Published on July 26, 2012
2Q12Financial and operating results for the period ended June 30, 2012July 26, 2012Unless otherwise specified, comparisons in this presentation are between 2Q12 and 2Q11.
Forward-Looking StatementsCertain statements made in this presentation should be consideredforward-looking statements as defined in the Private Securities LitigationReform Act of 1995. These include statements about future results ofoperations and capital plans. We caution investors that these forward-looking statements are not guarantees of future performance, and actualresults may differ materially. Investors should consider the importantrisks and uncertainties that may cause actual results to differ, includingthose included in our press release issued on July 25, 2012, our QuarterlyReports on Form 10-Q, our 2011 Annual Report on Form 10-K and otherfilings we make with the Securities and E hfili k ith th S iti d Exchange CCommission. W i i Weassume no obligation to update this presentation, which speaks as oftoday’s date.CNO Financial Group 2
Non-GAAP MeasuresThis presentation contains the following financial measures that differ from thecomparable measures under Generally Accepted Accounting Principles (GAAP):operating earnings measures; book value, excluding accumulated other comprehensive valueincome (loss) per share; operating return measures; earnings before net realizedinvestment gains (losses) and corporate interest and taxes; and debt to capital ratios,excluding accumulated other comprehensive income (loss). Reconciliations betweenthose non GAAP measures and the comparable GAAP measures are included in the non-GAAPAppendix, or on the page such measure is presented.While management believes these measures are useful to enhance understanding andcomparability of our financial results, these non-GAAP measures should not beconsidered substitutes for the most directly comparable GAAP measures.Additional information concerning non-GAAP measures is included in our periodic filingswith the Securities and Exchange Commission that are available in the “Investors – SECFilingsFilings” section of CNO s website, www CNOinc com CNO’s website www.CNOinc.com.CNO Financial Group 3
Adoption of New Accounting Standard p gEffective January 1, 2012, we adopted ASU 2010-26 which modified thedefinition of the types of acquisition costs that can be deferred byinsurance companies. We elected to adopt the new guidance on aretrospective basis. Accordingly, all prior periods presented have beenretrospectively adjusted. The new guidance impacts the timing of therecognition of profits on our business, but has no impact on cash flows,statutory financial results or the ultimate profitability of the business.CNO Financial Group 4
CNO Financial Group 5
Summary CNO Our businesses continue to perform well – Operating earnings up 22% p g g p – Sales growth of 6% over 2Q11 Continue to generate and proactively deploy significant amounts of excess capital – Strong statutory earnings – Increased share buyback program – Initiated common stock dividend – RBC* and Debt to Capital** ratios continue to improve Continued emphasis on profitable organic growth* Risk-Based Capital (“RBC”) requirements provide a tool for insurance regulators to determine the levels of statutory capital and surplus an insurermust maintain in relation to its insurance and investment risks. The RBC ratio is the ratio of the statutory consolidated adjusted capital of ourinsurance subsidiaries to RBC.** Debt to total capital ratio, excluding accumulated other comprehensive income (loss), a non-GAAP measure.CNO Financial Group 6
Operating EPS CNO Excluding Si ifi E l di Significant Items* (Diluted) I * (Dil d) Earnings Excluding Significant Items* 2Q12 Earnings Drivers: $0.19 $0 19 Business growth and retention 2Q11 $0.15 In-force margin improvement Proactive capital deployment Weighted average diluted shares (in millions): 308.0 293.5 Operating EPS**: $0.15 $0.20 Net income per diluted share: $0.16 $0.24 * A non-GAAP measure. See the Appendix for a reconciliation to the corresponding GAAP measure. ** Operating earnings per share exclude loss on extinguishment of debt, net realized investment gains (losses), fair value changes due to fluctuations in the interest rates used to discount embedded derivative liabilities related to our fixed index annuities and valuation allowance related to deferred tax assets. See Appendix for a reconciliation to the corresponding GAAP measure.CNO Financial Group 7
