CARMEL, Ind., Feb. 8, 2022 /PRNewswire/ -- CNO Financial Group,
Inc. (NYSE: CNO) today announced that for the quarter ended
December 31, 2021, net income was
$115.8 million, or $0.93 per diluted share, compared to net income
of $111.8 million, or $0.80 per diluted share, in 4Q20. Net operating
income (1) in 4Q21 was $108.5
million, or $0.87 per diluted
share, compared to $86.0 million, or
$0.61 per diluted share, in 4Q20.
Net income for the year ended December
31, 2021 was $441.0 million,
or $3.36 per diluted share, compared
to $301.8 million, or $2.11 per diluted share, in 2020. Net operating
income (1) for the year ended December 31,
2021 was $365.6 million, or
$2.79 per diluted share, compared to
$362.3 million, or $2.53 per diluted share, in 2020.
"Solid fourth quarter results capped off another strong year,
demonstrating CNO's continued agility navigating the pandemic and
the successful execution of our strategic priorities," said
Gary C. Bhojwani, chief executive
officer. "While visibility into COVID's ongoing impact on our
business remains unclear, the dedication of our associates and
agents and the strength of our model will enable us to continue to
drive value for all of the constituents we serve."
Full Year 2021 Highlights
- Earnings per diluted share of $3.36, up 59% compared to 2020
- Operating (1) EPS of $2.79, up
10% from 2020
- Total new annualized premiums (NAP) (4) up 9% from 2020
- Direct-to-consumer life insurance NAP (4) up 16% from 2020,
exceeding $100 million for first
time, up 40% from 2019
- Annuity collected premiums up 20% from 2020
- Returned $468.1 million to
shareholders in the form of share repurchases (a record
$402.4 million) and dividends
($65.7 million)
- Return on equity (ROE) of 8.5%; operating ROE, as adjusted (6),
of 12.1%
Fourth Quarter 2021 Highlights
- Earnings per diluted share of $0.93 in 4Q21, up 16% compared to 4Q20
- Operating (1) EPS of $0.87 in
4Q21, up 43% compared to 4Q20
- Total NAP (4) up 2% from 4Q20
- Direct-to-consumer life insurance NAP (4) up 21% from 4Q20
- Annuity collected premiums up 15% from 4Q20
- Returned $115.7 million to
shareholders in the form of share repurchases ($100.0 million) and dividends ($15.7 million); reduced weighted average share
count by 11% since 4Q20
- Book value per share was $43.69,
up 8% from 4Q20; book value per diluted share, excluding
accumulated other comprehensive income (2), was $26.86, up 12% from 4Q20
FINANCIAL
SUMMARY Quarter End
(Amounts in millions, except per share data)
(Unaudited)
|
Net operating income,
a non-GAAP(a) financial measure, is used consistently by
CNO's management to evaluate the operating performance of the
Company and is a measure commonly used in the
life insurance industry. It differs from net income primarily
because it excludes certain non-operating items such as net
investment gains (losses), changes in fair values of embedded
derivatives and
the liability for a deferred compensation plan, and certain
significant and unusual items included in net income.
Management believes an analysis of net operating income is
important in understanding
the profitability and operating trends of the Company's
business. Net income is the most directly comparable GAAP
measure.
|
|
|
Per diluted
share
|
|
|
|
|
|
|
|
|
Quarter
ended
|
|
Quarter
ended
|
|
December
31,
|
|
December
31,
|
|
2021
|
|
|
2020
|
|
%
change
|
|
2021
|
|
|
2020
|
|
%
change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from insurance
products (b)
|
$
0.89
|
|
|
$
0.48
|
|
85
|
|
$
110.5
|
|
|
$
67.9
|
|
63
|
Fee income
|
0.02
|
|
|
0.02
|
|
—
|
|
2.9
|
|
|
2.9
|
|
—
|
Investment income not
allocated to product lines (c)
|
0.34
|
|
|
0.41
|
|
(17)
|
|
42.8
|
|
|
57.8
|
|
(26)
|
Expenses not
allocated to product lines
|
(0.14)
|
|
|
(0.12)
|
|
17
|
|
(17.4)
|
|
|
(17.8)
|
|
(2)
|
Operating earnings
before taxes
|
1.11
|
|
|
0.79
|
|
|
|
138.8
|
|
|
110.8
|
|
|
Income tax expense on
operating income
|
(0.24)
|
|
|
(0.18)
|
|
33
|
|
(30.3)
|
|
|
(24.8)
|
|
22
|
Net operating
income (1)
|
0.87
|
|
|
0.61
|
|
43
|
|
108.5
|
|
|
86.0
|
|
26
|
Net realized
investment gains from sales,
impairments and change in allowance for credit
losses (net of related amortization)
|
0.04
|
|
|
0.09
|
|
|
|
4.7
|
|
|
12.6
|
|
|
Net change in market
value of investments
recognized in earnings
|
(0.10)
|
|
|
0.04
|
|
|
|
(12.1)
|
|
|
6.0
|
|
|
Fair value changes in
embedded derivative liabilities
(net of related amortization)
|
0.15
|
|
|
0.12
|
|
|
|
19.1
|
|
|
16.3
|
|
|
Other
|
(0.02)
|
|
|
(0.01)
|
|
|
|
(2.4)
|
|
|
(2.2)
|
|
|
Non-operating income
before taxes
|
0.07
|
|
|
0.24
|
|
|
|
9.3
|
|
|
32.7
|
|
|
Income tax expense on
non-operating income
|
(0.01)
|
|
|
(0.05)
|
|
|
|
(2.0)
|
|
|
(6.9)
|
|
|
Net non-operating
income
|
0.06
|
|
|
0.19
|
|
|
|
7.3
|
|
|
25.8
|
|
|
Net
income
|
$
0.93
|
|
|
$
0.80
|
|
|
|
$
115.8
|
|
|
$
111.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
diluted shares outstanding
|
125.0
|
|
|
140.4
|
|
|
|
|
|
|
|
|
|
FINANCIAL
SUMMARY Year
End
(Amounts in millions,
except per share data)
(Unaudited)
|
|
Per diluted
share
|
|
|
|
|
|
|
|
|
Year
ended
|
|
Year
ended
|
|
December
31,
|
|
December
31,
|
|
2021
|
|
|
2020
|
|
%
change
|
|
2021
|
|
|
2020
|
|
%
change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from insurance
products (b)
|
$
2.65
|
|
|
$
2.54
|
|
4
|
|
$
347.2
|
|
|
$
363.8
|
|
(5)
|
Fee income
|
0.15
|
|
|
0.11
|
|
36
|
|
19.4
|
|
|
16.7
|
|
16
|
Investment income not
allocated to product lines (c)
|
1.41
|
|
|
1.17
|
|
21
|
|
184.5
|
|
|
167.1
|
|
10
|
Expenses not
allocated to product lines
|
(0.62)
|
|
|
(0.58)
|
|
7
|
|
(80.5)
|
|
|
(83.8)
|
|
(4)
|
Operating earnings
before taxes
|
3.59
|
|
|
3.24
|
|
|
|
470.6
|
|
|
463.8
|
|
|
Income tax expense on
operating income
|
(0.80)
|
|
|
(0.71)
|
|
13
|
|
(105.0)
|
|
|
(101.5)
|
|
3
|
Net operating
income (1)
|
2.79
|
|
|
2.53
|
|
10
|
|
365.6
|
|
|
362.3
|
|
1
|
Net realized
investment gains (losses) from sales,
impairments and change in allowance for credit
losses (net of related amortization)
|
0.27
|
|
|
(0.22)
|
|
|
|
34.8
|
|
|
(31.1)
|
|
|
Net change in market
value of investments
recognized in earnings
|
(0.13)
|
|
|
(0.02)
|
|
|
|
(17.4)
|
|
|
(2.7)
|
|
|
Fair value changes in
embedded derivative liabilities
(net of related amortization)
|
0.51
|
|
|
(0.55)
|
|
|
|
67.2
|
|
|
(79.1)
|
|
|
Other
|
0.09
|
|
|
(0.04)
|
|
|
|
12.5
|
|
|
(6.6)
|
|
|
Non-operating income
(loss) before taxes
|
0.74
|
|
|
(0.83)
|
|
|
|
97.1
|
|
|
(119.5)
|
|
|
Income tax (expense)
benefit on non-operating income
|
(0.17)
|
|
|
0.17
|
|
|
|
(21.7)
|
|
|
25.0
|
|
|
Valuation allowance
for deferred tax assets and other
tax items
|
—
|
|
|
0.24
|
|
|
|
—
|
|
|
34.0
|
|
|
Net non-operating
income (loss)
|
0.57
|
|
|
(0.42)
|
|
|
|
75.4
|
|
|
(60.5)
|
|
|
Net
income
|
$
3.36
|
|
|
$
2.11
|
|
|
|
$
441.0
|
|
|
$
301.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
diluted shares outstanding
|
131.1
|
|
|
143.2
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
GAAP is defined as
accounting principles generally accepted in the United States of
America.
|
(b)
|
Income from insurance
products is the sum of the insurance margins of the annuity, health
and life segments, less allocated insurance administrative
expenses. It excludes the fee income segment, excess
investment income, parent company expenses and income taxes.
