CNO Financial Group, Inc.
) resumed its share repurchase activity by deploying $50 million
to repurchase 4.4 million shares during the second quarter of
2013. This translates into an average cost of $11.31 per
Shares bought back comprise 2% of CNO Financial's outstanding
share count of 223.5 million as of Mar 31, 2013. The company also
spent $9.4 million to buy back convertible debentures worth $4.5
million at a premium. This takes the total expenditure on
buybacks in the second quarter of 2013 to $59.4 million.
Apart from the share and debenture repurchase, CNO Financial
also made a principal prepayment of $18.9 million to fulfill the
terms of its senior secured credit agreement. Further, the
company made a scheduled principal payment of $5.7 million toward
its term loan installment. The next scheduled installment payment
of $12.5 million is due on the last day of September this
CNO Financial did not repurchase any shares in the first
quarter of 2013 but spent $125 million to repurchase convertible
debentures. Thus, its total expenditure on securities buyback was
higher than the second quarter. Total capital deployment for
securities buyback in the first half of 2013 amounted to $184.3
Due to the redemption of the debentures at a premium, CNO
Financial will likely record a one-time charge (post-tax) of
about $5 million during the second quarter of 2013. The company
expects to spend another $65.7-$115.7 million on the
repurchase of securities in 2013, taking the total amount to
CNO Financial has enough capital flexibility to finance these
buybacks. The company had cash and cash equivalents of $251.6
million as of Mar 31, 2013. Moreover, the operating cash flow of
CNO Financial has been strong over the years. The company
generated operating cash flow of $114.6 million in the first
quarter of 2013, which is more than enough to cover the capital
deployed in the second quarter.
Further, the timely repayment of the debt obligations and
fulfillment of the terms of the senior secured credit agreement
reflect CNO Financial's strong capital position and should boost
the confidence of creditors. As a result, the company should not
have trouble in obtaining credit in future. Moreover, these
measures go a long way in retaining the confidence of credit
rating agencies and may even result in a rating upgrade in the
Further, we expect the earnings per share of CNO Financial to
increase in the upcoming quarters as share buyback generally
increases the earnings per share due to the decline in the number
of outstanding shares. The Zacks Consensus Estimate for CNO
Financial's second-quarter earnings currently stands at 26 cents
per share, up 31% year over year.
CNO Financial carries a Zacks Rank #2 (Buy). Other multi-line
insurance companies worth considering are
Eastern Insurance Holdings, Inc.
Enstar Group Limited
). All these companies carry a Zacks Rank #1 (Strong Buy).
AXA SA -SP ADR (AXAHY): Get Free Report
CNO FINL GRP (CNO): Free Stock Analysis
EASTERN INSURNC (EIHI): Free Stock Analysis
ENSTAR GROUP LT (ESGR): Free Stock Analysis
To read this article on Zacks.com click here.