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Here's Why You Should Retain CNO Financial (CNO) Stock
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Shares of CNO Financial Group, Inc. (CNO - Free Report) have gained 5.9% year to date, outpacing the Zacks categorized Multi Line Insurance industry’s increase of 0.686%. This clearly reflects shareholders’ confidence on the stock. Also, the company’s prudent capital deployment initiatives like share repurchases and dividend payments have supported growth.
During 2016, the company bought back shares worth $203 million and paid dividends of $55 million. In the first quarter of 2017, the company repurchased shares worth $43 million and paid dividends of $14 million. Additionally, in May 2017, CNO Financial raised its dividend by 14% and its board approved an additional $300 million to repurchase the outstanding common stock.
CNO Financial’s Washington National segment has been delivering strong performance over the last few quarters.In the recently reported first quarter, the segment’s total collected premiums grew 5% year over year on higher sales of supplemental health products. CNO Financial also plans to restructure its field leadership and introduce technologically updated products to boost agent productivity in this particular segment.
The company’s liquidity supports investment in agent productivity, geographic expansion, product launches, worksite platform distribution as well as enhancement of operating efficiencies and customer retention. In 2016, it acquired Tennenbaum Capital Partners, which substantially boosted its return on investment. Recently, it also launched guaranteed lifetime income annuity. The company’s regular investments across the enterprise have significantly enhanced its operational efficiency.
The stock appears to be undervalued. CNO Financial’s Price to Cash flow (PCF) ratio of 4.93 is lower than the industry level of 6.69. Another important valuation ratio – Price to Sales (PS) – is 0.86, which compares favorably with the industry average of 1.02.
However, CNO Financial’s over dependence on debt is a major concern as it has been raising borrowing cost and limiting the company’s profitability. For 2016, interest expenses grew 22% year over year , followed by a 50% increase in the first quarter of 2017. Consolidated risk-based capital ratio was estimated at 446% as of Mar 31, 2017, reflecting estimated consolidated statutory operating earnings of $70 million and dividends to the holding company of $128.4 million.
Owing to its small market share, CNO Financial faces tremendous challenges in some product lines, such as life insurance and fixed annuities. Despite holding the ninth position in the list of the top writers in the individual long-term care insurance business, the company has been unable to grow it market share above 3%. This may limit business opportunities for it.
Zacks Rank and Stocks to Consider
CNO Financial presently carries a Zacks Rank #3 (Hold).
Cigna’s earnings beat estimates in three of the last four quarters with an average earnings surprise of 1.35%.
Another multi line insurer, James River Group, delivered positive earnings surprises in all of the the last four quarters with an average positive surprise of 9.47%.
Torchmark surpassed expectations in all of the last four quarters with an average beat of 2.01%.
Zacks' 2017 IPO Watch List
Before looking into the stocks mentioned above, you may want to get a head start on potential tech IPOs that are popping up on Zacks' radar. Imagine being in the first wave of investors to jump on a company with almost unlimited growth potential? This Special Report gives you the current scoop on 5 that may go public at any time.
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Here's Why You Should Retain CNO Financial (CNO) Stock
Shares of CNO Financial Group, Inc. (CNO - Free Report) have gained 5.9% year to date, outpacing the Zacks categorized Multi Line Insurance industry’s increase of 0.686%. This clearly reflects shareholders’ confidence on the stock. Also, the company’s prudent capital deployment initiatives like share repurchases and dividend payments have supported growth.
During 2016, the company bought back shares worth $203 million and paid dividends of $55 million. In the first quarter of 2017, the company repurchased shares worth $43 million and paid dividends of $14 million. Additionally, in May 2017, CNO Financial raised its dividend by 14% and its board approved an additional $300 million to repurchase the outstanding common stock.
CNO Financial’s Washington National segment has been delivering strong performance over the last few quarters.In the recently reported first quarter, the segment’s total collected premiums grew 5% year over year on higher sales of supplemental health products. CNO Financial also plans to restructure its field leadership and introduce technologically updated products to boost agent productivity in this particular segment.
The company’s liquidity supports investment in agent productivity, geographic expansion, product launches, worksite platform distribution as well as enhancement of operating efficiencies and customer retention. In 2016, it acquired Tennenbaum Capital Partners, which substantially boosted its return on investment. Recently, it also launched guaranteed lifetime income annuity. The company’s regular investments across the enterprise have significantly enhanced its operational efficiency.
The stock appears to be undervalued. CNO Financial’s Price to Cash flow (PCF) ratio of 4.93 is lower than the industry level of 6.69. Another important valuation ratio – Price to Sales (PS) – is 0.86, which compares favorably with the industry average of 1.02.
However, CNO Financial’s over dependence on debt is a major concern as it has been raising borrowing cost and limiting the company’s profitability. For 2016, interest expenses grew 22% year over year , followed by a 50% increase in the first quarter of 2017. Consolidated risk-based capital ratio was estimated at 446% as of Mar 31, 2017, reflecting estimated consolidated statutory operating earnings of $70 million and dividends to the holding company of $128.4 million.
Owing to its small market share, CNO Financial faces tremendous challenges in some product lines, such as life insurance and fixed annuities. Despite holding the ninth position in the list of the top writers in the individual long-term care insurance business, the company has been unable to grow it market share above 3%. This may limit business opportunities for it.
Zacks Rank and Stocks to Consider
CNO Financial presently carries a Zacks Rank #3 (Hold).
Some better-ranked multi line insurers are Cigna Corporation (CI - Free Report) , James River Group Holdings, Ltd. (JRVR - Free Report) and Torchmark Corporation . All of the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Cigna’s earnings beat estimates in three of the last four quarters with an average earnings surprise of 1.35%.
Another multi line insurer, James River Group, delivered positive earnings surprises in all of the the last four quarters with an average positive surprise of 9.47%.
Torchmark surpassed expectations in all of the last four quarters with an average beat of 2.01%.
Zacks' 2017 IPO Watch List
Before looking into the stocks mentioned above, you may want to get a head start on potential tech IPOs that are popping up on Zacks' radar. Imagine being in the first wave of investors to jump on a company with almost unlimited growth potential? This Special Report gives you the current scoop on 5 that may go public at any time.
One has driven from 0 to a $68 billion valuation in 8 years. Four others are a little less obvious but already show jaw-dropping growth. Download this IPO Watch List today for free >>