Insurance margin is management's measure of the profitability of
its annuity, health and life segments' performance and consists of
premiums plus allocated investment income less insurance policy
benefits, interest credited, commissions, advertising expense and
amortization of acquisition costs.
|
(c)
|
Investment income not
allocated to product lines is defined as net investment income
less: (i) equity returns credited to policyholder
account balances; (ii) the investment income allocated to our
product lines; (iii) interest expense on notes payable and
investment
borrowings; and (iv) certain expenses related to benefit plans that
are offset by special-purpose investment income.
|
FINANCIAL SUMMARY
(continued) Management vs. GAAP Measures (Dollars
in millions, except per share data)
(Unaudited)
|
Shareholders' equity,
excluding accumulated other comprehensive income, and book value
per share, excluding accumulated other comprehensive
income, are non-GAAP measures that are utilized by management to
view the business without the effect of accumulated other
comprehensive income
which is primarily attributable to fluctuations in interest rates
associated with fixed maturities, available for sale.
Management views the business in this
manner because the Company has the ability and generally, the
intent, to hold investments to maturity and meaningful trends can
be more easily identified
without the fluctuations. In addition, shareholders' equity
excludes net operating loss carryforwards in our non-GAAP return on
equity measures as such
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.
|
______________________________________________________________________________________________________
|
Quarter
ended
|
|
December
31,
|
|
2021
|
|
2020
|
|
|
|
|
Trailing twelve
months return on equity (a)
|
8.5%
|
|
6.5%
|
Trailing twelve
months operating return on equity, excluding accumulated other
comprehensive income (loss)
and net operating loss carryforwards (a non-GAAP financial measure)
(6)
|
12.1%
|
|
12.9%
|
Trailing twelve
months operating return, excluding significant items, on equity,
excluding accumulated other
comprehensive income (loss) and net operating loss carryforwards (a
non-GAAP financial measure) (6)
|
11.8%
|
|
12.0%
|
|
|
|
|
|
|
|
|
Shareholders'
equity
|
$
5,259.7
|
|
$
5,484.2
|
Accumulated other
comprehensive income
|
(1,947.1)
|
|
(2,186.1)
|
|
|
|
|
Shareholders' equity,
excluding accumulated other comprehensive income
|
3,312.6
|
|
3,298.1
|
Net operating loss
carryforwards
|
(243.7)
|
|
(341.9)
|
Shareholders' equity,
excluding accumulated other comprehensive income and net operating
loss
carryforwards
|
$
3,068.9
|
|
$
2,956.2
|
|
|
|
|
Book value per
diluted share
|
$
42.65
|
|
$
39.82
|
Accumulated other
comprehensive income
|
(15.79)
|
|
(15.87)
|
|
|
|
|
Book value per
diluted share, excluding accumulated other comprehensive income (a
non-GAAP financial
measure) (2)
|
$
26.86
|
|
$
23.95
|
(a)
|
Calculated using
average shareholders' equity for the measurement period.
|
INSURANCE OPERATIONS
Annuity products accounted for 37 percent of the Company's
margin for the quarter.
Annuity premiums collected increased 15 percent and annuity
account values increased 7 percent in 4Q21 compared to 4Q20.
Health products accounted for 51 percent of the Company's
insurance margin for the quarter and 66 percent of insurance policy
income.
Life products accounted for 12 percent of the Company's
insurance margin for the quarter and 33 percent of insurance policy
income.
Sales of health products were down 3 percent and sales of life
products were up 7 percent in 4Q21 compared to 4Q20.
ANNUITY COLLECTED
PREMIUMS
(Dollars in
millions)
(Unaudited)
|
|
Quarter ended
December 31,
|
|
|
|
2021
|
|
2020
|
|
%
change
|
Annuity collected
premiums
|
$
397.4
|
|
$
345.0
|
|
15
|
INSURANCE POLICY
INCOME
(Dollars in
millions)
(Unaudited)
|
|
Quarter ended
December 31,
|
|
|
|
2021
|
|
2020
|
|
%
change
|
Annuity
|
$
4.1
|
|
$
4.4
|
|
(7)
|
Health
|
415.2
|
|
422.6
|
|
(2)
|
Life
|
210.6
|
|
202.0
|
|
4
|
Total insurance
policy income
|
$
629.9
|
|
$
629.0
|
|
—
|
SALES MEASURED AS
NEW ANNUALIZED PREMIUMS FOR
LIFE AND HEALTH
PRODUCTS
(Dollars in
millions)
(Unaudited)
|
|
Quarter ended
December 31,
|
|
|
|
2021
|
|
2020
|
|
%
change
|
Health
|
$
47.7
|
|
$
49.1
|
|
(3)
|
Life
|
39.8
|
|
37.1
|
|
7
|
Total new
annualized premiums (4)
|
$
87.5
|
|
$
86.2
|
|
2
|
INSURANCE
MARGIN (Amounts in millions, except per share data)
(Unaudited)
|
Insurance margin is
management's measure of profitability of its annuity, health and
life segments' performance and consists of premiums
plus allocated investment income less insurance policy benefits,
interest credited, commissions, advertising expense and
amortization of
acquisition costs. Income from insurance products is the sum of the
insurance margins of the annuity, health and life segments, less
allocated
insurance administrative expenses. It excludes the fee income
segment, investment income not allocated to product lines, expenses
not
allocated to product lines and income taxes. Management believes
this information helps provide a better understanding of the
business
and a more meaningful analysis of our operations. Insurance income,
a non-GAAP measure, is a component of net operating income,
which
is reconciled to net income in the Financial Summary section
above.
|
|
|
Quarter
ended
|
|
December
31,
2021
|
|
% of
insurance
policy
income
|
|
|
December
31,
2020
|
|
% of
insurance
policy
income
|
|
%
change
|
Margin
|
|
|
|
|
|
|
|
|
|
|
Annuity interest
margin
|
$
93.9
|
|
|
|
|
$
68.1
|
|
|
|
38
|
Life insurance
interest margin
|
1.3
|
|
|
|
|
0.4
|
|
|
|
225
|
Total
interest-sensitive margin
|
95.2
|
|
|
|
|
68.5
|
|
|
|
39
|
Insurance
margin
|
|
|
|
|
|
|
|
|
|
|
Health
|
129.5
|
|
31
|
|
|
125.2
|
|
30
|
|
3
|
Life (a)
|
29.1
|
|
14
|
|
|
36.9
|
|
18
|
|
(21)
|
Total other insurance
margin
|
158.6
|
|
25
|
|
|
162.1
|
|
26
|
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
Total insurance
margin
|
253.8
|
|
|
|
|
230.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocated
expenses
|
(143.3)
|
|
|
|
|
(162.7)
|
|
|
|
|
Income from
insurance products
|
$
110.5
|
|
|
|
|
$
67.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per diluted
share
|
$
0.89
|
|
|
|
|
$
0.48
|
|
|
|
|
Weighted average
diluted shares
|
125.0
|
|
|
|
|
140.4
|
|
|
|
|
|
|
(a)
|
Net of $21.8 million
and $15.6 million of non-deferred television advertising expense
related to our direct distribution channel in the 2021 and 2020
periods, respectively.
|
Total allocated expenses were $143.3
million, down 12 percent from the year-ago quarter.
