
United States Treasury
securities and obligations of the United States government and
agencies
|
210.8
|
|
—
|
|
210.8
|
|
States and political
subdivisions
|
3,213.6
|
|
9.6
|
|
3,223.2
|
|
Foreign
governments
|
103.2
|
|
—
|
|
103.2
|
|
Asset-backed
securities
|
1,479.4
|
|
99.1
|
|
1,578.5
|
|
Agency residential
mortgage-backed securities
|
812.5
|
|
—
|
|
812.5
|
|
Non-agency residential
mortgage-backed securities
|
1,252.0
|
|
418.0
|
(a)
|
1,670.0
|
|
Collateralized loan
obligations
|
1,083.2
|
|
—
|
|
1,083.2
|
|
Commercial
mortgage-backed securities
|
2,285.8
|
|
84.0
|
|
2,369.8
|
|
|
|
|
|
|
|
Total
|
$ 23,993.8
|
|
$
1,252.6
|
|
$ 25,246.4
|
|
|
|
|
|
|
|
|
|
|
(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 $23.7 billion
compared with an amortized cost of $25.2 billion. Net unrealized losses
were comprised of gross unrealized gains of $300.3 million and gross unrealized losses
of $1,796.1 million. The
allowance for credit losses was $25.9 million at September 30,
2024.
Statutory (based on non-GAAP measures) and GAAP Capital
Information
The consolidated statutory risk-based capital
ratio of our U.S. based insurance subsidiaries was estimated at
388% at September 30, 2024, reflecting estimated 3Q24
statutory operating earnings of $8.4
million (and $32.5 million in
the first nine months of 2024) and the payment of insurance company
dividends (net of capital contributions) to the holding company of
$38.9 million during 3Q24 (and
$111.9 million (net of capital
contributions) in the first nine months of 2024).
During 3Q24, we repurchased $90.0 million of common stock under our
securities repurchase program (including $1.4 million of repurchases settled in
4Q24). We repurchased 2.8 million common shares at an
average cost of $32.03 per
share. As of September 30, 2024, we had
103.9 million shares outstanding and had authority to
repurchase up to an additional $331.8 million of our common stock.
During 3Q24, dividends paid on common stock totaled $16.9 million.
Unrestricted cash and investments held by our holding company
were $453 million at
September 30, 2024 compared to $256.0
million at December 31, 2023. In addition, the
holding company has invested $500
million of the proceeds from the previously announced
May 2024 issuance of $700.0 million of 6.450% senior notes due 2034
(the "2034 Notes") primarily into certificates of deposit which are
expected to be used for the repayment of $500.0 million of 5.250% senior notes due
May 2025 (the "2025 Notes").
Book value per common share was $25.86 at September 30, 2024 compared to
$20.26 at December 31,
2023. Book value per diluted share, excluding accumulated
other comprehensive income (loss) (2), was $35.84 at September 30, 2024 compared to
$33.94 at December 31,
2023.
The debt-to-capital ratio was 40.5% and 34.0% at
September 30, 2024 and December 31, 2023,
respectively. Our debt-to-total capital ratio, excluding
accumulated other comprehensive income (loss)(3), was
32.5% and 23.1% at September 30, 2024 and December 31,
2023, respectively. Such ratios reflect the issuance of the 2034
Notes in May 2024. At September 30, 2024, adjusting for
the expected repayment of the 2025 Notes, the debt-to-total capital
ratio would have been 33.2% and the debt-to-total capital ratio,
excluding accumulated other comprehensive income (loss), would have
been 26.0%.
Return on equity for the trailing four quarters ended
September 30, 2024 and 2023 was 11.8% and 14.5%,
respectively. Operating return, excluding significant items,
on equity as adjusted to exclude accumulated other comprehensive
income (loss) and net operating loss carryforwards(5),
for the trailing four quarters ended September 30, 2024 and
2023 was 10.5% and 8.0%, 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
a 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, 2023 and any subsequent Form 10-Q or Form 10-K 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
November 1, 2024 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
https://www.netroadshow.com/events/login?show=7b707407&confId=72581.
