CNO Financial Group Reports Fourth Quarter and Full Year 2016 Results
CNO also announced fourth quarter of 2016 operating income (1) of
"Our results again demonstrated the strength of our company, including solid earnings, growth in book value, capital and liquidity," said
Fourth Quarter 2016 Highlights
- First year collected premiums:
$374.6 million , up 16% from 4Q15 - Total collected premiums:
$951.3 million , up 8% from 4Q15 - New annualized premium ("NAP") (2):
$106.7 million , down 4% from 4Q15 - Policies in-force of 3.5 million (including third party policies in-force), up 1% from 4Q15
- Net income per diluted share:
$1.34 in 4Q16 compared to73 cents in 4Q15 - Net operating income (1) per diluted share:
49 cents in 4Q16 compared to52 cents in 4Q15 - Book value per common share increased to
$25.82 from$22.49 at 4Q15 - Book value per diluted share, excluding accumulated other comprehensive income (loss) (3), increased to
$22.02 from$20.05 at 4Q15 - Unrestricted cash and investments held by our holding company were
$264 million atDecember 31, 2016 , compared to$189 million atSeptember 30, 2016
Full Year 2016 Highlights
- First year collected premiums:
$1,344.8 million , up 12% from 2015 - Total collected premiums:
$3,610.6 million , up 6% from 2015 - NAP (2):
$416.6 million , down 2% from 2015 - Net income per diluted share:
$2.01 in 2016 compared to$1.39 in 2015 - Net operating income (1) per diluted share:
$1.47 in 2016 compared to$1.41 in 2015 - Common stock repurchases of
$203 million and dividends of$55 million in 2016 - Consolidated risk-based capital ratio was estimated at 459% at
December 31, 2016 , reflecting estimated statutory operating earnings of$286 million (including approximately$110 million loss on the recapture of long-term care business), compared to 449% atDecember 31, 2015
Quarterly Segment Operating Results
|
Three months ended |
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|
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|
2016 |
2015 |
||||||
|
(Dollars in millions, |
|||||||
|
Adjusted EBIT (4): |
|||||||
|
Bankers Life |
$ |
138.9 |
$ |
121.2 |
|||
|
|
29.9 |
32.3 |
|||||
|
Colonial Penn: |
|||||||
|
In-force business (5) |
13.4 |
14.8 |
|||||
|
New business (5) |
(8.8) |
(8.1) |
|||||
|
Total Colonial Penn |
4.6 |
6.7 |
|||||
|
Long-term care in run-off |
(3.9) |
— |
|||||
|
Adjusted EBIT from business segments |
169.5 |
160.2 |
|||||
|
Corporate Operations, excluding corporate interest expense |
(23.0) |
(.7) |
|||||
|
Adjusted EBIT |
146.5 |
159.5 |
|||||
|
Corporate interest expense |
(11.5) |
(11.3) |
|||||
|
Operating earnings before taxes |
135.0 |
148.2 |
|||||
|
Tax expense on operating income |
50.1 |
51.2 |
|||||
|
Net operating income (1) |
84.9 |
97.0 |
|||||
|
Net realized investment gains (losses) (net of related amortization) |
(14.8) |
(15.8) |
|||||
|
Fair value changes in embedded derivative liabilities (net of related amortization) |
46.2 |
14.6 |
|||||
|
Fair value changes related to agent deferred compensation plan |
15.1 |
15.1 |
|||||
|
Other |
(.8) |
(1.8) |
|||||
|
Non-operating income before taxes |
45.7 |
12.1 |
|||||
|
Income tax expense (benefit): |
|||||||
|
On non-operating income |
16.0 |
4.3 |
|||||
|
Valuation allowance for deferred tax assets and other tax items |
(119.6) |
(32.5) |
|||||
|
Net non-operating income |
149.3 |
40.3 |
|||||
|
Net income |
$ |
234.2 |
$ |
137.3 |
|||
|
Per diluted share: |
|||||||
|
Net operating income |
$ |
.49 |
$ |
.52 |
|||
|