Total insurance margins were favorably impacted by $25.9 million and $11.8
million in the quarters ended December 31, 2021 and 2020, respectively, due to
adjustments arising from our comprehensive annual actuarial review
of assumptions. See pages 19 and 21 for summaries of the
impacts of significant items.
In addition, total insurance margins were favorably impacted by
approximately $16 million and
$19 million in the quarters ended
December 31, 2021 and 2020,
respectively, due to the estimated impacts of COVID-19.
ANNUITY RESULTS BY
PRODUCT TYPE
(Dollars in
millions)
(Unaudited)
|
|
Annuity
margin
|
|
Quarter
ended
|
|
December
31,
|
|
2021
|
|
2020
|
Fixed index
annuities
|
$
77.4
|
|
$
58.1
|
Fixed interest
annuities
|
10.1
|
|
8.5
|
Other
annuities
|
6.4
|
|
1.5
|
Total
|
$
93.9
|
|
$
68.1
|
Annuity collected
premiums
|
|
Quarter
ended
|
|
December
31,
|
|
2021
|
|
2020
|
Annuity collected
premiums
|
$
397.4
|
|
$
345.0
|
Average net
insurance liabilities (5)
|
|
Quarter
ended
|
|
December
31,
|
|
2021
|
|
2020
|
Fixed index
annuities
|
$
8,096.7
|
|
$
7,342.1
|
Fixed interest
annuities
|
1,813.3
|
|
2,000.1
|
Other
annuities
|
495.8
|
|
517.9
|
Total
|
$
10,405.8
|
|
$
9,860.1
|
Margin/average net
insurance liabilities (a)
|
|
Quarter
ended
|
|
December
31,
|
|
2021
|
|
2020
|
Fixed index
annuities
|
3.82%
|
|
3.17%
|
Fixed interest
annuities
|
2.23%
|
|
1.70%
|
Other
annuities
|
5.16%
|
|
1.16%
|
Total
|
3.61%
|
|
2.76%
|
|
|
(a)
|
Defined as annualized
quarterly annuity margin divided by average net insurance
liabilities (5).
|
Total annuity margins were favorably impacted by $26.9 million and $16.1
million in the quarters ended December 31, 2021 and 2020, respectively, due to
adjustments arising from our comprehensive annual actuarial review
of assumptions. See pages 19 and 21 for summaries of the
impacts of significant items.
In addition, total annuity margins were favorably (unfavorably)
impacted by approximately $1 million
and $(1) million in the quarters
ended December 31, 2021 and 2020,
respectively, due to the estimated impacts of COVID-19.
HEALTH INSURANCE
RESULTS BY PRODUCT TYPE
(Dollars in
millions)
(Unaudited)
|
|
Health
margin
|
|
Quarter
ended
|
|
December
31,
|
|
2021
|
|
2020
|
|
|
|
Amount
|
|
% of
insurance
policy
income
|
|
Amount
|
|
% of
insurance
policy
income
|
|
%
change
|
Supplemental
health and other health
|
$
54.0
|
|
31
|
|
$
53.0
|
|
31
|
|
2
|
Medicare
supplement
|
42.8
|
|
24
|
|
43.3
|
|
23
|
|
(1)
|
Long-term
care
|
32.7
|
|
49
|
|
28.9
|
|
44
|
|
13
|
Total
|
$
129.5
|
|
31
|
|
$
125.2
|
|
30
|
|
3
|
Health insurance
policy income
|
|
Quarter
ended
|
|
|
|
December
31,
|
|
|
|
2021
|
|
2020
|
|
%
change
|
Supplemental
health and other health
|
$
172.8
|
|
$
170.6
|
|
1
|
Medicare
supplement
|
176.0
|
|
186.0
|
|
(5)
|
Long-term
care
|
66.4
|
|
66.0
|
|
1
|
Total
|
$
415.2
|
|
$
422.6
|
|
(2)
|
Health NAP
(4)
|
|
Quarter
ended
|
|
|
|
December
31,
|
|
|
|
2021
|
|
2020
|
|
%
change
|
Supplemental
health and other health
|
$
28.1
|
|
$
29.7
|
|
(5)
|
Medicare
supplement
|
9.1
|
|
12.2
|
|
(25)
|
Long-term
care
|
10.5
|
|
7.2
|
|
46
|
Total
|
$
47.7
|
|
$
49.1
|
|
(3)
|
Total health margins were favorably impacted by approximately
$35 million in each of the quarters
ended December 31, 2021 and 2020, due
to the estimated impacts of COVID-19.
LIFE INSURANCE
RESULTS BY PRODUCT TYPE
(Dollars in
millions)
(Unaudited)
|
|
Life
margin
|
|
Quarter
ended
|
|
|
|
December
31,
|
|
|
|
2021
|
|
2020
|
|
|
|
Amount
|
|
% of
insurance
policy
income
|
|
Amount
|
|
% of
insurance
policy
income
|
|
%
change
|
Life insurance
interest margin
|
$
1.3
|
|
|
|
$
0.4
|
|
|
|
225
|
Life insurance
margin:
|
|
|
|
|
|
|
|
|
|
Traditional
life
|
15.7
|
|
9
|
|
26.8
|
|
17
|
|
(41)
|
Interest sensitive
life
|
13.4
|
|
31
|
|
10.1
|
|
25
|
|
33
|
Subtotal
|
29.1
|
|
14
|
|
36.9
|
|
18
|
|
(21)
|
Total
margin
|
$
30.4
|
|
|
|
$
37.3
|
|
|
|
(18)
|
Life insurance
policy income
|
|
Quarter
ended
|
|
|
|
December
31,
|
|
|
|
2021
|
|
2020
|
|
%
change
|
Traditional
life
|
$
168.0
|
|
$
161.6
|
|
4
|
Interest sensitive
life
|
42.6
|
|
40.4
|
|
5
|
Total
|
$
210.6
|
|
$
202.0
|
|
4
|
Life NAP
(4)
|
|
Quarter
ended
|
|
|
|
December
31,
|
|
|
|
2021
|
|
2020
|
|
%
change
|
Traditional
life
|
$
31.2
|
|
$
29.8
|
|
5
|
Interest sensitive
life
|
8.6
|
|
7.3
|
|
18
|
Total
|
$
39.8
|
|
$
37.1
|
|
7
|
Average net
insurance liabilities (5) and interest margin
|
|
|
|
Quarter
ended
|
|
|
|
December
31,
|
|
|
|
2021
|
|
2020
|
|
%
change
|
Interest sensitive
life products
|
$
996.9
|
|
$
939.9
|
|
6
|
Interest
margin/average net insurance liabilities (5)
|
0.52%
|
|
0.17%
|
|
206
|
Total life margins were unfavorably impacted by $1.0 million and $4.3
million in the quarters ended December 31, 2021 and 2020, respectively, due to
adjustments arising from our comprehensive annual actuarial review
of assumptions. See pages 19 and 21 for summaries of the
impact of significant items.
In addition, total life margins were unfavorably impacted by
approximately $20 million and
$15 million in the quarters ended
December 31, 2021 and 2020,
respectively, due to the estimated impacts of COVID-19.
