CNO Financial casts out former Conseco demons
By O'Malley, Chris | |
Proquest LLC |
Think a 116-percent increase in profit last year, and a stock price up nearly 70 percent year-to-date, are a big deal for
Sure are, but it was an exorcism of CNO's legacy Conseco business recently that's really put the proverbial color back in the faces of management and investors of late.
You remember
The Carmel company got debt-heavy and couldn't be righted even by former General Electric Capital CEO
Built on Conseco's ashes, CNO and its new management created its own line of insurance products aimed at middle-income America. But for years CNO has been tormented by devilish old Conseco products it no longer markets but has on its books. Many are volatile, interest-rate-sensitive products that in any given quarter tainted results from CNO's core lines.
So volatile and underperforming was this old business that CNO, back in 2010, dug a pit known as OCB (Old CNO Business) to contain the evil spirits of the legacy business.
Since then, CNO has been methodically casting out the old business, under CEO-turned-exorcist
But the big victory came this month when CNO sold
This interest-sensitive block has been the most volatile among the OCB remnants.
In short order, CNO's total reserves that had been dedicated to OCB dropped from
The exorcism was years ahead of what some observers had expected.
"We're able to now finally focus going forward on our core business," Bonach said. "We're pleased with out progress in that relatively short period of time."
Earlier this month, he told analysts that the sale of Conseco Life "allows for a clean break from the legacy issues of the past."
Citicorp analyst
"We believe that ratings agencies will take a favorable view on the transaction, which should help further CNO's push for an investment-grade rating," Bass added.
Such ratings would give the company more flexibility in financing and debt matters and buoy its stock price.
Company executives earlier this month said the sale of Conseco Life should result in a net debt reduction of
CNO's core businesses are Bankers Life,
In 2013, CNO's total sales rose 6 percent, to
The rising stock price is to some degree attributable to CNO's buying back its own shares with fervor in recent years -
The company increased its dividend payout ratio to 20 percent, a year earlier than planned.
Not all was rosy in the fourth quarter. Although Colonial Penn sales rose 3 percent, that was below expectations. The
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