Net realized investment gains (losses) (net of related amortization and taxes) |
(.06) |
(.05) |
|||||
|
Fair value changes in embedded derivative liabilities (net of related amortization and taxes) |
.17 |
.05 |
|||||
|
Fair value changes related to agent deferred compensation plan (net of taxes) |
.06 |
.05 |
|||||
|
Valuation allowance for deferred tax assets and other tax items |
.68 |
.17 |
|||||
|
Other |
— |
(.01) |
|||||
|
Net income |
$ |
1.34 |
$ |
.73 |
|||
The following table summarizes the financial impact of significant items on our 4Q16 net operating income (dollars in millions, except per share amounts):
|
Three months ended |
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|
|||||||||||
|
Actual |
Significant |
Excluding |
|||||||||
|
Net Operating Income (1): |
|||||||||||
|
Bankers Life |
$ |
138.9 |
$ |
(48.2) |
$ |
90.7 |
|||||
|
|
29.9 |
— |
29.9 |
||||||||
|
Colonial Penn |
4.6 |
2.5 |
7.1 |
||||||||
|
Long-term care in run-off |
(3.9) |
2.6 |
(1.3) |
||||||||
|
Adjusted EBIT from business segments |
169.5 |
(43.1) |
126.4 |
||||||||
|
Corporate Operations, excluding corporate interest expense |
(23.0) |
5.5 |
(17.5) |
||||||||
|
Adjusted EBIT (4) |
146.5 |
(37.6) |
108.9 |
||||||||
|
Corporate interest expense |
(11.5) |
— |
(11.5) |
||||||||
|
Operating earnings before taxes |
135.0 |
(37.6) |
97.4 |
||||||||
|
Tax expense on operating income |
50.1 |
(13.5) |
36.6 |
||||||||
|
Net operating income |
$ |
84.9 |
$ |
(24.1) |
$ |
60.8 |
|||||
|
Net operating income per diluted share |
$ |
.49 |
$ |
(.14) |
$ |
.35 |
|||||
The significant items in 4Q16 included: (i) adjustments arising from our comprehensive annual actuarial review of assumptions including
* See page 10 for the table of Net Operating Income Excluding Significant Items for the three months ended
Segment Results
Bankers Life markets and distributes a variety of insurance products to middle-income Americans at or near retirement through a dedicated field force of career agents. First year collected premiums in 4Q16 were
Total collected premiums were up 9 percent in 4Q16 compared to 4Q15. Total collected premiums in 2016 were
Pre-tax operating earnings in 4Q16 compared to 4Q15 were up
The long-term care interest-adjusted benefit ratio was 76.0 percent in 4Q16, compared to 79.6 percent in 4Q15. The 4Q16 and 4Q15 ratios were favorably impacted by
Pre-tax operating earnings in 4Q16 reflected a
Total collected premiums from the segment's supplemental health block were up 3 percent in 4Q16 compared to 4Q15. Total collected premiums from this block in 2016 were
Pre-tax operating earnings in 4Q16 compared to 4Q15 were down
Colonial Penn markets primarily graded benefit and simplified issue life insurance directly to customers through television advertising, direct mail, the internet and telemarketing. First year collected premiums in 4Q16 were
Total collected premiums were up 6 percent in 4Q16 compared to 4Q15. Total collected premiums in 2016 were
Pre-tax operating earnings in 4Q16 of
Recognizing the accounting standard related to deferred acquisition costs, the amount of our investment in new business during a particular period will have a significant impact on this segment's results. We expect this segment to report earnings in 2017 in the range of
Long-term care in run-off is a new segment for the long-term care block that was recaptured in conjunction with the termination of the reinsurance agreements with
Corporate Operations includes our investment advisory subsidiary and corporate expenses.
