þ
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Annual 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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Title of each class
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Name of Each Exchange on which Registered
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Common Stock, par value $0.01 per share
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New York Stock Exchange
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Rights to purchase Series C Junior Participating Preferred Stock
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New York Stock Exchange
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PART I
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Page
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Item 1.
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Item 1A.
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Item 1B.
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Item 2.
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Item 3.
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Item 4.
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PART II
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Item 5.
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Item 6.
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Item 7.
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Item 7A.
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Item 8.
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Item 9.
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Item 9A.
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Item 9B.
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PART III
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Item 10.
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Item 11.
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Item 12.
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Item 13.
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Item 14.
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PART IV
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Item 15.
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Item 16.
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•
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Bankers Life,
which underwrites, 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, financial and investment advisors, and sales managers supported by a network of community-based sales offices. The Bankers Life segment includes primarily the business of Bankers Life. Bankers Life also has various distribution and marketing agreements with other insurance companies to use Bankers Life's career agents to distribute Medicare Advantage and prescription drug plans ("PDP") products in exchange for a fee.
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•
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Washington National,
which underwrites, 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, Inc. ("PMA", a wholly owned subsidiary) and through independent marketing organizations and insurance agencies including worksite marketing. The products being marketed are underwritten by Washington National Insurance Company ("Washington National"). This segment's business also includes certain closed blocks of annuities and Medicare supplement policies which are no longer being actively marketed by this segment and were primarily issued or acquired by Washington National.
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•
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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").
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•
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Long-term care in run-off
consists of: (i) the long-term care business that was recaptured due to the termination of certain reinsurance agreements effective September 30, 2016 (such business is not actively marketed and was issued or acquired by Washington National and Bankers Conseco Life Insurance Company ("BCLIC")); and (ii) certain legacy (prior to 2003) comprehensive and nursing home long-term care policies which were ceded to Wilton Re in September 2018 (such business was not actively marketed and was issued by Bankers Life).
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•
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Maximize our product portfolio to ensure it meets our customers’ needs for integrated products and advice covering a broad range of their financial goals
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•
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Respond effectively to evolving customer preferences
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•
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Expand and enhance elements of our broker-dealer and registered investment advisor program
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•
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Continue our "expand to the right" strategy to reach slightly younger and wealthier consumers within the middle-income market
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•
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Increase the speed-to-market for new products that are a good fit for our customers
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•
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Make strategic, measured changes to our business practices to improve our competitive advantage
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•
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Continue to invest in technology to support agent productivity and relationships with our customers
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•
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Maintain our strong capital position and favorable financial metrics
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•
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Work to increase our return on equity
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•
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Maintain pricing discipline
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•
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Maintain an active enterprise risk management process
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•
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Utilize excess cash flow to maximize long-term returns
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•
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Maintain a competitive dividend payout ratio
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•
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Attract, retain and develop the best talent to help us drive sustainable growth
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•
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Recruit, develop and retain our agent force
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2018
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2017
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2016
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||||||
Health:
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||||||
Bankers Life
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$
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1,019.0
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$
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1,025.1
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$
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1,028.5
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Washington National
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659.3
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642.5
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628.4
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|||
Colonial Penn
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1.7
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2.0
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2.4
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Long-term care in run-off
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145.8
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205.2
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211.5
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Total health
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1,825.8
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1,874.8
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1,870.8
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Annuities:
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||||||
Bankers Life
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1,163.2
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1,030.6
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970.0
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Washington National
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1.3
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|
.9
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1.5
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Total annuities
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1,164.5
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1,031.5
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971.5
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Life:
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||||||
Bankers Life
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466.0
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462.4
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461.1
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Washington National
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32.2
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30.0
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29.4
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Colonial Penn
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296.6
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289.6
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277.8
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Total life
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794.8
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782.0
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768.3
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Total premium collections
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$
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3,785.1
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$
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3,688.3
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$
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3,610.6
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2018
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2017
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2016
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||||||
Medicare supplement:
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Bankers Life
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$
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734.3
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$
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739.4
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$
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739.3
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Washington National
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46.3
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51.6
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61.0
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Colonial Penn
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1.5
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1.9
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2.3
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Total
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782.1
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792.9
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802.6
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Long-term care:
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||||||
Bankers Life
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255.1
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257.0
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261.8
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Long-term care in run-off
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145.8
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205.2
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211.5
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Total
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400.9
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462.2
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473.3
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Supplemental health:
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Bankers Life
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23.6
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22.6
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21.2
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Washington National
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611.3
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589.1
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|
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565.5
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Total
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634.9
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611.7
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586.7
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Other:
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Bankers Life
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6.0
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6.1
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6.2
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Washington National
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1.7
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1.8
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1.9
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Colonial Penn
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.2
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.1
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.1
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Total
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7.9
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8.0
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8.2
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Total health premium collections
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$
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1,825.8
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$
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1,874.8
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$
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1,870.8
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2018
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2017
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2016
|
||||||
Fixed index annuity:
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Bankers Life
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$
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1,112.0
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$
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964.7
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$
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868.1
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Washington National
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1.1
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|
.6
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1.2
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Total fixed index annuity premium collections
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1,113.1
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965.3
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869.3
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Other fixed interest annuity:
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||||||
Bankers Life
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51.2
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65.9
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101.9
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|||
Washington National
|
.2
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|
.3
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.3
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Total fixed interest annuity premium collections
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51.4
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66.2
|
|
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102.2
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Total annuity premium collections
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$
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1,164.5
|
|
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$
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1,031.5
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$
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971.5
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•
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The index to be used.
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•
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The time period during which the change in the index is measured. At the end of the time period, the change in the index is applied to the account value. The time period of the contract ranges from 1 to 4 years.
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•
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The method used to measure the change in the index.
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•
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The measured change in the index is multiplied by a "participation rate" (percentage of change in the index) before the credit is applied. Some policies guarantee the initial participation rate for the life of the contract, and some vary the rate for each period.
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•
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The measured change in the index may also be limited by a "cap" before the credit is applied. Some policies guarantee the initial cap for the life of the contract, and some vary the cap for each period.
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•
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The measured change in the index may also be limited to the excess in the measured change over a "margin" before the credit is applied. Some policies guarantee the initial margin for the life of the contract, and some vary the margin for each period.
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2018
|
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2017
|
|
2016
|
||||||
Interest-sensitive life products:
|
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||||||
Bankers Life
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$
|
170.8
|
|
|
$
|
162.5
|
|
|
$
|
175.0
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Washington National
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22.1
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|
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19.1
|
|
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18.0
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|||
Colonial Penn
|
.2
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.2
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.3
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|||
Total interest-sensitive life premium collections
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193.1
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|
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181.8
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|
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193.3
|
|
|||
Traditional life:
|
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||||||
Bankers Life
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295.2
|
|
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299.9
|
|
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286.1
|
|
|||
Washington National
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10.1
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|
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10.9
|
|
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11.4
|
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Colonial Penn
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296.4
|
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289.4
|
|
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277.5
|
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Total traditional life premium collections
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601.7
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600.2
|
|
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575.0
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|||
Total life insurance premium collections
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$
|
794.8
|
|
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$
|
782.0
|
|
|
$
|
768.3
|
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•
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provide largely stable investment income from a diversified high quality fixed income portfolio;
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•
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maximize and maintain a stable spread between our investment income and the yields we pay on insurance products;
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•
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sustain adequate liquidity levels to meet operating cash requirements, including a margin for potential adverse developments;
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•
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continually monitor and manage the relationship between our investment portfolio and the financial characteristics of our insurance liabilities such as durations and cash flows; and
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•
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maximize total return through active strategic asset allocation and investment management.
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•
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purchasing options on equity indices with similar payoff characteristics; and
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•
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adjusting the participation rate to reflect the change in the cost of such options (such cost varies based on market conditions).
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Name of Reinsurer
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Reinsurance receivables
|
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Ceded life insurance inforce
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|
A.M. Best rating
|
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Wilton Re (a)
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$
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3,046.4
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$
|
1,129.8
|
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A+
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Jackson National Life Insurance Company ("Jackson") (b)
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1,323.8
|
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|
642.3
|
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A+
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RGA Reinsurance Company (c)
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258.0
|
|
|
102.9
|
|
|
A+
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Swiss Re Life and Health America Inc.
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3.7
|
|
|
636.3
|
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|
A+
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Munich American Reassurance Company
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3.2
|
|
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518.5
|
|
|
A+
|
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SCOR Global Life USA Reinsurance Company
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1.3
|
|
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80.9
|
|
|
A+
|
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All others (d)
|
289.0
|
|
|
210.6
|
|
|
|
||
|
$
|
4,925.4
|
|
|
$
|
3,321.3
|
|
|
|
(a)
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In addition to the life insurance business, Wilton Re has assumed certain long-term care business through a 100% indemnity coinsurance agreement. Such business had total insurance policy liabilities of $2.8 billion at
December 31, 2018
.
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(b)
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In addition to the life insurance business, Jackson has assumed certain annuity business from our insurance subsidiaries through a coinsurance agreement. Such business had total insurance policy liabilities of $1.0 billion at
December 31, 2018
.
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(c)
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RGA Reinsurance Company has assumed a portion of the long-term care business of Bankers Life on a coinsurance basis.
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(d)
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No other single reinsurer represents more than 3 percent of the reinsurance receivables balance or has assumed greater than 2 percent of the total ceded life insurance business inforce.
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•
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grant and revoke business licenses;
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•
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regulate and supervise sales practices and market conduct;
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•
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establish guaranty associations;
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•
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license agents;
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•
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approve policy forms;
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•
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approve premium rates and premium rate increases for some lines of business such as long-term care and Medicare supplement;
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•
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establish reserve requirements;
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•
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prescribe the form and content of required financial statements and reports;
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•
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determine the reasonableness and adequacy of statutory capital and surplus;
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•
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perform financial, market conduct and other examinations;
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•
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define acceptable accounting principles; and
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•
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regulate the types and amounts of permitted investments.
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•
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reserve requirements;
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•
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risk-based capital ("RBC") standards;
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•
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codification of insurance accounting principles;
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•
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investment restrictions;
|
•
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restrictions on an insurance company's ability to pay dividends;
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•
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credit for reinsurance; and
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•
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product illustrations.
|
•
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statutory net gain from operations or statutory net income for the prior year; or
|
•
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10 percent of statutory capital and surplus at the end of the preceding year.
|
•
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between the current year and the prior year; and
|
•
|
for the average of the last 3 years.
|
Guaranteed
|
|
Fixed interest and fixed
|
|
Universal
|
|
|
||||||
rate
|
|
index annuities
|
|
life
|
|
Total
|
||||||
> 5.0% to 6.0%
|
|
$
|
.3
|
|
|
$
|
10.1
|
|
|
$
|
10.4
|
|
> 4.0% to 5.0%
|
|
29.1
|
|
|
273.1
|
|
|
302.2
|
|
|||
> 3.0% to 4.0%
|
|
816.4
|
|
|
44.2
|
|
|
860.6
|
|
|||
> 2.0% to 3.0%
|
|
1,817.0
|
|
|
218.1
|
|
|
2,035.1
|
|
|||
> 1.0% to 2.0%
|
|
710.6
|
|
|
25.2
|
|
|
735.8
|
|
|||
1.0% and under
|
|
5,576.2
|
|
|
410.6
|
|
|
5,986.8
|
|
|||
|
|
$
|
8,949.6
|
|
|
$
|
981.3
|
|
|
$
|
9,930.9
|
|
Weighted average
|
|
1.66
|
%
|
|
2.64
|
%
|
|
1.76
|
%
|
•
|
The first hypothetical scenario assumes immediate and permanent reductions to current interest rate spreads on interest-sensitive products. We estimate that a pre-tax charge of approximately $52 million would occur if assumed spreads related to our interest-sensitive life and annuity products immediately and permanently decreased by 10 basis points.
|
•
|
A second scenario assumes that new money rates remain at their current level indefinitely. We estimate that this scenario would result in a pre-tax charge of approximately $1 million related to an increase in deficiency reserves related to life contingent payout annuities and reduce future margins for all non-interest sensitive products by $95 million.
|
•
|
The third scenario assumes current new money rates increase modestly such that our current portfolio yield remains level. We estimate that this scenario would result in no charges, but would reduce margins for all non-interest sensitive products by $115 million.
|
•
|
The fourth scenario assumes that new money rates decrease 200 basis points and remain at that level indefinitely. We estimate that this scenario would result in a pre-tax charge of approximately $50 million related to an increase in
|
•
|
One scenario assumes that the new money rates available to invest cash flows from our retained long-term care blocks remain at their current level indefinitely. This scenario would reduce margins by approximately $25 million but would not result in a charge because margins would continue to be positive.
|
•
|
A second scenario assumes that current new money rates available to invest cash flows from the retained long-term care blocks immediately decrease to approximately 5.49 percent and remain at that level indefinitely. This scenario would reduce margins in the block by approximately $34 million but would also not result in a charge.
|
•
|
An additional scenario assumes that current new money rates available to invest cash flows from our long-term care blocks immediately decrease by approximately 220 basis points and remain at that level indefinitely. This scenario would result in a charge of $32 million and reduce margins in the blocks by approximately $195 million.
|
•
|
The value of our investment portfolio has been materially affected in the past by changes in market conditions which resulted in substantial changes in realized and/or unrealized losses. Future adverse capital market conditions could result in additional realized and/or unrealized losses.
|
•
|
Changes in interest rates also affect our investment portfolio. In periods of increasing interest rates, life insurance policy loans, surrenders and withdrawals could increase as policyholders seek higher returns. This could require us to sell invested assets at a time when their prices may be depressed by the increase in interest rates, which could cause us to realize investment losses. Conversely, during periods of declining interest rates, we could experience increased premium payments on products with flexible premium features, repayment of policy loans and increased percentages of policies remaining inforce. We could obtain lower returns on investments made with these cash flows. In addition, prepayment rates on investments may increase so that we might have to reinvest those proceeds in lower-yielding investments. As a consequence of these factors, we could experience a decrease in the spread between the returns on our investment portfolio and amounts to be credited to policyholders and contractholders, which could adversely affect our profitability. Further, reductions in interest rates could result in an acceleration of the amortization of deferred acquisition costs and the present value of future profits and a reduction in our projected loss recognition testing margins.
|
•
|
The attractiveness of certain of our insurance products may decrease because they are linked to the equity markets and assessments of our financial strength, resulting in lower profits. Increasing consumer concerns about the returns and features of our insurance products or our financial strength may cause existing customers to surrender policies or withdraw assets, and diminish our ability to sell policies and attract assets from new and existing customers, which would result in lower sales and fee revenues.
|
•
|
changes in interest rates and credit spreads, which can reduce the value of our investments as further discussed in the risk factor entitled "Changing interest rates may adversely affect our results of operations";
|
•
|
changes in patterns of relative liquidity in the capital markets for various asset classes;
|
•
|
changes in the perceived or actual ability of issuers to make timely repayments, which can reduce the value of our investments. This risk is significantly greater with respect to below-investment grade securities, which comprised 12 percent of the cost basis of our available for sale fixed maturity investments as of
December 31, 2018
; and
|
•
|
changes in the estimated timing of receipt of cash flows. For example, our structured securities, which comprised
28 percent
of our available for sale fixed maturity investments at
December 31, 2018
, are subject to variable prepayment on the assets underlying such securities, such as mortgage loans. When asset-backed securities, collateralized debt obligations, commercial mortgage-backed securities, mortgage pass-through securities and collateralized mortgage obligations (collectively referred to as "structured securities") prepay faster than expected, investment income may be adversely affected due to the acceleration of the amortization of purchase premiums or the inability to reinvest at comparable yields in lower interest rate environments.
