Attached files
| file | filename |
|---|---|
| EX-99.1 - EXHIBIT 99.1 - CNO Financial Group, Inc. | exhibit991-03312017earnings.htm |
| 8-K - 8-K - CNO Financial Group, Inc. | form8-kx03312017earnings.htm |
Exhibit 99.2
Quarterly Financial Supplement - 1Q2017 | |||||
April 26, 2017 | |||||
Page 1
Table of Contents | Page | |||
Consolidated balance sheet | 3 | |||
Consolidated statement of operations | 4 | |||
Operating results | 5 | |||
Computation of weighted average shares outstanding | 6 | |||
Analyses of income before taxes and selected data: | ||||
Bankers Life | 7-9 | |||
Washington National | 10-12 | |||
Colonial Penn | 13-14 | |||
Long-term care in run-off | 15 | |||
Corporate Operations | 16 | |||
Premiums collected on insurance products: | ||||
Bankers Life | 17 | |||
Washington National | 18 | |||
Colonial Penn | 19 | |||
Long-term care in run-off | 19 | |||
First-Year Collected Premiums, New Annualized Premiums and Total Policies Inforce | 20 | |||
Statutory information | 21 | |||
Notes | 22 | |||
Page 2
CNO Financial Group, Inc. | |||||||||||||||
Consolidated balance sheet (in millions) | Mar-16 | Jun-16 | Sep-16 | Dec-16 | Mar-17 | ||||||||||
Assets | |||||||||||||||
Investments: | |||||||||||||||
Fixed maturities, available for sale, at fair value | $ | 20,105.1 | $ | 20,989.8 | $ | 21,822.2 | $ | 21,096.2 | $ | 21,378.4 | |||||
Equity securities at fair value | 610.7 | 541.2 | 331.3 | 584.2 | 587.8 | ||||||||||
Mortgage loans | 1,700.8 | 1,732.9 | 1,749.5 | 1,768.0 | 1,788.5 | ||||||||||
Policy loans | 110.1 | 110.3 | 110.8 | 112.0 | 112.4 | ||||||||||
Trading securities | 285.2 | 289.3 | 307.2 | 363.4 | 341.1 | ||||||||||
Investments held by variable interest entities | 1,691.0 | 1,807.8 | 1,794.4 | 1,724.3 | 1,514.5 | ||||||||||
Other invested assets | 433.4 | 525.7 | 607.2 | 589.5 | 665.2 | ||||||||||
Total investments | 24,936.3 | 25,997.0 | 26,722.6 | 26,237.6 | 26,387.9 | ||||||||||
Cash and cash equivalents - unrestricted | 635.7 | 437.2 | 706.0 | 478.9 | 530.2 | ||||||||||
Cash and cash equivalents held by variable interest entities | 190.1 | 160.0 | 147.7 | 189.3 | 354.5 | ||||||||||
Accrued investment income | 247.7 | 228.7 | 255.3 | 239.6 | 258.2 | ||||||||||
Present value of future profits | 432.2 | 417.5 | 407.7 | 401.8 | 388.8 | ||||||||||
Deferred acquisition costs | 954.8 | 911.3 | 909.7 | 1,044.7 | 1,028.5 | ||||||||||
Reinsurance receivables | 2,839.4 | 2,820.4 | 2,290.1 | 2,260.4 | 2,241.1 | ||||||||||
Income tax assets, net | 828.8 | 677.7 | 606.9 | 789.7 | 697.8 | ||||||||||
Assets held in separate accounts | 4.6 | 4.6 | 4.7 | 4.7 | 4.6 | ||||||||||
Other assets | 388.4 | 368.1 | 370.0 | 328.5 | 535.8 | ||||||||||
Total assets | $ | 31,458.0 | $ | 32,022.5 | $ | 32,420.7 | $ | 31,975.2 | $ | 32,427.4 | |||||
Liabilities | |||||||||||||||
Liabilities for insurance products: | |||||||||||||||
Policyholder account balances | $ | 10,772.4 | $ | 10,754.8 | $ | 10,817.2 | $ | 10,912.7 | $ | 10,975.1 | |||||
Future policy benefits | 10,768.7 | 11,127.0 | 11,354.0 | 10,953.3 | 11,057.2 | ||||||||||
Liability for policy and contract claims | 488.7 | 489.2 | 492.4 | 500.6 | 498.1 | ||||||||||
Unearned and advanced premiums | 292.0 | 284.1 | 278.2 | 282.5 | 292.8 | ||||||||||
Liabilities related to separate accounts | 4.6 | 4.6 | 4.7 | 4.7 | 4.6 | ||||||||||
Other liabilities | 788.9 | 731.0 | 730.1 | 611.4 | 798.0 | ||||||||||
Investment borrowings | 1,548.0 | 1,547.8 | 1,647.6 | 1,647.4 | 1,647.2 | ||||||||||
Borrowings related to variable interest entities | 1,656.6 | 1,715.8 | 1,690.2 | 1,662.8 | 1,634.2 | ||||||||||
Notes payable - direct corporate obligations | 911.5 | 912.0 | 912.5 | 912.9 | 913.4 | ||||||||||
Total liabilities | 27,231.4 | 27,566.3 | 27,926.9 | 27,488.3 | 27,820.6 | ||||||||||
Shareholders' equity | |||||||||||||||
Common stock | 1.8 | 1.7 | 1.7 | 1.7 | 1.7 | ||||||||||
Additional paid-in capital | 3,304.3 | 3,251.1 | 3,206.3 | 3,212.1 | 3,177.1 | ||||||||||
Retained earnings | 380.0 | 425.6 | 430.3 | 650.7 | 698.4 | ||||||||||
Total shareholders' equity before accumulated other comprehensive income | 3,686.1 | 3,678.4 | 3,638.3 | 3,864.5 | 3,877.2 | ||||||||||
Accumulated other comprehensive income | 540.5 | 777.8 | 855.5 | 622.4 | 729.6 | ||||||||||
Total shareholders' equity | 4,226.6 | 4,456.2 | 4,493.8 | 4,486.9 | 4,606.8 | ||||||||||
Total liabilities and shareholders' equity | $ | 31,458.0 | $ | 32,022.5 | $ | 32,420.7 | $ | 31,975.2 | $ | 32,427.4 | |||||
Mar-16 | Jun-16 | Sep-16 | Dec-16 | Mar-17 | |||||||||||
Book value per common share | $ | 23.60 | $ | 25.28 | $ | 25.89 | $ | 25.82 | $ | 26.77 | |||||
Book value per common share, excluding accumulated other comprehensive income (1) (2) | $ | 20.58 | $ | 20.87 | $ | 20.96 | $ | 22.24 | $ | 22.53 | |||||
Book value per diluted share (1) (3) | $ | 20.38 | $ | 20.67 | $ | 20.80 | $ | 22.02 | $ | 22.31 | |||||
Page 3
CNO Financial Group, Inc. | ||||||||||||||||||
Consolidated statement of operations (in millions) | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 2016 | 1Q17 | ||||||||||||
Revenues | ||||||||||||||||||
Insurance policy income | $ | 644.4 | $ | 653.6 | $ | 649.0 | $ | 654.1 | $ | 2,601.1 | $ | 663.8 | ||||||
Net investment income: | ||||||||||||||||||
General account assets | 291.0 | 295.8 | 301.7 | 315.6 | 1,204.1 | 312.0 | ||||||||||||
Policyholder and other special-purpose portfolios | 11.7 | 27.9 | 43.1 | 38.4 | 121.1 | 75.2 | ||||||||||||
Realized investment gains (losses): | ||||||||||||||||||
Net realized investment gains (losses), excluding impairment losses | 9.1 | 33.5 | 12.8 | (7.5 | ) | 47.9 | 16.3 | |||||||||||
Other-than-temporary impairments: | ||||||||||||||||||
Total other-than-temporary impairment losses | (10.0 | ) | (13.6 | ) | (1.2 | ) | (11.1 | ) | (35.9 | ) | (8.4 | ) | ||||||
Portion of other-than-temporary impairment losses recognized in accumulated other comprehensive income | — | — | — | 3.6 | 3.6 | — | ||||||||||||
Net impairment losses recognized | (10.0 | ) | (13.6 | ) | (1.2 | ) | (7.5 | ) | (32.3 | ) | (8.4 | ) | ||||||
Loss on dissolution of a variable interest entity | — | (7.3 | ) | — | — | (7.3 | ) | — | ||||||||||
Total realized gains (losses) | (0.9 | ) | 12.6 | 11.6 | (15.0 | ) | 8.3 | 7.9 | ||||||||||
Fee revenue and other income | 14.2 | 14.0 | 10.5 | 11.8 | 50.5 | 11.8 | ||||||||||||
Total revenues | 960.4 | 1,003.9 | 1,015.9 | 1,004.9 | 3,985.1 | 1,070.7 | ||||||||||||
Benefits and expenses | ||||||||||||||||||
Insurance policy benefits | 619.0 | 632.4 | 609.8 | 529.3 | 2,390.5 | 669.3 | ||||||||||||
Loss on reinsurance transaction | — | — | 75.4 | — | 75.4 | — | ||||||||||||
Interest expense | 27.7 | 28.9 | 29.4 | 30.4 | 116.4 | 30.8 | ||||||||||||
