CNO Financial Group(CNO) - 2024 Q2 - Quarterly Results

Consolidated Balance Sheet The company's total assets grew to $36.3 billion, with shareholders' equity increasing to $2.43 billion as of June 2024 Consolidated Balance Sheet As of June 2024, total assets reached $36.3 billion, driven by investments, while equity increased to $2.43 billion Consolidated Balance Sheet Highlights (in millions) | Account | Jun-24 | Jun-23 | Mar-24 | | :--- | :--- | :--- | :--- | | Total investments | $27,230.2 | $25,350.0 | $26,211.4 | | Total assets | $36,290.2 | $34,053.9 | $34,939.7 | | Total liabilities | $33,861.3 | $32,058.1 | $32,572.0 | | Total shareholders' equity | $2,428.9 | $1,995.8 | $2,367.7 | Book Value Per Share | Metric | Jun-24 | Jun-23 | Mar-24 | | :--- | :--- | :--- | :--- | | Book value per common share | $22.80 | $17.56 | $21.81 | | Book value per common share, excluding AOCI | $36.55 | $32.81 | $35.44 | Consolidated Statement of Operations The company reported total revenues of $1.07 billion and net income of $116.3 million for Q2 2024, showing significant profitability growth Consolidated Statement of Operations For Q2 2024, total revenues reached $1.07 billion and net income was $116.3 million, reflecting strong year-over-year growth Quarterly Statement of Operations (in millions) | Metric | 2Q 2024 | 2Q 2023 | 1Q 2024 | | :--- | :--- | :--- | :--- | | Insurance policy income | $641.5 | $628.3 | $628.4 | | Net investment income | $409.1 | $399.7 | $469.2 | | Total revenues | $1,066.2 | $1,022.8 | $1,156.5 | | Total benefits and expenses | $915.6 | $926.7 | $1,010.3 | | Income before income taxes | $150.6 | $96.1 | $146.2 | | Net income (loss) | $116.3 | $73.7 | $112.3 | Financial Summary Net operating income significantly increased to $114.6 million, or $1.05 per diluted share, in Q2 2024 Financial Summary Net operating income reached $114.6 million, or $1.05 per diluted share, in Q2 2024, driven by insurance product income Net Operating Income (in millions, except per share data) | Metric | 2Q 2024 | 2Q 2023 | 1Q 2024 | | :--- | :--- | :--- | :--- | | Total insurance product margin | $275.1 | $223.2 | $229.6 | | Income from insurance products | $120.5 | $73.7 | $68.0 | | Net operating income | $114.6 | $62.3 | $57.5 | | Net operating income per diluted share | $1.05 | $0.54 | $0.52 | Reconciliation of Net Operating Income to Net Income (in millions) | Description | 2Q 2024 | 2Q 2023 | | :--- | :--- | :--- | | Net operating income | $114.6 | $62.3 | | Net non-operating income (loss) | $1.7 | $11.4 | | Net income (loss) | $116.3 | $73.7 | Insurance Operations and Product Margins Total insurance product margin significantly increased to $275.1 million in Q2 2024, driven by strong performance across all product lines Insurance Operations Summary Total insurance product margin reached $275.1 million in Q2 2024, with Health, Annuity, and Life margins all showing strong growth Insurance Product Margin Breakdown (in millions) | Product Line | 2Q 2024 | 2Q 2023 | 1Q 2024 | | :--- | :--- | :--- | :--- | | Annuity margin | $76.1 | $57.1 | $52.0 | | Health margin | $135.9 | $108.2 | $123.0 | | Life margin | $63.1 | $57.9 | $54.6 | | Total insurance product margin | $275.1 | $223.2 | $229.6 | | Income from insurance products | $120.5 | $73.7 | $68.0 | | Net operating income | $114.6 | $62.3 | $57.5 | Margin from Annuity Products Annuity margin significantly increased to $76.1 million in Q2 2024, primarily driven by fixed indexed and other annuities Annuity Margin by Product (in millions) | Annuity Product | 2Q 2024 Margin | 2Q 2023 Margin | | :--- | :--- | :--- | | Fixed indexed annuities | $49.9 | $47.6 | | Fixed interest annuities | $8.7 | $8.7 | | Other annuities | $17.5 | $0.8 | | Total annuity margin | $76.1 | $57.1 | Margin from Health Products