Attached files
| file | filename |
|---|---|
| 8-K - 8-K - CNO Financial Group, Inc. | form8-k09302017managementd.htm |
CNO Financial Group | 2017 Investor Day | June 5, 2017 1
3Q17
Financial and operating results for the period ended September 30, 2017
October 26, 2017
Unless otherwise specified, comparisons in this presentation are between 3Q16 and 3Q17.
Exhibit 99.1
CNO Financial Group | Third Quarter 2017 Earnings | October 26, 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 October 25, 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 | Third Quarter 2017 Earnings | October 26, 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 | Third Quarter 2017 Earnings | October 26, 2017 4
CNO Financial Group | Third Quarter 2017 Earnings | October 26, 2017 5
3Q17 in Review
Strong growth in earnings, free cash flow and capital
– Operating EPS up 22%
– Book value per diluted share up 11%
Growth scorecard mixed
– First year collected premium and new annualized premium down 5%
and 10%, respectively
– Annuity account values up 4%
– Fee revenue up 10%
Returned $43 million to shareholders, and $185 million YTD
CNO Financial Group | Third Quarter 2017 Earnings | October 26, 2017 6
3Q17 Sales and Distribution Results
Bankers Life
2 Measured as 100% of new term life and health annualized premiums and 10% of single premium whole life deposits.
3 Includes Medicare Advantage, Medicare supplement, PDP, Dental/Vision and ACA products (prior periods have been
…restated to include ACA product sales).
Total collected premiums down 4%
– First-year collected premiums down 5%
– Annuity total collected premiums down 4%
Annuity account values up 5%
Life and health new annualized premium down 18%
and 11%, respectively
Average Producing Agents1 down 7%
BD/RIA client assets and advisor counts up
sequentially
1 Producing agent counts are determined at the end of each month and only include agents who
submitted at least one policy in the month. The average producing agent counts represent the
average of the last 12 months producing agent counts.
Growth Highlights ($ mi l l ions , pol icies thousands)
3Q16 3Q17 % Change
New Annualized Premium 2
Life $19.8 $16.3 -17.7%
Health 22.8 20.3 -11.0%
Total New Annualized Premium
2
$42.6 $36.6 -14.1%
Annuity
Total Collected Premiums $245.1 $236.5 -3.5%
Account Values $7,675.9 $8,047.2 4.8%
Policies Inforce
Life 712.6 705.7 -1.0%
Annuity 178.5 175.3 -1.8%
Health 640.1 629.2 -1.7%
Total Policies Inforce 1,531.2 1,510.2 -1.4%
Third Party Products 3
Trailing 4 Quarter Fee Income, net $18.4 $19.3 4.9%
Policies Inforce 149.3 155.4 4.1%
Collected Premiums ($ millions)
3Q16 4Q16 1Q17 2Q1 3Q17
$304.8 $342.1 $311.1 $319.9 $288.2
$361.1
$369.5 $376.7 $360.7 $353.5
$665.9
$711.6 $687.8 $680.6 $641.7
First-Year Premium Renewal Premium
Sales Force (Producing Agents1 Only)
3Q16 4Q16 1Q17 2Q17 3Q17
1,875 1,875 1,877 1,880 1,873
2,664 2,604 2,527 2,444 2,370
4,539 4,479 4,404 4,324 4,243
Average 3+ Year Agents¹ Average 1st & 2nd Year Agents¹
CNO Financial Group | Third Quarter 2017 Earnings | October 26, 2017 7
$19.0 $19.3 $20.5 $19.7 $18.9
$129.8 $131.0 $138.2 $135.2 $133.6
$14.6 $14.9
$14.4 $12.6 $11.7
First-Year Premium Renewal Premium Medicare Supplement
Run-off Premium
$164.2
Total collected premiums flat
– First-year collected premiums flat
– Supplemental health total collected premiums
up 3%
Total life and health new annualized premium up 1%
– Worksite up 2%
– Individual up 1%
Average Producing Agents1 up 1%
3Q17 Sales and Distribution Results
Washington National
2 Measured as 100% of new term life and health annualized premiums
$163.4 $165.2
$173.1 $167.5
1 Producing agent counts are determined at the end of each month and only include agents who
submitted at least one policy in the month. The average producing agent counts represent the
average of the last 12 months producing agent counts.