Amortization | 62.1 | 54.8 | 64.7 | 71.7 | 253.3 | 63.5 | ||||||||||||
Other operating costs and expenses | 211.1 | 205.1 | 187.3 | 192.8 | 796.3 | 210.4 | ||||||||||||
Total benefits and expenses | 919.9 | 921.2 | 966.6 | 824.2 | 3,631.9 | 974.0 | ||||||||||||
Income before income taxes | 40.5 | 82.7 | 49.3 | 180.7 | 353.2 | 96.7 | ||||||||||||
Income tax expense on period income | 15.0 | 29.8 | 16.9 | 66.1 | 127.8 | 34.4 | ||||||||||||
Valuation allowance for deferred tax assets and other tax items | (20.0 | ) | (7.0 | ) | 13.8 | (119.6 | ) | (132.8 | ) | — | ||||||||
Net income | $ | 45.5 | $ | 59.9 | $ | 18.6 | $ | 234.2 | $ | 358.2 | $ | 62.3 | ||||||
Page 4
CNO Financial Group, Inc. | ||||||||||||||||||
Operating results ($ in millions, except per share amounts) | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 2016 | 1Q17 | ||||||||||||
Adjusted EBIT (4): | ||||||||||||||||||
Bankers Life | $ | 77.6 | $ | 93.3 | $ | 88.1 | $ | 138.9 | $ | 397.9 | $ | 89.7 | ||||||
Washington National | 26.3 | 21.5 | 25.2 | 29.9 | 102.9 | 23.5 | ||||||||||||
Colonial Penn | (6.8 | ) | 3.0 | 0.9 | 4.6 | 1.7 | (0.3 | ) | ||||||||||
Long-term care in run-off | — | — | — | (3.9 | ) | (3.9 | ) | 0.4 | ||||||||||
Adjusted EBIT from business segments | 97.1 | 117.8 | 114.2 | 169.5 | 498.6 | 113.3 | ||||||||||||
Corporate operations, excluding corporate interest expense | (8.1 | ) | (7.0 | ) | (4.4 | ) | (23.0 | ) | (42.5 | ) | (8.9 | ) | ||||||
Adjusted EBIT | 89.0 | 110.8 | 109.8 | 146.5 | 456.1 | 104.4 | ||||||||||||
Corporate interest expense | (11.4 | ) | (11.4 | ) | (11.5 | ) | (11.5 | ) | (45.8 | ) | (11.5 | ) | ||||||
Operating earnings before taxes | 77.6 | 99.4 | 98.3 | 135.0 | 410.3 | 92.9 | ||||||||||||
Tax expense on operating income | 28.0 | 35.7 | 34.0 | 50.1 | 147.8 | 33.1 | ||||||||||||
Net operating income (5) | 49.6 | 63.7 | 64.3 | 84.9 | 262.5 | 59.8 | ||||||||||||
Net realized investment gains (losses) (net of related amortization) | (1.0 | ) | 12.0 | 11.4 | (14.8 | ) | 7.6 | 7.9 | ||||||||||
Fair value changes in embedded derivative liabilities (net of related amortization) | (29.5 | ) | (16.5 | ) | 9.4 | 46.2 | 9.6 | (4.4 | ) | |||||||||
Fair value changes and amendment related to agent deferred compensation plan | (6.0 | ) | (12.3 | ) | 6.3 | 15.1 | 3.1 | — | ||||||||||
Loss on reinsurance transaction | — | — | (75.4 | ) | — | (75.4 | ) | — | ||||||||||
Other | (0.6 | ) | 0.1 | (0.7 | ) | (0.8 | ) | (2.0 | ) | 0.3 | ||||||||
Non-operating income (loss) before taxes | (37.1 | ) | (16.7 | ) | (49.0 | ) | 45.7 | (57.1 | ) | 3.8 | ||||||||
Income tax expense (benefit): | ||||||||||||||||||
On non-operating income (loss) | (13.0 | ) | (5.9 | ) | (17.1 | ) | 16.0 | (20.0 | ) | 1.3 | ||||||||
Valuation allowance for deferred tax assets and other tax items | (20.0 | ) | (7.0 | ) | 13.8 | (119.6 | ) | (132.8 | ) | — | ||||||||
Net non-operating income (loss) | (4.1 | ) | (3.8 | ) | (45.7 | ) | 149.3 | 95.7 | 2.5 | |||||||||
Net income | $ | 45.5 | $ | 59.9 | $ | 18.6 | $ | 234.2 | $ | 358.2 | $ | 62.3 | ||||||
Per diluted share: | ||||||||||||||||||
Net operating income | $ | .27 | $ | .35 | $ | .37 | $ | .49 | $ | 1.47 | $ | .34 | ||||||
Net realized investment gains (losses) (net of related amortization and taxes) | — | .04 | .04 | (.06 | ) | .03 | .03 | |||||||||||
Fair value changes in embedded derivative liabilities (net of related amortization and taxes) | (.11 | ) | (.06 | ) | .04 | .17 | .04 | (.01 | ) | |||||||||
Fair value changes and amendment related to agent deferred compensation plan (net of taxes) | (.02 | ) | (.04 | ) | .02 | .06 | .01 | — | ||||||||||
Loss on reinsurance transaction (net of taxes) | — | — | (.28 | ) | — | (.27 | ) | — | ||||||||||
Valuation allowance for deferred tax assets and other tax items | .11 | .04 | (.08 | ) | .68 | .74 | — | |||||||||||
Other | — | — | — | — | (.01 | ) | — | |||||||||||
Net income | $ | .25 | $ | .33 | $ | .11 | $ | 1.34 | $ | 2.01 | $ | .36 | ||||||
Page 5
CNO Financial Group, Inc. | ||||||||||||
Computation of weighted average shares outstanding | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 2016 | 1Q17 | ||||||
(000s) | ||||||||||||
Basic | ||||||||||||
Shares outstanding, beginning of period | 184,028.5 | 179,098.4 | 176,240.6 | 173,544.0 | 184,028.5 | 173,753.6 | ||||||
Weighted average shares issued during the period: | ||||||||||||
Shares repurchased | (3,839.6 | ) | (980.0 | ) | (2,351.4 | ) | — | (8,195.5 | ) | (513.6 | ) | |
Stock options exercised and vested restricted and performance stock | 233.9 | 205.3 | 359.9 | 90.0 | 963.1 | 213.3 | ||||||
Shares withheld for the payment of taxes on the vesting of restricted stock | (72.5 | ) | (0.7 | ) | (2.1 | ) | (0.4 | ) | (157.6 | ) | (22.6 | ) |
Weighted average basic shares outstanding during the period | 180,350.3 | 178,323.0 | 174,247.0 | 173,633.6 | 176,638.5 | 173,430.7 | ||||||
Basic shares outstanding, end of period | 179,098.4 | 176,240.6 | 173,544.0 | 173,753.6 | 173,753.6 | 172,103.8 | ||||||
Diluted | ||||||||||||
Weighted average basic shares outstanding | 180,350.3 | 178,323.0 | 174,247.0 | 173,633.6 | 176,638.5 | 173,430.7 | ||||||
Common stock equivalent shares related to: | ||||||||||||
Stock options, restricted stock and performance units | 1,777.8 | 1,943.9 | 1,476.3 | 1,538.9 | 1,684.2 | 1,634.7 | ||||||
Weighted average diluted shares outstanding during the period | 182,128.1 | 180,266.9 | 175,723.3 | 175,172.5 | 178,322.7 | 175,065.4 | ||||||
Diluted shares outstanding, end of period | 180,902.3 | 177,985.1 | 174,893.2 | 175,475.5 | 175,475.5 | 173,818.0 | ||||||
Page 6
CNO Financial Group, Inc. | ||||||||||||||||||
Bankers Life | ||||||||||||||||||
Analysis of income before taxes (in millions) | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 2016 | 1Q17 | ||||||||||||
Insurance policy income | $ | 413.2 | $ | 419.6 | $ | 413.7 | $ | 412.6 | $ | 1,659.1 | $ | 419.1 | ||||||
Net investment income (loss): | ||||||||||||||||||
General account invested assets | 222.0 | 225.1 | 229.1 | 233.3 | 909.5 | 231.1 | ||||||||||||
Fixed index products | (7.8 | ) | 2.8 | 15.6 | 16.7 | 27.3 | 41.8 | |||||||||||
Fee revenue and other income | 6.6 | 7.3 | 9.6 | 10.9 | 34.4 | 10.6 | ||||||||||||
Total revenues | 634.0 | 654.8 | 668.0 | 673.5 | 2,630.3 | 702.6 | ||||||||||||
Insurance policy benefits | 360.2 | 370.1 | 368.4 | 318.7 | 1,417.4 | 367.6 | ||||||||||||
Amounts added to policyholder account balances: | ||||||||||||||||||
Cost of interest credited to policyholders | 28.1 | 27.5 | 27.7 | 27.5 | 110.8 | 26.5 | ||||||||||||
Cost of options to fund index credits, net of forfeitures | 16.9 | 16.6 | 15.7 | 16.9 | 66.1 | 14.9 | ||||||||||||
Market value changes credited to policyholders | (8.2 | ) | 2.6 | 15.3 | 16.6 | 26.3 | 42.2 | |||||||||||
