Attached files
| file | filename |
|---|---|
| 8-K - 8-K - CNO Financial Group, Inc. | form8-k03312017managementd.htm |
1Q17
Financial and operating results for the period ended March 31, 2017
April 27, 2017
Unless otherwise specified, comparisons in this presentation are between 1Q16 and 1Q17.
Exhibit 99.1
CNO Financial Group | First Quarter 2017 Earnings | April 27, 2017 2
Forward-Looking Statements
Certain statements made in this presentation should be considered
forward-looking statements as defined in the Private Securities Litigation
Reform Act of 1995. These include statements about future results of
operations and capital plans. We caution investors that these forward-
looking statements are not guarantees of future performance, and actual
results may differ materially. Investors should consider the important
risks and uncertainties that may cause actual results to differ, including
those included in our press release issued on April 26, 2017, our
Quarterly Reports on Form 10-Q, our Annual Report on Form 10-K and
other filings we make with the Securities and Exchange Commission. We
assume no obligation to update this presentation, which speaks as of
today’s date.
CNO Financial Group | First Quarter 2017 Earnings | April 27, 2017 3
Non-GAAP Measures
This presentation contains the following financial measures that differ from the
comparable measures under Generally Accepted Accounting Principles (GAAP):
operating earnings measures; book value, excluding accumulated other comprehensive
income (loss) per share; operating return measures; earnings before the loss on
reinsurance transaction, net realized investment gains (losses), fair value changes in
embedded derivative liabilities, fair value changes and amendment related to the agent
deferred compensation plan, other non-operating items, corporate interest expense and
taxes; and debt to capital ratios, excluding accumulated other comprehensive income
(loss). Reconciliations between those non-GAAP measures and the comparable GAAP
measures are included in the Appendix, or on the page such measure is presented.
While management believes these measures are useful to enhance understanding and
comparability of our financial results, these non-GAAP measures should not be
considered substitutes for the most directly comparable GAAP measures.
Additional information concerning non-GAAP measures 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, www.CNOinc.com.
CNO Financial Group | First Quarter 2017 Earnings | April 27, 2017 4
CNO Financial Group | First Quarter 2017 Earnings | April 27, 2017 5
1Q17 in Review
Diversity of the franchise driving growth
− Increases in most key metrics demonstrate the strength of
our business model
Solid results
− Total collected premiums up 5%
− Operating EPS increased 26%
− Strong cash flow generation
Resumed share repurchases
CNO Financial Group | First Quarter 2017 Earnings | April 27, 2017 6
Growth Scorecard ($ millions)
1 Includes third party products sold. See the Appendix for a reconciliation to total policies inforce.
2 Measured as 100% of new term life and health annualized premiums and 10% of single premium whole life deposits.
2017
1Q 2Q 3Q 4Q 1Q
First Year Collected Premiums
Total CNO $328.6 $304.0 $337.6 $374.6 $345.3 5.1%
Collected Premiums
Total CNO $896.3 $863.0 $900.0 $951.3 $940.0 4.9%
Policies Inforce 1 (thousands)
Total CNO 3,489.7 3,495.4 3,503.1 3,505.2 3,501.5 0.3%
New Annualized Premium 2
Total Life & Health Insurance $93.9 $89.6 $85.6 $89.7 $91.3 -2.8%
Annuity Account Values
Total CNO $8,040.3 $8,029.8 $8,103.0 $8,202.2 $8,274.2 2.9%
Annuity Collected Premiums
Bankers Life $233.6 $206.4 $245.1 $284.9 $257.5 10.2%
Fee Revenue
Bankers Life $6.3 $7.3 $9.6 $10.7 $10.1 60.3%
2016 % Change
vs Prior Year
CNO Financial Group | First Quarter 2017 Earnings | April 27, 2017 7
$294.5 $270.4 $304.8
$342.1 $311.1
$366.2 $357.8
$361.1
$369.5 $376.7
$660.7
$628.2
$665.9 $711.6 $687.8
First Year Premium Renewal Premium
1Q17 Sales and Distribution Results
Bankers Life
3 Measured as 100% of new term life and health annualized premiums and 10% of single premium whole life deposits.
4 Includes Medicare Advantage, Medicare supplement, PDP, Dental/Vision and ACA products (prior periods have been
restated to include ACA product sales).
Total collected premiums up 4%
– First year collected premiums up 6%, driven by annuities
growth of 10%
Health new annualized premiums up 10%; led by growth in
Medicare supplement and short-term care
Life new annualized premiums down 18%, policies issued flat
Average Producing Agent count down 6%, reflecting fewer
first year agents
Customer assets and registered advisors up at BD/RIA
Collected Premiums ($ millions)
1Q16 2Q16 3Q16 4Q16 1Q17
1 Defined as the number of agents that have sold at least one policy in the period.
2 Last twelve months (LTM) average of the monthly end of period Producing Agent count.
Growth Highlights ($ millions, policies thousands)
1Q16 1Q17 % Change
New Annualized Premium 3
Life $22.4 $18.4 -17.9%
Health 24.0 26.5 10.4%
Total New Annualized Premium3 $46.4 $44.9 -3.2%
Annuity
Total Collected Premiums $233.6 $257.5 10.2%
Account Values 7,586.1 7,869.7 3.7%
Policies Inforce
Life 712.4 708.7 -0.5%
Annuity 180.6 177.4 -1.8%
Health 638.8 633.4 -0.8%
Total Policies Inforce 1,531.8 1,519.5 -0.8%
Third Party Products 4
Trailing 4 Quarter Fee Income, net $17.9 $18.9 5.6%
Policies Inforce 147.8 154.0 4.2%
Sales Force (Producing Agents1 Only)
1Q16 2Q16 3Q16 4Q16 1Q17
1,888 1,882 1,875 1,875 1,877
2,798 2,721 2,664 2,604 2,527
4,686 4,603 4,539 4,478 ,404
Average 3+ Year Agents² Average 1st & 2nd Year Agents²
CNO Financial Group | First Quarter 2017 Earnings | April 27, 2017 8
$20.1 $19.8 $19.0 $19.3 $20.5
$129.0 $130.3 $129.8 $131.0 $138.2
$16.4 $15.1 $14.6 $14.9
$14.4
$165.5 $165.2 $163.4 $165.2
$173.1
First Year Premium Renewal Premium Medicare Supplement
Run-off Premium
Total collected premiums up 5%
– First year collected premiums up 2% on higher
supplemental health sales
Total life and health new annualized premium up 5%
– Worksite up 2%, due to growth in the agent force and
recent enhancements to our universal life product
– Individual up 7%, primarily due to positive momentum
from field leadership realignment
Average Producing Agent count grew 6% on continued
strong recruiting and retention
1Q17 Sales and Distribution Results
Washington National
Collected Premiums ($ millions)
1Q16 2Q16 3Q16 4Q16 1Q17
3 Measured as 100% of new term life and health annualized premiums and 10% of single premium whole life
deposits.
