þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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75-3108137
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State of Incorporation
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IRS Employer Identification No.
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11825 N. Pennsylvania Street
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Carmel, Indiana 46032
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(317) 817-6100
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Address of principal executive offices
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Telephone
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PART I - FINANCIAL INFORMATION
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Page
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Item 1.
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Financial Statements (unaudited)
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Item 2.
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Item 3.
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Item 4.
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PART II - OTHER INFORMATION
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Item 1.
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Item 1A.
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Item 2.
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Item 6.
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March 31, 2014
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December 31, 2013
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||||
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||||
Investments:
|
|
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|
||||
Fixed maturities, available for sale, at fair value (amortized cost: March 31, 2014 - $18,465.6; December 31, 2013 - $21,860.6)
|
$
|
20,143.8
|
|
|
$
|
23,178.3
|
|
Equity securities at fair value (cost: March 31, 2014 - $260.5; December 31, 2013 - $237.9)
|
277.6
|
|
|
249.3
|
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||
Mortgage loans
|
1,501.7
|
|
|
1,729.5
|
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||
Policy loans
|
102.6
|
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|
277.0
|
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||
Trading securities
|
235.5
|
|
|
247.6
|
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||
Investments held by variable interest entities
|
1,134.1
|
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|
1,046.7
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Other invested assets
|
409.5
|
|
|
423.3
|
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Total investments
|
23,804.8
|
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|
27,151.7
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||
Cash and cash equivalents - unrestricted
|
285.4
|
|
|
699.0
|
|
||
Cash and cash equivalents held by variable interest entities
|
140.3
|
|
|
104.3
|
|
||
Accrued investment income
|
259.3
|
|
|
286.9
|
|
||
Present value of future profits
|
527.7
|
|
|
679.3
|
|
||
Deferred acquisition costs
|
740.4
|
|
|
968.1
|
|
||
Reinsurance receivables
|
3,072.8
|
|
|
3,392.1
|
|
||
Income tax assets, net
|
870.7
|
|
|
1,147.2
|
|
||
Assets held in separate accounts
|
10.0
|
|
|
10.3
|
|
||
Other assets
|
401.0
|
|
|
341.7
|
|
||
Assets of subsidiary being sold
|
4,346.3
|
|
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—
|
|
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Total assets
|
$
|
34,458.7
|
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$
|
34,780.6
|
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March 31, 2014
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December 31, 2013
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||||
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Liabilities:
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|
||||
Liabilities for insurance products:
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|
||||
Policyholder account balances
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$
|
10,625.3
|
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$
|
12,776.4
|
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Future policy benefits
|
10,138.6
|
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|
11,222.5
|
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||
Liability for policy and contract claims
|
482.2
|
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|
566.0
|
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||
Unearned and advanced premiums
|
279.5
|
|
|
300.6
|
|
||
Liabilities related to separate accounts
|
10.0
|
|
|
10.3
|
|
||
Other liabilities
|
727.4
|
|
|
590.6
|
|
||
Payable to reinsurer
|
—
|
|
|
590.3
|
|
||
Investment borrowings
|
1,499.4
|
|
|
1,900.0
|
|
||
Borrowings related to variable interest entities
|
1,019.4
|
|
|
1,012.3
|
|
||
Notes payable – direct corporate obligations
|
844.1
|
|
|
856.4
|
|
||
Liabilities of subsidiary being sold
|
4,122.6
|
|
|
—
|
|
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Total liabilities
|
29,748.5
|
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|
29,825.4
|
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Commitments and Contingencies
|
|
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Shareholders' equity:
|
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Common stock ($0.01 par value, 8,000,000,000 shares authorized, shares issued and outstanding: March 31, 2014 – 219,266,947; December 31, 2013 – 220,323,823)
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2.2
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2.2
|
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||
Additional paid-in capital
|
4,054.7
|
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|
4,092.8
|
|
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Accumulated other comprehensive income
|
766.2
|
|
|
731.8
|
|
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Retained earnings (accumulated deficit)
|
(112.9
|
)
|
|
128.4
|
|
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Total shareholders' equity
|
4,710.2
|
|
|
4,955.2
|
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Total liabilities and shareholders' equity
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$
|
34,458.7
|
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$
|
34,780.6
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Three months ended
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||||||
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March 31,
|
||||||
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2014
|
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2013
|
||||
Revenues:
|
|
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|
||||
Insurance policy income
|
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$
|
685.9
|
|
|
$
|
691.2
|
|
Net investment income (loss):
|
|
|
|
|
||||
General account assets
|
|
348.1
|
|
|
351.9
|
|
||
Policyholder and reinsurer accounts and other special-purpose portfolios
|
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20.9
|
|
|
77.7
|
|
||
Realized investment gains (losses):
|
|
|
|
|
||||
Net realized investment gains, excluding impairment losses
|
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35.3
|
|
|
15.3
|
|
||
Other-than-temporary impairment losses:
|
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|
|
|
||||
Total other-than-temporary impairment losses
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(11.9
|
)
|
|
—
|
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Portion of other-than-temporary impairment losses recognized in accumulated other comprehensive income
|
|
—
|
|
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—
|
|
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Net impairment losses recognized
|
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(11.9
|
)
|
|
—
|
|
||
Total realized gains
|
|
23.4
|
|
|
15.3
|
|
||
Fee revenue and other income
|
|
6.4
|
|
|
6.5
|
|
||
Total revenues
|
|
1,084.7
|
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|
1,142.6
|
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Benefits and expenses:
|
|
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|
||||
Insurance policy benefits
|
|
690.3
|
|
|
754.1
|
|
||
Loss on sale of subsidiary
|
|
278.6
|
|
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—
|
|
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Interest expense
|
|
24.6
|
|
|
27.3
|
|
||
Amortization
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|
66.7
|
|
|
79.3
|
|
||
Loss on extinguishment of debt
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—
|
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57.7
|
|
||
Other operating costs and expenses
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|
194.1
|
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|
189.6
|
|
||
Total benefits and expenses
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|
1,254.3
|
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|
1,108.0
|
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Income (loss) before income taxes
|
|
(169.6
|
)
|
|
34.6
|
|
||
Income tax expense:
|
|
|
|
|
||||
Tax expense on period income
|
|
39.0
|
|
|
33.2
|
|
||
Valuation allowance for deferred tax assets and other tax items
|
|
19.4
|
|
|
(10.5
|
)
|
||
Net income (loss)
|
|
$
|
(228.0
|
)
|
|
$
|
11.9
|
|
Earnings per common share:
|
|
|
|
|
||||
Basic:
|
|
|
|
|
||||
Weighted average shares outstanding
|
|
220,307,000
|
|
|
222,081,000
|
|
||
Net income (loss)
|
|
$
|
(1.03
|
)
|
|
$
|
.05
|
|
Diluted:
|
|
|
|
|
||||
Weighted average shares outstanding
|
|
220,307,000
|
|
|
243,467,000
|
|
||
Net income (loss)
|
|
$
|
(1.03
|
)
|
|
$
|
.05
|
|
|
Three months ended
|
||||||
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March 31,
|
||||||
|
2014
|
|
2013
|
||||
Net income (loss)
|
$
|
(228.0
|
)
|
|
$
|
11.9
|
|
Other comprehensive income, before tax:
|
|
|
|
||||
Unrealized gains (losses) for the period
|
393.8
|
|
|
(183.3
|
)
|
||
Amortization of present value of future profits and deferred acquisition costs
|
(77.4
|
)
|
|
20.7
|
|
||
Amount related to premium deficiencies assuming the net unrealized gains had been realized
|
(237.5
|
)
|
|
135.3
|
|
||
Reclassification adjustments:
|
|
|
|
||||
For net realized investment gains included in net income (loss)
|
(26.0
|
)
|
|
(14.8
|
)
|
||
For amortization of the present value of future profits and deferred acquisition costs related to net realized investment gains included in net income (loss)
|
.4
|
|
|
.8
|
|
||
Unrealized gains (losses) on investments
|
53.3
|
|
|
(41.3
|
)
|
||
Change related to deferred compensation plan
|
.3
|
|
|
1.0
|
|
||
Other comprehensive income (loss) before tax
|
53.6
|
|
|
(40.3
|
)
|
||
Income tax (expense) benefit related to items of accumulated other comprehensive income
|
(19.2
|
)
|
|
13.6
|
|
||
Other comprehensive income (loss), net of tax
|
34.4
|
|
|
(26.7
|
)
|
||
Comprehensive loss
|
$
|
(193.6
|
)
|
|
$
|
(14.8
|
)
|
|
Common stock and
additional
paid-in capital
|
|
Accumulated other
comprehensive income
|
|
Retained earnings (accumulated deficit)
|
|
Total
|
||||||||
Balance, December 31, 2012
|
$
|
4,176.9
|
|
|
$
|
1,197.4
|
|
|
$
|
(325.0
|
)
|
|
$
|
5,049.3
|
|
Net income
|
—
|
|
|
—
|
|
|
11.9
|
|
|
11.9
|
|
||||
Change in unrealized appreciation (depreciation) of investments (net of applicable income tax benefit of $13.8)
|
—
|
|
|
(27.0
|
)
|
|
—
|
|
|
(27.0
|
)
|
||||
Change in noncredit component of impairment losses on fixed maturities, available for sale (net of applicable income tax expense of $.2)
|
—
|
|
|
.3
|
|
|
—
|
|
|
.3
|
|
||||
Extinguishment of beneficial conversion feature related to the repurchase of convertible debentures
|
(12.6
|
)
|
|
—
|
|
|
—
|
|
|
(12.6
|
)
|
||||
Dividends on common stock
|
—
|
|
|
—
|
|
|
(4.4
|
)
|
|
(4.4
|
)
|
||||
Stock options, restricted stock and performance units
|
11.1
|
|
|
—
|
|
|
—
|
|
|
11.1
|
|
||||
Balance, March 31, 2013
|
$
|
4,175.4
|
|
|
$
|
1,170.7
|
|
|
$
|
(317.5
|
)
|
|
$
|
5,028.6
|
|
|
|
|
|
|
|
|
|
||||||||
Balance, December 31, 2013
|
$
|
4,095.0
|
|
|
$
|
731.8
|
|
|
$
|
128.4
|
|
|
$
|
4,955.2
|
|
Net loss
|
—
|
|
|
—
|
|
|
(228.0
|
)
|
|
(228.0
|
)
|
||||
Change in unrealized appreciation (depreciation) of investments (net of applicable income tax expense of $19.1)
|
—
|
|
|
34.2
|
|
|
—
|
|
|
34.2
|
|
||||
Change in noncredit component of impairment losses on fixed maturities, available for sale (net of applicable income tax expense of $.1)
|
—
|
|
|
.2
|
|
|
—
|
|
|
.2
|
|
||||
Cost of shares acquired
|
(41.0
|
)
|
|
—
|
|
|
—
|
|
|
(41.0
|
)
|
||||
Dividends on common stock
|
—
|
|
|
—
|
|
|
(13.3
|
)
|
|
(13.3
|
)
|
||||
Stock options, restricted stock and performance units
|
2.9
|
|
|
—
|
|
|
—
|
|
|
2.9
|
|
||||
Balance, March 31, 2014
|
$
|
4,056.9
|
|
|
$
|
766.2
|
|
|
$
|
(112.9
|
)
|
|
$
|
4,710.2
|
|
|
Three months ended
|
||||||
|
March 31,
|
||||||
|
2014
|
|
2013
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Insurance policy income
|
$
|
593.2
|
|
|
$
|
622.4
|
|
Net investment income
|
321.1
|
|
|
314.4
|
|
||
Fee revenue and other income
|
6.4
|
|
|
6.5
|
|
||
Insurance policy benefits
|
(523.7
|
)
|
|
(542.4
|
)
|
||
Payment to reinsurer pursuant to long-term care business reinsured
|
(590.3
|
)
|
|
—
|
|
||
Interest expense
|
(18.3
|
)
|
|
(20.1
|
)
|
||
Deferrable policy acquisition costs
|
(56.7
|
)
|
|
(53.5
|
)
|
||
Other operating costs
|
(211.3
|
)
|
|
(212.0
|
)
|
||
Taxes
|
(.7
|
)
|
|
(.7
|
)
|
||
Net cash from operating activities
|
(480.3
|
)
|
(a)
|
114.6
|
|
||
Cash flows from investing activities:
|
|
|
|
|
|
||
Sales of investments
|
807.2
|
|
|
547.4
|
|
||
Maturities and redemptions of investments
|
469.6
|
|
|
630.4
|
|
||
Purchases of investments
|
(1,010.2
|
)
|
|
(1,656.7
|
)
|
||
Net sales (purchases) of trading securities
|
(3.1
|
)
|
|
41.2
|
|
||
Change in cash and cash equivalents held by variable interest entities
|
(36.0
|
)
|
|
(408.0
|
)
|
||
Cash and cash equivalents held by subsidiary being sold
|
(50.0
|
)
|
|
—
|
|
||
Other
|
(5.9
|
)
|
|
(7.0
|
)
|
||
Net cash provided (used) by investing activities
|
171.6
|
|
|
(852.7
|
)
|
||
Cash flows from financing activities:
|
|
|
|
|
|
||
Payments on notes payable
|
(12.5
|
)
|
|
(72.8
|
)
|
||
Expenses related to extinguishment of debt
|
—
|
|
|
(54.7
|
)
|
||
Amount paid to extinguish the beneficial conversion feature associated with repurchase of convertible debentures
|
—
|
|
|
(12.6
|
)
|
||
Issuance of common stock
|
3.4
|
|
|
11.6
|
|
||
Payments to repurchase common stock
|
(33.0
|
)
|
|
—
|
|
||
Common stock dividends paid
|
(13.3
|
)
|
|
(4.4
|
)
|
||
Amounts received for deposit products
|
329.6
|
|
|
308.5
|
|
||
Withdrawals from deposit products
|
(368.7
|
)
|
|
(374.1
|
)
|
||
Issuance of investment borrowings:
|
|
|
|
||||
Federal Home Loan Bank
|
200.0
|
|
|
200.0
|
|
||
Related to variable interest entities
|
24.1
|
|
|
376.3
|
|
||
Payments on investment borrowings:
|
|
|
|
||||
Federal Home Loan Bank
|
(217.2
|
)
|
|
—
|
|
||
Related to variable interest entities and other
|
(17.3
|
)
|
|
(.1
|
)
|
||
Investment borrowings - repurchase agreements, net
|
—
|
|
|
29.5
|
|
||
Net cash provided (used) by financing activities
|
(104.9
|
)
|
|
407.2
|
|
||
Net decrease in cash and cash equivalents
|
(413.6
|
)
|
|
(330.9
|
)
|
||
Cash and cash equivalents, beginning of period
|
699.0
|
|
|
582.5
|
|
||
Cash and cash equivalents, end of period
|
$
|
285.4
|
|
|
$
|
251.6
|
|
(a)
|
Cash flows from operating activities reflect outflows in the 2014 period due to the payment to reinsurer to transfer certain long-term care business.
|
Estimated net cash proceeds
|
|
$
|
219.8
|
|
Net assets sold:
|
|
|
||
Investments
|
|
3,925.6
|
|
|
Cash and cash equivalents
|
|
50.0
|
|
|
Present value of future profits and deferred acquisition costs
|
|
54.8
|
|
|
Reinsurance receivables
|
|
159.6
|
|
|
Income tax assets, net
|
|
91.0
|
|
|
Other assets
|
|
65.3
|
|
|
Liabilities for insurance products
|
|
(3,234.1
|
)
|
|
Other liabilities
|
|
(33.1
|
)
|
|
Investment borrowings
|
|
(383.5
|
)
|
|
Accumulated other comprehensive income
|
|
(197.2
|
)
|
|
Net assets sold
|
|
498.4
|
|
|
Estimated loss before taxes
|
|
(278.6
|
)
|
|
Tax expense related to tax gain on sale
|
|
13.2
|
|
|
Previously unrecognized tax benefit now recognized as a result of the gain
|
|
(7.4
|
)
|
|
Valuation allowance release related to the gain
|
|
(5.8
|
)
|
|
Valuation allowance increase related to the decrease in projected future taxable income
|
|
19.4
|
|
|
Estimated net loss
|
|
$
|
(298.0
|
)
|
|
|
March 31, 2014
|
||
Investments
|
|
$
|
3,925.6
|
|
Cash and cash equivalents - unrestricted
|
|
50.0
|
|
|
Accrued investment income
|
|
47.7
|
|
|
Present value of future profits
|
|
15.8
|
|
|
Deferred acquisition costs
|
|
39.0
|
|
|
Reinsurance receivables
|
|
159.6
|
|
|
Income tax assets, net
|
|
91.0
|
|
|
Other assets
|
|
17.6
|
|
|
Assets of subsidiary being sold
|
|
$
|
4,346.3
|
|
|
|
|
||
Liabilities for insurance products
|
|
$
|
3,234.1
|
|
Other liabilities
|
|
33.1
|
|
|
Investment borrowings
|
|
383.5
|
|
|
Loss accrual
|
|
471.9
|
|
|
Liabilities of subsidiary being sold
|
|
$
|
4,122.6
|
|
|
March 31,
2014 |
|
December 31,
2013 |
||||
Net unrealized appreciation (depreciation) on fixed maturity securities, available for sale, on which an other-than-temporary impairment loss has been recognized
|
$
|
(4.1
|
)
|
|
$
|
6.5
|
|
Net unrealized gains on all other investments
|
1,701.0
|
|
|
1,322.6
|
|
||
Adjustment to present value of future profits (a)
|
(162.0
|
)
|
|
(47.7
|
)
|
||
Adjustment to deferred acquisition costs
|
(337.2
|
)
|
|
(137.0
|
)
|
||
Unrecognized net loss related to deferred compensation plan
|
(6.8
|
)
|
|
(7.1
|
)
|
||
Deferred income tax liabilities
|
(424.7
|
)
|
|
(405.5
|
)
|
||
Accumulated other comprehensive income
|
$
|
766.2
|
|
|
$
|
731.8
|
|
(a)
|
The present value of future profits is the value assigned to the right to receive future cash flows from contracts existing at September 10, 2003 (the date Conseco, Inc., an Indiana corporation (our "Predecessor"), emerged from bankruptcy.
|
|
Amortized cost
|
|
Gross unrealized gains
|
|
Gross unrealized losses
|
|
Estimated fair value
|
|
Other-than-temporary impairments included in accumulated other comprehensive income
|
||||||||||
Corporate securities
|
$
|
12,313.9
|
|
|
$
|
1,345.6
|
|
|
$
|
(52.2
|
)
|
|
$
|
13,607.3
|
|
|
$
|
—
|
|
United States Treasury securities and obligations of United States government corporations and agencies
|
143.9
|
|
|
2.7
|
|
|
(.4
|
)
|
|
146.2
|
|
|
—
|
|
|||||
States and political subdivisions
|
1,929.5
|
|
|
157.5
|
|
|
(16.2
|
)
|
|
2,070.8
|
|
|
—
|
|
|||||
Asset-backed securities
|
1,288.7
|
|
|
76.0
|
|
|
(3.7
|
)
|
|
1,361.0
|
|
|
—
|
|
|||||
Collateralized debt obligations
|
282.7
|
|
|
5.7
|
|
|
(.6
|
)
|
|
287.8
|
|
|
—
|
|
|||||
Commercial mortgage-backed securities
|
1,151.1
|
|
|
81.0
|
|
|
(2.2
|
)
|
|
1,229.9
|
|
|
—
|
|
|||||
Mortgage pass-through securities
|
8.4
|
|
|
.5
|
|
|
—
|
|
|
8.9
|
|
|
—
|
|
|||||
Collateralized mortgage obligations
|
1,347.4
|
|
|
85.5
|
|
|
(1.0
|
)
|
|
1,431.9
|
|
|
(3.8
|
)
|
|||||
Total fixed maturities, available for sale
|
$
|
18,465.6
|
|
|
$
|
1,754.5
|
|
|
$
|
(76.3
|
)
|
|
$
|
20,143.8
|
|
|
$
|
(3.8
|
)
|
Fixed maturities of CLIC being sold
|
$
|
3,456.0
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,456.0
|
|
|
$
|
—
|
|
|
Amortized
cost
|
|
Estimated
fair
value
|
||||
|
(Dollars in millions)
|
||||||
Due in one year or less
|
$
|
118.8
|
|
|
$
|
120.9
|
|
Due after one year through five years
|
1,719.2
|
|
|
1,889.3
|
|
||
Due after five years through ten years
|
3,042.5
|
|
|
3,307.6
|
|
||
Due after ten years
|
9,506.8
|
|
|
10,506.5
|
|
||
Subtotal
|
14,387.3
|
|
|
15,824.3
|
|
||
Structured securities
|
4,078.3
|
|
|
4,319.5
|
|
||
Total fixed maturities, available for sale
|
$
|
18,465.6
|
|
|
$
|
20,143.8
|
|
|
Three months ended
|
||||||
|
March 31,
|
||||||
|
2014
|
|
2013
|
||||
Fixed maturity securities, available for sale:
|
|
|
|
||||
Gross realized gains on sale
|
$
|
41.5
|
|
|
$
|
16.6
|
|
Gross realized losses on sale
|
(5.5
|
)
|
|
(2.0
|
)
|
||
Impairments:
|
|
|
|
||||
Total other-than-temporary impairment losses
|
—
|
|
|
—
|
|
||
Other-than-temporary impairment losses recognized in accumulated other comprehensive income
|
—
|
|
|
—
|
|
||
Net impairment losses recognized
|
—
|
|
|
—
|
|
||
Net realized investment gains from fixed maturities
|
36.0
|
|
|
14.6
|
|
||
Commercial mortgage loans
|
—
|
|
|
.7
|
|
||
Impairments of mortgage loans and other investments
|
(11.9
|
)
|
|
—
|
|
||
Other
|
(.7
|
)
|
|
—
|
|
||
Net realized investment gains
|
$
|
23.4
|
|
|
$
|
15.3
|
|
|
Three months ended
|
||||||
|
March 31,
|
||||||
|
2014
|
|
2013
|
||||
Credit losses on fixed maturity securities, available for sale, beginning of period
|
$
|
(1.3
|
)
|
|
$
|
(1.6
|
)
|
Add: credit losses on other-than-temporary impairments not previously recognized
|
—
|
|
|
—
|
|
||
Less: credit losses on securities sold
|
—
|
|
|
.1
|
|
||
Less: credit losses on securities impaired due to intent to sell (a)
|
—
|
|
|
—
|
|
||
Add: credit losses on previously impaired securities
|
—
|
|
|
—
|
|
||
Less: increases in cash flows expected on previously impaired securities
|
—
|
|
|
—
|
|
||
Credit losses on fixed maturity securities, available for sale, end of period
|
$
|
(1.3
|
)
|
|
$
|
(1.5
|
)
|
(a)
|
Represents securities for which the amount previously recognized in accumulated other comprehensive income was recognized in earnings because we intend to sell the security or we more likely than not will be required to sell the security before recovery of its amortized cost basis.