QUARTERLY AVERAGE
EXCLUSIVE PRODUCING AGENTS
|
|
|
Average Exclusive
Producing Agent Count
|
|
Quarter
ended
|
|
|
|
December
31,
|
|
%
|
|
2021
|
|
2020
|
|
change
|
Consumer
|
|
|
|
|
|
Field agents (a)
(c)
|
4,008
|
|
4,539
|
|
(12)
|
Tele-sales
agents
|
220
|
|
257
|
|
(14)
|
Total
agents
|
4,228
|
|
4,796
|
|
(12)
|
Registered agents (b)
(c)
|
655
|
|
641
|
|
2
|
Worksite (a)
(c)
|
227
|
|
255
|
|
(11)
|
____________________
(a)
|
Producing
agents represent the monthly average of exclusive agents
that have submitted at least one policy in the month.
|
(b)
|
Registered agents are
dually licensed as insurance agents and financial representatives
who can buy and sell securities for clients, and/or investment
advisors who can provide ongoing investment advice for
clients.
|
(c)
|
Agent counts
represent the average of the last 3 months.
|
INVESTMENTS
|
INVESTMENT INCOME
NOT ALLOCATED TO PRODUCT LINES
|
(Dollars in millions,
except per share data)
|
|
Management uses
investment income not allocated to product lines as the measure to
evaluate the performance
of the investment segment. It is defined as net investment
income less the investment income allocated to our
product segments and interest expense on debt. We also view
investment income not allocated to product lines
per diluted share as an important and useful measure to evaluate
performance of the investment segment as it
takes into consideration our share repurchase program.
|
|
|
Quarter ended
December 31,
|
|
|
|
2021
|
|
2020
|
|
%
change
|
Net investment
income
|
$
395.1
|
|
$
390.6
|
|
1
|
Allocated to product
lines:
|
|
|
|
|
|
Annuity
|
(116.3)
|
|
(115.5)
|
|
1
|
Health
|
(72.4)
|
|
(70.9)
|
|
2
|
Life
|
(36.4)
|
|
(35.4)
|
|
3
|
Equity returns
credited to policyholder account balances
|
(94.0)
|
|
(77.6)
|
|
21
|
Amounts allocated
to product lines and credited to policyholder account
balances
|
(319.1)
|
|
(299.4)
|
|
7
|
Amount related to
variable interest entities and other non-operating items
|
(7.6)
|
|
(8.2)
|
|
(7)
|
Interest expense on
corporate debt
|
(15.7)
|
|
(14.4)
|
|
9
|
Interest expense on
investment borrowings from the Federal Home Loan Bank
program
|
(2.3)
|
|
(2.9)
|
|
(21)
|
Expenses related to
funding agreement-backed note program
|
(2.3)
|
|
—
|
|
n/m
|
Less amounts credited
to deferred compensation plans (offsetting investment
income)
|
(5.3)
|
|
(7.9)
|
|
(33)
|
Total
adjustments
|
(33.2)
|
|
(33.4)
|
|
|
Investment income
not allocated to product lines
|
$
42.8
|
|
$
57.8
|
|
(26)
|
|
|
|
|
|
|
Per diluted
share
|
$
0.34
|
|
$
0.41
|
|
|
INVESTMENT
PORTFOLIO
(Dollars in
millions)
The composition of
the investment portfolio at December 31, 2021 is as
follows:
|
|
|
$
|
|
% of
total
|
Fixed maturities,
available for sale, at fair value
|
$
24,805.4
|
|
86
|
Equity securities at
fair value
|
131.1
|
|
1
|
Mortgage
loans
|
1,218.6
|
|
4
|
Policy
loans
|
120.2
|
|
—
|
Trading
securities
|
227.2
|
|
1
|
Investments held by
variable interest entities
|
1,199.6
|
|
4
|
Other invested
assets
|
1,224.0
|
|
4
|
Total investment
portfolio
|
$
28,926.1
|
|
100
|
Fixed maturities,
available for sale, at amortized cost by asset class as of December
31, 2021 are as follows:
|
|
|
Investment
grade
|
|
Below
investment
grade
|
|
Total
|
Corporate
securities
|
$
12,384.0
|
|
$
811.4
|
|
$
13,195.4
|
United States
Treasury securities and obligations of the United States
government
and agencies
|
166.2
|
|
—
|
|
166.2
|
States and political
subdivisions
|
2,637.4
|
|
11.6
|
|
2,649.0
|
Foreign
governments
|
85.4
|
|
—
|
|
85.4
|
Asset-backed
securities
|
983.1
|
|
145.9
|
|
1,129.0
|
Agency residential
mortgage-backed securities
|
36.7
|
|
—
|
|
36.7
|
Non-agency
residential mortgage-backed securities
|
1,141.0
|
|
729.4
|
(a)
|
1,870.4
|
Collateralized loan
obligations
|
574.2
|
|
13.1
|
|
587.3
|
Commercial
mortgage-backed securities
|
2,064.6
|
|
83.6
|
|
2,148.2
|
|
|
|
|
|
|
Total
|
$
20,072.6
|
|
$
1,795.0
|
|
$
21,867.6
|
____________________
(a)
|
Certain structured
securities rated below investment grade by Nationally Recognized
Statistical Rating Organizations may be assigned a NAIC 1 or NAIC 2
designation based on the cost basis of the security relative to
estimated recoverable amounts as determined by the National
Association of Insurance Commissioners (NAIC).
|
The fair value of CNO's available for sale fixed maturity
portfolio was $24.8 billion compared
with an amortized cost of $21.9
billion. Net unrealized gains were comprised of gross
unrealized gains of $3.0 billion and
gross unrealized losses of $41
million. The allowance for credit losses was
$7.6 million at December 31, 2021.
At both amortized cost and fair value, 92 percent of fixed
maturities, available for sale, were rated "investment grade."
Non-Operating Items
Net investment gains in 4Q21 were
$4.7 million (net of related
amortization) including the unfavorable change in the allowance for
credit losses of $1.7 million which
was recorded in earnings. Net investment gains in 4Q20 were
$12.6 million (net of related
amortization) including the favorable change in the allowance for
credit losses of $12.9 million which
was recorded in earnings.
During 4Q21 and 4Q20, we recognized an increase (decrease) in
earnings of $(12.1) million and
$6.0 million, respectively, due to
the net change in market value of investments recognized in
earnings.
During 4Q21 and 4Q20, we recognized an increase in earnings of
$19.1 million and $16.3 million, respectively, resulting from
changes in the estimated fair value of embedded derivative
liabilities related to our fixed index annuities, net of related
amortization. Such amounts include the impacts of changes in
market interest rates used to determine the derivative's estimated
fair value.
In 4Q21 and 4Q20, other non-operating items included a decrease
in earnings of $4.3 million and
$3.1 million, respectively, for the
mark-to-market change in the agent deferred compensation plan
liability which was impacted by changes in the underlying actuarial
assumptions used to value the liability. We recognize the
mark-to-market change in the estimated value of this liability
through earnings as assumptions change.
Statutory (based on non-GAAP measures) and GAAP Capital
Information
Our consolidated statutory risk-based capital
ratio was estimated at 386% at December 31,
2021, reflecting estimated 4Q21 statutory operating income
of $88 million (and $289 million during 2021) and the payment of
insurance company dividends to the holding company of $328.3 million during 2021 (none of which was
paid in 4Q21).
During the fourth quarter of 2021, we repurchased $100.0 million of common stock under our
securities repurchase program. We repurchased 4.1 million
common shares at an average cost of $24.69 per share. As of December 31, 2021, we had 120.4 million shares
outstanding and had authority to repurchase up to an additional
$366.9 million of our common
stock. During 4Q21, dividends paid on common stock totaled
$15.7 million.
Unrestricted cash and investments held by our holding company
were $249 million at December 31, 2021, compared to $388 million at December
31, 2020.
Book value per common share was $43.69 at December 31,
2021 compared to $40.54 at
December 31, 2020. Book value per diluted share,
excluding accumulated other comprehensive income (2), was
$26.86 at December 31, 2021, compared to $23.95 at December
31, 2020.
The debt-to-capital ratio was 17.8 percent and 17.2 percent at
December 31, 2021 and 2020,
respectively. Our debt-to-total capital ratio, excluding
accumulated other comprehensive income (3) was 25.6 percent at both
December 31, 2021 and 2020.
Return on equity for the years ended December 31, 2021 and 2020, was 8.5% and 6.5%,
respectively. Operating return, excluding significant items,
on equity, excluding accumulated other comprehensive income and net
operating loss carryforwards (6) for the years ended December 31, 2021 and 2020, was 11.8% and 12.0%,
respectively.
In this news release, CNO includes non-GAAP measures to enhance
investors' understanding of management's view of the
business. The non-GAAP measures are not a substitute for
GAAP, but rather a supplement to increase transparency by providing
broader perspective. CNO's definitions of non-GAAP measures
may differ from other companies' definitions. More detailed
information including various GAAP and non-GAAP measurements are
located at CNOinc.com in the Investors section under SEC
Filings.
