CNO Financial Group, Inc. (CNO) is a leading insurance and financial services company that has demonstrated its ability to adapt and thrive in an ever-changing market environment. With a strong focus on serving the retirement and healthcare needs of middle-income Americans, CNO has established itself as a diversified and resilient industry player.
Business Overview CNO Financial Group, Inc. (CNO) is a holding company for a group of insurance companies that develop, market and administer health insurance, annuity, individual life insurance and other insurance and financial services products. The company was originally organized in 1979 and commenced operations in 1982 under the name Conseco, Inc. (the "Predecessor").
In 2003, the Predecessor underwent a bankruptcy reorganization and CNO became the successor company. As part of the reorganization, CNO focused on strengthening and fortifying its balance sheet. This included reinsuring its long-term care insurance business in 2018, which helped improve the company's financial position and credit ratings.
Around 2020, CNO shifted its focus to restarting its sales engine. The company completed a strategic transformation of its business units, realigning its operating model to changing consumer behaviors. This resulted in the creation of the Consumer Division and Worksite Division, which have driven 10 consecutive quarters of sales growth for the company.
Over the years, CNO has faced various challenges, including regulatory examinations and fines related to sales and underwriting practices, as well as legal proceedings. The company has worked to navigate these issues, implementing enhanced compliance and risk management procedures. CNO has also dealt with the impact of economic conditions and market volatility on its investment portfolio, requiring periodic adjustments to assumptions and reserves.
Despite these challenges, CNO has demonstrated resilience, leveraging its diversified product portfolio and distribution channels to serve the middle-income pre-retiree and retired American market. The company's focus on strengthening its financial position, streamlining operations, and driving sales growth has positioned it for continued success in the years ahead.
CNO operates through three primary insurance product lines - annuity, health, and life - as well as an investment and fee income segment. The company's operations are divided into two main divisions: the Consumer Division, which serves individual consumers, and the Worksite Division, which focuses on the sale of voluntary benefit life and health insurance products in the workplace. This diversified approach has allowed CNO to cater to the evolving needs of its target demographic, leveraging both its established agent force and its growing direct-to-consumer capabilities.
Financials In 2024, CNO reported total assets of $37.9 billion and shareholders' equity of $2.5 billion, which included an accumulated other comprehensive loss of $1.4 billion. The company generated revenues of $4.4 billion and net income of $404 million for the full year.
Financial Performance and Ratios Over the past three years, CNO has demonstrated consistent financial performance, with net income of $631 million in 2022, $277 million in 2023, and $404 million in 2024. The company's operating return on equity (ROE), excluding significant items, improved by 280 basis points in 2024, reaching an estimated run-rate of 10% by the end of the year.
CNO's debt-to-total capitalization ratio, excluding accumulated other comprehensive income (AOCI), was 32.1% as of December 31, 2024. Adjusting for the expected repayment of the 2025 Notes, this ratio would have been 25.6%, well within the company's target range of 25% to 28%.
The company's consolidated risk-based capital (RBC) ratio, a key measure of financial strength, stood at 383% as of the end of 2024, well above the minimum requirement and the company's internal target of 375%.
For the most recent quarter, CNO reported revenue of $1.1 billion and net income of $166 million.
Liquidity CNO maintains a strong liquidity position, which is crucial for meeting its financial obligations and supporting its ongoing operations. The company's liquidity is supported by its diverse revenue streams, investment portfolio, and access to capital markets. In 2024, CNO exceeded its guidance for excess cash flow to the holding company, generating $284 million, which was above the high end of the previous guidance.
Operational Highlights CNO's strong sales momentum continued in 2024, with the company reporting its tenth consecutive quarter of sales growth. Both the Consumer and Worksite divisions set production records, with total new annualized premium (NAP) increasing by 7% across the enterprise.
The Consumer Division delivered an outstanding performance, with a 5% increase in total NAP for the full year. This was driven by strong results in health, Medicare Supplement, and long-term care products, offsetting a decline in life insurance sales due to the company's disciplined approach to direct-to-consumer television advertising during an election year.
The Worksite Division also had a record year, with a 16% increase in full-year insurance sales and a 23% jump in fourth-quarter insurance sales, representing the 11th consecutive quarter of growth. This growth was fueled by the success of new insurance products, geographic expansion initiatives, and the acquisition of new group clients.
Insurance Product Segments CNO Financial Group operates through three main insurance product line segments: annuity, health, and life insurance. These segments are aligned based on their common characteristics, comparability of profit margins, and how the company's chief operating decision maker assesses the performance of the business.
Annuity Segment: In 2024, annuity premium collections were $1.79 billion, or 41% of the company's total premiums collected. Fixed indexed annuities were the largest annuity product line, accounting for $1.54 billion, or 35% of total premiums. Fixed interest annuities accounted for $239 million, or 5% of total premiums. The annuity segment generated an insurance product margin of $274 million in 2024.
Health Segment: In 2024, health premiums were $1.63 billion, or 37% of total premiums collected. Supplemental health products accounted for $726 million, or 17% of total premiums. Medicare supplement policies generated $626 million, or 14% of total premiums. Long-term care insurance premiums were $276 million, or 6% of the total. The health segment reported an insurance product margin of $517 million in 2024.
Life Segment: In 2024, life insurance premiums were $961 million, or 22% of total premiums collected. Interest-sensitive life products accounted for $244 million, or 6% of total premiums. Traditional life products generated $716 million, or 16% of total premiums. The life segment reported an insurance product margin of $249 million in 2024.
Overall, CNO Financial's insurance product margins totaled $1.04 billion in 2024, up from $959 million in 2023 and $937 million in 2022, reflecting growth and improved profitability across the company's annuity, health, and life insurance product lines.
Guidance and Outlook For 2025, CNO expects operating earnings per share to be in the range of $3.70 to $3.90, excluding any significant items. The company also expects its expense ratio to be between 19.0% and 19.4%, with a quarterly trend similar to 2024, starting at the higher end in the first quarter and then improving throughout the year.
CNO is investing in a three-year project to modernize certain elements of its technology, which is expected to cost approximately $170 million, including $60 million in 2025. This initiative is aimed at enhancing the company's technology stack, leveraging AI and cloud solutions, and positioning CNO for long-term growth.
Despite this investment, CNO expects to improve its operating return on equity by 150 basis points over the next three years, including a 50-basis-point improvement in 2025. The company anticipates generating an operating return on equity of about 10.5% in 2025.
CNO also provided guidance for excess cash flow to the holding company, projecting between $200 million and $250 million for 2025.
Risks and Challenges As with any insurance and financial services company, CNO faces a range of risks and challenges that could impact its performance. These include economic conditions, market volatility, interest rate fluctuations, regulatory changes, and competition from other insurance providers and financial institutions.
The company's exposure to long-term care insurance, though reduced in recent years, still presents some risk, as claims experience and morbidity assumptions can be volatile. Additionally, the success of CNO's technology modernization initiative will be crucial in ensuring the company's ability to adapt to evolving consumer and agent preferences.
Conclusion CNO Financial Group has demonstrated its ability to navigate the complex and ever-changing insurance and financial services landscape. With a diversified product portfolio, a focus on the retirement and healthcare needs of middle-income Americans, and a commitment to investing in its future, the company appears well-positioned to continue its growth and profitability. While risks and challenges remain, CNO's strong financial position, experienced management team, and strategic initiatives suggest a promising outlook for the company and its shareholders.