Pre-tax losses in 4Q16 were
Non-Operating Items
Net realized investment losses in 4Q16 were
During 4Q16 and 4Q15, we recognized an increase in earnings of
During both 4Q16 and 4Q15, we recognized an increase in earnings of
As previously disclosed, we have reached a settlement with the
In 4Q15, we reduced the valuation allowance for deferred tax assets by
Statutory (based on non-GAAP measures) and GAAP Capital Information
Our consolidated statutory risk-based capital ratio was approximately 459% at
Unrestricted cash and investments held by our holding company were
As previously disclosed, in order to increase our excess capital, we suspended our share repurchase program in 3Q16. Accordingly, no shares were repurchased in 4Q16. During 2016, we repurchased 11.7 million common shares at a total cost of
Book value per common share was
The debt-to-total-capital ratio was 16.9 percent and 18.0 percent at
Earnings and Outlook Conference Call
The Company will host a conference call to discuss results on
About
- Tables Follow -
|
CONSOLIDATED BALANCE SHEET (Dollars in millions) (unaudited) |
|||||||
|
|
2015 |
||||||
|
ASSETS |
|||||||
|
Investments: |
|||||||
|
Fixed maturities, available for sale, at fair value (amortized cost: 2016 - |
$ |
21,096.2 |
$ |
19,882.9 |
|||
|
Equity securities at fair value (cost: 2016 - |
584.2 |
463.0 |
|||||
|
Mortgage loans |
1,768.0 |
1,721.0 |
|||||
|
Policy loans |
112.0 |
109.4 |
|||||
|
Trading securities |
363.4 |
262.1 |
|||||
|
Investments held by variable interest entities |
1,724.3 |
1,633.6 |
|||||
|
Other invested assets |
589.5 |
415.1 |
|||||
|
Total investments |
26,237.6 |
24,487.1 |
|||||
|
Cash and cash equivalents - unrestricted |
478.9 |
432.3 |
|||||
|
Cash and cash equivalents held by variable interest entities |
189.3 |
364.4 |
|||||
|
Accrued investment income |
239.6 |
237.0 |
|||||
|
Present value of future profits |
401.8 |
449.0 |
|||||
|
Deferred acquisition costs |
1,044.7 |
1,083.3 |
|||||
|
Reinsurance receivables |
2,260.4 |
2,859.3 |
|||||
|
Income tax assets, net |
789.7 |
898.8 |
|||||
|
Assets held in separate accounts |
4.7 |
4.7 |
|||||
|
Other assets |
328.5 |
309.2 |
|||||
|
Total assets |
$ |
31,975.2 |
$ |
31,125.1 |
|||
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|||||||
|
Liabilities: |
|||||||
|
Liabilities for insurance products: |
|||||||
|
Policyholder account balances |
$ |
10,912.7 |
$ |
10,762.3 |
|||
|
Future policy benefits |
10,953.3 |
10,602.1 |
|||||
|
Liability for policy and contract claims |
500.6 |
487.8 |
|||||
|
Unearned and advanced premiums |
282.5 |
286.3 |
|||||
|
Liabilities related to separate accounts |
4.7 |
4.7 |
|||||
|
Other liabilities |
611.4 |
707.8 |
|||||
|
Investment borrowings |
1,647.4 |
1,548.1 |
|||||
|
Borrowings related to variable interest entities |
1,662.8 |
1,676.4 |
|||||
|
Notes payable – direct corporate obligations |
912.9 |
911.1 |
|||||
|
Total liabilities |
27,488.3 |
26,986.6 |
|||||
|
Commitments and Contingencies |
|||||||
|
Shareholders' equity: |
|||||||
|
Common stock ( |
1.7 |
1.8 |
|||||
|
Additional paid-in capital |
3,212.1 |
3,386.8 |
|||||
|