Growth Highlights ($ mi l l ions , pol icies thousands)
3Q16 3Q17 % Change
New Annualized Premium 2
Supplemental Health $22.9 $22.8 -0.4%
Life 1.7 2.0 17.6%
Tot l $24.6 $24.8 0.8%
Policies Inforce
Supplemental Health 775.4 785.1 1.3%
Life 109.2 108.2 -0.9%
Medicare Supplement/Other 23.0 20.1 -12.6%
Annuity 52.3 49.7 -5.0%
Total 959.9 963.1 0.3%
Collected Premiums ($ millions)
3Q16 4Q16 1Q17 2Q17 3Q17
Sales Force (PMA Producing Agents1 Only)
3Q16 4Q16 1Q17 2Q17 3Q17
309 308 308 308 310
372 368 372 376 376
681 677 680 684 686
Average 3+ Year Agents¹ Average 1st & 2nd Year Agents¹
CNO Financial Group | Third Quarter 2017 Earnings | October 26, 2017 8
Total collected premiums up 3%
– First-year collected premiums down
12%
New annualized premium down 13%
– Remain disciplined and opportunistic
with television advertising spend
Continued focus on diversifying sales
generation sources
Maintaining 2017 total adjusted EBIT
guidance of $15-20 million range
(excluding 3Q17 significant item)
3Q17 Sales and Distribution Results
Colonial Penn
1 Measured as 100% of new life annualized premiums.
Growth Highlights ($ millions, policies thousands)
3Q16 3Q17 % Change
New Annualized Premium 1
Life $18.4 $16.0 -13.0%
Policies Inforce
Life 848.7 841.9 -0.8%
Other 3.6 3.2 -11.1%
Total 852.3 845.1 -0.8%
Collected Premiums ($ millions)
3Q16 4Q16 1Q17 2Q17 3Q17
$13.8 $13.2 $13.7 $12.7 $12.1
$56.9 $56.6 $60.8 $59.8 $60.5
$70.7 $69.8 $74.5 $72.5 $72.6
First-Year Premium Renewal Premium
CNO Financial Group | Third Quarter 2017 Earnings | October 26, 2017 9
$0.37
$0.45
$0.35
$0.44
Net Operating Income
Per Share¹
Net Operating Income
Per Share Excluding
Significant Items¹
1 A non-GAAP measure. See the Appendix for a reconciliation to the corresponding GAAP measure.
3Q16 3Q17
3Q17 Financial Results Financial Highlights
3Q17 Earnings Highlights ($ millions, except per share data)
Net Operating Income1 $64.3 $76.7
Net Operating Income
Excl. Significant Items1
$60.9 $74.7
Weighted Average
Shares Outstanding
175.7 171.0
Net income per diluted share of $0.59
Net operating income per diluted share1 of
$0.45 reflects:
– Favorability across most insurance product
margins
– Elevated call/prepayment income
Excluding significant items, Net Operating
EPS1 of $0.44, up 26%
Operating ROE1 of 9.3%
CNO Financial Group | Third Quarter 2017 Earnings | October 26, 2017 10
Segment Results ($ millions)
1 A non-GAAP measure. See the Appendix for a reconciliation to the corresponding GAAP measure.
Segment Adjusted EBIT Excluding Significant Items1
Segment Highlights
3Q16 4Q16 1Q17 2Q17 3Q17
$82.9 $90.7 $91.4
$103.2 $106.9
$25.2
$29.9
$24.8 $23.6
$27.5
$0.9
$7.1
($0.3)
$8.0 $6.0
Bankers Life
Washington
National
Colonial
Penn
($1.3)
$0.4 $1.7
($1.0)
($4.4) ($17.5)
($8.9) ($13.2) ($14.9)
LTC in
run-off
Corporate
Total CNO $104.6 $108.9 $107.4 $123.3 $124.5
Bankers Life results reflect higher LTC
margins and higher call/prepayment
income
Washington National results reflect growth
in the supplemental health business
Colonial Penn results reflect lower direct
marketing costs and growth in the
business
LTC in run-off in-line with expectations
Corporate results reflect higher expenses
CNO Financial Group | Third Quarter 2017 Earnings | October 26, 2017 11
$141 $144 $146 $146 $147
59.8%
57.0%
60.6% 60.4%
59.0%
3Q16 4Q16 1Q17 2Q17 3Q17
Earned Premium
Reported Benefit Ratio
($ 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 and other one-time impacts
Health Margins
Washington National
Supplemental Health IABR1
