CNO Financial Group(CNO) - 2025 Q2 - Quarterly Results

Consolidated Balance Sheet Consolidated Balance Sheet Overview CNO Financial Group's balance sheet shows a slight decrease in total assets and liabilities, with stable shareholders' equity and increased book value per common share Consolidated Balance Sheet Key Metrics (Dollars in millions) | Metric | Mar-25 | Jun-25 | Change (Mar-25 to Jun-25) | | :----------------------------------- | :------- | :------- | :-------------------------- | | Total assets | $ 37,429.2 | $ 37,329.1 | ($100.1) | | Total liabilities | $ 34,874.1 | $ 34,806.4 | ($67.7) | | Total shareholders' equity | $ 2,555.1 | $ 2,522.7 | ($32.4) | | Book value per common share | $ 25.58 | $ 25.92 | $0.34 | | Book value per common share, excluding AOCI | $ 37.98 | $ 38.79 | $0.81 | | Book value per diluted share, excluding AOCI | $ 37.27 | $ 38.05 | $0.78 | Consolidated Statement of Operations Consolidated Statement of Operations Overview CNO Financial Group's total revenues and net income significantly increased in 2Q25, driven by higher insurance policy and investment income Consolidated Statement of Operations (Dollars in millions) | Metric | 1Q 2025 | 2Q 2025 | Change (1Q to 2Q) | | :----------------------------------- | :-------- | :-------- | :------------------ | | Insurance policy income | $ 650.7 | $ 651.3 | $0.6 | | Net investment income (General account assets) | $ 375.1 | $ 378.3 | $3.2 | | Net investment income (Policyholder portfolios) | $ (63.6) | $ 105.4 | $169.0 | | Total revenues | $ 1,004.1 | $ 1,151.5 | $147.4 | | Total benefits and expenses | $ 976.3 | $ 1,033.5 | $57.2 | | Income before income taxes | $ 27.8 | $ 118.0 | $90.2 | | Net income | $ 21.5 | $ 91.8 | $70.3 | Financial Summary Financial Summary Overview The financial summary shows increased total insurance product margin and net operating income, with diluted net operating income per share rising to $0.87 Financial Summary Key Metrics (Dollars in millions, except per share data) | Metric | 1Q 2025 | 2Q 2025 | Change (1Q to 2Q) | | :----------------------------------- | :-------- | :-------- | :------------------ | | Total insurance product margin | $ 248.9 | $ 252.4 | $3.5 | | Income from insurance products | $ 87.7 | $ 103.0 | $15.3 | | Operating earnings before taxes | $ 104.6 | $ 112.3 | $7.7 | | Net operating income | $ 81.1 | $ 87.5 | $6.4 | | Net operating income per diluted share | $ 0.79 | $ 0.87 | $0.08 | | Net income per diluted share | $ 0.21 | $ 0.91 | $0.70 | Insurance Operations Overview Insurance Product Margins by Segment Total insurance product margin increased in 2Q25, primarily driven by Health products, while Annuity margin remained stable and Life margin slightly decreased Insurance Product Margins (Dollars in millions) | Product Line | 1Q 2025 | 2Q 2025 | Change (1Q to 2Q) | | :-------------------------- | :-------- | :-------- | :------------------ | | Annuity margin | $ 54.5 | $ 54.8 | $0.3 | | Health margin | $ 126.2 | $ 134.0 | $7.8 | | Life margin | $ 68.2 | $ 63.6 | ($4.6) | | Total insurance product margin | $ 248.9 | $ 252.4 | $3.5 | | Income from insurance products | $ 87.7 | $ 103.0 | $15.3 | | Net operating income | $ 81.1 | $ 87.5 | $6.4 | Margin from Insurance Products Margin from Annuity Products Annuity product margin remained stable in 2Q25, with fixed indexed annuities being the largest contributor despite a slight decrease in margin/average net insurance liabilities Annuity Product Margins (Dollars in millions) | Product Type | 1Q 2025 Margin | 2Q 2025 Margin | 2Q 2025 Margin/Average Net Insurance Liabilities | | :-------------------------- | :------------- | :------------- | :--------------------------------------------- | | Fixed indexed annuities | $ 44.5 | $ 45.4 | 1.72 % | | Fixed interest annuities | $ 8.1 | $ 8.0 | 2.01 % | | Other annuities | $ 1.9 | $ 1.4 | 1.41 % | | Total annuity margin | $ 54.5 | $ 54.8 | 1.75 % | Margin from Health Products Health product margin