CNO Financial Group Reports Fourth Quarter Results and Full Year 2022

CNO has a strong position for 2023, with its 2022 sales momentum.

CARMEL, Ind., Feb. 7, 2023 /PRNewswire/ CNO Financial Group, Inc. announced today that for the quarter ended December 31, 2022The net income was $43.4 MillionOr $0.37 Per diluted share, as compared to $115.8 millionsOr $0.93 In 4Q21, per diluted share Net operating income (1) In 4Q22, was $65.8 millionOr $0.56 Per diluted share, as compared to $108.5 MillionOr $0.87 In 4Q21, per diluted share

(PRNewsfoto/CNO Financial Group)

(PRNewsfoto/CNO Financial Group)

The year ended with net income December 31, 2022 This was $396.8 millionsOr $3.37 Per diluted share, as compared to $441.0 millionOr $3.36 In 2021, per diluted share Net operating income (1) For the year ended December 31, 2022 This was $273.9 millionOr $2.33 Per diluted share, as compared to $365.6 MillionOr $2.79 In 2021, per diluted share

“The earnings for the quarter as well as the whole year reflect market volatility, moderate investment returns and favorable actuarial benefits that were not repeated in 2022,” stated the statement. Gary C. BhojwaniChief executive officer. “Absent these elements, we delivered sustainable earnings. We had strong underlying margins across all our product portfolios and rising new money rates supporting investment yield results.  We are well-positioned to enter the next year with our strong sales momentum in the Consumer and Worksite Divisions.

Highlights of the Full Year 2022 (as compared with the corresponding period of the previous year, where applicable).

  • Direct-to-consumer life insurance new annualized premiums (NAP) (4) Up to 10%

  • Worksite Division NAP (4) Increased 20%

  • Annuity Premiums Up 15%

  • Returned $244.8 million To shareholders in the form share repurchases$180.0 million) and dividends ($64.8 million); reduced weighted average share count by 10% since 2021

  • 15.1% Return on equity (ROE); operating ROE as adjusted (6)8.6%

Fourth Quarter 2022 Highlights (compare to the preceding year, where applicable).

  • Total NAP (4) Up to 4%

  • Direct-to-consumer life insurance NAP (4) Up to 9%

  • Worksite Division NAP (4) Up to 8%

  • Annuity received premiums up to 8 percent

  • Returned $26.1 million To shareholders in the form share repurchases$10.0 million) and dividends ($16.1 Million; Lower weighted average share count of 7% from 4Q21

  • Based on an estimate of the consolidated risk-based Capital Ratio of 384% December 31, 2022

  • Book value per share: $12.25Book value per diluted Share, Excluding accumulated other comprehensive Losses (2)Was? $29.90 At December 31, 2022

FINANCIAL SUMMARY

Quarter End
(Except for data per share, amounts in millions)
(Unaudited)

Non-GAAP net operating income(a) CNO’s management uses this financial measure to continuously evaluate the Company’s operating performance. It is also a common measure in the life insurance industry.  It is different from net income in that it does not include certain non-operating items, such as net investment gains or losses, changes in fair value of embedded derivatives, liability for deferred compensation plans, and other significant and uncommon items.  An analysis of net operating profit is essential for understanding the profitability of the Company and its operating trends.  Net income is the GAAP measure that is most closely comparable.

 

Per diluted share

Quarter ended

Quarter ended

December 31

December 31

2022

2021

%
Change

2022

2021

%
Change

Insurance products provide income (b)

$           0.50

$            0.89

(44)

$       58.4

$    110.5

(47)

Fee income

0.08

0.02

300

9.2

2.9

217

Investment income is not allocated to product lines (c)

0.26

0.34

(24)

30.3

42.8

(29)

Expenses not allotted to product lines (d)

(0.11)

(0.14)

(21)

(12.8)

(17.4)

(26)

Operating earnings before taxes

0.73

1.11

85.1

138.8

Taxes on income from operating income

(0.17)

(0.24)

(29)

(19.3)

(30.3)

(36)

Net operating income (1)

0.56

0.87

(36)

65.8

108.5

(39)

