
Consolidated Balance Sheet CNO Financial Group's March 2024 balance sheet shows decreased assets and liabilities, with increased shareholders' equity and book value per common share, reflecting improved financial health Consolidated Balance Sheet Highlights (Dollars in millions) | Metric | Mar-23 | Dec-23 | Mar-24 | | :----------------------------------- | :------- | :------- | :------- | | Total Assets | $34,015.0 | $35,102.5 | $34,939.7 | | Total Liabilities | $31,983.2 | $32,886.9 | $32,572.0 | | Total Shareholders' Equity | $2,031.8 | $2,215.6 | $2,367.7 | | Book Value per Common Share | $17.68 | $20.26 | $21.81 | | Fixed maturities, available for sale, at fair value | $21,107.1 | $21,506.2 | $21,648.1 | - Total Shareholders' Equity increased by $152.1 million (6.8%) from December 2023 to March 2024, and by $335.9 million (16.5%) year-over-year from March 20235 - Book Value per Common Share rose to $21.81 in March 2024, up from $20.26 in December 2023 and $17.68 in March 2023, reflecting an increase of 7.7% quarter-over-quarter and 23.4% year-over-year5 Consolidated Statement of Operations 1Q24 consolidated operations show significant net income improvement over 1Q23, driven by increased revenues and a favorable investment gains environment Consolidated Statement of Operations Highlights (Dollars in millions) | Metric | 1Q23 | 1Q24 | YoY Change | | :----------------------------------- | :----- | :----- | :--------- | | Total Revenues | $1,006.0 | $1,156.5 | +14.96% | | Insurance policy income | $625.5 | $628.4 | +0.46% | | Net investment income (General account assets) | $292.2 | $301.9 | +3.32% | | Total investment gains (losses) | $(14.6) | $7.8 | N/A | | Total Benefits and Expenses | $1,007.0 | $1,010.3 | +0.33% | | Income (loss) before income taxes | $(1.0) | $146.2 | N/A | | Net income (loss) | $(0.8) | $112.3 | N/A | - Net income significantly improved from a loss of $0.8 million in 1Q23 to a gain of $112.3 million in 1Q247 - Total investment gains (losses) shifted from a loss of $14.6 million in 1Q23 to a gain of $7.8 million in 1Q247 Financial Summary 1Q24 financial summary shows slightly decreased net operating income but substantially improved net income over 1Q23, driven by a positive shift in non-operating income Financial Summary Highlights (Dollars in millions, except per share data) | Metric | 1Q23 | 1Q24 | YoY Change | | :----------------------------------- | :----- | :----- | :--------- | | Total insurance product margin | $221.2 | $229.6 | +3.79% | | Net operating income | $58.6 | $57.5 | -1.88% | | Net non-operating income (loss) | $(59.4) | $54.8 | N/A | | Net income (loss) | $(0.8) | $112.3 | N/A | | Net operating income per diluted share | $0.51 | $0.52 | +1.96% | | Net income (loss) per diluted share | $(0.01) | $1.01 | N/A | - Net non-operating income (loss) significantly improved from a loss of $59.4 million in 1Q23 to a gain of $54.8 million in 1Q249 - Total insurance product margin increased by 3.79% year-over-year to $229.6 million in 1Q249 Insurance Operations CNO Financial Group's 1Q24 insurance operations show increased total product margin, driven by health and life growth, despite a slight decline in annuity margin Insurance Operations Highlights (Dollars in millions) | Metric | 1Q23 | 1Q24 | YoY Change | | :-------------------------- | :----- | :----- | :--------- | | Total insurance product margin | $221.2 | $229.6 | +3.79% | | Annuity margin | $57.3 | $52.0 | -9.25% | | Health margin | $116.5 | $123.0 | +5.58% | | Life margin | $47.4 | $54.6 | +15.19% | | Net operating income | $58.6 | $57.5 | -1.88% | - Health margin increased by $6.5 million (5.58%) and Life margin increased by $7.2 million (15.19%) year-over-year in 1Q2411 - Annuity margin decreased by $5.3 million (9.25%) in 1Q24 compared to 1Q2311 Margin from Insurance Products Margin from Annuity Products 1Q24 annuity product margin decreased from 1Q23, mainly due to