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, Optavise 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 $38 billion in total
assets. Our 3,500 associates, 4,800 exclusive agents and more than
5,000 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,
2024
|
|
December 31,
2023
|
|
ASSETS
|
|
|
|
|
Investments:
|
|
|
|
|
Fixed maturities,
available for sale, at fair value (net of allowance for credit
losses:
September 30, 2024 - $25.9 and December 31, 2023 - $42.9;
amortized cost: September 30,
2024 - $25,246.4 and December 31, 2023 - $23,699.2)
|
$
23,724.7
|
|
$
21,506.2
|
|
Equity securities at
fair value
|
120.5
|
|
96.9
|
|
Mortgage loans (net of
allowance for credit losses: September 30, 2024 - $16.5
and
December 31, 2023 - $15.4)
|
2,372.7
|
|
2,064.1
|
|
Policy
loans
|
133.3
|
|
128.5
|
|
Trading
securities
|
217.4
|
|
222.7
|
|
Investments held by
variable interest entities (net of allowance for credit losses:
September 30,
2024 - $1.8 and December 31, 2023 - $3.1; amortized cost:
September 30, 2024 - $258.8 and
December 31, 2023 - $787.6)
|
250.1
|
|
768.6
|
|
Other invested
assets
|
1,595.5
|
|
1,353.4
|
|
Total
investments
|
28,414.2
|
|
26,140.4
|
|
Cash and cash
equivalents - unrestricted
|
1,164.7
|
|
774.5
|
|
Cash and cash
equivalents held by variable interest entities
|
80.6
|
|
114.5
|
|
Accrued investment
income
|
276.2
|
|
251.5
|
|
Present value of future
profits
|
165.7
|
|
180.7
|
|
Deferred acquisition
costs
|
2,100.9
|
|
1,944.4
|
|
Reinsurance receivables
(net of allowance for credit losses: September 30, 2024 - $3.0
and
December 31, 2023 - $3.0)
|
3,906.7
|
|
4,040.7
|
|
Market risk benefit
asset
|
96.4
|
|
75.4
|
|
Income tax assets,
net
|
788.7
|
|
936.2
|
|
Assets held in separate
accounts
|
3.3
|
|
3.1
|
|
Other assets
|
648.0
|
|
641.1
|
|
Total
assets
|
$
37,645.4
|
|
$
35,102.5
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
|
Liabilities:
|
|
|
|
|
Liabilities for
insurance products:
|
|
|
|
|
Policyholder account balances
|
$
17,240.5
|
|
$
15,667.8
|
|
Future
policy benefits
|
12,179.6
|
|
11,928.2
|
|
Market
risk benefit liability
|
1.0
|
|
7.4
|
|
Liability
for life insurance policy claims
|
59.9
|
|
62.1
|
|
Unearned
and advanced premiums
|
217.4
|
|
218.9
|
|
Liabilities related to separate accounts
|
3.3
|
|
3.1
|
|
Other
liabilities
|
951.0
|
|
848.8
|
|
Investment
borrowings
|
2,188.9
|
|
2,189.3
|
|
Borrowings related to
variable interest entities
|
283.1
|
|
820.8
|
|
Notes payable – direct
corporate obligations
|
1,832.9
|
|
1,140.5
|
|
Total
liabilities
|
34,957.6
|
|
32,886.9
|
|
Commitments and
Contingencies
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
|
Common stock ($0.01 par
value, 8,000,000,000 shares authorized, shares issued and
outstanding: September 30, 2024 – 103,922,954;
December 31, 2023 – 109,357,540)
|
1.0
|
|
1.1
|
|
Additional paid-in
capital
|
1,715.9
|
|
1,891.5
|
|
Accumulated other
comprehensive loss
|
(1,116.0)
|
|
(1,576.8)
|
|
Retained
earnings
|
2,086.9
|
|
1,899.8
|
|
Total
shareholders' equity
|
2,687.8
|
|
2,215.6
|
|
Total
liabilities and shareholders' equity