Bankers Life Long-term Care
IABR1
Bankers Life Medicare
Supplement Benefit Ratio
$194 $193 $196 $194 $195
72.5% 71.2% 70.0% 70.4%
72.0%
3Q16 4Q16 1Q17 2Q17 3Q17
Earned Premium
Reported Benefit Ratio
$117 $118 $116 $114 $113
77.7%
76.0%
72.5%
66.2%
72.9%
82.6%
78.4%
74.2% 74.4% 72.9%
3Q16 4Q16 1Q17 2Q17 3Q17
Earned Premium
Reported IABR
Adjusted Benefit Ratio²
Benefit ratio of 72.0% reflecting
favorable incurred claims
Maintaining benefit ratio guidance
of 70-73% for remainder of 2017
IABR1 of 59.0% is in-line with
expectations
Maintaining IABR1 guidance of
58-61% for remainder of 2017
Adjusted IABR2 of 72.9%, excluding
shock lapse and other one-time
impacts
No future loss reserve accrual in 2017
Maintaining IABR1 guidance of
75-80% for remainder of 2017
CNO Financial Group | Third Quarter 2017 Earnings | October 26, 2017 12
$13.2
$20.3
$3.5
$10.9 $9.5
$1.2
$7.5
$8.4
$5.1
$4.7
$31.2
$14.2
$43.4
Investment Results ($ millions)
Average Invested Assets and Cash Realized Gains, Losses and Impairments
Impairments
3Q17 3Q16 4Q16 1Q17
$22,875
$23,736 $23,864 $23,982 $24,286
$301.7 $315.6 $312.0 $322.4 $325.9
3Q16 4Q16 1Q17 2Q17 3Q17
Net Investment
Income
2Q17
$26.0
$14.4
1 Earned Yield excludes assets held in our FHLB matchbook program.
Gains from impact of tightened credit spreads on liquidations of high beta
credit
Continued strong credit performance in generally all sectors
No investment losses due to recent catastrophe activity
Continue to reposition recaptured assets; remaining balance of $33.4 million
as of 9/30/17, down from $74.8 million as of 6/30/17
$12.8
Strong new money rate due to investments in esoteric ABS, direct
credit, corporate high yield, fixed income preferreds, and lengthening
in IG securities to match liabilities
Higher than expected call/prepayment income due to larger volume of
corporate bond and CRE loan refinancing
Continued favorable alternative results especially for credit oriented
exposures
$27.8
$19.8
$11.9
New Money Rate 5.29% 5.02% 5.23% 4.64% 5.38%
Earned Yield1: 5.59% 5.58% 5.42% 5.54% 5.51%
Pre-Pay/Call/Make-
whole Income
$5.4 $5.3 $0.6 $9.8 $16.9
Alternative
Investment Income
$4.7 $6.7 $8.5 $6.1 $8.9
$16.0
Gross Realized Gains Gross Realized Losses
CNO Financial Group | Third Quarter 2017 Earnings | October 26, 2017 13
3Q17 Capital & Liquidity Highlights
Strength & stability 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 450%
Leverage1 of 18.8%
Book value per diluted share1 increased to $23.19 from $20.80 at
September 30, 2016
Holding company cash and investments of $380 million
Amended, extended and upsized revolving credit facility
Repurchased $28.2 million of common stock in the quarter at an average cost
of $22.19 per share, year-to-date repurchased $140.1 million of common stock
at an average cost of $20.91 per share
– Lowering 2017 repurchase guidance to $175 to $225 million, absent compelling
alternatives
CNO Financial Group | Third Quarter 2017 Earnings | October 26, 2017 14
Wrap Up
Making progress on long-term growth initiatives
Remain committed to reducing our relative long-term
care exposure
Farewell to Ed
– 13 ratings upgrades as CEO
– Implemented common stock dividend in 2012; five subsequent
increases
– Total shareholder return of over 350% as CEO
CNO Financial Group | Third Quarter 2017 Earnings | October 26, 2017 15
Questions and Answers
CNO Financial Group | Third Quarter 2017 Earnings | October 26, 2017 16
Appendix
CNO Financial Group | Third Quarter 2017 Earnings | October 26, 2017 17
Growth Scorecard ($ millions)