Amortization related to operations | 51.5 | 40.0 | 43.8 | 41.2 | 176.5 | 46.3 | ||||||||||||
Interest expense on investment borrowings | 2.9 | 3.0 | 3.5 | 3.8 | 13.2 | 4.2 | ||||||||||||
Other operating costs and expenses | 105.0 | 101.7 | 105.5 | 109.9 | 422.1 | 111.2 | ||||||||||||
Total benefits and expenses | 556.4 | 561.5 | 579.9 | 534.6 | 2,232.4 | 612.9 | ||||||||||||
Adjusted EBIT (4) | $ | 77.6 | $ | 93.3 | $ | 88.1 | $ | 138.9 | $ | 397.9 | $ | 89.7 | ||||||
Health underwriting margins (in millions) | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 2016 | 1Q17 | ||||||||||||
Medicare supplement: | ||||||||||||||||||
Earned premium | $ | 192.7 | $ | 193.5 | $ | 193.7 | $ | 193.0 | $ | 772.9 | $ | 196.0 | ||||||
Benefit ratio | 71.1 | % | 73.0 | % | 72.5 | % | 71.2 | % | 71.9 | % | 70.0 | % | ||||||
Underwriting margin (earned premium less policy benefits) | $ | 55.7 | $ | 52.3 | $ | 53.2 | $ | 55.5 | $ | 216.7 | $ | 58.8 | ||||||
Long-term care: | ||||||||||||||||||
Earned premium | $ | 118.5 | $ | 118.3 | $ | 116.6 | $ | 117.8 | $ | 471.2 | $ | 115.6 | ||||||
Benefit ratio before interest income on reserves | 132.9 | % | 134.7 | % | 137.7 | % | 134.7 | % | 135.0 | % | 132.6 | % | ||||||
Interest-adjusted benefit ratio | 75.3 | % | 77.9 | % | 77.7 | % | 76.0 | % | 76.7 | % | 72.5 | % | ||||||
Underwriting margin (earned premium plus interest income on reserves less policy benefits) | $ | 29.3 | $ | 26.2 | $ | 26.0 | $ | 28.3 | $ | 109.8 | $ | 31.8 | ||||||
Page 7
CNO Financial Group, Inc. | ||||||||||||||||||
Bankers Life | ||||||||||||||||||
Average liabilities for insurance products (in millions) | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 2016 | 1Q17 | ||||||||||||
Fixed index annuities | $ | 4,327.5 | $ | 4,461.1 | $ | 4,597.1 | $ | 4,725.6 | $ | 4,527.8 | $ | 4,871.4 | ||||||
Fixed interest annuities | 3,297.5 | 3,221.1 | 3,149.7 | 3,084.4 | 3,188.2 | 3,012.3 | ||||||||||||
SPIAs and supplemental contracts: | ||||||||||||||||||
Mortality based | 181.4 | 177.1 | 172.7 | 168.3 | 174.9 | 164.9 | ||||||||||||
Deposit based | 155.3 | 153.8 | 152.9 | 152.6 | 153.7 | 151.6 | ||||||||||||
Health: | ||||||||||||||||||
Long-term care | 4,814.2 | 4,980.8 | 5,161.2 | 5,036.0 | 4,998.0 | 4,866.1 | ||||||||||||
Medicare supplement | 339.3 | 335.4 | 333.0 | 339.5 | 336.8 | 343.4 | ||||||||||||
Other health | 48.7 | 49.7 | 50.8 | 52.1 | 50.3 | 54.1 | ||||||||||||
Life: | ||||||||||||||||||
Interest sensitive | 689.2 | 706.6 | 722.7 | 740.0 | 714.6 | 757.3 | ||||||||||||
Non-interest sensitive | 989.7 | 1,009.6 | 1,027.9 | 1,044.8 | 1,018.0 | 1,062.2 | ||||||||||||
Total average liabilities for insurance products, net of reinsurance ceded | $ | 14,842.8 | $ | 15,095.2 | $ | 15,368.0 | $ | 15,343.3 | $ | 15,162.3 | $ | 15,283.3 | ||||||
Annuities - account value rollforwards (in millions) | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 2016 | 1Q17 | ||||||||||||
Fixed index annuities | ||||||||||||||||||
Balance as of the beginning of the period | $ | 4,220.2 | $ | 4,325.5 | $ | 4,410.5 | $ | 4,558.3 | $ | 4,220.2 | $ | 4,740.2 | ||||||
Gross deposits | 199.9 | 179.3 | 218.3 | 270.5 | 868.0 | 235.3 | ||||||||||||
Withdrawals | (97.4 | ) | (96.2 | ) | (87.0 | ) | (98.9 | ) | (379.5 | ) | (112.0 | ) | ||||||
Returns reinvested | 2.8 | 1.9 | 16.5 | 10.3 | 31.5 | 32.8 | ||||||||||||
Balance as of the end of the period | $ | 4,325.5 | $ | 4,410.5 | $ | 4,558.3 | $ | 4,740.2 | $ | 4,740.2 | $ | 4,896.3 | ||||||
Fixed interest annuities | ||||||||||||||||||
Balance as of the beginning of the period | $ | 3,331.9 | $ | 3,260.6 | $ | 3,178.9 | $ | 3,117.6 | $ | 3,331.9 | $ | 3,048.3 | ||||||
Gross deposits | 30.7 | 24.5 | 20.8 | 12.1 | 88.1 | 18.6 | ||||||||||||
Withdrawals | (123.2 | ) | (126.8 | ) | (102.8 | ) | (101.8 | ) | (454.6 | ) | (112.9 | ) | ||||||
Returns reinvested | 21.2 | 20.6 | 20.7 | 20.4 | 82.9 | 19.4 | ||||||||||||
Balance as of the end of the period | $ | 3,260.6 | $ | 3,178.9 | $ | 3,117.6 | $ | 3,048.3 | $ | 3,048.3 | $ | 2,973.4 | ||||||
Total annuities | ||||||||||||||||||
Balance as of the beginning of the period | $ | 7,552.1 | $ | 7,586.1 | $ | 7,589.4 | $ | 7,675.9 | $ | 7,552.1 | $ | 7,788.5 | ||||||
Gross deposits | 230.6 | 203.8 | 239.1 | 282.6 | 956.1 | 253.9 | ||||||||||||
Withdrawals | (220.6 | ) | (223.0 | ) | (189.8 | ) | (200.7 | ) | (834.1 | ) | (224.9 | ) | ||||||
Returns reinvested | 24.0 | 22.5 | 37.2 | 30.7 | 114.4 | 52.2 | ||||||||||||
Balance as of the end of the period | $ | 7,586.1 | $ | 7,589.4 | $ | 7,675.9 | $ | 7,788.5 | $ | 7,788.5 | $ | 7,869.7 | ||||||
Page 8
CNO Financial Group, Inc. | ||||||||||||||||||
Bankers Life | ||||||||||||||||||
Present value of future profits (in millions) | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 2016 | 1Q17 | ||||||||||||
Balance, beginning of period | $ | 114.9 | $ | 106.2 | $ | 101.8 | $ | 98.2 | $ | 114.9 | $ | 95.5 | ||||||
Amortization related to operations | (9.9 | ) | (8.1 | ) | (7.6 | ) | (8.8 | ) | (34.4 | ) | (7.9 | ) | ||||||
Amortization related to net realized investment (gains) losses | — | — | — | — | — | — | ||||||||||||
Amounts related to changes in unrealized investment gains (losses) on fixed maturities, available for sale | 1.2 | 3.7 | 4.0 | 6.1 | 15.0 | 3.7 | ||||||||||||
Balance, end of period | $ | 106.2 | $ | 101.8 | $ | 98.2 | $ | 95.5 | $ | 95.5 | $ | 91.3 | ||||||
Deferred acquisition costs (in millions) | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 2016 | 1Q17 | ||||||||||||
Balance, beginning of period | $ | 718.2 | $ | 582.4 | $ | 533.5 | $ | 525.2 | $ | 718.2 | $ | 646.2 | ||||||
Deferred acquisition expenses | 40.3 | 36.9 | 40.6 | 44.9 | 162.7 | 41.7 | ||||||||||||
Amortization related to operations | (41.6 | ) | (31.9 | ) | (36.2 | ) | (32.4 | ) | (142.1 | ) | (38.4 | ) | ||||||
Amortization related to net realized investment (gains) losses | 0.1 | (0.5 | ) | (0.2 | ) | 0.2 | (0.4 | ) | — | |||||||||
Amortization related to fair value changes in embedded derivative liabilities | 7.6 | 4.2 | (2.3 | ) | (10.8 | ) | (1.3 | ) | 1.0 | |||||||||
Amounts related to changes in unrealized investment gains (losses) on fixed maturities, available for sale | (142.2 | ) | (57.6 | ) | (10.2 | ) | 119.1 | (90.9 | ) | (28.7 | ) | |||||||
Balance, end of period | $ | 582.4 | $ | 533.5 | $ | 525.2 | $ | 646.2 | $ | 646.2 | $ | 621.8 | ||||||
Page 9
CNO Financial Group, Inc. | ||||||||||||||||||
Washington National | ||||||||||||||||||
Analysis of income before taxes (in millions) | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 2016 | 1Q17 | ||||||||||||
Insurance policy income | $ | 162.1 | $ | 163.5 | $ | 164.4 | $ | 165.8 | $ | 655.8 | $ | 167.1 | ||||||