|
|
|
Less than 12 months
|
|
12 months or greater
|
|
Total
|
||||||||||||||||||
Description of securities
|
|
Fair
value
|
|
Unrealized
losses
|
|
Fair
value
|
|
Unrealized
losses
|
|
Fair
value
|
|
Unrealized
losses
|
||||||||||||
United States Treasury securities and obligations of United States government corporations and agencies
|
|
$
|
19.2
|
|
|
$
|
(.4
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
19.2
|
|
|
$
|
(.4
|
)
|
States and political subdivisions
|
|
186.2
|
|
|
(11.6
|
)
|
|
63.5
|
|
|
(4.6
|
)
|
|
249.7
|
|
|
(16.2
|
)
|
||||||
Corporate securities
|
|
980.5
|
|
|
(35.7
|
)
|
|
196.3
|
|
|
(16.5
|
)
|
|
1,176.8
|
|
|
(52.2
|
)
|
||||||
Asset-backed securities
|
|
229.7
|
|
|
(2.9
|
)
|
|
35.3
|
|
|
(.8
|
)
|
|
265.0
|
|
|
(3.7
|
)
|
||||||
Collateralized debt obligations
|
|
26.9
|
|
|
(.6
|
)
|
|
—
|
|
|
—
|
|
|
26.9
|
|
|
(.6
|
)
|
||||||
Commercial mortgage-backed securities
|
|
77.1
|
|
|
(2.2
|
)
|
|
—
|
|
|
—
|
|
|
77.1
|
|
|
(2.2
|
)
|
||||||
Mortgage pass-through securities
|
|
.9
|
|
|
—
|
|
|
.4
|
|
|
—
|
|
|
1.3
|
|
|
—
|
|
||||||
Collateralized mortgage obligations
|
|
102.2
|
|
|
(.6
|
)
|
|
5.2
|
|
|
(.4
|
)
|
|
107.4
|
|
|
(1.0
|
)
|
||||||
Total fixed maturities, available for sale
|
|
$
|
1,622.7
|
|
|
$
|
(54.0
|
)
|
|
$
|
300.7
|
|
|
$
|
(22.3
|
)
|
|
$
|
1,923.4
|
|
|
$
|
(76.3
|
)
|
Equity securities
|
|
$
|
41.0
|
|
|
$
|
(2.2
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
41.0
|
|
|
$
|
(2.2
|
)
|
|
|
Less than 12 months
|
|
12 months or greater
|
|
Total
|
||||||||||||||||||
Description of securities
|
|
Fair
value
|
|
Unrealized
losses
|
|
Fair
value
|
|
Unrealized
losses
|
|
Fair
value
|
|
Unrealized
losses
|
||||||||||||
United States Treasury securities and obligations of United States government corporations and agencies
|
|
$
|
23.8
|
|
|
$
|
(.6
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
23.8
|
|
|
$
|
(.6
|
)
|
States and political subdivisions
|
|
473.6
|
|
|
(30.3
|
)
|
|
79.2
|
|
|
(8.7
|
)
|
|
552.8
|
|
|
(39.0
|
)
|
||||||
Corporate securities
|
|
2,406.1
|
|
|
(132.8
|
)
|
|
170.3
|
|
|
(20.8
|
)
|
|
2,576.4
|
|
|
(153.6
|
)
|
||||||
Asset-backed securities
|
|
308.4
|
|
|
(6.5
|
)
|
|
32.5
|
|
|
(.7
|
)
|
|
340.9
|
|
|
(7.2
|
)
|
||||||
Collateralized debt obligations
|
|
46.7
|
|
|
(.5
|
)
|
|
—
|
|
|
—
|
|
|
46.7
|
|
|
(.5
|
)
|
||||||
Commercial mortgage-backed securities
|
|
161.8
|
|
|
(5.8
|
)
|
|
—
|
|
|
—
|
|
|
161.8
|
|
|
(5.8
|
)
|
||||||
Mortgage pass-through securities
|
|
1.6
|
|
|
—
|
|
|
1.6
|
|
|
—
|
|
|
3.2
|
|
|
—
|
|
||||||
Collateralized mortgage obligations
|
|
121.8
|
|
|
(1.6
|
)
|
|
2.2
|
|
|
—
|
|
|
124.0
|
|
|
(1.6
|
)
|
||||||
Total fixed maturities, available for sale
|
|
$
|
3,543.8
|
|
|
$
|
(178.1
|
)
|
|
$
|
285.8
|
|
|
$
|
(30.2
|
)
|
|
$
|
3,829.6
|
|
|
$
|
(208.3
|
)
|
Equity securities
|
|
$
|
26.8
|
|
|
$
|
(4.9
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
26.8
|
|
|
$
|
(4.9
|
)
|
|
Three months ended
|
||||||
|
March 31,
|
||||||
|
2014
|
|
2013
|
||||
Net income (loss) for basic earnings per share
|
$
|
(228.0
|
)
|
|
$
|
11.9
|
|
Add: interest expense on 7.0% Senior Debentures due 2016 (the "7.0% Debentures"), net of income taxes
|
—
|
|
|
1.2
|
|
||
Net income (loss) for diluted earnings per share
|
$
|
(228.0
|
)
|
|
$
|
13.1
|
|
Shares:
|
|
|
|
|
|
||
Weighted average shares outstanding for basic earnings per share
|
220,307
|
|
|
222,081
|
|
||
Effect of dilutive securities on weighted average shares:
|
|
|
|
|
|
||
7.0% Debentures
|
—
|
|
|
16,591
|
|
||
Stock options, restricted stock and performance units
|
—
|
|
|
2,828
|
|
||
Warrants
|
—
|
|
|
1,967
|
|
||
Dilutive potential common shares
|
—
|
|
|
21,386
|
|
||
Weighted average shares outstanding for diluted earnings per share
|
220,307
|
|
|
243,467
|
|
|
Three months ended
|
||||||
|
March 31,
|
||||||
|
2014
|
|
2013
|
||||
Revenues:
|
|
|
|
||||
Bankers Life:
|
|
|
|
||||
Insurance policy income:
|
|
|
|
||||
Annuities
|
$
|
7.5
|
|
|
$
|
7.9
|
|
Health
|
330.5
|
|
|
332.6
|
|
||
Life
|
78.3
|
|
|
77.5
|
|
||
Net investment income (a)
|
224.4
|
|
|
261.7
|
|
||
Fee revenue and other income (a)
|
5.3
|
|
|
3.7
|
|
||
Total Bankers Life revenues
|
646.0
|
|
|
683.4
|
|
||
Washington National:
|
|
|
|
|
|
||
Insurance policy income:
|
|
|
|
|
|
||
Annuities
|
1.0
|
|
|
1.5
|
|
||
Health
|
148.9
|
|
|
145.4
|
|
||
Life
|
5.7
|
|
|
6.0
|
|
||
Net investment income (a)
|
69.0
|
|
|
77.9
|
|
||
Fee revenue and other income (a)
|
.2
|
|
|
.2
|
|
||
Total Washington National revenues
|
224.8
|
|
|
231.0
|
|
||
Colonial Penn:
|
|
|
|
|
|
||
Insurance policy income:
|
|
|
|
|
|
||
Health
|
1.0
|
|
|
1.1
|
|
||
Life
|
59.5
|
|
|
55.8
|
|
||
Net investment income (a)
|
10.7
|
|
|
9.9
|
|
||
Fee revenue and other income (a)
|
.2
|
|
|
.2
|
|
||
Total Colonial Penn revenues
|
71.4
|
|
|
67.0
|
|
||
Other CNO Business:
|
|
|
|
|
|
||
Insurance policy income - health
|
—
|
|
|
6.2
|
|
||
Net investment income (a)
|
—
|
|
|
8.4
|
|
||
Total Other CNO Business revenues
|
—
|
|
|
14.6
|
|
||
Corporate operations:
|
|
|
|
|
|
||
Net investment income
|
7.0
|
|
|
10.1
|
|
||
Fee and other income
|
1.4
|
|
|
1.7
|
|
||
Total corporate revenues
|
8.4
|
|
|
11.8
|
|
||
Total revenues
|
950.6
|
|
|
1,007.8
|
|
|
Three months ended
|
||||||
|
March 31,
|
||||||
|
2014
|
|
2013
|
||||
Expenses:
|
|
|
|
||||
Bankers Life:
|
|
|
|
||||
Insurance policy benefits
|
$
|
415.0
|
|
|
$
|
470.5
|
|
Amortization
|
48.2
|
|
|
54.5
|
|
||
Interest expense on investment borrowings
|
1.9
|
|
|
1.4
|
|
||
Other operating costs and expenses
|
96.7
|
|
|
94.9
|
|
||
Total Bankers Life expenses
|
561.8
|
|
|
621.3
|
|
||
Washington National:
|
|
|
|
|
|
||
Insurance policy benefits
|
131.8
|
|
|
137.7
|
|
||
Amortization
|
16.3
|
|
|
17.1
|
|
||
Interest expense on investment borrowings
|
.4
|
|
|
.5
|
|
||
Other operating costs and expenses
|
45.2
|
|
|
41.7
|
|
||
Total Washington National expenses
|
193.7
|
|
|
197.0
|
|
||
Colonial Penn:
|
|
|
|
|
|
||
Insurance policy benefits
|
44.7
|
|
|
43.0
|
|
||
Amortization
|
4.0
|
|
|
3.7
|
|
||
Other operating costs and expenses
|
28.9
|
|
|
25.7
|
|
||
Total Colonial Penn expenses
|
77.6
|
|
|
72.4
|
|
||
Other CNO Business:
|
|
|
|
|
|
||
Insurance policy benefits
|
—
|
|
|
15.6
|
|
||
Other operating costs and expenses
|
—
|
|
|
6.3
|
|
||
Total Other CNO Business expenses
|
—
|
|
|
21.9
|
|
||
Corporate operations:
|
|
|
|
|
|
||
Interest expense on corporate debt
|
11.1
|
|
|
15.1
|
|
||
Interest expense on investment borrowings
|
—
|
|
|
.1
|
|
||
Other operating costs and expenses
|
14.4
|
|
|
8.7
|
|
||
Total corporate expenses
|
25.5
|
|
|
23.9
|
|
||
Total expenses
|
858.6
|
|
|
936.5
|
|
||
Pre-tax operating earnings by segment:
|
|
|
|
|
|
||
Bankers Life
|
84.2
|
|
|
62.1
|
|
||
Washington National
|
31.1
|
|
|
34.0
|
|
||
Colonial Penn
|
(6.2
|
)
|
|
(5.4
|
)
|
||
Other CNO Business
|
—
|
|
|
(7.3
|
)
|
||
Corporate operations
|
(17.1
|
)
|
|
(12.1
|
)
|
||
Pre-tax operating earnings
|
$
|
92.0
|
|
|
$
|
71.3
|
|
(a)
|
It is not practicable to provide additional components of revenue by product or services.
|
|
Three months ended
|
||||||
|
March 31,
|
||||||
|
2014
|
|
2013
|
||||
Total segment revenues
|
$
|
950.6
|
|
|
$
|
1,007.8
|
|
Net realized investment gains
|
21.3
|
|
|
13.2
|
|
||
Revenues related to certain non-strategic investments and earnings attributable to VIEs
|
6.3
|
|
|
6.9
|
|
||
Revenues of CLIC being sold
|
106.5
|
|
|
114.7
|
|
||
Consolidated revenues
|
1,084.7
|
|
|
1,142.6
|
|
||
|
|
|
|
||||
Total segment expenses
|
858.6
|
|
|
936.5
|
|
||
Insurance policy benefits - fair value changes in embedded derivative liabilities
|
15.2
|
|
|
(3.1
|
)
|
||
Amortization related to fair value changes in embedded derivative liabilities
|
(4.2
|
)
|
|
1.0
|
|
||
Amortization related to net realized investment gains
|
.4
|
|
|
.8
|
|
||
Expenses related to certain non-strategic investments and earnings attributable to VIEs
|
9.6
|
|
|
8.8
|
|
||
Loss on extinguishment of debt
|
—
|
|
|
57.7
|
|
||
Loss on sale of subsidiary
|
278.6
|
|
|
—
|
|
||
Expenses of CLIC being sold
|
96.1
|
|
|
106.3
|
|
||
Consolidated expenses
|
1,254.3
|
|
|
1,108.0
|
|
||
Income (loss) before tax
|
(169.6
|
)
|
|
34.6
|
|
||
Income tax expense:
|
|
|
|
||||
Tax expense on period income
|
39.0
|
|
|
33.2
|
|
||
Valuation allowance for deferred taxes and other tax items
|
19.4
|
|
|
(10.5
|
)
|
||
Net income (loss)
|
$
|
(228.0
|
)
|
|
$
|
11.9
|
|
|
Three months ended
|
||||||
|
March 31,
|
||||||
|
2014
|
|
2013
|
||||
Current tax expense
|
$
|
2.2
|
|
|
$
|
2.7
|
|
Deferred tax expense
|
36.8
|
|
|
31.0
|
|
||
Income tax expense calculated based on estimated annual effective tax rate
|
39.0
|
|
|
33.7
|
|
||
Income tax expense (benefit) on discrete items:
|
|
|
|
||||
Related to the sale of CLIC:
|
|
|
|
||||
Tax expense related to tax gain on sale
|
13.2
|
|
|
—
|
|
||
Previously unrecognized tax benefit recognized as a result of the gain
|
(7.4
|
)
|
|
—
|
|
||
Valuation allowance release related to the gain
|
(5.8
|
)
|
|
—
|
|
||
Valuation allowance increase related to the decrease in projected future taxable income
|
19.4
|
|
|
—
|
|
||
Valuation allowance reduction applicable to utilization of capital loss carryforwards
|
—
|
|
|
(10.5
|
)
|
||
Deferred tax benefit related to loss on extinguishment of debt
|
—
|
|
|
(.5
|
)
|
||
Total income tax expense
|
$
|
58.4
|
|
|
$
|
22.7
|
|
|
Three months ended
|
||||
|
March 31,
|
||||
|
2014
|
|
2013
|
||
U.S. statutory corporate rate
|
35.0
|
%
|
|
35.0
|
%
|
Non-taxable income and nondeductible benefits, net
|
(.7
|
)
|
|
.1
|
|
State taxes
|
1.5
|
|
|
1.4
|
|
Estimated annual effective tax rate
|
35.8
|
%
|
|
36.5
|
%
|
|
March 31,
2014 |
|
December 31,
2013 |
||||
Deferred tax assets:
|
|
|
|
||||
Net federal operating loss carryforwards
|
$
|
1,196.7
|
|
|
$
|
1,240.2
|
|
Net state operating loss carryforwards
|
20.1
|
|
|
20.0
|
|
||
Tax credits
|
37.2
|
|
|
43.9
|
|
||
Capital loss carryforwards
|
1.0
|
|
|
13.4
|
|
||
Deductible temporary differences:
|
|
|
|
|
|
||
Investments
|
73.2
|
|
|
74.3
|
|
||
Insurance liabilities
|
567.2
|
|
|
723.8
|
|
||
Other
|
50.0
|
|
|
64.7
|
|
||
Gross deferred tax assets
|
1,945.4
|
|
|
2,180.3
|
|
||
Deferred tax liabilities:
|
|
|
|
|
|
||
Present value of future profits and deferred acquisition costs
|
(320.9
|
)
|
|
(306.8
|
)
|
||
Accumulated other comprehensive income
|
(424.7
|
)
|
|
(405.5
|
)
|
||
Gross deferred tax liabilities
|
(745.6
|
)
|
|
(712.3
|
)
|
||
Net deferred tax assets before valuation allowance
|
1,199.8
|
|
|
1,468.0
|
|
||
Valuation allowance
|
(308.4
|
)
|
|
(294.8
|
)
|
||
Net deferred tax assets
|
891.4
|
|
|
1,173.2
|
|
||
Current income taxes accrued
|
(20.7
|
)
|
|
(26.0
|
)
|
||
Income tax assets, net
|
$
|
870.7
|
|
|
$
|
1,147.2
|
|
Year of expiration
|
|
Net operating loss carryforwards
|
|
Capital loss
|
|
Total loss
|
||||||||||
|
|
Life
|
|
Non-life
|
|
carryforwards
|
|
carryforwards
|
||||||||
2018
|
|
$
|
214.1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
214.1
|
|
2021
|
|
30.0
|
|
|
—
|
|
|
—
|
|
|
30.0
|
|
||||
2022
|
|
152.0
|
|
|
—
|
|
|
—
|
|
|
152.0
|
|
||||
2023
|
|
742.6
|
|
|
2,192.5
|
|
|
—
|
|
|
2,935.1
|
|
||||
2025
|
|
—
|
|
|
115.3
|
|
|
—
|
|
|
115.3
|
|
||||
2027
|
|
—
|
|
|
202.6
|
|
|
—
|
|
|
202.6
|
|
||||
2028
|
|
—
|
|
|
.5
|
|
|
—
|
|
|
.5
|
|
||||
2029
|
|
—
|
|
|
272.3
|
|
|
—
|
|
|
272.3
|
|
||||
2032
|
|
—
|
|
|
44.0
|
|
|
—
|
|
|
44.0
|
|
||||
Subtotal
|
|
1,138.7
|
|
|
2,827.2
|
|
|
—
|
|
|
3,965.9
|
|
||||
Less:
|
|
|
|
|
|
|
|
|
||||||||
Unrecognized tax benefits
|
|
(345.6
|
)
|
|
(201.2
|
)
|
|
2.8
|
|
|
(544.0
|
)
|
||||
Total
|
|
$
|
793.1
|
|
|
$
|
2,626.0
|
|
|
$
|
2.8
|
|
|
$
|
3,421.9
|
|
|
March 31,
2014 |
|
December 31,
2013 |
||||
Senior Secured Credit Agreement (as defined below)
|
$
|
569.0
|
|
|
$
|
581.5
|
|
6.375% Senior Secured Notes due October 2020 (the "6.375% Notes")
|
275.0
|
|
|
275.0
|
|
||
7.0% Debentures
|
3.5
|
|
|
3.5
|
|
||
Unamortized discount on Senior Secured Credit Agreement
|
(3.4
|
)
|
|
(3.6
|
)
|
||
Direct corporate obligations
|
$
|
844.1
|
|
|
$
|
856.4
|
|
Year ending March 31,
|
|
||
2015
|
$
|
66.7
|
|
2016
|
79.3
|
|
|
2017
|
45.2
|
|
|
2018
|
4.2
|
|
|
2019
|
377.1
|
|
|
Thereafter
|
275.0
|
|
|
|
$
|
847.5
|
|
Amount
|
|
Maturity
|
|
Interest rate at
|
||
borrowed
|
|
date
|
|
March 31, 2014
|
||
$
|
50.0
|
|
|
September 2015
|
|
Variable rate – 0.535%
|
50.0
|
|
|
October 2015
|
|
Variable rate – 0.505%
|
|
100.0
|
|
|
November 2015
|
|
Variable rate – 0.316%
|
|
100.0
|
|
|
June 2016
|
|
Variable rate – 0.594%
|
|
75.0
|
|
|
June 2016
|
|
Variable rate – 0.394%
|
|
100.0
|
|
|
October 2016
|
|
Variable rate – 0.426%
|
|
50.0
|
|
|
November 2016
|
|
Variable rate – 0.506%
|
|
50.0
|
|
|
November 2016
|
|
Variable rate – 0.624%
|
|
57.8
|
|
|
June 2017
|
|
Variable rate – 0.585%
|
|
50.0
|
|
|
August 2017
|
|
Variable rate – 0.436%
|
|
75.0
|
|
|
August 2017
|
|
Variable rate – 0.385%
|
|
100.0
|
|
|
October 2017
|
|
Variable rate – 0.669%
|
|
50.0
|
|
|
November 2017
|
|
Variable rate – 0.744%
|
|
50.0
|
|
|
January 2018
|
|
Variable rate – 0.592%
|
|
50.0
|
|
|
January 2018
|
|
Variable rate – 0.577%
|
|
50.0
|
|
|
February 2018
|
|
Variable rate – 0.546%
|
|
22.0
|
|
|
February 2018
|
|
Variable rate – 0.563%
|
|
100.0
|
|
|
May 2018
|
|
Variable rate – 0.603%
|
|
50.0
|
|
|
July 2018
|
|
Variable rate – 0.705%
|
|
50.0
|
|
|
August 2018
|
|
Variable rate – 0.356%
|
|
50.0
|
|
|
January 2019
|
|
Variable rate – 0.656%
|
|
100.0
|
|
|
March 2019
|
|
Variable rate – 0.636%
|
|
21.8
|
|
|
June 2020
|
|
Fixed rate – 1.960%
|
|
27.3
|
|
|
March 2023
|
|
Fixed rate – 2.160%
|
|
20.5
|
|
|
June 2025
|
|
Fixed rate – 2.940%
|
|
$
|
1,499.4
|
|
|
|
|
|
Amount
|
|
Maturity
|
|
Interest rate at
|
||
borrowed
|
|
date
|
|
March 31, 2014
|
||
$
|
146.5
|
|
|
November 2015
|
|
Fixed rate – 5.300%
|
100.0
|
|
|
December 2015
|
|
Fixed rate – 4.710%
|
|
100.0
|
|
|
July 2017
|
|
Fixed rate – 3.900%
|
|
37.0
|
|
|
November 2017
|
|
Fixed rate – 3.750%
|
|
$
|
383.5
|
|
|
|
|
|
Balance, December 31, 2013
|
220,324
|
|
|
Treasury stock purchased and retired
|
(2,200
|
)
|
|
Stock options exercised
|
682
|
|
|
Restricted and performance stock vested
|
461
|
|
(a)
|
Balance, March 31, 2014
|
219,267
|
|
|
(a)
|
Such amount was reduced by
224 thousand
shares which were tendered to the Company for the payment of required federal and state tax withholdings owed on the vesting of restricted and performance stock.