CAUTION REGARDING FORWARD-LOOKING STATEMENTS:
This press release may contain forward-looking statements within
the meaning of federal securities laws. These prospective
statements reflect management's current expectations, but are not
guarantees of future performance. Accordingly, please refer
to CNO's cautionary statement regarding forward-looking statements,
and the business environment in which the Company operates,
contained in the Company's Form 10-K for the year ended
December 31, 2020 and any subsequent
Form 10-Q or Form 10-K on file with the Securities and Exchange
Commission and on the Company's website at CNOinc.com in the
Investors section. CNO specifically disclaims any obligation
to update or revise any forward-looking statement because of new
information, future developments or otherwise.
EARNINGS RELEASE CONFERENCE CALL WEBCAST:
The Company will host a conference call to discuss results on
February 9, 2022 at 11:00 a.m. Eastern Time. During the call,
we will be referring to a presentation that will be available at
the Investors section of the company's website.
To participate by dial-in, please register at
http://www.directeventreg.com/registration/event/7844578. Upon
registering, you will be provided with call details and a
registrant ID used to track attendance on the conference call.
Reminders will also be sent to registered participants via
email.
For those investors who prefer to listen to the call online, we
will be broadcasting the call live via webcast. The event can
be accessed through the Investors section of the company's website:
ir.CNOinc.com. Participants should go to the website at least
15 minutes before the event to register and download any necessary
audio software.
ABOUT CNO FINANCIAL GROUP
CNO Financial Group, Inc. (NYSE: CNO) secures the future of
middle-income America. CNO provides life and health
insurance, annuities, financial services, and workforce benefits
solutions through our family of brands, including Bankers Life,
Colonial Penn and Washington National. Our customers work
hard to save for the future, and we help protect their health,
income and retirement needs with 3.2 million policies and
$36 billion in total assets. Our
3,400 associates, 4,500 exclusive agents and 4,000 independent
partner agents guide individuals, families and businesses through a
lifetime of financial decisions. For more information, visit
CNOinc.com.
CNO FINANCIAL
GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEET
(Dollars in
millions)
(unaudited)
|
|
December 31,
2021
|
|
December 31,
2020
|
ASSETS
|
|
|
|
Investments:
|
|
|
|
Fixed maturities,
available for sale, at fair value (net of allowance for credit
losses: 2021 -
$7.6 and 2020 - $2.2; amortized cost: 2021 - $21,867.6 and
2020 - $19,921.1)
|
$
24,805.4
|
|
$
23,383.6
|
Equity securities at
fair value
|
131.1
|
|
151.2
|
Mortgage loans (net of
allowance for credit losses: 2021 - $5.6 and 2020 -
$11.8)
|
1,218.6
|
|
1,358.7
|
Policy
loans
|
120.2
|
|
123.0
|
Trading
securities
|
227.2
|
|
232.0
|
Investments held by
variable interest entities (net of allowance for credit losses:
2021 - $3.7
and 2020 - $15.1; amortized cost: 2021 - $1,206.8 and 2020 -
$1,211.3)
|
1,199.6
|
|
1,189.4
|
Other invested
assets
|
1,224.0
|
|
1,146.4
|
Total
investments
|
28,926.1
|
|
27,584.3
|
Cash and cash
equivalents - unrestricted
|
632.1
|
|
937.8
|
Cash and cash
equivalents held by variable interest entities
|
99.6
|
|
54.1
|
Accrued investment
income
|
216.4
|
|
205.8
|
Present value of
future profits
|
222.6
|
|
249.4
|
Deferred acquisition
costs
|
1,112.0
|
|
1,027.8
|
Reinsurance
receivables (net of allowance for credit losses: 2021 - $3.0 and
2020 - $4.0)
|
4,354.3
|
|
4,584.3
|
Income tax assets,
net
|
118.3
|
|
199.4
|
Assets held in
separate accounts
|
3.9
|
|
4.2
|
Other
assets
|
519.1
|
|
492.8
|
Total
assets
|
$
36,204.4
|
|
$
35,339.9
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
Liabilities:
|
|
|
|
Liabilities for
insurance products:
|
|
|
|
Policyholder account
liabilities
|
$
13,689.7
|
|
$
12,540.6
|
Future policy
benefits
|
11,670.7
|
|
11,744.2
|
Liability for policy
and contract claims
|
501.8
|
|
561.8
|
Unearned and advanced
premiums
|
246.7
|
|
252.6
|
Liabilities related to
separate accounts
|
3.9
|
|
4.2
|
Other
liabilities
|
830.9
|
|
821.8
|
Investment
borrowings
|
1,715.8
|
|
1,642.5
|
Borrowings related to
variable interest entities
|
1,147.9
|
|
1,151.8
|
Notes payable – direct
corporate obligations
|
1,137.3
|
|
1,136.2
|
Total
liabilities
|
30,944.7
|
|
29,855.7
|
Commitments and
Contingencies
|
|
|
|
Shareholders'
equity:
|
|
|
|
Common stock ($0.01 par
value, 8,000,000,000 shares authorized, shares issued and
outstanding: 2021 - 120,377,152 and 2020 -
135,279,119)
|
1.2
|
|
1.3
|
Additional paid-in
capital
|
2,184.2
|
|
2,544.5
|
Accumulated other
comprehensive income
|
1,947.1
|
|
2,186.1
|
Retained
earnings
|
1,127.2
|
|
752.3
|
Total shareholders'
equity
|
5,259.7
|
|
5,484.2
|
Total liabilities and
shareholders' equity
|
$
36,204.4
|
|
$
35,339.9
|
CNO FINANCIAL
GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENT OF OPERATIONS
(Dollars in millions,
except per share data)
(unaudited)
|
|
Three months
ended
|
|
Year ended
|
|
December
31,
|
|
December
31,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Revenues:
|
|
|
|
|
|
|
|
Insurance policy
income
|
$
629.9
|
|
$
629.0
|
|
$
2,523.4
|
|
$
2,511.3
|
Net investment
income:
|
|
|
|
|
|
|
|
General account
assets
|
285.9
|
|
290.1
|
|
1,140.2
|
|
1,079.0
|
Policyholder and other
special-purpose portfolios
|
109.2
|
|
100.5
|
|
280.5
|
|
143.5
|
Investment gains
(losses):
|
|
|
|
|
|
|
|
Net investment gains
(losses)
|
(5.4)
|
|
6.3
|
|
6.9
|
|
(17.7)
|
Change in allowance
for credit losses and other-than-temporary
impairment losses
|
(1.7)
|
|
12.9
|
|
12.2
|
|
(18.5)
|
Total investment gains
(losses)
|
(7.1)
|
|
19.2
|
|
19.1
|
|
(36.2)
|
Fee revenue and other
income
|
56.9
|
|
37.4
|
|
159.0
|
|
123.5
|
Total
revenues
|
1,074.8
|
|
1,076.2
|
|
4,122.2
|
|
3,821.1
|
Benefits and
expenses:
|
|
|
|
|
|
|
|
Insurance policy
benefits
|
549.4
|
|
566.1
|
|
2,190.7
|
|
2,157.9
|
Interest
expense
|
23.6
|
|
23.3
|
|
95.4
|
|
108.8
|
Amortization
|
80.9
|
|
75.9
|
|
281.1
|
|
268.1
|
Other operating costs
and expenses
|
272.8
|
|
267.4
|
|
987.3
|
|
942.0
|
Total benefits and
expenses
|
926.7
|
|
932.7
|
|
3,554.5
|
|
3,476.8
|
Income before income
taxes
|
148.1
|
|
143.5
|
|
567.7
|
|
344.3
|
Income tax expense
(benefit):
|
|
|
|
|
|
|
|
Tax expense on period
income
|
32.3
|
|
31.7
|
|
126.7
|
|
76.5
|
Valuation allowance
for deferred tax assets and other tax items
|
—
|
|
—
|
|
—
|
|
(34.0)
|
Net income
|
$
115.8
|
|
$
111.8
|
|
$
441.0
|
|
$
301.8
|
Earnings per common
share:
|
|
|
|
|
|
|
|
Basic:
|
|
|
|
|
|
|
|
Weighted average
shares outstanding
|
122,017,000
|
|
138,232,000
|
|
128,400,000
|
|
142,096,000
|
Net income
|
$
.95
|
|
$
.81
|
|
$
3.43
|
|
$
2.12
|
Diluted:
|
|
|
|
|
|
|
|
Weighted average
shares outstanding
|
125,020,000
|
|
140,387,000
|
|
131,126,000
|
|
143,164,000
|
Net income
|
$
.93
|
|
$
.80
|
|
$
3.36
|
|
$
2.11
|
NOTES
|
|
(1)
|
Management believes
that an analysis of Net income applicable to common stock before:
(i) net realized investment gains or losses from sales, impairments
and the change in allowance for credit losses, net of related
amortization and taxes; (ii) net change in market value of
investments recognized in earnings, net of taxes; (iii) fair value
changes due to fluctuations in the interest rates used to discount
embedded derivative liabilities related to our fixed index
annuities, net of related amortization and taxes; (iv) fair value
changes related to the agent deferred compensation plan, net of
taxes; (v) loss on extinguishment of debt, net of taxes; (vi)
changes in the valuation allowance for deferred tax assets and
other tax items; and (viii) other non-operating items consisting
primarily of earnings attributable to variable interest entities,
net of taxes ("Net operating income," a non-GAAP financial measure)
is important to evaluate the financial performance of the company,
and is a key measure commonly used in the life insurance
industry. Management uses this measure to evaluate
performance because the items excluded from net operating income
can be affected by events that are unrelated to the company's
underlying fundamentals. A reconciliation of Net operating
income to Net income applicable to common stock is provided in the
tables on pages 2 and 3. Additional information concerning
this non-GAAP measure 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,
CNOinc.com.