1 Includes third party products sold. See page 21 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.
3Q 4Q 1Q 2Q 3Q
First Year Collected Premiums Bankers Life $304.8 $342.1 $311.1 $319.9 $288.2 -5.4%
Washington National 19.0 19.3 20.5 19.7 18.9 -0.5%
Colonial Penn 13.8 13.2 13.7 12.7 12.1 -12.3%
Total CNO $337.6 $374.6 $345.3 $352.3 $319.2 -5.5%
Collected Premiums Bankers Life $665.9 $711.6 $687.8 $680.6 $641.7 -3.6%
Washington National 163.4 165.2 173.1 167.5 164.2 0.5%
Colonial Penn 70.7 69.8 74.5 72.5 72.6 2.7%
LTC in run-off - 4.7 4.6 4.4 3.9 100.0%
Total CNO $900.0 $951.3 $940.0 $925.0 $882.4 -2.0%
Policies Inforce 1 (thousands) Bankers Life 1,680.4 1,686.9 1,673.5 1,671.7 1,665.6 -0.9%
Washington National 959.9 961.7 964.6 964.5 963.1 0.3%
Colonial Penn 852.3 846.4 853.3 849.4 845.1 -0.8%
LTC in run-off 10.5 10.2 10.1 9.8 9.5 -9.5%
Total CNO 3,503.1 3,505.2 3,501.5 3,495.4 3,483.3 -0.6%
New Annualized Premium 2 Life Insurance $39.9 $33.5 $41.5 $36.0 $34.3 -14.0%
Health Insurance 45.7 56.2 46.4 45.9 43.1 -5.7%
Total Life & Health Insurance $85.6 $89.7 $87.9 $81.9 $77.4 -9.6%
Annu ty Account Values Bankers Life $7,675.9 $7,788.5 $7,869.7 $7,954.7 $8,047.2 4.8%
Washington National 427.1 413.7 404.5 393.4 385.7 -9.7%
Total $8,103.0 $8,202.2 $8,274.2 $8,348.1 $8,432.9 4.1%
Annuity Collected Premiums Bankers Life $245.1 $284.9 $257.5 $264.3 $236.5 -3.5%
Fee Revenue Bankers Life $9.6 $10.7 $10.1 $10.1 $10.6 10.4%
2016 % Change
vs Prior Year
2017
CNO Financial Group | Third Quarter 2017 Earnings | October 26, 2017 18
Average Producing Agents1
1st Yr 2nd Yr 3rd Yr + Total 1st Yr 2nd Yr 3rd Yr + Total
9/30/2017 1,887 483 1,873 4,243 287 89 310 686
6/30/2017 1,941 503 1,880 4,324 285 91 308 684
3/31/2017 1,994 533 1,877 4,404 280 92 308 680
12/31/2016 2,037 567 1,875 4,479 279 89 308 677
9/30/2016 2,081 584 1,875 4,540 283 89 309 681
6/30/2016 2,123 598 1,882 4,603 284 88 307 679
3/31/2016 2,194 604 1,888 4,686 287 90 300 677
12/31/2015 2,266 613 1,883 4,761 282 92 293 666
9/30/2015 2,311 635 1,884 4,830 269 89 287 644
Bankers Life Washington National
1 Producing agent counts are determined at the end of each month and only include agents who submitted at least one policy in the month. The average producing
agent counts represent the average of the last 12 months producing agent counts
CNO Financial Group | Third Quarter 2017 Earnings | October 26, 2017 19
3Q17 Holding Company Liquidity ($ millions)
3Q17 YTD
Cash and Investments Balance - Beginning $278.2 $263.6
Sources
Dividends from Insurance Subsidiaries 109.8 286.8
Dividends from Non-insurance Subsidiaries - 5.8
Service and Investment Fees, Net 38.5 91.1
Surplus Debenture Interest 20.4 44.5
Interest/Earnings on Corporate Investments 3.6 12.7
Other 3.0 8.1
Total Sources 175.3 449.0
Uses
Contributions to Non-insurance Subsidiaries - 2.0
Share Repurchases 31.2 (1) 140.1
Interest 0.8 22.7
Common Stock Dividends 15.2 44.5
Intercompany Payments
2
- 41.4
Tax Payments 23.0 52.8
Ge eral Expenses & Other 7.5 39.6
Total Uses 77.7 343.1
Non-Cash Changes in Investment Balances 4.0 10.3
Cash and Investments Balance -September 30, 2017 $379.8 $379.8
1 $3.0 million of 2Q17 reported repurchases settled in 3Q17.