1 Defined as PMA agents with $1,000 or more of NAP in the prior 12 months.
2 Last twelve months (LTM) average of the monthly end of period Producing Agent count.
Growth Highlights ($ millions, policies thousands)
1Q16 1Q17 % Change
New Annualized Premium 3
Supplemental Health $22.0 $22.9 4.1%
Life 1.4 1.7 21.4%
Total $23.4 $24.6 5.1%
Policies Inf rce
Supplemental Health 771.7 782.7 1.4%
Life 109.4 108.6 -0.7%
Medicare Supplement/Other 24.4 21.6 -11.5%
Annuity 53.3 51.7 -3.0%
Total 958.8 964.6 0.6%
Sales Force (PMA Producing Agents1 Only)
1Q16 2Q1 Q16 4Q16 1Q17
360 368 372 373 370
534 538 549 567 580
894 906 921 940 950
Average 3+ Year Agents² Average 1st & 2nd Year Agents²
CNO Financial Group | First Quarter 2017 Earnings | April 27, 2017 9
$14.0 $13.8 $13.8 $13.2 $13.7
$56.1 $55.8 $56.9 $56.6
$60.8
$70.1 $69.6 $70.7 $69.8
$74.5
First Year Premium Renewal Premium
Total collected premiums up 6% due to
steady sales growth and persistency
– First year collected premiums down 2%
New annualized premium down 10%, due
to competition for television advertising
– Remain disciplined and opportunistic
with television advertising spend
Continue to effectively diversify lead
generation away from non-deferrable
television advertising to web & direct mail
1Q17 Sales and Distribution Results
Colonial Penn
Collected Premiums ($ millions)
1Q16 2Q16 3Q16 4Q16 1Q17
1 Measured as 100% of new life annualized premiums.
Growth Highlights ($ millions, policies thousands)
1Q16 1Q17 % Change
New Annualized Premium 1
Life $24.1 $21.8 -9.5%
Policies Inforce
Life 847.3 849.9 0.3%
Other 3.8 3.4 -10.5%
Total 851.1 853.3 0.3%
CNO Financial Group | First Quarter 2017 Earnings | April 27, 2017 10
$0.27 $0.34
$0.26
$0.35
Net Operating Income
Per Share¹
Net Operating Income
Per Share Excluding
Significant Items¹
1 A non-GAAP measure. See the Appendix for a reconciliation to the corresponding GAAP measure.
1Q16 1Q17
1Q17 Financial Results Financial Highlights
1Q17 Earnings Highlights ($ millions, except per share data)
Net Operating Income1 $49.6 $59.8
Net Operating Income
Excl. Significant Items1
$46.6 $61.7
Weighted Average
Shares Outstanding
182.1 175.1
Net income per diluted share of $0.36
Net operating income per diluted share1 of
$0.34 reflects favorable underwriting
margins and investment income, partially
offset by higher expenses due to guaranty
fund assessment true-up
Excluding significant items, Net Operating
EPS of $0.35, up 35%
Operating ROE1 of 8.8%
CNO Financial Group | First Quarter 2017 Earnings | April 27, 2017 11
Segment Results ($ millions)
1 A non-GAAP measure. See the Appendix for a reconciliation to the corresponding GAAP measure.
Segment Adjusted EBIT Excluding Significant Items1
Bankers Life results reflect higher
Annuity, LTC and Medicare supplement
margins
Washington National results reflect lower
Supplemental Health margins
Colonial Penn results reflect favorable
mortality and lower direct marketing costs
LTC in run-off results in-line with
expectations
Corporate results reflect higher expenses
partially offset by higher investment
income
Segment Highlights
1Q16 2Q16 3Q16 4Q16 1Q17
$69.9
$88.8 $82.9 $90.7
$91.4
$26.3
$21.5
$25.2
$29.9
$24.8
($6.8)
$3.0
$0.9 $7.1
($0.3)
Bankers Life
Washington
National
Colonial
Penn
($1.3)
$0.4
($5.1)
($7.0)
($4.4)
($17.5)
($8.9)
LTC in
run-off
Corporate
Total CNO $84.3 $106.3 $104.6 $108.9 $107.4
CNO Financial Group | First Quarter 2017 Earnings | April 27, 2017 12
$139 $141 $141 $144
$146
57.7%
61.6%
59.8%
57.0%
60.6%
1Q16 2Q16 3Q16 4Q16 1Q17
Earned Premium
Reported Benefit Ratio
($ millions)
1 Interest-adjusted benefit ratio (IABR); a non-GAAP measure. Refer to the Appendix for the corresponding GAAP measure.
2 Adjusted benefit ratio; long-term care IABR1 excluding impact of policyholder actions following rate increases
Health Margins
Washington National
Supplemental Health IABR1
Bankers Life Long-term Care
IABR1
Bankers Life Medicare
Supplement Benefit Ratio
$193 $194 $194 $193 $196
71.1%
73.0% 72.5% 71.2% 70.0%
1Q16 2Q16 3Q16 4Q16 1Q17
Earned Premium
Reported Benefit Ratio
$118 $118 $117 $118 $116
75.3%
77.9% 77.7%
76.0%
72.5%
82.4% 82.1% 82.6%
78.4%
74.2%
1Q16 2Q16 3Q16 4Q16 1Q17
Earned Premium
Reported Benefit Ratio
Adjusted Benefit Ratio²
Benefit ratio of 70.0% reflects
favorable incurred claims
2017 Outlook: Benefit ratio of 71-
74%
IABR1 of 60.6% is in line with
expectations
2017 Outlook: IABR1 of 58-61%
Adjusted IABR2 of 74.2%, excluding
shock lapse impacts, reflects
favorable persistency and incurred
claims
No FLR accrual in 1Q17
2017 Outlook: IABR1 of 77-82%
CNO Financial Group | First Quarter 2017 Earnings | April 27, 2017 13
$93.1
$8.7 $13.2
$20.3
$3.5
$10.0
$13.6
$1.2
$7.5
$8.4
Investment Results ($ millions)