|
•
|
subsidiary debt;
|
•
|
liens;
|
•
|
restrictive agreements;
|
•
|
restricted payments during the continuance of an event of default;
|
•
|
disposition of assets and sale and leaseback transactions;
|
•
|
transactions with affiliates;
|
•
|
change in business;
|
•
|
fundamental changes;
|
•
|
modification of certain agreements; and
|
•
|
changes to fiscal year.
|
•
|
non-payment;
|
•
|
breach of representations, warranties or covenants;
|
•
|
cross-default and cross-acceleration;
|
•
|
bankruptcy and insolvency events;
|
•
|
judgment defaults;
|
•
|
actual or asserted invalidity of documentation with respect to the Revolving Credit Agreement;
|
•
|
change of control; and
|
•
|
customary ERISA defaults.
|
•
|
incur certain subsidiary indebtedness without also guaranteeing the Notes;
|
•
|
create liens;
|
•
|
enter into sale and leaseback transactions;
|
•
|
issue, sell, transfer or otherwise dispose of any shares of capital stock of any Insurance Subsidiary (as defined in the Indenture); and
|
•
|
consolidate or merge with or into other companies or transfer all or substantially all of the Company’s assets.
|
•
|
statutory net gain from operations or statutory net income for the prior year, or
|
•
|
10 percent of statutory capital and surplus as of the end of the preceding year.
|
Officer
|
With CNO
|
Positions with CNO, Principal
|
Name and Age (a)
|
Since
|
Occupation and Business Experience (b)
|
Bruce Baude, 54
|
2012
|
Since July 2012, executive vice president, chief operations and technology officer. From 2008 to 2012, Mr. Baude was chief operating officer at Univita Health.
|
Gary C. Bhojwani, 51
|
2016
|
Since January 2018, chief executive officer. From April 2016 to December 2017, president of CNO. From April 2015 until joining CNO, chief executive officer of GCB, LLC, an insurance and financial services consulting company that he founded. Mr. Bhojwani served as a member of the board of management at Allianz SE, Chairman of Allianz of America, Allianz Life Insurance Company, and Fireman’s Fund Insurance Company from 2012 to January 1, 2015. From 2007 to 2012, he served as president of Allianz Life Insurance Company of North America.
|
Yvonne K. Franzese, 60
|
2017
|
Since November 2017, executive vice president and chief human resources officer of CNO. From 2016 until joining CNO, chief human capital officer of TCF Bank. From 2007 to 2016, Ms. Franzese held various human resource positions at Allianz, including the chief human resources role for Allianz of North America.
|
Scott L. Goldberg, 48
|
2004
|
Since September 2013, president of Bankers Life. Mr. Goldberg has held various other positions since joining CNO in 2004.
|
Michael D. Heard, 53
|
2013
|
Since March 2017, president of Washington National. From 2013 to March 2017, senior vice president of enterprise operations for CNO.
|
Erik M. Helding, 46
|
2004
|
Since April 2016, executive vice president and chief financial officer. From August 2012 to April 2016, senior vice president, treasury and investor relations. Prior to August 2012, Mr. Helding was vice president, financial planning and analysis and he has held various finance positions since joining CNO in 2004.
|
Eric R. Johnson, 58
|
1997
|
Since September 2003, executive vice president and chief investment officer of CNO and president and chief executive officer of 40|86 Advisors, CNO's wholly-owned registered investment advisor. Since January 2018, executive in charge of corporate development activities. Mr. Johnson has held various investment management positions since joining CNO in 1997.
|
John R. Kline, 61
|
1990
|
Since July 2002, senior vice president and chief accounting officer. Mr. Kline has served in various accounting and finance capacities with CNO since 1990.
|
Gerardo Monroy, 51
|
2001
|
Since March 2017, chief marketing officer of CNO. From August 2012 to March 2017, president of Colonial Penn. Mr. Monroy has held various other positions since joining CNO in 2001.
|
Joel Schwartz, 55
|
2014
|
Since March 2017, president of Colonial Penn. From 2014 to March 2017, Mr. Schwartz held various positions with Colonial Penn. Prior to joining CNO, he spent nine years with Lincoln Financial Group.
|
Matthew J. Zimpfer, 51
|
1998
|
Since June 2008, executive vice president and general counsel. Mr. Zimpfer has held various legal positions since joining CNO in 1998.
|
(a)
|
The executive officers serve as such at the discretion of the Board of Directors and are elected annually.
|
(b)
|
Business experience is given for at least the last five years.
|
ITEM 5.
|
MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
|
|
12/13
|
12/14
|
12/15
|
12/16
|
12/17
|
12/18
|
||||||||||||
CNO Financial Group, Inc.
|
$
|
100.00
|
|
$
|
100.58
|
|
$
|
112.44
|
|
$
|
113.33
|
|
$
|
148.49
|
|
$
|
91.28
|
|
S&P 500 Index
|
100.00
|
|
114.87
|
|
116.36
|
|
129.05
|
|
157.22
|
|
150.33
|
|
||||||
S&P Life & Health Insurance Index
|
100.00
|
|
103.48
|
|
96.48
|
|
119.26
|
|
138.85
|
|
110.01
|
|
||||||
S&P MidCap 400 Index
|
100.00
|
|
110.93
|
|
108.49
|
|
129.65
|
|
150.71
|
|
134.01
|
|
Period (in 2018)
|
|
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)
|
||||||
October 1 through October 31
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
325.1
|
|
November 1 through November 30
|
|
20,674
|
|
|
17.95
|
|
|
18,791
|
|
|
324.7
|
|
||
December 1 through December 31
|
|
2,470,385
|
|
|
16.25
|
|
|
2,468,810
|
|
|
284.6
|
|
||
Total
|
|
2,491,059
|
|
|
16.26
|
|
|
2,487,601
|
|
|
284.6
|
|
(a)
|
In May 2011, the Company announced a securities repurchase program of up to
$100.0 million
. In February 2012, June 2012, December 2012, December 2013, November 2014, November 2015 and May 2017, the Company's Board of Directors approved, in aggregate, an additional
$1,900.0 million
to repurchase the Company's outstanding securities.
|
|
|
Number of securities to be issued upon exercise of outstanding options and rights
|
|
Weighted-average exercise price of outstanding options and rights
|
|
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in first column)
|
||||
Equity compensation plans approved by security holders
|
|
6,539,168
|
|
|
$
|
17.77
|
|
|
5,296,134
|
|
Equity compensation plans not approved by security holders
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Total
|
|
6,539,168
|
|
|
$
|
17.77
|
|
|
5,296,134
|
|
|
|
Years ended December 31,
|
||||||||||||||||||
|
|
2018
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
||||||||||
|
|
(Amounts in millions, except per share data)
|
||||||||||||||||||
STATEMENT OF OPERATIONS DATA
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Insurance policy income
|
|
$
|
2,593.1
|
|
|
$
|
2,647.3
|
|
|
$
|
2,601.1
|
|
|
$
|
2,556.0
|
|
|
$
|
2,629.7
|
|
Net investment income
|
|
1,306.2
|
|
|
1,551.3
|
|
|
1,325.2
|
|
|
1,233.6
|
|
|
1,427.4
|
|
|||||
Net realized investment gains (losses)
|
|
352.1
|
|
|
50.3
|
|
|
8.3
|
|
|
(36.6
|
)
|
|
36.7
|
|
|||||
Total revenues
|
|
4,313.5
|
|
|
4,297.2
|
|
|
3,985.1
|
|
|
3,811.9
|
|
|
4,144.7
|
|
|||||
Interest expense
|
|
149.8
|
|
|
123.7
|
|
|
116.4
|
|
|
94.9
|
|
|
92.8
|
|
|||||
Total benefits and expenses
|
|
4,578.3
|
|
|
3,816.7
|
|
|
3,631.9
|
|
|
3,444.2
|
|
|
3,969.6
|
|
|||||
Income (loss) before income taxes
|
|
(264.8
|
)
|
|
480.5
|
|
|
353.2
|
|
|
367.7
|
|
|
175.1
|
|
|||||
Income tax expense (benefit)
|
|
50.2
|
|
|
304.9
|
|
|
(5.0
|
)
|
|
97.0
|
|
|
123.7
|
|
|||||
Net income (loss)
|
|
(315.0
|
)
|
|
175.6
|
|
|
358.2
|
|
|
270.7
|
|
|
51.4
|
|
|||||
PER SHARE DATA
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net income (loss), basic
|
|
$
|
(1.90
|
)
|
|
$
|
1.03
|
|
|
$
|
2.03
|
|
|
$
|
1.40
|
|
|
$
|
.24
|
|
Net income (loss), diluted
|
|
(1.90
|
)
|
|
1.02
|
|
|
2.01
|
|
|
1.39
|
|
|
.24
|
|
|||||
Dividends declared per common share
|
|
.39
|
|
|
.35
|
|
|
.31
|
|
|
.27
|
|
|
.24
|
|
|||||
Book value per common share outstanding
|
|
20.78
|
|
|
29.05
|
|
|
25.82
|
|
|
22.49
|
|
|
23.06
|
|
|||||
Weighted average shares outstanding for basic earnings
|
|
165.5
|
|
|
170.0
|
|
|
176.6
|
|
|
193.1
|
|
|
212.9
|
|
|||||
Weighted average shares outstanding for diluted earnings
|
|
165.5
|
|
|
172.1
|
|
|
178.3
|
|
|
195.2
|
|
|
217.7
|
|
|||||
Shares outstanding at period-end
|
|
162.2
|
|
|
166.9
|
|
|
173.8
|
|
|
184.0
|
|
|
203.3
|
|
|||||
BALANCE SHEET DATA
-
AT PERIOD END
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Total investments
|
|
$
|
22,995.4
|
|
|
$
|
27,854.1
|
|
|
$
|
26,237.6
|
|
|
$
|
24,487.1
|
|
|
$
|
24,908.3
|
|
Total assets
|
|
31,439.8
|
|
|
33,110.3
|
|
|
31,975.2
|
|
|
31,125.1
|
|
|
31,155.9
|
|
|||||
Corporate notes payable
|
|
916.8
|
|
|
914.6
|
|
|
912.9
|
|
|
911.1
|
|
|
780.3
|
|
|||||
Total liabilities
|
|
28,068.9
|
|
|
28,262.8
|
|
|
27,488.3
|
|
|
26,986.6
|
|
|
26,467.7
|
|
|||||
Shareholders' equity
|
|
3,370.9
|
|
|
4,847.5
|
|
|
4,486.9
|
|
|
4,138.5
|
|
|
4,688.2
|
|
|||||
STATUTORY DATA - AT PERIOD END (a)
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Statutory capital and surplus
|
|
$
|
1,652.8
|
|
|
$
|
1,904.4
|
|
|
$
|
1,956.8
|
|
|
$
|
1,739.2
|
|
|
$
|
1,654.4
|
|
Asset valuation reserve ("AVR")
|
|
233.3
|
|
|
246.8
|
|
|
253.3
|
|
|
196.9
|
|
|
203.1
|
|
|||||
Total statutory capital and surplus and AVR
|
|
1,886.1
|
|
|
2,151.2
|
|
|
2,210.1
|
|
|
1,936.1
|
|
|
1,857.5
|
|
(a)
|
We have derived the statutory data from statements filed by our insurance subsidiaries with regulatory authorities which are prepared in accordance with statutory accounting principles, which vary in certain respects from GAAP.
|
ITEM 7.
|
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 and uncertainties, including the performance and fluctuations 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, changes in the health care market 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;
|
•
|
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;
|
•
|
changes in capital deployment opportunities;
|
•
|
our ability to maintain effective controls over financial reporting;
|
•
|
our ability to continue to recruit and retain productive agents and distribution partners;
|
•
|
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;
|
•
|
regulatory changes or actions, including: those relating to regulation of the financial affairs of our insurance companies, such as the calculation of risk-based capital and minimum capital requirements, and 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;
|
•
|
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;
|
•
|
availability and effectiveness of reinsurance arrangements, as well as the impact of any defaults or failure of reinsurers to perform;
|
•
|
the performance of third party service providers and potential difficulties arising from outsourcing arrangements;
|
•
|
the growth rate of sales, collected premiums, annuity deposits and assets;
|
•
|
interruption in telecommunication, information technology or other operational systems or failure to maintain the security, confidentiality or privacy of sensitive data on such systems;
|
•
|
events of terrorism, cyber attacks, natural disasters or other catastrophic events, including losses from a disease pandemic;
|
•
|
ineffectiveness of risk management policies and procedures in identifying, monitoring and managing risks; and
|
•
|
the risk factors or uncertainties listed from time to time in our filings with the SEC.
|
•
|
Bankers Life,
which underwrites, 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, financial and investment advisors, 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 has various distribution and marketing agreements with other insurance companies to use Bankers Life's career agents to distribute Medicare Advantage and PDP products in exchange for a fee.
|
•
|
Washington National,
which underwrites, 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 PMA and through independent marketing organizations and insurance agencies including worksite marketing. The products being marketed are underwritten by Washington National. This segment's business also includes certain closed blocks of annuities and Medicare supplement policies which are no longer being actively marketed by this segment and were primarily issued or acquired 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.
|
•
|
Long-term care in run-off
consists of: (i) the long-term care business that was recaptured due to the termination of certain reinsurance agreements effective September 30, 2016 (such business is not actively marketed and was issued or acquired by Washington National and BCLIC); and (ii) certain legacy (prior to 2003) comprehensive and nursing home long-term care policies which were ceded in September 2018 (such business is not actively marketed and was issued by Bankers Life).