|
|
|
|
|
|
|
|
|
|
Gross amounts not offset in the balance sheet
|
|
|
||||||||||||||
|
|
|
Gross amounts of recognized assets
|
|
Gross amounts offset in the balance sheet
|
|
Net amounts of assets presented in the balance sheet
|
|
Financial instruments
|
|
Cash collateral received
|
|
Net amount
|
||||||||||||
March 31, 2014:
|
|
|
|||||||||||||||||||||||
|
Call Options (a)
|
|
$
|
128.5
|
|
|
$
|
—
|
|
|
$
|
128.5
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
128.5
|
|
December 31, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Call Options
|
|
156.2
|
|
|
—
|
|
|
156.2
|
|
|
—
|
|
|
—
|
|
|
156.2
|
|
|
Three months ended
|
||||||
|
March 31,
|
||||||
|
2014
|
|
2013
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net income (loss)
|
$
|
(228.0
|
)
|
|
$
|
11.9
|
|
Adjustments to reconcile net income to net cash from operating activities:
|
|
|
|
|
|||
Amortization and depreciation
|
73.8
|
|
|
87.1
|
|
||
Income taxes
|
57.7
|
|
|
22.1
|
|
||
Insurance liabilities
|
74.0
|
|
|
142.9
|
|
||
Accrual and amortization of investment income
|
(47.9
|
)
|
|
(115.2
|
)
|
||
Deferral of policy acquisition costs
|
(56.7
|
)
|
|
(53.5
|
)
|
||
Net realized investment gains
|
(23.4
|
)
|
|
(15.3
|
)
|
||
Payment to reinsurer pursuant to long-term care business reinsured
|
(590.3
|
)
|
|
—
|
|
||
Loss on sale of subsidiary
|
278.6
|
|
|
—
|
|
||
Loss on extinguishment of debt
|
—
|
|
|
57.7
|
|
||
Other
|
(18.1
|
)
|
|
(23.1
|
)
|
||
Net cash from operating activities
|
$
|
(480.3
|
)
|
(a)
|
$
|
114.6
|
|
(a)
|
Cash flows from operating activities reflect outflows in the 2014 period due to the payment to reinsurer to transfer certain long-term care business.
|
|
Three months ended
|
||||||
|
March 31,
|
||||||
|
2014
|
|
2013
|
||||
Stock options, restricted stock and performance units
|
$
|
3.6
|
|
|
$
|
3.3
|
|
|
March 31, 2014
|
||||||||||
|
VIEs
|
|
Eliminations
|
|
Net effect on
consolidated
balance sheet
|
||||||
Assets:
|
|
|
|
|
|
||||||
Investments held by variable interest entities
|
$
|
1,134.1
|
|
|
$
|
—
|
|
|
$
|
1,134.1
|
|
Notes receivable of VIEs held by insurance subsidiaries
|
—
|
|
|
(133.5
|
)
|
|
(133.5
|
)
|
|||
Cash and cash equivalents held by variable interest entities
|
140.3
|
|
|
—
|
|
|
140.3
|
|
|||
Accrued investment income
|
2.4
|
|
|
—
|
|
|
2.4
|
|
|||
Income tax assets, net
|
6.4
|
|
|
(2.2
|
)
|
|
4.2
|
|
|||
Other assets
|
35.5
|
|
|
(.8
|
)
|
|
34.7
|
|
|||
Total assets
|
$
|
1,318.7
|
|
|
$
|
(136.5
|
)
|
|
$
|
1,182.2
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|||
Other liabilities
|
$
|
173.9
|
|
|
$
|
(3.3
|
)
|
|
$
|
170.6
|
|
Borrowings related to variable interest entities
|
1,019.4
|
|
|
—
|
|
|
1,019.4
|
|
|||
Notes payable of VIEs held by insurance subsidiaries
|
137.5
|
|
|
(137.5
|
)
|
|
—
|
|
|||
Total liabilities
|
$
|
1,330.8
|
|
|
$
|
(140.8
|
)
|
|
$
|
1,190.0
|
|
|
December 31, 2013
|
||||||||||
|
VIEs
|
|
Eliminations
|
|
Net effect on
consolidated
balance sheet
|
||||||
Assets:
|
|
|
|
|
|
||||||
Investments held by variable interest entities
|
$
|
1,046.7
|
|
|
$
|
—
|
|
|
$
|
1,046.7
|
|
Notes receivable of VIEs held by insurance subsidiaries
|
—
|
|
|
(108.5
|
)
|
|
(108.5
|
)
|
|||
Cash and cash equivalents held by variable interest entities
|
104.3
|
|
|
—
|
|
|
104.3
|
|
|||
Accrued investment income
|
1.9
|
|
|
—
|
|
|
1.9
|
|
|||
Income tax assets, net
|
5.4
|
|
|
(2.5
|
)
|
|
2.9
|
|
|||
Other assets
|
22.6
|
|
|
(.9
|
)
|
|
21.7
|
|
|||
Total assets
|
$
|
1,180.9
|
|
|
$
|
(111.9
|
)
|
|
$
|
1,069.0
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|||
Other liabilities
|
$
|
66.0
|
|
|
$
|
(4.0
|
)
|
|
$
|
62.0
|
|
Borrowings related to variable interest entities
|
1,012.3
|
|
|
—
|
|
|
1,012.3
|
|
|||
Notes payable of VIEs held by insurance subsidiaries
|
112.5
|
|
|
(112.5
|
)
|
|
—
|
|
|||
Total liabilities
|
$
|
1,190.8
|
|
|
$
|
(116.5
|
)
|
|
$
|
1,074.3
|
|
|
Amortized
cost
|
|
Estimated
fair
value
|
||||
|
(Dollars in millions)
|
||||||
Due in one year or less
|
$
|
3.6
|
|
|
$
|
3.5
|
|
Due after one year through five years
|
370.2
|
|
|
370.9
|
|
||
Due after five years through ten years
|
759.7
|
|
|
759.7
|
|
||
Total
|
$
|
1,133.5
|
|
|
$
|
1,134.1
|
|
•
|
Level 1 – includes assets and liabilities valued using inputs that are unadjusted quoted prices in active markets for identical assets or liabilities. Our Level 1 assets primarily include cash and exchange traded securities.
|
•
|
Level 2 – includes assets and liabilities valued using inputs that are quoted prices for similar assets in an active market, quoted prices for identical or similar assets in a market that is not active, observable inputs, or observable inputs that can be corroborated by market data. Level 2 assets and liabilities include those financial instruments that are valued by independent pricing services using models or other valuation methodologies. These models consider various inputs such as interest rate, credit or issuer spreads, reported trades and other inputs that are observable or derived from observable information in the marketplace or are supported by observable levels at which transactions are executed in the marketplace. Financial assets in this category primarily include: certain public and privately placed corporate fixed maturity securities; certain government or agency securities; certain mortgage and asset-backed securities; certain equity securities; most investments held by our consolidated VIEs; certain mutual fund and hedge fund investments; and most short-term investments; and non-exchange-traded derivatives such as call options to hedge liabilities related to our fixed index annuity products. Financial liabilities in this category include investment borrowings, notes payable and borrowings related to VIEs.
|
•
|
Level 3 – includes assets and liabilities valued using unobservable inputs that are used in model-based valuations that contain management assumptions. Level 3 assets and liabilities include those financial instruments whose fair value is estimated based on broker/dealer quotes, pricing services or internally developed models or methodologies utilizing significant inputs not based on, or corroborated by, readily available market information. Financial assets in this category include certain corporate securities (primarily certain below-investment grade privately placed securities), certain structured securities, mortgage loans, and other less liquid securities. Financial liabilities in this category include our insurance liabilities for interest-sensitive products, which includes embedded derivatives (including embedded derivatives related to our fixed index annuity products and to a modified coinsurance arrangement) since their values include significant unobservable inputs including actuarial assumptions.
|
|
Quoted prices in active markets
for identical assets or liabilities (Level 1) |
|
Significant other observable inputs
(Level 2)
|
|
Significant unobservable inputs
(Level 3)
|
|
Total
|
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Fixed maturities, available for sale:
|
|
|
|
|
|
|
|
||||||||
Corporate securities
|
$
|
—
|
|
|
$
|
13,270.5
|
|
|
$
|
336.8
|
|
|
$
|
13,607.3
|
|
United States Treasury securities and obligations of United States government corporations and agencies
|
—
|
|
|
146.2
|
|
|
—
|
|
|
146.2
|
|
||||
States and political subdivisions
|
—
|
|
|
2,070.8
|
|
|
—
|
|
|
2,070.8
|
|
||||
Asset-backed securities
|
—
|
|
|
1,318.8
|
|
|
42.2
|
|
|
1,361.0
|
|
||||
Collateralized debt obligations
|
—
|
|
|
273.7
|
|
|
14.1
|
|
|
287.8
|
|
||||
Commercial mortgage-backed securities
|
—
|
|
|
1,229.9
|
|
|
—
|
|
|
1,229.9
|
|
||||
Mortgage pass-through securities
|
—
|
|
|
8.5
|
|
|
.4
|
|
|
8.9
|
|
||||
Collateralized mortgage obligations
|
—
|
|
|
1,431.9
|
|
|
—
|
|
|
1,431.9
|
|
||||
Total fixed maturities, available for sale
|
—
|
|
|
19,750.3
|
|
|
393.5
|
|
|
20,143.8
|
|
||||
Equity securities - corporate securities
|
103.0
|
|
|
149.2
|
|
|
25.4
|
|
|
277.6
|
|
||||
Trading securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate securities
|
—
|
|
|
51.3
|
|
|
—
|
|
|
51.3
|
|
||||
United States Treasury securities and obligations of United States government corporations and agencies
|
—
|
|
|
4.3
|
|
|
—
|
|
|
4.3
|
|
||||
States and political subdivisions
|
—
|
|
|
14.7
|
|
|
—
|
|
|
14.7
|
|
||||
Asset-backed securities
|
—
|
|
|
20.9
|
|
|
—
|
|
|
20.9
|
|
||||
Commercial mortgage-backed securities
|
—
|
|
|
111.7
|
|
|
—
|
|
|
111.7
|
|
||||
Mortgage pass-through securities
|
—
|
|
|
.1
|
|
|
—
|
|
|
.1
|
|
||||
Collateralized mortgage obligations
|
—
|
|
|
24.7
|
|
|
5.9
|
|
|
30.6
|
|
||||
Equity securities
|
1.9
|
|
|
—
|
|
|
—
|
|
|
1.9
|
|
||||
Total trading securities
|
1.9
|
|
|
227.7
|
|
|
5.9
|
|
|
235.5
|
|
||||
Investments held by variable interest entities - corporate securities
|
—
|
|
|
1,134.1
|
|
|
—
|
|
|
1,134.1
|
|
||||
Other invested assets - derivatives
|
1.0
|
|
|
124.2
|
|
|
—
|
|
|
125.2
|
|
||||
Assets held in separate accounts
|
—
|
|
|
10.0
|
|
|
—
|
|
|
10.0
|
|
||||
Assets of subsidiary being sold
|
—
|
|
|
3,447.8
|
|
|
58.9
|
|
|
3,506.7
|
|
||||
Total assets carried at fair value by category
|
$
|
105.9
|
|
|
$
|
24,843.3
|
|
|
$
|
483.7
|
|
|
$
|
25,432.9
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Liabilities for insurance products:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest-sensitive products - embedded derivatives associated with fixed index annuity products
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
930.8
|
|
|
$
|
930.8
|
|
Interest-sensitive products - embedded derivatives associated with modified coinsurance agreement
|
—
|
|
|
—
|
|
|
3.4
|
|
|
3.4
|
|
||||
Total liabilities for insurance products
|
—
|
|
|
—
|
|
|
934.2
|
|
|
934.2
|
|
||||
Total liabilities carried at fair value by category
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
934.2
|
|
|
$
|
934.2
|
|
|
Quoted prices in active markets
for identical assets or liabilities
(Level 1)
|
|
Significant other observable inputs
(Level 2)
|
|
Significant unobservable inputs
(Level 3)
|
|
Total
|
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Fixed maturities, available for sale:
|
|
|
|
|
|
|
|
||||||||
Corporate securities
|
$
|
—
|
|
|
$
|
15,313.8
|
|
|
$
|
359.6
|
|
|
$
|
15,673.4
|
|
United States Treasury securities and obligations of United States government corporations and agencies
|
—
|
|
|
73.1
|
|
|
—
|
|
|
73.1
|
|
||||
States and political subdivisions
|
—
|
|
|
2,204.4
|
|
|
—
|
|
|
2,204.4
|
|
||||
Asset-backed securities
|
—
|
|
|
1,419.9
|
|
|
42.2
|
|
|
1,462.1
|
|
||||
Collateralized debt obligations
|
—
|
|
|
47.3
|
|
|
246.7
|
|
|
294.0
|
|
||||
Commercial mortgage-backed securities
|
—
|
|
|
1,609.0
|
|
|
—
|
|
|
1,609.0
|
|
||||
Mortgage pass-through securities
|
—
|
|
|
11.8
|
|
|
1.6
|
|
|
13.4
|
|
||||
Collateralized mortgage obligations
|
—
|
|
|
1,848.9
|
|
|
—
|
|
|
1,848.9
|
|
||||
Total fixed maturities, available for sale
|
—
|
|
|
22,528.2
|
|
|
650.1
|
|
|
23,178.3
|
|
||||
Equity securities - corporate securities
|
79.6
|
|
|
145.2
|
|
|
24.5
|
|
|
249.3
|
|
||||
Trading securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate securities
|
—
|
|
|
45.2
|
|
|
—
|
|
|
45.2
|
|
||||
United States Treasury securities and obligations of United States government corporations and agencies
|
—
|
|
|
4.6
|
|
|
—
|
|
|
4.6
|
|
||||
States and political subdivisions
|
—
|
|
|
14.1
|
|
|
—
|
|
|
14.1
|
|
||||
Asset-backed securities
|
—
|
|
|
24.3
|
|
|
—
|
|
|
24.3
|
|
||||
Commercial mortgage-backed securities
|
—
|
|
|
125.8
|
|
|
—
|
|
|
125.8
|
|
||||
Mortgage pass-through securities
|
—
|
|
|
.1
|
|
|
—
|
|
|
.1
|
|
||||
Collateralized mortgage obligations
|
—
|
|
|
31.1
|
|
|
—
|
|
|
31.1
|
|
||||
Equity securities
|
2.4
|
|
|
—
|
|
|
—
|
|
|
2.4
|
|
||||
Total trading securities
|
2.4
|
|
|
245.2
|
|
|
—
|
|
|
247.6
|
|
||||
Investments held by variable interest entities - corporate securities
|
—
|
|
|
1,046.7
|
|
|
—
|
|
|
1,046.7
|
|
||||
Other invested assets - derivatives
|
.6
|
|
|
156.2
|
|
|
—
|
|
|
156.8
|
|
||||
Assets held in separate accounts
|
—
|
|
|
10.3
|
|
|
—
|
|
|
10.3
|
|
||||
Total assets carried at fair value by category
|
$
|
82.6
|
|
|
$
|
24,131.8
|
|
|
$
|
674.6
|
|
|
$
|
24,889.0
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Liabilities for insurance products:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest-sensitive products - embedded derivatives associated with fixed index annuity products
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
903.7
|
|
|
$
|
903.7
|
|
Interest-sensitive products - embedded derivatives associated with modified coinsurance agreement
|
—
|
|
|
—
|
|
|
1.8
|
|
|
1.8
|
|
||||
Total liabilities for insurance products
|
—
|
|
|
—
|
|
|
905.5
|
|
|
905.5
|
|
||||
Total liabilities carried at fair value by category
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
905.5
|
|
|
$
|
905.5
|
|
|
March 31, 2014
|
||||||||||||||||||
|
Quoted prices in active markets for identical assets or liabilities
(Level 1)
|
|
Significant other observable inputs
(Level 2)
|
|
Significant unobservable inputs
(Level 3)
|
|
Total estimated fair value
|
|
Total carrying amount
|
||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Mortgage loans
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,533.6
|
|
|
$
|
1,533.6
|
|
|
$
|
1,501.7
|
|
Policy loans
|
—
|
|
|
—
|
|
|
102.6
|
|
|
102.6
|
|
|
102.6
|
|
|||||
Other invested assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Company-owned life insurance
|
—
|
|
|
144.6
|
|
|
—
|
|
|
144.6
|
|
|
144.6
|
|
|||||
Alternative investment funds
|
—
|
|
|
83.7
|
|
|
—
|
|
|
83.7
|
|
|
83.7
|
|
|||||
Cash and cash equivalents:
|
|
|
|
|
|
|
|
|
|
||||||||||
Unrestricted
|
160.9
|
|
|
124.5
|
|
|
—
|
|
|
285.4
|
|
|
285.4
|
|
|||||
Held by variable interest entities
|
140.3
|
|
|
—
|
|
|
—
|
|
|
140.3
|
|
|
140.3
|
|
|||||
Assets of subsidiary being sold
|
45.5
|
|
|
4.5
|
|
|
429.4
|
|
|
479.4
|
|
|
466.0
|
|
|||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Policyholder account balances (a)
|
—
|
|
|
—
|
|
|
10,625.3
|
|
|
10,625.3
|
|
|
10,625.3
|
|
|||||
Investment borrowings
|
—
|
|
|
1,497.3
|
|
|
—
|
|
|
1,497.3
|
|
|
1,499.4
|
|
|||||
Borrowings related to variable interest entities
|
—
|
|
|
980.5
|
|
|
—
|
|
|
980.5
|
|
|
1,019.4
|
|
|||||
Notes payable – direct corporate obligations
|
—
|
|
|
870.3
|
|
|
—
|
|
|
870.3
|
|
|
844.1
|
|
|||||
Liabilities of subsidiary being sold
|
—
|
|
|
416.4
|
|
|
2,096.9
|
|
|
2,513.3
|
|
|
2,480.4
|
|
|
December 31, 2013
|
||||||||||||||||||
|
Quoted prices in active markets for identical assets or liabilities
(Level 1)
|
|
Significant other observable inputs
(Level 2)
|
|
Significant unobservable inputs
(Level 3)
|
|
Total estimated fair value
|
|
Total carrying amount
|
||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Mortgage loans
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,749.5
|
|
|
$
|
1,749.5
|
|
|
$
|
1,729.5
|
|
Policy loans
|
—
|
|
|
—
|
|
|
277.0
|
|
|
277.0
|
|
|
277.0
|
|
|||||
Other invested assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Company-owned life insurance
|
—
|
|
|
144.8
|
|
|
—
|
|
|
144.8
|
|
|
144.8
|
|
|||||
Alternative investment funds
|
—
|
|
|
67.6
|
|
|
—
|
|
|
67.6
|
|
|
67.6
|
|
|||||
Cash and cash equivalents:
|
|
|
|
|
|
|
|
|
|
||||||||||
Unrestricted
|
457.8
|
|
|
241.2
|
|
|
—
|
|
|
699.0
|
|
|
699.0
|
|
|||||
Held by variable interest entities
|
104.3
|
|
|
—
|
|
|
—
|
|
|
104.3
|
|
|
104.3
|
|
|||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Policyholder account balances (a)
|
—
|
|
|
—
|
|
|
12,776.4
|
|
|
12,776.4
|
|
|
12,776.4
|
|
|||||
Investment borrowings
|
—
|
|
|
1,948.5
|
|
|
—
|
|
|
1,948.5
|
|
|
1,900.0
|
|
|||||
Borrowings related to variable interest entities
|
—
|
|
|
993.7
|
|
|
—
|
|
|
993.7
|
|
|
1,012.3
|
|
|||||
Notes payable – direct corporate obligations
|
—
|
|
|
872.5
|
|
|
—
|
|
|
872.5
|
|
|
856.4
|
|
(a)
|
The estimated fair value of insurance liabilities for policyholder account balances was approximately equal to its carrying value at
March 31, 2014
and
December 31, 2013
. This was because interest rates credited on the vast majority of account balances approximate current rates paid on similar products and because these rates are not generally guaranteed beyond one year.
