CARMEL, Ind., July 30, 2019 /PRNewswire/ -- CNO Financial Group, Inc. (NYSE: CNO) today announced that for the quarter ending June 30, 2019, net income was $0.24 per diluted share, compared to $0.61 per diluted share in 2Q18. CNO also reported that 2Q19 net operating income (1) was $0.48 per diluted share, compared to $0.46 in 2Q18 (as adjusted to remove the earnings from the long-term care business that was ceded in 3Q18).
"Leveraging our multiple distribution channels, CNO delivered its fourth consecutive quarter of growth with solid production across each of our businesses and product lines," said Gary C. Bhojwani, chief executive officer. "We continued to use excess capital to repurchase shares, which drove an increase in operating earnings per share, adjusting for the long-term care business that was ceded in the third quarter of 2018, and contributed to higher operating return on equity."
- Annuity collected premiums were up 19% from 2Q18
- First-year collected premiums were up 14% from 2Q18
- Life and health sales were up 4% from 2Q18
- All benefit ratios were within provided guidance
- Returned $72.4 million to shareholders in the form of share repurchases ($55.0 million) and dividends ($17.4 million)
Quarterly Operating Results
Please refer to our 2Q2019 Quarterly Financial Supplement for additional information related to the Company's financial and reporting results for the quarter ended June 30, 2019. Such information was furnished as an exhibit to our Current Report on Form 8-K dated July 30, 2019.
Significant Items Impacting Net Operating Income
In 3Q18, we ceded the Bankers Life legacy long-term care business under a 100% indemnity coinsurance agreement. In the above table, we have adjusted the operating earnings in 2Q18 to remove the earnings of this block.
There were no other significant items in 2Q19 or 2Q18.
Net realized investment gains (losses) (net of related amortization) in 2Q19 and 2Q18 were $(1.7) million and $10.9 million, respectively. There were no other-than-temporary impairment losses recognized in 2Q19 or 2Q18.
During 2Q19 and 2Q18, we recognized an increase (decrease) in earnings of $6.8 million and $(.3) million, respectively, due to the net change in market value of investments recognized in earnings.
During 2Q19 and 2Q18, we recognized an increase (decrease) in earnings of $(35.9) million and $8.3 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.
In 2Q19 and 2Q18, we recognized an increase (decrease) in earnings of $(11.6) million and $11.0 million, 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.
The results for 2Q19 include a $7.3 million loss on the extinguishment of debt related to the completion of our previously announced debt refinancing transaction.
Statutory (based on non-GAAP measures) and GAAP Capital Information
Our consolidated statutory risk-based capital ratio was estimated at 409% at June 30, 2019, reflecting estimated 2Q19 statutory operating income of $79 million (and $162 million in the first six months of 2019) and the payment of insurance company dividends to the holding company of $89.9 million during 2Q19 and $130.9 million during the first six months of 2019.
During the second quarter of 2019, we repurchased $55.0 million of common stock under our securities repurchase program (including $2.0 million of repurchases settled in 3Q19). We repurchased 3.3 million common shares at an average cost of $16.46 per share. As of June 30, 2019, we had 156.8 million shares outstanding and had authority to repurchase up to an additional $182.6 million of our common stock. During 2Q19, dividends paid on common stock totaled $17.4 million.
Unrestricted cash and investments held by our holding company were $264 million at June 30, 2019, compared to $220 million at December 31, 2018.
Book value per common share was $27.12 and $20.78 at June 30, 2019 and December 31, 2018, respectively. Book value per diluted share, excluding accumulated other comprehensive income (loss) (2), was $20.00 at June 30, 2019, compared to $19.52 at December 31, 2018.
The debt-to-capital ratio was 18.9 percent and 21.4 percent at June 30, 2019 and December 31, 2018, respectively. Our debt-to-total capital ratio, excluding accumulated other comprehensive income (3) was 23.9 percent at June 30, 2019 compared to 22.3 percent at December 31, 2018.
Return on equity for the trailing four quarters ended June 30, 2019 and 2018, was (10.9)% and 4.6%, respectively. Return on equity for the trailing four quarters ended June 30, 2019 was unfavorably impacted by a loss of $661.1 million recognized in the third quarter of 2018 related to a long-term care reinsurance transaction. Operating return, excluding significant items, on equity, excluding accumulated other comprehensive income and net operating loss carryforwards (7) for the trailing four quarters ended June 30, 2019 and 2018, was 10.9% and 9.4%, respectively.
The Company will host a conference call to discuss results on July 31, 2019 at 11:00 a.m. Eastern Daylight Time. During the call, we will be referring to a presentation that will be available at the Investors section of the company's website this evening.
To participate by dial-in, please dial (844) 668-8093 or (647) 253-8656 for international participants, at least five minutes before the call start time. The operator will ask you to identify yourself and your company, and will also ask for the conference ID, "9687346."
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 our website as follows: (http://ir.cnoinc.com ). Listeners should go to the website at least 15 minutes before the event to register, download and install any necessary software.
If you are unable to join us on the call, you may access a replay of the call through webcast, available through the Investors section of our website at: (http://ir.cnoinc.com ).