Net investment income (loss): | ||||||||||||||||||
General account invested assets | 61.7 | 62.6 | 66.0 | 65.9 | 256.2 | 63.4 | ||||||||||||
Fixed index products | (1.2 | ) | — | 1.5 | 1.6 | 1.9 | 2.6 | |||||||||||
Trading account income related to policyholder accounts | 0.1 | 1.0 | (0.4 | ) | 0.5 | 1.2 | 1.4 | |||||||||||
Fee revenue and other income | 0.3 | 0.3 | 0.4 | 0.3 | 1.3 | 0.3 | ||||||||||||
Total revenues | 223.0 | 227.4 | 231.9 | 234.1 | 916.4 | 234.8 | ||||||||||||
Insurance policy benefits | 129.1 | 137.8 | 138.7 | 132.6 | 538.2 | 137.8 | ||||||||||||
Amounts added to policyholder account balances: | ||||||||||||||||||
Cost of interest credited to policyholders | 3.5 | 3.5 | 3.3 | 3.5 | 13.8 | 3.3 | ||||||||||||
Cost of options to fund index credits, net of forfeitures | 1.7 | 1.5 | 1.2 | 1.4 | 5.8 | 1.0 | ||||||||||||
Market value changes credited to policyholders | (0.8 | ) | 1.2 | 1.3 | 2.2 | 3.9 | 4.6 | |||||||||||
Amortization related to operations | 15.1 | 15.1 | 14.3 | 14.6 | 59.1 | 14.3 | ||||||||||||
Interest expense on investment borrowings | 0.8 | 0.8 | 0.9 | 1.2 | 3.7 | 1.3 | ||||||||||||
Other operating costs and expenses | 47.3 | 46.0 | 47.0 | 48.7 | 189.0 | 49.0 | ||||||||||||
Total benefits and expenses | 196.7 | 205.9 | 206.7 | 204.2 | 813.5 | 211.3 | ||||||||||||
Adjusted EBIT (4) | $ | 26.3 | $ | 21.5 | $ | 25.2 | $ | 29.9 | $ | 102.9 | $ | 23.5 | ||||||
Health underwriting margins (in millions) | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 2016 | 1Q17 | ||||||||||||
Medicare supplement: | ||||||||||||||||||
Earned premium | $ | 16.3 | $ | 15.8 | $ | 15.4 | $ | 15.0 | $ | 62.5 | $ | 14.3 | ||||||
Benefit ratio | 65.1 | % | 74.0 | % | 69.5 | % | 64.8 | % | 68.4 | % | 66.8 | % | ||||||
Underwriting margin (earned premium less policy benefits) | $ | 5.7 | $ | 4.1 | $ | 4.7 | $ | 5.3 | $ | 19.8 | $ | 4.8 | ||||||
Supplemental health and other: | ||||||||||||||||||
Earned premium | $ | 139.2 | $ | 140.9 | $ | 141.4 | $ | 144.0 | $ | 565.5 | $ | 145.6 | ||||||
Benefit ratio before interest income on reserves | 81.2 | % | 85.7 | % | 84.0 | % | 81.0 | % | 83.0 | % | 84.6 | % | ||||||
Interest-adjusted benefit ratio | 57.7 | % | 61.6 | % | 59.8 | % | 57.0 | % | 59.0 | % | 60.6 | % | ||||||
Underwriting margin (earned premium plus interest income on reserves less policy benefits) | $ | 58.9 | $ | 54.0 | $ | 56.9 | $ | 62.0 | $ | 231.8 | $ | 57.3 | ||||||
Page 10
CNO Financial Group, Inc. | ||||||||||||||||||
Washington National | ||||||||||||||||||
Average liabilities for insurance products (in millions) | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 2016 | 1Q17 | ||||||||||||
Fixed index annuities | $ | 363.5 | $ | 355.7 | $ | 346.0 | $ | 335.5 | $ | 350.2 | $ | 326.1 | ||||||
Fixed interest annuities | 111.2 | 108.5 | 105.6 | 102.6 | 107.0 | 100.8 | ||||||||||||
SPIAs and supplemental contracts: | ||||||||||||||||||
Mortality based | 248.5 | 250.9 | 251.9 | 243.2 | 248.6 | 233.5 | ||||||||||||
Deposit based | 265.5 | 266.8 | 267.1 | 269.6 | 267.2 | 271.9 | ||||||||||||
Separate Accounts | 4.7 | 4.6 | 4.7 | 4.7 | 4.7 | 4.6 | ||||||||||||
Health: | ||||||||||||||||||
Supplemental health | 2,558.0 | 2,587.5 | 2,621.7 | 2,650.3 | 2,604.4 | 2,680.2 | ||||||||||||
Medicare supplement | 29.5 | 28.4 | 27.8 | 27.5 | 28.3 | 26.9 | ||||||||||||
Other health | 14.3 | 14.3 | 14.1 | 13.9 | 14.1 | 13.8 | ||||||||||||
Life: | ||||||||||||||||||
Interest sensitive | 150.5 | 150.6 | 150.3 | 149.7 | 150.3 | 149.2 | ||||||||||||
Non-interest sensitive | 182.3 | 180.5 | 178.9 | 177.5 | 179.8 | 175.3 | ||||||||||||
Total average liabilities for insurance products, net of reinsurance ceded | $ | 3,928.0 | $ | 3,947.8 | $ | 3,968.1 | $ | 3,974.5 | $ | 3,954.6 | $ | 3,982.3 | ||||||
Annuities - account value rollforwards (in millions) | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 2016 | 1Q17 | ||||||||||||
Fixed index annuities | ||||||||||||||||||
Balance as of the beginning of the period | $ | 354.0 | $ | 345.9 | $ | 334.5 | $ | 324.0 | $ | 354.0 | $ | 313.4 | ||||||
Gross deposits | 0.2 | 0.3 | 0.2 | 0.5 | 1.2 | 0.2 | ||||||||||||
Withdrawals | (9.2 | ) | (12.6 | ) | (12.9 | ) | (13.0 | ) | (47.7 | ) | (11.6 | ) | ||||||
Returns reinvested | 0.9 | 0.9 | 2.2 | 1.9 | 5.9 | 2.8 | ||||||||||||
Balance as of the end of the period | $ | 345.9 | $ | 334.5 | $ | 324.0 | $ | 313.4 | $ | 313.4 | $ | 304.8 | ||||||
Fixed interest annuities | ||||||||||||||||||
Balance as of the beginning of the period | $ | 111.4 | $ | 108.3 | $ | 105.9 | $ | 103.1 | $ | 111.4 | $ | 100.3 | ||||||
Gross deposits | 0.1 | 0.1 | 0.1 | — | 0.3 | 0.1 | ||||||||||||
Withdrawals | (4.2 | ) | (4.3 | ) | (3.3 | ) | (4.2 | ) | (16.0 | ) | (2.9 | ) | ||||||
Returns reinvested | 1.0 | 1.8 | 0.4 | 1.4 | 4.6 | 2.2 | ||||||||||||
Balance as of the end of the period | $ | 108.3 | $ | 105.9 | $ | 103.1 | $ | 100.3 | $ | 100.3 | $ | 99.7 | ||||||
Total annuities | ||||||||||||||||||
Balance as of the beginning of the period | $ | 465.4 | $ | 454.2 | $ | 440.4 | $ | 427.1 | $ | 465.4 | $ | 413.7 | ||||||
Gross deposits | 0.3 | 0.4 | 0.3 | 0.5 | 1.5 | 0.3 | ||||||||||||
Withdrawals | (13.4 | ) | (16.9 | ) | (16.2 | ) | (17.2 | ) | (63.7 | ) | (14.5 | ) | ||||||
Returns reinvested | 1.9 | 2.7 | 2.6 | 3.3 | 10.5 | 5.0 | ||||||||||||
Balance as of the end of the period | $ | 454.2 | $ | 440.4 | $ | 427.1 | $ | 413.7 | $ | 413.7 | $ | 404.5 | ||||||
Page 11
CNO Financial Group, Inc. | ||||||||||||||||||
Washington National | ||||||||||||||||||
Present value of future profits (in millions) | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 2016 | 1Q17 | ||||||||||||
Balance, beginning of period | $ | 290.2 | $ | 283.4 | $ | 274.1 | $ | 269.0 | $ | 290.2 | $ | 266.8 | ||||||
Amortization related to operations | (6.5 | ) | (6.3 | ) | (5.2 | ) | (5.4 | ) | (23.4 | ) | (5.3 | ) | ||||||
Amounts related to changes in unrealized investment gains (losses) on fixed maturities, available for sale | (0.3 | ) | (3.0 | ) | 0.1 | 3.2 | — | (2.4 | ) | |||||||||
Balance, end of period | $ | 283.4 | $ | 274.1 | $ | 269.0 | $ | 266.8 | $ | 266.8 | $ | 259.1 | ||||||
Deferred acquisition costs (in millions) | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 2016 | 1Q17 | ||||||||||||
Balance, beginning of period | $ | 280.0 | $ | 282.3 | $ | 284.7 | $ | 287.8 | $ | 280.0 | $ | 299.9 | ||||||
Deferred acquisition expenses | 14.3 | 14.0 | 13.8 | 13.5 | 55.6 | 14.6 | ||||||||||||
Amortization related to operations | (8.6 | ) | (8.8 | ) | (9.1 | ) | (9.2 | ) | (35.7 | ) | (9.0 | ) | ||||||
Amortization related to net realized investment (gains) losses | (0.2 | ) | (0.1 | ) | — | — | (0.3 | ) | — | |||||||||
