8-K: CNO Financial Group Reports Strong Fourth Quarter and Full Year 2024 Results, Poised for Continued Growth

CNO Financial Group announces exceptional fourth quarter and full-year 2024 earnings and sales, positioning the company for sustainable growth and ROE expansion in 2025.

Summary

• CNO Financial Group reported a net income of $166.1 million, or $1.58 per diluted share, in 4Q24, compared to $36.3 million, or $0.32 per diluted share, in 4Q23.
• The net income for the year ended December 31, 2024, was $404.0 million, or $3.74 per diluted share, compared to $276.5 million, or $2.40 per diluted share, in 2023.
• Net operating income for 4Q24 was $138.0 million, or $1.31 per diluted share, compared to $133.9 million, or $1.18 per diluted share, in 4Q23.
• Net operating income for the year ended December 31, 2024, was $429.3 million, or $3.97 per diluted share, compared to $356.1 million, or $3.09 per diluted share, in 2023.
• Total new annualized premiums (NAP) were up 7% for the full year 2024.
• The company returned $349.3 million to shareholders and achieved a return on equity (ROE) of 16.4% for the full year.
• The consolidated statutory risk-based capital ratio of the U.S. based insurance subsidiaries was estimated at 383% at December 31, 2024.
• Unrestricted cash and investments held by the holding company were $372.5 million at December 31, 2024, compared to $256.0 million at December 31, 2023.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with strong financial results and strategic initiatives for future growth. The tone is optimistic and confident, reflecting a well-managed and successful company.

Positives

• Sustained sales growth translated into earnings growth.
• Significant improvement in operating earnings per share and operating return on equity reflect ongoing strength in underwriting margins and net investment income coupled with expense and capital discipline.
• Capital position and free cash flow generation remained robust.
• The company is well-positioned to continue profitable growth, capitalize on the favorable macro and demographic environment, and drive long-term ROE expansion.
• New products are driving growth in the Worksite Division, with Critical Illness, Accident, and Hospital Indemnity products all showing strong increases.
• Fee sales in the Worksite Division are up 37% for the year.
• Geographic expansion is contributing significantly to NAP growth in the Worksite Division.
• The company is taking a disciplined and opportunistic approach to D2C advertising spend in the Consumer Division.
• Technology is enabling growth, with NAP generated from web/digital channels accounting for 30% of total D2C in the Consumer Division.

Negatives

• Non-economic accounting impacts due to market volatility increased net income in 4Q24 and full year 2024, and decreased net income in 4Q23 and full year 2023.
• Significant items unfavorably impacted net income and net operating income in 4Q24 by $3.1 million, or $0.03 per diluted share.
• The debt-to-capital ratio increased to 42.3% at December 31, 2024, reflecting the issuance of the 2034 Notes in May 2024.

Risks

• The company's forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially.
• The company's statutory risk-based capital ratio is subject to variability in periods of market volatility.
• The company's ability to utilize its net operating loss carryforwards is dependent on receiving IRS approval of its method change prior to December 31, 2024.

Future Outlook

CNO Financial Group expects to improve its run rate operating ROE by 150 basis points over the next three years, with a 50 basis point improvement in 2025 to a run rate Operating ROE of approximately 10.5%. The company projects an operating EPS of $3.70 $3.90, an expense ratio of approximately 19.0% 19.4%, an effective tax rate of approximately 23%, and excess cash flow to the holding company of $200 $250 million.

Management Comments

• CNO delivered an exceptional quarter and full-year financial performance, demonstrating our ability to grow the franchise while also growing earnings and improving profitability, said Gary C. Bhojwani, chief executive officer.
• Building on 10 consecutive quarters of sales growth and strong agent force metrics, 2024 represented one of CNOs best operating performances of the past several years, highlighted by production records across both divisions.
• As we enter 2025, CNO continues to be well-positioned to continue profitable growth, capitalize on the favorable macro and demographic environment, and drive long-term ROE expansion.

Industry Context

The announcement reflects a positive trend in the insurance and financial services sector, with CNO Financial Group demonstrating its ability to capitalize on market opportunities and deliver strong financial results. The company's focus on middle-income America and its diverse product offerings position it well for continued growth in a competitive landscape.

Comparison to Industry Standards

• CNO Financial's ROE of 16.4% compares favorably to industry peers such as Prudential Financial (approximately 12%) and MetLife (approximately 10%).
• The company's expense ratio of 19.2% is competitive within the industry, indicating efficient cost management.
• The growth in new annualized premiums (NAP) aligns with the broader trend of increasing demand for insurance and financial services products.
• CNO's focus on the middle-income market differentiates it from competitors that primarily target high-net-worth individuals.

Stakeholder Impact

• Shareholders will benefit from the increased earnings, ROE, and capital returns.
• Employees will benefit from the company's continued growth and success.
• Customers will benefit from the company's diverse product offerings and commitment to securing their financial future.
• Suppliers and creditors will benefit from the company's strong financial position and ability to meet its obligations.

Next Steps

• The company will host a conference call on February 7, 2025, to discuss the results.
• The company will continue to focus on profitable growth, capitalizing on the favorable macro and demographic environment, and driving long-term ROE expansion.

Key Dates