Operating ROE CNO ($ millions) Trailing 4 q g quarters earnings up 6% g p Operating ROE*, Trailing 4 Quarters ROE , Average common shareholders’ equity up 10% 2Q11 3Q11 4Q11 2Q12 1Q12 Levers to improve ROE 6.3% 6.0% 6.1% 5.8% 6.0% – Layering o new bus ess with 12+% a e a , aye g on e business % after-tax, unlevered return – Effectively deploying excess capital – Improving OCB – Continuing to improve efficiencies Average common shareholders’ equity, excluding AOCI and $2,688.1 $2,761.5 $2,828.0 $2,895.6 $2,968.0 net operating loss carryforwards, trailing 4 quarters: *Operating return excludes loss on extinguishment of debt, net realized investment g p g g gains ((losses), fair value changes due to fluctuations in the interest rates used to discount ) g embedded derivative liabilities related to our fixed index annuities and change in valuation allowance related to deferred tax assets. Equity excludes accumulated other comprehensive income (loss) and the value of net operating loss carryforwards. See Appendix for a reconciliation to the corresponding GAAP measure.CNO Financial Group 8
Growth in the CNO Franchise($ millions) CNO Average liabilities on core business segments are increasing, while OCB is shrinking $16,514.1 $16,106.8 $15,481.7 $711.7 $711 7 $704.0 $698.0 $2,624.0 $2,637.6 $2,676.8 $12,765.2 $13,178.4 $12,106.9 $5,511.5 $5,286.1 $5,058.5 2010 2011 2Q12CNO Financial Group 9
Free Cash Flow Building CNO Voluntary debt prepayments and RBC build now complete Continued strong statutory performance results in guidance increases to insurance company dividends and share buybacks Confidence in free cash flow evidenced by initiation of common stock dividend2011 Capital Generation* $500mm AllocationRetained in Insurance Subsidiaries (Growth & RBC) $155mmHolding Company Debt Reduction $145mmHolding Company Interest Expense & Costs $90mmStock Repurchase $70mmHolding Company Investment Portfolio / Liquidity Build $40mm * Defined as Statutory income before taxes, dividends, surplus note interest income, and administrative payments CNO Financial Group 10 made to the holding company for asset management and administrative services.
2Q12 Recap CNOInvesting in our growthContinuing to generate and deploy significant excess capital pIncreased share repurchase program and initiated dividend programProfitability, financial strength and credit profile further improvingCNO Financial Group 11
2Q12 Core Business Review Continued to improve performance across all core segments Gains in agent retention and productivity led to an increase in life, Med supp, and LTC sales Continued stability in LTC line Manager Trainee Program fully operational; continue to hire and recruit 2012 class of trainees PMA sales benefited from increased agent productivity and an improvement in worksite WNIC Independent experienced growth through increased wholesaling support and strong recruiting Increased investment in marketing and advertising and improved productivity driving sales growthCNO Financial Group 12
2Q12 Sales and Distribution Results Bankers Life ($ millions) Quarterly NAP* Agent force grew 9% driven by increased 4Q11 agent retention $69.8 2Q11 3Q11 2Q12 Distribution and market focus allow for shift $60.1 $60.8 1Q12 $58.8 $59.5 in product mix – Overall sales down 1% – Annuity sales down 35% as a result of the low interest rate environment and other product adjustments – Sales excluding annuities up 11% • Life sales up 12% • Med supp sales up 11% • Short term care (STC) sales up 10% – Introduced new critical illness product in 1Q; now available in 35 states CNO Financial Group *MA/PDP sales are excluded from NAP in all periods. 13