|
|
2018
|
|
2017
|
|
2016
|
||||||
Adjusted EBIT (a non-GAAP financial measure) (a):
|
|
|
|
|
|
||||||
Bankers Life
|
$
|
340.6
|
|
|
$
|
367.5
|
|
|
$
|
375.6
|
|
Washington National
|
121.9
|
|
|
98.3
|
|
|
102.9
|
|
|||
Colonial Penn
|
14.8
|
|
|
22.6
|
|
|
1.7
|
|
|||
Long-term care in run-off
|
22.9
|
|
|
53.1
|
|
|
18.4
|
|
|||
Adjusted EBIT from business segments
|
500.2
|
|
|
541.5
|
|
|
498.6
|
|
|||
Corporate Operations, excluding corporate interest expense
|
(71.0
|
)
|
|
(40.3
|
)
|
|
(42.5
|
)
|
|||
Adjusted EBIT
|
429.2
|
|
|
501.2
|
|
|
456.1
|
|
|||
Corporate interest expense
|
(48.0
|
)
|
|
(46.5
|
)
|
|
(45.8
|
)
|
|||
Operating earnings before taxes
|
381.2
|
|
|
454.7
|
|
|
410.3
|
|
|||
Tax expense on operating income
|
78.1
|
|
|
153.8
|
|
|
147.8
|
|
|||
Net operating income
|
303.1
|
|
|
300.9
|
|
|
262.5
|
|
|||
Net realized investment gains from sales and impairments (net of related amortization)
|
37.9
|
|
|
34.3
|
|
|
9.0
|
|
|||
Net change in market value of investments recognized in earnings
|
(48.8
|
)
|
|
15.0
|
|
|
(1.4
|
)
|
|||
Fair value changes in embedded derivative liabilities (net of related amortization)
|
55.5
|
|
|
(2.5
|
)
|
|
9.6
|
|
|||
Fair value changes and amendment related to agent deferred compensation plan
|
11.9
|
|
|
(12.2
|
)
|
|
3.1
|
|
|||
Loss related to reinsurance transactions
|
(704.2
|
)
|
|
—
|
|
|
(75.4
|
)
|
|||
Other
|
1.7
|
|
|
(8.8
|
)
|
|
(2.0
|
)
|
|||
Non-operating income (loss) before taxes
|
(646.0
|
)
|
|
25.8
|
|
|
(57.1
|
)
|
|||
Income tax expense (benefit):
|
|
|
|
|
|
||||||
On non-operating income (loss)
|
(135.7
|
)
|
|
9.0
|
|
|
(20.0
|
)
|
|||
Valuation allowance for deferred tax assets and other tax items
|
107.8
|
|
|
142.1
|
|
|
(132.8
|
)
|
|||
Net non-operating income (loss)
|
(618.1
|
)
|
|
(125.3
|
)
|
|
95.7
|
|
|||
Net income (loss)
|
$
|
(315.0
|
)
|
|
$
|
175.6
|
|
|
$
|
358.2
|
|
|
|
|
|
|
|
||||||
Per diluted share:
|
|
|
|
|
|
||||||
Net operating income
|
$
|
1.83
|
|
|
$
|
1.75
|
|
|
$
|
1.47
|
|
Net realized investment gains from sales and impairments (net of related amortization and taxes)
|
.18
|
|
|
.13
|
|
|
.03
|
|
|||
Net change in market value of investments recognized in earnings (net of taxes)
|
(.23
|
)
|
|
.06
|
|
|
—
|
|
|||
Fair value changes in embedded derivative liabilities (net of related amortization and taxes)
|
.27
|
|
|
(.01
|
)
|
|
.04
|
|
|||
Fair value changes and amendment related to agent deferred compensation plan (net of taxes)
|
.06
|
|
|
(.05
|
)
|
|
.01
|
|
|||
Loss related to reinsurance transactions (net of taxes)
|
(4.00
|
)
|
|
—
|
|
|
(.27
|
)
|
|||
Valuation allowance for deferred tax assets and other tax items
|
(.02
|
)
|
|
(.83
|
)
|
|
.74
|
|
|||
Other
|
.01
|
|
|
(.03
|
)
|
|
(.01
|
)
|
|||
Net income (loss)
|
$
|
(1.90
|
)
|
|
$
|
1.02
|
|
|
$
|
2.01
|
|
(a)
|
Management believes that an analysis of net operating income provides a clearer comparison of the operating results of the Company from period to period because it excludes: (i) loss related to reinsurance transaction, including impact of taxes; (ii) net realized investment gains or losses from sales and impairments, net of related amortization and taxes; (iii) net change in market value of investments recognized in earnings, net of 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) fair value changes and amendment related to the agent deferred compensation plan, net of taxes; (vi) changes in the valuation allowance for deferred tax assets and other tax items; and (vii)
other non-operating items consisting primarily of earnings attributable to VIEs
. Adjusted EBIT is presented as net operating income excluding corporate interest expense and income tax expense. The table above reconciles the non-GAAP measure to the corresponding GAAP measure.
|
•
|
Maximize our product portfolio to ensure it meets our customers’ needs for integrated products and advice covering a broad range of their financial goals
|
•
|
Respond effectively to evolving customer preferences
|
•
|
Expand and enhance elements of our broker-dealer and registered investment advisor program
|
•
|
Continue our "expand to the right" strategy to reach slightly younger and wealthier consumers within the middle-income market
|
•
|
Increase the speed-to-market for new products that are a good fit for our customers
|
•
|
Make strategic, measured changes to our business practices to improve our competitive advantage
|
•
|
Continue to invest in technology to support agent productivity and relationships with our customers
|
•
|
Maintain our strong capital position and favorable financial metrics
|
•
|
Work to increase our return on equity
|
•
|
Maintain pricing discipline
|
•
|
Maintain an active enterprise risk management process
|
•
|
Utilize excess cash flow to maximize long-term returns
|
•
|
Maintain a competitive dividend payout ratio
|
•
|
Attract, retain and develop the best talent to help us drive sustainable growth
|
•
|
Recruit, develop and retain our agent force
|
•
|
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 cash equivalents 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 credit rating, maturity, corporate credit spreads, reported trades and other inputs that are observable or derived from observable information in the marketplace or are supported by transactions executed in the marketplace. Financial assets in this category primarily include: certain publicly registered and privately placed corporate fixed maturity securities; certain government or agency securities; certain mortgage and asset-backed securities; certain
|
•
|
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.
|
Change in assumptions
|
|
Estimated adjustment to income before income taxes based on revisions to certain assumptions
|
||
|
|
(dollars in millions)
|
||
Interest-sensitive life products:
|
|
|
||
5% increase to assumed mortality
|
|
$
|
(31
|
)
|
5% decrease to assumed mortality
|
|
31
|
|
|
15% increase to assumed expenses
|
|
(12
|
)
|
|
15% decrease to assumed expenses
|
|
12
|
|
|
10 basis point decrease to assumed spread
|
|
(10
|
)
|
|
10 basis point increase to assumed spread
|
|
10
|
|
|
20% increase to assumed lapses
|
|
(13
|
)
|
|
20% decrease to assumed lapses
|
|
15
|
|
|
Fixed index and fixed interest annuity products:
|
|
|
||
20% increase to assumed surrenders
|
|
(81
|
)
|
|
20% decrease to assumed surrenders
|
|
98
|
|
|
15% increase to assumed expenses
|
|
(9
|
)
|
|
15% decrease to assumed expenses
|
|
9
|
|
|
10 basis point decrease to assumed spread
|
|
(42
|
)
|
|
10 basis point increase to assumed spread
|
|
42
|
|
|
Other than interest-sensitive life and annuity products (a):
|
|
|
||
5% increase to assumed morbidity
|
|
(24
|
)
|
|
5% decrease to assumed mortality
|
|
(5
|
)
|
|
No increase in new money rate assumption after one year
|
|
(1
|
)
|
(a)
|
We have excluded the effect of reasonably likely changes in lapse, surrender and expense assumptions for policies other than interest-sensitive life and annuity products.
|
|
Years ended December 31,
|
|||||||
|
2018
|
|
2017
|
|
2016
|
|||
Bankers Life:
|
|
|
|
|
|
|||
Medicare supplement (1)
|
85.1
|
%
|
|
85.0
|
%
|
|
85.9
|
%
|
Long-term care (1)
|
90.1
|
%
|
|
89.9
|
%
|
|
89.6
|
%
|
Fixed index annuities (2)
|
90.9
|
%
|
|
91.2
|
%
|
|
91.5
|
%
|
Other annuities (2)
|
83.0
|
%
|
|
85.2
|
%
|
|
85.8
|
%
|
Life (1)
|
88.5
|
%
|
|
87.5
|
%
|
|
87.1
|
%
|
Washington National:
|
|
|
|
|
|
|||
Medicare supplement (1)
|
84.9
|
%
|
|
85.3
|
%
|
|
85.8
|
%
|
Supplemental health (1)
|
89.3
|
%
|
|
89.2
|
%
|
|
89.2
|
%
|
Life (1)
|
91.8
|
%
|
|
90.6
|
%
|
|
91.2
|
%
|
Colonial Penn:
|
|
|
|
|
|
|||
Life (1)
|
83.1
|
%
|
|
83.4
|
%
|
|
83.0
|
%
|
Long-term care in run-off (1)
|
90.7
|
%
|
|
91.2
|
%
|
|
90.8
|
%
|
(1)
|
Based on number of inforce policies.
|
(2)
|
Based on the percentage of the inforce block persisting.
|
|
|
2018
|
|
2017
|
||||
|
|
(Dollars in millions)
|
||||||
Amounts classified as future policy benefits:
|
|
|
|
|
||||
Active life reserves
|
|
$
|
3,873.3
|
|
|
$
|
3,846.0
|
|
Reserves for the present value of amounts not yet due on claims
|
|
1,404.6
|
|
|
1,366.9
|
|
||
Future loss reserves
|
|
—
|
|
|
190.0
|
|
||
Premium deficiency reserves assuming net unrealized gains had been realized
|
|
—
|
|
|
266.1
|
|
||
Amounts classified as liability for policy and contract claims:
|
|
|
|
|
|
|||
Liability for due and unpaid claims, claims in the course of settlement and incurred but not reported claims
|
|
211.7
|
|
|
200.1
|
|
||
Total
|
|
5,489.6
|
|
|
5,869.1
|
|
||
Reinsurance receivables
|
|
3,030.3
|
|
|
221.5
|
|
||
Long-term care reserves, net of reinsurance receivables
|
|
$
|
2,459.3
|
|
|
$
|
5,647.6
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Fee revenue:
|
|
|
|
|
|
||||||
Medicare Advantage contracts
|
$
|
30.3
|
|
|
$
|
24.6
|
|
|
$
|
23.2
|
|
PDP contracts
|
2.9
|
|
|
3.3
|
|
|
3.1
|
|
|||
Total revenue
|
33.2
|
|
|
27.9
|
|
|
26.3
|
|
|||
Distribution expenses
|
13.3
|
|
|
10.9
|
|
|
9.3
|
|
|||
Fee revenue, net of distribution expenses
|
$
|
19.9
|
|
|
$
|
17.0
|
|
|
$
|
17.0
|
|
Balance, December 31, 2015
|
$
|
213.5
|
|
|
Increase in 2016
|
26.7
|
|
(a)
|
|
Balance, December 31, 2016
|
240.2
|
|
|
|
Decrease in 2017
|
(166.8
|
)
|
(b)
|
|
Cumulative effect of accounting change
|
15.7
|
|
(c)
|
|
Balance, December 31, 2017
|
89.1
|
|
|
|
Increase in 2018
|
104.6
|
|
(d)
|
|
Balance, December 31, 2018
|
$
|
193.7
|
|
|
(a)
|
The
2016
increase to the deferred tax valuation allowance primarily resulted from additional non-life NOLs due to the settlement with the IRS.
|
(b)
|
The
2017
decrease to the deferred tax valuation allowance includes: (i)
$138.1 million
related to a reduction in the federal corporate income tax rate and other changes from the Tax Reform Act; (ii)
$13.4 million
of reductions to the deferred tax valuation allowance primarily related to the recognition of capital gains; and (iii)
$15.3 million
of reductions in the deferred tax valuation allowance reflecting higher current year taxable income than previously reflected in our deferred tax valuation model.
|
(c)
|
Effective January 1, 2017, the Company adopted new authoritative guidance related to several aspects of the accounting for share-based payment transactions, including the income tax consequences. Under the new guidance, any excess tax benefits are recognized as an income tax benefit in the income statement. The new guidance is applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings for all tax benefits that were not previously recognized because the related tax deduction had not reduced taxes payable. The Company had NOL carryforwards of
$15.7 million
related to deductions for stock options and restricted stock on the date of adoption. However, a corresponding valuation allowance of
$15.7 million
was recognized as a result of adopting this guidance. Therefore, there was no impact to our consolidated financial statements related to the initial adoption of this provision of the new guidance.
|
(d)
|
The
2018
increase to the deferred tax valuation allowance includes: (i) an increase of
$104.8 million
due to the life NOLs generated by the tax loss on the long-term care reinsurance transaction; and (ii) other changes netting to
$(.2) million
.
|
|
|
Net operating loss
|
||
Year of expiration
|
|
carryforwards
|
||
2023
|
|
$
|
1,751.9
|
|
2025
|
|
85.2
|
|
|
2026
|
|
149.9
|
|
|
2027
|
|
10.8
|
|
|
2028
|
|
80.3
|
|
|
2029
|
|
213.2
|
|
|
2030
|
|
.3
|
|
|
2031
|
|
.2
|
|
|
2032
|
|
44.4
|
|
|
2033
|
|
.6
|
|
|
2034
|
|
.9
|
|
|
2035
|
|
.8
|
|
|
Total federal non-life NOLs
|
|
2,338.5
|
|
|
Post 2017 life NOLs with no expiration
|
|
923.9
|
|
|
Total federal NOLs
|
|
$
|
3,262.4
|
|
•
|
Premium rate increases - If premium rate increases reflect a change in our previous rate increase assumptions, the new assumptions are not reflected prospectively in our reserves. Instead, the additional premium revenue resulting from the rate increase is recognized as earned and original assumptions continue to be used to determine changes to liabilities for insurance products unless a premium deficiency exists.
|
•
|
Benefit reductions - If there is a premium rate increase on one of our long-term care policies, a policyholder may choose reduced coverage with a proportionate reduction in premium, when permitted by our contracts. This option does not require additional underwriting. Benefit reductions are treated as a partial lapse of coverage, and the balance of our reserves and deferred insurance acquisition costs is reduced in proportion to the reduced coverage.
|
•
|
Non-forfeiture benefits offered in conjunction with a rate increase - In some cases, non-forfeiture benefits are offered to policyholders who wish to lapse their policies at the time of a significant rate increase. In these cases, exercise of this option is treated as an extinguishment of the original contract and issuance of a new contract. The balance of our reserves and deferred insurance acquisition costs are released, and a reserve for the new contract is established.
|
|
2018
|
|
2017
|
|
2016
|
||||||
Pre-tax operating earnings (a non-GAAP measure) (a):
|
|
|
|
|
|
||||||
Bankers Life
|
$
|
340.6
|
|
|
$
|
367.5
|
|
|
$
|
375.6
|
|
Washington National
|
121.9
|
|
|
98.3
|
|
|
102.9
|
|
|||
Colonial Penn
|
14.8
|
|
|
22.6
|
|
|
1.7
|
|
|||
Long-term care in run-off
|
22.9
|
|
|
53.1
|
|
|
18.4
|
|
|||
Corporate operations
|
(119.0
|
)
|
|
(86.8
|
)
|
|
(88.3
|
)
|
|||
|
381.2
|
|
|
454.7
|
|
|
410.3
|
|
|||
Loss related to reinsurance transactions:
|
|
|
|
|
|
||||||
Corporate operations
|
(704.2
|
)
|
|
—
|
|
|
(75.4
|
)
|
|||
|
(704.2
|
)
|
|
—
|
|
|
(75.4
|
)
|
|||
Net realized investment gains (losses), net of related amortization:
|
|
|
|
|
|
||||||
Bankers Life
|
13.5
|
|
|
29.8
|
|
|
(5.3
|
)
|
|||
Washington National
|
(9.9
|
)
|
|
11.7
|
|
|
19.4
|
|
|||
Colonial Penn
|
(2.4
|
)
|
|
—
|
|
|
(.2
|
)
|
|||
Long-term care in run-off
|
(4.5
|
)
|
|
10.8
|
|
|
(3.6
|
)
|
|||
Corporate operations
|
(7.6
|
)
|
|
(3.0
|
)
|
|
(2.7
|
)
|
|||
|
(10.9
|
)
|
|
49.3
|
|
|
7.6
|
|
|||
Fair value changes in embedded derivative liabilities, net of related amortization:
|
|
|
|
|
|
||||||
Bankers Life
|
55.0
|
|
|
(2.7
|
)
|
|
9.4
|
|
|||
Washington National
|
.5
|
|
|
.2
|
|
|
.2
|
|
|||
|
55.5
|
|
|
(2.5
|
)
|
|
9.6
|
|
|||
Earnings attributable to VIEs:
|
|
|
|
|
|
||||||
Corporate operations
|
1.6
|
|
|
(8.8
|
)
|
|
(2.0
|
)
|
|||
Net revenue pursuant to transition and support services agreements, net of taxes:
|
|
|
|
|
|
||||||
Corporate operations
|
.1
|
|
|
—
|
|
|
—
|
|
|||
Fair value changes and amendment related to agent deferred compensation plan:
|
|
|
|
|
|
||||||
Corporate operations
|
11.9
|
|
|
(12.2
|
)
|
|
3.1
|
|
|||
Income (loss) before income taxes:
|
|
|
|
|
|
||||||
Bankers Life
|
409.1
|
|
|
394.6
|
|
|
379.7
|
|
|||
Washington National
|
112.5
|
|
|
110.2
|
|
|
122.5
|
|
|||
Colonial Penn
|
12.4
|
|
|
22.6
|
|
|
1.5
|
|
|||
Long-term care in run-off
|
18.4
|
|
|
63.9
|
|
|
14.8
|
|
|||
Corporate operations
|
(817.2
|
)
|
|
(110.8
|
)
|
|
(165.3
|
)
|
|||
Income (loss) before income taxes
|
$
|
(264.8
|
)
|
|
$
|
480.5
|
|
|
$
|
353.2
|
|
(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 related to reinsurance transactions, net realized investment gains (losses), fair value changes in embedded derivative liabilities, net of related amortization, fair value changes and amendment related to the agent deferred compensation plan, other non-operating items consisting primarily of earnings attributable to VIEs
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.