|
$
37,645.4
|
|
$
35,102.5
|
|
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,
|
|
2024
|
|
2023
|
|
2024
|
|
2023
|
|
Revenues:
|
|
|
|
|
|
|
|
|
Insurance policy
income
|
$
645.0
|
|
$
626.0
|
|
$
1,914.9
|
|
$
1,879.8
|
|
Net investment
income:
|
|
|
|
|
|
|
|
|
General
account assets
|
366.3
|
|
324.8
|
|
1,019.9
|
|
925.1
|
|
Policyholder and other special-purpose portfolios
|
87.6
|
|
(33.0)
|
|
312.3
|
|
109.4
|
|
Investment gains
(losses):
|
|
|
|
|
|
|
|
|
Realized
investment losses
|
(13.1)
|
|
(21.6)
|
|
(49.4)
|
|
(58.0)
|
|
Other
investment gains (losses)
|
14.3
|
|
(7.7)
|
|
41.2
|
|
(21.2)
|
|
Total investment gains
(losses)
|
1.2
|
|
(29.3)
|
|
(8.2)
|
|
(79.2)
|
|
Fee revenue and other
income
|
29.5
|
|
59.0
|
|
113.4
|
|
141.2
|
|
Total
revenues
|
1,129.6
|
|
947.5
|
|
3,352.3
|
|
2,976.3
|
|
Benefits and
expenses:
|
|
|
|
|
|
|
|
|
Insurance policy
benefits
|
726.2
|
|
399.1
|
|
1,926.4
|
|
1,574.7
|
|
Liability for future
policy benefits remeasurement (gain) loss
|
7.3
|
|
(0.1)
|
|
(29.1)
|
|
8.8
|
|
Change in fair value
of market risk benefits
|
(16.1)
|
|
(33.8)
|
|
(30.0)
|
|
(36.6)
|
|
Interest
expense
|
68.0
|
|
62.6
|
|
192.4
|
|
174.9
|
|
Amortization of
deferred acquisition costs and present value of future
profits
|
64.0
|
|
57.0
|
|
185.9
|
|
168.5
|
|
Other operating costs
and expenses
|
269.2
|
|
247.1
|
|
798.9
|
|
775.3
|
|
Total benefits and
expenses
|
1,118.6
|
|
731.9
|
|
3,044.5
|
|
2,665.6
|
|
Income before income
taxes
|
11.0
|
|
215.6
|
|
307.8
|
|
310.7
|
|
Income tax
expense
|
1.7
|
|
48.3
|
|
69.9
|
|
70.5
|
|
Net income
|
$
9.3
|
|
$
167.3
|
|
$
237.9
|
|
$
240.2
|
|
Earnings per common
share:
|
|
|
|
|
|
|
|
|
Basic:
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding
|
105,101,000
|
|
112,689,000
|
|
107,265,000
|
|
113,836,000
|
|
Net income
|
$
.09
|
|
$
1.48
|
|
$
2.22
|
|
$
2.11
|
|
Diluted:
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding
|
107,131,000
|
|
114,462,000
|
|
109,078,000
|
|
115,613,000
|
|
Net income
|
$
.09
|
|
$
1.46
|
|
$
2.18
|
|
$
2.08
|
|
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 taxes; (ii)
net change in market value of investments recognized in earnings,
net of taxes; (iii) changes in fair value of embedded derivative
liabilities and market risk benefits related to our fixed indexed
annuities, net of taxes; (iv) fair value changes related to the
agent deferred compensation plan, net of taxes; (v) gains or losses
related to material reinsurance transactions, net of taxes; (vi)
loss on extinguishment of debt, net of taxes; (vii) changes in the
valuation allowance for deferred tax assets and other tax items;
and (viii) other non-operating items consisting primarily of
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)
|
The following
summarizes the calculations of: (i) operating return on equity as
adjusted to exclude accumulated other comprehensive income (loss)
and net operating loss carryforwards (a non-GAAP financial
measure); (ii) operating return, excluding significant items, as
adjusted to exclude 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