2 Settlement of intercompany balances related to previously disclosed 4Q16 IRS tax settlement.
CNO Financial Group | Third Quarter 2017 Earnings | October 26, 2017 20
Loss Carryforwards Valuation Allowance
Non-
Life(1)
$842
Tax Asset Summary ($ millions)
Loss Carryforwards Details
Total estimated economic value
of NOLs of $400 million @ 10%
discount rate (~$2.35 on per
share basis)
NOLs are expected to offset
100% of the taxable income of
our non-life companies and
35% of the taxable income of
our life insurance companies
through 2023
1 Excludes $12 million related to state operating loss carryforwards.
2 Excludes $10 million related to state operating loss carryforwards.
Non-Life(2)
$231
CNO Financial Group | Third Quarter 2017 Earnings | October 26, 2017 21
Policies Inforce
3Q16 4Q16 1Q17 2Q17 3Q17
Policies inforce:
Bankers Life 1,531,204 1,526,344 1,519,474 1,515,445 1,510,160
Washington National 959,867 961,689 964,642 964,519 963,141
C lonial Penn 852,305 846,372 853,307 849,353 845,135
Long-term care in run-off 10,480 10,260 10,068 9,769 9,473
Total policies inforce 3,353,856 3,344,665 3,347,491 3,339,086 3,327,909
Third party policies inforce sold by
Bankers Life agents 149,255 160,548 154,005 156,308 155,430
Total policies inforce and third party policies
inforce sold by Bankers Life agents 3,503,111 3,505,213 3,501,496 3,495,394 3,483,339
The following summarizes total policies inforce as of the end of the period indicated.
CNO Financial Group | Third Quarter 2017 Earnings | October 26, 2017 22
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 27 and 29 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 | Third Quarter 2017 Earnings | October 26, 2017 23
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 27 and 29 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 | Third Quarter 2017 Earnings | October 26, 2017 24
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 27 and 29 for a reconciliation to the corresponding GAAP measure.
CNO Financial Group | Third Quarter 2017 Earnings | October 26, 2017 25
Net Operating Income:
Bankers Life $ 112.6 $ (9.4) (1) $ 103.2
Washington National
Colonial Penn
Long-term care in run-off 1.7 -
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 * $ 78.6 $ (6.1) $ 72.5
Net operating income per diluted share* $ 0.45 $ 0.03 $ 0.42
Three months ended
June 30, 2017
Actual results Significant items
Excluding
significant
items
23.6 23.6
1.7
136.5
(9.4) 123.3
8.0 - 8.0
145.9 (9.4)
(13.2) - (13.2)
39.2
132.7
(11.6) - (11.6)
(1) Pre-tax earnings in the Bankers Life segment included: (i) favorable persistency (including the results of extensive procedures performed to identify policies that
had terminated prior to June 30, 2017 due to death); and (ii) policy holder actions following long-term care rate increases. These items resulted in a release of
reserves, primarily related to the long-term care business in the Bankers Life segment, which totaled $9.4 million.
121.1 (9.4) 111.7
42.5 (3.3)
The table below summarizes the financial impact of significant items on our 2Q17 net operating income. Management believes that
identifying the impact of these items enhances the understanding of our operating results (dollars in millions).
2Q17 Significant Items
* A non-GAAP measure. See pages 27 and 29 for a reconciliation to the corresponding GAAP measure.
CNO Financial Group | Third Quarter 2017 Earnings | October 26, 2017 26
Net Operating Income:
Bankers Life $ 106.9 $ - $ 106.9
Washington National
Colonial Penn (1)
Long-term care in run-off (1.0) -
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 * $ 76.7 $ (2.0) $ 74.7
Net operating income per diluted share* $ 0.45 $ (0.01) $ 0.44
Three months ended
September 30, 2017
Actual results Significant items
Excluding
significant
items
27.5 - 27.5
(1.0)
139.4
(3.0) 124.5
9.0 (3.0) 6.0
142.4 (3.0)
(14.9) - (14.9)
38.1
127.5
(11.7) - (11.7)
(1) Pre-tax earnings in the Colonial Penn segment reflects a $3.0 million out-of-period adjustment and refinement to liabilities for insurance products identified in
conjunction with periodic updating of assumptions.
115.8 (3.0) 112.8
39.1 (1.0)
The table below summarizes the financial impact of significant items on our 3Q17 net operating income. Management believes that
identifying the impact of these items enhances the understanding of our operating results (dollars in millions).
3Q17 Significant Items
* A non-GAAP measure. See pages 27 and 29 for a reconciliation to the corresponding GAAP measure.
CNO Financial Group | Third Quarter 2017 Earnings | October 26, 2017 27
Quarterly Earnings
*Management believes that an analysis of earnings before net realized investment gains (losses), fair value changes in embedded derivative liabilities, fair value changes and amendment
related to the agent deferred compensation plan, loss on reinsurance transaction, other non-operating items, corporate interest expense and taxes (“Adjusted EBIT,” a non-GAAP
financial measure) provides a clearer comparison of the operating results of the company quarter-over-quarter because it excludes: (1) net realized investment gains (losses); (2) fair
value changes due to fluctuations in the interest rates used to discount embedded derivative liabilities related to our fixed index annuities that are unrelated to the company’s underlying
fundamentals; (3) fair value changes and amendment related to the agent deferred compensation plan; (4) loss on reinsurance transaction; (5) charges in the valuation allowance for
deferred tax assets and other tax items; and (6) other non-operating items consisting primarily of earnings attributable to variable interest entities. The table above provides a
reconciliation of Adjusted EBIT to net income.