Sales results are reflected in net realized investment losses (gains)
Change in allowance for credit loss (net of)
Related amortization

(0.22)

0.04

(25.5)

4.7

Net Change in Market Value of Investments
Recognized in earnings

(0.07)

(0.10)

(9.0)

(12.1)

Fair value fluctuations in embedded derivative liabilities
(net of amortization)

0.09

0.15

10.7

19.1

Other

(0.05)

(0.02)

(5.9)

(2.4)

Non-operating income (loss), before taxes

(0.25)

0.07

(29.7)

9.3

Benefits from non-operating include income tax (expense), and
Income

0.06

(0.01)

7.3

(2.0)

Net non-operating Income (loss)

(0.19)

0.06

(22.4)

7.3

Net income

$           0.37

$            0.93

$       43.4

$    115.8

Weighted Average of Diluted Shares Outstanding

116.7

125.0

 

FINANCIAL SUMMARY

Year End

(Amounts in million, except for data per share)

(Unaudited)

Per diluted share

Year ended

Year ended

December 31

December 31

2022

2021

%
Change

2022

2021

%
Change

Insurance products provide income (b)

$           1.82

$            2.65

(31)

$     214.7

$    347.2

(38)

Fee income

0.20

0.15

33

23.7

19.4

22

Investment income is not allocated to product lines (c)

1.35

1.41

(4)

159.5

184.5

(14)

Expenses that are not allocated to product lines (d)

(0.34)

(0.62)

(45)

(40.8)

(80.5)

(49)

Operating earnings before taxes

3.03

3.59

357.1

470.6

Taxes on income from operating income

(0.70)

(0.80)

(13)

(83.2)

(105.0)

(21)

Net operating income (1)

2.33

2.79

(16)

273.9

365.6

(25)

Sales results are reflected in net realized investment losses (gains)
Change in allowance for credit loss (net of)
Related amortization

(0.50)

0.27

(58.8)

34.8

Net Change in Market Value of Investments
Recognized in earnings

(0.62)

(0.13)

(73.2)

(17.4)

Fair value fluctuations in embedded derivative liabilities
(net of amortization)

2.10

0.51

247.2

67.2

Other

0.38

0.09

45.0

12.5

Non-operating income prior to taxes

1.36

0.74

160.2

97.1

Non-operating income is subject to income tax

(0.32)

(0.17)

(37.3)

(21.7)

Net non-operating income

1.04

0.57

122.9

75.4

Net income

$           3.37

$            3.36

$     396.8

$    441.0

Weighted Average of Diluted Shares Outstanding

117.7

131.1

(a)

GAAP refers to accounting principles that are generally accepted in the United States of America.

(b)

The income from insurance products is the sum total of the insurance margins for the annuity, life, and health segments less any allocated insurance administrative costs.  It does not include fees income, investment income not assigned to product lines, expense not allocated in product lines, income taxes, or investment income not attributable to product lines.  The insurance margin is the management’s measure to determine whether its annuity, life, and health segments are profitable. It includes premiums plus allotted investment income, less commissions, interest credited and amortization for acquisition costs.

(c)

Net investment income that is not allocated to product line investment income can be defined as: (i. equity returns credited towards policyholder account balances, (ii. investment income allocated directly to our product lines), (iii. interest expense on investment borrowings and notes payables), (iv. expenses related to the funding arrangement-backed notes (“FABN”) program and (v. certain expenses related benefits plans that are offset or offset by special-purpose income investment income.

 

FINANCIAL SUMMARY (continued)
Management vs. GAAP measures
(Dollars per million, except for data per share)
(Unaudited)

Management uses non-GAAP measures to evaluate the business. They exclude accumulated income (loss) and shareholders’ equity (split), which are not GAAP measures. This is due to fluctuations in fixed maturity interest rates, which are primarily attributable by the loss of accumulated other complete income (loss).  Because the Company has the ability, and generally the intention, to hold investments until maturity, meaningful trends can be identified more easily without fluctuation.  Also, shareholders’ equity does NOT include net operating losses carryforwards in our non GAAP return on equity measures. Such assets cannot be discounted and will not yield a return to shareholders until they are realized as a reduction of taxes that would otherwise need to be paid.  Management believes that by excluding this value from this measure, we can better understand the effect of non-discounted assets on operating returns.
 