Average Invested Assets and Cash Realized Gains, Losses and Impairments
Gross Realized Gains
Gross Realized Losses
Impairments
1Q17 1Q16 2Q16 3Q16
$22,323 $22,640 $22,875
$23,736 $23,864
$291.0 $295.8 $301.7
$315.6 $312.0
1Q16 2Q16 3Q16 4Q16 1Q17
Net
Investment
Income
4Q16
$102.2 $103.1
$22.3
$34.9
$26.0
$14.4
1 Earned Yield excludes FHLB.
Portfolio turnover and realized gains/losses remain low in light of
market reinvestment yields
Continued favorable credit performance (low impairments)
Continue to reposition recaptured assets; remaining balance of $88
million as of 3/31/17
$12.8
New money rate up slightly; purchases focused on longer
duration asset/liability matching
Nominal prepayment/call activity in the quarter
Strong Alternatives results benefiting from increased credit
and real asset allocation along with higher equity markets
$27.8
$19.8
$11.9
New Money Rate 4.90% 5.50% 5.29% 5.02% 5.23%
Earned Yield1: 5.47% 5.52% 5.59% 5.58% 5.42%
Pre-Pay/Call/Make-
whole Income
$6.3 $1.8 $5.4 $5.3 $0.6
Alternative
Investment Income
($3.7) $4.6 $4.7 $6.7 $8.5
CNO Financial Group | First Quarter 2017 Earnings | April 27, 2017 14
1Q17 Capital & Liquidity Highlights
Continued strength in key capital measures
1 A non-GAAP measure. See the Appendix for a reconciliation to the corresponding GAAP measure.
Estimated consolidated risk-based capital of 446%
Leverage1 of 19.1%
Book value per diluted share1 increased to $22.31 from $22.02 at December
31, 2016
Holding company cash and investments of $314 million, up $50 million from
December 31, 2016
Repurchased $43.0 million of common stock in the quarter at an average cost
of $20.61 per share
‒ Maintaining 2017 repurchase guidance of $200 to $275 million, absent compelling
alternatives
CNO Financial Group | First Quarter 2017 Earnings | April 27, 2017 15
Wrap Up
Focused on middle-income market key to our sustainable
competitive advantage
− Multiple channels to reach the market
− Diversified products and services to meet customers’ needs
Investor Day June 5th at the New York Stock Exchange, themes
for the day expected to include:
− Insights on our diversified business
− Plans to grow our customer base and serve them more broadly
− Leveraging data to drive profitable growth
− Long-term care inforce dynamics and risk reduction considerations
CNO Financial Group | First Quarter 2017 Earnings | April 27, 2017 16
Questions and Answers
CNO Financial Group | First Quarter 2017 Earnings | April 27, 2017 17
Appendix
CNO Financial Group | First Quarter 2017 Earnings | April 27, 2017 18
Growth Scorecard ($ millions)
1 Includes third party products sold. See page 24 for a reconciliation to total policies inforce.
2 Measured as 100% of new term life and health annualized premiums and 10% of single premium whole life deposits.
2017
1Q 2Q 3Q 4Q 1Q
First Year Collected Premiums Bankers Life $294.5 $270.4 $304.8 $342.1 $311.1 5.6%
Washington National 20.1 19.8 19.0 19.3 20.5 2.0%
Colonial Penn 14.0 13.8 13.8 13.2 13.7 -2.1%
Total CNO $328.6 $304.0 $337.6 $374.6 $345.3 5.1%
Collected Premiums Bankers Life $660.7 $628.2 $665.9 $711.6 $687.8 4.1%
Washington National 165.5 165.2 163.4 165.2 173.1 4.6%
Colonial Penn 70.1 69.6 70.7 69.8 74.5 6.3%
LTC in run-off - - - 4.7 4.6 100.0%
Total CNO $896.3 $863.0 $900.0 $951.3 $940.0 4.9%
Policies Inforce 1 (thousands) Bankers Life 1,679.7 1,682.6 1,680.4 1,686.9 1,673.5 -0.4%
Washington National 958.9 961.0 959.9 961.7 964.6 0.6%
Colonial Penn 851.1 851.8 852.3 846.4 853.3 0.3%
LTC in run-off - - 10.5 10.2 10.1 100.0%
Total CNO 3,489.7 3,495.4 3,503.1 3,505.2 3,501.5 0.3%
New Annualized Premium 2 Life Insurance $47.9 $42.8 $39.9 $33.5 $41.9 -12.5%
Health Insurance 46.0 46.8 45.7 56.2 49.4 7.3%
Total Life & Health Insurance $93.9 $89.6 $85.6 $89.7 $91.3 -2.8%
Annu ty Account Values Bankers Life $7,586.1 $7,589.4 $7,675.9 $7,788.5 $7,869.7 3.7%
Washington National 454.2 440.4 427.1 413.7 404.5 -10.9%
Total $8,040.3 $8,029.8 $8,103.0 $8,202.2 $8,274.2 2.9%
Annuity Collected Premiums Bankers Life $233.6 $206.4 $245.1 $284.9 $257.5 10.2%
Fee Revenue Bankers Life $6.3 $7.3 $9.6 $10.7 $10.1 60.3%
2016 % Change
vs Prior Year
CNO Financial Group | First Quarter 2017 Earnings | April 27, 2017 19
Average Producing Agent Counts1
1st Yr 2nd Yr 3rd Yr + Total 1st Yr 2nd Yr 3rd Yr + Total
3/31/2017 1,994 533 1,877 4,404 440 140 370 950
12/31/2016 2,037 567 1,875 4,478 435 132 373 940
9/30/2016 2,081 584 1,875 4,539 425 125 372 921
6/30/2016 2,123 598 1,882 4,603 418 120 368 906
3/31/2016 2,194 604 1,888 4,686 412 122 360 894
12/31/2015 2,265 739 1,912 4,916 398 126 352 876
9/30/2015 2,311 635 1,884 4,831 385 129 345 859
6/30/2015 2,335 653 1,865 4,853 376 130 338 844
3/31/2015 2,338 676 1,839 4,852 367 126 334 826
1 Agent counts at the end of each month used to calculate the last twelve month average
2 Defined as the number of agents that have sold at least one policy in the period
3 Defined as active PMA appointed agents with $1,000 or more of New Annualized Premium in the prior 12 months
Bankers Life
2
Washington National
3
CNO Financial Group | First Quarter 2017 Earnings | April 27, 2017 20
Bankers Life LTC - 2016 Testing Margins
$320 million of aggregate margin, however, the block has multiple
product and issue year cohorts
Four distinct product coverage categories:
− Nursing Home
− Comprehensive
− Home Health Care
− Short Term Care
Three issue year categories:
− Policies issued prior to 2003
− Policies issued between 2003 and 2007
− Policies issued after 2007
Margins are strongest in more recent issue years and primarily
negative for policies issued prior to 2003
CNO Financial Group | First Quarter 2017 Earnings | April 27, 2017 21
Bankers Life LTC - Key Points of Differentiation
Sold primarily to middle-income individuals at/near retirement