Long Term Care Bankers Life Proactive management of risk and profitability resulting in continued stability in our LTC business… Bankers utilizes exclusive distribution with a focus on middle income 65+ target market; lower risk profile – no group business Since 2006, have implemented 4 rounds of rate increases, covering approximately 50% of all i f f ll inforce policies li i As of 6/30/12 we have received $31.8 million or +90% of expected approvals for latest round LTC (LTC and HHC) and STC Sales Mix Reduced risk profile of LTC block p Less than 5% of in force policies contain lifetime 48% 52% benefit options 64% 59% 71% 67% 81% Less than 1% of total LTC sales contain lifetime benefit options +50% of current new sales are STC policies 48% 52% 36% 41% 29% 33% 19% True LTC sales representing 6% of total NAP for Bankers YTD 2012 2006 2007 2008 2009 2010 2011 2012 YTD STC (Short Term Care) LTC (Long Term Care and Home Health Care) CNO Financial Group 14
2Q12 Sales and Distribution R Di t ib ti Results lt Washington National ($ millions) Quarterly Core NAP* Core* product sales up 18% 4Q11 2Q12 $22.0 3Q11 1Q12 2Q11 $20.7 – Voluntary worksite sales up 23% $18.7 $19.5 $19.6 Investment in life sales continues to gain traction New producing IMOs up 24% Average PMA sales per agent has grown 14%, a key measure of agent productivity CNO Financial Group *NAP for core products includes Life and Supplemental Health sales. 15
2Q12 Sales and Colonial Penn Distribution R Di t ib ti Results lt Quarterly NAP 1Q12 Sales growth continues, NAP up $17.5 2Q12 22% 2Q11 3Q11 $15.6 4Q11 $12.8 $12.7 $12.3 Increased investments in marketing and advertising driving sales growth Results reflect increase in lead levels and productivity CNO Financial Group 16
2012 OutlookStrong start with Sales Up In All 3 Core Segments and Positioned Well To Serve Our Target Market Continued investment in branch expansion and management development Introduction of new critical illness product Expect strong sales of life insurance to continue Expect continued headwinds in annuity sales while interest rates remain low Expect increased focus and positive momentum in voluntary worksite market to continue PMA state expansion and improved recruiting performance will drive increases in agent force and continued g g growth Continue to invest in lead generation activity Spending on lead based programs to slow due to presidential election On track for new product launch in 2H2012CNO Financial Group 17
Net Investment Income($ millions) CNO General Account Investment Income Relatively stable new money rate 2Q12 2Q11 4Q11 1Q12 $351.1 trends and favorable recent earned $342.2 3Q11 $344.2 $345.2 yield progression with li it d i i ld i ith limited impact t $338.2 $ from low interest rate environment Year over year increase in investment income primarily due to growth in assets New M N Money R t Rate: 5.24% 5 24% 5.55% 5 55% 5.29% 5 29% 5.32% 5 32% 5.25% 5 25% Earned Yield: 5.87% 5.67% 5.70% 5.64% 5.76% Earned Yield (excluding floating rate FHLB): 5.97% 5.79% 5.83% 5.78% 5.90%CNO Financial Group 18
Realized Gains/Losses Recognizedthrough N t Ith h Net Income CNO ($ millions) 2Q11 3Q11 4Q11 1Q12 2Q12Gross Gains $29.7 $74.5 $41.9 $33.3 $41.6Gross Losses ( (16.7)) ( (41.0)) ( (10.4)) ( ) (2.5) ( ) (6.2)Losses due to recognition of other-than-temporary impairments recognized in earnings (10.1) (2.9) (8.3) (7.9) (3.5)Amortization adjustments to insurance intangibles 0.7 (4.9) (2.4) (1.1) (3.1) Net investment gains before tax 3.6 25.7 20.8 21.8 28.8Income tax expenseI t (1.2) (1 2) (9.1) (9 1) (7.2) (7 2) (7.7) (7 7) (10.1) (10 1)Net investment gains after tax $2.4 $16.6 $13.6 $14.1 $18.7CNO Financial Group 19
Impairments ($ millions) CNO Low impairments reflect stable portfolio quality and benign $14 U.S. credit environment $12 $10.1 $10 $8.3 $8 3 $7.9 $8 $6 $4 $3.5 $2.9 $2 $0 2Q11 3Q11 4Q11 1Q12 2Q12 IGA Corporates Commercial Mortgage Loans OtherCNO Financial Group 20
Unrealized Gain/Loss* Gain/Loss CNO ($ millions) Unrealized Gain % of Invested Assets $2,500 Unrealized Gain 10% % of Invested Assets 9% $2,000 8% 7% $1,500 6% % 5% $1,000 4% 3% $500 2% 1% $0 0% 2Q11 3Q11 4Q11 1Q12 2Q12CNO Financial Group *Includes debt and equity securities classified as available for sale. Excludes investments from variable interest 21 entities which we consolidate under GAAP.