|
|
|
March 31, 2014
|
|
|
||||||||||||||||||||||||||||||||
|
|
Beginning balance as of December 31, 2013
|
|
Purchases, sales, issuances and settlements, net (b)
|
|
Total realized and unrealized gains (losses) included in net income
|
|
Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)
|
|
Transfers into Level 3
|
|
Transfers out of Level 3 (a)
|
|
Amounts classified as Assets of subsidiary being sold
|
|
Ending balance as of March 31, 2014
|
|
Amount of total gains (losses) for the three months ended March 31, 2014 included in our net income relating to assets and liabilities still held as of the reporting date
|
||||||||||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Fixed maturities, available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Corporate securities
|
|
$
|
359.6
|
|
|
$
|
(13.6
|
)
|
|
$
|
.1
|
|
|
$
|
7.5
|
|
|
$
|
31.5
|
|
|
$
|
—
|
|
|
$
|
(48.3
|
)
|
|
$
|
336.8
|
|
|
$
|
—
|
|
Asset-backed securities
|
|
42.2
|
|
|
(.3
|
)
|
|
—
|
|
|
1.9
|
|
|
7.9
|
|
|
—
|
|
|
(9.5
|
)
|
|
42.2
|
|
|
—
|
|
|||||||||
Collateralized debt obligations
|
|
246.7
|
|
|
(4.4
|
)
|
|
—
|
|
|
(.1
|
)
|
|
12.6
|
|
|
(240.7
|
)
|
|
—
|
|
|
14.1
|
|
|
—
|
|
|||||||||
Mortgage pass-through securities
|
|
1.6
|
|
|
(.1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1.1
|
)
|
|
.4
|
|
|
—
|
|
|||||||||
Total fixed maturities, available for sale
|
|
650.1
|
|
|
(18.4
|
)
|
|
.1
|
|
|
9.3
|
|
|
52.0
|
|
|
(240.7
|
)
|
|
(58.9
|
)
|
|
393.5
|
|
|
—
|
|
|||||||||
Equity securities - corporate securities
|
|
24.5
|
|
|
.9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
25.4
|
|
|
—
|
|
|||||||||
Trading securities - collateralized mortgage obligations
|
|
—
|
|
|
—
|
|
|
—
|
|
|
.1
|
|
|
5.8
|
|
|
—
|
|
|
—
|
|
|
5.9
|
|
|
.1
|
|
|||||||||
Assets of subsidiary being sold
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
58.9
|
|
|
58.9
|
|
|
—
|
|
|||||||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Liabilities for insurance products:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest-sensitive products - embedded derivatives associated with fixed index annuity products
|
|
(903.7
|
)
|
|
(11.1
|
)
|
|
(16.0
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(930.8
|
)
|
|
(16.0
|
)
|
|||||||||
Interest-sensitive products - embedded derivatives associated with modified coinsurance agreement
|
|
(1.8
|
)
|
|
(1.6
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3.4
|
)
|
|
—
|
|
|||||||||
Total liabilities for insurance products
|
|
(905.5
|
)
|
|
(12.7
|
)
|
|
(16.0
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(934.2
|
)
|
|
(16.0
|
)
|
(a)
|
For our fixed maturity securities, the majority of our transfers out of Level 3 are the result of obtaining a valuation from an independent pricing service at the end of the period, whereas a broker quote was used as of the beginning of the period.
|
(b)
|
Purchases, sales, issuances and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period. Such activity primarily consists of purchases and sales of fixed maturity and equity securities and changes to embedded derivative instruments related to insurance products resulting from the issuance of new contracts, or changes to existing contracts. The following summarizes such activity for the
three
months ended
March 31, 2014
(dollars in millions):
|
|
Purchases
|
|
Sales
|
|
Issuances
|
|
Settlements
|
|
Purchases, sales, issuances and settlements, net
|
||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Fixed maturities, available for sale:
|
|
|
|
|
|
|
|
|
|
||||||||||
Corporate securities
|
$
|
—
|
|
|
$
|
(13.6
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(13.6
|
)
|
Asset-backed securities
|
—
|
|
|
(.3
|
)
|
|
—
|
|
|
—
|
|
|
(.3
|
)
|
|||||
Collateralized debt obligations
|
.9
|
|
|
(5.3
|
)
|
|
—
|
|
|
—
|
|
|
(4.4
|
)
|
|||||
Mortgage pass-through securities
|
—
|
|
|
(.1
|
)
|
|
—
|
|
|
—
|
|
|
(.1
|
)
|
|||||
Total fixed maturities, available for sale
|
.9
|
|
|
(19.3
|
)
|
|
—
|
|
|
—
|
|
|
(18.4
|
)
|
|||||
Equity securities - corporate securities
|
—
|
|
|
.9
|
|
|
—
|
|
|
—
|
|
|
.9
|
|
|||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Liabilities for insurance products:
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest-sensitive products - embedded derivatives associated with fixed index annuity products
|
(26.6
|
)
|
|
3.1
|
|
|
(2.1
|
)
|
|
14.5
|
|
|
(11.1
|
)
|
|||||
Interest-sensitive products - embedded derivatives associated with modified coinsurance agreement
|
—
|
|
|
—
|
|
|
(1.6
|
)
|
|
—
|
|
|
(1.6
|
)
|
|||||
Total liabilities for insurance products
|
(26.6
|
)
|
|
3.1
|
|
|
(3.7
|
)
|
|
14.5
|
|
|
(12.7
|
)
|
|
March 31, 2013
|
|
|||||||||||||||||||||||||||||
|
Beginning balance as of December 31, 2012
|
|
Purchases, sales, issuances and settlements, net (b)
|
|
Total realized and unrealized gains (losses) included in net income
|
|
Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)
|
|
Transfers into Level 3
|
|
Transfers out of Level 3 (a)
|
|
Ending balance as of March 31, 2013
|
|
Amount of total gains (losses) for the three months ended March 31, 2013 included in our net income relating to assets and liabilities still held as of the reporting date
|
||||||||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Fixed maturities, available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Corporate securities
|
$
|
355.5
|
|
|
$
|
17.0
|
|
|
$
|
—
|
|
|
$
|
(3.8
|
)
|
|
$
|
—
|
|
|
$
|
(12.4
|
)
|
|
$
|
356.3
|
|
|
$
|
—
|
|
States and political subdivisions
|
13.1
|
|
|
—
|
|
|
—
|
|
|
.6
|
|
|
1.3
|
|
|
—
|
|
|
15.0
|
|
|
—
|
|
||||||||
Asset-backed securities
|
44.0
|
|
|
6.8
|
|
|
—
|
|
|
(.8
|
)
|
|
.6
|
|
|
(4.0
|
)
|
|
46.6
|
|
|
—
|
|
||||||||
Collateralized debt obligations
|
324.0
|
|
|
(19.1
|
)
|
|
.2
|
|
|
4.6
|
|
|
—
|
|
|
—
|
|
|
309.7
|
|
|
—
|
|
||||||||
Commercial mortgage-backed securities
|
6.2
|
|
|
(.2
|
)
|
|
—
|
|
|
.1
|
|
|
—
|
|
|
(2.3
|
)
|
|
3.8
|
|
|
—
|
|
||||||||
Mortgage pass-through securities
|
1.9
|
|
|
(.1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1.8
|
|
|
—
|
|
||||||||
Collateralized mortgage obligations
|
16.9
|
|
|
24.8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5.1
|
)
|
|
36.6
|
|
|
—
|
|
||||||||
Total fixed maturities, available for sale
|
761.6
|
|
|
29.2
|
|
|
.2
|
|
|
.7
|
|
|
1.9
|
|
|
(23.8
|
)
|
|
769.8
|
|
|
—
|
|
||||||||
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Corporate securities
|
.1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
.1
|
|
|
—
|
|
||||||||
Venture capital investments
|
2.8
|
|
|
—
|
|
|
—
|
|
|
.3
|
|
|
—
|
|
|
—
|
|
|
3.1
|
|
|
—
|
|
||||||||
Total equity securities
|
2.9
|
|
|
—
|
|
|
—
|
|
|
.3
|
|
|
—
|
|
|
—
|
|
|
3.2
|
|
|
—
|
|
||||||||
Trading securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
States and political subdivisions
|
.6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
.6
|
|
|
—
|
|
||||||||
Collateralized debt obligations
|
7.3
|
|
|
(7.7
|
)
|
|
.6
|
|
|
(.2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Collateralized mortgage obligations
|
5.8
|
|
|
—
|
|
|
—
|
|
|
(.1
|
)
|
|
—
|
|
|
—
|
|
|
5.7
|
|
|
—
|
|
||||||||
Total trading securities
|
13.7
|
|
|
(7.7
|
)
|
|
.6
|
|
|
(.3
|
)
|
|
—
|
|
|
—
|
|
|
6.3
|
|
|
—
|
|
||||||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities for insurance products:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Interest-sensitive products - embedded derivatives associated with fixed index annuity products
|
(734.0
|
)
|
|
(63.1
|
)
|
|
2.8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(794.3
|
)
|
|
2.8
|
|
||||||||
Interest-sensitive products - embedded derivatives associated with modified coinsurance agreement
|
(5.5
|
)
|
|
.4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5.1
|
)
|
|
—
|
|
||||||||
Total liabilities for insurance products
|
(739.5
|
)
|
|
(62.7
|
)
|
|
2.8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(799.4
|
)
|
|
2.8
|
|
(a)
|
For our fixed maturity securities, the majority of our transfers out of Level 3 are the result of obtaining a valuation from an independent pricing service which utilized observable inputs at the end of the period, whereas a broker quote was used as of the beginning of the period.
|
(b)
|
Purchases, sales, issuances and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period. Such activity primarily consists of purchases and sales of fixed maturity and equity securities and changes to embedded derivative instruments related to insurance products resulting from the issuance of new contracts, or changes to existing contracts. The following summarizes such activity for the
three
months ended
March 31, 2013
(dollars in millions):
|
|
Purchases
|
|
Sales
|
|
Issuances
|
|
Settlements
|
|
Purchases, sales, issuances and settlements, net
|
||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Fixed maturities, available for sale:
|
|
|
|
|
|
|
|
|
|
||||||||||
Corporate securities
|
$
|
17.0
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
17.0
|
|
Asset-backed securities
|
7.6
|
|
|
(.8
|
)
|
|
—
|
|
|
—
|
|
|
6.8
|
|
|||||
Collateralized debt obligations
|
2.6
|
|
|
(21.7
|
)
|
|
—
|
|
|
—
|
|
|
(19.1
|
)
|
|||||
Commercial mortgage-backed securities
|
—
|
|
|
(.2
|
)
|
|
—
|
|
|
—
|
|
|
(.2
|
)
|
|||||
Mortgage pass-through securities
|
—
|
|
|
(.1
|
)
|
|
—
|
|
|
—
|
|
|
(.1
|
)
|
|||||
Collateralized mortgage obligations
|
24.9
|
|
|
(.1
|
)
|
|
—
|
|
|
—
|
|
|
24.8
|
|
|||||
Total fixed maturities, available for sale
|
52.1
|
|
|
(22.9
|
)
|
|
—
|
|
|
—
|
|
|
29.2
|
|
|||||
Trading securities - collateralized debt obligations
|
—
|
|
|
(7.7
|
)
|
|
—
|
|
|
—
|
|
|
(7.7
|
)
|
|||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Liabilities for insurance products:
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest-sensitive products - embedded derivatives associated with fixed index annuity products
|
(25.1
|
)
|
|
1.4
|
|
|
(50.2
|
)
|
|
10.8
|
|
|
(63.1
|
)
|
|||||
Interest-sensitive products - embedded derivatives associated with modified coinsurance agreement
|
—
|
|
|
.4
|
|
|
—
|
|
|
—
|
|
|
.4
|
|
|||||
Total liabilities for insurance products
|
(25.1
|
)
|
|
1.8
|
|
|
(50.2
|
)
|
|
10.8
|
|
|
(62.7
|
)
|
|
Fair value at March 31, 2014
|
|
Valuation technique(s)
|
|
Unobservable inputs
|
|
Range (weighted average)
|
||
Assets:
|
|
|
|
|
|
|
|
||
Corporate securities (a)
|
$
|
251.2
|
|
|
Discounted cash flow analysis
|
|
Discount margins
|
|
1.60% - 3.20% (2.33%)
|
Asset-backed securities (b)
|
28.3
|
|
|
Discounted cash flow analysis
|
|
Discount margins
|
|
2.06% - 4.30% (3.11%)
|
|
Other assets categorized as Level 3 (c)
|
145.3
|
|
|
Unadjusted third-party price source
|
|
Not applicable
|
|
Not applicable
|
|
Assets of subsidiary being sold:
|
|
|
|
|
|
|
|
||
Corporate securities (a)
|
23.0
|
|
|
Discounted cash flow analysis
|
|
Discount margins
|
|
1.65% - 2.72% (2.21%)
|
|
Asset-backed securities (b)
|
8.5
|
|
|
Discounted cash flow analysis
|
|
Discount margins
|
|
3.50%
|
|
Other assets categorized as Level 3 (c)
|
27.4
|
|
|
Unadjusted third-party price source
|
|
Not applicable
|
|
Not applicable
|
|
Total
|
483.7
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
||
Interest-sensitive products (d)
|
932.4
|
|
|
Discounted projected embedded derivatives
|
|
Projected portfolio yields
|
|
5.35% - 6.63% (5.60%)
|
|
|
|
|
|
|
Discount rates
|
|
0.00 - 3.97% (2.22%)
|
||
|
|
|
|
|
Surrender rates
|
|
2.80% - 54.60% (14.39%)
|
(a)
|
Corporate securities - The significant unobservable input used in the fair value measurement of our corporate securities is discount margin added to a riskless market yield. Significant increases (decreases) in discount margin in isolation would result in a significantly lower (higher) fair value measurement.
|
(b)
|
Asset-backed securities - The significant unobservable input used in the fair value measurement of our asset-backed securities is discount margin added to a riskless market yield. Significant increases (decreases) in discount margin in isolation would result in a significantly lower (higher) fair value measurement.
|
(c)
|
Other assets categorized as Level 3 - For these assets, there were no adjustments to quoted market prices obtained from third-party pricing sources.
|
(d)
|
Interest-sensitive products - The significant unobservable inputs used in the fair value measurement of our interest-sensitive products are projected portfolio yields, discount rates and surrender rates. Increases (decreases) in projected portfolio yields in isolation would lead to a higher (lower) fair value measurement. The discount rate is based on the Treasury rate adjusted by a margin. Increases (decreases) in the discount rates would lead to a lower (higher) fair value measurement. Assumed surrender rates are used to project how long the contracts remain in force. Generally, the longer the contracts are assumed to be in force the higher the fair value of the embedded derivative.
|
|
Fair value at December 31, 2013
|
|
Valuation technique(s)
|
|
Unobservable inputs
|
|
Range (weighted average)
|
||
Assets:
|
|
|
|
|
|
|
|
||
Corporate securities (a)
|
$
|
260.3
|
|
|
Discounted cash flow analysis
|
|
Discount margins
|
|
1.65% - 2.90% (2.36%)
|
Asset-backed securities (b)
|
35.1
|
|
|
Discounted cash flow analysis
|
|
Discount margins
|
|
2.03% - 4.20% (3.09%)
|
|
Collateralized debt obligations (c)
|
240.7
|
|
|
Discounted cash flow analysis
|
|
Recoveries
|
|
64% - 67% (65.8%)
|
|
|
|
|
|
|
Constant prepayment rate
|
|
20%
|
||
|
|
|
|
|
Discount margins
|
|
.95% - 2.00% (1.32%)
|
||
|
|
|
|
|
Annual default rate
|
|
1.14% - 5.57% (3.05%)
|
||
|
|
|
|
|
Portfolio CCC %
|
|
1.52% - 21.79% (12.57%)
|
||
Equity security (d)
|
24.5
|
|
|
Cost approach
|
|
Historical cost
|
|
Not applicable
|
|
Other assets categorized as Level 3 (e)
|
114.0
|
|
|
Unadjusted third-party price source
|
|
Not applicable
|
|
Not applicable
|
|
Total
|
674.6
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
||
Interest-sensitive products (f)
|
905.5
|
|
|
Discounted projected embedded derivatives
|
|
Projected portfolio yields
|
|
5.35% - 6.63% (5.60%)
|
|
|
|
|
|
|
Discount rates
|
|
0.00 - 4.64% (2.47%)
|
||
|
|
|
|
|
Surrender rates
|
|
2.80% - 54.60% (14.39%)
|
(a)
|
Corporate securities - The significant unobservable input used in the fair value measurement of our corporate securities is discount margin added to a riskless market yield. Significant increases (decreases) in discount margin in isolation would result in a significantly lower (higher) fair value measurement.
|
(b)
|
Asset-backed securities - The significant unobservable input used in the fair value measurement of our asset-backed securities is discount margin added to a riskless market yield. Significant increases (decreases) in discount margin in isolation would result in a significantly lower (higher) fair value measurement.
|
(c)
|
Collateralized debt obligations - The significant unobservable inputs used in the fair value measurement of our collateralized debt obligations relate to collateral performance, including default rate, recoveries and constant prepayment rate, as well as discount margins of the underlying collateral. Significant increases (decreases) in default rate in isolation would result in a significantly lower (higher) fair value measurement. Generally, a significant increase (decrease) in the constant prepayment rate and recoveries in isolation would result in a significantly higher (lower) fair value measurement. Generally a significant increase (decrease) in discount margin in isolation would result in a significantly lower (higher) fair value measurement. Generally, a change in the assumption used for the annual default rate is accompanied by a directionally similar change in the assumption used for discount margins and portfolio CCC % and a directionally opposite change in the assumption used for constant prepayment rate and recoveries. A tranche's payment priority and investment cost basis could alter generalized fair value outcomes.