lower fixed indexed annuities margin and a reduced overall margin/average net insurance liabilities Annuity Margin Highlights (Dollars in millions) | Metric | 1Q23 | 1Q24 | YoY Change | | :----------------------------------- | :----- | :----- | :--------- | | Annuity margin | $57.3 | $52.0 | -9.25% | | Margin from fixed indexed annuities | $46.5 | $43.4 | -6.67% | | Margin from fixed interest annuities | $9.1 | $7.6 | -16.50% | | Margin from other annuities | $1.7 | $1.0 | -41.18% | | Total annuity margin/average net insurance liabilities | 2.03% | 1.78% | -0.25 pp | - Fixed indexed annuities margin decreased by $3.1 million (6.67%) from 1Q23 to 1Q2413 - The overall margin/average net insurance liabilities for annuities declined by 0.25 percentage points year-over-year13 Margin from Health Products 1Q24 health product margin increased from 1Q23, driven by improved supplemental health and long-term care performance, resulting in a higher overall margin/insurance policy income Health Margin Highlights (Dollars in millions) | Metric | 1Q23 | 1Q24 | YoY Change | | :----------------------------------- | :----- | :----- | :--------- | | Total health margin | $116.5 | $123.0 | +5.58% | | Margin from supplemental health | $63.3 | $65.4 | +3.32% | | Margin from Medicare supplement | $26.1 | $26.5 | +1.53% | | Margin from long-term care | $27.1 | $31.1 | +14.76% | | Total health margin/insurance policy income | 29% | 31% | +2 pp | - Long-term care margin saw a significant increase of $4.0 million (14.76%) from 1Q23 to 1Q2415 - The total health margin/insurance policy income improved by 2 percentage points year-over-year15 Margin from Life Products 1Q24 life product margin increased from 1Q23, primarily due to strong traditional life product performance, despite a slight decrease in interest-sensitive life margin Life Margin Highlights (Dollars in millions) | Metric | 1Q23 | 1Q24 | YoY Change | | :----------------------------------- | :----- | :----- | :--------- | | Total life margin | $47.4 | $54.6 | +15.19% | | Margin from interest sensitive life | $22.8 | $22.5 | -1.32% | | Margin from traditional life | $24.6 | $32.1 | +30.49% | | Traditional life margin/insurance policy income | 14% | 18% | +4 pp | - Margin from traditional life products increased substantially by $7.5 million (30.49%) from 1Q23 to 1Q2417 - The traditional life margin/insurance policy income improved by 4 percentage points year-over-year17 Collected Premiums and Insurance Policy Income 1Q24 total collected premiums and insurance policy income showed modest growth, with annuity and life products contributing, while health collected premiums remained stable Collected Premiums and Insurance Policy Income (Dollars in millions) | Metric | 1Q23 | 1Q24 | YoY Change | | :----------------------------------- | :----- | :----- | :--------- | | Total collected premiums | $1,010.4 | $1,035.4 | +2.47% | | Total annuity collected premiums | $370.9 | $393.3 | +6.04% | | Total health collected premiums | $404.9 | $404.8 | -0.02% | | Total life collected premiums | $234.6 | $237.3 | +1.15% | | Total insurance policy income | $625.5 | $628.4 | +0.46% | - Annuity collected premiums increased by $22.4 million (6.04%) year-over-year19 - Total collected premiums grew by $25.0 million (2.47%) in 1Q24 compared to 1Q2319 Health and Life New Annualized Premiums (NAP) 1Q24 total new annualized premiums (NAP) for health and life products increased, driven by growth in both Consumer and Worksite Divisions, particularly in health Health and Life New Annualized Premiums (NAP) (Dollars in millions) | Metric | 1Q23 | 1Q24 | YoY Change | | :----------------------------------- | :----- | :----- | :--------- | | Total NAP (both divisions) | $96.6 | $104.5 | +8.18% | | Total Consumer Division health and life NAP | $85.7 | $91.5 | +6.77% | | Total Worksite Division health and life NAP | $10.9 | $13.0 | +19.27% | | Total health NAP | $39.5 | $47.8 | +21.01% | | Total life NAP | $57.1 | $56.7 | -0.70% | - Total health NAP increased significantly by $8.3 million (21.01%) in 1Q24 compared to 1Q2321 - Worksite Division health and life NAP showed strong growth of 19.27% year-over-year21 Computation of Weighted Average Shares Outstanding 1Q24 weighted average shares outstanding, both basic and diluted, decreased from 1Q23, primarily due to share repurchases, indicating a market share reduction Weighted Average Shares Outstanding (Shares in thousands) | Metric | 1Q23 | 1Q24 | YoY Change | | :----------------------------------- | :--------- | :--------- | :--------- | | Weighted average basic shares outstanding | 114,544.9 | 108,963.9 | -4.87% | | Weighted average diluted shares outstanding | 114,544.9 | 110,844.9 | -3.19% | | Shares repurchased | (255.7) | (618.6) | +141.96% | | Shares outstanding, end of period | 114,905.2 | 108,568.6 | -5.51% | - Shares repurchased increased significantly from (255.7) thousand in 1Q23 to (618.6) thousand in 1Q2423 - The weighted average basic shares outstanding decreased by 4.87% year-over-year23 Annuities - Account Value Rollforwards 1Q24 total annuity account values increased, driven by higher new business issuances and interest credited, despite increased surrenders and withdrawals Annuities - Account Value Rollforwards (Dollars in millions) | Metric | 1Q23 | 1Q24 | YoY Change | | :----------------------------------- | :--------- | :--------- | :--------- | | Total annuities balance, beginning of period | $11,153.5 | $11,635.6 | +4.32% | | Issuances (funds collected from new business) | $368.6 | $390.5 | +5.94% | | Surrenders and withdrawals | $(221.5) | $(285.0) | +28.67% | | Benefit payments | $(86.9) | $(104.6) | +20.37% | | Interest credited | $17.4 | $80.3 | +361.49% | | Total annuities balance, end of period | $11,233.6 | $11,723.3 | +4.36% | - Interest credited to total annuities saw a substantial increase of 361.49% from 1Q23 to 1Q2426 - Surrenders and withdrawals for total annuities increased by 28.67% year-over-year26 Consolidated Statutory Information of U.S. Based Insurance Subsidiaries 1Q24 U.S. insurance subsidiaries' statutory data shows declining net gain from operations and net income, decreased capital and surplus, despite a slight increase in risk-based capital ratio Consolidated Statutory Information Highlights (Dollars in millions) | Metric | 1Q23 | 1Q24 | YoY Change | | :----------------------------------- | :----- | :----- | :--------- | | Net gain from operations before interest expense and federal income taxes | $58.3 | $40.3 | -30.87% | | Net gain (loss) from operations before net realized capital gains (losses) | $39.1 | $(4.0) | N/A | | Net income (loss) | $37.8 | $(8.2) | N/A | | Capital and surplus | $1,831.3 | $1,487.3 | -18.89% | | Risk-based capital ratio | 380% | 391% | +11 pp | - Net income (loss) shifted from a gain of $37.8 million in 1Q23 to a loss of $8.2 million in 1Q2429 - Capital and surplus decreased by $344.0 million (18.89%) year-over-year29 Investment Income Analysis Investment Income Not Allocated to Product Lines (Summary) 1Q24 unallocated investment income decreased from 1Q23, primarily due to increased equity returns credited to policyholders and higher alternative investment losses, partially offset by stable FHLB/FABN net spread income Investment Income Not Allocated to Product Lines (Dollars in millions) | Metric | 1Q23 | 1Q24 | YoY Change | | :----------------------------------- | :----- | :----- | :--------- | | Investment income not allocated to product lines | $15.5 | $12.3 | -20.65% | | Equity returns credited to policyholder account balances | $(18.6) | $(139.7) | +651.08% | | Net spread income on FHLB program | $10.1 | $10.3 | +1.98% | | Net spread income on FABN program | $6.2 | $7.3 | +17.74% | | Excess alternative investment income (loss) | $(17.2) | $(31.4) | +82.56% | - Equity returns credited to policyholder