Accumulated other comprehensive income |
622.4 |
402.8 |
|||||
|
Retained earnings |
650.7 |
347.1 |
|||||
|
Total shareholders' equity |
4,486.9 |
4,138.5 |
|||||
|
Total liabilities and shareholders' equity |
$ |
31,975.2 |
$ |
31,125.1 |
|||
|
CONSOLIDATED STATEMENT OF OPERATIONS (Dollars in millions, except per share data) (unaudited) |
|||||||||||||||
|
Three months ended |
Year ended |
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|
|
||||||||||||||
|
2016 |
2015 |
2016 |
2015 |
||||||||||||
|
Revenues: |
|||||||||||||||
|
Insurance policy income |
$ |
654.1 |
$ |
638.8 |
$ |
2,601.1 |
$ |
2,556.0 |
|||||||
|
Net investment income: |
|||||||||||||||
|
General account assets |
315.6 |
303.2 |
1,204.1 |
1,203.6 |
|||||||||||
|
Policyholder and other special-purpose portfolios |
38.4 |
29.2 |
121.1 |
30.0 |
|||||||||||
|
Realized investment gains (losses): |
|||||||||||||||
|
Net realized investment gains (losses), excluding impairment losses |
(7.5) |
2.5 |
47.9 |
(8.0) |
|||||||||||
|
Other-than-temporary impairments: |
|||||||||||||||
|
Total other-than-temporary impairment losses |
(11.1) |
(18.3) |
(35.9) |
(42.9) |
|||||||||||
|
Portion of other-than-temporary impairment losses recognized in accumulated other comprehensive income |
3.6 |
— |
3.6 |
3.0 |
|||||||||||
|
Net impairment losses recognized |
(7.5) |
(18.3) |
(32.3) |
(39.9) |
|||||||||||
|
Gain (loss) on dissolution of variable interest entities |
— |
— |
(7.3) |
11.3 |
|||||||||||
|
Total realized gains (losses) |
(15.0) |
(15.8) |
8.3 |
(36.6) |
|||||||||||
|
Fee revenue and other income |
11.8 |
14.2 |
50.5 |
58.9 |
|||||||||||
|
Total revenues |
1,004.9 |
969.6 |
3,985.1 |
3,811.9 |
|||||||||||
|
Benefits and expenses: |
|||||||||||||||
|
Insurance policy benefits |
529.3 |
551.9 |
2,390.5 |
2,308.3 |
|||||||||||
|
Loss on reinsurance transaction and transition expenses |
— |
— |
75.4 |
9.0 |
|||||||||||
|
Interest expense |
30.4 |
24.2 |
116.4 |
94.9 |
|||||||||||
|
Amortization |
71.7 |
64.4 |
253.3 |
260.0 |
|||||||||||
|
Loss on extinguishment of debt |
— |
— |
— |
32.8 |
|||||||||||
|
Other operating costs and expenses |
192.8 |
168.8 |
796.3 |
739.2 |
|||||||||||
|
Total benefits and expenses |
824.2 |
809.3 |
3,631.9 |
3,444.2 |
|||||||||||
|
Income before income taxes |
180.7 |
160.3 |
353.2 |
367.7 |
|||||||||||
|
Income tax expense (benefit): |
|||||||||||||||
|
Tax expense on period income |
66.1 |
55.5 |
127.8 |
129.5 |
|||||||||||
|
Valuation allowance for deferred tax assets and other tax items |
(119.6) |
(32.5) |
(132.8) |
(32.5) |
|||||||||||
|
Net income |
$ |
234.2 |
$ |
137.3 |
$ |
358.2 |
$ |
270.7 |
|||||||
|
Earnings per common share: |
|||||||||||||||
|
Basic: |
|||||||||||||||
|
Weighted average shares outstanding |
173,634,000 |
185,608,000 |
176,638,000 |
193,054,000 |
|||||||||||
|
Net income |
$ |
1.35 |
$ |
.74 |
$ |
2.03 |
$ |
1.40 |
|||||||
|
Diluted: |
|||||||||||||||
|
Weighted average shares outstanding |
175,173,000 |
187,951,000 |
178,323,000 |
195,166,000 |
|||||||||||
|
Net income |
$ |
1.34 |
$ |
.73 |
$ |
2.01 |
$ |
1.39 |
|||||||
|
SEGMENT OPERATING RESULTS (Dollars in millions, except per share data) |