|
|
2018
|
|
2017
|
|
2016
|
||||||
Premium collections:
|
|
|
|
|
|
||||||
Annuities
|
$
|
1,163.2
|
|
|
$
|
1,030.6
|
|
|
$
|
970.0
|
|
Medicare supplement and other supplemental health
|
1,019.0
|
|
|
1,025.1
|
|
|
1,028.5
|
|
|||
Life
|
466.0
|
|
|
462.4
|
|
|
461.1
|
|
|||
Total collections
|
$
|
2,648.2
|
|
|
$
|
2,518.1
|
|
|
$
|
2,459.6
|
|
Average liabilities for insurance products:
|
|
|
|
|
|
|
|||||
Fixed index annuities
|
$
|
5,788.9
|
|
|
$
|
5,139.6
|
|
|
$
|
4,527.8
|
|
Fixed interest annuities
|
2,590.1
|
|
|
2,899.5
|
|
|
3,188.2
|
|
|||
SPIAs and supplemental contracts:
|
|
|
|
|
|
||||||
Mortality based
|
147.9
|
|
|
160.5
|
|
|
174.9
|
|
|||
Deposit based
|
144.1
|
|
|
149.0
|
|
|
153.7
|
|
|||
Health:
|
|
|
|
|
|
||||||
Long-term care
|
1,907.1
|
|
|
1,805.1
|
|
|
1,703.2
|
|
|||
Medicare supplement
|
314.3
|
|
|
334.9
|
|
|
336.8
|
|
|||
Other health
|
59.8
|
|
|
55.9
|
|
|
50.3
|
|
|||
Life:
|
|
|
|
|
|
||||||
Interest sensitive
|
829.1
|
|
|
778.2
|
|
|
714.6
|
|
|||
Non-interest sensitive
|
1,159.8
|
|
|
1,089.9
|
|
|
1,018.0
|
|
|||
Total average liabilities for insurance products, net of reinsurance ceded
|
$
|
12,941.1
|
|
|
$
|
12,412.6
|
|
|
$
|
11,867.5
|
|
Broker dealer and registered investment advisor client assets:
|
|
|
|
|
|
||||||
Net new client assets (a)
|
|
|
|
|
|
||||||
Brokerage
|
$
|
40.5
|
|
|
$
|
35.0
|
|
|
|
||
Advisory
|
157.0
|
|
|
116.0
|
|
|
|
||||
Total
|
$
|
197.5
|
|
|
$
|
151.0
|
|
|
|
|
|
Client assets at end of period (b)
|
|
|
|
|
|
||||||
Brokerage
|
$
|
794.1
|
|
|
$
|
831.3
|
|
|
|
||
Advisory
|
310.8
|
|
|
171.3
|
|
|
|
||||
Total
|
$
|
1,104.9
|
|
|
$
|
1,002.6
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Revenues:
|
|
|
|
|
|
||||||
Insurance policy income
|
$
|
1,458.5
|
|
|
$
|
1,473.7
|
|
|
$
|
1,450.2
|
|
Net investment income:
|
|
|
|
|
|
||||||
General account invested assets
|
804.4
|
|
|
764.7
|
|
|
724.2
|
|
|||
Fixed index products
|
(41.5
|
)
|
|
153.5
|
|
|
27.3
|
|
|||
Fee revenue and other income
|
51.9
|
|
|
44.1
|
|
|
34.4
|
|
|||
Total revenues
|
2,273.3
|
|
|
2,436.0
|
|
|
2,236.1
|
|
|||
Expenses:
|
|
|
|
|
|
||||||
Insurance policy benefits
|
1,175.3
|
|
|
1,151.6
|
|
|
1,080.0
|
|
|||
Amounts added to policyholder account balances:
|
|
|
|
|
|
||||||
Cost of interest credited to policyholders
|
98.1
|
|
|
105.0
|
|
|
110.8
|
|
|||
Cost of options to fund index credits, net of forfeitures
|
81.4
|
|
|
63.7
|
|
|
66.1
|
|
|||
Market value changes credited to policyholders
|
(42.9
|
)
|
|
154.6
|
|
|
26.3
|
|
|||
Amortization related to operations
|
171.3
|
|
|
153.3
|
|
|
163.9
|
|
|||
Interest expense on investment borrowings
|
29.7
|
|
|
19.8
|
|
|
13.2
|
|
|||
Other operating costs and expenses
|
419.8
|
|
|
420.5
|
|
|
400.2
|
|
|||
Total benefits and expenses
|
1,932.7
|
|
|
2,068.5
|
|
|
1,860.5
|
|
|||
Income before net realized investment gains (losses), net of related amortization, and fair value changes in embedded derivative liabilities, net of related amortization, and income taxes
|
340.6
|
|
|
367.5
|
|
|
375.6
|
|
|||
Net realized investment gains (losses)
|
13.2
|
|
|
30.8
|
|
|
(4.9
|
)
|
|||
Amortization related to net realized investment gains (losses)
|
.3
|
|
|
(1.0
|
)
|
|
(.4
|
)
|
|||
Net realized investment gains (losses), net of related amortization
|
13.5
|
|
|
29.8
|
|
|
(5.3
|
)
|
|||
Insurance policy benefits - fair value changes in embedded derivative liabilities
|
66.7
|
|
|
(3.4
|
)
|
|
10.7
|
|
|||
Amortization related to fair value changes in embedded derivative liabilities
|
(11.7
|
)
|
|
.7
|
|
|
(1.3
|
)
|
|||
Fair value changes in embedded derivative liabilities, net of related amortization
|
55.0
|
|
|
(2.7
|
)
|
|
9.4
|
|
|||
Income before income taxes
|
$
|
409.1
|
|
|
$
|
394.6
|
|
|
$
|
379.7
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Health benefit ratios:
|
|
|
|
|
|
||||||
All health lines:
|
|
|
|
|
|
||||||
Insurance policy benefits
|
$
|
876.1
|
|
|
$
|
853.0
|
|
|
$
|
854.9
|
|
Benefit ratio (c)
|
85.6
|
%
|
|
82.2
|
%
|
|
82.6
|
%
|
|||
Medicare supplement:
|
|
|
|
|
|
||||||
Insurance policy benefits
|
$
|
571.8
|
|
|
$
|
550.6
|
|
|
$
|
556.2
|
|
Benefit ratio (c)
|
74.5
|
%
|
|
70.8
|
%
|
|
71.9
|
%
|
|||
Long-term care:
|
|
|
|
|
|
||||||
Insurance policy benefits
|
$
|
304.3
|
|
|
$
|
302.4
|
|
|
$
|
298.7
|
|
Benefit ratio (c)
|
119.0
|
%
|
|
116.2
|
%
|
|
113.9
|
%
|
|||
Interest-adjusted benefit ratio (d)
|
76.0
|
%
|
|
75.0
|
%
|
|
75.3
|
%
|
(a)
|
Net new client assets includes total inflows of cash and securities into brokerage and managed advisory accounts less outflows. Inflows include interest and dividends and exclude changes due to market fluctuations.
|
(b)
|
Client assets include cash and securities in brokerage and managed advisory accounts.
|
(c)
|
We calculate benefit ratios by dividing the related product's insurance policy benefits by insurance policy income.
|
(d)
|
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.
|
|
2018
|
|
2017
|
|
2016
|
||||||
Commission expense and agent manager benefits
|
$
|
69.0
|
|
|
$
|
69.5
|
|
|
$
|
70.1
|
|
Other operating expenses
|
350.8
|
|
|
351.0
|
|
|
330.1
|
|
|||
Total
|
$
|
419.8
|
|
|
$
|
420.5
|
|
|
$
|
400.2
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Premium collections:
|
|
|
|
|
|
||||||
Supplemental health and other health
|
$
|
613.0
|
|
|
$
|
589.1
|
|
|
$
|
567.4
|
|
Medicare supplement
|
46.3
|
|
|
51.6
|
|
|
61.0
|
|
|||
Life
|
32.2
|
|
|
30.0
|
|
|
29.4
|
|
|||
Annuity
|
1.3
|
|
|
.9
|
|
|
1.5
|
|
|||
Total collections
|
$
|
692.8
|
|
|
$
|
671.6
|
|
|
$
|
659.3
|
|
Average liabilities for insurance products:
|
|
|
|
|
|
|
|||||
Fixed index annuities
|
$
|
283.3
|
|
|
$
|
314.2
|
|
|
$
|
350.2
|
|
Fixed interest annuities
|
90.3
|
|
|
97.9
|
|
|
107.0
|
|
|||
SPIAs and supplemental contracts:
|
|
|
|
|
|
||||||
Mortality based
|
219.5
|
|
|
232.1
|
|
|
248.6
|
|
|||
Deposit based
|
270.6
|
|
|
269.5
|
|
|
267.2
|
|
|||
Separate Accounts
|
4.8
|
|
|
4.7
|
|
|
4.7
|
|
|||
Health:
|
|
|
|
|
|
||||||
Supplemental health
|
2,867.5
|
|
|
2,732.0
|
|
|
2,604.4
|
|
|||
Medicare supplement
|
20.7
|
|
|
24.8
|
|
|
28.3
|
|
|||
Other health
|
11.8
|
|
|
13.5
|
|
|
14.1
|
|
|||
Life:
|
|
|
|
|
|
||||||
Interest sensitive life
|
149.2
|
|
|
149.2
|
|
|
150.3
|
|
|||
Non-interest sensitive life
|
166.6
|
|
|
175.0
|
|
|
179.8
|
|
|||
Total average liabilities for insurance products, net of reinsurance ceded
|
$
|
4,084.3
|
|
|
$
|
4,012.9
|
|
|
$
|
3,954.6
|
|
Revenues:
|
|
|
|
|
|
||||||
Insurance policy income
|
$
|
687.6
|
|
|
$
|
671.4
|
|
|
$
|
655.8
|
|
Net investment income (loss):
|
|
|
|
|
|
||||||
General account invested assets
|
261.1
|
|
|
257.5
|
|
|
256.2
|
|
|||
Fixed index products
|
(1.5
|
)
|
|
9.0
|
|
|
1.9
|
|
|||
Trading account income related to policyholder accounts
|
.2
|
|
|
3.7
|
|
|
1.2
|
|
|||
Fee revenue and other income
|
.9
|
|
|
1.0
|
|
|
1.3
|
|
|||
Total revenues
|
948.3
|
|
|
942.6
|
|
|
916.4
|
|
|||
Expenses:
|
|
|
|
|
|
||||||
Insurance policy benefits
|
540.9
|
|
|
550.7
|
|
|
538.2
|
|
|||
Amounts added to policyholder account balances:
|
|
|
|
|
|
||||||
Cost of interest credited to policyholders
|
12.8
|
|
|
12.9
|
|
|
13.8
|
|
|||
Cost of options to fund index credits, net of forfeitures
|
4.6
|
|
|
4.4
|
|
|
5.8
|
|
|||
Market value changes credited to policyholders
|
(1.8
|
)
|
|
13.1
|
|
|
3.9
|
|
|||
Amortization related to operations
|
55.8
|
|
|
58.8
|
|
|
59.1
|
|
|||
Interest expense on investment borrowings
|
10.8
|
|
|
6.3
|
|
|
3.7
|
|
|||
Other operating costs and expenses
|
203.3
|
|
|
198.1
|
|
|
189.0
|
|
|||
Total benefits and expenses
|
826.4
|
|
|
844.3
|
|
|
813.5
|
|
|||
Income before net realized investment gains (losses) and fair value changes in embedded derivative liabilities, net of related amortization, and income taxes
|
121.9
|
|
|
98.3
|
|
|
102.9
|
|
|||
Net realized investment gains (losses)
|
(10.0
|
)
|
|
11.7
|
|
|
19.7
|
|
|||
Amortization related to net realized investment gains (losses)
|
.1
|
|
|
—
|
|
|
(.3
|
)
|
|||
Net realized investment gains (losses), net of related amortization
|
(9.9
|
)
|
|
11.7
|
|
|
19.4
|
|
|||
Insurance policy benefits - fair value changes in embedded derivative liabilities
|
1.6
|
|
|
.5
|
|
|
.6
|
|
|||
Amortization related to fair value changes in embedded derivative liabilities
|
(1.1
|
)
|
|
(.3
|
)
|
|
(.4
|
)
|
|||
Fair value changes in embedded derivative liabilities, net of related amortization
|
.5
|
|
|
.2
|
|
|
.2
|
|
|||
Income before income taxes
|
$
|
112.5
|
|
|
$
|
110.2
|
|
|
$
|
122.5
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Health benefit ratios:
|
|
|
|
|
|
||||||
Supplemental health:
|
|
|
|
|
|
||||||
Insurance policy benefits
|
$
|
486.0
|
|
|
$
|
489.8
|
|
|
$
|
469.3
|
|
Benefit ratio (a)
|
79.5
|
%
|
|
83.2
|
%
|
|
83.0
|
%
|
|||
Interest-adjusted benefit ratio (b)
|
55.4
|
%
|
|
59.1
|
%
|
|
59.0
|
%
|
|||
Medicare supplement:
|
|
|
|
|
|
||||||
Insurance policy benefits
|
$
|
32.8
|
|
|
$
|
37.0
|
|
|
$
|
42.7
|
|
Benefit ratio (a)
|
68.9
|
%
|
|
68.1
|
%
|
|
68.4
|
%
|
(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.