Asset Allocation and Quality at 6/30/12* 6/30/12 CNO ($ millions) Book Value by Allocation y Investment Quality: Fixed Maturities y Govts/Agency 1.0% Cash & <BBB AAA ABS Other 6.1% 6 1% 5.1% 5 1% 10% 11% AA Municipals 9% 7.3% CMBS 6.0% IG Corporates 54.2% 54 2% HY Corporates BBB A 4.9% 47% 23% Mortgage Loans 6.3% CMOs 9.1% Relatively stable 2011 - 2012 Stable at 90% IG*Excludes investments from variable interest entities which we consolidate under GAAP (the related liabilities are non-recourse to CNO).CNO Financial Group 22
Holding Company Investments at 6/30/12($ millions) g p y CNO Current Investment Performance Current Investment Allocation Performance Summary 2Q12 YTD Cash & Money Market /Cash & Money Market 0.02% 0.07% Fixed Income Equities / $151.7Fixed Income 3.15% 4.83% Alternatives $46.0Equities (2.75%) (2 75%) 9.48% 9 48%Alternatives (5.94%) (6.32%) Portfolio strategy is to maximize returns to better utilize non-life tax benefits while preserving liquidity for contingent capital needs p g q y g pCNO Financial Group 23
2Q12 Investment Summary and O tl k d Outlook CNO Market Observations What we are doing… risk- Remain engaged with credit, but cautious on U S yields at record lows as investors move to a “risk U.S. credit off” posture, bearish on Europe and global growth. This high beta names trend is amplified by decent U.S. corporate See rate and credit markets as largely range- fundamentals, hence continued strong demand for bound for near term but likely brief episodes of credit. volatility Most structured credit markets face ongoing Realize spreads could continue to grind tighter supply/demand imbalance due to limited new issue volume and ongoing pay down proceeds Buyer of select non-agency RMBS, ABS, and high yield Recent pressure on equities and risky assets caused by lack of clarity on Chinese growth, fiscal dynamics in No curve position (ALM match neutral) peripheral Europe. Seeking attractive opportunities to increase our Fed’s extended low rate policy has marginal accreting allocation to A quality commercial mortgages effect on portfolio yield Credit migration trends continue to be moderate Probability for QE3 or some other form of monetary stimulus is likely higher CNO Financial Group 24
2Q12 Consolidated Summary CNO Operating Income* and Book Value Per Share: - Operating income of $54.2 million (20 cents per diluted share) - EBIT growth of 18% after adjusting for significant items - Stable benefit ratios and persistency with elevated mortality in OCB - Book value per share (excluding AOCI)** increased 5% from 4Q11 to $16.67 per share - Trailing 4 quarters ROE at 6.0% Capital and Liquidity: - Consolidated risk-based capital ratio of 369%, debt to capital ratio*** decreased 170 basis points from year-end to 16.6% with holding company liquidity of $197.7 million - Stable capital generation with statutory operating earnings of $97 million and total cash flows sent to the holding company of $102 million - Capital deployment included $39 million of stock repurchase (5.6 million shares), $5 million of dividend payments ($.02 per share) and $22 million of debt reduction*Management believes that an analysis of net income applicable to common stock before: (1) loss on extinguishment of debt, net of income taxes; (2) net realized investment gains orlosses, net of related amortization and income taxes; (3) increases or decreases in the valuation allowance related to deferred tax assets; and (4) fair value changes due to fluctuationsin the interest rates used to discount embedded derivative liabilities related to our fixed index annuities, net of related amortization and income taxes (“Net operating income,” a non-GAAP financial measure) is important to evaluate the financial performance of the company, and is a key measure commonly used in the life insurance industry. Management uses thismeasure to evaluate performance because such items can be affected by events that are unrelated to the company’s underlying fundamentals. The table on page 39 reconciles thenon-GAAP measure to the corresponding GAAP measure.** A non-GAAP measure. R f t the Appendix for a reconciliation t th comparable GAAP measure. GAAP Refer to th A di f ili ti to the bl*** Debt to total capital ratio, excluding accumulated other comprehensive income (loss), a non-GAAP measure. Refer to the Appendix for a reconciliation to the comparable GAAPmeasure. CNO Financial Group 25