|
|
|
|
3Q24
|
|
3Q23
|
|
Net operating
income
|
$
425.2
|
|
$ 305.1
|
|
|
|
|
|
|
|
Net operating income,
excluding significant items
|
$
380.0
|
|
$ 287.7
|
|
|
|
|
|
|
|
Net income
|
$
274.2
|
|
$ 278.2
|
|
|
|
|
|
|
|
Average common equity,
excluding accumulated other
|
|
|
|
|
comprehensive income
(loss) and net operating loss
|
|
|
|
|
carryforwards (a
non-GAAP financial measure)
|
$ 3,620.8
|
|
$
3,582.8
|
|
|
|
|
|
|
|
Average common
shareholders' equity
|
$ 2,325.3
|
|
$
1,918.3
|
|
|
|
|
|
|
|
Operating return on
equity as adjusted to exclude accumulated
|
|
|
|
|
other comprehensive
income (loss) and net operating loss
|
|
|
|
|
carryforwards (a
non-GAAP financial measure)
|
11.7 %
|
|
8.5 %
|
|
|
|
|
|
|
|
Operating return,
excluding significant items, on equity as adjusted
|
|
|
|
|
to exclude accumulated
other comprehensive income (loss) and
|
|
|
|
|
net operating loss
carryforwards (a non-GAAP financial measure)
|
10.5 %
|
|
8.0 %
|
|
|
|
|
|
|
|
Return on
equity
|
11.8 %
|
|
14.5 %
|
|
The following
summarizes: (i) net operating income; (ii) significant items; (iii)
net operating income, excluding significant items; and (iv) net
income (loss) (dollars in millions):
|
|
|
|
|
|
|
|
|
|
Net
operating
|
|
|
|
|
|
|
|
|
|
|
Net
operating
|
|
income,
|
|
|
|
|
|
|
|
|
|
|
income,
|
|
excluding
|
|
|
|
Net
|
|
|
|
|
|
|
excluding
|
|
significant
|
|
|
|
income -
|
|
|
Net
operating
|
|
Significant
|
|
significant
|
|
items -
trailing
|
|
Net
|
|
trailing
|
|
|
income
|
|
items
|
|
items (a)
|
|
four
quarters
|
|
income
(loss)
|
|
four
quarters
|
|
4Q22
|
|
$
82.9
|
|
$
(0.5)
|
(b)
|
$
82.4
|
|
$
342.5
|
|
$
38.0
|
|
$
630.6
|
|
1Q23
|
|
58.6
|
|
—
|
|
58.6
|
|
336.6
|
|
(0.8)
|
|
446.4
|
|
2Q23
|
|
62.3
|
|
—
|
|
62.3
|
|
281.2
|
|
73.7
|
|
286.8
|
|
3Q23
|
|
101.3
|
|
(16.9)
|
(c)
|
84.4
|
|
287.7
|
|
167.3
|
|
278.2
|
|
4Q23
|
|
133.9
|
|
(26.4)
|
(d)
|
107.5
|
|
312.8
|
|
36.3
|
|
276.5
|
|
1Q24
|
|
57.5
|
|
—
|
|
57.5
|
|
311.7
|
|
112.3
|
|
389.6
|
|
2Q24
|
|
114.6
|
|
—
|
|
114.6
|
|
364.0
|
|
116.3
|
|
432.2
|
|
3Q24
|
|
119.2
|
|
(18.8)
|
(e)
|
100.4
|
|
380.0
|
|
9.3
|
|
274.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) See note (6)
for additional information.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(b) Comprised of
$.7 million of the net favorable impact arising from our
comprehensive annual actuarial review, net of tax expense of $.2
million.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(c) Comprised of
$21.7 million of legal recoveries, net of expenses and increased
legal accruals, net of tax expense of $4.8 million.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(d) Comprised of
$33.9 million of the net favorable impact arising from our
comprehensive annual actuarial review, net of tax expense of $7.5
million.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(e) Comprised of
$27.3 million of the net favorable impact arising from our
comprehensive annual actuarial review and $2.9 million of the
unfavorable impact related to a fixed asset impairment, net of tax
expense of $5.6 million.