|
|
2018
|
|
2017
|
|
2016
|
||||||
Premium collections:
|
|
|
|
|
|
||||||
Life
|
$
|
296.6
|
|
|
$
|
289.6
|
|
|
$
|
277.8
|
|
Medicare supplement and other health
|
1.7
|
|
|
2.0
|
|
|
2.4
|
|
|||
Total collections
|
$
|
298.3
|
|
|
$
|
291.6
|
|
|
$
|
280.2
|
|
Average liabilities for insurance products:
|
|
|
|
|
|
|
|||||
SPIAs - mortality based
|
$
|
69.6
|
|
|
$
|
73.0
|
|
|
$
|
74.1
|
|
Health:
|
|
|
|
|
|
||||||
Medicare supplement
|
5.0
|
|
|
5.7
|
|
|
6.5
|
|
|||
Other health
|
3.7
|
|
|
4.1
|
|
|
4.2
|
|
|||
Life:
|
|
|
|
|
|
||||||
Interest sensitive
|
14.7
|
|
|
15.5
|
|
|
16.2
|
|
|||
Non-interest sensitive
|
739.8
|
|
|
717.5
|
|
|
689.4
|
|
|||
Total average liabilities for insurance products, net of reinsurance ceded
|
$
|
832.8
|
|
|
$
|
815.8
|
|
|
$
|
790.4
|
|
Revenues:
|
|
|
|
|
|
||||||
Insurance policy income
|
$
|
298.6
|
|
|
$
|
291.8
|
|
|
$
|
281.4
|
|
Net investment income on general account invested assets
|
44.6
|
|
|
44.4
|
|
|
44.2
|
|
|||
Fee revenue and other income
|
1.8
|
|
|
1.3
|
|
|
1.1
|
|
|||
Total revenues
|
345.0
|
|
|
337.5
|
|
|
326.7
|
|
|||
Expenses:
|
|
|
|
|
|
||||||
Insurance policy benefits
|
206.6
|
|
|
199.0
|
|
|
201.2
|
|
|||
Amounts added to annuity and interest-sensitive life product account balances
|
.6
|
|
|
.6
|
|
|
.7
|
|
|||
Amortization related to operations
|
17.8
|
|
|
16.3
|
|
|
15.3
|
|
|||
Interest expense on investment borrowings
|
1.4
|
|
|
.9
|
|
|
.6
|
|
|||
Other operating costs and expenses
|
103.8
|
|
|
98.1
|
|
|
107.2
|
|
|||
Total benefits and expenses
|
330.2
|
|
|
314.9
|
|
|
325.0
|
|
|||
Income before net realized investment losses and income taxes
|
14.8
|
|
|
22.6
|
|
|
1.7
|
|
|||
Net realized investment losses
|
(2.4
|
)
|
|
—
|
|
|
(.2
|
)
|
|||
Income before income taxes
|
$
|
12.4
|
|
|
$
|
22.6
|
|
|
$
|
1.5
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Adjusted EBIT from In-force Business
|
|
|
|
|
|
||||||
Revenues:
|
|
|
|
|
|
||||||
Insurance policy income
|
$
|
251.6
|
|
|
$
|
241.8
|
|
|
$
|
226.5
|
|
Net investment income and other
|
46.4
|
|
|
45.7
|
|
|
45.3
|
|
|||
Total revenues
|
298.0
|
|
|
287.5
|
|
|
271.8
|
|
|||
Benefits and expenses:
|
|
|
|
|
|
||||||
Insurance policy benefits
|
178.6
|
|
|
169.2
|
|
|
168.5
|
|
|||
Amortization
|
17.2
|
|
|
15.6
|
|
|
14.5
|
|
|||
Other expenses
|
36.4
|
|
|
33.9
|
|
|
34.4
|
|
|||
Total benefits and expenses
|
232.2
|
|
|
218.7
|
|
|
217.4
|
|
|||
Adjusted EBIT from In-force Business
|
$
|
65.8
|
|
|
$
|
68.8
|
|
|
$
|
54.4
|
|
|
|
|
|
|
|
||||||
Adjusted EBIT from New Business
|
|
|
|
|
|
||||||
Revenues:
|
|
|
|
|
|
||||||
Insurance policy income
|
$
|
47.0
|
|
|
$
|
50.0
|
|
|
$
|
54.9
|
|
Net investment income and other
|
—
|
|
|
—
|
|
|
—
|
|
|||
Total revenues
|
47.0
|
|
|
50.0
|
|
|
54.9
|
|
|||
Benefits and expenses:
|
|
|
|
|
|
||||||
Insurance policy benefits
|
28.6
|
|
|
30.4
|
|
|
33.4
|
|
|||
Amortization
|
.6
|
|
|
.7
|
|
|
.8
|
|
|||
Other expenses
|
68.8
|
|
|
65.1
|
|
|
73.4
|
|
|||
Total benefits and expenses
|
98.0
|
|
|
96.2
|
|
|
107.6
|
|
|||
Adjusted EBIT from New Business
|
$
|
(51.0
|
)
|
|
$
|
(46.2
|
)
|
|
$
|
(52.7
|
)
|
|
|
|
|
|
|
||||||
Adjusted EBIT from In-force and New Business
|
|
|
|
|
|
||||||
Revenues:
|
|
|
|
|
|
||||||
Insurance policy income
|
$
|
298.6
|
|
|
$
|
291.8
|
|
|
$
|
281.4
|
|
Net investment income and other
|
46.4
|
|
|
45.7
|
|
|
45.3
|
|
|||
Total revenues
|
345.0
|
|
|
337.5
|
|
|
326.7
|
|
|||
Benefits and expenses:
|
|
|
|
|
|
||||||
Insurance policy benefits
|
207.2
|
|
|
199.6
|
|
|
201.9
|
|
|||
Amortization
|
17.8
|
|
|
16.3
|
|
|
15.3
|
|
|||
Other expenses
|
105.2
|
|
|
99.0
|
|
|
107.8
|
|
|||
Total benefits and expenses
|
330.2
|
|
|
314.9
|
|
|
325.0
|
|
|||
Adjusted EBIT from In-force and New Business
|
$
|
14.8
|
|
|
$
|
22.6
|
|
|
$
|
1.7
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Premium collections:
|
|
|
|
|
|
||||||
Long-term care (all renewal)
|
$
|
145.8
|
|
|
$
|
205.2
|
|
|
$
|
211.5
|
|
|
|
|
|
|
|
||||||
Average liabilities for insurance products:
|
|
|
|
|
|
||||||
Average liabilities for long-term care products, net of reinsurance ceded
|
$
|
2,857.7
|
|
|
$
|
3,754.7
|
|
|
$
|
3,433.2
|
|
|
|
|
|
|
|
||||||
Revenues:
|
|
|
|
|
|
||||||
Insurance policy income
|
$
|
148.4
|
|
|
$
|
210.4
|
|
|
$
|
213.7
|
|
Net investment income on general account invested assets
|
172.7
|
|
|
223.7
|
|
|
194.7
|
|
|||
Total revenues
|
321.1
|
|
|
434.1
|
|
|
408.4
|
|
|||
Expenses:
|
|
|
|
|
|
||||||
Insurance policy benefits
|
271.3
|
|
|
344.2
|
|
|
355.0
|
|
|||
Amortization
|
7.0
|
|
|
10.3
|
|
|
12.6
|
|
|||
Other operating costs and expenses
|
19.9
|
|
|
26.5
|
|
|
22.4
|
|
|||
Total benefits and expenses
|
298.2
|
|
|
381.0
|
|
|
390.0
|
|
|||
Income (loss) before net realized investment gains (losses) and income taxes
|
22.9
|
|
|
53.1
|
|
|
18.4
|
|
|||
Net realized investment gains (losses)
|
(4.5
|
)
|
|
10.8
|
|
|
(3.6
|
)
|
|||
Income (loss) before income taxes
|
$
|
18.4
|
|
|
$
|
63.9
|
|
|
$
|
14.8
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Health benefit ratios:
|
|
|
|
|
|
||||||
Long-term care:
|
|
|
|
|
|
||||||
Insurance policy benefits
|
$
|
271.3
|
|
|
$
|
344.2
|
|
|
$
|
355.0
|
|
Benefit ratio (a)
|
182.8
|
%
|
|
163.6
|
%
|
|
166.1
|
%
|
|||
Interest-adjusted benefit ratio (b)
|
79.1
|
%
|
|
69.1
|
%
|
|
81.5
|
%
|
(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 long-term care products in this segment 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.
|
|
2018
|
|
2017
|
|
2016
|
||||||
Corporate operations:
|
|
|
|
|
|
||||||
Interest expense on corporate debt
|
$
|
(48.0
|
)
|
|
$
|
(46.5
|
)
|
|
$
|
(45.8
|
)
|
Net investment income (loss):
|
|
|
|
|
|
||||||
General investment portfolio
|
6.6
|
|
|
5.6
|
|
|
4.8
|
|
|||
Other special-purpose portfolios:
|
|
|
|
|
|
||||||
COLI
|
(17.8
|
)
|
|
17.4
|
|
|
(.3
|
)
|
|||
Investments held in a rabbi trust
|
(2.7
|
)
|
|
3.4
|
|
|
1.1
|
|
|||
Other trading account activities
|
8.3
|
|
|
9.1
|
|
|
11.0
|
|
|||
Fee revenue and other income
|
6.7
|
|
|
8.5
|
|
|
10.0
|
|
|||
Other operating costs and expenses
|
(72.1
|
)
|
|
(84.3
|
)
|
|
(69.1
|
)
|
|||
Loss before net realized investment losses, earnings attributable to VIEs, fair value changes and amendment related to agent deferred compensation plan, loss related to reinsurance transactions, net revenue pursuant to transition services agreement and income taxes
|
(119.0
|
)
|
|
(86.8
|
)
|
|
(88.3
|
)
|
|||
Net realized investment losses
|
(7.6
|
)
|
|
(3.0
|
)
|
|
(2.7
|
)
|
|||
Earnings attributable to VIEs
|
1.6
|
|
|
(8.8
|
)
|
|
(2.0
|
)
|
|||
Fair value changes and amendment related to agent deferred compensation plan
|
11.9
|
|
|
(12.2
|
)
|
|
3.1
|
|
|||
Loss related to reinsurance transactions
|
(704.2
|
)
|
|
—
|
|
|
(75.4
|
)
|
|||
Net revenue pursuant to transition services agreement
|
.1
|
|
|
—
|
|
|
—
|
|
|||
Loss before income taxes
|
$
|
(817.2
|
)
|
|
$
|
(110.8
|
)
|
|
$
|
(165.3
|
)
|
|
2018
|
|
2017
|
|
2016
|
||||||
First year:
|
|
|
|
|
|
||||||
Bankers Life
|
$
|
1,361.1
|
|
|
$
|
1,245.6
|
|
|
$
|
1,211.8
|
|
Washington National
|
76.5
|
|
|
78.4
|
|
|
78.2
|
|
|||
Colonial Penn
|
46.9
|
|
|
50.1
|
|
|
54.8
|
|
|||
Total first year
|
1,484.5
|
|
|
1,374.1
|
|
|
1,344.8
|
|
|||
|
|
|
|
|
|
||||||
Renewal:
|
|
|
|
|
|
||||||
Bankers Life
|
1,287.1
|
|
|
1,272.5
|
|
|
1,247.8
|
|
|||
Washington National
|
616.3
|
|
|
595.0
|
|
|
581.1
|
|
|||
Colonial Penn
|
251.4
|
|
|
241.5
|
|
|
225.4
|
|
|||
Long-term care in run-off
|
145.8
|
|
|
205.2
|
|
|
211.5
|
|
|||
Total renewal
|
2,300.6
|
|
|
2,314.2
|
|
|
2,265.8
|
|
|||
Total premiums collected
|
$
|
3,785.1
|
|
|
$
|
3,688.3
|
|
|
$
|
3,610.6
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Premiums collected by product:
|
|
|
|
|
|
||||||
Annuities:
|
|
|
|
|
|
||||||
Fixed index (first-year)
|
$
|
1,112.0
|
|
|
$
|
964.7
|
|
|
$
|
868.1
|
|
Other fixed interest (first-year)
|
45.8
|
|
|
59.8
|
|
|
95.7
|
|
|||
Other fixed interest (renewal)
|
5.4
|
|
|
6.1
|
|
|
6.2
|
|
|||
Subtotal - other fixed interest annuities
|
51.2
|
|
|
65.9
|
|
|
101.9
|
|
|||
Total annuities
|
1,163.2
|
|
|
1,030.6
|
|
|
970.0
|
|
|||
Health:
|
|
|
|
|
|
||||||
Medicare supplement (first-year)
|
61.9
|
|
|
69.3
|
|
|
75.6
|
|
|||
Medicare supplement (renewal)
|
672.4
|
|
|
670.1
|
|
|
663.7
|
|
|||
Subtotal - Medicare supplement
|
734.3
|
|
|
739.4
|
|
|
739.3
|
|
|||
Long-term care (first-year)
|
15.6
|
|
|
16.0
|
|
|
17.4
|
|
|||
Long-term care (renewal)
|
239.5
|
|
|
241.0
|
|
|
244.4
|
|
|||
Subtotal - long-term care
|
255.1
|
|
|
257.0
|
|
|
261.8
|
|
|||
Supplemental health (first-year)
|
4.4
|
|
|
5.0
|
|
|
5.5
|
|
|||
Supplemental health (renewal)
|
19.2
|
|
|
17.6
|
|
|
15.7
|
|
|||
Subtotal – supplemental health
|
23.6
|
|
|
22.6
|
|
|
21.2
|
|
|||
Other health (first-year)
|
.8
|
|
|
.8
|
|
|
.1
|
|
|||
Other health (renewal)
|
5.2
|
|
|
5.3
|
|
|
6.1
|
|
|||
Subtotal - other health
|
6.0
|
|
|
6.1
|
|
|
6.2
|
|
|||
Total health
|
1,019.0
|
|
|
1,025.1
|
|
|
1,028.5
|
|
|||
Life insurance:
|
|
|
|
|
|
||||||
Traditional (first-year)
|
71.6
|
|
|
82.6
|
|
|
78.8
|
|
|||
Traditional (renewal)
|
223.6
|
|
|
217.3
|
|
|
207.3
|
|
|||
Subtotal - traditional
|
295.2
|
|
|
299.9
|
|
|
286.1
|
|
|||
Interest-sensitive (first-year)
|
49.0
|
|
|
47.4
|
|
|
70.6
|
|
|||
Interest-sensitive (renewal)
|
121.8
|
|
|
115.1
|
|
|
104.4
|
|
|||
Subtotal - interest-sensitive
|
170.8
|
|
|
162.5
|
|
|
175.0
|
|
|||
Total life insurance
|
466.0
|
|
|
462.4
|
|
|
461.1
|
|
|||
Collections on insurance products:
|
|
|
|
|
|
||||||
Total first-year premium collections on insurance products
|
1,361.1
|
|
|
1,245.6
|
|
|
1,211.8
|
|
|||
Total renewal premium collections on insurance products
|
1,287.1
|
|
|
1,272.5
|
|
|
1,247.8
|
|
|||
Total collections on insurance products
|
$
|
2,648.2
|
|
|
$
|
2,518.1
|
|
|
$
|
2,459.6
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Premiums collected by product:
|
|
|
|
|
|
||||||
Health:
|
|
|
|
|
|
||||||
Medicare supplement (renewal)
|
$
|
46.3
|
|
|
$
|
51.6
|
|
|
$
|
61.0
|
|
Supplemental health (first-year)
|
70.2
|
|
|
73.2
|
|
|
72.2
|
|
|||
Supplemental health (renewal)
|
541.1
|
|
|
515.9
|
|
|
493.3
|
|
|||
Subtotal – supplemental health
|
611.3
|
|
|
589.1
|
|
|
565.5
|
|
|||
Other health (first-year)
|
.2
|
|
|
.3
|
|
|
.2
|
|
|||
Other health (renewal)
|
1.5
|
|
|
1.5
|
|
|
1.7
|
|
|||
Subtotal – other health
|
1.7
|
|
|
1.8
|
|
|
1.9
|
|
|||
Total health
|
659.3
|
|
|
642.5
|
|
|
628.4
|
|
|||
Life insurance:
|
|
|
|
|
|
||||||
Traditional (first-year)
|
.6
|
|
|
.7
|
|
|
.9
|
|
|||
Traditional (renewal)
|
9.5
|
|
|
10.2
|
|
|
10.5
|
|
|||
Subtotal - traditional
|
10.1
|
|
|
10.9
|
|
|
11.4
|
|
|||
Interest-sensitive (first-year)
|
5.4
|
|
|
4.2
|
|
|
4.7
|
|
|||
Interest-sensitive (renewal)
|
16.7
|
|
|
14.9
|
|
|
13.3
|
|
|||
Subtotal - interest-sensitive
|
22.1
|
|
|
19.1
|
|
|
18.0
|
|
|||
Total life insurance
|
32.2
|
|
|
30.0
|
|
|
29.4
|
|
|||
Annuities:
|
|
|
|
|
|
||||||
Fixed index (first-year)
|
.1
|
|
|
—
|
|
|
.2
|
|
|||
Fixed index (renewal)
|
1.0
|
|
|
.6
|
|
|
1.0
|
|
|||
Subtotal - fixed index annuities
|
1.1
|
|
|
.6
|
|
|
1.2
|
|
|||