Health margin rose to $135.9 million in Q2 2024, with strong contributions from supplemental, Medicare, and long-term care products Health Margin by Product (in millions) | Health Product | 2Q 2024 Margin | 2Q 2023 Margin | | :--- | :--- | :--- | | Supplemental health | $65.1 | $59.9 | | Medicare supplement | $35.5 | $32.3 | | Long-term care | $35.3 | $16.0 | | Total health margin | $135.9 | $108.2 | Margin from Life Products Life margin increased to $63.1 million in Q2 2024, primarily driven by growth in traditional life products Life Margin by Product (in millions) | Life Product | 2Q 2024 Margin | 2Q 2023 Margin | | :--- | :--- | :--- | | Interest sensitive life | $23.9 | $24.1 | | Traditional life | $39.2 | $33.8 | | Total life margin | $63.1 | $57.9 | Collected Premiums and Insurance Policy Income Total collected premiums increased to $1.08 billion in Q2 2024, alongside growth in insurance policy income across all product lines Collected Premiums and Insurance Policy Income Total collected premiums reached $1.08 billion in Q2 2024, driven by annuities, with insurance policy income at $641.5 million Collected Premiums by Product (in millions) | Product Line | 2Q 2024 | 2Q 2023 | | :--- | :--- | :--- | | Annuity products | $439.1 | $401.8 | | Health products | $400.1 | $389.3 | | Life products | $242.4 | $236.6 | | Total collected premiums | $1,081.6 | $1,027.7 | Insurance Policy Income by Product (in millions) | Product Line | 2Q 2024 | 2Q 2023 | | :--- | :--- | :--- | | Annuity products | $9.3 | $8.1 | | Health products | $403.6 | $397.1 | | Life products | $228.6 | $223.1 | | Total insurance policy income | $641.5 | $628.3 | Health and Life New Annualized Premiums (NAP) Total New Annualized Premiums (NAP) for health and life products increased by 4.3% to $102.9 million in Q2 2024 Health and Life New Annualized Premiums (NAP) Total NAP for health and life products reached $102.9 million in Q2 2024, driven by health NAP growth Total New Annualized Premiums (in millions) | Product Line | 2Q 2024 | 2Q 2023 | % Change | | :--- | :--- | :--- | :--- | | Total health NAP | $50.6 | $43.1 | +17.4% | | Total life NAP | $52.3 | $55.6 | -5.9% | | Total NAP | $102.9 | $98.7 | +4.3% | Computation of Weighted Average Shares Outstanding Weighted average diluted shares outstanding decreased to 109.3 million in Q2 2024, primarily due to share repurchases Computation of Weighted Average Shares Outstanding Weighted average diluted shares outstanding were 109.3 million in Q2 2024, a reduction from 115.6 million in Q2 2023 Weighted Average Shares Outstanding (in thousands) | Share Type | 2Q 2024 | 2Q 2023 | | :--- | :--- | :--- | | Weighted average basic shares | 107,730.7 | 114,273.5 | | Weighted average diluted shares | 109,258.2 | 115,649.6 | Annuities - Account Value Rollforwards Total annuity account value grew to $11.88 billion in Q2 2024, driven by new business issuances and interest credited Annuities - Account Value Rollforwards The total annuity account value reached $11.88 billion in Q2 2024, supported by $437.0 million in new business Total Annuities Account Value Rollforward - Q2 2024 (in millions) | Description | Amount | | :--- | :--- | | Beginning Balance (1Q 2024) | $11,723.3 | | Issuances (new business) | $437.0 | | Surrenders and withdrawals | ($277.6) | | Benefit payments | ($103.4) | | Interest credited | $95.6 | | Ending Balance (2Q 2024) | $11,881.7 | Consolidated Statutory Information U.S. insurance subsidiaries reported $35.5 million in preliminary net income for Q2 2024, with a strong 394% RBC ratio U.S. Insurance Subsidiaries Statutory Information U.S. insurance subsidiaries reported preliminary net income of $35.5 million for Q2 2024, maintaining a robust 394% RBC ratio Statutory Financial Highlights (in millions) | Metric | 2Q 2024 (preliminary) | 2Q 2023 | | :--- | :--- | :--- | | Net income (loss) | $35.5 | $16.5 | | Capital and surplus | $1,489.5 | $1,857.0 | | Total statutory capital, surplus, AVR & IMR | $2,203.3 | $2,555.2 | | Risk-based capital ratio | 394% | 386% | Investment Income Analysis Net investment income totaled $409.1 million in Q2 2024, with a significant portion allocated to product lines and strong unallocated income Investment Income Allocation and Reconciliation Net investment income was $409.1 million in Q2 2024, with $252.3 million allocated to product lines and $44.8 million unallocated Investment Income Reconciliation - Q2 2024 (in millions) | Description | Amount | | :--- | :--- | | Net investment income | $409.1 | | Less: Allocated to product lines | ($252.3) | | Less: Other adjustments (debt expense, etc.) | ($112.0) | | Investment income not allocated to product lines | $44.8 | Allocated Investment Income by Product - Q2 2024 (in millions) | Product Line | Allocated Income | | :--- | :--- | | Annuities | $140.5 | | Health | $75.1 | | Life | $36.7 | | Total | $252.3 | Analysis of Unallocated Investment Income Unallocated investment income reached $44.8 million in Q2 2024, significantly boosted by positive alternative investment income Unallocated Investment Income Breakdown (in millions) | Component | Amount | | :--- | :--- | | Total excluding variable components | $28.5 | | Total variable components | $16.3 | | Total investment income not allocated | $44.8 | - Alternative investment income contributed a positive $11.9 million in Q2 2024, compared to a loss of $(24.3) million in Q1 2024 and a small gain of $0.2 million in Q2 2023[41][47] Key Investment Yields The new money rate for investments purchased in Q2 2024 increased to 6.41%, reflecting a higher interest rate environment Key Investment Yields | Yield Metric | 2Q 2024 | 2Q 2023 | 1Q 2024 | | :--- | :--- | :--- | :--- | | New money rate | 6.41% | 6.32% | 6.17% | | Book yield | 4.73% | 4.58% | 4.64% | | Earned yield | 4.71% | 4.41% | 4.06% | Significant Items The report details significant items impacting net operating income, including actuarial review adjustments and legal recoveries Significant Items Analysis Significant items for 4Q23 included an unfavorable actuarial review impact and favorable legal recoveries in 3Q23 - In 4Q23, a comprehensive annual actuarial assumption and model review resulted in a $(33.9) million pre-tax impact, reducing net operating income by $(26.4) million, or $(0.23) per diluted share[48][55][56] - In 3Q23, legal recoveries, net of expenses and increased legal accruals, had a $(21.7) million pre-tax impact, which favorably impacted net operating income by $16.9 million after tax, or $0.14 per diluted share[49][57][58] Notes to Financials This section defines key non-GAAP financial measures, such as Net Operating Income and Insurance Product Margin, used in the report Notes on Non-GAAP Measures and Definitions Key non-GAAP measures like Net Operating Income and Insurance Product Margin are defined to clarify core operational performance - Net Operating Income: A non-GAAP measure that excludes items like net realized investment gains/losses, changes in market value of investments, and fair value changes of certain liabilities. Management believes it is a key measure for evaluating financial performance in the life insurance industry[67] - Insurance Margin: A management measure of product line profitability, consisting of policy income and allocated investment income, less benefits, interest, commissions, and amortization. It is a component of Net Operating Income[66] - Book Value per Share, excluding AOCI: A non-GAAP measure that removes the volatility from unrealized appreciation/depreciation of investments to provide a more stable view of shareholder equity[66]