increased in 2Q25, driven by Long-term care and Supplemental health, with Long-term care showing the highest margin/insurance policy income Health Product Margins (Dollars in millions) | Product Type | 1Q 2025 Margin | 2Q 2025 Margin | 2Q 2025 Margin/Insurance Policy Income | | :-------------------------- | :------------- | :------------- | :------------------------------------- | | Supplemental health | $ 65.6 | $ 68.6 | 37 % | | Medicare supplement | $ 28.1 | $ 28.2 | 18 % | | Long-term care | $ 32.5 | $ 37.2 | 52 % | | Total health margin | $ 126.2 | $ 134.0 | 32 % | Margin from Life Products Life product margin decreased in 2Q25, primarily due to a decline in Interest sensitive life margin, while Traditional life margin remained robust Life Product Margins (Dollars in millions) | Product Type | 1Q 2025 Margin | 2Q 2025 Margin | 2Q 2025 Margin/Insurance Policy Income | | :-------------------------- | :------------- | :------------- | :------------------------------------- | | Interest sensitive life | $ 24.1 | $ 21.9 | 45 % (Underwriting margin) | | Traditional life | $ 44.1 | $ 41.7 | 23 % | | Total life margin | $ 68.2 | $ 63.6 | - | Collected Premiums and Insurance Policy Income Collected Premiums and Insurance Policy Income Overview Total collected premiums and insurance policy income increased in 2Q25, primarily driven by a significant rise in annuity product premiums Collected Premiums and Insurance Policy Income (Dollars in millions) | Metric | 1Q 2025 | 2Q 2025 | Change (1Q to 2Q) | | :----------------------------------- | :-------- | :-------- | :------------------ | | Total annuity collected premiums | $ 442.0 | $ 520.5 | $78.5 | | Total health collected premiums | $ 405.7 | $ 409.5 | $3.8 | | Total life collected premiums | $ 244.4 | $ 245.5 | $1.1 | | Total collected premiums | $ 1,092.1 | $ 1,175.5 | $83.4 | | Total annuity insurance policy income | $ 9.8 | $ 8.5 | ($1.3) | | Total health insurance policy income | $ 412.0 | $ 412.5 | $0.5 | | Total life insurance policy income | $ 228.9 | $ 230.4 | $1.5 | | Total insurance policy income | $ 650.7 | $ 651.4 | $0.7 | Health and Life New Annualized Premiums ("NAP") New Annualized Premiums by Division and Product Total New Annualized Premiums (NAP) increased in 2Q25, with growth across both Consumer and Worksite Divisions and significant increases in life products New Annualized Premiums (Dollars in millions) | Metric | 1Q 2025 | 2Q 2025 | Change (1Q to 2Q) | | :----------------------------------- | :-------- | :-------- | :------------------ | | Total Consumer Division health NAP | $ 41.7 | $ 44.3 | $2.6 | | Total Consumer Division life NAP | $ 49.6 | $ 57.6 | $8.0 | | Total Consumer Division health and life NAP | $ 91.3 | $ 101.9 | $10.6 | | Total Worksite Division health and life NAP | $ 14.4 | $ 18.0 | $3.6 | | Total health NAP | $ 52.0 | $ 56.0 | $4.0 | | Total life NAP | $ 53.7 | $ 63.9 | $10.2 | | Total NAP | $ 105.7 | $ 119.9 | $14.2 | Computation of Weighted Average Shares Outstanding Weighted Average Shares Outstanding Details Weighted average basic and diluted shares outstanding decreased in 2Q25, primarily due to share repurchases Weighted Average Shares Outstanding (Shares in thousands) | Metric | 1Q 2025 | 2Q 2025 | Change (1Q to 2Q) | | :----------------------------------- | :-------- | :-------- | :------------------ | | Weighted average basic shares outstanding | 100,742.8 | 98,572.2 | (2,170.6) | | Weighted average diluted shares outstanding | 103,069.9 | 100,386.2 | (2,683.7) | | Shares repurchased | (1,106.8) | (1,347.6) | (240.8) | Annuities - Account Value Rollforwards Annuity Policyholder Account Balances Rollforward Total annuity policyholder account balances increased in 2Q25, driven by new issuances and interest credited, with fixed indexed annuities as the largest component Annuity Policyholder Account Balances (Dollars in millions) | Metric | 1Q 2025 End of Period | 2Q 2025 End of Period | Change (1Q to 