Other fixed interest (renewal)
|
.2
|
|
|
.3
|
|
|
.3
|
|
|||
Total annuities
|
1.3
|
|
|
.9
|
|
|
1.5
|
|
|||
Collections on insurance products:
|
|
|
|
|
|
||||||
Total first-year premium collections on insurance products
|
76.5
|
|
|
78.4
|
|
|
78.2
|
|
|||
Total renewal premium collections on insurance products
|
616.3
|
|
|
595.0
|
|
|
581.1
|
|
|||
Total collections on insurance products
|
$
|
692.8
|
|
|
$
|
673.4
|
|
|
$
|
659.3
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Premiums collected by product:
|
|
|
|
|
|
||||||
Life insurance:
|
|
|
|
|
|
||||||
Traditional (first-year)
|
$
|
46.9
|
|
|
$
|
50.1
|
|
|
$
|
54.8
|
|
Traditional (renewal)
|
249.5
|
|
|
239.3
|
|
|
222.7
|
|
|||
Subtotal - traditional
|
296.4
|
|
|
289.4
|
|
|
277.5
|
|
|||
Interest-sensitive (all renewal)
|
.2
|
|
|
.2
|
|
|
.3
|
|
|||
Total life insurance
|
296.6
|
|
|
289.6
|
|
|
277.8
|
|
|||
Health (all renewal):
|
|
|
|
|
|
||||||
Medicare supplement
|
1.5
|
|
|
1.9
|
|
|
2.3
|
|
|||
Other health
|
.2
|
|
|
.1
|
|
|
.1
|
|
|||
Total health
|
1.7
|
|
|
2.0
|
|
|
2.4
|
|
|||
Collections on insurance products:
|
|
|
|
|
|
||||||
Total first-year premium collections on insurance products
|
46.9
|
|
|
50.1
|
|
|
54.8
|
|
|||
Total renewal premium collections on insurance products
|
251.4
|
|
|
241.5
|
|
|
225.4
|
|
|||
Total collections on insurance products
|
$
|
298.3
|
|
|
$
|
291.6
|
|
|
$
|
280.2
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Premiums collected by product:
|
|
|
|
|
|
||||||
Health:
|
|
|
|
|
|
||||||
Long-term care (renewal)
|
$
|
145.8
|
|
|
$
|
205.2
|
|
|
$
|
211.5
|
|
|
Carrying value
|
|
Percent of total investments
|
|||
Fixed maturities, available for sale
|
$
|
18,447.7
|
|
|
80
|
%
|
Equity securities
|
291.0
|
|
|
1
|
|
|
Mortgage loans
|
1,602.1
|
|
|
7
|
|
|
Policy loans
|
119.7
|
|
|
1
|
|
|
Trading securities
|
233.1
|
|
|
1
|
|
|
Investments held by variable interest entities
|
1,468.4
|
|
|
6
|
|
|
Company-owned life insurance
|
171.7
|
|
|
1
|
|
|
Other invested assets
|
661.7
|
|
|
3
|
|
|
Total investments
|
$
|
22,995.4
|
|
|
100
|
%
|
|
Carrying value
|
|
Percent of fixed maturities
|
|
Gross unrealized losses
|
|
Percent of gross unrealized losses
|
||||||
Asset-backed securities
|
$
|
2,674.8
|
|
|
14.5
|
%
|
|
$
|
7.6
|
|
|
1.8
|
%
|
States and political subdivisions
|
1,867.8
|
|
|
10.1
|
|
|
2.6
|
|
|
.6
|
|
||
Commercial mortgage-backed securities
|
1,518.0
|
|
|
8.2
|
|
|
21.7
|
|
|
5.1
|
|
||
Utilities
|
1,165.1
|
|
|
6.3
|
|
|
16.8
|
|
|
4.0
|
|
||
Insurance
|
1,149.5
|
|
|
6.2
|
|
|
21.0
|
|
|
5.0
|
|
||
Banks
|
1,146.3
|
|
|
6.2
|
|
|
44.0
|
|
|
10.4
|
|
||
Healthcare/pharmaceuticals
|
1,065.1
|
|
|
5.8
|
|
|
39.0
|
|
|
9.2
|
|
||
Energy
|
864.4
|
|
|
4.7
|
|
|
41.0
|
|
|
9.7
|
|
||
Food/beverage
|
804.6
|
|
|
4.4
|
|
|
39.9
|
|
|
9.4
|
|
||
Collateralized mortgage obligations
|
625.4
|
|
|
3.4
|
|
|
4.1
|
|
|
1.0
|
|
||
Real estate/REITs
|
526.5
|
|
|
2.8
|
|
|
8.0
|
|
|
1.9
|
|
||
Transportation
|
442.0
|
|
|
2.4
|
|
|
8.7
|
|
|
2.1
|
|
||
Cable/media
|
441.4
|
|
|
2.4
|
|
|
20.5
|
|
|
4.8
|
|
||
Brokerage
|
437.4
|
|
|
2.4
|
|
|
21.0
|
|
|
4.9
|
|
||
Capital goods
|
391.7
|
|
|
2.1
|
|
|
5.5
|
|
|
1.3
|
|
||
Chemicals
|
383.6
|
|
|
2.1
|
|
|
14.9
|
|
|
3.5
|
|
||
Technology
|
368.5
|
|
|
2.0
|
|
|
16.0
|
|
|
3.8
|
|
||
Telecom
|
351.5
|
|
|
1.9
|
|
|
8.5
|
|
|
2.0
|
|
||
Collateralized debt obligations
|
322.8
|
|
|
1.8
|
|
|
15.2
|
|
|
3.6
|
|
||
Aerospace/defense
|
239.8
|
|
|
1.3
|
|
|
3.2
|
|
|
.7
|
|
||
U.S. Treasury and Obligations
|
174.8
|
|
|
.9
|
|
|
.2
|
|
|
.1
|
|
||
Autos
|
154.7
|
|
|
.9
|
|
|
10.1
|
|
|
2.4
|
|
||
Building materials
|
150.3
|
|
|
.8
|
|
|
16.4
|
|
|
3.9
|
|
||
Other
|
1,181.7
|
|
|
6.4
|
|
|
37.4
|
|
|
8.8
|
|
||
Total fixed maturities, available for sale
|
$
|
18,447.7
|
|
|
100.0
|
%
|
|
$
|
423.3
|
|
|
100.0
|
%
|
|
Investment grade
|
|
Below-investment grade
|
|
|
||||||||||||||
|
AAA/AA/A
|
|
BBB
|
|
BB
|
|
B+ and
below
|
|
Total gross
unrealized
losses |
||||||||||
Banks
|
$
|
6.1
|
|
|
$
|
37.9
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
44.0
|
|
Energy
|
1.6
|
|
|
29.5
|
|
|
4.9
|
|
|
5.0
|
|
|
41.0
|
|
|||||
Food/beverage
|
.3
|
|
|
37.2
|
|
|
1.5
|
|
|
.9
|
|
|
39.9
|
|
|||||
Healthcare/pharmaceuticals
|
1.8
|
|
|
33.5
|
|
|
1.6
|
|
|
2.1
|
|
|
39.0
|
|
|||||
Commercial mortgage-backed securities
|
18.5
|
|
|
1.9
|
|
|
1.3
|
|
|
—
|
|
|
21.7
|
|
|||||
Insurance
|
2.3
|
|
|
18.0
|
|
|
.8
|
|
|
—
|
|
|
21.1
|
|
|||||
Brokerage
|
3.3
|
|
|
17.2
|
|
|
.3
|
|
|
.2
|
|
|
21.0
|
|
|||||
Cable/media
|
.3
|
|
|
13.8
|
|
|
3.5
|
|
|
2.9
|
|
|
20.5
|
|
|||||
Utilities
|
6.2
|
|
|
9.4
|
|
|
.5
|
|
|
.7
|
|
|
16.8
|
|
|||||
Building materials
|
—
|
|
|
14.2
|
|
|
2.3
|
|
|
—
|
|
|
16.5
|
|
|||||
Technology
|
.6
|
|
|
11.1
|
|
|
3.8
|
|
|
.5
|
|
|
16.0
|
|
|||||
Collateralized debt obligations
|
6.1
|
|
|
7.4
|
|
|
1.7
|
|
|
—
|
|
|
15.2
|
|
|||||
Chemicals
|
.2
|
|
|
13.2
|
|
|
1.5
|
|
|
—
|
|
|
14.9
|
|
|||||
Autos
|
1.9
|
|
|
5.9
|
|
|
1.8
|
|
|
.5
|
|
|
10.1
|
|
|||||
Transportation
|
1.1
|
|
|
7.6
|
|
|
.1
|
|
|
—
|
|
|
8.8
|
|
|||||
Telecom
|
—
|
|
|
7.9
|
|
|
.3
|
|
|
.2
|
|
|
8.4
|
|
|||||
Real estate/REITs
|
.1
|
|
|
7.1
|
|
|
.4
|
|
|
.4
|
|
|
8.0
|
|
|||||
Asset-backed securities
|
4.2
|
|
|
2.5
|
|
|
.3
|
|
|
.6
|
|
|
7.6
|
|
|||||
Retail
|
—
|
|
|
6.1
|
|
|
—
|
|
|
1.3
|
|
|
7.4
|
|
|||||
Paper
|
—
|
|
|
5.3
|
|
|
.6
|
|
|
—
|
|
|
5.9
|
|
|||||
Capital goods
|
.4
|
|
|
4.0
|
|
|
.6
|
|
|
.4
|
|
|
5.4
|
|
|||||
Consumer products
|
—
|
|
|
4.0
|
|
|
.1
|
|
|
1.2
|
|
|
5.3
|
|
|||||
Collateralized mortgage obligations
|
3.9
|
|
|
—
|
|
|
—
|
|
|
.2
|
|
|
4.1
|
|
|||||
Metals and mining
|
—
|
|
|
1.9
|
|
|
1.6
|
|
|
—
|
|
|
3.5
|
|
|||||
Aerospace/defense
|
—
|
|
|
2.6
|
|
|
—
|
|
|
.5
|
|
|
3.1
|
|
|||||
Entertainment/hotels
|
—
|
|
|
1.1
|
|
|
.5
|
|
|
1.4
|
|
|
3.0
|
|
|||||
States and political subdivisions
|
1.3
|
|
|
1.3
|
|
|
—
|
|
|
—
|
|
|
2.6
|
|
|||||
Debt securities issued by foreign governments
|
.5
|
|
|
1.2
|
|
|
—
|
|
|
—
|
|
|
1.7
|
|
|||||
Business services
|
—
|
|
|
.2
|
|
|
1.1
|
|
|
.3
|
|
|
1.6
|
|
|||||
Packaging
|
—
|
|
|
—
|
|
|
.4
|
|
|
.8
|
|
|
1.2
|
|
|||||
Gaming
|
—
|
|
|
.1
|
|
|
.7
|
|
|
.4
|
|
|
1.2
|
|
|||||
Textiles
|
—
|
|
|
—
|
|
|
.4
|
|
|
—
|
|
|
.4
|
|
|||||
United States Treasury securities and obligations of United States government corporations and agencies
|
.2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
.2
|
|
|||||
Other
|
2.7
|
|
|
1.5
|
|
|
—
|
|
|
2.0
|
|
|
6.2
|
|
|||||
Total fixed maturities, available for sale
|
$
|
63.6
|
|
|
$
|
304.6
|
|
|
$
|
32.6
|
|
|
$
|
22.5
|
|
|
$
|
423.3
|
|
•
|
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 cash equivalents 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 credit rating, maturity, corporate credit spreads, reported trades and other inputs that are observable or derived from observable information in the marketplace or are supported by transactions executed in the marketplace. Financial assets in this category primarily include: certain publicly registered 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 investments; most short-term investments; and non-exchange-traded derivatives such as call options. 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.
|
•
|
Investments held by VIEs
|
•
|
Other invested assets - derivatives
|
|
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
|
$
|
—
|
|
|
$
|
11,044.4
|
|
|
$
|
158.6
|
|
|
$
|
11,203.0
|
|
United States Treasury securities and obligations of United States government corporations and agencies
|
—
|
|
|
174.8
|
|
|
—
|
|
|
174.8
|
|
||||
States and political subdivisions
|
—
|
|
|
1,867.8
|
|
|
—
|
|
|
1,867.8
|
|
||||
Debt securities issued by foreign governments
|
—
|
|
|
58.5
|
|
|
1.0
|
|
|
59.5
|
|
||||
Asset-backed securities
|
—
|
|
|
2,662.8
|
|
|
12.0
|
|
|
2,674.8
|
|
||||
Collateralized debt obligations
|
—
|
|
|
322.8
|
|
|
—
|
|
|
322.8
|
|
||||
Commercial mortgage-backed securities
|
—
|
|
|
1,518.0
|
|
|
—
|
|
|
1,518.0
|
|
||||
Mortgage pass-through securities
|
—
|
|
|
1.6
|
|
|
—
|
|
|
1.6
|
|
||||
Collateralized mortgage obligations
|
—
|
|
|
625.4
|
|
|
—
|
|
|
625.4
|
|
||||
Total fixed maturities, available for sale
|
—
|
|
|
18,276.1
|
|
|
171.6
|
|
|
18,447.7
|
|
||||
Equity securities - corporate securities
|
181.1
|
|
|
100.4
|
|
|
9.5
|
|
|
291.0
|
|
||||
Trading securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Asset-backed securities
|
—
|
|
|
86.5
|
|
|
—
|
|
|
86.5
|
|
||||
Commercial mortgage-backed securities
|
—
|
|
|
93.6
|
|
|
—
|
|
|
93.6
|
|
||||
Collateralized mortgage obligations
|
—
|
|
|
53.0
|
|
|
—
|
|
|
53.0
|
|
||||
Total trading securities
|
—
|
|
|
233.1
|
|
|
—
|
|
|
233.1
|
|
||||
Investments held by variable interest entities - corporate securities
|
—
|
|
|
1,468.4
|
|
|
—
|
|
|
1,468.4
|
|
||||
Other invested assets - derivatives
|
—
|
|
|
26.6
|
|
|
—
|
|
|
26.6
|
|
||||
Assets held in separate accounts
|
—
|
|
|
4.4
|
|
|
—
|
|
|
4.4
|
|
||||
Total assets carried at fair value by category
|
$
|
181.1
|
|
|
$
|
20,109.0
|
|
|
$
|
181.1
|
|
|
$
|
20,471.2
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Future policy benefits - embedded derivatives associated with fixed index annuity products
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,289.0
|
|
|
$
|
1,289.0
|
|
|
|
December 31, 2018
|
|
|
||||||||||||||||||||||||||||
|
|
Beginning balance as of December 31, 2017
|
|
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 (a)
|
|
Transfers out of Level 3 (a)
|
|
Ending balance as of December 31, 2018
|
|
Amount of total gains (losses) for the year ended December 31, 2018 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
|
|
$
|
230.4
|
|
|
$
|
(24.6
|
)
|
|
$
|
.2
|
|
|
$
|
(5.3
|
)
|
|
$
|
12.7
|
|
|
$
|
(54.8
|
)
|
|
$
|
158.6
|
|
|
$
|
(.5
|
)
|
Debt securities issued by foreign governments
|
|
3.9
|
|
|
(2.9
|
)
|
|
(.1
|
)
|
|
.1
|
|
|
—
|
|
|
—
|
|
|
1.0
|
|
|
—
|
|
||||||||
Asset-backed securities
|
|
24.2
|
|
|
(11.5
|
)
|
|
—
|
|
|
(.7
|
)
|
|
—
|
|
|
—
|
|
|
12.0
|
|
|
—
|
|
||||||||
Total fixed maturities, available for sale
|
|
258.5
|
|
|
(39.0
|
)
|
|
.1
|
|
|
(5.9
|
)
|
|
12.7
|
|
|
(54.8
|
)
|
|
171.6
|
|
|
(.5
|
)
|
||||||||
Equity securities - corporate securities
|
|
21.2
|
|
|
(10.9
|
)
|
|
(.8
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9.5
|
|
|
—
|
|
||||||||
Investments held by variable interest entities - corporate securities
|
|
4.9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4.9
|
)
|
|
—
|
|
|
—
|
|
||||||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Future policy benefits - embedded derivatives associated with fixed index annuity products
|
|
(1,334.8
|
)
|
|
(62.0
|
)
|
|
107.8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,289.0
|
)
|
|
107.8
|
|
(a)
|
Transfers into Level 3 are the result of unobservable inputs utilized within valuation methodologies for assets that were previously valued using observable inputs. Transfers out of Level 3 are due to the use of observable inputs in valuation methodologies as well as the utilization of pricing service information for certain assets that the Company is able to validate.