‒ Results in higher average issue age (~67) and higher average attained age (~77)
‒ Assets and liabilities matched
‒ Lower average benefit periods; 87% of policies with benefit period of four years or less and only 4% of
policies with lifetime benefits
‒ Continue to offer solutions to address critical need
‒ Over 90% of current sales have benefit periods of two years or less
‒ Coinsurance on new business since 2008; independent review of underwriting and claim practices
‒ Products periodically re-priced to reflect current key assumptions (interest rates, claim trends, etc)
‒ New sales are ~1% of CNO first year collected premiums
Proactive in-force management
− Largely completed five rounds of actuarially justified rate increases since 2006
− Piloting and implementing initiatives to bend the claim cost curve
− Comprehensive claim and persistency studies conducted (and reviewed by third party) in 2014 and 2015
− Solid track record; claim reserves have been net redundant over the past several years
CNO Financial Group | First Quarter 2017 Earnings | April 27, 2017 22
1Q17 Holding Company Liquidity ($ millions)
Cash and Investments Balance - December 31, 2016 $263.6
Sources
Dividends from Insurance Subsidiaries 128.4
Service and Investment Fees, Net 17.0
Surplus Debenture Interest 12.0
Interest/Earnings on Corporate Investments 5.3
Other 1.6
Total Sources 164.3
Uses
Contributions to Non-insurance Subsidiaries 2.0
Share Repurchases
1
38.5
Interest 0.7
Common Stock Dividends 14.0
Intercompany Payments
2
41.4
General Expenses 10.9
Other 9.8
Total Uses 117.3
Non-Cash Changes in Investment Balances 3.0
Cash and Investments Balance - March 31, 2017 $313.6
1 $4.5 million of 1Q 2017 reported repurchases settled in 2Q 2017.
2 Settlement of intercompany balances related to previously disclosed 4Q2016 IRS tax settlement.
CNO Financial Group | First Quarter 2017 Earnings | April 27, 2017 23
Non-
Life(1)
$887
Loss Carryforwards Valuation Allowance
Tax Asset Summary ($ millions)
Loss Carryforwards Details
Total estimated economic value of
NOLs of $415 million @ 10% discount
rate
Increase in both tax asset and
valuation allowance due to adoption of
new accounting guidance for tax
benefits on stock options. This
increased tax asset by $16 million with
a corresponding increase to valuation
allowance. No net financial impact
related to adoption
1 Excludes $12 million related to state operating loss carryforwards.
2 Excludes $10 million related to state operating loss carryforwards.
Non-Life(2)
$246
CNO Financial Group | First Quarter 2017 Earnings | April 27, 2017 24
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
C lonial 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
The following summarizes total policies inforce as of the end of the period indicated.
CNO Financial Group | First Quarter 2017 Earnings | April 27, 2017 25
The table below summarizes the financial impact of significant items on our 1Q16 net operating income. Management believes that
identifying the impact of these items enhances the understanding of our operating results (dollars in millions).
1Q16 Significant Items
* A non-GAAP measure. See pages 30 and 32 for a reconciliation to the corresponding GAAP measure.
Net Operating Income:
Bankers Life $ 77.6 $ (7.7) (1) $ 69.9
Washington National
Colonial Penn
Adjusted EBIT from business segments
Corporate Operations, excluding corporate interest expense (2)
Adjusted EBIT
Corporate interest expense
Operating earnings before tax
Tax expense on operating income
Net operating income* $ 49.6 $ (3.0) $ 46.6
Net operating income per diluted share* $ 0.27 $ (0.01) $ 0.26
(2) Pre-tax earnings in the Corporate segment included $3.0 million of accelerated stock compensation expense releated to retirement eligible employees.
(1) Pre-tax earnings in the Bankers Life segment included the $7.7 million release of long-term care reserves (net of the reduction in insurance intangibles) due to the
impact of policyholder actions following rate increases.
77.6 (4.7) 72.9
28.0 (1.7)
(8.1) 3.0 (5.1)
26.3
89.0 (4.7) 84.3
(11.4) - (11.4)
(6.8) - (6.8)
97.1 (7.7) 89.4
26.3 - 26.3
Three months ended
March 31, 2016
Actual results Significant items
Excluding
significant
items
CNO Financial Group | First Quarter 2017 Earnings | April 27, 2017 26
The table below summarizes the financial impact of significant items on our 2Q16 net operating income. Management believes that
identifying the impact of these items enhances the understanding of our operating results (dollars in millions).
2Q16 Significant Items
* A non-GAAP measure. See pages 30 and 32 for a reconciliation to the corresponding GAAP measure.
Net Operating Income:
Bankers Life $ 93.3 $ (4.5) (1) $ 88.8
Washington National
Colonial Penn
Adjusted EBIT from business segments
Corporate Operations, excluding corporate interest expense
Adjusted EBIT
Corporate interest expense
Operating earnings before tax
Tax expense on operating income
Net operating income * $ 63.7 $ (2.9) $ 60.8
Net operating income per diluted share* $ 0.35 $ (0.01) $ 0.34
(1) Pre-tax earnings in the Bankers Life segment included the $4.5 million release of long-term care reserves (net of the reduction in insurance intangibles) due to the
impact of policyholder actions following rate increases.
99.4 (4.5) 94.9
35.7 (1.6)
(7.0) - (7.0)
34.1
110.8 (4.5) 106.3
(11.4) - (11.4)
3.0 - 3.0
117.8 (4.5) 113.3
21.5 - 21.5
Three months ended
June 30, 2016
Actual results Significant items
Excluding
significant
items
CNO Financial Group | First Quarter 2017 Earnings | April 27, 2017 27
The table below summarizes the financial impact of significant items on our 3Q16 net operating income. Management believes that
identifying the impact of these items enhances the understanding of our operating results (dollars in millions).