|
(2)
|
Book value per
diluted share reflects the potential dilution that could occur if
outstanding stock options were exercised and restricted stock and
performance units were vested. The dilution from options,
restricted shares and performance units is calculated using the
treasury stock method. Under this method, we assume the
proceeds from the exercise of the options (or the unrecognized
compensation expense with respect to restricted stock and
performance units) will be used to purchase shares of our common
stock at the closing market price on the last day of the
period. 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.
|
(3)
|
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.
|
(4)
|
Measured by new
annualized premiums for life and health products, which includes
10% of single premium whole life
deposits and 100% of all other premiums (excluding
annuities). Sales of third-party products are
excluded.
|
(5)
|
Net insurance
liabilities are equal to total insurance liabilities less: (i)
amounts related to reinsured business; (ii) deferred acquisition
costs; (iii) present value of future profits; and (iv) the value of
unexpired options credited to insurance liabilities.
|
(6)
|
The following
summarizes 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):
|
|
|
|
|
|
Year ended
|
|
|
|
4Q21
|
|
4Q20
|
Net operating
income
|
$
365.6
|
|
$
362.3
|
|
|
|
|
|
|
Net operating income,
excluding significant items
|
$
357.3
|
|
$
338.2
|
|
|
|
|
|
|
Net income
|
$
441.0
|
|
$
301.8
|
|
|
|
|
|
|
Average common
equity, excluding accumulated other
|
|
|
|
|
comprehensive income
(loss) and net operating loss
|
|
|
|
|
carryforwards (a
non-GAAP financial measure)
|
$
3,026.0
|
|
$
2,812.4
|
|
|
|
|
|
|
Average common
shareholders' equity
|
$
5,197.4
|
|
$
4,665.4
|
|
|
|
|
|
|
Operating return on
equity, excluding accumulated other
|
|
|
|
|
comprehensive income
(loss) and net operating loss
|
|
|
|
|
carryforwards (a
non-GAAP financial measure)
|
12.1%
|
|
12.9%
|
|
|
|
|
|
|
Operating return,
excluding significant items, on equity, excluding
|
|
|
|
|
accumulated other
comprehensive income (loss) and net
|
|
|
|
|
operating loss
carryforwards (a non-GAAP financial measure)
|
11.8%
|
|
12.0%
|
|
|
|
|
|
|
Return on
equity
|
8.5%
|
|
6.5%
|
The following
summarizes: (i) operating earnings; (ii) significant items; (iii)
operating earnings, excluding significant items; and (iv) net
income (loss) (dollars in millions):
|
|
|
|
|
|
|
|
|
|
Net
operating
|
|
|
|
|
|
|
|
|
|
|
Net
operating
|
|
income,
|
|
|
|
|
|
|
|
|
|
|
income,
|
|
excluding
|
|
|
|
Net
|
|
|
|
|
|
|
excluding
|
|
significant
|
|
|
|
income (loss)
-
|
|
|
Net
operating
|
|
Significant
|
|
significant
|
|
items -
trailing
|
|
Net
|
|
trailing
|
|
|
income
|
|
items
|
|
items (a)
|
|
four
quarters
|
|
income
(loss)
|
|
four
quarters
|
1Q20
|
|
$
84.3
|
|
$
—
|
|
$
84.3
|
|
$
300.6
|
|
$
(21.2)
|
|
$
336.4
|
2Q20
|
|
79.4
|
|
(17.7)
|
(b)
|
61.7
|
|
285.9
|
|
82.0
|
|
380.8
|
3Q20
|
|
112.6
|
|
—
|
|
112.6
|
|
329.3
|
|
129.2
|
|
468.0
|
4Q20
|
|
86.0
|
|
(6.4)
|
(c)
|
79.6
|
|
338.2
|
|
111.8
|
|
301.8
|
1Q21
|
|
75.2
|
|
6.1
|
(d)
|
81.3
|
|
335.2
|
|
147.4
|
|
470.4
|
2Q21
|
|
89.1
|
|
3.5
|
(e)
|
92.6
|
|
366.1
|
|
78.0
|
|
466.4
|
3Q21
|
|
92.8
|
|
2.3
|
(f)
|
95.1
|
|
348.6
|
|
99.8
|
|
437.0
|
4Q21
|
|
108.5
|
|
(20.2)
|
(g)
|
88.3
|
|
357.3
|
|
115.8
|
|
441.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) See note
(7) for additional information.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(b) Comprised
of: (i) $45.9 million of net favorable adjustments arising from our
review of actuarial assumptions; (ii) $23.5 million
unfavorable impact related to regulatory matters; and (iii) an
increase in tax expense of $4.7 million.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(c) Comprised
of: (i) $11.8 million of net favorable adjustments arising from our
review of actuarial assumptions; (ii) $3.7 million
unfavorable impact related to asset impairments; and (iii) an
increase in tax expense of $1.7 million.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(d) Comprised
of: (i) $5.3 million from legal and regulatory matters; (ii) $2.5
million of transaction expenses related to the previously
announced acquisition of DirectPath, LLC; and (iii) a decrease in
tax expense of $1.7 million.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(e) Comprised
of: (i) $4.5 million from legal and regulatory matters; and (ii) a
decrease in tax expense of $1.0 million.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(f) Comprised
of: (i) $3.0 million from legal and regulatory matters; and (ii) a
decrease in tax expense of $.7 million.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(g) Comprised
of: (i) $25.9 million of net favorable adjustments arising from our
review of actuarial assumptions; and (ii) an increase in
tax expense of
$5.7 million.