|
|
A reconciliation of
pre-tax operating earnings (a non-GAAP financial measure) to net
income is as follows (dollars in millions):
|
|
|
|
|
Twelve months
ended
|
|
|
|
3Q24
|
|
3Q23
|
|
Pre-tax operating
earnings (a non-GAAP financial measure)
|
$
549.0
|
|
$
394.4
|
|
Income tax
expense
|
(123.8)
|
|
(89.3)
|
|
Net operating
income
|
425.2
|
|
305.1
|
|
Non-operating
items:
|
|
|
|
|
Net realized
investment losses from sales, impairments and change in allowance
for credit losses
|
(36.2)
|
|
(91.3)
|
|
Net change in market
value of investments recognized in earnings
|
38.2
|
|
(24.1)
|
|
Changes in fair value
of embedded derivative liabilities and market risk
benefits
|
(170.9)
|
|
78.3
|
|
Fair value changes
related to the agent deferred compensation plan
|
(10.3)
|
|
7.0
|
|
Other
|
(15.9)
|
|
(5.1)
|
|
Non-operating loss
before taxes
|
(195.1)
|
|
(35.2)
|
|
Income tax benefit on non-operating loss
|
44.1
|
|
8.3
|
|
Net non-operating
loss
|
(151.0)
|
|
(26.9)
|
|
Net income
|
$
274.2
|
|
$
278.2
|
|
|
|
|
|
|
|
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):
|
|
|
|
|
1Q22
|
|
2Q22
|
|
3Q22
|
|
4Q22
|
|
Consolidated capital,
excluding accumulated other comprehensive
|
|
|
|
|
|
|
|
|
income (loss) and net
operating loss carryforwards
|
|
|
|
|
|
|
|
|
(a non-GAAP financial
measure)
|
$
3,141.7
|
|
$
3,329.0
|
|
$
3,510.3
|
|
$
3,557.1
|
|
Net operating loss
carryforwards
|
238.2
|
|
214.7
|
|
190.9
|
|
169.0
|
|
Accumulated other
comprehensive loss
|
(561.5)
|
|
(1,415.8)
|
|
(1,837.8)
|
|
(1,957.3)
|
|
Common shareholders'
equity
|
$
2,818.4
|
|
$
2,127.9
|
|
$
1,863.4
|
|
$
1,768.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1Q23
|
|
2Q23
|
|
3Q23
|
|
4Q23
|
|
Consolidated capital,
excluding accumulated other comprehensive
|
|
|
|
|
|
|
|
|
income (loss) and net
operating loss carryforwards
|
|
|
|
|
|
|
|
|
(a non-GAAP financial
measure)
|
$
3,543.8
|
|
$
3,603.0
|
|
$
3,744.2
|
|
$
3,712.8
|
|
Net operating loss
carryforwards
|
152.4
|
|
126.3
|
|
102.6
|
|
79.6
|
|
Accumulated other
comprehensive loss
|
(1,664.4)
|
|
(1,733.5)
|
|
(1,956.7)
|
|
(1,576.8)
|
|
Common shareholders'
equity
|
$
2,031.8
|
|
$
1,995.8
|
|
$
1,890.1
|
|
$
2,215.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1Q24
|
|
2Q24
|
|
3Q24
|
|
|
|
Consolidated capital,
excluding accumulated other comprehensive
|
|
|
|
|
|
|
|
|
income (loss) and net
operating loss carryforwards
|
|
|
|
|
|
|
|
|
(a non-GAAP financial
measure)
|
$
3,536.8
|
|
$
3,596.7
|
|
$
3,529.9
|
|
|
|
Net operating loss
carryforwards
|
311.2
|
|
296.5
|
|
273.9
|
|
|
|
Accumulated other
comprehensive loss
|
(1,480.3)
|
|
(1,464.3)
|
|
(1,116.0)
|
|
|
|
Common shareholders'
equity
|
$
2,367.7
|
|
$
2,428.9
|
|
$
2,687.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
3Q24
|
|
3Q23
|
|