3Q16 Significant Items
* A non-GAAP measure. See pages 30 and 32 for a reconciliation to the corresponding GAAP measure.
Net Operating Income:
Bankers Life $ 88.1 $ (5.2) (1) $ 82.9
Washington National
Colonial Penn
Adjusted EBIT from business segments
Corporate Operations, excluding corporate interest expense
Adjusted EBIT
Corporate interest expense
Operating earnings before tax
Tax expense on operating income
Net operating income * $ 64.3 $ (3.4) $ 60.9
Net operating income per diluted share* $ 0.37 $ (0.02) $ 0.35
Three months ended
September 30, 2016
Actual results Significant items
Excluding
significant
items
109.0
25.2 - 25.2
(5.2) 104.6
(11.5) - (11.5)
0.9 - 0.9
114.2 (5.2)
98.3 (5.2) 93.1
34.0 (1.8)
(4.4) - (4.4)
32.2
109.8
(1) Pre-tax earnings in the Bankers Life segment included the $5.2 million release of long-term care reserves (net of the reduction in insurance intangibles) due to the
impact of policyholder actions following rate increases.
CNO Financial Group | First Quarter 2017 Earnings | April 27, 2017 28
The table below summarizes the financial impact of significant items on our 4Q16 net operating income. Management believes that
identifying the impact of these items enhances the understanding of our operating results (dollars in millions).
4Q16 Significant Items
* A non-GAAP measure. See pages 30 and 32 for a reconciliation to the corresponding GAAP measure.
Net Operating Income:
Bankers Life $ 138.9 $ (48.2) (1) $ 90.7
Washington National
Colonial Penn (2)
Long-term care in run-off (3.9) 2.6 (3)
Adjusted EBIT from business segments
Corporate Operations, excluding corporate interest expense (4)
Adjusted EBIT
Corporate interest expense
Operating earnings before tax
Tax expense on operating income
Net operating income * $ 84.9 $ (24.1) $ 60.8
Net operating income per diluted share* $ 0.49 $ (0.14) $ 0.35
(1) Pre-tax earnings in the Bankers Life segment included: (i) $45.8 million of favorable impacts for adjustments arising from our comprehensive annual actuarial review of
assumpt on , and (ii) the $2.4 million release of long-term care reserves (net of the reduction in insurance intangibles) due to the impact of policyholder actions following rate
increases.
(2) Pre-tax earnings in the Colonial Penn segment were reduced $2.5 million related to the impact of loss recognition on a closed block of payout annuities.
(3) Pre-tax earnings in Long-term care in run-off segment were reduced by $2.6 million related to the impact of loss recognition on this closed block of long-term care business.
135.0 (37.6) 97.4
50.1 (13.5)
(23.0) 5.5 (17.5)
36.6
146.5
(11.5) - (11.5)
108.9
4.6 2.5 7.1
169.5 (43.1)
29.9 - 29.9
(1.3)
(4) Pre-tax earnings in the Corporate segment included a $5.5 million increase to legal reserves related to legacy business of our predecessor.
126.4
(37.6)
Three months ended
December 31, 2016
Actual results Significant items
Excluding
significant
items
CNO Financial Group | First Quarter 2017 Earnings | April 27, 2017 29
Net Operating Income:
Bankers Life $ 89.7 $ 1.7 (1) $ 91.4
Washington National (2)
Colonial Penn
Long-term care in run-off 0.4 -
Adjusted EBIT from business segments
Corporate Operations, excluding corporate interest expense
Adjusted EBIT
Corporate interest expense
Operating earnings before tax
Tax expense on operating income
Net operating income * $ 59.8 $ 1.9 $ 61.7
Net operating income per diluted share* $ 0.34 $ 0.01 $ 0.35
Three months ended
March 31, 2017
Actual results Significant items
Excluding
significant
items
23.5 1.3 24.8
0.4
116.3
3.0 107.4
(0.3) - (0.3)
113.3 3.0
(8.9) - (8.9)
34.2
104.4
(11.5) - (11.5)
(1) Pre-tax earnings in the Bankers Life segment included: (i) a $3.5 million expense increase for estimated future state guaranty association assessments, net of
premium tax offsets, related to the liquidation of Penn Treaty Network America Insurance Company ("Penn Treaty"); partially offset by (ii) the $1.8 million release of
long-term care reserves (net of the reduction in insurance intangibles) due to the impact of policy holder actions following rate increases.
(2) Pre-tax earnings in the Washington National segment included a $1.3 million expense increase related to the aforementioned estimated future state guaranty
association assessments, net of premium tax offsets, related to Penn Treaty.
92.9 3.0 95.9
33.1 1.1
The table below summarizes the financial impact of significant items on our 1Q17 net operating income. Management believes that
identifying the impact of these items enhances the understanding of our operating results (dollars in millions).
1Q17 Significant Items
* A non-GAAP measure. See pages 30 and 32 for a reconciliation to the corresponding GAAP measure.
CNO Financial Group | First Quarter 2017 Earnings | April 27, 2017 30
Quarterly Earnings
*Management believes that an analysis of earnings before net realized investment gains (losses), fair value changes in embedded derivative liabilities, fair value changes and amendment
related to the agent deferred compensation plan, loss on reinsurance transaction, other non-operating items, corporate interest expense and taxes (“Adjusted EBIT,” a non-GAAP
financial measure) provides a clearer comparison of the operating results of the company quarter-over-quarter because it excludes: (1) net realized investment gains (losses); (2) fair
value changes due to fluctuations in the interest rates used to discount embedded derivative liabilities related to our fixed index annuities that are unrelated to the company’s underlying
fundamentals; (3) fair value changes and amendment related to the agent deferred compensation plan; (4) loss on reinsurance transaction; (5) charges in the valuation allowance for
deferred tax assets and other tax items; and (6) other non-operating items consisting primarily of earnings attributable to variable interest entities. The table above provides a
reconciliation of Adjusted EBIT to net income.