|
A reconciliation of
pre-tax operating earnings (a non-GAAP financial measure) to net
income is as follows (dollars in millions):
|
|
Year ended
|
|
4Q21
|
|
4Q20
|
Pre-tax operating
earnings (a non-GAAP financial measure)
|
$
470.6
|
|
$
463.8
|
Income tax
expense
|
(105.0)
|
|
(101.5)
|
Net operating
income
|
365.6
|
|
362.3
|
Non-operating
items:
|
|
|
|
Net realized
investment gains (losses) from sales, impairments and change in
allowance for
credit losses, net of related amortization
|
34.8
|
|
(31.1)
|
Net change in market
value of investments recognized in earnings
|
(17.4)
|
|
(2.7)
|
Fair value changes in
embedded derivative liabilities, net of related
amortization
|
67.2
|
|
(79.1)
|
Fair value changes
related to the agent deferred compensation plan
|
8.9
|
|
(16.3)
|
Other
|
3.6
|
|
9.7
|
Non-operating income
(loss) before taxes
|
97.1
|
|
(119.5)
|
Income tax (expense)
benefit:
|
|
|
|
On
non-operating income (loss)
|
(21.7)
|
|
25.0
|
Valuation allowance for deferred tax assets and other tax
items
|
—
|
|
34.0
|
Net non-operating
income (loss)
|
75.4
|
|
(60.5)
|
Net income
|
$
441.0
|
|
$
301.8
|
|
|
|
|
|
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):
|
|
|
|
|
|
|
|
|
|
|
4Q19
|
Consolidated capital,
excluding accumulated other comprehensive
|
|
|
|
|
|
|
|
|
income (loss) and net
operating loss carryforwards
|
|
|
|
|
|
|
|
|
(a non-GAAP financial
measure)
|
|
|
|
|
|
|
$
2,761.9
|
Net operating loss
carryforwards
|
|
|
|
|
|
|
542.6
|
Accumulated other
comprehensive income
|
|
|
|
|
|
|
1,372.5
|
Common shareholders'
equity
|
|
|
|
|
|
|
$
4,677.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1Q20
|
|
2Q20
|
|
3Q20
|
|
4Q20
|
Consolidated capital,
excluding accumulated other comprehensive
|
|
|
|
|
|
|
|
|
income (loss) and net
operating loss carryforwards
|
|
|
|
|
|
|
|
|
(a non-GAAP financial
measure)
|
$
2,701.2
|
|
$
2,784.2
|
|
$
2,905.1
|
|
$
2,956.2
|
Net operating loss
carryforwards
|
469.4
|
|
426.8
|
|
377.2
|
|
341.9
|
Accumulated other
comprehensive income
|
595.2
|
|
1,520.2
|
|
1,801.6
|
|
2,186.1
|
Common shareholders'
equity
|
$
3,765.8
|
|
$
4,731.2
|
|
$
5,083.9
|
|
$
5,484.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1Q21
|
|
2Q21
|
|
3Q21
|
|
4Q21
|
Consolidated capital,
excluding accumulated other comprehensive
|
|
|
|
|
|
|
|
|
income (loss) and net
operating loss carryforwards
|
|
|
|
|
|
|
|
|
(a non-GAAP financial
measure)
|
$
3,019.5
|
|
$
3,035.6
|
|
$
3,036.3
|
|
$
3,068.9
|
Net operating loss
carryforwards
|
323.1
|
|
292.9
|
|
266.9
|
|
243.7
|
Accumulated other
comprehensive income
|
1,518.1
|
|
1,995.5
|
|
1,929.7
|
|
1,947.1
|
Common shareholders'
equity
|
$
4,860.7
|
|
$
5,324.0
|
|
$
5,232.9
|
|
$
5,259.7
|
|
|
|
|
|
|
|
|
|
|
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):
|
|
|
|
|
Trailing four quarter
average
|
|
|
|
4Q21
|
|
4Q20
|
Consolidated capital,
excluding accumulated other comprehensive
|
|
|
|
|
income (loss) and net
operating loss carryforwards
|
|
|
|
|
(a non-GAAP financial
measure)
|
$
3,026.0
|
|
$
2,812.4
|
Net operating loss
carryforwards
|
293.9
|
|
428.9
|
Accumulated other
comprehensive income
|
1,877.5
|
|
1,424.1
|
Common shareholders'
equity
|
$
5,197.4
|
|
$
4,665.4
|
(7)
|
The tables below
summarize the financial impact of significant items on our net
operating income. Management believes that identifying the
impact of these items enhances the understanding of our operating
results (dollars in millions, except per share data).
|
|
|
|
|
Three months
ended
|
|
|
December 31,
2021
|
|
|
Actual
results
|
|
Significant
items
|
|
Excluding
significant
items
|
Insurance product
margin
|
|
|
|
|
|
|
Annuity
margin
|
|
$
93.9
|
|
$
(26.9)
|
(a)
|
$
67.0
|
Health
margin
|
|
129.5
|
|
—
|
|
129.5
|
Life margin
|
|
30.4
|
|
1.0
|
(a)
|
31.4
|
Total insurance
product margin
|
|
253.8
|
|
(25.9)
|
|
227.9
|
Allocated
expenses
|
|
(143.3)
|
|
—
|
|
(143.3)
|
Income from insurance
products
|
|
110.5
|
|
(25.9)
|
|
84.6
|
Fee income
|
|
2.9
|
|
—
|
|
2.9
|
Investment income not
allocated to product lines
|
|
42.8
|
|
—
|
|
42.8
|
Expenses not
allocated to product lines
|
|
(17.4)
|
|
—
|
|
(17.4)
|
Operating earnings
before taxes
|
|
138.8
|
|
(25.9)
|
|
112.9
|
Income tax (expense)
benefit on operating income
|
|
(30.3)
|
|
5.7
|
|
(24.6)
|
Net operating
income
|
|
$
108.5
|
|
$
(20.2)
|
|
$
88.3
|
|
|
|
|
|
|
|
Net operating income
per diluted share
|
|
$
0.87
|
|
$
(0.16)
|
|
$
0.71
|
___________
(a)
|
Adjustments arising
from our comprehensive annual actuarial review of
assumptions.
|
|
|
|
|
Three months
ended
|
|
|
September 30,
2021
|
|
|
Actual
results
|
|
Significant
items
|
|
Excluding
significant
items
|
Insurance product
margin
|
|
|
|
|
|
|
Annuity
margin
|
|
$
52.5
|
|
$
—
|
|
$
52.5
|
Health
margin
|
|
117.9
|
|
—
|
|
117.9
|
Life margin
|
|
53.2
|
|
—
|
|
53.2
|
Total insurance
product margin
|
|
223.6
|
|
—
|
|
223.6
|
Allocated
expenses
|
|
(140.5)
|
|
—
|
|
(140.5)
|
Income from insurance
products
|
|
83.1
|
|
—
|
|
83.1
|
Fee income
|
|
2.6
|
|
—
|
|
2.6
|
Investment income not
allocated to product lines
|
|
50.9
|
|
—
|
|
50.9
|
Expenses not
allocated to product lines
|
|
(17.3)
|
|
3.0
|
(a)
|
(14.3)
|
Operating earnings
before taxes
|
|
119.3
|
|
3.0
|
|
122.3
|
Income tax (expense)
benefit on operating income
|
|
(26.5)
|
|
(0.7)
|
|
(27.2)
|
Net operating
income
|
|
$
92.8
|
|
$
2.3
|
|
$
95.1
|
|
|
|
|
|
|
|
Net operating income
per diluted share
|
|
$
0.72
|
|
$
0.02
|
|
$
0.74
|
___________
(a)
|
Comprised of $3.0
million from legal and regulatory matters.
|
|
|
Three months
ended
|
|
|
June 30,
2021
|
|
|
Actual
results
|
|
Significant
items
|
|
Excluding
significant
items
|
Insurance product
margin
|
|
|
|
|
|
|
Annuity
margin
|
|
$
66.0
|
|
$
—
|
|
$
66.0
|
Health
margin
|
|
120.9
|
|
—
|
|
120.9
|
Life margin
|
|
39.7
|
|
—
|
|
39.7
|
Total insurance
product margin
|
|
226.6
|
|
—
|
|
226.6
|
Allocated
expenses
|
|
(141.6)
|
|
—
|
|
(141.6)
|
Income from insurance
products
|
|
85.0
|
|
—
|
|
85.0
|
Fee income
|
|
6.6
|
|
—
|
|
6.6
|
Investment income not
allocated to product lines
|
|
47.8
|
|
—
|
|
47.8
|
Expenses not
allocated to product lines
|
|
(23.8)
|
|
4.5
|
(a)
|
(19.3)
|
Operating earnings
before taxes
|
|
115.6
|
|
4.5
|
|
120.1
|
Income tax (expense)
benefit on operating income
|
|
(26.5)
|
|
(1.0)
|
|
(27.5)
|
Net operating
income
|
|
$
89.1
|
|
$
3.5
|
|
$
92.6
|
|
|
|
|
|
|
|
Net operating income
per diluted share
|
|
$
0.66
|
|
$
0.03
|
|
$
0.69
|
___________
(a)
|
Comprised of $4.5
million from legal and regulatory matters.
