CNO Financial Group Inc. ( CNO )
reported second-quarter 2012 operating income of 20 cents per
share, handily beating the Zacks Consensus Estimate of 17 cents as
well as the year-ago earnings of 15 cents. Operating income in the
quarter was $54.2 million, up 22% from $44.5 million in the second
quarter of 2011.
Including net realized investment gains of $18.7 million, $6.9
million in after-tax non-operating charges related to the change in
estimated fair value of embedded derivatives and $0.3 million loss
on extinguishment of debt, CNO Financial reported net income of
$65.7 million or 24 cents per share in the quarter under review.
Results compared favorably with $46.4 million or 16 cents per share
earned in the year-ago quarter.
Net income of the year-ago quarter included net realized
investment gains of $2.3 million and loss on extinguishment of debt
of $0.4 million.
CNO Financial's revenues increased 3.2% to $1.07 billion from
$1.03 billion in the prior-year quarter. Total revenue also
surpassed the Zacks Consensus Estimate of $1.03 billion. Total new
annualized premium increased 6% year over year to $97.4 million.
Total benefits and expenses stayed almost constant year over year
at $960.5 million.
Pre-tax operating earnings in the Bankers
Life segment improved 6% year over year to $76.1
million in the reported quarter. Pre-tax earnings for the reported
and year-ago quarters include $3.6 million and $3.7 of premium
adjustments on assumed reinsurance agreements with Coventry.
Washington National 's pre-tax
operating earnings were $33.9 million in the quarter, surging 56%
from the year-ago quarter.
Pre-tax operating loss of Colonial
Penn accelerated marginally to $0.6 million from $0.5
million in the comparable quarter last year.
Other CNO Business reported pre-tax
operating earnings of $1.9 million in the quarter compared with
$5.1 million in the year-ago quarter.
Moreover, Corporate Operations , which
includes investment advisory subsidiary and corporate expenses,
incurred net expense of $9.1 million in the quarter under review
compared with $11.3 million in the year-ago quarter.
During the reported quarter, the consolidated statutory
risk-based capital ratio of CNO Financial's insurance subsidiaries
increased 9 percentage points sequentially to 369%, driven by
statutory earnings of $97 million.
In addition, unrestricted cash and investments held by CNO
Financial's non-insurance subsidiaries decreased to $197.7 million
as of June 30, 2012 from $171.9 million as of March 31, 2012,
mainly due to $44 million in share repurchases and $22 million of
CNO Financial had $172 million remaining under its existing
share repurchase program, as of June 30, 2012. The company expects
to repurchase shares worth $150-$170 million for the remainder of
As of June 30, 2012, debt-to-total capital ratio, excluding
accumulated other comprehensive income (loss), edged down 1.7% from
2011 end to 16.6% in the reported quarter. Book value per common
share, excluding accumulated other comprehensive income (loss),
increased to $16.67 at the end of the reported period from $15.88
at 2011 end.
As of June 30, 2012, CNO Financial had total assets worth $33.4
billion and shareholders' equity stood at $4.89 billion.
Adoption of New Accounting Standard
CNO Financial adopted a new accounting standard - ASU 2010-26 -
from January 1, 2012. The accounting standard, which is related to
the accounting for deferred acquisition costs, has been adopted on
a retrospective basis.
While it has no impact on cash flows, statutory financial
results or profitability of the company, it impacts the timing of
recognition of certain profits. Consequently, the new guidance led
to a negative impact of $12.1 million and $13.1 million,
respectively, on the net income of the reported quarter and the
year-ago quarter. Additionally, the shareholders' equity at the end
of 2011 reduced $575 million.
Aflac Inc. ( AFL ), a
competitor of CNO Financial, reported second-quarter 2012 operating
earnings per share of $1.61, in line with the Zacks Consensus
Estimate, but modestly surpassing the year-ago quarter's earnings
of $1.55. Operating earnings climbed 3.9% year over year to $755
Torchmark Corp. ( TMK )
reported second-quarter 2012 net operating income of $1.30 per
share, up 19% year over year.
We retain our Neutral recommendation on CNO Financial. The
quantitative Zacks #2 Rank for the company indicates a short-term
AFLAC INC (AFL): Free Stock Analysis Report
CNO FINL GRP (CNO): Free Stock Analysis Report
TORCHMARK CORP (TMK): Free Stock Analysis
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