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CNO Financial Group, Inc.$17.75$.01.06%

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 CNO Financial Group Reports Fourth Quarter and Full Year 2019 Results
   Tuesday, February 11, 2020 4:15:00 PM ET

CARMEL, Ind., Feb. 11, 2020 /PRNewswire/ -- CNO Financial Group, Inc. (NYSE: CNO) today announced that for the quarter ending December 31, 2019, net income was $278.0 million, or $1.84 per diluted share, compared to $28.3 million, or $0.17 per diluted share in 4Q18.  CNO also reported that 4Q19 net operating income (1) was $78.6 million, or $0.52 per diluted share, compared to $59.8 million, or $0.36 per diluted share in 4Q18.

Net income for the year ended December 31, 2019, was $409.4 million, or $2.61 per diluted share, compared to a net loss of $315.0 million, or $1.90 per diluted share in 2018. Net operating income (1) was $290.0 million, or $1.85 per diluted share, compared to $289.0 million, or $1.75 per diluted share in 2018 (as adjusted to remove the earnings from the long-term care business that was ceded in 3Q18).



"CNO reported another solid quarter, capping off a successful 2019," said Gary C. Bhojwani, chief executive officer. "We delivered measured growth, exercising discipline to carefully balance sales and profitability. As a result, operating earnings per share were up 4%, excluding significant items, despite a 7% decline in net investment income due to a challenging low interest rate environment."

"Through proactive management, we maximized an expiring tax asset to generate meaningful incremental value for our shareholders. Rigorous expense control, including benefits from our recently announced corporate transformation and strategic IT partnership, will mitigate the interest rate impact and position us well for the future."

Full Year 2019 Highlights

  • Net income of $409.4 million (including $194 million tax benefit related to a tax planning strategy) compared to a net loss of $315.0 million in 2018 (including the net loss of $661 million related to completion of a long-term care reinsurance transaction)
  • Operating income (1) per share up 6%, as adjusted to remove the earnings from the long-term care business that was ceded in 3Q18
  • Life and health sales were up 5%; annuity collected premiums were up 12% from 2018
  • At December 31, 2019, book value per common share was $31.58, up 52% from $20.78 at December 31, 2018
  • At December 31, 2019, book value per diluted share, excluding accumulated other comprehensive income (2), was $22.09, up 13% from $19.52 at December 31, 2018
  • Returned $319 million to shareholders in share repurchases ($252 million) and dividends ($67 million)

Fourth Quarter 2019 Highlights

  • Net income of $278.0 million compared to $28.3 million in 4Q18
  • Operating income (1) per share was up 44% from 4Q18
  • Life and health sales were up 9% from 4Q18
  • Annuity collected premiums were down 9% from 4Q18, reflecting pricing discipline and a difficult comparable from prior year
  • Recorded a $194 million tax benefit from a tax strategy that will enable the Company to utilize all of the net operating losses ("NOLs") that would have otherwise expired in 2023, resulting in the elimination of the valuation allowance related to those NOLs
  • Returned $91 million to shareholders in share repurchases ($75 million) and dividends ($16 million)










































































Please refer to our 4Q2019 Quarterly Financial Supplement for additional information related to the Company's financial and operating results for the quarter ended December 31, 2019.  Such information is being furnished as an exhibit to the Current Report on Form 8-K dated February 11, 2020.



































The significant items in 4Q19 included: (i) adjustments arising from our comprehensive annual actuarial review of assumptions including $10.8 million of unfavorable impacts in the Bankers Life segment and $.8 million of favorable impacts in the Washington National segment; (ii) $20.0 million of the net favorable impact from legal and regulatory matters in the Corporate segment; and (iii) an increase in income tax expense of $2.1 million.

The significant items in 4Q18 included: (i) adjustments arising from our comprehensive annual actuarial review of assumptions including $3.1 million of unfavorable impacts in the Bankers Life segment and $2.2 million of favorable impacts in the Washington National segment; (ii) the $14.4 million reduction in the value of investments backing our COLI used as a vehicle to fund Bankers Life's agent deferred compensation plan; and (iii) an increase in tax expense of $.2 million.  It should be noted that changes in the value of COLI investments are not subject to income taxes.

Non-Operating Items
Net realized investment gains in 4Q19 were $7.1 million (net of related amortization) including other-than-temporary impairment losses of $6.8 million which were recorded in earnings.  Net realized investment losses in 4Q18 were $10.5 million (net of related amortization) including other-than-temporary impairment losses of $.5 million which were recorded in earnings.

During 4Q19 and 4Q18, we recognized a decrease in earnings of $2.6 million and $27.5 million, respectively, due to the net change in market value of investments recognized in earnings.

During 4Q19 and 4Q18, we recognized an increase (decrease) in earnings of $13.4 million and $(.8) 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.

During 4Q19 and 4Q18, we recognized an increase in earnings of $2.5 million and $.9 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 other non-operating items in 4Q19 include the previously announced pre-tax charge of approximately $14 million related to our new operating model to create a leaner, more integrated customer-centric organization.

During 4Q19, we implemented a tax planning strategy that is expected to utilize net operating loss carryforwards that otherwise would have expired in 2023.  Accordingly, we eliminated the valuation allowance for deferred tax assets of $193.7 million in 4Q19.