3Q16 4Q16 1Q17 2Q17 3Q17
Bankers Life 88.1$ 138.9$ 89.7$ 112.6$ 106.9$
Washington National 25.2 29.9 23.5 23.6 27.5
Colonial Penn 0.9 4.6 (0.3) 8.0 9.0
Long-term care in run-off - (3.9) 0.4 1.7 (1.0)
Adjusted EBIT from business segments 114.2 169.5 113.3 145.9 142.4
Corporate operations, excluding interest expense (4.4) (23.0) (8.9) (13.2) (14.9)
Adjusted EBIT* 109.8 146.5 104.4 132.7 127.5
Corporate interest expense (11.5) (11.5) (11.5) (11.6) (11.7)
Operating earnings before taxes 98.3 135.0 92.9 121.1 115.8
Tax expense on period income 34.0 50.1 33.1 42.5 39.1
Net operating income 64.3 84.9 59.8 78.6 76.7
Net realized investment gains (losses), net of related amortization 11.4 (14.8) 7.9 14.9 28.5
Fair value changes in embedded derivative liabilities, net of related amortization 9.4 46.2 (4.4) (5.9) 2.3
Fair value changes and amendment related to the agent deferred compensation plan 6.3 15.1 - - (13.4)
Loss on reinsurance transaction (75.4) - - - -
Other (0.7) (0.8) 0.3 (1.6) (3.3)
Non-operating income (loss) before taxes (49.0) 45.7 3.8 7.4 14.1
Income tax expense (benefit):
On non-operating income (loss) (17.1) 16.0 1.3 2.6 5.0
Valuation allowance for deferred tax assets and other tax items 13.8 (119.6) - - (15.0)
Net non-operating income (loss) (45.7) 149.3 2.5 4.8 24.1
Net income 18.6$ 234.2$ 62.3$ 83.4$ 100.8$
($ millions)
CNO Financial Group | Third Quarter 2017 Earnings | October 26, 2017 28
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 | Third Quarter 2017 Earnings | October 26, 2017 29
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):
3Q16 4Q16 1Q17 2Q17 3Q17
Net income applicable to common stock 18.6$ 234.2$ 62.3$ 83.4$ 100.8$
Non-operating items:
Net realized investment (gains) losses, net of related amortization (11.4) 14.8 (7.9) (14.9) (28.5)
Fair value changes in embedded derivative liabilities, net of related amortization (9.4) (46.2) 4.4 5.9 (2.3)
Fair value changes and amendment related to the agent deferred compensation plan (6.3) (15.1) - - 13.4
Loss on reinsurance transaction 75.4 - - - -
Other 0.7 0.8 (0.3) 1.6 3.3
Non-operating (income) loss before taxes 49.0 (45.7) (3.8) (7.4) (14.1)
Income tax (expense) benefit:
On non-operating (income) loss 17.1 (16.0) (1.3) (2.6) (5.0)
Valuation allowance for deferred tax assets and other tax items (13.8) 119.6 - - 15.0
Net non-operating (income) loss 45.7 (149.3) (2.5) (4.8) (24.1)
Net operating income (a non-GAAP financial measure) 64.3$ 84.9$ 59.8$ 78.6$ 76.7$
Per diluted share:
Net income 0.11$ 1.34$ 0.36$ 0.48$ 0.59$
Net re lized investment (gains) losses (net of related amortization and taxes) (0.04) 0.06 (0.03) (0.06) (0.11)
Fair value changes in embedded derivative liabilities (net of related amortization and taxes) (0.04) (0.17) 0.01 0.02 (0.01)
Fair value changes and amendment related to the agent deferred compensation plan (net of taxes) (0.02) (0.06) - - 0.05
Valuation allowance for deferred tax assets and other tax items 0.08 (0.68) - - (0.09)
Loss on reinsurance transaction (net of taxes) 0.28 - - - -
Other - - - 0.01 0.02
Net operating income (a non-GAAP financial measure) 0.37$ 0.49$ 0.34$ 0.45$ 0.45$
CNO Financial Group | Third Quarter 2017 Earnings | October 26, 2017 30
3Q16 4Q16 1Q17 2Q17 3Q17
Operating income 64.3$ 84.9$ 59.8$ 78.6$ 76.7$
Weighted average shares outstanding for basic earnings per share 174,247 173,634 173,431 170,556 168,684
Effect of dilutive securities on weighted average shares:
Stock options, restricted stock and performance units 1,476 1,539 1,634 1,796 2,298
Weighted average shares outstanding for diluted earnings per share 175,723 175,173 175,065 172,352 170,982
Net operating income per diluted share 0.37$ 0.49$ 0.34$ 0.45$ 0.45$
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 | Third Quarter 2017 Earnings | October 26, 2017 31
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.