About CNO Financial Group
CNO Financial Group, Inc. (NYSE: CNO) is a holding company. Our insurance companies - principally Bankers Life and Casualty Company, Colonial Penn Life Insurance Company and Washington National Insurance Company - primarily serve middle-income pre-retiree and retired Americans by helping them protect against financial adversity and provide for a more secure retirement. For more information, visit CNO online at www.CNOinc.com .
Cautionary Statement Regarding Forward-Looking Statements. Our statements, trend analyses and other information contained in this press release relative to markets for CNO Financial's products and trends in CNO Financial's operations or financial results, as well as other statements, contain forward-looking statements within the meaning of the federal securities laws and the Private Securities Litigation Reform Act of 1995. Forward-looking statements typically are identified by the use of terms such as "anticipate," "believe," "plan," "estimate," "expect," "project," "intend," "may," "will," "would," "contemplate," "possible," "attempt," "seek," "should," "could," "goal," "target," "on track," "comfortable with," "optimistic," "guidance," "outlook" and similar words, although some forward-looking statements are expressed differently. You should consider statements that contain these words carefully because they describe our expectations, plans, strategies and goals and our beliefs concerning future business conditions, our results of operations, financial position, and our business outlook or they state other ''forward-looking'' information based on currently available information. Assumptions and other important factors that could cause our actual results to differ materially from those anticipated in our forward-looking statements include, among other things: (i) changes in or sustained low interest rates causing reductions in investment income, the margins of our fixed annuity and life insurance businesses, and sales of, and demand for, our products; (ii) expectations of lower future investment earnings may cause us to accelerate amortization, write down the balance of insurance acquisition costs or establish additional liabilities for insurance products; (iii) general economic, market and political conditions and uncertainties, including the performance and fluctuations of the financial markets which may affect the value of our investments as well as our ability to raise capital or refinance existing indebtedness and the cost of doing so; (iv) the ultimate outcome of lawsuits filed against us and other legal and regulatory proceedings to which we are subject; (v) our ability to make anticipated changes to certain non-guaranteed elements of our life insurance products; (vi) our ability to obtain adequate and timely rate increases on our health products, including our long-term care business; (vii) the receipt of any required regulatory approvals for dividend and surplus debenture interest payments from our insurance subsidiaries; (viii) mortality, morbidity, the increased cost and usage of health care services, persistency, the adequacy of our previous reserve estimates, changes in the health care market and other factors which may affect the profitability of our insurance products; (ix) changes in our assumptions related to deferred acquisition costs or the present value of future profits; (x) the recoverability of our deferred tax assets and the effect of potential ownership changes and tax rate changes on their value; (xi) our assumption that the positions we take on our tax return filings will not be successfully challenged by the Internal Revenue Service; (xii) changes in accounting principles and the interpretation thereof; (xiii) our ability to continue to satisfy the financial ratio and balance requirements and other covenants of our debt agreements; (xiv) our ability to achieve anticipated expense reductions and levels of operational efficiencies including improvements in claims adjudication and continued automation and rationalization of operating systems; (xv) performance and valuation of our investments, including the impact of realized losses (including other-than-temporary impairment charges); (xvi) our ability to identify products and markets in which we can compete effectively against competitors with greater market share, higher ratings, greater financial resources and stronger brand recognition; (xvii) our ability to generate sufficient liquidity to meet our debt service obligations and other cash needs; (xviii) changes in capital deployment opportunities; (xix) our ability to maintain effective controls over financial reporting; (xx) our ability to continue to recruit and retain productive agents and distribution partners; (xxi) customer response to new products, distribution channels and marketing initiatives; (xxii) our ability to achieve additional upgrades of the financial strength ratings of CNO Financial and our insurance company subsidiaries as well as the impact of our ratings on our business, our ability to access capital and the cost of capital; (xxiii) regulatory changes or actions, including: those relating to regulation of the financial affairs of our insurance companies, such as the calculation of risk-based capital and minimum capital requirements, and payment of dividends and surplus debenture interest to us; regulation of the sale, underwriting and pricing of products; and health care regulation affecting health insurance products; (xxiv) changes in the Federal income tax laws and regulations which may affect or eliminate the relative tax advantages of some of our products or affect the value of our deferred tax assets; (xxv) availability and effectiveness of reinsurance arrangements, as well as the impact of any defaults or failure of reinsurers to perform; (xxvi) the performance of third party service providers and potential difficulties arising from outsourcing arrangements; (xxvii) the growth rate of sales, collected premiums, annuity deposits and assets; (xxviii) interruption in telecommunication, information technology or other operational systems or failure to maintain the security, confidentiality or privacy of sensitive data on such systems; (xxix) events of terrorism, cyber attacks, natural disasters or other catastrophic events, including losses from a disease pandemic; (xxx) ineffectiveness of risk management policies and procedures in identifying, monitoring and managing risks; and (xxxi) the risk factors or uncertainties listed from time to time in our filings with the Securities and Exchange Commission. Other factors and assumptions not identified above are also relevant to the forward-looking statements, and if they prove incorrect, could also cause actual results to differ materially from those projected. All written or oral forward-looking statements attributable to us are expressly qualified in their entirety by the foregoing cautionary statement. Our forward-looking statements speak only as of the date made. We assume no obligation to update or to publicly announce the results of any revisions to any of the forward-looking statements to reflect actual results, future events or developments, changes in assumptions or changes in other factors affecting the forward-looking statements.
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SOURCE CNO Financial Group, Inc.