account balances increased substantially from $(18.6) million in 1Q23 to $(139.7) million in 1Q2432 - Excess alternative investment income (loss) worsened from $(17.2) million in 1Q23 to $(31.4) million in 1Q2434 Investment Income Not Allocated to Product Lines (Detailed Reconciliation) Detailed Reconciliation of Investment Income Not Allocated to Product Lines (Dollars in millions) | Metric | 1Q23 | 1Q24 | YoY Change | | :----------------------------------- | :----- | :----- | :--------- | | Adjusted net investment income | $296.2 | $307.3 | +3.75% | | Total investment income allocated to product lines | $(235.7) | $(245.3) | +4.07% | | Equity returns credited to policyholders (Annuity) | $(16.5) | $(128.6) | +679.39% | | Interest expense on investment borrowings from FHLB program | $(21.7) | $(31.4) | +44.70% | | Investment income not allocated to product lines | $15.5 | $12.3 | -20.65% | - Equity returns credited to annuity policyholders increased significantly from $(16.5) million in 1Q23 to $(128.6) million in 1Q2441 - Interest expense on investment borrowings from the FHLB program increased by 44.70% year-over-year41 Investment Income Allocated to Product Lines 1Q24 total investment income allocated to product lines increased, driven by growth across annuity, health, and life categories, with a slight improvement in average yield on allocated investments Investment Income Allocated to Product Lines (Dollars in millions) | Metric | 1Q23 | 1Q24 | YoY Change | | :----------------------------------- | :----- | :----- | :--------- | | Total allocated investment income | $235.7 | $245.3 | +4.07% | | Investment income allocated to annuities | $125.4 | $134.5 | +7.26% | | Investment income allocated to health products | $74.0 | $74.3 | +0.41% | | Investment income allocated to life products | $36.3 | $36.5 | +0.55% | | Total average yield on allocated investments | 4.62% | 4.70% | +0.08 pp | - Investment income allocated to annuities increased by $9.1 million (7.26%) year-over-year39 - The total average yield on allocated investments slightly increased by 0.08 percentage points39 Other Investment Data 1Q24 other investment data shows increased average book value of invested assets and cash, and a higher book yield, despite significant alternative investment losses and a slight decrease in the new money rate Other Investment Data (Dollars in millions) | Metric | 1Q23 | 1Q24 | YoY Change | | :----------------------------------- | :--------- | :--------- | :--------- | | Average book value of invested assets and cash | $26,801.8 | $27,897.0 | +4.16% | | Net investment income from general account investments | $292.2 | $301.9 | +3.32% | | New money rate | 6.34% | 6.17% | -0.17 pp | | Book yield | 4.56% | 4.64% | +0.08 pp | | Earned yield | 4.22% | 4.06% | -0.16 pp | | Alternative investment income (loss) | $(9.4) | $(24.3) | +158.51% | - Average book value of invested assets and cash increased by $1,095.2 million (4.16%) year-over-year42 - Alternative investment income (loss) worsened significantly from $(9.4) million in 1Q23 to $(24.3) million in 1Q2442 Significant Items 4Q23 Significant Items 4Q23 significant items, mainly a net unfavorable actuarial assumption review impact, reduced net operating income by $26.4 million, resulting in an adjusted net operating income of $107.5 million 4Q23 Significant Items Impact (Dollars in millions, except per share amounts) | Metric | Actual Results | Significant Items | Excluding Significant Items | | :----------------------------------- | :------------- | :---------------- | :-------------------------- | | Total insurance product margin | $274.6 | $(33.9) | $240.7 | | Operating earnings before taxes | $172.1 | $(33.9) | $138.2 | | Net operating income | $133.9 | $(26.4) | $107.5 | | Net operating income per diluted share | $1.18 | $(0.23) | $0.95 | - The significant items in 4Q23 were comprised of a $33.9 million net unfavorable