|
(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 year ended
December 31, 2018
(dollars in millions):
|
|
Purchases
|
|
Sales
|
|
Issuances
|
|
Settlements
|
|
Purchases, sales, issuances and settlements, net
|
||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Fixed maturities, available for sale:
|
|
|
|
|
|
|
|
|
|
||||||||||
Corporate securities
|
$
|
32.4
|
|
|
$
|
(57.0
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(24.6
|
)
|
Debt securities issued by foreign governments
|
3.0
|
|
|
(5.9
|
)
|
|
—
|
|
|
—
|
|
|
(2.9
|
)
|
|||||
Asset-backed securities
|
—
|
|
|
(11.5
|
)
|
|
—
|
|
|
—
|
|
|
(11.5
|
)
|
|||||
Total fixed maturities, available for sale
|
35.4
|
|
|
(74.4
|
)
|
|
—
|
|
|
—
|
|
|
(39.0
|
)
|
|||||
Equity securities - corporate securities
|
—
|
|
|
(10.9
|
)
|
|
—
|
|
|
—
|
|
|
(10.9
|
)
|
|||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Future policy benefits - embedded derivatives associated with fixed index annuity products
|
(177.6
|
)
|
|
16.5
|
|
|
16.7
|
|
|
82.4
|
|
|
(62.0
|
)
|
|
|
|
Estimated fair value
|
|||||||
Investment rating
|
Amortized cost
|
|
Amount
|
|
Percent of fixed maturities
|
|||||
AAA
|
$
|
1,403.9
|
|
|
$
|
1,415.0
|
|
|
8
|
%
|
AA
|
1,609.4
|
|
|
1,704.1
|
|
|
9
|
|
||
A
|
4,248.8
|
|
|
4,473.8
|
|
|
24
|
|
||
BBB+
|
2,457.7
|
|
|
2,486.8
|
|
|
13
|
|
||
BBB
|
3,543.5
|
|
|
3,503.9
|
|
|
19
|
|
||
BBB-
|
2,614.4
|
|
|
2,545.9
|
|
|
14
|
|
||
Investment grade
|
15,877.7
|
|
|
16,129.5
|
|
|
87
|
|
||
BB+
|
186.2
|
|
|
178.3
|
|
|
1
|
|
||
BB
|
289.9
|
|
|
282.1
|
|
|
2
|
|
||
BB-
|
349.2
|
|
|
337.4
|
|
|
2
|
|
||
B+ and below
|
1,404.8
|
|
|
1,520.4
|
|
|
8
|
|
||
Below-investment grade
|
2,230.1
|
|
|
2,318.2
|
|
|
13
|
|
||
Total fixed maturity securities
|
$
|
18,107.8
|
|
|
$
|
18,447.7
|
|
|
100
|
%
|
|
2018
|
|
2017
|
|
2016
|
||||||
|
(dollars in millions)
|
||||||||||
Weighted average general account invested assets at amortized cost
|
$
|
23,668.0
|
|
|
$
|
23,819.5
|
|
|
$
|
22,539.5
|
|
Net investment income on general account invested assets
|
1,282.8
|
|
|
1,290.3
|
|
|
1,219.3
|
|
|||
Yield earned
|
5.42
|
%
|
|
5.42
|
%
|
|
5.41
|
%
|
|
Par
value
|
|
Amortized
cost
|
|
Estimated
fair value
|
||||||
Below 4 percent
|
$
|
1,826.2
|
|
|
$
|
1,688.5
|
|
|
$
|
1,731.4
|
|
4 percent – 5 percent
|
1,868.9
|
|
|
1,764.6
|
|
|
1,812.5
|
|
|||
5 percent – 6 percent
|
1,160.0
|
|
|
1,080.4
|
|
|
1,121.0
|
|
|||
6 percent – 7 percent
|
178.5
|
|
|
167.1
|
|
|
173.8
|
|
|||
7 percent – 8 percent
|
69.9
|
|
|
70.5
|
|
|
74.2
|
|
|||
8 percent and above
|
229.1
|
|
|
229.2
|
|
|
229.7
|
|
|||
Total structured securities
|
$
|
5,332.6
|
|
|
$
|
5,000.3
|
|
|
$
|
5,142.6
|
|
|
|
|
Estimated fair value
|
|||||||
Type
|
Amortized
cost
|
|
Amount
|
|
Percent
of fixed
maturities
|
|||||
Pass-throughs, sequential and equivalent securities
|
$
|
514.3
|
|
|
$
|
546.3
|
|
|
3.0
|
%
|
Planned amortization classes, target amortization classes and accretion-directed bonds
|
64.4
|
|
|
72.0
|
|
|
.4
|
|
||
Commercial mortgage-backed securities
|
1,522.9
|
|
|
1,518.0
|
|
|
8.2
|
|
||
Asset-backed securities
|
2,552.1
|
|
|
2,674.8
|
|
|
14.5
|
|
||
Collateralized debt obligations
|
338.0
|
|
|
322.8
|
|
|
1.8
|
|
||
Other
|
8.6
|
|
|
8.7
|
|
|
—
|
|
||
Total structured securities
|
$
|
5,000.3
|
|
|
$
|
5,142.6
|
|
|
27.9
|
%
|
|
Number of loans
|
|
Carrying value
|
|||
Retail
|
78
|
|
|
$
|
278.8
|
|
Industrial
|
35
|
|
|
292.6
|
|
|
Multi-family
|
32
|
|
|
458.7
|
|
|
Office building
|
26
|
|
|
259.5
|
|
|
Other
|
19
|
|
|
162.9
|
|
|
Total commercial mortgage loans
|
190
|
|
|
$
|
1,452.5
|
|
|
Number of loans
|
|
Carrying value
|
|||
Under $5 million
|
76
|
|
|
$
|
142.0
|
|
$5 million but less than $10 million
|
61
|
|
|
420.6
|
|
|
$10 million but less than $20 million
|
38
|
|
|
545.6
|
|
|
Over $20 million
|
15
|
|
|
344.3
|
|
|
Total commercial mortgage loans
|
190
|
|
|
$
|
1,452.5
|
|
|
Number of loans
|
|
Carrying value
|
|||
2019
|
16
|
|
|
$
|
19.2
|
|
2020
|
7
|
|
|
14.9
|
|
|
2021
|
6
|
|
|
11.5
|
|
|
2022
|
14
|
|
|
89.5
|
|
|
2023
|
13
|
|
|
166.9
|
|
|
after 2023
|
134
|
|
|
1,150.5
|
|
|
Total commercial mortgage loans
|
190
|
|
|
$
|
1,452.5
|
|
|
|
|
Estimated fair
value
|
||||||||
Loan-to-value ratio (a)
|
Carrying value
|
|
Mortgage loans
|
|
Collateral
|
||||||
Less than 60%
|
$
|
918.2
|
|
|
$
|
936.9
|
|
|
$
|
2,425.1
|
|
60% to 70%
|
315.2
|
|
|
318.2
|
|
|
496.7
|
|
|||
Greater than 70% to 80%
|
173.2
|
|
|
176.1
|
|
|
236.3
|
|
|||
Greater than 80% to 90%
|
13.7
|
|
|
13.1
|
|
|
16.5
|
|
|||
Greater than 90%
|
32.2
|
|
|
31.1
|
|
|
34.5
|
|
|||
Total
|
$
|
1,452.5
|
|
|
$
|
1,475.4
|
|
|
$
|
3,209.1
|
|
(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.
|
|
December 31,
2018 |
|
December 31, 2017
|
||||
Total capital:
|
|
|
|
||||
Corporate notes payable
|
$
|
916.8
|
|
|
$
|
914.6
|
|
Shareholders’ equity:
|
|
|
|
|
|||
Common stock
|
1.6
|
|
|
1.7
|
|
||
Additional paid-in capital
|
2,995.0
|
|
|
3,073.3
|
|
||
Accumulated other comprehensive income
|
177.7
|
|
|
1,212.1
|
|
||
Retained earnings
|
196.6
|
|
|
560.4
|
|
||
Total shareholders’ equity
|
3,370.9
|
|
|
4,847.5
|
|
||
Total capital
|
$
|
4,287.7
|
|
|
$
|
5,762.1
|
|
|
December 31,
2018 |
|
December 31, 2017
|
||||
Book value per common share
|
$
|
20.78
|
|
|
$
|
29.05
|
|
Book value per common share, excluding accumulated other comprehensive income (a)
|
19.69
|
|
|
21.79
|
|
||
Ratio of earnings to fixed charges
|
(b)
|
|
|
2.94X
|
|
||
Debt to total capital ratios:
|
|
|
|
||||
Corporate debt to total capital
|
21.4
|
%
|
|
15.9
|
%
|
||
Corporate debt to total capital, excluding accumulated other comprehensive income (a)
|
22.3
|
%
|
|
20.1
|
%
|
(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 $264.8 million less than fixed charges due to the loss recognized related to the long-term care reinsurance transaction completed in September 2018.
|
|
|
|
Payment due in
|
||||||||||||||||
|
Total
|
|
2019
|
|
2020-2021
|
|
2022-2023
|
|
Thereafter
|
||||||||||
Insurance liabilities (a)
|
$
|
54,608.4
|
|
|
$
|
3,254.4
|
|
|
$
|
6,923.8
|
|
|
$
|
6,412.2
|
|
|
$
|
38,018.0
|
|
Notes payable (b)
|
1,121.6
|
|
|
144.8
|
|
|
384.9
|
|
|
52.5
|
|
|
539.4
|
|
|||||
Investment borrowings (c)
|
1,779.8
|
|
|
137.3
|
|
|
1,003.2
|
|
|
620.5
|
|
|
18.8
|
|
|||||
Borrowings related to variable interest
entities (d)
|
1,839.6
|
|
|
64.8
|
|
|
152.0
|
|
|
550.8
|
|
|
1,072.0
|
|
|||||
Postretirement plans (e)
|
259.1
|
|
|
7.5
|
|
|
15.8
|
|
|
16.9
|
|
|
218.9
|
|
|||||
Operating leases and certain other contractual commitments (f)
|
399.6
|
|
|
298.8
|
|
|
67.6
|
|
|
31.8
|
|
|
1.4
|
|
|||||
Total
|
$
|
60,008.1
|
|
|
$
|
3,907.6
|
|
|
$
|
8,547.3
|
|
|
$
|
7,684.7
|
|
|
$
|
39,868.5
|
|
(a)
|
These cash flows represent our estimates of the payments we expect to make to our policyholders, without consideration of future premiums or reinsurance recoveries. These estimates are based on numerous assumptions (depending on the product type) related to mortality, morbidity, lapses, withdrawals, future premiums, future deposits, interest rates on investments, credited rates, expenses and other factors which affect our future payments. The cash flows presented are undiscounted for interest. As a result, total outflows for all years exceed the corresponding liabilities of
$23.5 billion
included in our consolidated balance sheet as of
December 31, 2018
. As such payments are based on numerous assumptions, the actual payments may vary significantly from the amounts shown.
|
•
|
For products such as immediate annuities and structured settlement annuities without life contingencies, the payment obligation is fixed and determinable based on the terms of the policy.
|
•
|
For products such as universal life, ordinary life, long-term care, supplemental health and fixed rate annuities, the future payments are not due until the occurrence of an insurable event (such as death or disability) or a triggering event (such as a surrender or partial withdrawal). We estimated these payments using actuarial models based on historical experience and our expectation of the future payment patterns.
|
•
|
For short-term insurance products such as Medicare supplement insurance, the future payments relate only to amounts necessary to settle all outstanding claims, including those that have been incurred but not reported as of the balance sheet date. We estimated these payments based on our historical experience and our expectation of future payment patterns.
|
•
|
The average interest rate we assumed would be credited to our total insurance liabilities (excluding interest rate bonuses for the first policy year only and excluding the effect of credited rates attributable to variable or fixed index products) over the term of the contracts was 4.6 percent.
|
(b)
|
Includes projected interest payments based on interest rates, as applicable, as of
December 31, 2018
. Refer to the note to the consolidated financial statements entitled "Notes Payable - Direct Corporate Obligations" for additional information on notes payable.
|
(c)
|
These borrowings represent collateralized borrowings from the FHLB.
|
(d)
|
These borrowings represent the securities issued by VIEs and include projected interest payments based on interest rates, as applicable, as of
December 31, 2018
.
|
(e)
|
Includes benefits expected to be paid pursuant to our deferred compensation plan and postretirement plans based on numerous actuarial assumptions and interest credited at
4.25 percent
.
|
(f)
|
Includes amounts related to noncancellable operating leases, sponsorship agreements and commitments to purchase investments. Also included are obligations with third parties for information technology services, software maintenance and license agreements and consulting services.
|
•
|
An adverse decision in pending or future litigation.
|
•
|
An inability to obtain rate increases on certain of our insurance products.
|
•
|
Worse than anticipated claims experience.
|
•
|
Lower than expected dividends and/or surplus debenture interest payments from our insurance subsidiaries (resulting from inadequate earnings or capital or regulatory requirements).
|
•
|
An inability to meet and/or maintain the covenants in our Revolving Credit Agreement.
|
•
|
A significant increase in policy surrender levels.
|
•
|
A significant increase in investment defaults.
|
•
|
An inability of our reinsurers to meet their financial obligations.
|
Amount
|
|
Maturity
|
|
Interest rate at
|
||
borrowed
|
|
date
|
|
December 31, 2018
|
||
$
|
50.0
|
|
|
February 2019
|
|
Variable rate – 2.719%
|
21.8
|
|
|
July 2019
|
|
Variable rate – 2.969%
|
|
15.0
|
|
|
October 2019
|
|
Variable rate – 3.022%
|
|
50.0
|
|
|
May 2020
|
|
Variable rate – 2.975%
|
|
21.8
|
|
|
June 2020
|
|
Fixed rate – 1.960%
|
|
25.0
|
|
|
September 2020
|
|
Variable rate – 3.449%
|
|
100.0
|
|
|
September 2020
|
|
Variable rate – 3.166%
|
|
50.0
|
|
|
September 2020
|
|
Variable rate – 3.166%
|
|
75.0
|
|
|
September 2020
|
|
Variable rate – 2.923%
|
|
100.0
|
|
|
October 2020
|
|
Variable rate – 2.518%
|
|
50.0
|
|
|
December 2020
|
|
Variable rate – 3.047%
|
|
100.0
|
|
|
July 2021
|
|
Variable rate – 2.986%
|
|
100.0
|
|
|
July 2021
|
|
Variable rate – 2.956%
|
|
57.7
|
|
|
August 2021
|
|
Variable rate – 3.112%
|
|
28.2
|
|
|
August 2021
|
|
Fixed rate – 2.550%
|
|
125.0
|
|
|
August 2021
|
|
Variable rate – 2.986%
|
|
50.0
|
|
|
September 2021
|
|
Variable rate – 3.229%
|
|
22.0
|
|
|
May 2022
|
|
Variable rate – 3.057%
|
|
100.0
|
|
|
May 2022
|
|
Variable rate – 2.952%
|
|
10.0
|
|
|
June 2022
|
|
Variable rate – 3.381%
|
|
50.0
|
|
|
July 2022
|
|
Variable rate – 2.790%
|
|
50.0
|
|
|
July 2022
|
|
Variable rate – 2.867%
|
|
50.0
|
|
|
July 2022
|
|
Variable rate – 2.889%
|
|
50.0
|
|
|
August 2022
|
|
Variable rate – 2.979%
|
|
50.0
|
|
|
December 2022
|
|
Variable rate – 3.038%
|
|
50.0
|
|
|
December 2022
|
|
Variable rate – 3.038%
|
|
23.9
|
|
|
March 2023
|
|
Fixed rate – 2.160%
|
|
50.0
|
|
|
July 2023
|
|
Variable rate – 2.845%
|
|
100.0
|
|
|
July 2023
|
|
Variable rate – 2.845%
|
|
20.4
|
|
|
June 2025
|
|
Fixed rate – 2.940%
|
|
$
|
1,645.8
|
|
|
|
|
|
|
Years ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Net dividends (contributions) from/to insurance subsidiaries
|
$
|
(51.1
|
)
|
|
$
|
357.7
|
|
|
$
|
74.3
|
|
Surplus debenture interest
|
58.2
|
|
|
56.8
|
|
|
56.0
|
|
|||
Fees for services provided pursuant to service agreements
|
108.9
|
|
|
108.1
|
|
|
78.6
|
|
|||
Total dividends and other distributions paid by insurance subsidiaries
|
$
|
116.0
|
|
|
$
|
522.6
|
|
|
$
|
208.9
|
|
Subsidiary of CLTX
|
|
Earned surplus (deficit)
|
|
Additional information
|
||
Bankers Life
|
|
$
|
131.6
|
|
|
(a)
|
Colonial Penn
|
|
(325.2
|
)
|
|
(b)
|
(a)
|
Bankers Life paid dividends of $145.0 million to CLTX in
2018
. Bankers Life may pay dividends without regulatory approval or prior notice for any 12-month period if such dividends are less than the greater of: (i) statutory net income for the prior year; or (ii) 10 percent of statutory capital and surplus as of the end of the preceding year. Dividends in excess of these levels require 30 days prior notice. If a company has negative unassigned surplus, any dividend payments require prior approval. Bankers Life recognized a statutory loss in 2018 due to the closing of the reinsurance transaction as further described in the note to the consolidated financial statements entitled "Summary of Significant Accounting
|
(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.