|||||||
|
Year ended |
|||||||
|
|
|||||||
|
2016 |
2015 |
||||||
|
Adjusted EBIT (4): |
|||||||
|
Bankers Life |
$ |
397.9 |
$ |
369.6 |
|||
|
|
102.9 |
111.5 |
|||||
|
Colonial Penn: |
|||||||
|
In-force business (5) |
54.4 |
53.6 |
|||||
|
New business (5) |
(52.7) |
(48.0) |
|||||
|
Total Colonial Penn |
1.7 |
5.6 |
|||||
|
Long-term care in run-off |
(3.9) |
— |
|||||
|
Adjusted EBIT from business segments |
498.6 |
486.7 |
|||||
|
Corporate Operations, excluding corporate interest expense |
(42.5) |
(18.9) |
|||||
|
Adjusted EBIT |
456.1 |
467.8 |
|||||
|
Corporate interest expense |
(45.8) |
(45.0) |
|||||
|
Operating earnings before taxes |
410.3 |
422.8 |
|||||
|
Tax expense on operating income |
147.8 |
148.1 |
|||||
|
Net operating income (1) |
262.5 |
274.7 |
|||||
|
Net realized investment gains (losses) (net of related amortization) |
7.6 |
(36.1) |
|||||
|
Fair value changes in embedded derivative liabilities (net of related amortization) |
9.6 |
11.9 |
|||||
|
Fair value changes and amendment related to agent deferred compensation plan |
3.1 |
15.1 |
|||||
|
Loss on reinsurance transaction |
(75.4) |
— |
|||||
|
Loss on extinguishment of debt |
— |
(32.8) |
|||||
|
Other |
(2.0) |
(13.2) |
|||||
|
Non-operating income (loss) before taxes |
(57.1) |
(55.1) |
|||||
|
Income tax expense (benefit): |
|||||||
|
On non-operating income (loss) |
(20.0) |
(18.6) |
|||||
|
Valuation allowance for deferred tax assets and other tax items |
(132.8) |
(32.5) |
|||||
|
Net non-operating income (loss) |
95.7 |
(4.0) |
|||||
|
Net income |
$ |
358.2 |
$ |
270.7 |
|||
|
Per diluted share: |
|||||||
|
Net operating income |
$ |
1.47 |
$ |
1.41 |
|||
|
Net realized investment gains (losses) (net of related amortization and taxes) |
.03 |
(.12) |
|||||
|
Fair value changes in embedded derivative liabilities (net of related amortization and taxes) |
.04 |
.04 |
|||||
|
Fair value changes and amendment related to agent deferred compensation plan (net of taxes) |
.01 |
.05 |
|||||
|
Loss on reinsurance transaction (net of taxes) |
(.27) |
— |
|||||
|
Loss on extinguishment of debt (net of taxes) |
— |
(.11) |
|||||
|
Valuation allowance for deferred tax assets and other tax items |
.74 |
.17 |
|||||
|
Other |
(.01) |
(.05) |
|||||
|
Net income |
$ |
2.01 |
$ |
1.39 |
|||
|
NET OPERATING INCOME EXCLUDING SIGNIFICANT ITEMS* (Dollars in millions, except per share data) |
|||||||||||
|
Three months ended |
|||||||||||
|
|
|||||||||||
|
Actual |
Significant items |
Excluding |
|||||||||
|
Net Operating Income (1): |
|||||||||||
|
Bankers Life |
$ |
121.2 |
$ |
(32.1) |
$ |
89.1 |
|||||
|
|
32.3 |
(1.0) |
31.3 |
||||||||
|
Colonial Penn |
6.7 |
— |
6.7 |
||||||||
|
Adjusted EBIT from business segments |
160.2 |
(33.1) |
127.1 |
||||||||
|
Corporate Operations, excluding corporate interest expense |
(.7) |
(4.2) |
(4.9) |
||||||||
|
Adjusted EBIT (4) |
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 |
|||||
* This table summarizes the financial impacts of significant items (as described in the segment results section of this press release) on our 4Q15 net operating income.