Segment EBITExcluding Significant Items* Items CNO ($ millions) $99.8 $84.5 $1.9 CNO’s Earnings Engine $5.1 $33.9 Bankers EBIT driven by favorable $21.8 persistency and insurance policy income Washington National earnings responding to strong sales growth and benefit ratios $68.4 $72.5 Colonial Penn new business investments tapered off in the second quarter t d ff i th d t OCB results impacted by elevated $0.5 $0.6 mortality $(11.3) $(11 3) $(9.1) $(9 1) 2Q11 2Q12 CP BLC WN OCB CorporateCNO Financial Group * A non-GAAP measure. See the Appendix for a reconciliation to the corresponding GAAP measure. 26
ASU 2010-26 Impact by Segment Quarter E d d J Q t Ended June 30 2012 30, CNO ($ in millions) Three months ended June 30, 2012 Restated f R t t d for ASU 2010-26 2010 26 Before DAC New Change Total In-force BusinessBankers Life $ 85.3 $ 76.1 $ 102.6 $ (26.5)Washington National 34.7 33.9 34.2 (0.3)Colonial Penn 7.4 0.6 11.2 (10.6)Other CNO Business 1.7 1.9 1.9 -EBIT from business segments 129.1 112.5 $ 149.9 $ (37.4)Corporate, excluding corporate interest expense (9.1) (9.1)EBIT $ 120.0 $ 103.4 Colonial Penn EBIT guidance: Based on current advertising plan, expect to report approximately break-even results for the remainder of 2012 CNO Financial Group 27
Capital Generation - $500 Million Run-Rate CNO ($ millions) 6-month statutory operating earnings of $183mm and statutory dividends of $103mm Anticipate statutory dividends to the holding company of $200 - $275mm in 2012 2010 2011 YTD 2Q12 $500.8 $154.1 $389.7 $346.7 $95.5 $294.2 $245.8 $209.0 ** $209.0 ** $166.0 $166.0 $79.7 $166.1 $103.0 $103 0 $103.0 $103 0 $128.2 $128.2 $137.7 $137.7 $63.1 $63.1 Statutory Earnings Inflows to Holding Co Statutory Earnings Inflows to Holding Co Statutory Earnings Inflows to Holding Co Power Power Power Fees and Interest to Holding Company Net Dividends to Holding Company * Net Gain from Operations Retained in Insurance Companies CNO Financial Group * Dividends net of capital contributions 28 ** Amount is net of $26mm contribution to life companies accrued in 2011
Holding Company Sources and Uses CNO($ in millions) 2010 2011 YTD 2Q12 $346.7 $294.2 $209.0 $166.0 $166.1 $139.1 $145.5 $25.0 $103.0 $55.0 $137.7 $128.2 $90.5 $90 5 $44.0 $114.1 $63.1 Recurring Sources Dividends Recurring Uses* Scheduled Debt Payments** P t ** CNO Financial Group * Includes corporate expenses and interest payments 29 ** Excludes impact of capital transactions
Free Cash Flow Run-Rate Building($ in millions) CNO 2011 Capital Generation & Free Cash Flow 2012 – Sources Building While $501 Recurring Uses Moderating RBC ratio in excess of management target; of ~ $360 $155 million in 2011 retained capital, over $100 ($155) million used to build RBC ($61) ($29) Holding company leverage below management $256 target; $145 million of 2011 free cash flow used to reduce debt Interest expense declining and “cash flow sweep” on debt lowered $137.7 $139.8 $128.2 $129.6 $129.2 Gross Retained Interest Holdco Free Holding company liquidity of $198 million nearly million, Statutory Capital Expense Expenses Cash Flow (1) $100 million above management target Earnings (net) (1) Cash flow available for capital management and debt reduction Revised statutory dividend and share repurchase guidance accordingly Retained capital for Recurring uses of RBC build capital CNO Financial Group 30