Amortization related to fair value changes in embedded derivative liabilities | 0.9 | 0.4 | (0.4 | ) | (1.3 | ) | (0.4 | ) | 0.1 | |||||||||
Amounts related to changes in unrealized investment gains (losses) on fixed maturities, available for sale | (4.1 | ) | (3.1 | ) | (1.2 | ) | 9.1 | 0.7 | (1.5 | ) | ||||||||
Balance, end of period | $ | 282.3 | $ | 284.7 | $ | 287.8 | $ | 299.9 | $ | 299.9 | $ | 304.1 | ||||||
Page 12
CNO Financial Group, Inc. | ||||||||||||||||||
Colonial Penn | ||||||||||||||||||
Analysis of income (loss) before taxes (in millions) | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 2016 | 1Q17 | ||||||||||||
Insurance policy income | $ | 69.1 | $ | 70.5 | $ | 70.9 | $ | 70.9 | $ | 281.4 | $ | 73.0 | ||||||
Net investment income on general account invested assets | 11.0 | 10.9 | 11.1 | 11.2 | 44.2 | 10.9 | ||||||||||||
Fee revenue and other income | 0.4 | 0.2 | 0.2 | 0.3 | 1.1 | 0.2 | ||||||||||||
Total revenues | 80.5 | 81.6 | 82.2 | 82.4 | 326.7 | 84.1 | ||||||||||||
Insurance policy benefits | 50.4 | 50.3 | 50.1 | 50.4 | 201.2 | 52.6 | ||||||||||||
Amounts added to annuity and interest-sensitive life product account balances | 0.1 | 0.2 | 0.2 | 0.2 | 0.7 | 0.1 | ||||||||||||
Amortization related to operations | 3.9 | 3.7 | 3.7 | 4.0 | 15.3 | 4.0 | ||||||||||||
Interest expense on investment borrowings | 0.1 | 0.2 | 0.1 | 0.2 | 0.6 | 0.2 | ||||||||||||
Other operating costs and expenses | 32.8 | 24.2 | 27.2 | 23.0 | 107.2 | 27.5 | ||||||||||||
Total benefits and expenses | 87.3 | 78.6 | 81.3 | 77.8 | 325.0 | 84.4 | ||||||||||||
Adjusted EBIT (4) | $ | (6.8 | ) | $ | 3.0 | $ | 0.9 | $ | 4.6 | $ | 1.7 | $ | (0.3 | ) | ||||
Average liabilities for insurance products (in millions) | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 2016 | 1Q17 | ||||||||||||
SPIAs - mortality based | $ | 71.2 | $ | 74.3 | $ | 76.1 | $ | 74.8 | $ | 74.1 | $ | 72.6 | ||||||
Health: | ||||||||||||||||||
Medicare supplement | 6.8 | 6.6 | 6.4 | 6.2 | 6.5 | 6.0 | ||||||||||||
Other health | 4.3 | 4.3 | 4.2 | 4.2 | 4.2 | 4.1 | ||||||||||||
Life: | ||||||||||||||||||
Interest sensitive | 16.2 | 16.2 | 16.3 | 16.0 | 16.2 | 15.8 | ||||||||||||
Non-interest sensitive | 680.6 | 684.7 | 691.9 | 700.3 | 689.4 | 708.0 | ||||||||||||
Total average liabilities for insurance products, net of reinsurance ceded | $ | 779.1 | $ | 786.1 | $ | 794.9 | $ | 801.5 | $ | 790.4 | $ | 806.5 | ||||||
Present value of future profits (in millions) | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 2016 | 1Q17 | ||||||||||||
Balance, beginning of period | $ | 43.9 | $ | 42.6 | $ | 41.6 | $ | 40.5 | $ | 43.9 | $ | 39.5 | ||||||
Amortization related to operations | (1.3 | ) | (1.0 | ) | (1.1 | ) | (1.0 | ) | (4.4 | ) | (1.1 | ) | ||||||
Amounts related to changes in unrealized investment gains (losses) on fixed maturities, available for sale | — | — | $ | — | — | — | — | |||||||||||
Balance, end of period | $ | 42.6 | $ | 41.6 | $ | 40.5 | $ | 39.5 | $ | 39.5 | $ | 38.4 | ||||||
Deferred acquisition costs (in millions) | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 2016 | 1Q17 | ||||||||||||
Balance, beginning of period | $ | 85.1 | $ | 90.1 | $ | 93.1 | $ | 96.7 | $ | 85.1 | $ | 98.6 | ||||||
Deferred acquisition expenses | 7.6 | 5.7 | 6.2 | 4.9 | 24.4 | 6.9 | ||||||||||||
Amortization related to operations | (2.6 | ) | (2.7 | ) | (2.6 | ) | (3.0 | ) | (10.9 | ) | (2.9 | ) | ||||||
Balance, end of period | $ | 90.1 | $ | 93.1 | $ | 96.7 | $ | 98.6 | $ | 98.6 | $ | 102.6 | ||||||
Page 13
Colonial Penn Segment Adjusted EBIT | ||||||||||||||||||
Summarized by Inforce and New Business (6) | ||||||||||||||||||
(in millions) | ||||||||||||||||||
CNO Financial Group, Inc. | ||||||||||||||||||
Adjusted EBIT from Inforce Business | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 2016 | 1Q17 | ||||||||||||
Revenues | ||||||||||||||||||
Insurance policy income | $ | 55.3 | $ | 56.5 | $ | 57.2 | $ | 57.5 | $ | 226.5 | $ | 59.6 | ||||||
Net investment income | 11.0 | 10.9 | 11.1 | 11.2 | 44.2 | 10.9 | ||||||||||||
Fee revenue and other income | 0.4 | 0.2 | 0.2 | 0.3 | 1.1 | 0.2 | ||||||||||||
Total revenues | 66.7 | 67.6 | 68.5 | 69.0 | 271.8 | 70.7 | ||||||||||||
Benefits and expenses | ||||||||||||||||||
Insurance policy benefits | 42.1 | 42.0 | 41.9 | 42.5 | 168.5 | 44.6 | ||||||||||||
Interest expense | 0.1 | 0.2 | 0.1 | 0.2 | 0.6 | 0.2 | ||||||||||||
Amortization | 3.7 | 3.5 | 3.5 | 3.8 | 14.5 | 3.8 | ||||||||||||
Other operating costs and expenses | 8.1 | 7.8 | 8.8 | 9.1 | 33.8 | 8.0 | ||||||||||||
Total benefits and expenses | 54.0 | 53.5 | 54.3 | 55.6 | 217.4 | 56.6 | ||||||||||||
Adjusted EBIT from Inforce Business | $ | 12.7 | $ | 14.1 | $ | 14.2 | $ | 13.4 | $ | 54.4 | $ | 14.1 | ||||||
Adjusted EBIT from New Business | ||||||||||||||||||
Revenues | ||||||||||||||||||
Insurance policy income | $ | 13.8 | $ | 14.0 | $ | 13.7 | $ | 13.4 | $ | 54.9 | $ | 13.4 | ||||||
Net investment income | — | — | — | — | — | — | ||||||||||||
Fee revenue and other income | — | — | — | — | — | — | ||||||||||||
Total revenues | 13.8 | 14.0 | 13.7 | 13.4 | 54.9 | 13.4 | ||||||||||||
Benefits and expenses | ||||||||||||||||||
Insurance policy benefits | 8.4 | 8.5 | 8.4 | 8.1 | 33.4 | 8.1 | ||||||||||||
Interest expense | — | — | — | — | — | — | ||||||||||||
Amortization | 0.2 | 0.2 | 0.2 | 0.2 | 0.8 | 0.2 | ||||||||||||
Other operating costs and expenses | 24.7 | 16.4 | 18.4 | 13.9 | 73.4 | 19.5 | ||||||||||||
Total benefits and expenses | 33.3 | 25.1 | 27.0 | 22.2 | 107.6 | 27.8 | ||||||||||||
Adjusted EBIT from New Business | $ | (19.5 | ) | $ | (11.1 | ) | $ | (13.3 | ) | $ | (8.8 | ) | $ | (52.7 | ) | $ | (14.4 | ) |
Adjusted EBIT from Inforce and New Business | ||||||||||||||||||
Revenues | ||||||||||||||||||
Insurance policy income | $ | 69.1 | $ | 70.5 | $ | 70.9 | $ | 70.9 | $ | 281.4 | $ | 73.0 | ||||||
Net investment income | 11.0 | 10.9 | 11.1 | 11.2 | 44.2 | 10.9 | ||||||||||||
Fee revenue and other income | 0.4 | 0.2 | 0.2 | 0.3 | 1.1 | 0.2 | ||||||||||||
Total revenues | 80.5 | 81.6 | 82.2 | 82.4 | 326.7 | 84.1 | ||||||||||||
Benefits and expenses | ||||||||||||||||||
Insurance policy benefits | 50.5 | 50.5 | 50.3 | 50.6 | 201.9 | 52.7 | ||||||||||||
Interest expense | 0.1 | 0.2 | 0.1 | 0.2 | 0.6 | 0.2 | ||||||||||||
Amortization | 3.9 | 3.7 | 3.7 | 4.0 | 15.3 | 4.0 | ||||||||||||
Other operating costs and expenses | 32.8 | 24.2 | 27.2 | 23.0 | 107.2 | 27.5 | ||||||||||||
Total benefits and expenses | 87.3 | 78.6 | 81.3 | 77.8 | 325.0 | 84.4 | ||||||||||||
Adjusted EBIT from Inforce and New Business | $ | (6.8 | ) | $ | 3.0 | $ | 0.9 | $ | 4.6 | $ | 1.7 | $ | (0.3 | ) | ||||
Page 14
CNO Financial Group, Inc. | |||||||||
Long-term care in run-off | |||||||||