|
FIRST-YEAR COLLECTED PREMIUMS (Dollars in millions) |
|||||||
|
Three months ended |
|||||||
|
|
|||||||
|
2016 |
2015 |
||||||
|
Bankers Life: |
|||||||
|
|
$ |
19.3 |
$ |
20.6 |
|||
|
Long-term care |
4.2 |
4.3 |
|||||
|
Supplemental health |
1.4 |
1.4 |
|||||
|
Other health |
.1 |
— |
|||||
|
Life |
33.7 |
38.5 |
|||||
|
Annuity |
283.4 |
225.8 |
|||||
|
Total |
342.1 |
290.6 |
|||||
|
|
|||||||
|
Supplemental health and other health |
17.7 |
18.6 |
|||||
|
Life |
1.4 |
1.4 |
|||||
|
Annuity |
.2 |
— |
|||||
|
Total |
19.3 |
20.0 |
|||||
|
Colonial Penn: |
|||||||
|
Life |
13.2 |
12.9 |
|||||
|
Total |
13.2 |
12.9 |
|||||
|
Total first-year collected premiums from segments |
$ |
374.6 |
$ |
323.5 |
|||
|
TOTAL COLLECTED PREMIUMS (Dollars in millions) |
|||||||
|
Three months ended |
|||||||
|
|
|||||||
|
2016 |
2015 |
||||||
|
Bankers Life: |
|||||||
|
|
$ |
191.2 |
$ |
192.6 |
|||
|
Long-term care |
114.7 |
116.9 |
|||||
|
Supplemental health |
5.5 |
4.9 |
|||||
|
Other health |
1.5 |
1.7 |
|||||
|
Life |
113.8 |
110.7 |
|||||
|
Annuity |
284.9 |
227.7 |
|||||
|
Total |
711.6 |
654.5 |
|||||
|
|
|||||||
|
Supplemental health and other health |
142.1 |
138.1 |
|||||
|
|
14.9 |
17.9 |
|||||
|
Life |
7.7 |
7.1 |
|||||
|
Annuity |
.5 |
.5 |
|||||
|
Total |
165.2 |
163.6 |
|||||
|
Colonial Penn: |
|||||||
|
Life |
69.2 |
65.2 |
|||||
|
|
.6 |
.8 |
|||||
|
Total |
69.8 |
66.0 |
|||||
|
Long-term care in run-off: |
|||||||
|
Long-term care |
4.7 |
N/A |
|||||
|
Total |
4.7 |
N/A |
|||||
|
Total collected premiums from segments |
$ |
951.3 |
$ |
884.1 |
|||
|
NEW ANNUALIZED PREMIUMS (2) (Dollars in millions) |
|||||||
|
Three months ended |
|||||||
|
|
|||||||
|
2016 |
2015 |
||||||
|
Bankers Life: |
|||||||
|
|
$ |
23.9 |
$ |
27.6 |
|||
|
Long-term care |
5.5 |
6.7 |
|||||
|
Supplemental health |
1.6 |
1.6 |
|||||
|
Life |
17.0 |
19.6 |
|||||
|
Annuity |
17.0 |
13.6 |
|||||
|
Total |
65.0 |
69.1 |
|||||
|
|
|||||||
|
Supplemental health |
25.2 |
24.1 |
|||||
|
Life |
1.8 |
2.2 |
|||||
|
Total |
27.0 |
26.3 |
|||||
|
Colonial Penn: |
|||||||
|
Life |
14.7 |
15.6 |
|||||
|
Total |
14.7 |
15.6 |
|||||
|
Total new annualized premiums |
$ |
106.7 |
$ |
111.0 |
|||
|
BENEFIT RATIOS ON MAJOR HEALTH LINES OF BUSINESS |
|||||
|
Three months ended |
|||||
|
|
|||||
|
2016 |
2015 |
||||
|
Bankers Life: |
|||||
|
Medicare Supplement: |
|||||
|
Earned premium |
|
|
|||
|
Benefit ratio (7) |
71.2 |
% |
70.8 |
% |
|
|
Long-term care: |
|||||
|
Earned premium |
|
|
|||
|
Benefit ratio (7) |
134.7 |
% |
137.1 |
% |
|
|
Interest-adjusted benefit ratio (a non-GAAP measure) (8) |
76.0 |
% |
79.6 |
% |
|
|
|
|||||
|
Medicare Supplement: |
|||||
|
Earned premium |
|
|
|||
|
Benefit ratio (7) |
64.8 |
% |
63.8 |
% |
|
|
Supplemental health: |
|||||
|
Earned premium |
|
|
|||
|
Benefit ratio (7) |
81.0 |
% |
81.8 |
% |
|
|
Interest-adjusted benefit ratio (a non-GAAP measure) (8) |
57.0 |
% |
57.5 |
% |
|
|
Long-term care in run-off: |
|||||
|
Long-term care: |
|||||
|
Earned premium |
|
N/A |
|||
|
Benefit ratio (7) |
365.8 |
% |
N/A |
||
|
Interest-adjusted benefit ratio (a non-GAAP measure) (8) |
213.5 |
% |
N/A |
||
NOTES
|
(1) |