|
(d)
|
Equity security - The significant unobservable input used in the fair value measurement of this equity security is historical cost as that is the amount that would be required to replace the security with a comparable security. The amount represents an investment in an entity that is currently in the construction phase of a manufacturing facility. The fair value measurement is sensitive to the construction phase and operational risk of the security.
|
(e)
|
Other assets categorized as Level 3 - For these assets, there were no adjustments to quoted market prices obtained from third-party pricing sources.
|
(f)
|
Interest-sensitive products - The significant unobservable inputs used in the fair value measurement of our interest-sensitive products are projected portfolio yields, discount rates and surrender rates. Increases (decreases) in projected portfolio yields in isolation would lead to a higher (lower) fair value measurement. The discount rate is based on the Treasury rate adjusted by a margin. Increases (decreases) in the discount rates would lead to a lower (higher) fair value measurement. Assumed surrender rates are used to project how long the contracts remain in force. Generally, the longer the contracts are assumed to be in force the higher the fair value of the embedded derivative.
|
ITEM 2.
|
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
|
•
|
changes in or sustained low interest rates causing reductions in investment income, the margins of our fixed annuity and life insurance businesses, and sales of, and demand for, our products;
|
•
|
expectations of lower future investment earnings may cause us to accelerate amortization, write down the balance of insurance acquisition costs or establish additional liabilities for insurance products;
|
•
|
general economic, market and political conditions, including the performance of the financial markets which may affect the value of our investments as well as our ability to raise capital or refinance existing indebtedness and the cost of doing so;
|
•
|
the ultimate outcome of lawsuits filed against us and other legal and regulatory proceedings to which we are subject;
|
•
|
our ability to make anticipated changes to certain non-guaranteed elements of our life insurance products;
|
•
|
our ability to obtain adequate and timely rate increases on our health products, including our long-term care business;
|
•
|
the receipt of any required regulatory approvals for dividend and surplus debenture interest payments from our insurance subsidiaries;
|
•
|
mortality, morbidity, the increased cost and usage of health care services, persistency, the adequacy of our previous reserve estimates and other factors which may affect the profitability of our insurance products;
|
•
|
changes in our assumptions related to deferred acquisition costs or the present value of future profits;
|
•
|
the recoverability of our deferred tax assets and the effect of potential ownership changes and tax rate changes on their value;
|
•
|
our assumption that the positions we take on our tax return filings will not be successfully challenged by the IRS;
|
•
|
changes in accounting principles and the interpretation thereof (including changes in principles related to accounting for deferred acquisition costs);
|
•
|
our ability to continue to satisfy the financial ratio and balance requirements and other covenants of our debt agreements;
|
•
|
our ability to achieve anticipated expense reductions and levels of operational efficiencies including improvements in claims adjudication and continued automation and rationalization of operating systems;
|
•
|
performance and valuation of our investments, including the impact of realized losses (including other-than-temporary impairment charges);
|
•
|
our ability to identify products and markets in which we can compete effectively against competitors with greater market share, higher ratings, greater financial resources and stronger brand recognition;
|
•
|
our ability to generate sufficient liquidity to meet our debt service obligations and other cash needs;
|
•
|
our ability to maintain effective controls over financial reporting;
|
•
|
our ability to continue to recruit and retain productive agents and distribution partners and customer response to new products, distribution channels and marketing initiatives;
|
•
|
our ability to achieve additional upgrades of the financial strength ratings of CNO and our insurance company subsidiaries as well as the impact of our ratings on our business, our ability to access capital, and the cost of capital;
|
•
|
the risk factors or uncertainties listed from time to time in our filings with the SEC;
|
•
|
regulatory changes or actions, including those relating to regulation of the financial affairs of our insurance companies, such as the payment of dividends and surplus debenture interest to us, regulation of the sale, underwriting and pricing of products, and health care regulation affecting health insurance products;
|
•
|
closing of the sale of CLIC; and
|
•
|
changes in the Federal income tax laws and regulations which may affect or eliminate the relative tax advantages of some of our products or affect the value of our deferred tax assets.
|
•
|
Bankers Life,
which markets and distributes Medicare supplement insurance, interest-sensitive life insurance, traditional life insurance, fixed annuities and long-term care insurance products to the middle-income senior market through a dedicated field force of career agents and sales managers supported by a network of community-based sales offices. The Bankers Life segment includes primarily the business of Bankers Life and Casualty Company. Bankers Life also markets and distributes Medicare Advantage plans primarily through distribution arrangements with Humana, Inc. and United HealthCare and PDP primarily through a distribution arrangement with Coventry.
|
•
|
Washington National,
which markets and distributes supplemental health (including specified disease, accident and hospital indemnity insurance products) and life insurance to middle-income consumers at home and at the worksite. These products are marketed through Performance Matters Associates of Texas, Inc. ("PMA") and through independent marketing organizations and insurance agencies including worksite marketing. The products being marketed are underwritten by Washington National.
|
•
|
Colonial Penn
, which markets primarily graded benefit and simplified issue life insurance directly to customers in the senior middle-income market through television advertising, direct mail, the internet and telemarketing. The Colonial Penn segment includes primarily the business of Colonial Penn Life Insurance Company ("Colonial Penn").
|
|
Three months ended
|
||||||
|
March 31,
|
||||||
|
2014
|
|
2013
|
||||
Income before the loss on the operations of CLIC being sold, the earnings of CLIC being sold, net realized investment gains, fair value changes in embedded derivative liabilities, equity in earnings of certain non-strategic investments and earnings attributable to non-controlling interests, corporate interest expense, loss on extinguishment of debt and income taxes ("EBIT" a non-GAAP financial measure) (a):
|
|
|
|
||||
Bankers Life
|
$
|
84.2
|
|
|
$
|
62.1
|
|
Washington National
|
31.1
|
|
|
34.0
|
|
||
Colonial Penn
|
(6.2
|
)
|
|
(5.4
|
)
|
||
Other CNO Business:
|
|
|
|
||||
Losses from the long-term care business reinsured effective December 31, 2013
|
—
|
|
|
(2.7
|
)
|
||
Overhead expense of CLIC allocated to other segments effective January 1, 2014
|
—
|
|
|
(4.6
|
)
|
||
EBIT from business segments continuing after the CLIC sale
|
109.1
|
|
|
83.4
|
|
||
Corporate operations, excluding corporate interest expense
|
(6.0
|
)
|
|
3.0
|
|
||
EBIT from operations continuing after the CLIC sale
|
103.1
|
|
|
86.4
|
|
||
Corporate interest expense
|
(11.1
|
)
|
|
(15.1
|
)
|
||
Operating earnings before taxes
|
92.0
|
|
|
71.3
|
|
||
Tax expense on operating income
|
32.1
|
|
|
25.7
|
|
||
Net operating income
|
59.9
|
|
|
45.6
|
|
||
Earnings of CLIC being sold (net of taxes)
|
6.7
|
|
|
5.5
|
|
||
Loss on operations of CLIC being sold (including impact of taxes)
|
(298.0
|
)
|
|
—
|
|
||
Net realized investment gains (net of related amortization and taxes)
|
13.6
|
|
|
8.0
|
|
||
Fair value changes in embedded derivative liabilities (net of related amortization and taxes)
|
(7.2
|
)
|
|
1.3
|
|
||
Equity in earnings of certain non-strategic investments and earnings attributable to non-controlling interests (net of taxes)
|
(3.0
|
)
|
|
(1.8
|
)
|
||
Loss on extinguishment of debt (net of taxes)
|
—
|
|
|
(57.2
|
)
|
||
Valuation allowance for deferred tax assets and other tax items (a)
|
—
|
|
|
10.5
|
|
||
Net income (loss)
|
$
|
(228.0
|
)
|
|
$
|
11.9
|
|
Per diluted share:
|
|
|
|
||||
Net operating income
|
$
|
.27
|
|
|
$
|
.19
|
|
Earnings of CLIC being sold (net of taxes)
|
.03
|
|
|
.02
|
|
||
Loss on operations of CLIC being sold (including impact of taxes)
|
(1.35
|
)
|
|
—
|
|
||
Net realized investment gains (net of related amortization and taxes)
|
.06
|
|
|
.04
|
|
||
Fair value changes in embedded derivative liabilities (net of related amortization and taxes)
|
(.03
|
)
|
|
.01
|
|
||
Equity in earnings of certain non-strategic investments and earnings attributable to non-controlling interests (net of taxes)
|
(.01
|
)
|
|
(.01
|
)
|
||
Loss on extinguishment of debt (net of taxes)
|
—
|
|
|
(.24
|
)
|
||
Valuation allowance for deferred tax assets and other tax items (a)
|
—
|
|
|
.04
|
|
||
Net income (loss)
|
$
|
(1.03
|
)
|
|
$
|
.05
|
|
(a)
|
Management believes that an analysis of EBIT provides a clearer comparison of the operating results of the Company from period to period because it excludes: (i) the loss on the operations of CLIC being sold; (ii) the earnings of CLIC being sold; (iii) net realized investment gains or losses, net of related amortization and taxes; (iv) fair value changes due to fluctuations in the interest rates used to discount embedded derivative liabilities related to our fixed index annuities, net of related amortization and taxes; (v) equity in earnings of certain non-strategic investments and earnings attributable to VIEs, net of taxes; (vi) loss on extinguishment of debt, net of taxes; and (vii) changes in the valuation allowance for deferred tax assets. Net realized investment gains or losses include: (i) gains or losses on the sales of investments; (ii) other-than-temporary impairments recognized through net income; and (iii) changes in fair value of certain fixed maturity investments with embedded derivatives. The table above reconciles the non-GAAP measure to the corresponding GAAP measure.
|
|
Three months ended
|
||||||
|
March 31,
|
||||||
|
2014
|
|
2013
|
||||
Pre-tax operating earnings (a non-GAAP measure) (a):
|
|
|
|
||||
Bankers Life
|
$
|
84.2
|
|
|
$
|
62.1
|
|
Washington National
|
31.1
|
|
|
34.0
|
|
||
Colonial Penn
|
(6.2
|
)
|
|
(5.4
|
)
|
||
Corporate operations
|
(17.1
|
)
|
|
(12.1
|
)
|
||
Other CNO Business
|
—
|
|
|
(7.3
|
)
|
||
|
92.0
|
|
|
71.3
|
|
||
Net realized investment gains (losses), net of related amortization:
|
|
|
|
||||
Bankers Life
|
1.5
|
|
|
7.9
|
|
||
Washington National
|
29.1
|
|
|
4.3
|
|
||
Colonial Penn
|
.2
|
|
|
(.3
|
)
|
||
Corporate operations
|
(9.9
|
)
|
|
.5
|
|
||
|
20.9
|
|
|
12.4
|
|
||
Fair value changes in embedded derivative liabilities, net of related amortization:
|
|
|
|
||||
Bankers Life
|
(10.9
|
)
|
|
2.1
|
|
||
Washington National
|
(.1
|
)
|
|
—
|
|
||
|
(11.0
|
)
|
|
2.1
|
|
||
Equity in earnings of certain non-strategic investments and earnings attributable to VIEs:
|
|
|
|
||||
Corporate operations
|
(3.3
|
)
|
|
(1.9
|
)
|
||
Loss on extinguishment of debt:
|
|
|
|
||||
Corporate operations
|
—
|
|
|
(57.7
|
)
|
||
Amounts related to CLIC being sold:
|
|
|
|
||||
Earnings of CLIC being sold
|
10.4
|
|
|
8.4
|
|
||
Loss on sale of CLIC
|
(278.6
|
)
|
|
—
|
|
||
|
(268.2
|
)
|
|
8.4
|
|
||
Income (loss) before income taxes:
|
|
|
|
||||
Bankers Life
|
74.8
|
|
|
72.1
|
|
||
Washington National
|
60.1
|
|
|
38.3
|
|
||
Colonial Penn
|
(6.0
|
)
|
|
(5.7
|
)
|
||
Corporate operations
|
(30.3
|
)
|
|
(71.2
|
)
|
||
Other CNO Business
|
—
|
|
|
(7.3
|
)
|
||
Amount related to CLIC being sold
|
(268.2
|
)
|
|
8.4
|
|
||
Income (loss) before income taxes
|
$
|
(169.6
|
)
|
|
$
|
34.6
|
|
(a)
|
These non-GAAP measures as presented in the above table and in the following segment financial data and discussions of segment results exclude the loss on the operations of CLIC being sold, the earnings of CLIC being sold, net realized investment gains (losses), fair value changes in embedded derivative liabilities, net of related amortization, equity in earnings of certain non-strategic investments and earnings attributable to VIEs,
loss on extinguishment of debt and before income taxes. These are considered non-GAAP financial measures. A non-GAAP measure is a numerical measure of a company's performance, financial position, or cash flows that excludes or includes amounts that are normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP.
|
|
Three months ended
|
||||||
|
March 31,
|
||||||
|
2014
|
|
2013
|
||||
Premium collections:
|
|
|
|
||||
Annuities
|
$
|
190.5
|
|
|
$
|
165.6
|
|
Medicare supplement and other supplemental health
|
315.5
|
|
|
335.1
|
|
||
Life
|
94.0
|
|
|
89.5
|
|
||
Total collections
|
$
|
600.0
|
|
|
$
|
590.2
|
|
Average liabilities for insurance products:
|
|
|
|
||||
Fixed index annuities
|
$
|
3,462.8
|
|
|
$
|
3,038.8
|
|
Deferred annuities
|
3,983.1
|
|
|
4,245.7
|
|
||
SPIAs and supplemental contracts:
|
|
|
|
||||
Mortality based
|
203.1
|
|
|
229.2
|
|
||
Deposit based
|
150.1
|
|
|
158.6
|
|
||
Health:
|
|
|
|
||||
Long-term care
|
4,568.0
|
|
|
4,837.7
|
|
||
Medicare supplement
|
338.2
|
|
|
337.4
|
|
||
Other health
|
46.5
|
|
|
45.1
|
|
||
Life:
|
|
|
|
||||
Interest sensitive
|
533.2
|
|
|
467.6
|
|
||
Non-interest sensitive
|
672.4
|
|
|
570.5
|
|
||
Total average liabilities for insurance products, net of reinsurance ceded
|
$
|
13,957.4
|
|
|
$
|
13,930.6
|
|
Revenues:
|
|
|
|
||||
Insurance policy income
|
$
|
416.3
|
|
|
$
|
418.0
|
|
Net investment income:
|
|
|
|
||||
General account invested assets
|
219.8
|
|
|
212.8
|
|
||
Fixed index products
|
4.6
|
|
|
48.9
|
|
||
Fee revenue and other income
|
5.3
|
|
|
3.7
|
|
||
Total revenues
|
646.0
|
|
|
683.4
|
|
||
Expenses:
|
|
|
|
||||
Insurance policy benefits
|
365.7
|
|
|
373.8
|
|
||
Amounts added to policyholder account balances:
|
|
|
|
||||
Cost of interest credited to policyholders
|
32.9
|
|
|
35.9
|
|
||
Cost of options to fund index credits, net of forfeitures
|
12.0
|
|
|
11.8
|
|
||
Market value changes credited to policyholders
|
4.4
|
|
|
49.0
|
|
||
Amortization related to operations
|
48.2
|
|
|
54.5
|
|
||
Interest expense on investment borrowings
|
1.9
|
|
|
1.4
|
|
||
Other operating costs and expenses
|
96.7
|
|
|
94.9
|
|
||
Total benefits and expenses
|
561.8
|
|
|
621.3
|
|
||
Income before net realized investment gains, net of related amortization, and fair value changes in embedded derivative liabilities, net of related amortization, and income taxes
|
84.2
|
|
|
62.1
|
|
||
Net realized investment gains
|
1.5
|
|
|
8.6
|
|
||
Amortization related to net realized investment gains
|
—
|
|
|
(.7
|
)
|
||
Net realized investment gains, net of related amortization
|
1.5
|
|
|
7.9
|
|
||
Insurance policy benefits - fair value changes in embedded derivative liabilities
|
(14.7
|
)
|
|
3.2
|
|
||
Amortization related to fair value changes in embedded derivative liabilities
|
3.8
|
|
|
(1.1
|
)
|
||
Fair value changes in embedded derivative liabilities, net of related amortization
|
(10.9
|
)
|
|
2.1
|
|
||
Income before income taxes
|
$
|
74.8
|
|
|
$
|
72.1
|
|
|
Three months ended
|
||||||
|
March 31,
|
||||||
|
2014
|
|
2013
|
||||
Health benefit ratios:
|
|
|
|
||||
All health lines:
|
|
|
|
||||
Insurance policy benefits
|
$
|
307.2
|
|
|
$
|
310.8
|
|
Benefit ratio (a)
|
93.0
|
%
|
|
93.4
|
%
|
||
Medicare supplement:
|
|
|
|
||||
Insurance policy benefits
|
$
|
131.6
|
|
|
$
|
129.0
|
|
Benefit ratio (a)
|
67.7
|
%
|
|
68.5
|
%
|
||
PDP:
|
|
|
|
||||
Insurance policy benefits
|
$
|
5.3
|
|
|
$
|
6.7
|
|
Benefit ratio (a)
|
77.9
|
%
|
|
74.9
|
%
|
||
Long-term care:
|
|
|
|
||||
Insurance policy benefits
|
$
|
170.3
|
|
|
$
|
175.1
|
|
Benefit ratio (a)
|
131.9
|
%
|
|
129.4
|
%
|
||
Interest-adjusted benefit ratio (b)
|
81.0
|
%
|
|
81.7
|
%
|
(a)
|
We calculate benefit ratios by dividing the related product's insurance policy benefits by insurance policy income.
|
(b)
|
We calculate the interest-adjusted benefit ratio (a non-GAAP measure) for Bankers Life's long-term care products by dividing such product's insurance policy benefits less the imputed interest income on the accumulated assets backing the insurance liabilities by policy income. These are considered non-GAAP financial measures. A non-GAAP measure is a numerical measure of a company's performance, financial position, or cash flows that excludes or includes amounts that are normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP.
