CNO Financial Group Inc.
) reported third-quarter 2012 adjusted operating earnings of 26
cents per share, substantially surpassing the Zacks Consensus
Estimate of 19 cents. Results were a penny lower from 16 cents
earned in the year-ago quarter. Adjusted operating income
in the quarter was $53.1 million, down 18% from $32.8 million in
the third quarter of 2011.
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Adverse impact of review of actuarial assumptions and an increase
to litigation reserves weighed on the numbers.
Including the charges due to the review of actuarial assumptions
of $27.5 million, net realized investment gains of $4.8 million,
fair value changes in embedded derivative liabilities of $2.0
million, loss on extinguishment of debt of $176.4 million and
decrease in valuation allowance for deferred tax assets of $143
million, the company reported net loss of $5.0 million or 2 cents
per share, comparing unfavorably with net income of $179.5
million or 61 cents.
CNO Financial's revenues increased 10.1% to $1.1 billion from
$0.9 billion in the prior-year quarter. Total revenue also
surpassed the Zacks Consensus Estimate of $1.03 billion. Total
new annualized premium increased 1% year over year to $94.1
million. Total benefits and expenses escalated 34.5% year over
year to $1.3 billion.
Pre-tax operating earnings in the
segment improved 1.5% year over year to $80.6 million in the
reported quarter. The improvement stemmed from higher earnings
from annuity business driven by favorable investment spreads and
higher account values. It was, however, partially offset by
higher benefit ratios in the long-term care block.
's pre-tax operating earnings were $33.9 million in the quarter,
surging 60% from the year-ago quarter. Favorable benefit ratios
in the supplemental health and Medicare supplement blocks fueled
Pre-tax operating loss of
increased to $2.6 million from $1.3 million in the comparable
quarter last year.
Other CNO Business
reported pre-tax operating loss of $53.6 million in the quarter
compared with earnings of $2.6 million in the year-ago quarter.
, which includes investment advisory subsidiary and corporate
expenses, narrowed pre-tax loss to $6.7 million from $27.5
million in the year-ago quarter.
During the reported quarter, the consolidated statutory
risk-based capital ratio of CNO Financial's insurance
subsidiaries decreased 8 percentage points sequentially to 361%,
driven by statutory earnings of $60.3 million.
In addition, unrestricted cash and investments held by CNO
Financial's non-insurance subsidiaries increased to $313.6
million as of September 30, 2012 from $197.7 million as of June
CNO Financial bought back 12.9 million shares for $99.5 million
in the first nine months of 2012 and as of September 30, 2012,
had $130.7 million remaining under its existing share repurchase
program. The company expects to repurchase shares near the high
end of the $150-170 million range.
As of September 30, 2012, debt-to-total capital ratio, excluding
accumulated other comprehensive income (loss), increased 300
basis points over 2011 end to 21.3%. Book value per common share,
excluding accumulated other comprehensive income (loss),
increased to $16.70 as of September 30, 2012 from $15.88 as of
December 31, 2011.
As of September 30, 2012, CNO Financial had total assets worth
$34.0 billion and shareholders' equity stood at $5.3 billion.
), a competitor of CNO Financial, reported third-quarter 2012
operating earnings per share of $1.77, modestly exceeding the
Zacks Consensus Estimate of $1.66 and the year-ago quarter's
earnings of $1.65. A slightly weak yen/dollar exchange rate had
no impact on the operating earnings.
) reported third-quarter 2012 net operating income of $1.29 per
share, up 10.3% year over year. The earnings increase was due to
higher premium revenue as well as increased insurance
underwriting income. Lower share count compared with the year-ago
period, owing to share repurchases, also buoyed the bottom line.
We retain our Outperform recommendation on CNO Financial. The
quantitative Zacks #2 Rank for the company indicates a short-term