2Q) | | :----------------------------------- | :-------------------- | :-------------------- | :------------------ | | Fixed indexed annuities | $ 10,952.1 | $ 11,221.3 | $269.2 | | Fixed interest annuities | $ 1,640.7 | $ 1,634.7 | ($6.0) | | Total annuities | $ 12,592.8 | $ 12,856.0 | $263.2 | | Issuances (funds collected from new business) | $ 434.6 | $ 510.1 | $75.5 | | Interest credited (Total annuities) | $ 109.1 | $ 97.5 | ($11.6) | | Surrenders and withdrawals (Total annuities) | $ (274.7) | $ (262.5) | $12.2 | Consolidated Statutory Information of U.S. Based Insurance Subsidiaries Statutory Financials and Capital Ratios U.S. insurance subsidiaries reported increased net gain from operations and net income in 2Q25, maintaining a strong Risk-based capital ratio of 378% Consolidated Statutory Information (Dollars in millions) | Metric | 1Q 2025 | 2Q 2025 (a) | Change (1Q to 2Q) | | :----------------------------------- | :-------- | :------------ | :------------------ | | Net gain from operations before interest expense and federal income taxes | $ 29.0 | $ 37.7 | $8.7 | | Net gain from operations before federal income taxes | $ 13.5 | $ 22.0 | $8.5 | | Net income (loss) | $ 12.3 | $ 19.4 | $7.1 | | Capital and surplus | $ 1,422.3 | $ 1,417.8 | ($4.5) | | Risk-based capital ratio | 379 % | 378 % | (1) % | - The amounts for 2Q25 are preliminary, as statutory basis financial statements will be filed around August 14, 2025[32] Investment Income Investment Income Not Allocated to Product Lines Investment income not allocated to product lines decreased in 2Q25, reflecting mixed performance in FHLB and FABN programs and various variable components Investment Income Not Allocated to Product Lines (Dollars in millions) | Metric | 1Q 2025 | 2Q 2025 | Change (1Q to 2Q) | | :----------------------------------- | :-------- | :-------- | :------------------ | | Total investment income not allocated to product lines | $ 38.0 | $ 33.8 | ($4.2) | | Net spread income on FHLB program | $ 9.4 | $ 8.9 | ($0.5) | | Net spread income on FABN program | $ 6.4 | $ 9.2 | $2.8 | | Total excluding variable components | $ 25.8 | $ 22.8 | ($3.0) | | Total variable components | $ 12.2 | $ 11.0 | ($1.2) | Investment Income Allocated to Product Lines Total investment income allocated to product lines increased in 2Q25, with annuity products receiving the largest allocation and an average yield of 4.95% Investment Income Allocated to Product Lines (Dollars in millions) | Product Line | 1Q 2025 Allocated Investment Income | 2Q 2025 Allocated Investment Income | 2Q 2025 Average Yield | | :----------------------------------- | :---------------------------------- | :---------------------------------- | :-------------------- | | Annuity | $ 148.0 | $ 155.2 | 4.95 % | | Health | $ 75.1 | $ 75.9 | 4.90 % | | Life | $ 37.6 | $ 37.8 | 4.85 % | | Total allocated investment income | $ 260.7 | $ 268.9 | 4.92 % | | Total average net insurance liabilities | $ 21,400.0 | $ 21,854.2 | - | Other Investment Data Key Investment Metrics Average book value of invested assets and cash slightly decreased in 2Q25, while the new money rate remained stable and book and earned yields showed minor increases Other Investment Data (Dollars in millions, except rates) | Metric | 1Q 2025 | 2Q 2025 | Change (1Q to 2Q) | | :----------------------------------- | :-------- | :-------- | :------------------ | | Average book value of invested assets and cash | $ 30,755.7 | $ 30,732.5 | ($23.2) | | Net investment income from general account investments | $ 375.1 | $ 378.3 | $3.2 | | New money rate | 6.43 % | 6.42 % | (0.01) % | | Book yield | 4.81 % | 4.83 % | 0.02 % | | Earned yield | 4.71 % | 4.73 % | 0.02 % | | Alternative investment income (loss) | $ 12.9 | $ 11.7 | ($1.2) | Significant Items 1Q25 Significant Items A favorable out-of-period adjustment in 1Q25 decreased reserves, positively impacting net operating income and diluted EPS 1Q25 Significant Items Impact (Dollars in millions, except