Yesterday, the board of directors of CNO Financial Group Inc. (CNO - Analyst Report) approved a hike of $300 million in the buyback program. The company had an outstanding balance of $60 million in its old program. Thus, the approval takes the total balance in the buyback program to $360 million.
CNO Financial can use the balance in the buyback program to repurchase its outstanding stock, warrants and convertible debentures. The company follows an active capital deployment policy through share buybacks and dividend payments. It projects the total amount spent on share buybacks in 2012 to be near the high end of the $150–$170 million range, as revealed on Sep 28, 2012.
Toward this goal, CNO Financial has already repurchased 12.89 million shares at an average price of $7.72 in the first three quarters of 2012. This corresponds to 5.3% of the outstanding shares at the end of the 2011. Further, between Oct 1, 2012 and Dec 12, 2012, the company repurchased about 7.55 million shares at an average price of $9.32 per share.
CNO Financial also revealed that it is likely to spend $250–$300 million each on share buybacks and dividend payment in 2013. This is higher than the estimated $200–$275 million to be spent on dividend payments in 2012 as well as the 2012 share repurchase projection.
CNO Financial’s strong organic growth and excess capital generation allows it to constantly return capital to shareholders. This is the second increase in the repurchase program this year. The company had announced a $100 million hike in its share repurchase authorization in February as well.
CNO Financial’s dividend policy was initiated in May this year. Thereafter, the company paid its first quarterly dividend of 2 cents per share in June and the second one in September. The third quarterly cash dividend will be paid on Dec 24, 2012, to shareholders of record as of Dec 10, 2012.
CNO Financial carries a Zacks #3 Rank (Hold). We maintain a long-term ‘Neutral’ recommendation on the stock. Peer Prudential Financial, Inc. (PRU - Analyst Report) carries a Zacks #2 Rank (Buy).