Quarter ended

December 31

2022

2021

12-month trailing return equity (a)

15.1 %

8.5 %

Twelve months trailing operating return on equity, exempting accumulated other comprehensive income (loss).
Net operating loss carryforwards (a non GAAP financial measure)

8.6 %

12.1 %

Twelve month trailing operating return, excluding significant elements, on equity excluding accumulated Other
Comprehensive income (loss), and net operating losses carryforwards (a non GAAP financial measurement)

8.1 %

11.8 %

Equity of shareholders

$     1,400.8

$    5,259.7

Loss of other comprehensive (or income) accumulation

2,093.1

(1,947.1)

Equity of shareholders, excluding accumulated income (loss).

3,493.9

3,312.6

Carryforwards of net operating loss

(169.0)

(243.7)

Equity of shareholders, excluding accumulated income (loss), and net operating loss
Carryforwards

$     3,324.9

$    3,068.9

Book value per diluted share

$        11.99

$       42.65

Loss of other comprehensive (or income) accumulation

17.91

(15.79)

Book value per diluted shares, excluding accumulated income (loss), (a non GAAP).
(2). Financial Measure

$        29.90

$       26.86

(a)  Calculated using average shareholders’ equity for the measurement period.

INSURANCE OPERATIONS

For the quarter, 19% of the Company’s margin came from Annuity products.

Annuity account values rose 6 percent in the 4Q22, while annuity premiums were up 8 percent.

The Company’s quarter-end insurance margin was 55 percent, and the company’s income from insurance policies was 64 percent.

For the quarter, 26 percent of Company’s insurance margin was made up by life products and 35 percent were from insurance policies.

Sales of life products increased 3 percent, while sales of health products rose 5 percent in 4Q22.

ANNUITY COLLECTED PREMIUMS

(Dollars per million)

(Unaudited)

Quarter ended December 31,

2022

2021

%
Change

Annuity-collected premiums

$             431.0

$             397.4

8

 

INCOME OF INSURANCE POLICY

(Dollars per million)

(Unaudited)

Quarter ended December 31,

2022

2021

%
Change

Annuity

$                 6.0

$                 4.1

46

Health

403.6

415.2

(3)

Life

216.4

210.6

3

Total insurance policy revenue

$             626.0

$             629.9

(1)

 

SALES MEASURED AS NEW ANNUALIZED PREMIUMS FOR

PRODUCTS FOR LIFE AND HEALTH

(Dollars per million)

(Unaudited)

Quarter ended December 31,

2022

2021

%
Change

Health

$               49.9

$               47.7

5

Life

40.8

39.8

3

Annualized total premiums

$               90.7

$               87.5

4

 

 

INSURANCE MARK
(Amounts not per share, but in millions)
(Unaudited)

The insurance margin is the management’s measure to determine profitability of annuity, healthcare, or life segment performance. It includes premiums and allocated investment income, less commissions and interest credited, as well as advertising expense and amortization for acquisition costs. The insurance margins for the annuity, life and health segments are less than the allocated insurance administrative costs. This is income from insurance products.  It does not include investment income, fees, income taxes, or expenses not related to product lines. This information is important to management as it allows them to gain a better understanding and analysis of their operations. The non-GAAP measure of insurance income is included in net operating earnings. It is also reconciled with net income at the Financial Summary section.

Quarter ended

December 31
2022

%
Insurance
Policy
Income

December 31
2021

%
Insurance
Policy
Income

%
Change

Margin

Annuity interest margin

$               39.6

$               93.9

(58)

Interest margin for life insurance

0.9

1.3

(31)

Margin that is total interest-sensitive

40.5

95.2

(57)

Margin for insurance

Health

115.0

28

129.5

31

(11)

Life (a)

51.9

24

29.1

14

78

Total insurance margin

166.9

27

158.6

25

5

Margin of total insurance

207.4

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