3Q16 4Q16 1Q17 2Q17 3Q17
Total shareholders' equity 4,493.8$ 4,486.9$ 4,606.8$ 4,779.3$ 4,881.7$
Shares outstanding for the period 173,543,965 173,753,614 172,103,802 169,018,890 167,762,323
Book value per share 25.89$ 25.82$ 26.77$ 28.28$ 29.10$
Total shareholders' equity 4,493.8$ 4,486.9$ 4,606.8$ 4,779.3$ 4,881.7$
Less accumulated other comprehensive income (855.5) (622.4) (729.6) (894.5) (933.6)
A justed hareholders' equity excluding AOCI 3,638.3$ 3,864.5$ 3,877.2$ 3,884.8$ 3,948.1$
Sh o tsta d ng for the period 173,543,965 173,753,614 172,103,802 169,018,890 167,762,323
Dilutive common stock equivalents related to:
Stock options, restricted stock and performance units 1,349,207 1,721,878 1,714,212 1,840,391 2,474,837
Diluted shares outstanding 174,893,172 175,475,492 173,818,014 170,859,281 170,237,160
Book value per diluted share (a non-GAAP financial measure) 20.80$ 22.02$ 22.31$ 22.74$ 23.19$
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 | Third Quarter 2017 Earnings | October 26, 2017 32
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 and other one-
time impacts eliminates the release of reserves due to the impact of policyholder actions following rate increases and other one-time
impacts.
(Dollars in millions)
3Q16 4Q16 1Q17 2Q17 3Q17
Bankers Life
Long-term care benefit ratios
Earned premium 116.6$ 117.8$ 115.6$ 113.7$ 112.7$
Benefit ratio before imputed interest income on reserves 137.7% 134.7% 132.6% 126.9% 134.2%
Interest-adjusted benefit ratio 77.7% 76.0% 72.5% 66.2% 72.9%
Interest-adjusted benefit ratio, excluding the impact of reserve releases due to rate increases and other one-time impacts 82.6% 78.4% 74.2% 74.4% 72.9%
Underwriting margin (earned premium plus imputed interest income on reserves less policy benefits) 26.0$ 28.3$ 31.8$ 38.4$ 30.5$
A just d u d rwriting margin (excluding the impact of reserve releases due to rate increases and other one-time impacts) 20.3 25.6 29.8 29.0 30.5
W shingt National
Supplemental health benefit ratios
Earned premium 141.5$ 144.0$ 145.6$ 146.3$ 147.2$
Benefit ratio before imputed interest income on reserves 84.0% 81.0% 84.6% 84.5% 83.2%
Interest-adjusted benefit ratio 59.8% 57.0% 60.6% 60.4% 59.0%
Underwriting margin (earned premium plus imputed interest income on reserves less policy benefits) 56.9$ 62.0$ 57.3$ 57.9$ 60.4$
Interest-adjusted benefit ratios
CNO Financial Group | Third Quarter 2017 Earnings | October 26, 2017 33
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 | Third Quarter 2017 Earnings | October 26, 2017 34
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):
3Q16 4Q16 1Q17 2Q17 3Q17
Operating income 274.6$ 262.5$ 272.7$ 287.6$ 300.0$
Operating income, excluding significant items 239.6$ 229.1$ 244.2$ 255.9$ 269.7$
Net Income 261.3$ 358.2$ 375.0$ 398.5$ 480.7$
Average common equity, excluding accumulated other
comprehensive income (loss) and net operating loss
carryforwards (a non-GAAP financial measure) 2,991.1$ 3,026.5$ 3,083.9$ 3,148.2$ 3,220.5$
Average common shareholders' equity 4,288.4$ 4,372.3$ 4,463.4$ 4,551.3$ 4,640.2$
Operating return on equity, excluding accumulated other
comprehensive income (loss) and net operating loss
carryfo wards (a non-GAAP financial measure) 9.2% 8.7% 8.8% 9.1% 9.3%
Operating return, excluding significant items, on equity, excluding
accumulated other comprehensive income (loss) and net
operating loss carryforwards (a non-GAAP financial measure) 8.0% 7.6% 7.9% 8.1% 8.4%
Return on equity 6.1% 8.2% 8.4% 8.8% 10.4%
Trailing Twelve Months Ended
(Continued on next page)
CNO Financial Group | Third Quarter 2017 Earnings | October 26, 2017 35
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
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
2Q17 78.6 (6.1) 72.5 255.9 83.4 398.5
3Q17 76.7 (2.0) 74.7 269.7 100.8 480.7
(Continued on next page)
(a) The significant items have been discussed in prior press releases.