impact arising from the comprehensive annual actuarial assumption and model review45 3Q23 Significant Items 3Q23 significant items, primarily legal recoveries net of expenses and increased legal accruals, reduced net operating income by $16.9 million, leading to an adjusted net operating income of $84.4 million 3Q23 Significant Items Impact (Dollars in millions, except per share amounts) | Metric | Actual Results | Significant Items | Excluding Significant Items | | :----------------------------------- | :------------- | :---------------- | :-------------------------- | | Total insurance product margin | $240.0 | — | $240.0 | | Operating earnings before taxes | $129.8 | $(21.7) | $108.1 | | Net operating income | $101.3 | $(16.9) | $84.4 | | Net operating income per diluted share | $0.88 | $(0.14) | $0.74 | - The significant items in 3Q23 were comprised of $21.7 million of legal recoveries, net of expenses and increased legal accruals47 4Q22 Significant Items 4Q22 significant items, mainly a net favorable actuarial assumption review, had a minor net unfavorable impact of $0.5 million on net operating income, resulting in an adjusted net operating income of $82.4 million 4Q22 Significant Items Impact (Dollars in millions, except per share amounts) | Metric | Actual Results | Significant Items | Excluding Significant Items | | :----------------------------------- | :------------- | :---------------- | :-------------------------- | | Total insurance product margin | $234.5 | $(0.7) | $233.8 | | Operating earnings before taxes | $107.0 | $(0.7) | $106.3 | | Net operating income | $82.9 | $(0.5) | $82.4 | | Net operating income per diluted share | $0.71 | — | $0.71 | - The significant items in 4Q22 were comprised of a $0.7 million net favorable impact arising from the comprehensive annual actuarial assumption and model review51 2Q22 Significant Items 2Q22 significant items, primarily an experience refund of $22.5 million from a reinsurance agreement, reduced net operating income by $17.4 million, leading to an adjusted net operating income of $117.7 million 2Q22 Significant Items Impact (Dollars in millions, except per share amounts) | Metric | Actual Results | Significant Items | Excluding Significant Items | | :----------------------------------- | :------------- | :---------------- | :-------------------------- | | Total insurance product margin | $255.7 | — | $255.7 | | Operating earnings before taxes | $174.2 | $(22.5) | $151.7 | | Net operating income | $135.1 | $(17.4) | $117.7 | | Net operating income per diluted share | $1.15 | $(0.15) | $1.00 | - The significant items in 2Q22 were comprised of an experience refund of $22.5 million related to a reinsurance agreement53 Notes - Book value per common share, excluding accumulated other comprehensive income (loss), is a non-GAAP measure used to remove volatility from changes in unrealized appreciation/depreciation of investments57 - Insurance margin is a management measure of profitability for annuity, health, and life product lines, calculated as insurance policy income plus allocated investment income, less various expenses including benefits, interest, commissions, advertising, and amortization of acquisition costs57 - Net operating income is a non-GAAP financial measure that excludes specific non-operating items (e.g., realized investment gains/losses, changes in market value of investments, fair value changes of embedded derivatives) to provide a clearer evaluation of the company's underlying financial performance57 - Investment income is allocated to product lines based on the book yield of investments backing the block of business, applied to the average net insurance liabilities for that block57 - The new money rate refers to the rate for investments purchased during the period to support insurance products and capital, excluding investments from specific programs (FHLB, FABN) and variable interest entities57