Analysis of income (loss) before taxes (in millions) | 4Q16 | 2016 | 1Q17 | ||||||
Insurance policy income | $ | 4.8 | $ | 4.8 | $ | 4.6 | |||
Net investment income on general account invested assets | 9.4 | 9.4 | 9.7 | ||||||
Total revenues | 14.2 | 14.2 | 14.3 | ||||||
Insurance policy benefits | 17.6 | 17.6 | 13.2 | ||||||
Other operating costs and expenses | 0.5 | 0.5 | 0.7 | ||||||
Total benefits and expenses | 18.1 | 18.1 | 13.9 | ||||||
Adjusted EBIT (4) | $ | (3.9 | ) | $ | (3.9 | ) | $ | 0.4 | |
Health underwriting margins (in millions) | 4Q16 | 2016 | 1Q17 | ||||||
Long-term care: | |||||||||
Earned premium | $ | 4.8 | $ | 4.8 | $ | 4.6 | |||
Benefit ratio before interest income on reserves | 365.8 | % | 365.8 | % | 286.5 | % | |||
Interest-adjusted benefit ratio | 213.5 | % | 213.5 | % | 128.1 | % | |||
Underwriting margin (earned premium plus interest income on reserves less policy benefits) | $ | (5.5 | ) | $ | (5.5 | ) | $ | (1.3 | ) |
Average liabilities for insurance products (in millions) | 4Q16 | 2016 | 1Q17 | ||||||
Health: | |||||||||
Long-term care | $ | 553.6 | $ | 138.4 | $ | 560.7 | |||
Total average liabilities for insurance products, net of reinsurance ceded | $ | 553.6 | $ | 138.4 | $ | 560.7 | |||
As previously disclosed, we terminated certain reinsurance agreements and recaptured the long-term care block in this segment in September 2016. Certain investments received in the recapture were subject to an independent third party audit by a forensic accounting firm in late June 2016. The scope of such audit was expanded in September 2016.
In addition to the investments subject to the independent audits, we received approximately $380 million in other investments and cash balances in the recapture. A substantial portion of these investments have been sold or redeemed since the recapture. The activity since the date of the recapture with respect to the assets received in the recapture is summarized below (dollars in millions):
Investments not included in scope of audit | ||||||||||||||||
Investments included in initial scope of audit | Investments included in additional scope of audit | Cash, fixed maturities and other invested assets | Total investments | |||||||||||||
September 30, 2016 values | $ | 62.2 | $ | 62.6 | $ | 379.8 | $ | 504.6 | ||||||||
Net cash flows (1) | (13.5 | ) | (11.6 | ) | (359.5 | ) | (384.6 | ) | ||||||||
Realized losses and impairments (2) | .4 | (1.7 | ) | (4.0 | ) | (5.3 | ) | |||||||||
Other activity (4) | 3.9 | 1.9 | .6 | 6.4 | ||||||||||||
December 31, 2016 values | 53.0 | 51.2 | 16.9 | 121.1 | ||||||||||||
Net cash flows (1) | (16.7 | ) | (5.5 | ) | (8.7 | ) | (30.9 | ) | ||||||||
Realized losses and impairments (3) | 3.2 | (4.5 | ) | 1.0 | (.3 | ) | ||||||||||
Other activity (4) | (1.8 | ) | 1.3 | (1.4 | ) | (1.9 | ) | |||||||||
March 31, 2017 values | $ | 37.7 | $ | 42.5 | $ | 7.8 | $ | 88.0 | ||||||||
________________
(1) | Net cash inflows from sales and redemptions of investments during the period. |
(2) | Includes $4.6 million of impairment charges and $.7 million of net realized losses recognized on the sale of transferred investments. |
(3) | Includes $8.4 million of impairment charges; partially offset by $8.1 million of net realized gains recognized on the sale of transferred investments. |
(4) | Includes amortization of discount and premium and changes in estimated fair values of investments during the period. |
Page 15
CNO Financial Group, Inc. | ||||||||||||||||||
Corporate Operations | ||||||||||||||||||
Analysis of loss before taxes (in millions) | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 2016 | 1Q17 | ||||||||||||
Net investment income (loss): | ||||||||||||||||||
General investment portfolio | $ | 1.3 | $ | 1.6 | $ | 1.5 | $ | 0.4 | $ | 4.8 | $ | 0.9 | ||||||
Other special-purpose portfolios | 2.7 | 4.3 | 5.2 | (0.4 | ) | 11.8 | 9.5 | |||||||||||
Fee revenue and other income | 2.5 | 2.6 | 2.5 | 2.4 | 10.0 | 2.4 | ||||||||||||
Interest expense on investment borrowings | — | — | — | — | — | — | ||||||||||||
Other operating costs and expenses | (14.6 | ) | (15.5 | ) | (13.6 | ) | (25.4 | ) | (69.1 | ) | (21.7 | ) | ||||||
Corporate operations, excluding corporate interest expense | (8.1 | ) | (7.0 | ) | (4.4 | ) | (23.0 | ) | (42.5 | ) | (8.9 | ) | ||||||
Interest expense on corporate debt | (11.4 | ) | (11.4 | ) | (11.5 | ) | (11.5 | ) | (45.8 | ) | (11.5 | ) | ||||||
Operating loss before taxes | $ | (19.5 | ) | $ | (18.4 | ) | $ | (15.9 | ) | $ | (34.5 | ) | $ | (88.3 | ) | $ | (20.4 | ) |
Page 16
CNO Financial Group, Inc. | ||||||||||||||||||
Bankers Life | ||||||||||||||||||
Premiums collected on insurance products (in millions) | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 2016 | 1Q17 | ||||||||||||
Annuities | ||||||||||||||||||
Fixed index (first-year) | $ | 199.9 | $ | 179.6 | $ | 218.1 | $ | 270.5 | $ | 868.1 | $ | 235.3 | ||||||
Other fixed interest (first-year) | 31.9 | 25.5 | 25.4 | 12.9 | 95.7 | 20.6 | ||||||||||||
Other fixed interest (renewal) | 1.8 | 1.3 | 1.6 | 1.5 | 6.2 | 1.6 | ||||||||||||
Subtotal - other fixed interest annuities | 33.7 | 26.8 | 27.0 | 14.4 | 101.9 | 22.2 | ||||||||||||
Total annuities | 233.6 | 206.4 | 245.1 | 284.9 | 970.0 | 257.5 | ||||||||||||
Health | ||||||||||||||||||
Medicare supplement (first-year) | 18.4 | 19.1 | 18.8 | 19.3 | 75.6 | 17.5 | ||||||||||||
Medicare supplement (renewal) | 168.5 | 159.9 | 163.4 | 171.9 | 663.7 | 174.2 | ||||||||||||
Subtotal - Medicare supplement | 186.9 | 179.0 | 182.2 | 191.2 | 739.3 | 191.7 | ||||||||||||
Long-term care (first-year) | 4.4 | 4.4 | 4.4 | 4.2 | 17.4 | 4.2 | ||||||||||||
Long-term care (renewal) | 115.2 | 113.6 | 111.9 | 110.5 | 451.2 | 112.8 | ||||||||||||
Subtotal - long-term care | 119.6 | 118.0 | 116.3 | 114.7 | 468.6 | 117.0 | ||||||||||||
Supplemental health (first-year) | 1.3 | 1.4 | 1.4 | 1.4 | 5.5 | 1.4 | ||||||||||||
Supplemental health (renewal) | 3.7 | 3.9 | 4.0 | 4.1 | 15.7 | 4.3 | ||||||||||||
Subtotal - supplemental health | 5.0 | 5.3 | 5.4 | 5.5 | 21.2 | 5.7 | ||||||||||||
Other health (first-year) | — | — | — | 0.1 | 0.1 | 0.2 | ||||||||||||
Other health (renewal) | 1.6 | 1.6 | 1.5 | 1.4 | 6.1 | 1.4 | ||||||||||||
Subtotal - other health | 1.6 | 1.6 | 1.5 | 1.5 | 6.2 | 1.6 | ||||||||||||
Total health | 313.1 | 303.9 | 305.4 | 312.9 | 1,235.3 | 316.0 | ||||||||||||
Life insurance | ||||||||||||||||||
Traditional (first-year) | 20.8 | 22.2 | 18.8 | 17.0 | 78.8 | 20.2 | ||||||||||||
Traditional (renewal) | 50.2 | 52.0 | 52.3 | 52.8 | 207.3 | 54.1 | ||||||||||||
Subtotal - traditional | 71.0 | 74.2 | 71.1 | 69.8 | 286.1 | 74.3 | ||||||||||||
Interest-sensitive (first-year) | 17.8 | 18.2 | 17.9 | 16.7 | 70.6 | 11.7 | ||||||||||||