CNO Financial Group | Third Quarter 2017 Earnings | October 26, 2017 36
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):
3Q16 4Q16 1Q17 2Q17 3Q17
Pretax operating earnings (a non-GAAP financial measure) 423.5$ 410.3$ 425.6$ 447.3$ 464.8$
Income tax (expense) benefit (148.9) (147.8) (152.9) (159.7) (164.8)
Operating return 274.6 262.5 272.7 287.6 300.0
Non-operating items:
Net realized investment gains (losses), net of related amortization 6.6 7.6 16.5 19.4 36.5
Fair value changes in embedded derivative liabilities, net of related amortization (22.0) 9.6 34.7 45.3 38.2
Fair value changes and amendment related to the agent deferred compensation plan 3.1 3.1 9.1 21.4 1.7
Loss on reinsurance transaction (75.4) (75.4) (75.4) (75.4) -
Other (3.0) (2.0) (1.1) (2.8) (5.4)
Non-operating income (loss) before taxes (90.7) (57.1) (16.2) 7.9 71.0
I come t x xpense (benefit):
On non-operating income (loss) (31.7) (20.0) (5.7) 2.8 24.9
Valuation allowance for deferred tax assets and other tax items (45.7) (132.8) (112.8) (105.8) (134.6)
Net non-operating income (loss) (13.3) 95.7 102.3 110.9 180.7
Net income 261.3$ 358.2$ 375.0$ 398.5$ 480.7$
Twelve Months Ended
(Continued on next page)
CNO Financial Group | Third Quarter 2017 Earnings | October 26, 2017 37
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 2Q17 3Q17
Consolidated capital, excluding accumulated other comprehensive
incom (loss) and net operating loss carryforwards
(a non-GAAP financial measure) 3,236.6$ 3,263.2$ 3,335.0$
Net operating loss carryforwards 640.6 621.6 613.1
Accumulated other comprehensive income 729.6 894.5 933.6
Common shareholders' equity 4,606.8$ 4,779.3$ 4,881.7$
CNO Financial Group | Third Quarter 2017 Earnings | October 26, 2017 38
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):
3Q16 4Q16 1Q17 2Q17 3Q17
C solidat d capital, excluding accumulated other comprehensive
i co (loss) and net operating loss carryforwards
(a non-GAAP financial measure) 2,991.1$ 3,026.5$ 3,083.9$ 3,148.2$ 3,220.5$
Net operating loss carryforwards 696.3 674.2 656.8 642.2 634.4
Accumulated other comprehensive income 601.0 671.6 722.7 760.9 785.3
Common shareholders' equity 4,288.4$ 4,372.3$ 4,463.4$ 4,551.3$ 4,640.2$
Trailing Four Quarter Average
CNO Financial Group | Third Quarter 2017 Earnings | October 26, 2017 39
Information Related to Certain Non-GAAP Financial Measures
3Q16 4Q16 1Q17 2Q17 3Q17
Corporate notes payable 912.5$ 912.9$ 913.4$ 913.9$ 914.4$
Total shareholders' equity 4,493.8 4,486.9 4,606.8 4,779.3 4,881.7
Total capital 5,406.3$ 5,399.8$ 5,520.2$ 5,693.2$ 5,796.1$
orporat debt to capital 16.9% 16.9% 16.5% 16.1% 15.8%
Corporate notes payable 912.5$ 912.9$ 913.4$ 913.9$ 914.4$
Total shareholders' equity 4,493.8 4,486.9 4,606.8 4,779.3 4,881.7
Less accumulated other comprehensive income (855.5) (622.4) (729.6) (894.5) (933.6)
Total capital 4,550.8$ 4,777.4$ 4,790.6$ 4,798.7$ 4,862.5$
Debt to total capital ratio, excluding AOCI (a
non-GAAP financial measure) 20.1% 19.1% 19.1% 19.0% 18.8%
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):