|
|
Three months ended
|
||||||
|
March 31,
|
||||||
|
2014
|
|
2013
|
||||
Commission expense and agent manager benefits
|
$
|
13.8
|
|
|
$
|
16.2
|
|
Other operating expenses
|
82.9
|
|
|
78.7
|
|
||
Total
|
$
|
96.7
|
|
|
$
|
94.9
|
|
|
Three months ended
|
||||||
|
March 31,
|
||||||
|
2014
|
|
2013
|
||||
Premium collections:
|
|
|
|
||||
Supplemental health
|
$
|
125.9
|
|
|
$
|
120.3
|
|
Medicare supplement and other health
|
21.7
|
|
|
27.4
|
|
||
Life
|
6.5
|
|
|
6.3
|
|
||
Annuity
|
.6
|
|
|
.9
|
|
||
Total collections
|
$
|
154.7
|
|
|
$
|
154.9
|
|
Average liabilities for insurance products:
|
|
|
|
||||
Fixed index annuities
|
$
|
433.7
|
|
|
$
|
474.2
|
|
Deferred annuities
|
134.4
|
|
|
157.0
|
|
||
SPIAs and supplemental contracts:
|
|
|
|
||||
Mortality based
|
245.5
|
|
|
250.9
|
|
||
Deposit based
|
249.5
|
|
|
241.9
|
|
||
Separate Accounts
|
10.2
|
|
|
15.2
|
|
||
Health:
|
|
|
|
||||
Supplemental health
|
2,265.3
|
|
|
2,212.0
|
|
||
Medicare supplement
|
36.8
|
|
|
40.4
|
|
||
Other health
|
11.1
|
|
|
12.9
|
|
||
Life:
|
|
|
|
||||
Interest sensitive life
|
165.8
|
|
|
167.1
|
|
||
Non-interest sensitive life
|
194.2
|
|
|
197.2
|
|
||
Total average liabilities for insurance products, net of reinsurance ceded
|
$
|
3,746.5
|
|
|
$
|
3,768.8
|
|
Revenues:
|
|
|
|
||||
Insurance policy income
|
$
|
155.6
|
|
|
$
|
152.9
|
|
Net investment income:
|
|
|
|
||||
General account invested assets
|
68.2
|
|
|
69.8
|
|
||
Fixed index products
|
.9
|
|
|
6.8
|
|
||
Trading account income related to reinsurer accounts
|
1.6
|
|
|
(.4
|
)
|
||
Change in value of embedded derivatives related to modified coinsurance agreements
|
(1.6
|
)
|
|
.4
|
|
||
Trading account income related to policyholder accounts
|
(.1
|
)
|
|
1.3
|
|
||
Fee revenue and other income
|
.2
|
|
|
.2
|
|
||
Total revenues
|
224.8
|
|
|
231.0
|
|
||
Expenses:
|
|
|
|
||||
Insurance policy benefits
|
126.0
|
|
|
123.6
|
|
||
Amounts added to policyholder account balances:
|
|
|
|
||||
Cost of interest credited to policyholders
|
3.4
|
|
|
3.8
|
|
||
Cost of options to fund index credits, net of forfeitures
|
1.5
|
|
|
1.9
|
|
||
Market value changes credited to policyholders
|
.9
|
|
|
8.4
|
|
||
Amortization related to operations
|
16.3
|
|
|
17.1
|
|
||
Interest expense on investment borrowings
|
.4
|
|
|
.5
|
|
||
Other operating costs and expenses
|
45.2
|
|
|
41.7
|
|
||
Total benefits and expenses
|
193.7
|
|
|
197.0
|
|
||
Income before net realized investment gains and fair value changes in embedded derivative liabilities, net of related amortization, and income taxes
|
31.1
|
|
|
34.0
|
|
||
Net realized investment gains
|
29.5
|
|
|
4.4
|
|
||
Amortization related to net realized investment gains
|
(.4
|
)
|
|
(.1
|
)
|
||
Net realized investment gains, net of related amortization
|
29.1
|
|
|
4.3
|
|
||
Insurance policy benefits - fair value changes in embedded derivative liabilities
|
(.5
|
)
|
|
(.1
|
)
|
||
Amortization related to fair value changes in embedded derivative liabilities
|
.4
|
|
|
.1
|
|
||
Fair value changes in embedded derivative liabilities, net of related amortization
|
(.1
|
)
|
|
—
|
|
||
Income before income taxes
|
$
|
60.1
|
|
|
$
|
38.3
|
|
|
Three months ended
|
||||||
|
March 31,
|
||||||
|
2014
|
|
2013
|
||||
Health benefit ratios:
|
|
|
|
||||
Medicare supplement:
|
|
|
|
||||
Insurance policy benefits
|
$
|
14.8
|
|
|
$
|
17.4
|
|
Benefit ratio (a)
|
63.9
|
%
|
|
65.0
|
%
|
||
Supplemental health:
|
|
|
|
||||
Insurance policy benefits
|
$
|
99.0
|
|
|
$
|
93.4
|
|
Benefit ratio (a)
|
79.2
|
%
|
|
79.3
|
%
|
||
Interest-adjusted benefit ratio (b)
|
53.2
|
%
|
|
53.1
|
%
|
(a)
|
We calculate benefit ratios by dividing the related product’s insurance policy benefits by insurance policy income.
|
(b)
|
We calculate the interest-adjusted benefit ratio (a non-GAAP measure) for Washington National's supplemental health products by dividing such product’s insurance policy benefits less the imputed interest income on the accumulated assets backing the insurance liabilities by policy income. These are considered non-GAAP financial measures. A non-GAAP measure is a numerical measure of a company's performance, financial position, or cash flows that excludes or includes amounts that are normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP.
|
|
Three months ended
|
||||||
|
March 31,
|
||||||
|
2014
|
|
2013
|
||||
Premium collections:
|
|
|
|
||||
Life
|
$
|
60.1
|
|
|
$
|
56.1
|
|
Supplemental health
|
.9
|
|
|
1.1
|
|
||
Total collections
|
$
|
61.0
|
|
|
$
|
57.2
|
|
Average liabilities for insurance products:
|
|
|
|
||||
SPIAs - mortality based
|
$
|
69.4
|
|
|
$
|
74.8
|
|
Health:
|
|
|
|
||||
Medicare supplement
|
8.6
|
|
|
9.6
|
|
||
Other health
|
4.5
|
|
|
4.8
|
|
||
Life:
|
|
|
|
||||
Interest sensitive
|
17.1
|
|
|
17.7
|
|
||
Non-interest sensitive
|
644.5
|
|
|
618.1
|
|
||
Total average liabilities for insurance products, net of reinsurance ceded
|
$
|
744.1
|
|
|
$
|
725.0
|
|
Revenues:
|
|
|
|
||||
Insurance policy income
|
$
|
60.5
|
|
|
$
|
56.9
|
|
Net investment income on general account invested assets
|
10.7
|
|
|
9.9
|
|
||
Fee revenue and other income
|
.2
|
|
|
.2
|
|
||
Total revenues
|
71.4
|
|
|
67.0
|
|
||
Expenses:
|
|
|
|
||||
Insurance policy benefits
|
44.5
|
|
|
42.8
|
|
||
Amounts added to annuity and interest-sensitive life product account balances
|
.2
|
|
|
.2
|
|
||
Amortization related to operations
|
4.0
|
|
|
3.7
|
|
||
Other operating costs and expenses
|
28.9
|
|
|
25.7
|
|
||
Total benefits and expenses
|
77.6
|
|
|
72.4
|
|
||
Loss before net realized investment gains (losses) and income taxes
|
(6.2
|
)
|
|
(5.4
|
)
|
||
Net realized investment gains (losses)
|
.2
|
|
|
(.3
|
)
|
||
Loss before income taxes
|
$
|
(6.0
|
)
|
|
$
|
(5.7
|
)
|
|
Three months ended
|
||||||
|
March 31,
|
||||||
|
2014
|
|
2013
|
||||
Corporate operations:
|
|
|
|
||||
Interest expense on corporate debt
|
$
|
(11.1
|
)
|
|
$
|
(15.1
|
)
|
Net investment income (loss):
|
|
|
|
||||
General investment portfolio
|
1.8
|
|
|
1.1
|
|
||
Other special-purpose portfolios:
|
|
|
|
||||
COLI
|
1.0
|
|
|
4.6
|
|
||
Investments held in a rabbi trust
|
.1
|
|
|
.4
|
|
||
Investments in certain hedge funds
|
1.1
|
|
|
.2
|
|
||
Other trading account activities
|
3.0
|
|
|
3.8
|
|
||
Fee revenue and other income
|
1.4
|
|
|
1.7
|
|
||
Interest expense on investment borrowings
|
—
|
|
|
(.1
|
)
|
||
Other operating costs and expenses
|
(14.4
|
)
|
|
(8.7
|
)
|
||
Loss before net realized investment gains (losses), equity in earnings of certain non-strategic investments and earnings attributable to non-controlling interests, loss on extinguishment of debt and income taxes
|
(17.1
|
)
|
|
(12.1
|
)
|
||
Net realized investment gains (losses)
|
(9.9
|
)
|
|
.5
|
|
||
Equity in earnings of certain non-strategic investments and earnings attributable to VIEs
|
(3.3
|
)
|
|
(1.9
|
)
|
||
Loss on extinguishment of debt
|
—
|
|
|
(57.7
|
)
|
||
Loss before income taxes
|
$
|
(30.3
|
)
|
|
$
|
(71.2
|
)
|
|
|
Three months ended
|
||
|
|
March 31,
|
||
|
|
2013
|
||
Premium collections:
|
|
|
||
Long-term care (all renewal)
|
|
$
|
6.3
|
|
|
|
|
||
Average liabilities for insurance products:
|
|
|
||
Average liabilities for long-term care products, net of reinsurance ceded
|
|
$
|
468.0
|
|
|
|
|
||
Revenues:
|
|
|
||
Insurance policy income
|
|
$
|
6.2
|
|
Net investment income on general account invested assets
|
|
8.4
|
|
|
Total revenues
|
|
14.6
|
|
|
Expenses:
|
|
|
||
Insurance policy benefits
|
|
15.6
|
|
|
Other operating costs and expenses:
|
|
|
||
Related to long-term care block reinsured effective December 31, 2013
|
|
1.7
|
|
|
Overhead expense of CLIC expected to continue after the completion of the sale
|
|
4.6
|
|
|
Total benefits and expenses
|
|
21.9
|
|
|
Loss before income taxes
|
|
$
|
(7.3
|
)
|
|
Three months ended
|
||||||
|
March 31,
|
||||||
|
2014
|
|
2013
|
||||
Premium collections:
|
|
|
|
||||
Annuities
|
$
|
—
|
|
|
$
|
.1
|
|
Life
|
36.2
|
|
|
38.4
|
|
||
Total collections
|
$
|
36.2
|
|
|
$
|
38.5
|
|
Average liabilities for insurance products:
|
|
|
|
||||
Fixed index annuities
|
$
|
.8
|
|
|
$
|
—
|
|
Deferred annuities
|
143.9
|
|
|
151.9
|
|
||
SPIAs and supplemental contracts:
|
|
|
|
||||
Mortality based
|
37.7
|
|
|
40.3
|
|
||
Deposit based
|
96.7
|
|
|
111.4
|
|
||
Health:
|
|
|
|
||||
Supplemental health
|
136.3
|
|
|
153.6
|
|
||
Medicare supplement
|
1.9
|
|
|
2.5
|
|
||
Other health
|
6.8
|
|
|
6.8
|
|
||
Life:
|
|
|
|
||||
Interest sensitive
|
2,253.8
|
|
|
2,354.0
|
|
||
Non-interest sensitive
|
421.2
|
|
|
439.9
|
|
||
Total average liabilities for insurance products, net of reinsurance ceded
|
$
|
3,099.1
|
|
|
$
|
3,260.4
|
|
Revenues:
|
|
|
|
||||
Insurance policy income
|
$
|
53.5
|
|
|
$
|
57.2
|
|
Net investment income:
|
|
|
|
||||
General account invested assets
|
51.0
|
|
|
53.2
|
|
||
Fixed index products
|
(.1
|
)
|
|
2.2
|
|
||
Total revenues
|
104.4
|
|
|
112.6
|
|
||
Expenses:
|
|
|
|
||||
Insurance policy benefits
|
61.7
|
|
|
64.6
|
|
||
Amounts added to policyholder account balances:
|
|
|
|
||||
Cost of interest credited to policyholders
|
21.6
|
|
|
23.3
|
|
||
Cost of options to fund index credits, net of forfeitures
|
.4
|
|
|
.4
|
|
||
Market value changes credited to policyholders
|
(.1
|
)
|
|
2.1
|
|
||
Amortization related to operations
|
2.0
|
|
|
2.2
|
|
||
Interest expense on investment borrowings
|
4.7
|
|
|
4.8
|
|
||
Other operating costs and expenses
|
5.8
|
|
|
8.9
|
|
||
Total benefits and expenses
|
96.1
|
|
|
106.3
|
|
||
Income (loss) before net realized investment gains, loss on sale of CLIC and income taxes
|
8.3
|
|
|
6.3
|
|
||
Net realized investment gains
|
2.1
|
|
|
2.1
|
|
||
Earnings of CLIC being sold
|
10.4
|
|
|
8.4
|
|
||
Loss on sale of CLIC
|
(278.6
|
)
|
|
—
|
|
||
Income (loss) before income taxes
|
$
|
(268.2
|
)
|
|
$
|
8.4
|
|
|
Three months ended
|
||||||
|
March 31,
|
||||||
|
2014
|
|
2013
|
||||
EBIT from In-Force Business
|
|
|
|
||||
Revenues:
|
|
|
|
||||
Insurance policy income
|
$
|
541.6
|
|
|
$
|
535.0
|
|
Net investment income and other
|
302.4
|
|
|
350.8
|
|
||
Total revenues
|
844.0
|
|
|
885.8
|
|
||
Benefits and expenses:
|
|
|
|
||||
Insurance policy benefits
|
532.9
|
|
|
595.9
|
|
||
Amortization
|
61.6
|
|
|
68.6
|
|
||
Other expenses
|
82.9
|
|
|
86.4
|
|
||
Total benefits and expenses
|
677.4
|
|
|
750.9
|
|
||
EBIT from In-Force Business
|
$
|
166.6
|
|
|
$
|
134.9
|
|
|
|
|
|
||||
EBIT from New Business
|
|
|
|
||||
Revenues:
|
|
|
|
||||
Insurance policy income
|
$
|
90.8
|
|
|
$
|
99.0
|
|
Net investment income and other
|
7.4
|
|
|
11.2
|
|
||
Total revenues
|
98.2
|
|
|
110.2
|
|
||
Benefits and expenses:
|
|
|
|
||||
Insurance policy benefits
|
58.6
|
|
|
70.9
|
|
||
Amortization
|
6.9
|
|
|
6.7
|
|
||
Other expenses
|
90.2
|
|
|
84.1
|
|
||
Total benefits and expenses
|
155.7
|
|
|
161.7
|
|
||
EBIT from New Business
|
$
|
(57.5
|
)
|
|
$
|
(51.5
|
)
|
|
|
|
|
||||
EBIT from In-Force and New Business
|
|
|
|
||||
Revenues:
|
|
|
|
||||
Insurance policy income
|
$
|
632.4
|
|
|
$
|
634.0
|
|
Net investment income and other
|
309.8
|
|
|
362.0
|
|
||
Total revenues
|
942.2
|
|
|
996.0
|
|
||
Benefits and expenses:
|
|
|
|
||||
Insurance policy benefits
|
591.5
|
|
|
666.8
|
|
||
Amortization
|
68.5
|
|
|
75.3
|
|
||
Other expenses
|
173.1
|
|
|
170.5
|
|
||
Total benefits and expenses
|
833.1
|
|
|
912.6
|
|
||
EBIT from In-Force and New Business
|
$
|
109.1
|
|
|
$
|
83.4
|
|
|
Three months ended
|
||||||
|
March 31,
|
||||||
|
2014
|
|
2013
|
||||
EBIT from In-Force Business
|
|
|
|
||||
Revenues:
|
|
|
|
||||
Insurance policy income
|
$
|
354.2
|
|
|
$
|
345.8
|
|
Net investment income and other
|
222.3
|
|
|
254.2
|
|
||
Total revenues
|
576.5
|
|
|
600.0
|
|
||
Benefits and expenses:
|
|
|
|
||||
Insurance policy benefits
|
370.1
|
|
|
412.8
|
|
||
Amortization
|
42.5
|
|
|
48.7
|
|
||
Other expenses
|
41.5
|
|
|
42.4
|
|
||
Total benefits and expenses
|
454.1
|
|
|
503.9
|
|
||
EBIT from In-Force Business
|
$
|
122.4
|
|
|
$
|
96.1
|
|
|
|
|
|
||||
EBIT from New Business
|
|
|
|
||||
Revenues:
|
|
|
|
||||
Insurance policy income
|
$
|
62.1
|
|
|
$
|
72.2
|
|
Net investment income and other
|
7.4
|
|
|
11.2
|
|
||
Total revenues
|
69.5
|
|
|
83.4
|
|
||
Benefits and expenses:
|
|
|
|
||||
Insurance policy benefits
|
44.9
|
|
|
57.7
|
|
||
Amortization
|
5.7
|
|
|
5.8
|
|
||
Other expenses
|
57.1
|
|
|
53.9
|
|
||
Total benefits and expenses
|
107.7
|
|
|
117.4
|
|
||
EBIT from New Business
|
$
|
(38.2
|
)
|
|
$
|
(34.0
|
)
|
|
|
|
|
||||
EBIT from In-Force and New Business
|
|
|
|
||||
Revenues:
|
|
|
|
||||
Insurance policy income
|
$
|
416.3
|
|
|
$
|
418.0
|
|
Net investment income and other
|
229.7
|
|
|
265.4
|
|
||
Total revenues
|
646.0
|
|
|
683.4
|
|
||
Benefits and expenses:
|
|
|
|
||||
Insurance policy benefits
|
415.0
|
|
|
470.5
|
|
||
Amortization
|
48.2
|
|
|
54.5
|
|
||
Other expenses
|
98.6
|
|
|
96.3
|
|
||
Total benefits and expenses
|
561.8
|
|
|
621.3
|
|
||
EBIT from In-Force and New Business
|
$
|
84.2
|
|
|
$
|
62.1
|
|
|
Three months ended
|
||||||
|
March 31,
|
||||||
|
2014
|
|
2013
|
||||
EBIT from In-Force Business
|
|
|
|
||||
Revenues:
|
|
|
|
||||
Insurance policy income
|
$
|
138.1
|
|
|
$
|
137.4
|
|
Net investment income and other
|
69.2
|
|
|
78.1
|
|
||
Total revenues
|
207.3
|
|
|
215.5
|
|
||
Benefits and expenses:
|
|
|
|
||||
Insurance policy benefits
|
124.5
|
|
|
131.0
|
|
||
Amortization
|
15.2
|
|
|
16.3
|
|
||
Other expenses
|
33.7
|
|
|
30.9
|
|
||
Total benefits and expenses
|
173.4
|
|
|
178.2
|
|
||
EBIT from In-Force Business
|
$
|
33.9
|
|
|
$
|
37.3
|
|
|
|
|
|
||||
EBIT from New Business
|
|
|
|
||||
Revenues:
|
|
|
|
||||
Insurance policy income
|
$
|
17.5
|
|
|
$
|
15.5
|
|
Net investment income and other
|
—
|
|
|
—
|
|
||
Total revenues
|
17.5
|
|
|
15.5
|
|
||
Benefits and expenses:
|
|
|
|
||||
Insurance policy benefits
|
7.3
|
|
|
6.7
|
|
||
Amortization
|
1.1
|
|
|
.8
|
|
||
Other expenses
|
11.9
|
|
|
11.3
|
|
||
Total benefits and expenses
|
20.3
|
|
|
18.8
|
|
||
EBIT from New Business
|
$
|
(2.8
|
)
|
|
$
|
(3.3
|
)
|
|
|
|
|
||||
EBIT from In-Force and New Business
|
|
|
|
||||
Revenues:
|
|
|
|
||||
Insurance policy income
|
$
|
155.6
|
|
|
$
|
152.9
|
|
Net investment income and other
|
69.2
|
|
|
78.1
|
|
||
Total revenues
|
224.8
|
|
|
231.0
|
|
||
Benefits and expenses:
|
|
|
|
||||
Insurance policy benefits
|
131.8
|
|
|
137.7
|
|
||
Amortization
|
16.3
|
|
|
17.1
|
|
||
Other expenses
|
45.6
|
|
|
42.2
|
|
||
Total benefits and expenses
|
193.7
|
|
|
197.0
|
|
||
EBIT from In-Force and New Business
|
$
|
31.1
|
|
|
$
|
34.0
|
|
|
Three months ended
|
||||||
|
March 31,
|
||||||
|
2014
|
|
2013
|
||||
EBIT from In-Force Business
|
|
|
|
||||
Revenues:
|
|
|
|
||||
Insurance policy income
|
$
|
49.3
|
|
|
$
|
45.6
|
|
Net investment income and other
|
10.9
|
|
|
10.1
|
|
||
Total revenues
|
60.2
|
|
|
55.7
|
|
||
Benefits and expenses:
|
|
|
|
||||
Insurance policy benefits
|
38.3
|
|
|
36.5
|
|
||
Amortization
|
3.9
|
|
|
3.6
|
|
||
Other expenses
|
7.7
|
|
|
6.8
|
|
||
Total benefits and expenses
|
49.9
|
|
|
46.9
|
|
||
EBIT from In-Force Business
|
$
|
10.3
|
|
|
$
|
8.8
|
|
|
|
|
|
||||
EBIT from New Business
|
|
|
|
||||
Revenues:
|
|
|
|
||||
Insurance policy income
|
$
|
11.2
|
|
|
$
|
11.3
|
|
Net investment income and other
|
—
|
|
|
—
|
|
||
Total revenues
|
11.2
|
|
|
11.3
|
|
||
Benefits and expenses:
|
|
|
|
||||
Insurance policy benefits
|
6.4
|
|
|
6.5
|
|
||
Amortization
|
.1
|
|
|
.1
|
|
||
Other expenses
|
21.2
|
|
|
18.9
|
|
||
Total benefits and expenses
|
27.7
|
|
|
25.5
|
|
||
EBIT from New Business
|
$
|
(16.5
|
)
|
|
$
|
(14.2
|
)
|
|
|
|
|
||||
EBIT from In-Force and New Business
|
|
|
|
||||
Revenues:
|
|
|
|
||||
Insurance policy income
|
$
|
60.5
|
|
|
$
|
56.9
|
|
Net investment income and other
|
10.9
|
|
|
10.1
|
|
||
Total revenues
|
71.4
|
|
|
67.0
|
|
||
Benefits and expenses:
|
|
|
|
||||
Insurance policy benefits
|
44.7
|
|
|
43.0
|
|
||
Amortization
|
4.0
|
|
|
3.7
|
|
||
Other expenses
|
28.9
|
|
|
25.7
|
|
||
Total benefits and expenses
|
77.6
|
|
|
72.4
|
|
||
EBIT from In-Force and New Business
|
$
|
(6.2
|
)
|
|
$
|
(5.4
|
)
|
|
Three months ended
|
||
|
March 31,
|
||
|
2013
|
||
EBIT from In-Force Business (a)
|
|
||
Revenues:
|
|
||
Insurance policy income
|
$
|
6.2
|
|
Net investment income and other
|
8.4
|
|
|
Total revenues
|
14.6
|
|
|
Benefits and expenses:
|
|
||
Insurance policy benefits
|
15.6
|
|
|
Other expenses
|
6.3
|
|
|
Total benefits and expenses
|
21.9
|
|
|
EBIT from In-Force Business
|
$
|
(7.3
|
)
|
(a)
|
All activity in the Other CNO Business segment relates to in-force business.
