OREANDA-NEWS. CNO Financial Group, Inc. (NYSE: CNO) today announced fourth quarter of 2015 operating earnings (1) of $97.0 million, or 52 cents per diluted share, compared to $69.1 million, or 34 cents per diluted share, in the fourth quarter of 2014.  For the full year 2015, CNO reported operating earnings (1) of $274.7 million, or $1.41 per diluted share, compared to $276.9 million, or $1.27 per diluted share in 2014.

"The strength of our company and core businesses shone through in the year with solid earnings, margins, cash flows and capital," said Ed Bonach, CEO of CNO.  "I am also pleased that we grew the enterprise and extended our reach in serving the middle market while continuing to maintain pricing discipline."

Fourth Quarter 2015 Highlights

  • Sales, as defined by total new annualized premium ("NAP") (2): $111.0 million, down 3% from 4Q14
  • Collected premiums from our operating segments: $884.1 million, down slightly from 4Q14
  • Net income per diluted share: 73 cents in 4Q15 (including 17 cents from the release of the valuation allowance for deferred tax assets) compared to 41 cents in 4Q14 (including 17 cents from the release of the valuation allowance for deferred tax assets and other tax items)
  • Net operating income (1) per diluted share: 52 cents in 4Q15 compared to 34 cents in 4Q14
  • Unrestricted cash and investments held by our holding company were $382 million at December 31, 2015
  • Common stock repurchases of $54.0 million and dividends of $13.0 million in 4Q15

Full Year 2015 Highlights

  • Sales, as defined by total NAP (2): $426.4 million, up slightly from 2014
  • Issued 3% more new policies in 2015 than in 2014, resulting in approximately 3.5 million policies in-force (including third party policies sold by Bankers Life agents)
  • Collected premiums from our continuing operating segments (3): $3,403.9 million, up 1% from 2014
  • Net income per diluted share: $1.39 in 2015 compared to 24 cents in 2014 (including $(1.24) from the net loss on the sale of Conseco Life Insurance Company ("CLIC") and gain on reinsurance transactions and 25 cents from the release of the valuation allowance for deferred taxes and other tax items)
  • Net operating income (1) per diluted share: $1.41 in 2015 compared to $1.27 in 2014
  • Consolidated risk-based capital ratio was estimated at 449% at December 31, 2015 compared to 431% at December 31, 2014, reflecting estimated 2015 statutory operating earnings of $350 million and insurance company dividends to the holding company of $265.7 million during 2015
  • Common stock repurchases of $365.2 million and dividends of $52.0 million in 2015

Quarterly Segment Operating Results

 

Three months ended
 

December 31,
 

2015

  

2014
 

(Dollars in millions,
except per share data)

EBIT (5):

      

Bankers Life

$

121.2

    

$

103.5

  

Washington National

32.3

    

20.2

  

Colonial Penn

6.7

    

2.8

  

EBIT from business segments

160.2

    

126.5

  

Corporate Operations, excluding corporate interest expense

(.7)

    

(8.8)

  

EBIT

159.5

    

117.7

  

Corporate interest expense

(11.3)

    

(10.8)

  

Operating earnings before taxes

148.2

    

106.9

  

Tax expense on operating income

51.2

    

37.8

  

Net operating income (1)

97.0

    

69.1

  

Adjustment to loss on sale of CLIC (including impact of taxes)

—

    

2.9

  

Net realized investment gains (losses) (net of related amortization and taxes)

(10.3)

    

(2.3)

  

Fair value changes in embedded derivative liabilities (net of related amortization
and taxes)

9.4

    

(11.4)

  

Fair value changes related to agent deferred compensation plan (net of taxes)

9.8

    

(9.8)

  

Valuation allowance for deferred tax assets and other tax items

32.5

    

34.1

  

Other

(1.1)

    

1.3

  

Net income

$

137.3

    

$

83.9

  
       

Per diluted share:

      

Net operating income

$

.52

    

$

.34

  

Adjustment to loss on sale of CLIC (including impact of taxes)

—

    

.01

  

Net realized investment gains (losses) (net of related amortization and taxes)

(.05)

    

(.01)

  

Fair value changes in embedded derivative liabilities (net of related amortization and taxes)

.05

    

(.05)

  

Fair value changes related to agent deferred compensation plan (net of taxes)

.05

    

(.05)

  

Valuation allowance for deferred tax assets and other tax items

.17

    

.17

  

Other

(.01)

    

—

  

  Net income

$

.73

    

$

.41

  

The following table summarizes the financial impact of significant items on our 4Q15 net operating income (dollars in millions, except per share amounts):                          

 

Three months ended
 

December 31, 2015*
 

Actual
results

  

Significant
items

  

Excluding
significant
items

Net Operating Income (1):

          

Bankers Life

$

121.2

    

$

(32.1)

    

$

89.1

  

Washington National

32.3

    

(1.0)

    

31.3

  

Colonial Penn

6.7

    

—

    

6.7

  

EBIT from business segments

160.2

    

(33.1)

    

127.1

  

Corporate Operations, excluding corporate interest expense

(.7)

    

(4.2)

    

(4.9)

  

EBIT (5)

159.5

    

(37.3)

    

122.2

  

Corporate interest expense

(11.3)

    

—

    

(11.3)

  

Operating earnings before taxes

148.2

    

(37.3)

    

110.9

  

Tax expense on operating income

51.2

    

(11.6)

    

39.6

  

  Net operating income

$

97.0

    

$

(25.7)

    

$

71.3

  
           

Net operating income per diluted share

$

.52

    

$

(.14)

    

$

.38

  

The significant items in 4Q15 included: (i) adjustments arising from our comprehensive annual actuarial review of assumptions including $25.8 million of favorable impacts in the Bankers Life segment and $1.0 million of favorable impacts in the Washington National segment; (ii) the $6.3 million release of long-term care reserves (net of the reduction in insurance intangibles) due to the impact of policyholder actions following rate increases; and (iii) the $4.2 million impact of current market conditions on the value of investments backing our Company-owned life insurance ("COLI") used as a vehicle to fund Bankers Life's agent deferred compensation plan.  It should be noted that changes in the value of COLI investments are not subject to income tax.