Actively Managing Interest Rate Risk CNO Asset Liability Management Concentrations ALM Strategies Product Statutory Asset Liability Duration – Tight duration management (less than half a year Liabilities Duration Duration* Duration Duration* Variance tolerances across all product portfolios)Fixed Annuities $4.6b 5.26 5.25 0.01 – Diversification benefits with non-interest sensitive productsFixed Index Annuities $3.1b 6.91 7.00 (0.09) – Stable liability profile (smaller policies andLong Term Care $4.5b 13.72 13.41 0.31 exclusive distribution)Universal Life $2.9b $2 9b 8.25 8 25 8.29 8 29 (0.04) (0 04) – Emphasis remains on matching asset and liability durations (i.e. not extending asset durations toTraditional Life $1.7b 9.85 10.05 (0.20) increase spread)Supplemental Health $2.5b 10.22 9.81 0.41 7.00% 7 00% 6.00% Investment Strategies 5.00% – Successfully defending earned yields – a product 4.00% of ALM and investment strategies 3.00% – New money yields exceed management 2.00% expectations 1.00% – Slowing portfolio turnover to reduce reinvestment pressure on yields 0.00% 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q – Ratio of C1 capital to invested assets remains 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 stable, balancing risk and returns 10 Year Tresaury New Money Rate Portfolio Rate (Book Yield) CNO Financial Group * Duration represented in years 31
Interest Rate Stress-Test Results CNO Stress Test (Low-for-Long Scenario): New money investment rates consistent with a 10 year treasury at 1.75%, remaining flat for 5 years Net Income Impact Earnings impact (Net Investment Income) – Net investment income impact of 2.5 - 3.5% reduction to growth over the 3 year planning horizon 2013 - $5 to -$10 million $10 – Low For Long scenario suggest a after-tax income charge related to Low-For-Long after tax actuarial analysis over a three year period of 2014 - $15 to -$20 million – $50-80 million for GAAP – $20-50 million for statutory Reserve Testing Generally Low-for-Long Portfolio Rates Compared – Sustained low interest-rate environment considered in determining to Management Assumptions (1) reserve adequacy – Statutory testing included three severe down scenarios; no reserveIntermediate (year 10) - 25bps strengthening required in 2011 – GAAP testing included various economic scenarios; no lossUltimate (year 30) - 50bps recognition testing related strengthening – 2011 Annual GAAP and Statutory reserve testing confirmed the strong asset-liability matching position(1) Represents the change in our long-term portfolio book yield projections as a result of applying low-for-long new money rate scenarioCNO Financial Group 32
Capital Management – Well Positioned CNO ($ millions) Liquidity Debt to Total Capital Consolidated RBC Ratio* Ratio** 2Q11 2Q12 2Q11 2Q11 20.4% 369% $234.0 2Q12 351% 16.6% 2Q12 $197.7 Well positioned to absorb market volatility and low-for-long rate impact Active capital management critical to achieving ROE expansion Important to continue ratings momentum – “4B’s” remains a near-term goal of CNO 4B s near term Monitor markets for opportunities to lower cost of capital and improve financial flexibility* Risk-Based Capital (“RBC”) requirements provide a tool for insurance regulators to determine the levels of statutory capital and surplus an insurer must maintain in relation to itsinsurance and investment risks. The RBC ratio is the ratio of the statutory consolidated adjusted capital of our insurance subsidiaries to RBC. y j p** Debt to total capital ratio, excluding accumulated other comprehensive income (loss), a non-GAAP measure. Refer to the Appendix for a reconciliation to the comparable GAAPmeasure. CNO Financial Group 33
CNO: Well Positioned in Growing & Underserved Markets The middle-income, pre-retiree and retirement markets are growing as the Baby Boomers age These markets need straightforward products that help address payment of healthcare expenditures, adequacy of retirement, and leaving a legacy for loved ones We are well positioned in all 3 segments to serve these needs Sales of these products convert q p quickly to cash y Gear shift to increased capital deployment Alignment of target market, product mix, distribution, and home office CNO Financial Group 34