|
|
Three months ended
|
||||||
|
March 31,
|
||||||
|
2014
|
|
2013
|
||||
Premiums collected by product:
|
|
|
|
||||
Annuities:
|
|
|
|
||||
Fixed index (first-year)
|
$
|
147.3
|
|
|
$
|
126.6
|
|
Other fixed rate (first-year)
|
41.4
|
|
|
37.2
|
|
||
Other fixed rate (renewal)
|
1.8
|
|
|
1.8
|
|
||
Subtotal - other fixed rate annuities
|
43.2
|
|
|
39.0
|
|
||
Total annuities
|
190.5
|
|
|
165.6
|
|
||
Health:
|
|
|
|
||||
Medicare supplement (first-year)
|
21.2
|
|
|
22.7
|
|
||
Medicare supplement (renewal)
|
158.2
|
|
|
162.5
|
|
||
Subtotal - Medicare supplement
|
179.4
|
|
|
185.2
|
|
||
Long-term care (first-year)
|
4.4
|
|
|
5.7
|
|
||
Long-term care (renewal)
|
119.3
|
|
|
129.7
|
|
||
Subtotal - long-term care
|
123.7
|
|
|
135.4
|
|
||
PDP (first year)
|
—
|
|
|
.1
|
|
||
PDP (renewal)
|
6.8
|
|
|
10.1
|
|
||
Subtotal – PDP
|
6.8
|
|
|
10.2
|
|
||
Supplemental health (first-year)
|
2.1
|
|
|
1.6
|
|
||
Supplemental health (renewal)
|
1.5
|
|
|
—
|
|
||
Subtotal – supplemental health
|
3.6
|
|
|
1.6
|
|
||
Other health (first-year)
|
.2
|
|
|
.3
|
|
||
Other health (renewal)
|
1.8
|
|
|
2.4
|
|
||
Subtotal - other health
|
2.0
|
|
|
2.7
|
|
||
Total health
|
315.5
|
|
|
335.1
|
|
||
Life insurance:
|
|
|
|
||||
First-year
|
38.2
|
|
|
42.4
|
|
||
Renewal
|
55.8
|
|
|
47.1
|
|
||
Total life insurance
|
94.0
|
|
|
89.5
|
|
||
Collections on insurance products:
|
|
|
|
|
|
||
Total first-year premium collections on insurance products
|
254.8
|
|
|
236.6
|
|
||
Total renewal premium collections on insurance products
|
345.2
|
|
|
353.6
|
|
||
Total collections on insurance products
|
$
|
600.0
|
|
|
$
|
590.2
|
|
|
Three months ended
|
||||||
|
March 31,
|
||||||
|
2014
|
|
2013
|
||||
Premiums collected by product:
|
|
|
|
||||
Annuities:
|
|
|
|
||||
Fixed index (first-year)
|
$
|
.1
|
|
|
$
|
.2
|
|
Fixed index (renewal)
|
.4
|
|
|
.6
|
|
||
Subtotal - fixed index annuities
|
.5
|
|
|
.8
|
|
||
Other fixed rate (first-year)
|
—
|
|
|
—
|
|
||
Other fixed rate (renewal)
|
.1
|
|
|
.1
|
|
||
Subtotal - other fixed rate annuities
|
.1
|
|
|
.1
|
|
||
Total annuities
|
.6
|
|
|
.9
|
|
||
Health:
|
|
|
|
||||
Medicare supplement (first-year)
|
—
|
|
|
.2
|
|
||
Medicare supplement (renewal)
|
21.1
|
|
|
26.4
|
|
||
Subtotal - Medicare supplement
|
21.1
|
|
|
26.6
|
|
||
Supplemental health (first-year)
|
16.7
|
|
|
15.6
|
|
||
Supplemental health (renewal)
|
109.2
|
|
|
104.7
|
|
||
Subtotal – supplemental health
|
125.9
|
|
|
120.3
|
|
||
Other health (all renewal)
|
.6
|
|
|
.8
|
|
||
Total health
|
147.6
|
|
|
147.7
|
|
||
Life insurance:
|
|
|
|
||||
First-year
|
1.1
|
|
|
1.2
|
|
||
Renewal
|
5.4
|
|
|
5.1
|
|
||
Total life insurance
|
6.5
|
|
|
6.3
|
|
||
Collections on insurance products:
|
|
|
|
||||
Total first-year premium collections on insurance products
|
17.9
|
|
|
17.2
|
|
||
Total renewal premium collections on insurance products
|
136.8
|
|
|
137.7
|
|
||
Total collections on insurance products
|
$
|
154.7
|
|
|
$
|
154.9
|
|
|
Three months ended
|
||||||
|
March 31,
|
||||||
|
2014
|
|
2013
|
||||
Premiums collected by product:
|
|
|
|
||||
Life insurance:
|
|
|
|
||||
First-year
|
$
|
11.3
|
|
|
$
|
11.4
|
|
Renewal
|
48.8
|
|
|
44.7
|
|
||
Total life insurance
|
60.1
|
|
|
56.1
|
|
||
Health (all renewal):
|
|
|
|
||||
Medicare supplement
|
.8
|
|
|
1.0
|
|
||
Other health
|
.1
|
|
|
.1
|
|
||
Total health
|
.9
|
|
|
1.1
|
|
||
Collections on insurance products:
|
|
|
|
||||
Total first-year premium collections on insurance products
|
11.3
|
|
|
11.4
|
|
||
Total renewal premium collections on insurance products
|
49.7
|
|
|
45.8
|
|
||
Total collections on insurance products
|
$
|
61.0
|
|
|
$
|
57.2
|
|
|
Three months ended
|
||||||
|
March 31,
|
||||||
|
2014
|
|
2013
|
||||
Premiums collected by product:
|
|
|
|
||||
Health:
|
|
|
|
||||
Long-term care (all renewal)
|
$
|
—
|
|
|
$
|
6.3
|
|
|
March 31, 2014
|
|
December 31, 2013
|
||||
Total capital:
|
|
|
|
||||
Corporate notes payable
|
$
|
844.1
|
|
|
$
|
856.4
|
|
Shareholders’ equity:
|
|
|
|
|
|||
Common stock
|
2.2
|
|
|
2.2
|
|
||
Additional paid-in capital
|
4,054.7
|
|
|
4,092.8
|
|
||
Accumulated other comprehensive income
|
766.2
|
|
|
731.8
|
|
||
Retained earnings (accumulated deficit)
|
(112.9
|
)
|
|
128.4
|
|
||
Total shareholders’ equity
|
4,710.2
|
|
|
4,955.2
|
|
||
Total capital
|
$
|
5,554.3
|
|
|
$
|
5,811.6
|
|
|
March 31, 2014
|
|
December 31, 2013
|
||||
Book value per common share
|
$
|
21.48
|
|
|
$
|
22.49
|
|
Book value per common share, excluding accumulated other comprehensive income (a)
|
17.99
|
|
|
19.17
|
|
||
Ratio of earnings to fixed charges
|
(b)
|
|
|
1.87X
|
|
||
Debt to total capital ratios:
|
|
|
|
||||
Corporate debt to total capital
|
15.2
|
%
|
|
14.7
|
%
|
||
Corporate debt to total capital, excluding accumulated other comprehensive income (a)
|
17.6
|
%
|
|
16.9
|
%
|
(a)
|
This non-GAAP measure differs from the corresponding GAAP measure presented immediately above, because accumulated other comprehensive income has been excluded from the value of capital used to determine this measure. Management believes this non-GAAP measure is useful because it removes the volatility that arises from changes in accumulated other comprehensive income. Such volatility is often caused by changes in the estimated fair value of our investment portfolio resulting from changes in general market interest rates rather than the business decisions made by management. However, this measure does not replace the corresponding GAAP measure.
|
(b)
|
For such ratio, earnings were $169.6 million less than fixed charges.
|
Amount
|
|
Maturity
|
|
Interest rate at
|
||
borrowed
|
|
date
|
|
March 31, 2014
|
||
$
|
50.0
|
|
|
September 2015
|
|
Variable rate – 0.535%
|
50.0
|
|
|
October 2015
|
|
Variable rate – 0.505%
|
|
100.0
|
|
|
November 2015
|
|
Variable rate – 0.316%
|
|
100.0
|
|
|
June 2016
|
|
Variable rate – 0.594%
|
|
75.0
|
|
|
June 2016
|
|
Variable rate – 0.394%
|
|
100.0
|
|
|
October 2016
|
|
Variable rate – 0.426%
|
|
50.0
|
|
|
November 2016
|
|
Variable rate – 0.506%
|
|
50.0
|
|
|
November 2016
|
|
Variable rate – 0.624%
|
|
57.8
|
|
|
June 2017
|
|
Variable rate – 0.585%
|
|
50.0
|
|
|
August 2017
|
|
Variable rate – 0.436%
|
|
75.0
|
|
|
August 2017
|
|
Variable rate – 0.385%
|
|
100.0
|
|
|
October 2017
|
|
Variable rate – 0.669%
|
|
50.0
|
|
|
November 2017
|
|
Variable rate – 0.744%
|
|
50.0
|
|
|
January 2018
|
|
Variable rate – 0.592%
|
|
50.0
|
|
|
January 2018
|
|
Variable rate – 0.577%
|
|
50.0
|
|
|
February 2018
|
|
Variable rate – 0.546%
|
|
22.0
|
|
|
February 2018
|
|
Variable rate – 0.563%
|
|
100.0
|
|
|
May 2018
|
|
Variable rate – 0.603%
|
|
50.0
|
|
|
July 2018
|
|
Variable rate – 0.705%
|
|
50.0
|
|
|
August 2018
|
|
Variable rate – 0.356%
|
|
50.0
|
|
|
January 2019
|
|
Variable rate – 0.656%
|
|
100.0
|
|
|
March 2019
|
|
Variable rate – 0.636%
|
|
21.8
|
|
|
June 2020
|
|
Fixed rate – 1.960%
|
|
27.3
|
|
|
March 2023
|
|
Fixed rate – 2.160%
|
|
20.5
|
|
|
June 2025
|
|
Fixed rate – 2.940%
|
|
$
|
1,499.4
|
|
|
|
|
|
Amount
|
|
Maturity
|
|
Interest rate at
|
||
borrowed
|
|
date
|
|
March 31, 2014
|
||
$
|
146.5
|
|
|
November 2015
|
|
Fixed rate – 5.300%
|
100.0
|
|
|
December 2015
|
|
Fixed rate – 4.710%
|
|
100.0
|
|
|
July 2017
|
|
Fixed rate – 3.900%
|
|
37.0
|
|
|
November 2017
|
|
Fixed rate – 3.750%
|
|
$
|
383.5
|
|
|
|
|
|
Subsidiary of CDOC
|
|
Earned surplus (deficit)
|
|
Additional information
|
||
Subsidiaries of Conseco Life of Texas:
|
|
|
|
|
||
Bankers Life
|
|
$
|
369.6
|
|
|
(a)
|
Colonial Penn
|
|
(263.9
|
)
|
|
(b)
|
(a)
|
Bankers Life paid ordinary dividends of $40.0 million to Conseco Life of Texas in the first three months of
2014
.
|
(b)
|
The deficit is primarily due to transactions which occurred several years ago, including a tax planning transaction and the fee paid to recapture a block of business previously ceded to an unaffiliated insurer.
|
Year ending March 31,
|
Principal
|
||
2015
|
$
|
66.7
|
|
2016
|
79.3
|
|
|
2017
|
45.2
|
|
|
2018
|
4.2
|
|
|
2019
|
377.1
|
|
|
2020
|
—
|
|
|
2021
|
275.0
|
|
|
|
$
|
847.5
|
|
|
Amortized
cost
|
|
Gross
unrealized
gains
|
|
Gross
unrealized
losses
|
|
Estimated
fair
value
|
||||||||
Investment grade (a):
|
|
|
|
|
|
|
|
||||||||
Corporate securities
|
$
|
11,224.9
|
|
|
$
|
1,297.7
|
|
|
$
|
(38.3
|
)
|
|
$
|
12,484.3
|
|
United States Treasury securities and obligations of United States government corporations and agencies
|
143.9
|
|
|
2.7
|
|
|
(.4
|
)
|
|
146.2
|
|
||||
States and political subdivisions
|
1,924.4
|
|
|
157.5
|
|
|
(15.9
|
)
|
|
2,066.0
|
|
||||
Asset-backed securities
|
752.7
|
|
|
41.4
|
|
|
(1.3
|
)
|
|
792.8
|
|
||||
Collateralized debt obligations
|
258.7
|
|
|
5.6
|
|
|
(.4
|
)
|
|
263.9
|
|
||||
Commercial mortgage-backed securities
|
1,151.1
|
|
|
81.0
|
|
|
(2.2
|
)
|
|
1,229.9
|
|
||||
Mortgage pass-through securities
|
8.4
|
|
|
.5
|
|
|
—
|
|
|
8.9
|
|
||||
Collateralized mortgage obligations
|
612.6
|
|
|
23.6
|
|
|
(.8
|
)
|
|
635.4
|
|
||||
Total investment grade fixed maturities, available for sale
|
16,076.7
|
|
|
1,610.0
|
|
|
(59.3
|
)
|
|
17,627.4
|
|
||||
Below-investment grade (a):
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate securities
|
1,089.0
|
|
|
47.9
|
|
|
(13.9
|
)
|
|
1,123.0
|
|
||||
States and political subdivisions
|
5.1
|
|
|
—
|
|
|
(.3
|
)
|
|
4.8
|
|
||||
Asset-backed securities
|
536.0
|
|
|
34.6
|
|
|
(2.4
|
)
|
|
568.2
|
|
||||
Collateralized debt obligations
|
24.0
|
|
|
.1
|
|
|
(.2
|
)
|
|
23.9
|
|
||||
Collateralized mortgage obligations
|
734.8
|
|
|
61.9
|
|
|
(.2
|
)
|
|
796.5
|
|
||||
Total below-investment grade fixed maturities, available for sale
|
2,388.9
|
|
|
144.5
|
|
|
(17.0
|
)
|
|
2,516.4
|
|
||||
Total fixed maturities, available for sale
|
$
|
18,465.6
|
|
|
$
|
1,754.5
|
|
|
$
|
(76.3
|
)
|
|
$
|
20,143.8
|
|
Equity securities
|
$
|
260.5
|
|
|
$
|
19.3
|
|
|
$
|
(2.2
|
)
|
|
$
|
277.6
|
|
(a)
|
Investment ratings – Investment ratings are assigned the second lowest rating by Nationally Recognized Statistical Rating Organizations ("NRSROs") (Moody's, S&P or Fitch), or if not rated by such firms, the rating assigned by the National Association of Insurance Commissioners (the "NAIC"). NAIC designations of "1" or "2" include fixed maturities generally rated investment grade (rated "Baa3" or higher by Moody's or rated "BBB-" or higher by S&P and Fitch). NAIC designations of "3" through "6" are referred to as below-investment grade (which generally are rated "Ba1" or lower by Moody's or rated "BB+" or lower by S&P and Fitch). References to investment grade or below-investment grade throughout our consolidated financial statements are determined as described above.
