CNO Financial Group, Inc. (CNO-PA): A Diversified Insurance Provider Delivering Consistent Growth and Profitability

Published on September 24, 2024 | Ticker: CNO-PA

CNO Financial Group, Inc. (NYSE: CNO-PA) is a leading insurance and financial services company that has demonstrated a strong track record of consistent growth and profitability. With a focus on serving the middle-income market, CNO Financial Group has established a diversified business model that spans across various insurance product lines, including annuity, health, and life insurance.

Financials

In the latest fiscal year, CNO Financial Group reported annual net income of $276.5 million and annual revenue of $4,168.1 million. CNO Financial Group's annual operating cash flow and free cash flow both stood at $582.9 million, showcasing its robust cash generation capabilities.

For the latest quarter, CNO Financial Group continued to deliver impressive financial and operational performance. Net operating income increased by 94% year-over-year to $1.05 per diluted share, driven by improved product margins and investment returns. CNO Financial Group's insurance product margin was up 23% in the quarter, reflecting sustained growth in the business and favorable experience across all three product categories.

Segment Performance

The annuity segment was a standout performer, with fixed indexed annuity margins benefiting from improved portfolio yields and growth in the block. Other annuity margins also saw a boost from reserve releases due to higher mortality on larger closed block policies. The health segment, particularly the long-term care business, reported favorable claims experience, contributing to the overall margin expansion.

CNO Financial Group's investment portfolio also played a key role in the quarter's strong results. The new money rate exceeded 6% for the sixth consecutive quarter, driving a 6% increase in net investment income allocated to products. Investment income not allocated to products was up 60%, further enhancing CNO Financial Group's profitability.

Distribution Model

CNO Financial Group's diversified distribution model, which includes both the Consumer and Worksite Divisions, has been a significant driver of its growth momentum. In the Consumer Division, total new annualized premium (NAP) was up 2%, with strong performance in the health and Medicare product lines. The Worksite Division delivered its second-highest quarter ever for Life and Health NAP, with sales up 18%.

The Worksite Division's success was driven by the continued strength of its insurance offerings, as well as the growth in its fee-based benefit services business. The division's producing agent count was up 25%, reflecting CNO Financial Group's ability to attract and retain talented distribution partners.

Liquidity

CNO Financial Group's capital position remains robust, with a consolidated risk-based capital (RBC) ratio of 394% at the end of the latest quarter. CNO Financial Group's available holding company liquidity stood at $429 million, further strengthening its financial flexibility.

Outlook

Looking ahead, CNO Financial Group has raised its full-year 2024 guidance for operating earnings per share to $3.30 to $3.50, excluding significant items. This guidance reflects the strong performance in the first half of the year, as well as a modest improvement in the outlook for the second half. CNO Financial Group has also increased its guidance for excess cash flow to the holding company, now expected to be in the range of $200 million to $250 million.

CNO Financial Group's management team remains focused on driving further improvements in return on equity (ROE), with a long-term goal of aligning CNO Financial Group's ROE more closely with industry peers. While no specific timeline has been provided, CNO Financial Group has outlined several initiatives underway to enhance ROE, including continued business growth, operational efficiency, and prudent capital management.

Conclusion

CNO Financial Group's diversified product portfolio, strong distribution capabilities, and robust financial position position CNO Financial Group well to capitalize on the growing demand for insurance and financial services in the middle-income market. As CNO Financial Group continues to execute on its strategic priorities, investors can expect to see further improvements in CNO Financial Group's financial performance and shareholder value creation.

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