Interest-sensitive (renewal) | 25.2 | 25.5 | 26.4 | 27.3 | 104.4 | 28.3 | ||||||||||||
Subtotal - interest-sensitive | 43.0 | 43.7 | 44.3 | 44.0 | 175.0 | 40.0 | ||||||||||||
Total life insurance | 114.0 | 117.9 | 115.4 | 113.8 | 461.1 | 114.3 | ||||||||||||
Collections on insurance products | ||||||||||||||||||
Total first-year premium collections on insurance products | 294.5 | 270.4 | 304.8 | 342.1 | 1,211.8 | 311.1 | ||||||||||||
Total renewal premium collections on insurance products | 366.2 | 357.8 | 361.1 | 369.5 | 1,454.6 | 376.7 | ||||||||||||
Total collections on insurance products | $ | 660.7 | $ | 628.2 | $ | 665.9 | $ | 711.6 | $ | 2,666.4 | $ | 687.8 | ||||||
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CNO Financial Group, Inc. | ||||||||||||||||||
Washington National | ||||||||||||||||||
Premiums collected on insurance products (in millions) | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 2016 | 1Q17 | ||||||||||||
Health | ||||||||||||||||||
Medicare supplement (renewal) | $ | 16.4 | $ | 15.1 | $ | 14.6 | $ | 14.9 | $ | 61.0 | $ | 14.4 | ||||||
Supplemental health (first-year) | 18.5 | 18.3 | 17.7 | 17.7 | 72.2 | 19.0 | ||||||||||||
Supplemental health (renewal) | 122.6 | 123.5 | 123.3 | 123.9 | 493.3 | 131.1 | ||||||||||||
Subtotal - supplemental health | 141.1 | 141.8 | 141.0 | 141.6 | 565.5 | 150.1 | ||||||||||||
Other health (first-year) | — | 0.1 | 0.1 | — | 0.2 | 0.1 | ||||||||||||
Other health (renewal) | 0.5 | 0.3 | 0.4 | 0.5 | 1.7 | 0.4 | ||||||||||||
Subtotal - other health | 0.5 | 0.4 | 0.5 | 0.5 | 1.9 | 0.5 | ||||||||||||
Total health | 158.0 | 157.3 | 156.1 | 157.0 | 628.4 | 165.0 | ||||||||||||
Life insurance | ||||||||||||||||||
Traditional (first-year) | 0.2 | 0.2 | 0.2 | 0.3 | 0.9 | 0.2 | ||||||||||||
Traditional (renewal) | 2.6 | 2.8 | 2.6 | 2.5 | 10.5 | 2.6 | ||||||||||||
Subtotal - traditional | 2.8 | 3.0 | 2.8 | 2.8 | 11.4 | 2.8 | ||||||||||||
Interest-sensitive (first-year) | 1.4 | 1.2 | 1.0 | 1.1 | 4.7 | 1.2 | ||||||||||||
Interest-sensitive (renewal) | 3.0 | 3.2 | 3.3 | 3.8 | 13.3 | 3.9 | ||||||||||||
Subtotal - interest-sensitive | 4.4 | 4.4 | 4.3 | 4.9 | 18.0 | 5.1 | ||||||||||||
Total life insurance | 7.2 | 7.4 | 7.1 | 7.7 | 29.4 | 7.9 | ||||||||||||
Annuities | ||||||||||||||||||
Fixed index (first-year) | — | — | — | 0.2 | 0.2 | — | ||||||||||||
Fixed index (renewal) | 0.2 | 0.4 | 0.2 | 0.2 | 1.0 | 0.2 | ||||||||||||
Subtotal - fixed index annuities | 0.2 | 0.4 | 0.2 | 0.4 | 1.2 | 0.2 | ||||||||||||
Other fixed interest (renewal) | 0.1 | 0.1 | — | 0.1 | 0.3 | — | ||||||||||||
Total annuities | 0.3 | 0.5 | 0.2 | 0.5 | 1.5 | 0.2 | ||||||||||||
Collections on insurance products | ||||||||||||||||||
Total first-year premium collections on insurance products | 20.1 | 19.8 | 19.0 | 19.3 | 78.2 | 20.5 | ||||||||||||
Total renewal premium collections on insurance products | 145.4 | 145.4 | 144.4 | 145.9 | 581.1 | 152.6 | ||||||||||||
Total collections on insurance products | $ | 165.5 | $ | 165.2 | $ | 163.4 | $ | 165.2 | $ | 659.3 | $ | 173.1 | ||||||
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CNO Financial Group, Inc. | ||||||||||||||||||
Colonial Penn | ||||||||||||||||||
Premiums collected on insurance products (in millions) | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 2016 | 1Q17 | ||||||||||||
Life insurance | ||||||||||||||||||
Traditional (first-year) | $ | 14.0 | $ | 13.8 | $ | 13.8 | $ | 13.2 | $ | 54.8 | $ | 13.7 | ||||||
Traditional (renewal) | 55.4 | 55.1 | 56.2 | 56.0 | 222.7 | 60.2 | ||||||||||||
Subtotal - traditional | 69.4 | 68.9 | 70.0 | 69.2 | 277.5 | 73.9 | ||||||||||||
Interest-sensitive (all renewal) | 0.1 | 0.1 | 0.1 | — | 0.3 | 0.1 | ||||||||||||
Total life insurance | 69.5 | 69.0 | 70.1 | 69.2 | 277.8 | 74.0 | ||||||||||||
Health (all renewal) | ||||||||||||||||||
Medicare supplement | 0.5 | 0.6 | 0.6 | 0.6 | 2.3 | 0.5 | ||||||||||||
Other health | 0.1 | — | — | — | 0.1 | — | ||||||||||||
Total health | 0.6 | 0.6 | 0.6 | 0.6 | 2.4 | 0.5 | ||||||||||||
Collections on insurance products | ||||||||||||||||||
Total first-year premium collections on insurance products | 14.0 | 13.8 | 13.8 | 13.2 | 54.8 | 13.7 | ||||||||||||
Total renewal premium collections on insurance products | 56.1 | 55.8 | 56.9 | 56.6 | 225.4 | 60.8 | ||||||||||||
Total collections on insurance products | $ | 70.1 | $ | 69.6 | $ | 70.7 | $ | 69.8 | $ | 280.2 | $ | 74.5 | ||||||
CNO Financial Group, Inc. | ||||||||||||||||||
Long-term care in run-off | ||||||||||||||||||
Premiums collected on insurance products (in millions) | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 2016 | 1Q17 | ||||||||||||
Long-term care (renewal) | — | — | — | 4.7 | 4.7 | 4.6 | ||||||||||||
Total collections on insurance products | $ | — | $ | — | $ | — | $ | 4.7 | $ | 4.7 | $ | 4.6 | ||||||
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CNO Financial Group, Inc. | ||||||||||||||||||
First-year collected premiums (in millions) | ||||||||||||||||||
Bankers Life | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 2016 | 1Q17 | ||||||||||||
Medicare supplement | $ | 18.4 | $ | 19.1 | $ | 18.8 | $ | 19.3 | $ | 75.6 | $ | 17.5 | ||||||
Long-term care | 4.4 | 4.4 | 4.4 | 4.2 | 17.4 | 4.2 | ||||||||||||
Supplemental health and other health | 1.3 | 1.4 | 1.4 | 1.5 | 5.6 | 1.6 | ||||||||||||
Life | 38.6 | 40.4 | 36.7 | 33.7 | 149.4 | 31.9 | ||||||||||||
Annuity | 231.8 | 205.1 | 243.5 | 283.4 | 963.8 | 255.9 | ||||||||||||
Subtotal Bankers Life | 294.5 | 270.4 | 304.8 | 342.1 | 1,211.8 | 311.1 | ||||||||||||
Washington National | ||||||||||||||||||
Supplemental health and other health | 18.5 | 18.4 | 17.8 | 17.7 | 72.4 | 19.1 | ||||||||||||
Life | 1.6 | 1.4 | 1.2 | 1.4 | 5.6 | 1.4 | ||||||||||||
Annuity | — | — | — | 0.2 | 0.2 | — | ||||||||||||
Subtotal Washington National | 20.1 | 19.8 | 19.0 | 19.3 | 78.2 | 20.5 | ||||||||||||
Colonial Penn | ||||||||||||||||||
Life | 14.0 | 13.8 | 13.8 | 13.2 | 54.8 | 13.7 | ||||||||||||
Total first-year collected premiums | $ | 328.6 | $ | 304.0 | $ | 337.6 | $ | 374.6 | $ | 1,344.8 | $ | 345.3 | ||||||
CNO Financial Group, Inc. | ||||||||||||||||||
Life and Health New Annualized Premiums ("NAP") (in millions) | ||||||||||||||||||
Bankers Life | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 2016 | 1Q17 | ||||||||||||
Medicare supplement | $ | 16.4 | $ | 16.7 | $ | 15.9 | $ | 23.9 | $ | 72.9 | $ | 17.7 | ||||||
Long-term care | 6.1 | 6.0 | 5.2 | 5.5 | 22.8 | 6.9 | ||||||||||||
Supplemental health and other health | 1.5 | 1.7 | 1.7 | 1.6 | 6.5 | 1.9 | ||||||||||||
Life | 22.4 | 21.8 | 19.8 | 17.0 | 81.0 | 18.4 | ||||||||||||
Subtotal Bankers Life | 46.4 | 46.2 | 42.6 | 48.0 | 183.2 | 44.9 | ||||||||||||
Washington National | ||||||||||||||||||