|
|
|
Three months
ended
|
|
|
March 31,
2021
|
|
|
Actual
results
|
|
Significant
items
|
|
Excluding
significant
items
|
Insurance product
margin
|
|
|
|
|
|
|
Annuity
margin
|
|
$
57.9
|
|
$
—
|
|
$
57.9
|
Health
margin
|
|
124.7
|
|
—
|
|
124.7
|
Life margin
|
|
27.1
|
|
—
|
|
27.1
|
Total insurance
product margin
|
|
209.7
|
|
—
|
|
209.7
|
Allocated
expenses
|
|
(141.1)
|
|
—
|
|
(141.1)
|
Income from insurance
products
|
|
68.6
|
|
—
|
|
68.6
|
Fee income
|
|
7.3
|
|
—
|
|
7.3
|
Investment income not
allocated to product lines
|
|
43.0
|
|
—
|
|
43.0
|
Expenses not
allocated to product lines
|
|
(22.0)
|
|
7.8
|
(a)
|
(14.2)
|
Operating earnings
before taxes
|
|
96.9
|
|
7.8
|
|
104.7
|
Income tax (expense)
benefit on operating income
|
|
(21.7)
|
|
(1.7)
|
|
(23.4)
|
Net operating
income
|
|
$
75.2
|
|
$
6.1
|
|
$
81.3
|
|
|
|
|
|
|
|
Net operating income
per diluted share
|
|
$
0.55
|
|
$
0.04
|
|
$
0.59
|
___________
(a)
|
Comprised of: (i)
$5.3 million from legal and regulatory matters; and (ii) $2.5
million of transaction expenses related to the previously announced
acquisition of DirectPath, LLC. The legal and regulatory matters
primarily consist of an increase to our liability for claims and
interest pursuant to the Global Resolution Agreement, as we have
now processed and verified most of the claims provided by the third
party auditor allowing us to more accurately estimate the ultimate
liability.
|
|
|
Three months
ended
|
|
|
December 31,
2020
|
|
|
Actual
results
|
|
Significant
items
|
|
Excluding
significant
items
|
Insurance product
margin
|
|
|
|
|
|
|
Annuity
margin
|
|
$
68.1
|
|
$
(16.1)
|
(a)
|
$
52.0
|
Health
margin
|
|
125.2
|
|
—
|
|
125.2
|
Life margin
|
|
37.3
|
|
4.3
|
(a)
|
41.6
|
Total insurance
product margin
|
|
230.6
|
|
(11.8)
|
|
218.8
|
Allocated
expenses
|
|
(162.7)
|
|
—
|
|
(162.7)
|
Income from insurance
products
|
|
67.9
|
|
(11.8)
|
|
56.1
|
Fee income
|
|
2.9
|
|
—
|
|
2.9
|
Investment income not
allocated to product lines
|
|
57.8
|
|
—
|
|
57.8
|
Expenses not
allocated to product lines
|
|
(17.8)
|
|
3.7
|
(b)
|
(14.1)
|
Operating earnings
before taxes
|
|
110.8
|
|
(8.1)
|
|
102.7
|
Income tax (expense)
benefit on operating income
|
|
(24.8)
|
|
1.7
|
|
(23.1)
|
Net operating
income
|
|
$
86.0
|
|
$
(6.4)
|
|
$
79.6
|
|
|
|
|
|
|
|
Net operating income
per diluted share
|
|
$
0.61
|
|
$
(0.04)
|
|
$
0.57
|
___________
(a)
|
Adjustments arising
from our comprehensive annual actuarial review of
assumptions.
|
(b)
|
Unfavorable impact
related to asset impairments.
|
|
|
Three months
ended
|
|
|
June 30,
2020
|
|
|
Actual
results
|
|
Significant
items
|
|
Excluding
significant
items
|
Insurance product
margin
|
|
|
|
|
|
|
Annuity
margin
|
|
$
123.8
|
|
$
40.0
|
(a)
|
$
72.3
|
|
|
|
|
(91.5)
|
(a)
|
|
Health
margin
|
|
95.5
|
|
—
|
|
95.5
|
Life margin
|
|
36.1
|
|
5.6
|
(a)
|
41.7
|
Total insurance
product margin
|
|
255.4
|
|
(45.9)
|
|
209.5
|
Allocated
expenses
|
|
(128.1)
|
|
—
|
|
(128.1)
|
Income from insurance
products
|
|
127.3
|
|
(45.9)
|
|
81.4
|
Fee income
|
|
5.2
|
|
—
|
|
5.2
|
Investment income not
allocated to product lines
|
|
8.2
|
|
—
|
|
8.2
|
Expenses not
allocated to product lines
|
|
(38.5)
|
|
23.5
|
(b)
|
(15.0)
|
Operating earnings
before taxes
|
|
102.2
|
|
(22.4)
|
|
79.8
|
Income tax (expense)
benefit on operating income
|
|
(22.8)
|
|
4.7
|
|
(18.1)
|
Net operating
income
|
|
$
79.4
|
|
$
(17.7)
|
|
$
61.7
|
|
|
|
|
|
|
|
Net operating income
per diluted share
|
|
$
0.55
|
|
$
(0.12)
|
|
$
0.43
|
___________
(a)
|
Given our expectation
that interest rates will remain low for the long-term, we performed
an actuarial unlocking exercise in the second quarter of 2020 to
reflect our assumption that average new money rates will remain
flat at 4 percent forever. This change and the related
impacts to persistency assumptions had a $45.6 million unfavorable
impact on pre-tax earnings. As part of the actuarial
unlocking exercise, we also changed our assumptions related to the
future option costs we incur in providing benefits on fixed index
annuities which had a favorable impact on pre-tax earnings of $91.5
million. The impact of these changes in assumptions is
summarized below (dollars in millions):
|
|
Line of
business
|
|
|
|
Fixed index
annuities
|
|
Fixed interest
annuities
|
|
Interest-
sensitive life
|
|
Total
|
|
Favorable
(unfavorable)
|
Impacts of an average
new money rate assumption of 4 percent
|
|
|
|
|
|
|
|
Insurance policy
benefits
|
$
(5.0)
|
|
$
—
|
|
$
(7.4)
|
|
$
(12.4)
|
Amortization
|
(25.6)
|
|
(9.4)
|
|
1.8
|
|
(33.2)
|
Subtotal
|
(30.6)
|
|
(9.4)
|
|
(5.6)
|
|
(45.6)
|
Impacts of changes in
future option costs
|
|
|
|
|
|
|
|
Insurance policy
benefits
|
104.8
|
|
—
|
|
—
|
|
104.8
|
Amortization
|
(13.3)
|
|
—
|
|
—
|
|
(13.3)
|
Subtotal
|
91.5
|
|
—
|
|
—
|
|
91.5
|
Impact on pre-tax
income
|
$
60.9
|
|
$
(9.4)
|
|
$
(5.6)
|
|
$
45.9
|
|
This
actuarial unlocking exercise did not replace our comprehensive
annual review of all assumptions for our insurance products, which
we completed in the fourth quarter of 2020.
|
|
(b)
|
We increased our
liability for claims and interest pursuant to the previously
disclosed Global Resolution Agreement entered into in November
2018. Pursuant to this agreement, a third-party auditor is
acting on behalf of 41 states and the District of Columbia for the
purpose of identifying deceased insureds and contract holders where
benefits are payable pursuant to unclaimed property laws. The
third-party auditor has provided information that we have processed
and verified allowing us to more accurately estimate the ultimate
liability pursuant to this agreement.
|
View original
content:https://www.prnewswire.com/news-releases/cno-financial-group-reports-fourth-quarter-and-full-year-2021-results-301478093.html
SOURCE CNO Financial Group, Inc.