|
NAIC Designation
|
|
NRSRO Equivalent Rating
|
1
|
|
AAA/AA/A
|
2
|
|
BBB
|
3
|
|
BB
|
4
|
|
B
|
5
|
|
CCC and lower
|
6
|
|
In or near default
|
NAIC designation
|
|
Amortized cost
|
|
Estimated fair value
|
|
Percentage of total estimated fair value
|
|||||
1
|
|
$
|
8,801.9
|
|
|
$
|
9,640.7
|
|
|
47.9
|
%
|
2
|
|
8,509.6
|
|
|
9,314.3
|
|
|
46.2
|
|
||
3
|
|
850.6
|
|
|
877.2
|
|
|
4.4
|
|
||
4
|
|
274.3
|
|
|
282.1
|
|
|
1.4
|
|
||
5
|
|
29.2
|
|
|
29.2
|
|
|
.1
|
|
||
6
|
|
—
|
|
|
.3
|
|
|
—
|
|
||
|
|
$
|
18,465.6
|
|
|
$
|
20,143.8
|
|
|
100.0
|
%
|
|
Carrying value
|
|
Percent of fixed maturities
|
|
Gross unrealized losses
|
|
Percent of gross unrealized losses
|
||||||
States and political subdivisions
|
$
|
2,070.8
|
|
|
10.3
|
%
|
|
$
|
16.2
|
|
|
21.2
|
%
|
Energy/pipelines
|
2,043.2
|
|
|
10.1
|
|
|
8.4
|
|
|
11.0
|
|
||
Utilities
|
1,645.1
|
|
|
8.2
|
|
|
1.2
|
|
|
1.6
|
|
||
Collateralized mortgage obligations
|
1,431.9
|
|
|
7.1
|
|
|
1.0
|
|
|
1.3
|
|
||
Asset-backed securities
|
1,361.0
|
|
|
6.8
|
|
|
3.7
|
|
|
4.9
|
|
||
Insurance
|
1,338.7
|
|
|
6.6
|
|
|
1.3
|
|
|
1.7
|
|
||
Commercial mortgage-backed securities
|
1,229.9
|
|
|
6.1
|
|
|
2.2
|
|
|
2.8
|
|
||
Healthcare/pharmaceuticals
|
1,116.0
|
|
|
5.5
|
|
|
8.0
|
|
|
10.4
|
|
||
Food/beverage
|
941.9
|
|
|
4.7
|
|
|
3.9
|
|
|
5.1
|
|
||
Cable/media
|
789.9
|
|
|
3.9
|
|
|
7.1
|
|
|
9.2
|
|
||
Real estate/REITs
|
698.5
|
|
|
3.5
|
|
|
—
|
|
|
—
|
|
||
Banks
|
643.1
|
|
|
3.2
|
|
|
1.7
|
|
|
2.3
|
|
||
Capital goods
|
584.4
|
|
|
2.9
|
|
|
.2
|
|
|
.3
|
|
||
Aerospace/defense
|
408.4
|
|
|
2.0
|
|
|
.1
|
|
|
—
|
|
||
Chemicals
|
378.7
|
|
|
1.9
|
|
|
3.4
|
|
|
4.5
|
|
||
Transportation
|
360.6
|
|
|
1.8
|
|
|
.3
|
|
|
.5
|
|
||
Telecom
|
355.1
|
|
|
1.8
|
|
|
1.0
|
|
|
1.3
|
|
||
Building materials
|
305.8
|
|
|
1.5
|
|
|
1.7
|
|
|
2.2
|
|
||
Metals and mining
|
294.8
|
|
|
1.5
|
|
|
5.2
|
|
|
6.9
|
|
||
Collateralized debt obligations
|
287.7
|
|
|
1.4
|
|
|
.6
|
|
|
.8
|
|
||
Technology
|
263.7
|
|
|
1.3
|
|
|
.1
|
|
|
.1
|
|
||
Paper
|
258.3
|
|
|
1.3
|
|
|
.4
|
|
|
.5
|
|
||
Brokerage
|
243.6
|
|
|
1.2
|
|
|
—
|
|
|
—
|
|
||
Business services
|
217.2
|
|
|
1.1
|
|
|
5.6
|
|
|
7.4
|
|
||
Other
|
875.1
|
|
|
4.3
|
|
|
3.0
|
|
|
4.0
|
|
||
Total fixed maturities, available for sale
|
$
|
20,143.4
|
|
|
100.0
|
%
|
|
$
|
76.3
|
|
|
100.0
|
%
|
|
Three months ended
|
||||||
|
March 31,
|
||||||
|
2014
|
|
2013
|
||||
Fixed maturity securities, available for sale:
|
|
|
|
||||
Gross realized gains on sale
|
$
|
41.5
|
|
|
$
|
16.6
|
|
Gross realized losses on sale
|
(5.5
|
)
|
|
(2.0
|
)
|
||
Impairments:
|
|
|
|
||||
Total other-than-temporary impairment losses
|
—
|
|
|
—
|
|
||
Other-than-temporary impairment losses recognized in accumulated other comprehensive income
|
—
|
|
|
—
|
|
||
Net impairment losses recognized
|
—
|
|
|
—
|
|
||
Net realized investment gains from fixed maturities
|
36.0
|
|
|
14.6
|
|
||
Commercial mortgage loans
|
—
|
|
|
.7
|
|
||
Impairments of mortgage loans and other investments
|
(11.9
|
)
|
|
—
|
|
||
Other
|
(.7
|
)
|
|
—
|
|
||
Net realized investment gains
|
$
|
23.4
|
|
|
$
|
15.3
|
|
|
Amortized
cost
|
|
Estimated
fair
value
|
||||
|
(Dollars in millions)
|
||||||
Due in one year or less
|
$
|
12.6
|
|
|
$
|
12.6
|
|
Due after one year through five years
|
82.2
|
|
|
81.3
|
|
||
Due after five years through ten years
|
267.6
|
|
|
263.1
|
|
||
Due after ten years
|
1,152.1
|
|
|
1,088.7
|
|
||
Subtotal
|
1,514.5
|
|
|
1,445.7
|
|
||
Structured securities
|
485.2
|
|
|
477.7
|
|
||
Total
|
$
|
1,999.7
|
|
|
$
|
1,923.4
|
|
|
Investment grade
|
|
Below-investment grade
|
|
|
||||||||||||||
|
AAA/AA/A
|
|
BBB
|
|
BB
|
|
B+ and
below
|
|
Total gross
unrealized
losses |
||||||||||
States and political subdivisions
|
$
|
10.3
|
|
|
$
|
5.6
|
|
|
$
|
.3
|
|
|
$
|
—
|
|
|
$
|
16.2
|
|
Energy/pipelines
|
—
|
|
|
6.9
|
|
|
.1
|
|
|
1.4
|
|
|
8.4
|
|
|||||
Healthcare/pharmaceuticals
|
.1
|
|
|
7.9
|
|
|
—
|
|
|
—
|
|
|
8.0
|
|
|||||
Cable/media
|
—
|
|
|
6.2
|
|
|
.7
|
|
|
.2
|
|
|
7.1
|
|
|||||
Business services
|
—
|
|
|
—
|
|
|
5.6
|
|
|
—
|
|
|
5.6
|
|
|||||
Metals and mining
|
—
|
|
|
4.8
|
|
|
.4
|
|
|
—
|
|
|
5.2
|
|
|||||
Food/beverage
|
.8
|
|
|
.6
|
|
|
2.2
|
|
|
.3
|
|
|
3.9
|
|
|||||
Asset-backed securities
|
.5
|
|
|
.8
|
|
|
.6
|
|
|
1.8
|
|
|
3.7
|
|
|||||
Chemicals
|
—
|
|
|
3.1
|
|
|
.3
|
|
|
—
|
|
|
3.4
|
|
|||||
Commercial mortgage-backed securities
|
.5
|
|
|
1.7
|
|
|
—
|
|
|
—
|
|
|
2.2
|
|
|||||
Banks
|
1.6
|
|
|
.1
|
|
|
—
|
|
|
—
|
|
|
1.7
|
|
|||||
Building materials
|
—
|
|
|
.2
|
|
|
1.5
|
|
|
—
|
|
|
1.7
|
|
|||||
Retail
|
—
|
|
|
1.5
|
|
|
—
|
|
|
—
|
|
|
1.5
|
|
|||||
Insurance
|
—
|
|
|
1.3
|
|
|
—
|
|
|
—
|
|
|
1.3
|
|
|||||
Utilities
|
.1
|
|
|
1.1
|
|
|
—
|
|
|
—
|
|
|
1.2
|
|
|||||
Telecom
|
.4
|
|
|
—
|
|
|
.3
|
|
|
.3
|
|
|
1.0
|
|
|||||
Collateralized mortgage obligations
|
.6
|
|
|
.2
|
|
|
.1
|
|
|
.1
|
|
|
1.0
|
|
|||||
Collateralized debt obligations
|
.1
|
|
|
.3
|
|
|
.2
|
|
|
—
|
|
|
.6
|
|
|||||
Autos
|
—
|
|
|
.5
|
|
|
—
|
|
|
—
|
|
|
.5
|
|
|||||
United States Treasury securities and obligations of United States government corporations and agencies
|
.4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
.4
|
|
|||||
Consumer products
|
—
|
|
|
—
|
|
|
.4
|
|
|
—
|
|
|
.4
|
|
|||||
Paper
|
—
|
|
|
.4
|
|
|
—
|
|
|
—
|
|
|
.4
|
|
|||||
Transportation
|
—
|
|
|
.3
|
|
|
—
|
|
|
—
|
|
|
.3
|
|
|||||
Capital goods
|
—
|
|
|
.2
|
|
|
—
|
|
|
—
|
|
|
.2
|
|
|||||
Entertainment/hotels
|
—
|
|
|
.1
|
|
|
—
|
|
|
—
|
|
|
.1
|
|
|||||
Technology
|
—
|
|
|
—
|
|
|
—
|
|
|
.1
|
|
|
.1
|
|
|||||
Aerospace/defense
|
—
|
|
|
—
|
|
|
.1
|
|
|
—
|
|
|
.1
|
|
|||||
Other
|
—
|
|
|
.1
|
|
|
—
|
|
|
—
|
|
|
.1
|
|
|||||
Total fixed maturities, available for sale
|
$
|
15.4
|
|
|
$
|
43.9
|
|
|
$
|
12.8
|
|
|
$
|
4.2
|
|
|
$
|
76.3
|
|
|
|
Less than 12 months
|
|
12 months or greater
|
|
Total
|
||||||||||||||||||
Description of securities
|
|
Fair
value
|
|
Unrealized
losses
|
|
Fair
value
|
|
Unrealized
losses
|
|
Fair
value
|
|
Unrealized
losses
|
||||||||||||
United States Treasury securities and obligations of United States government corporations and agencies
|
|
$
|
19.2
|
|
|
$
|
(.4
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
19.2
|
|
|
$
|
(.4
|
)
|
States and political subdivisions
|
|
186.2
|
|
|
(11.6
|
)
|
|
63.5
|
|
|
(4.6
|
)
|
|
249.7
|
|
|
(16.2
|
)
|
||||||
Corporate securities
|
|
980.5
|
|
|
(35.7
|
)
|
|
196.3
|
|
|
(16.5
|
)
|
|
1,176.8
|
|
|
(52.2
|
)
|
||||||
Asset-backed securities
|
|
229.7
|
|
|
(2.9
|
)
|
|
35.3
|
|
|
(.8
|
)
|
|
265.0
|
|
|
(3.7
|
)
|
||||||
Collateralized debt obligations
|
|
26.9
|
|
|
(.6
|
)
|
|
—
|
|
|
—
|
|
|
26.9
|
|
|
(.6
|
)
|
||||||
Commercial mortgage-backed securities
|
|
77.1
|
|
|
(2.2
|
)
|
|
—
|
|
|
—
|
|
|
77.1
|
|
|
(2.2
|
)
|
||||||
Mortgage pass-through securities
|
|
.9
|
|
|
—
|
|
|
.4
|
|
|
—
|
|
|
1.3
|
|
|
—
|
|
||||||
Collateralized mortgage obligations
|
|
102.2
|
|
|
(.6
|
)
|
|
5.2
|
|
|
(.4
|
)
|
|
107.4
|
|
|
(1.0
|
)
|
||||||
Total fixed maturities, available for sale
|
|
$
|
1,622.7
|
|
|
$
|
(54.0
|
)
|
|
$
|
300.7
|
|
|
$
|
(22.3
|
)
|
|
$
|
1,923.4
|
|
|
$
|
(76.3
|
)
|
Equity securities
|
|
$
|
41.0
|
|
|
$
|
(2.2
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
41.0
|
|
|
$
|
(2.2
|
)
|
|
Par
value
|
|
Amortized
cost
|
|
Estimated
fair value
|
||||||
Below 4 percent
|
$
|
1,049.8
|
|
|
$
|
886.6
|
|
|
$
|
906.1
|
|
4 percent – 5 percent
|
703.3
|
|
|
660.6
|
|
|
683.7
|
|
|||
5 percent – 6 percent
|
1,967.8
|
|
|
1,834.1
|
|
|
1,967.1
|
|
|||
6 percent – 7 percent
|
599.3
|
|
|
557.0
|
|
|
609.8
|
|
|||
7 percent – 8 percent
|
95.6
|
|
|
97.3
|
|
|
109.3
|
|
|||
8 percent and above
|
41.8
|
|
|
42.7
|
|
|
43.5
|
|
|||
Total structured securities
|
$
|
4,457.6
|
|
|
$
|
4,078.3
|
|
|
$
|
4,319.5
|
|
|
|
|
Estimated fair value
|
|||||||
Type
|
Amortized
cost
|
|
Amount
|
|
Percent
of fixed
maturities
|
|||||
Pass-throughs, sequential and equivalent securities
|
$
|
1,073.1
|
|
|
$
|
1,137.6
|
|
|
5.6
|
%
|
Planned amortization classes, target amortization classes and accretion-directed bonds
|
258.7
|
|
|
279.2
|
|
|
1.4
|
|
||
Commercial mortgage-backed securities
|
1,151.1
|
|
|
1,229.9
|
|
|
6.1
|
|
||
Asset-backed securities
|
1,288.7
|
|
|
1,361.0
|
|
|
6.8
|
|
||
Collateralized debt obligations
|
282.7
|
|
|
287.8
|
|
|
1.4
|
|
||
Other
|
24.0
|
|
|
24.0
|
|
|
.1
|
|
||
Total structured securities
|
$
|
4,078.3
|
|
|
$
|
4,319.5
|
|
|
21.4
|
%
|
|
|
|
Estimated fair
value
|
||||||||
Loan-to-value ratio (a)
|
Carrying value
|
|
Mortgage loans
|
|
Collateral
|
||||||
Less than 60%
|
$
|
691.6
|
|
|
$
|
721.0
|
|
|
$
|
1,986.1
|
|
60% to 70%
|
317.9
|
|
|
322.9
|
|
|
491.1
|
|
|||
Greater than 70% to 80%
|
350.2
|
|
|
347.2
|
|
|
474.3
|
|
|||
Greater than 80% to 90%
|
132.4
|
|
|
132.5
|
|
|
155.4
|
|
|||
Greater than 90%
|
9.6
|
|
|
10.0
|
|
|
9.9
|
|
|||
Total
|
$
|
1,501.7
|
|
|
$
|
1,533.6
|
|
|
$
|
3,116.8
|
|
(a)
|
Loan-to-value ratios are calculated as the ratio of: (i) the carrying value of the commercial mortgage loans; to (ii) the estimated fair value of the underlying collateral.
|
|
Three months ended
|
||||||
|
March 31,
|
||||||
|
2014
|
|
2013
|
||||
Revenues:
|
|
|
|
||||
Net investment income – policyholder and reinsurer accounts and other special-purpose portfolios
|
$
|
10.4
|
|
|
$
|
9.5
|
|
Fee revenue and other income
|
.1
|
|
|
.8
|
|
||
Total revenues
|
10.5
|
|
|
10.3
|
|
||
Expenses:
|
|
|
|
||||
Interest expense
|
6.5
|
|
|
5.4
|
|
||
Other operating expenses
|
.2
|
|
|
.1
|
|
||
Total expenses
|
6.7
|
|
|
5.5
|
|
||
Income before net realized investment gains (losses) and income taxes
|
3.8
|
|
|
4.8
|
|
||
Net realized investment gains (losses)
|
(2.0
|
)
|
|
.1
|
|
||
Income before income taxes
|
$
|
1.8
|
|
|
$
|
4.9
|
|
|
Carrying value
|
|
Percent
of fixed
maturities
|
|
Gross
unrealized
losses
|
|
Percent of
gross
unrealized
losses
|
||||||
Cable/media
|
$
|
125.0
|
|
|
11.0
|
%
|
|
$
|
.7
|
|
|
24.1
|
%
|
Healthcare/pharmaceuticals
|
123.7
|
|
|
10.9
|
|
|
.1
|
|
|
4.2
|
|
||
Technology
|
110.9
|
|
|
9.8
|
|
|
.3
|
|
|
8.6
|
|
||
Food/beverage
|
90.8
|
|
|
8.0
|
|
|
.2
|
|
|
8.3
|
|
||
Autos
|
81.4
|
|
|
7.2
|
|
|
.2
|
|
|
6.3
|
|
||
Brokerage
|
56.5
|
|
|
5.0
|
|
|
.1
|
|
|
4.6
|
|
||
Energy/pipelines
|
53.3
|
|
|
4.7
|
|
|
.1
|
|
|
2.9
|
|
||
Entertainment/hotels
|
45.9
|
|
|
4.1
|
|
|
.2
|
|
|
5.5
|
|
||
Capital goods
|
41.2
|
|
|
3.6
|
|
|
.1
|
|
|
3.9
|
|
||
Aerospace/defense
|
40.3
|
|
|
3.6
|
|
|
.1
|
|
|
2.4
|
|
||
Utilities
|
37.6
|
|
|
3.3
|
|
|
.3
|
|
|
9.2
|
|
||
Building materials
|
35.9
|
|
|
3.2
|
|
|
—
|
|
|
.9
|
|
||
Consumer products
|
33.7
|
|
|
3.0
|
|
|
.1
|
|
|
1.2
|
|
||
Gaming
|
32.7
|
|
|
2.9
|
|
|
—
|
|
|
.6
|
|
||
Insurance
|
29.9
|
|
|
2.6
|
|
|
—
|
|
|
1.1
|
|
||
Chemicals
|
27.6
|
|
|
2.4
|
|
|
—
|
|
|
.9
|
|
||
Retail
|
22.9
|
|
|
2.0
|
|
|
.1
|
|
|
2.1
|
|
||
Transportation
|
21.0
|
|
|
1.9
|
|
|
.1
|
|
|
4.7
|
|
||
Paper
|
18.9
|
|
|
1.7
|
|
|
—
|
|
|
.8
|
|
||
Metals and mining
|
18.2
|
|
|
1.6
|
|
|
—
|
|
|
.2
|
|
||
Real estate/REITs
|
11.9
|
|
|
1.0
|
|
|
.1
|
|
|
1.8
|
|
||
Telecom
|
11.0
|
|
|
.9
|
|
|
—
|
|
|
3.8
|
|
||
Textiles
|
7.8
|
|
|
.7
|
|
|
—
|
|
|
1.0
|
|
||
Business services
|
6.2
|
|
|
.5
|
|
|
—
|
|
|
.2
|
|
||
Other
|
49.8
|
|
|
4.4
|
|
|
—
|
|
|
.7
|
|
||
Total
|
$
|
1,134.1
|
|
|
100.0
|
%
|
|
$
|
2.8
|
|
|
100.0
|
%
|
|
Amortized
cost
|
|
Estimated
fair
value
|
||||
|
(Dollars in millions)
|
||||||
Due in one year or less
|
$
|
3.6
|
|
|
$
|
3.5
|
|
Due after one year through five years
|
137.5
|
|
|
136.8
|
|
||
Due after five years through ten years
|
362.9
|
|
|
360.9
|
|
||
Total
|
$
|
504.0
|
|
|
$
|
501.2
|
|
Period
|
|
Total number of shares (or units)
|
|
Average price paid per share (or unit)
|
|
Total number of shares (or units) purchased as part of publicly announced plans or programs
|
|
Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs (a)
|
||||||
|
|
|
|
|
|
|
|
(dollars in millions)
|
||||||
January 1 through January 31
|
|
5,164
|
|
|
$
|
17.69
|
|
|
—
|
|
|
$
|
397.4
|
|
February 1 through February 28
|
|
133,228
|
|
|
18.16
|
|
|
—
|
|
|
397.4
|
|
||
March 1 through March 31
|
|
2,285,931
|
|
|
18.63
|
|
|
2,200,200
|
|
|
356.4
|
|
||
Total
|
|
2,424,323
|
|
|
18.60
|
|
|
2,200,200
|
|
|
356.4
|
|
(a)
|
In May 2011, the Company announced a securities repurchase program of up to
$100.0 million
. In February 2012, June 2012, December 2012 and December 2013, the Company's Board of Directors approved, in aggregate, an additional
$800.0 million
to repurchase the Company's outstanding securities.
|
10.1
|
Form of stock option agreement under the CNO Financial Group, Inc. Amended and Restated Long-Term Incentive Plan.
|
|
|
10.2
|
Form of restricted stock agreement under the CNO Financial Group, Inc. Amended and Restated Long-Term Incentive Plan.
|
|
|
10.3
|
Form of performance unit award agreement (TSR) under the CNO Financial Group, Inc. Amended and Restated Long-Term Incentive Plan.
|
|
|
10.4
|
Form of performance unit award agreement (ROE) under the CNO Financial Group, Inc. Amended and Restated Long-Term Incentive Plan.
|
|
|
12.1
|
Computation of Ratio of Earnings to Fixed Charges.
|
|
|
31.1
|
Certification Pursuant to the Securities Exchange Act Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
31.2
|
Certification Pursuant to the Securities Exchange Act Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
32.1
|
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
32.2
|
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
101.INS
|
XBRL Instance Document.
|
|
|
101.SCH
|
XBRL Taxonomy Extension Schema Document.
|
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
|
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
|
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document.
|
|
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
|
By:
|
/s/ Frederick J. Crawford
|
|
|
Frederick J. Crawford
|
|
|
Executive Vice President and Chief Financial Officer
|
|
|
(authorized officer and principal financial officer)
|
|
|
By: /s/ Sue Menzel
|
|
|
Name: Susan L. Menzel
|
|
|
Title: Executive Vice President,
|
|
|
Human Resources
|
|
|
By: /s/ Sue Menzel
|
|
|
Name: Susan L. Menzel
|
|
|
Title: Executive Vice President,
|
|
|
Human Resources
|
|
By: /s/ Sue Menzel
|
|
Name: Susan L. Menzel
|
|
Title: Executive Vice President,
|
|
Human Resources
|
36-month Relative TSR
Performance (1/1/14-12/31/16)
|
TSR Performance Share
Payout (Vesting)
|
|
|
At or above 75
th
percentile
|
150%
|
50
th
percentile
|
100%
|
25
th
percentile
|
25%
|
Below 25
th
percentile
|
NO PAYOUT
|
|
By: /s/ Sue Menzel
|
|
Name: Susan L. Menzel
|
|
Title: Executive Vice President,
|
|
Human Resources
|
2014 - 2016
|
Performance Share
|
Average Operating Return on Equity
1
|
Payout (Vesting)
2
|
≥% (maximum)
|
150%
|
% (target)
|
100%
|
% (threshold)
|
25%
|
<%
|
0%
|
|
Three months
|
|
|
||||
|
ended
|
|
Year ended
|
||||
|
March 31,
2014 |
|
December 31,
2013 |
||||
Pretax income (loss) from operations:
|
|
|
|
||||
Net income (loss)
|
$
|
(228.0
|
)
|
|
$
|
478.0
|
|
Add income tax expense (benefit)
|
58.4
|
|
|
(173.2
|
)
|
||
Pretax income (loss) from operations
|
(169.6
|
)
|
|
304.8
|
|
||
Add fixed charges:
|
|
|
|
||||
Interest expense on corporate debt
|
11.1
|
|
|
51.3
|
|
||
Interest expense on investment borrowings and borrowings related to variable interest entities
|
13.5
|
|
|
54.0
|
|
||
Interest added to policyholder account balances
|
54.3
|
|
|
232.5
|
|
||
Portion of rental (a)
|
3.5
|
|
|
13.3
|
|
||
Fixed charges
|
82.4
|
|
|
351.1
|
|
||
Adjusted earnings (loss)
|
$
|
(87.2
|
)
|
|
$
|
655.9
|
|
Ratio of earnings to fixed charges
|
(b)
|
|
1.87X
|
|
(a)
|
Interest portion of rental is estimated to be 33 percent.
|
(b)
|
For such ratio, earnings were $169.6 million less than fixed charges.
|
1.
|
I have reviewed this quarterly report on Form 10-Q of CNO Financial Group, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the period presented in this report;
|
4.
|
I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report; and
|
(d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
1.
|
I have reviewed this quarterly report on Form 10-Q of CNO Financial Group, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the period presented in this report;
|
4.
|
I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report; and
|
(d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
(1)
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
(1)
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|