Consolidated capital,
excluding accumulated other comprehensive
|
|
|
|
|
income (loss) and net
operating loss carryforwards
|
|
|
|
|
(a non-GAAP financial
measure)
|
$
3,620.8
|
|
$
3,582.8
|
|
Net operating loss
carryforwards
|
218.9
|
|
148.6
|
|
Accumulated other
comprehensive loss
|
(1,514.4)
|
|
(1,813.1)
|
|
Common shareholders'
equity
|
$
2,325.3
|
|
$
1,918.3
|
|
|
|
(6)
|
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,
2024
|
|
|
Actual
results
|
|
Significant
items
|
|
Excluding
significant
items
|
|
Insurance product
margin
|
|
|
|
|
|
|
|
Annuity
margin
|
|
$
91.1
|
|
$
(36.2)
|
(a)
|
$
54.9
|
|
Health
margin
|
|
127.8
|
|
8.2
|
(a)
|
136.0
|
|
Life margin
|
|
63.3
|
|
0.7
|
(a)
|
64.0
|
|
Total insurance product
margin
|
|
282.2
|
|
(27.3)
|
|
254.9
|
|
Allocated
expenses
|
|
(153.0)
|
|
—
|
|
(153.0)
|
|
Income from insurance
products
|
|
129.2
|
|
(27.3)
|
|
101.9
|
|
Fee income
|
|
(2.7)
|
|
—
|
|
(2.7)
|
|
Investment income not
allocated to product lines
|
|
45.5
|
|
—
|
|
45.5
|
|
Expenses not allocated
to product lines
|
|
(18.5)
|
|
2.9
|
(b)
|
(15.6)
|
|
Operating earnings
before taxes
|
|
153.5
|
|
(24.4)
|
|
129.1
|
|
Income tax (expense)
benefit on operating income
|
|
(34.3)
|
|
5.6
|
|
(28.7)
|
|
Net operating
income
|
|
$
119.2
|
|
$
(18.8)
|
|
$
100.4
|
|
|
|
|
|
|
|
|
Net operating income
per diluted share
|
|
$
1.11
|
|
$
(0.17)
|
|
$
0.94
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Comprised of $27.3
million of the net favorable impact arising from our comprehensive
annual actuarial review.
|
|
(b)
|
Comprised of $2.9
million of the unfavorable impact related to a fixed asset
impairment.
|
|
|
Three months
ended
|
|
|
December 31,
2023
|
|
|
Actual
results
|
|
Significant
items
|
|
Excluding
significant
items
|
|
Insurance product
margin
|
|
|
|
|
|
|
|
Annuity
margin
|
|
$
63.6
|
|
$
(12.9)
|
(a)
|
$
50.7
|
|
Health
margin
|
|
146.4
|
|
(22.3)
|
(a)
|
124.1
|
|
Life margin
|
|
64.6
|
|
1.3
|
(a)
|
65.9
|
|
Total insurance product
margin
|
|
274.6
|
|
(33.9)
|
|
240.7
|
|
Allocated
expenses
|
|
(138.8)
|
|
—
|
|
(138.8)
|
|
Income from insurance
products
|
|
135.8
|
|
(33.9)
|
|
101.9
|
|
Fee income
|
|
17.8
|
|
—
|
|
17.8
|
|
Investment income not
allocated to product lines
|
|
38.3
|
|
—
|
|
38.3
|
|
Expenses not allocated
to product lines
|
|
(19.8)
|
|
—
|
|
(19.8)
|
|
Operating earnings
before taxes
|
|
172.1
|
|
(33.9)
|
|
138.2
|
|
Income tax (expense)
benefit on operating income
|
|
(38.2)
|
|
7.5
|
|
(30.7)
|
|
Net operating
income
|
|
$
133.9
|
|
$
(26.4)
|
|
$
107.5
|
|
|
|
|
|
|
|
|
Net operating income
per diluted share
|
|
$
1.18
|
|
$
(0.23)
|
|
$
0.95
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Comprised of $33.9
million of the net favorable impact arising from our comprehensive
annual actuarial review.
