Back to top

Analyst Blog

CNO Financial Group Inc. (CNO - Analyst Report) reported second-quarter 2013 operating earnings of 30 cents per share, surpassing the Zacks Consensus Estimate of 26 cents. The result also surpassed 20 cents earned in the year-ago quarter. Adjusted operating income in the quarter was $67.7 million, up 24.9% from $54.2 million in the second quarter of 2012.

CNO Financial reported net income of $77.1 million or 34 cents per share. The result includes net realized investment gains of $1.8 million, changes in fair value of embedded derivative liabilities of $12.1 million, loss on extinguishment of debt of $6.8 million, equity in earnings of certain non-strategic investments and earnings attributable to non-controlling interests of ($2.7 million), and valuation allowance for deferred tax assets of $5 million in the reported quarter. The reported net income compared favorably with net income of $65.7 million or 24 cents per share in the year-ago quarter.

CNO Financial’s revenues inched up 1.6% to $1.08 billion from $1.07 billion in the prior-year quarter. Total revenue also surpassed the Zacks Consensus Estimate of $1.06 billion. Total new annualized premium increased 5% year over year to $102.3 million. Total benefits and expenses increased 0.7% year over year to $966.8 million.

Segment Update

Pre-tax operating earnings in the Bankers Life segment increased 3.9% year over year to $79.1 million in the reported quarter due to higher premiums collected and stable benefit ratios and interest rate spreads.

Washington National’s pre-tax operating earnings were $31.8 million in the quarter, declining 6.2% from the year-ago quarter.

Pre-tax operating earnings of Colonial Penn inched up to $1.2 million from $0.6 million in the comparable quarter last year due to higher earnings from in-force business. Management expects a pre-tax loss of $5–$10 million in this segment in 2013.

Other CNO Business reported pre-tax operating income of $2.6 million in the quarter, against $1.9 million in the year-ago quarter. The guidance for this segment’s 2013 pre-tax income stands at $5–$20 million.

Corporate Operations, which includes investment advisory subsidiary and corporate expenses, bounced back to a pre-tax income of $2.4 million from pre-tax loss of $9.1 million in the year-ago quarter, based on improved investment income and reduced expenses.

Financial Update

During the second quarter of 2013, the consolidated statutory risk-based capital ratio of CNO Financial’s insurance subsidiaries increased 100 basis points to 376%, driven by statutory earnings of $102.1 million and dividend of $57.5 million paid to the holding company during the quarter.

In addition, unrestricted cash and investments held by CNO Financial’s holding company decreased to $230 million as of Jun 30, 2013 from $294 million as of Dec 31, 2013 due to tender offers and debt repayment.

As of Jun 30, 2013, CNO Financial’s debt-to-total capital ratio, excluding accumulated other comprehensive income (loss), declined 180 basis points over 2012-end to 18.9% due to the company’s recapitalization plan. Book value per common share, excluding accumulated other comprehensive income (loss), increased to $17.01 as of Jun 30, 2013 from $16.21 as of Dec 31, 2012.

As of Jun 30, 2013, CNO Financial had total assets worth $33.8 billion and shareholder equity stood at $4.6 billion.

Securities Repurchase Update

CNO Financial spent $50 million to repurchase 4.4 million shares in the reported quarter. Moreover, the company spent $9.4 million to repurchase convertible debentures worth $4.5 million during the quarter. The company expects to spend $250–$300 million on the repurchase of securities in 2013.

Dividend Update

CNO Financial spent $6.6 million on dividend payment in the reported quarter.

Ratings Update

On Jul 24, 2013, Standard and Poor’s increased CNO Financial’s issuer credit ratings and debt ratings to “BB” from “BB-” with a stable outlook.

Zacks Rank

CNO Financial carries a Zacks Rank #3 (Hold). Other multi-line insurers worth considering are AXA Group (AXAHY), Horace Mann Educators Corp. (HMN - Snapshot Report) and Enstar Group Limited (ESGR - Snapshot Report). All these companies carry a Zacks Rank #1 (Strong Buy).

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
RPC INC RES 24.91 +8.35%
LITHIA MOTO… LAD 94.59 +4.60%
DELTA AIR L… DAL 39.15 +3.90%
FLAMEL TECH… FLML 14.51 +3.50%
SOUTHWEST A… LUV 28.87 +2.92%