Statutory (based on non-GAAP measures) and GAAP Capital Information
Our consolidated statutory risk-based capital ratio was estimated at 408% at December 31, 2019, reflecting estimated 4Q19 statutory operating income of $56 million (and $262 million in 2019) and the payment of insurance company dividends to the holding company of $16.0 million during 4Q19 (and $186.3 million during 2019).  Both statutory operating income and dividends paid to the holding company exclude $46.0 million of intercompany tax sharing payments to be received by the insurance companies that will be returned to the holding company in the form of a dividend.

During the fourth quarter of 2019, we repurchased $75.0 million of common stock under our securities repurchase program (including $1.8 million of repurchases settled in 1Q2020).  We repurchased 4.4 million common shares at an average cost of $17.14 per share.  As of December 31, 2019, we had 148.1 million shares outstanding and had authority to repurchase up to an additional $532.3 million of our common stock.  During 4Q19, dividends paid on common stock totaled $16.4 million.

Unrestricted cash and investments held by our holding company were $187 million at December 31, 2019, compared to $220 million at December 31, 2018.

Book value per common share was $31.58 at December 31, 2019, compared to $20.78 at December 31, 2018.  Book value per diluted share, excluding accumulated other comprehensive income (loss) (2), was $22.09 at December 31, 2019, compared to $19.52 at December 31, 2018.

The debt-to-capital ratio was 17.5 percent and 21.4 percent at December 31, 2019 and 2018, respectively.  Our debt-to-total capital ratio, excluding accumulated other comprehensive income (3) was 23.0 percent at December 31, 2019 compared to 22.3 percent at December 31, 2018.

Return on equity for the year ended December 31, 2019 and 2018, was 9.8% and (7.5)%, respectively.  Return on equity for the year ended December 31, 2018 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 year ended December 31, 2019 and 2018, was 10.4% and 10.3%, respectively.

Conference Call
The Company will host a conference call to discuss results on February 12, 2020 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 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, "9696167."

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 at ir.CNOinc.com .  Participants 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 ir.CNOinc.com .

For more information, visit CNO online at CNOinc.com .































































































































 

 

















































































































































































































































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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, excluding significant items, in 2018 to remove the earnings of this block.

The significant items in 2019 included: (i) adjustments arising from our comprehensive annual actuarial review of assumptions including $10.8 million of unfavorable impacts in the Bankers Life segment and $.8 million of favorable impacts in the Washington National segment; (ii) $20.0 million of the net favorable impact from legal and regulatory matters in the Corporate segment; and (iii) an increase in income tax expense of $2.1 million.

The significant items in 2018 included: (i) a $2.3 million release of long-term care reserves (net of the reduction in insurance intangibles) due to the impact of policyholder actions following rate increases; (ii) a $1.1 million out-of-period adjustment which increased reserves on closed block annuities; (iii) adjustments arising from our comprehensive annual actuarial review of assumptions including $3.1 million of unfavorable impacts in the Bankers Life segment and $2.2 million of favorable impacts in the Washington National segment; (iv) the $14.4 million reduction in the value of investments backing our COLI used as a vehicle to fund Bankers Life's agent deferred compensation plan; and (v) a decrease in tax expense of $.1 million.

 

























































 

 








































































 

 
















































 

 














 

 






































Bankers Life is the marketing brand of various affiliated companies of CNO Financial Group including, Bankers Life and Casualty Company, Bankers Life Securities, Inc., and Bankers Life Advisory Services, Inc. Non-affiliated insurance products are offered through Bankers Life General Agency, Inc. (dba BL General Insurance Agency, Inc., AK, AL, CA, NV, PA). Agents who are financial advisors are registered with Bankers Life Securities, Inc.

Securities and variable annuity products and services are offered by Bankers Life Securities, Inc. Member FINRA/SIPC, (dba BL Securities, Inc., AL, GA, IA, IL, MI, NV, PA). Advisory products and services are offered by Bankers Life Advisory Services, Inc. SEC Registered Investment Adviser (dba BL Advisory Services, Inc., AL, GA, IA, MT, NV, PA). Home Office: 111 East Wacker Drive, Suite 1900, Chicago, IL 60601.





























 


 




























































































The following summarizes: (i) operating earnings; (ii) significant items; (iii) operating earnings, excluding significant items; and (iv) net income (loss) (dollars in millions):










































































































































































A reconciliation of pretax operating earnings (a non-GAAP financial measure) to net income (loss) is as follows (dollars in millions):

































































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):
























































































































































































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):




































 











 

































Cautionary Statement Regarding Forward-Looking Statements. This press release may contain forward-looking statements within the meaning of the federal securities laws.  These prospective statements reflect management's current expectations, but are not guarantees of future performance.  Accordingly, please refer to CNO Financial'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, 2018, and any subsequent Forms 10-Q on file with the Securities and Exchange Commission and on the Company's website at CNOinc.com on the Investors page.  CNO Financial specifically disclaims any obligation to update or revise any forward-looking statement because of new information, future developments or otherwise.

 

Cision View original content:http://www.prnewswire.com/news-releases/cno-financial-group-reports-fourth-quarter-and-full-year-2019-results-301003196.html

SOURCE CNO Financial Group, Inc.



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