|
|
|
Three months
ended
|
|
|
September 30,
2023
|
|
|
Actual
results
|
|
Significant
items
|
|
Excluding
significant
items
|
|
Insurance product
margin
|
|
|
|
|
|
|
|
Annuity
margin
|
|
$
57.0
|
|
$
—
|
|
$
57.0
|
|
Health
margin
|
|
123.2
|
|
—
|
|
123.2
|
|
Life margin
|
|
59.8
|
|
—
|
|
59.8
|
|
Total insurance product
margin
|
|
240.0
|
|
—
|
|
240.0
|
|
Allocated
expenses
|
|
(153.2)
|
|
—
|
|
(153.2)
|
|
Income from insurance
products
|
|
86.8
|
|
—
|
|
86.8
|
|
Fee income
|
|
(2.9)
|
|
—
|
|
(2.9)
|
|
Investment income not
allocated to product lines
|
|
38.4
|
|
—
|
|
38.4
|
|
Expenses not allocated
to product lines
|
|
7.5
|
|
(21.7)
|
(a)
|
(14.2)
|
|
Operating earnings
before taxes
|
|
129.8
|
|
(21.7)
|
|
108.1
|
|
Income tax (expense)
benefit on operating income
|
|
(28.5)
|
|
4.8
|
|
(23.7)
|
|
Net operating
income
|
|
$
101.3
|
|
$
(16.9)
|
|
$
84.4
|
|
|
|
|
|
|
|
|
Net operating income
per diluted share
|
|
$
0.88
|
|
$
(0.14)
|
|
$
0.74
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Comprised of $21.7
million of legal recoveries, net of expenses and increased legal
accruals.
|
|
|
Three months
ended
|
|
|
December 31,
2022
|
|
|
Actual
results
|
|
Significant
items
|
|
Excluding
significant
items
|
|
Insurance product
margin
|
|
|
|
|
|
|
|
Annuity
margin
|
|
$
50.8
|
|
$
3.2
|
(a)
|
$
54.0
|
|
Health
margin
|
|
140.4
|
|
(18.3)
|
(a)
|
122.1
|
|
Life margin
|
|
43.3
|
|
14.4
|
(a)
|
57.7
|
|
Total insurance product
margin
|
|
234.5
|
|
(0.7)
|
|
233.8
|
|
Allocated
expenses
|
|
(149.1)
|
|
—
|
|
(149.1)
|
|
Income from insurance
products
|
|
85.4
|
|
(0.7)
|
|
84.7
|
|
Fee income
|
|
9.2
|
|
—
|
|
9.2
|
|
Investment income not
allocated to product lines
|
|
25.2
|
|
—
|
|
25.2
|
|
Expenses not allocated
to product lines
|
|
(12.8)
|
|
—
|
|
(12.8)
|
|
Operating earnings
before taxes
|
|
107.0
|
|
(0.7)
|
|
106.3
|
|
Income tax (expense)
benefit on operating income
|
|
(24.1)
|
|
0.2
|
|
(23.9)
|
|
Net operating
income
|
|
$
82.9
|
|
$
(0.5)
|
|
$
82.4
|
|
|
|
|
|
|
|
|
Net operating income
per diluted share
|
|
$
0.71
|
|
$
—
|
|
$
0.71
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Comprised of $0.7
million of the net favorable impact arising from our comprehensive
annual actuarial review.
|
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SOURCE CNO Financial Group