Questions and AnswersCNO Financial Group 35
AppendixCNO Financial Group 36
CNO Value Proposition Above average growth potential; expected sales growth of 8-12% annually – Percentage of the population 65 years old and older projected to increase by 50% in Growth twenty years Well – On average, over 10,000 Americans will turn 65 each day through 2030Positioned in Broad product suite tailored to CNO’s target market Market Competitive Exclusive, growing distribution Target market focus, with growth as Baby Boomers turn 65 Advantage Sustainable with barriers to entry 2Q2012 marks the fourteenth consecutive quarter of GAAP net income Profitability 2011 GAAP net operating earnings of $171.5 million, up 26% over 2010 Growth in actively marketed segments Value Drivers Capital 2011 Statutory net operating earnings of $ $363.1 million, up 39% over 2010 Excess capital generation of $200-$275 million annually Generation Diversified product suite focused on protection needs Risk Products P d t Actively managed inforce blockManagement Focus on products with attractive returns and less impacted by capital markets volatility $197.7 million in liquidity at the Holding Company at 6/30/2012, compared to $59.0 Well million at 12/31/2008Capitalized Credit Profile RBC of 369% versus 255% at 12/31/2008 f t Debt to Capital at 16.6% CNO Financial Group 37
2Q12 Significant Item($ millions) CNOThe table below summarizes the financial impact of a significant item on our 2Q12 net operating income. Management believes that identifying theimpact of this item enhances the understanding of our operating results during 2Q12. Three months ended June 30, 2012 Excluding g significant Actual results Significant item item Net Operating Income: Bankers Life $ 76.1 $ (3.6) (1) $ 72.5 Washington National 33.9 - 33.9 Colonial Penn 0.6 - 0.6 Other CNO Business 1.9 - 1.9 EBIT from business segments 112.5 (3.6) 108.9 Corporate Operations, excluding corporate interest expense (9.1) - (9.1) EBIT 103.4 (3.6) 99.8 Corporate interest expense (16.6) - (16.6) Operating earnings before tax 86.8 (3.6) 83.2 Tax expense on operating income 32.6 (1.3) 31.3 Net operating income * $ 54.2 $ (2.3) $ 51.9 Net operating income per diluted share * $ 0.20 $ (0.01) $ 0.19 (1) Pre-tax earnings in the Bankers Life segment included earnings of $3.6 million from the PDP business assumed from Coventry due to premium adjustments. CNO Financial Group * A non-GAAP measure. See pages 40 and 52 for reconciliations to the corresponding GAAP measures. 38
2Q11 Significant Item CNO($ millions) )The table below summarizes the financial impact of a significant item on our 2Q11 net operating income. Management believes that identifying theimpact of this item enhances the understanding of our operating results during 2Q2011. Three months ended June 30, 2011 Excluding Significant significant Actual results item item Net Operating Income: Bankers Life $ 72.1 $ (3.7) (1) $ 68.4 Washington National 21.8 - 21.8 Colonial Penn 0.5 - 0.5 Other CNO Business 5.1 - 5.1 EBIT from business segments 99.5 (3.7) 95.8 Corporate Operations, excluding corporate interest expense p p , g p p ( (11.3) ) - ( (11.3) ) EBIT 88.2 (3.7) 84.5 Corporate interest expense (19.3) - (19.3) Operating earnings before tax 68.9 (3.7) 65.2 Tax expense on operating income 24.4 24 4 (1.3) (1 3) 23.1 23 1 Net operating income * $ 44.5 $ (2.4) $ 42.1 Net operating income per diluted share * $ 0.15 $ - $ 0.15 (1) Pre-tax earnings in the Bankers Life segment included earnings of $3.7 million from the PFFS business assumed from Coventry due to premium adjustments. CNO Financial Group * A non-GAAP measure. See pages 40 and 52 for reconciliations to the corresponding GAAP measures. 39
Quarterly Earnings y g CNO ($ millions) 2Q11 3Q11 4Q11 1Q12 2Q12Bankers Life $ 72.1 $ 79.4 $ 77.2 $ 70.5 $ 76.1Washington National 21.8 21.2 28.8 24.7 33.9Colonial PennC l i lP 0.5 05 (1.3)
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