Supplemental health | 22.0 | 22.4 | 22.9 | 25.2 | 92.5 | 22.9 | ||||||||||||
Life | 1.4 | 1.8 | 1.7 | 1.8 | 6.7 | 1.7 | ||||||||||||
Subtotal Washington National | 23.4 | 24.2 | 24.6 | 27.0 | 99.2 | 24.6 | ||||||||||||
Colonial Penn | ||||||||||||||||||
Life | 24.1 | 19.2 | 18.4 | 14.7 | 76.4 | 21.8 | ||||||||||||
Total NAP | $ | 93.9 | $ | 89.6 | $ | 85.6 | $ | 89.7 | $ | 358.8 | $ | 91.3 | ||||||
CNO Financial Group, Inc. | ||||||||||
Total Policies Inforce | ||||||||||
1Q16 | 2Q16 | 3Q16 | 4Q16 | 1Q17 | ||||||
Policies inforce: | ||||||||||
Bankers Life | 1,531,842 | 1,533,894 | 1,531,204 | 1,526,344 | 1,519,474 | |||||
Washington National | 958,833 | 961,003 | 959,867 | 961,689 | 964,642 | |||||
Colonial Penn | 851,138 | 851,789 | 852,305 | 846,372 | 853,307 | |||||
Long-term care in run-off | — | — | 10,480 | 10,260 | 10,068 | |||||
Total policies inforce | 3,341,813 | 3,346,686 | 3,353,856 | 3,344,665 | 3,347,491 | |||||
Third party policies inforce sold by | ||||||||||
Bankers Life agents | 147,838 | 148,718 | 149,255 | 160,548 | 154,005 | |||||
Total policies inforce and third party policies | ||||||||||
inforce sold by Bankers Life agents | 3,489,651 | 3,495,404 | 3,503,111 | 3,505,213 | 3,501,496 | |||||
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CNO Financial Group, Inc. | ||||||||||||||||||
Statutory information - consolidated basis (7) (in millions) | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 2016 | 1Q17(a) | ||||||||||||
Net gain (loss) from operations before interest expense and federal income taxes | $ | 91.4 | $ | 101.5 | $ | (11.0 | ) | $ | 83.0 | $ | 264.9 | $ | 93.9 | |||||
Interest expense on surplus debentures held by parent company | 12.1 | 12.1 | 12.3 | 19.5 | 56.0 | 12.0 | ||||||||||||
Net gain (loss) from operations before federal income taxes | 79.3 | 89.4 | (23.3 | ) | 63.5 | 208.9 | 81.9 | |||||||||||
Federal income tax expense (benefit) | (0.6 | ) | (5.0 | ) | (10.7 | ) | (61.1 | ) | (77.4 | ) | 11.3 | |||||||
Net gain (loss) from operations before net realized capital losses | 79.9 | 94.4 | (12.6 | ) | 124.6 | 286.3 | 70.6 | |||||||||||
Net realized capital losses | (10.5 | ) | (8.6 | ) | (0.4 | ) | (10.2 | ) | (29.7 | ) | (8.6 | ) | ||||||
Net income (loss) | $ | 69.4 | $ | 85.8 | $ | (13.0 | ) | $ | 114.4 | $ | 256.6 | $ | 62.0 | |||||
Capital and surplus | $ | 1,717.4 | $ | 1,763.4 | $ | 1,914.5 | $ | 1,956.8 | $ | 1,956.8 | $ | 1,904.7 | ||||||
Asset valuation reserve (AVR) | 201.7 | 214.1 | 241.5 | 253.3 | 253.3 | 258.0 | ||||||||||||
Capital, surplus and AVR | 1,919.1 | 1,977.5 | 2,156.0 | 2,210.1 | 2,210.1 | 2,162.7 | ||||||||||||
Interest maintenance reserve (IMR) | 491.6 | 501.5 | 496.5 | 486.9 | 486.9 | 481.8 | ||||||||||||
Total statutory capital, surplus, AVR & IMR | $ | 2,410.7 | $ | 2,479.0 | $ | 2,652.5 | $ | 2,697.0 | $ | 2,697.0 | $ | 2,644.5 | ||||||
(a) Such amounts are preliminary as the statutory basis financial statements of our insurance subsidiaries for 1Q17 will
be filed with the respective insurance regulators on or about May 15, 2017.
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Notes
(1) Excludes accumulated other comprehensive income.
(2) Shareholders' equity divided by common shares outstanding.
(3) Book value per diluted share reflects the potential dilution that could occur if outstanding stock options were exercised and restricted stock and performance units were vested. The dilution from options, restricted shares and performance units is calculated using the treasury stock method. Under this method, we assume the proceeds from the exercise of the options (or the unrecognized compensation expense with respect to restricted stock and performance units) will be used to purchase shares of our common stock at the closing market price on the last day of the period.
(4) Management believes that an analysis of earnings before net realized investment gains (losses), fair value changes due to fluctuations in the interest rates used to discount embedded derivative liabilities related to our fixed index annuities, fair value changes and amendment related to the agent deferred compensation plan, loss on reinsurance transaction, other non-operating items, corporate interest expense and taxes (“Adjusted EBIT,” a non-GAAP financial measure) provides a clearer comparison of the operating results of the company quarter-over-quarter because these items are unrelated to the company's underlying fundamentals.
(5) Management believes that an analysis of Net income applicable to common stock before: (i) net realized investment gains or losses, net of related amortization and taxes; (ii) fair value changes due to fluctuations in the interest rates used to discount embedded derivative liabilities related to our fixed index annuities, net of related amortization and taxes; (iii) fair value changes and amendment related to the agent deferred compensation plan, net of taxes; (iv) loss on reinsurance transaction, net of taxes; (v) changes in the valuation allowance for deferred tax assets and other tax items; and (vi) other non-operating items consisting primarily of earnings attributable to variable interest entities, net of taxes (“Net operating income,” a non-GAAP financial measure) is important to evaluate the financial performance of the company, and is a key measure commonly used in the life insurance industry. Management uses this measure to evaluate performance because the items excluded from net operating income can be affected by events that are unrelated to the company's underlying fundamentals.
(6) Management believes that an analysis of Adjusted EBIT for Colonial Penn, separated between inforce and new business provides increased clarity for this segment as the vast majority of the costs to generate new business in this segment are not deferrable and Adjusted EBIT will fluctuate based on management's decisions on how much marketing costs to incur in each period. Adjusted EBIT from new business includes pre-tax revenues and expenses associated with new sales of our insurance products during the first year after the sale is completed. Adjusted EBIT from inforce business includes all pre-tax revenues and expenses associated with sales of insurance products that were completed more than one year before the end of the reporting period. The allocation of certain revenues and expenses between new and inforce business is based on estimates, which we believe are reasonable.
(7) | Based on statutory accounting practices prescribed or permitted by regulatory authorities for CNO Financial's insurance subsidiaries after appropriate elimination of intercompany accounts among such subsidiaries. Such accounting practices differ from GAAP. |
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