Management believes that an analysis of Net income applicable to common stock before: (i) net realized investment gains or losses, net of related amortization and taxes; (ii) 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; (iii) fair value changes and amendment related to the agent deferred compensation plan, net of taxes, (iv) loss on reinsurance transaction, 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 (vii) other non-operating items consisting primarily of equity in earnings of certain non-strategic investments and 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. Net realized investment gains or losses include: (i) gains or losses on the sales of investments; (ii) other-than-temporary impairments recognized through net income; and (iii) changes in fair value of certain fixed maturity investments with embedded derivatives. A reconciliation of Net operating income to Net income applicable to common stock is provided in the tables on pages 2 and 9. Additional information concerning this non-GAAP measure is included in our periodic filings with the |
|
(2) |
Measured by new annualized premium, which includes 6% of annuity and 10% of single premium whole life deposits and 100% of all other premiums. |
|
(3) |
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. The dilution from convertible securities is calculated assuming the securities were converted 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. |
|
(4) |
Management believes that an analysis of earnings before net realized investment gains (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, loss on extinguishment of debt, 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 these items are unrelated to the company's underlying fundamentals. A reconciliation of Adjusted EBIT to Net Income applicable to common stock is provided in the tables on pages 2 and 9. |
|
(5) |
Management believes that an analysis of Adjusted EBIT for Colonial Penn, separated between in-force and new business, provides increased clarity for this segment as the vast majority of the costs to generate new business in this segment are not deferrable and Adjusted EBIT will fluctuate based on management's decisions on how much marketing costs to incur in each period. Adjusted EBIT from new business includes pre-tax revenues and expenses associated with new sales of our insurance products during the first year after the sale is completed. Adjusted EBIT from in-force business includes all pre-tax revenues and expenses associated with sales of insurance products that were completed more than one year before the end of the reporting period. The allocation of certain revenues and expenses between new and in-force business is based on estimates, which we believe are reasonable. |
|
(6) |
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. |
|
(7) |
The benefit ratio is calculated by dividing the related product's insurance policy benefits by insurance policy income. |
|
(8) |
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 (which is equal to the tabular interest on the related insurance liabilities). 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. Additional information concerning this non-GAAP measure is included in our periodic filings with the |
Cautionary Statement Regarding Forward-Looking Statements. Our statements, trend analyses and other information contained in this press release relative to markets for
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/cno-financial-group-reports-fourth-quarter-and-full-year-2016-results-300403623.html
SOURCE


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