1Q16 2Q16 3Q16 4Q16 1Q17
Bankers Life 77.6$ 93.3$ 88.1$ 138.9$ 89.7$
Washington National 26.3 21.5 25.2 29.9 23.5
Colonial Penn (6.8) 3.0 0.9 4.6 (0.3)
Long-term care in run-off - - - (3.9) 0.4
Adjusted EBIT from business segments 97.1 117.8 114.2 169.5 113.3
Corporate operations, excluding interest expense (8.1) (7.0) (4.4) (23.0) (8.9)
Adjusted EBIT* 89.0 110.8 109.8 146.5 104.4
Corporate interest expense (11.4) (11.4) (11.5) (11.5) (11.5)
Operating earnings before taxes 77.6 99.4 98.3 135.0 92.9
Tax expense on period income 28.0 35.7 34.0 50.1 33.1
Net operating income 49.6 63.7 64.3 84.9 59.8
Net realized investment gains (losses), net of related amortization (1.0) 12.0 11.4 (14.8) 7.9
Fair value changes in embedded derivative liabilities, net of related amortization (29.5) (16.5) 9.4 46.2 (4.4)
Fair value changes and amendment related to the agent deferred compensation plan (6.0) (12.3) 6.3 15.1 -
Loss on reinsurance transaction - - (75.4) - -
Other (0.6) 0.1 (0.7) (0.8) 0.3
Non-operating income (loss) before taxes (37.1) (16.7) (49.0) 45.7 3.8
Income tax expense (benefit):
On non-operating income (loss) (13.0) (5.9) (17.1) 16.0 1.3
Valuation allowance for deferred tax assets and other tax items (20.0) (7.0) 13.8 (119.6) -
Net non-operating income (loss) (4.1) (3.8) (45.7) 149.3 2.5
Net income 45.5$ 59.9$ 18.6$ 234.2$ 62.3$
($ millions)
CNO Financial Group | First Quarter 2017 Earnings | April 27, 2017 31
The following provides additional information regarding certain non-GAAP measures used in this presentation.
A non-GAAP measure is a numerical measure of a company’s performance, financial position, or cash flows
that excludes or includes amounts that are normally excluded or included in the most directly comparable
measure calculated and presented in accordance with GAAP. While management believes these measures
are useful to enhance understanding and comparability of our financial results, these non-GAAP measures
should not be considered as substitutes for the most directly comparable GAAP measures. Additional
information concerning non-GAAP measures 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,
www.CNOinc.com.
Operating earnings measures
Management believes that an analysis of net income applicable to common stock before net realized
investment gains or 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, changes in the valuation
allowance for deferred tax assets and other tax items and other non-operating items consisting primarily of
earnings attributable to variable interest entities (“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.
Information Related to Certain Non-GAAP Financial Measures
CNO Financial Group | First Quarter 2017 Earnings | April 27, 2017 32
Information Related to Certain Non-GAAP Financial Measures
A reconciliation of net income applicable to common stock to net operating income (and related per-share amounts) is as follows
(dollars in millions, except per-share amounts):
1Q16 2Q16 3Q16 4Q16 1Q17
Net income applicable to common stock 45.5$ 59.9$ 18.6$ 234.2$ 62.3$
Non-operating items:
Net realized investment (gains) losses, net of related amortization 1.0 (12.0) (11.4) 14.8 (7.9)
Fair value changes in embedded derivative liabilities, net of related amortization 29.5 16.5 (9.4) (46.2) 4.4
Fair value changes and amendment related to the agent deferred compensation plan 6.0 12.3 (6.3) (15.1) -
Loss on reinsurance transaction - - 75.4 - -
Other 0.6 (0.1) 0.7 0.8 (0.3)
Non-operating income (loss) before taxes 37.1 16.7 49.0 (45.7) (3.8)
Income tax (expense) benefit:
On non-operating (income) loss 13.0 5.9 17.1 (16.0) (1.3)
Valuation allowance for deferred tax assets and other tax items 20.0 7.0 (13.8) 119.6 -
Net non-operating (income) loss 4.1 3.8 45.7 (149.3) (2.5)
Net operating income (a non-GAAP financial measure) 49.6$ 63.7$ 64.3$ 84.9$ 59.8$
Per diluted share:
Net income 0.25$ 0.33$ 0.11$ 1.34$ 0.36$
Net re lized investment (gains) losses (net of related amortization and taxes) - (0.04) (0.04) 0.06 (0.03)
Fair value changes in embedded derivative liabilities (net of related amortization and taxes) 0.11 0.06 (0.04) (0.17) 0.01
Fair value changes and amendment related to the agent deferred compensation plan (net of taxes) 0.02 0.04 (0.02) (0.06) -
Valuation allowance for deferred tax assets and other tax items (0.11) (0.04) 0.08 (0.68) -
Loss on reinsurance transaction (net of taxes) - - 0.28 - -
Other - - - - -
Net operating income (a non-GAAP financial measure) 0.27$ 0.35$ 0.37$ 0.49$ 0.34$
CNO Financial Group | First Quarter 2017 Earnings | April 27, 2017 33
1Q16 2Q16 3Q16 4Q16 1Q17
Operating income 49.6$ 63.7$ 64.3$ 84.9$ 59.8$
Weighted average shares outstanding for basic earnings per share 180,350 178,323 174,247 173,634 173,431
Effect of dilutive securities on weighted average shares:
Stock options, restricted stock and performance units 1,778 1,944 1,476 1,539 1,634
Weighted average shares outstanding for diluted earnings per share 182,128 180,267 175,723 175,173 175,065
Net operating income per diluted share 0.27$ 0.35$ 0.37$ 0.49$ 0.34$
A reconciliation of operating income and shares used to calculate basic and diluted operating earnings per share is as
follows (dollars in millions, except per-share amounts, and shares in thousands):
Information Related to Certain Non-GAAP Financial Measures
CNO Financial Group | First Quarter 2017 Earnings | April 27, 2017 34
Book value per diluted share
Book value per diluted share reflects the potential dilution that could occur if outstanding stock options were exercised, restricted stock and performance units
were vested and convertible securities were converted. 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.
