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Bear of the Day

We have downgraded our recommendation on CNO Financial Group (CNO) to Underperform based on the continuous deterioration in the premium revenue of its Bankers Life segment, coupled with the significant underwriting and pricing risks. The company's third-quarter earnings results were driven by poor top-line performance in most business segments.

The current interest rate environment, which is generating spread compression, will continue to put pressure on the bottom line. We do not expect any significant improvement on that front in the forthcoming quarters as the pricing pressure is expected to persist for awhile.

Our six-month target price of $5.75 equates to 7.9x our earnings estimate for 2011. This price target implies an expected negative total return of 10.9% over that period. This is consistent with our Underperform recommendation on the shares.

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