per share amounts) | Metric | Actual Results | Significant Items Impact | Excluding Significant Items | | :----------------------------------- | :------------- | :----------------------- | :-------------------------- | | Life margin | $ 68.2 | $ (6.8) (a) | $ 61.4 | | Total insurance product margin | $ 248.9 | $ (6.8) | $ 242.1 | | Operating earnings before taxes | $ 104.6 | $ (6.8) | $ 97.8 | | Net operating income | $ 81.1 | $ (5.3) | $ 75.8 | | Net operating income per diluted share | $ 0.79 | $ (0.05) | $ 0.74 | - The significant item in 1Q25 was a $6.8 million favorable out-of-period adjustment that decreased reserves[49] 4Q24 Significant Items An unfavorable actuarial review in 4Q24 impacted Health margin, leading to a positive adjustment to net operating income and diluted EPS when excluded 4Q24 Significant Items Impact (Dollars in millions, except per share amounts) | Metric | Actual Results | Significant Items Impact | Excluding Significant Items | | :----------------------------------- | :------------- | :----------------------- | :-------------------------- | | Health margin | $ 130.1 | $ 3.9 (a) | $ 134.0 | | Total insurance product margin | $ 253.1 | $ 3.9 | $ 257.0 | | Operating earnings before taxes | $ 173.9 | $ 3.9 | $ 177.8 | | Net operating income | $ 138.0 | $ 3.1 | $ 141.1 | | Net operating income per diluted share | $ 1.31 | $ 0.03 | $ 1.34 | - The significant item in 4Q24 was a $3.9 million unfavorable impact from a comprehensive annual actuarial review[51] 3Q24 Significant Items 3Q24 saw a net favorable actuarial review impact and an unfavorable fixed asset impairment, resulting in a negative impact on net operating income and diluted EPS 3Q24 Significant Items Impact (Dollars in millions, except per share amounts) | Metric | Actual Results | Significant Items Impact | Excluding Significant Items | | :----------------------------------- | :------------- | :----------------------- | :-------------------------- | | Annuity margin | $ 91.1 | $ (36.2) (a) | $ 54.9 | | Health margin | $ 127.8 | $ 4.3 (a) | $ 132.1 | | Life margin | $ 63.3 | $ 0.7 (a) | $ 64.0 | | Total insurance product margin | $ 282.2 | $ (31.2) | $ 251.0 | | Operating earnings before taxes | $ 153.5 | $ (28.3) | $ 125.2 | | Net operating income | $ 119.2 | $ (21.9) | $ 97.3 | | Net operating income per diluted share | $ 1.11 | $ (0.19) | $ 0.92 | - The significant items in 3Q24 included a $31.2 million net favorable impact from the comprehensive annual actuarial review and a $2.9 million unfavorable impact related to a fixed asset impairment[54] Notes Definitions of Key Financial Measures This section defines key financial measures, including non-GAAP metrics, investment allocation methodologies, and statutory accounting practices, for comprehensive report understanding - Book value per common share, excluding accumulated other comprehensive income (loss), is a non-GAAP measure that removes volatility from unrealized investment appreciation/depreciation[56] - Insurance product margin is a management measure of profitability for annuity, health, and life product lines, comprising insurance policy income plus allocated investment income less insurance policy benefits, interest credited, commissions, advertising expense, and amortization of acquisition costs[56] - Net operating income is a non-GAAP measure used to evaluate financial performance, excluding various non-recurring or market-related items such as net realized investment gains or losses, changes in fair value of investments, and embedded derivative liabilities[57] - Investment income is allocated to product lines based on the book yield of investments backing the block of business, which is applied to the average net insurance liabilities for the block in each period[56] - The new money rate refers to the rate for investments purchased during the period to support insurance products and capital, excluding FHLB, FABN, and variable interest entity investments[57]