1Q16 2Q16 3Q16 4Q16 1Q17
Total shareholders' equity 4,226.6$ 4,456.2$ 4,493.8$ 4,486.9$ 4,606.8$
Shares outstanding for the period 179,098,447 176,240,559 173,543,965 173,753,614 172,103,802
Book value per share 23.60$ 25.28$ 25.89$ 25.82$ 26.77$
Total shareholders' equity 4,226.6$ 4,456.2$ 4,493.8$ 4,486.9$ 4,606.8$
Less accumulated other comprehensive income (540.5) (777.8) (855.5) (622.4) (729.6)
A justed hareholders' equity excluding AOCI 3,686.1$ 3,678.4$ 3,638.3$ 3,864.5$ 3,877.2$
Sh o tsta ding for the period 179,098,447 176,240,559 173,543,965 173,753,614 172,103,802
Dilutive common stock equivalents related to:
Stock options, restricted stock and performance units 1,803,822 1,744,508 1,349,207 1,721,878 1,714,212
Diluted shares outstanding 180,902,269 177,985,067 174,893,172 175,475,492 173,818,014
Book value per diluted share (a non-GAAP financial measure) 20.38$ 20.67$ 20.80$ 22.02$ 22.31$
A reconciliation from book value per share to book value per diluted share, excluding accumulated other comprehensive income (loss) is as follows (dollars in
millions, except per share amounts):
Information Related to Certain Non-GAAP Financial Measures
CNO Financial Group | First Quarter 2017 Earnings | April 27, 2017 35
Information Related to Certain Non-GAAP Financial Measures
The interest-adjusted benefit ratio (a non-GAAP measure) is calculated by dividing the product's insurance policy benefits less
imputed interest income on the accumulated assets backing the insurance liabilities by insurance policy income. Interest income is
an important factor in measuring the performance of longer duration health products. The net cash flows generally cause an
accumulation of amounts in the early years of a policy (accounted for as reserve increases), which will be paid out as benefits in
later policy years (accounted for as reserve decreases). Accordingly, as the policies age, the benefit ratio will typically increase, but
the increase in the change in reserve will be partially offset by the imputed interest income earned on the accumulated assets. The
interest-adjusted benefit ratio reflects the effects of such interest income offset. Since interest income is an important factor in
measuring the performance of these products, management believes a benefit ratio, which includes the effect of interest income, is
useful in analyzing product performance. The interest-adjusted benefit ratio excluding the impact of rate increases eliminates the
release of reserves due to the impact of policyholder actions following rate increases.
(Dollars in millions)
1Q16 2Q16 3Q16 4Q16 1Q17
Bankers Life
Long-term care benefit ratios
Earned premium 118.5$ 118.3$ 116.6$ 117.8$ 115.6$
Benefit ratio before imputed interest income on reserves 132.9% 134.7% 137.7% 134.7% 132.6%
Interest-adjusted benefit ratio 75.3% 77.9% 77.7% 76.0% 72.5%
Interest-adjusted benefit ratio, exluding the impact of reserve releases due to rate increases 82.4% 82.1% 82.6% 78.4% 74.2%
Underwriting margin (earned premium plus imputed interest income on reserves less policy benefits) 29.3$ 26.2$ 26.0$ 28.3$ 31.8$
A just d u d rwriting margin (excluding the impact of reserve releases due to rate increases) 20.9 21.1 20.3 25.6 29.8
Washin ton National
Supplemental health benefit ratios
Earned premium 139.2$ 140.9$ 141.5$ 144.0$ 145.6$
Benefit ratio before imputed interest income on reserves 81.2% 85.7% 84.0% 81.0% 84.6%
Interest-adjusted benefit ratio 57.7% 61.6% 59.8% 57.0% 60.6%
Underwriting margin (earned premium plus imputed interest income on reserves less policy benefits) 58.9$ 54.0$ 56.9$ 62.0$ 57.3$
Interest-adjusted benefit ratios
CNO Financial Group | First Quarter 2017 Earnings | April 27, 2017 36
Information Related to Certain Non-GAAP Financial Measures
Operating return measures
Management believes that an analysis of net income applicable to common stock before net realized investment gains
or 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, changes in the valuation allowance for deferred tax assets and other tax items,
loss on extinguishment of debt and other non-operating items consisting primarily of earnings attributable to variable
interest entities (“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.
Management also believes that an operating return, excluding significant items, is important as the impact of these
items enhances the understanding of our operating results.
This non-GAAP financial measure also differs from return on equity because accumulated other comprehensive income
(loss) has been excluded from the value of equity used to determine this ratio. Management believes this non-GAAP
financial measure is useful because it removes the volatility that arises from changes in accumulated other
comprehensive income (loss). Such volatility is often caused by changes in the estimated fair value of our investment
portfolio resulting from changes in general market interest rates rather than the business decisions made by
management.
In addition, our equity includes the value of significant net operating loss carryforwards (included in income tax assets).
In accordance with GAAP, these 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 and the comparability of these measures from period-to-period. Operating return
measures are used in measuring the performance of our business units and are used as a basis for incentive
compensation.
CNO Financial Group | First Quarter 2017 Earnings | April 27, 2017 37
Information Related to Certain Non-GAAP Financial Measures
The calculations of: (i) operating return on equity, excluding accumulated other comprehensive income (loss) and net
operating loss carryforwards (a non-GAAP financial measure); (ii) operating return, excluding significant items, on
equity, excluding accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-
GAAP financial measure); and (iii) return on equity are as follows (dollars in millions):
1Q16 2Q16 3Q16 4Q16 1Q17
Operating income 264.2$ 267.1$ 274.6$ 262.5$ 272.7$
Operating income, excluding significant items 248.8$ 243.0$ 239.6$ 229.1$ 244.2$
Net Income 263.4$ 276.5$ 261.3$ 358.2$ 375.0$
Average common equity, excluding accumulated other
comprehensive income (loss) and net operating loss
carryforwards (a non-GAAP financial measure) 2,981.7$ 2,977.9$ 2,991.1$ 3,026.5$ 3,083.9$
Average common shareholders' equity 4,290.9$ 4,236.6$ 4,288.4$ 4,372.3$ 4,463.4$
Operating return on equity, excluding accumulated other
comprehensive income (loss) and net operating loss
carryfo wards (a non-GAAP financial measure) 8.9% 9.0% 9.2% 8.7% 8.8%
Operating return, excluding significant items, on equity, excluding
accumulated other comprehensive income (loss) and net
operating loss carryforwards (a non-GAAP financial measure) 8.3% 8.2% 8.0% 7.6% 7.9%
Return on equity 6.1% 6.5% 6.1% 8.2% 8.4%
Trailing Twelve Months Ended
(Continued on next page)
CNO Financial Group | First Quarter 2017 Earnings | April 27, 2017 38
Information Related to Certain Non-GAAP Financial Measures
The following summarizes: (i) operating earnings; (ii) significant items; (iii) operating earnings, excluding significant
items; and (iv) net income (dollars in millions):
Net Operating
Net Operating income,
income, excluding Net
excluding significant income -
Net Operating Significant significant items - trailing Net trailing
income items (a) items four quarters income four quarters
2Q15 60.8$ 5.8$ 66.6$ 265.9$ 46.8$ 300.9$
3Q15 56.8 7.5 64.3 260.7 33.8 217.3
4Q15 97.0 (25.7) 71.3 262.3 137.3 270.7
1Q16 49.6 (3.0) 46.6 248.8 45.5 263.4
2Q16 63.7 (2.9) 60.8 243.0 59.9 276.5
3Q16 64.3 (3.4) 60.9 239.6 18.6 261.3
4Q16 84.9 (24.1) 60.8 229.1 234.2 358.2
1Q17 59.8 1.9 61.7 244.2 62.3 375.0
(Continued on next page)
(a) The significant items have been discussed in prior press releases.
CNO Financial Group | First Quarter 2017 Earnings | April 27, 2017 39
Information Related to Certain Non-GAAP Financial Measures
A reconciliation of pretax operating earnings (a non-GAAP financial measure) to net income is as follows (dollars in
millions):
1Q16 2Q16 3Q16 4Q16 1Q17
Pretax operating earnings (a non-GAAP financial measure) 407.4$ 413.0$ 423.5$ 410.3$ 425.6$
Income tax (expense) benefit (143.2) (145.9) (148.9) (147.8) (152.9)
Operating return 264.2 267.1 274.6 262.5 272.7
Non-operating items:
Net realized investment gains (losses), net of related amortization (46.2) (23.8) 6.6 7.6 16.5
Fair value changes in embedded derivative liabilities, net of related amortization (4.9) (47.1) (22.0) 9.6 34.7
Fair value changes and amendment related to the agent deferred compensation plan 9.1 (3.2) 3.1 3.1 9.1
Loss on reinsurance transaction - - (75.4) (75.4) (75.4)
Loss on extinguishment of debt (32.8) - - - -
Other (6.7) (3.0) (3.0) (2.0) (1.1)
Non-operating income (loss) before taxes (81.5) (77.1) (90.7) (57.1) (16.2)
Income tax expense (benefit):
On non-operating income (loss) (28.2) (27.0) (31.7) (20.0) (5.7)
Valuation allowance for deferred tax assets and other tax items (52.5) (59.5) (45.7) (132.8) (112.8)
Net non-operating income (loss) (0.8) 9.4 (13.3) 95.7 102.3
Net income 263.4$ 276.5$ 261.3$ 358.2$ 375.0$
Twelve Months Ended
(Continued on next page)
CNO Financial Group | First Quarter 2017 Earnings | April 27, 2017 40
Information Related to Certain Non-GAAP Financial Measures
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):
1Q15 2Q15 3Q15 4Q15
Consolidated capital, excluding accumulated other comprehensive
income (loss) and net operating loss carryforwards
(a non-GAAP financial measure) 3,026.1$ 2,989.7$ 2,924.9$ 3,011.6$
Net operating loss carryforwards 793.3 769.5 735.7 724.1
Accumulated other comprehensive income 934.2 605.0 510.4 402.8
Common shareholders' equity 4,753.6$ 4,364.2$ 4,171.0$ 4,138.5$
1Q16 2Q16 3Q16 4Q16
Consolidated capital, excluding accumulated other comprehensive
income (loss) and net operating loss carryforwards
(a non-GAAP financial measure) 2,975.3$ 3,010.1$ 3,010.1$ 3,209.5$
Net operating loss carryforwards 710.8 668.3 628.2 655.0
Accumulated other comprehensive income 540.5 777.8 855.5 622.4
Common shareholders' equity 4,226.6$ 4,456.2$ 4,493.8$ 4,486.9$
1Q17
Consolidated capital, excluding accumulated other comprehensive
incom (loss) and net operating loss carryforwards
(a non-GAAP financial measure) 3,236.6$
Net operating loss carryforwards 640.6
Accumulated other comprehensive income 729.6
Common shareholders' equity 4,606.8$
CNO Financial Group | First Quarter 2017 Earnings | April 27, 2017 41
Information Related to Certain Non-GAAP Financial Measures
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):
1Q16 2Q16 3Q16 4Q16 1Q17
Consolidated capital, excluding accumulated other comprehensive
income (loss) and net operating loss carryforwards
(a non-GAAP financial measure) 2,981.7$ 2,977.9$ 2,991.1$ 3,026.5$ 3,083.9$
Net operating loss carryforwards 745.3 722.4 696.3 674.2 656.8
Accumulated other comprehensive income 563.9 536.3 601.0 671.6 722.7
Common shareholders' equity 4,290.9$ 4,236.6$ 4,288.4$ 4,372.3$ 4,463.4$
Trailing Four Quarter Average
CNO Financial Group | First Quarter 2017 Earnings | April 27, 2017 42
Information Related to Certain Non-GAAP Financial Measures
1Q16 2Q16 3Q16 4Q16 1Q17
Corporate notes payable 911.5$ 912.0$ 912.5$ 912.9$ 913.4$
Total shareholders' equity 4,226.6 4,456.2 4,493.8 4,486.9 4,606.8
Total capital 5,138.1$ 5,368.2$ 5,406.3$ 5,399.8$ 5,520.2$
orporat debt to capital 17.7% 17.0% 16.9% 16.9% 16.5%
Corporate notes payable 911.5$ 912.0$ 912.5$ 912.9$ 913.4$
Total shareholders' equity 4,226.6 4,456.2 4,493.8 4,486.9 4,606.8
Less accumulated other comprehensive income (540.5) (777.8) (855.5) (622.4) (729.6)
Total capital 4,597.6$ 4,590.4$ 4,550.8$ 4,777.4$ 4,790.6$
Debt to total capital ratio, excluding AOCI (a
non-GAAP financial measure) 19.8% 19.9% 20.1% 19.1% 19.1%
Debt to capital ratio, excluding accumulated other comprehensive income (loss)
The debt to capital ratio, excluding accumulated other comprehensive income (loss), differs from the debt to capital ratio because accumulated
other comprehensive income (loss) has been excluded from the value of capital used to determine this measure. Management believes this non-
GAAP financial measure is useful because it removes the volatility that arises from changes in accumulated other comprehensive income (loss).
Such volatility is often caused by changes in the estimated fair value of our investment portfolio resulting from changes in general market interest
rates rather than the business decisions made by management. A reconciliation of these ratios is as follows (dollars in millions):