|
|
Principal
|
|
Interest (a)
|
||||
2019
|
$
|
100.0
|
|
(b)
|
$
|
44.8
|
|
2020
|
325.0
|
|
|
33.6
|
|
||
2021
|
—
|
|
|
26.3
|
|
||
2022
|
—
|
|
|
26.2
|
|
||
2023
|
—
|
|
|
26.3
|
|
||
2024 and thereafter
|
500.0
|
|
|
39.4
|
|
||
|
$
|
925.0
|
|
|
$
|
196.6
|
|
(a)
|
Based on interest rates as of
December 31, 2018
.
|
(b)
|
The maturity date of the Revolving Credit Agreement is the earlier of October 13, 2022 and the date that is six months prior to the maturity date of the Company’s 4.50% senior notes due 2020, which is November 30, 2019.
|
Index to Consolidated Financial Statements
|
|
|
Page
|
|
2018
|
|
2017
|
||||
|
|
|
|
||||
Investments:
|
|
|
|
||||
Fixed maturities, available for sale, at fair value (amortized cost: 2018 - $18,107.8; 2017 - $20,702.1)
|
$
|
18,447.7
|
|
|
$
|
22,910.9
|
|
Equity securities at fair value (cost: 2018 - $319.8; 2017 - $420.0)
|
291.0
|
|
|
440.6
|
|
||
Mortgage loans
|
1,602.1
|
|
|
1,650.6
|
|
||
Policy loans
|
119.7
|
|
|
116.0
|
|
||
Trading securities
|
233.1
|
|
|
284.6
|
|
||
Investments held by variable interest entities
|
1,468.4
|
|
|
1,526.9
|
|
||
Other invested assets
|
833.4
|
|
|
924.5
|
|
||
Total investments
|
22,995.4
|
|
|
27,854.1
|
|
||
Cash and cash equivalents - unrestricted
|
594.2
|
|
|
578.4
|
|
||
Cash and cash equivalents held by variable interest entities
|
62.4
|
|
|
178.9
|
|
||
Accrued investment income
|
205.2
|
|
|
245.9
|
|
||
Present value of future profits
|
343.6
|
|
|
359.6
|
|
||
Deferred acquisition costs
|
1,322.5
|
|
|
1,026.8
|
|
||
Reinsurance receivables
|
4,925.4
|
|
|
2,175.2
|
|
||
Income tax assets, net
|
630.0
|
|
|
366.9
|
|
||
Assets held in separate accounts
|
4.4
|
|
|
5.0
|
|
||
Other assets
|
356.7
|
|
|
319.5
|
|
||
Total assets
|
$
|
31,439.8
|
|
|
$
|
33,110.3
|
|
|
2018
|
|
2017
|
||||
|
|
|
|
||||
Liabilities:
|
|
|
|
||||
Liabilities for insurance products:
|
|
|
|
||||
Policyholder account balances
|
$
|
11,594.1
|
|
|
$
|
11,220.7
|
|
Future policy benefits
|
11,082.4
|
|
|
11,521.3
|
|
||
Liability for policy and contract claims
|
521.9
|
|
|
530.3
|
|
||
Unearned and advanced premiums
|
253.9
|
|
|
261.7
|
|
||
Liabilities related to separate accounts
|
4.4
|
|
|
5.0
|
|
||
Other liabilities
|
632.4
|
|
|
751.8
|
|
||
Investment borrowings
|
1,645.8
|
|
|
1,646.7
|
|
||
Borrowings related to variable interest entities
|
1,417.2
|
|
|
1,410.7
|
|
||
Notes payable – direct corporate obligations
|
916.8
|
|
|
914.6
|
|
||
Total liabilities
|
28,068.9
|
|
|
28,262.8
|
|
||
Commitments and Contingencies
|
|
|
|
|
|
||
Shareholders' equity:
|
|
|
|
|
|
||
Common stock ($0.01 par value, 8,000,000,000 shares authorized, shares issued and outstanding: 2018 - 162,201,692; 2017 - 166,857,931)
|
1.6
|
|
|
1.7
|
|
||
Additional paid-in capital
|
2,995.0
|
|
|
3,073.3
|
|
||
Accumulated other comprehensive income
|
177.7
|
|
|
1,212.1
|
|
||
Retained earnings
|
196.6
|
|
|
560.4
|
|
||
Total shareholders' equity
|
3,370.9
|
|
|
4,847.5
|
|
||
Total liabilities and shareholders' equity
|
$
|
31,439.8
|
|
|
$
|
33,110.3
|
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Revenues:
|
|
|
|
|
|
|
||||||
Insurance policy income
|
|
$
|
2,593.1
|
|
|
$
|
2,647.3
|
|
|
$
|
2,601.1
|
|
Net investment income:
|
|
|
|
|
|
|
|
|
|
|||
General account assets
|
|
1,279.7
|
|
|
1,285.4
|
|
|
1,204.1
|
|
|||
Policyholder and other special-purpose portfolios
|
|
26.5
|
|
|
265.9
|
|
|
121.1
|
|
|||
Realized investment gains (losses):
|
|
|
|
|
|
|
|
|
|
|||
Net realized gains on the transfer of assets related to reinsurance transaction
|
|
363.4
|
|
|
—
|
|
|
—
|
|
|||
Other net realized investment gains, excluding impairment losses
|
|
(8.7
|
)
|
|
77.4
|
|
|
47.9
|
|
|||
Other-than-temporary impairments:
|
|
|
|
|
|
|
|
|
|
|||
Total other-than-temporary impairment losses
|
|
(2.6
|
)
|
|
(21.9
|
)
|
|
(35.9
|
)
|
|||
Portion of other-than-temporary impairment losses recognized in accumulated other comprehensive income
|
|
—
|
|
|
(.9
|
)
|
|
3.6
|
|
|||
Net impairment losses recognized
|
|
(2.6
|
)
|
|
(22.8
|
)
|
|
(32.3
|
)
|
|||
Loss on dissolution of variable interest entities
|
|
—
|
|
|
(4.3
|
)
|
|
(7.3
|
)
|
|||
Total realized gains
|
|
352.1
|
|
|
50.3
|
|
|
8.3
|
|
|||
Fee revenue and other income
|
|
62.1
|
|
|
48.3
|
|
|
50.5
|
|
|||
Total revenues
|
|
4,313.5
|
|
|
4,297.2
|
|
|
3,985.1
|
|
|||
Benefits and expenses:
|
|
|
|
|
|
|
||||||
Insurance policy benefits
|
|
2,278.6
|
|
|
2,602.7
|
|
|
2,390.5
|
|
|||
Loss related to reinsurance transactions
|
|
1,067.6
|
|
|
—
|
|
|
75.4
|
|
|||
Interest expense
|
|
149.8
|
|
|
123.7
|
|
|
116.4
|
|
|||
Amortization
|
|
264.3
|
|
|
239.3
|
|
|
253.3
|
|
|||
Loss on extinguishment of borrowings related to variable interest entities
|
|
3.8
|
|
|
9.5
|
|
|
—
|
|
|||
Other operating costs and expenses
|
|
814.2
|
|
|
841.5
|
|
|
796.3
|
|
|||
Total benefits and expenses
|
|
4,578.3
|
|
|
3,816.7
|
|
|
3,631.9
|
|
|||
Income (loss) before income taxes
|
|
(264.8
|
)
|
|
480.5
|
|
|
353.2
|
|
|||
Income tax expense (benefit):
|
|
|
|
|
|
|
||||||
Tax expense (benefit) on period income
|
|
(57.6
|
)
|
|
162.8
|
|
|
127.8
|
|
|||
Valuation allowance for deferred tax assets and other tax items
|
|
107.8
|
|
|
142.1
|
|
|
(132.8
|
)
|
|||
Net income (loss)
|
|
$
|
(315.0
|
)
|
|
$
|
175.6
|
|
|
$
|
358.2
|
|
Earnings per common share:
|
|
|
|
|
|
|
||||||
Basic:
|
|
|
|
|
|
|
||||||
Weighted average shares outstanding
|
|
165,457,000
|
|
|
170,025,000
|
|
|
176,638,000
|
|
|||
Net income (loss)
|
|
$
|
(1.90
|
)
|
|
$
|
1.03
|
|
|
$
|
2.03
|
|
Diluted:
|
|
|
|
|
|
|
||||||
Weighted average shares outstanding
|
|
165,457,000
|
|
|
172,144,000
|
|
|
178,323,000
|
|
|||
Net income (loss)
|
|
$
|
(1.90
|
)
|
|
$
|
1.02
|
|
|
$
|
2.01
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Net income (loss)
|
$
|
(315.0
|
)
|
|
$
|
175.6
|
|
|
$
|
358.2
|
|
Other comprehensive income, before tax:
|
|
|
|
|
|
||||||
Unrealized gains (losses) for the period
|
(1,579.9
|
)
|
|
959.3
|
|
|
424.4
|
|
|||
Amortization of present value of future profits and deferred acquisition costs
|
125.5
|
|
|
(29.7
|
)
|
|
(27.9
|
)
|
|||
Amount related to premium deficiencies assuming the net unrealized gains (losses) had been realized
|
512.0
|
|
|
(310.5
|
)
|
|
(46.9
|
)
|
|||
Reclassification adjustments:
|
|
|
|
|
|
||||||
For net realized investment gains (losses) included in net income (loss)
|
(356.9
|
)
|
|
(40.2
|
)
|
|
(18.6
|
)
|
|||
For amortization of the present value of future profits and deferred acquisition costs related to net realized investment gains (losses) included in net income (loss)
|
(.4
|
)
|
|
1.0
|
|
|
.7
|
|
|||
Unrealized gains (losses) on investments
|
(1,299.7
|
)
|
|
579.9
|
|
|
331.7
|
|
|||
Change related to deferred compensation plan
|
—
|
|
|
—
|
|
|
8.6
|
|
|||
Other comprehensive income (loss) before tax
|
(1,299.7
|
)
|
|
579.9
|
|
|
340.3
|
|
|||
Income tax (expense) benefit related to items of accumulated other comprehensive income (loss)
|
281.6
|
|
|
(195.6
|
)
|
|
(120.7
|
)
|
|||
Other comprehensive income (loss), net of tax
|
(1,018.1
|
)
|
|
384.3
|
|
|
219.6
|
|
|||
Comprehensive income (loss)
|
$
|
(1,333.1
|
)
|
|
$
|
559.9
|
|
|
$
|
577.8
|
|
|
Common stock and
additional
paid-in capital
|
|
Accumulated other
comprehensive income
|
|
Retained earnings
|
|
Total
|
||||||||
Balance, December 31, 2015
|
$
|
3,388.6
|
|
|
$
|
402.8
|
|
|
$
|
347.1
|
|
|
$
|
4,138.5
|
|
Net income
|
—
|
|
|
—
|
|
|
358.2
|
|
|
358.2
|
|
||||
Change in unrealized appreciation (depreciation) of investments (net of applicable income tax expense of $121.5)
|
—
|
|
|
221.1
|
|
|
—
|
|
|
221.1
|
|
||||
Change in noncredit component of impairment losses on fixed maturities, available for sale (net of applicable income tax benefit of $.8)
|
—
|
|
|
(1.5
|
)
|
|
—
|
|
|
(1.5
|
)
|
||||
Cost of common stock repurchased
|
(203.0
|
)
|
|
—
|
|
|
—
|
|
|
(203.0
|
)
|
||||
Dividends on common stock
|
—
|
|
|
—
|
|
|
(54.6
|
)
|
|
(54.6
|
)
|
||||
Stock options, restricted stock and performance units
|
28.2
|
|
|
—
|
|
|
—
|
|
|
28.2
|
|
||||
Balance, December 31, 2016
|
3,213.8
|
|
|
622.4
|
|
|
650.7
|
|
|
4,486.9
|
|
||||
Cumulative effect of accounting change
|
.9
|
|
|
—
|
|
|
(.6
|
)
|
|
.3
|
|
||||
Balance, January 1, 2017
|
3,214.7
|
|
|
622.4
|
|
|
650.1
|
|
|
4,487.2
|
|
||||
Net income
|
—
|
|
|
—
|
|
|
175.6
|
|
|
175.6
|
|
||||
Change in unrealized appreciation (depreciation) of investments (net of applicable income tax expense of $194.4)
|
—
|
|
|
382.1
|
|
|
—
|
|
|
382.1
|
|
||||
Change in noncredit component of impairment losses on fixed maturities, available for sale (net of applicable income tax expense of $1.2)
|
—
|
|
|
2.2
|
|
|
—
|
|
|
2.2
|
|
||||
Reclassification of stranded income tax effects from the Tax Cuts and Jobs Act
|
—
|
|
|
205.4
|
|
|
(205.4
|
)
|
|
—
|
|
||||
Cost of common stock repurchased
|
(167.1
|
)
|
|
—
|
|
|
—
|
|
|
(167.1
|
)
|
||||
Dividends on common stock
|
—
|
|
|
—
|
|
|
(59.9
|
)
|
|
(59.9
|
)
|
||||
Stock options, restricted stock and performance units
|
27.4
|
|
|
—
|
|
|
—
|
|
|
27.4
|
|
||||
Balance, December 31, 2017
|
3,075.0
|
|
|
1,212.1
|
|
|
560.4
|
|
|
4,847.5
|
|
||||
Cumulative effect of accounting change
|
—
|
|
|
(16.3
|
)
|
|
16.3
|
|
|
—
|
|
||||
Balance, January 1, 2018
|
3,075.0
|
|
|
1,195.8
|
|
|
576.7
|
|
|
4,847.5
|
|
||||
Net loss
|
—
|
|
|
—
|
|
|
(315.0
|
)
|
|
(315.0
|
)
|
||||
Change in unrealized appreciation (depreciation) of investments (net of applicable income tax benefit of $281.3)
|
—
|
|
|
(1,017.0
|
)
|
|
—
|
|
|
(1,017.0
|
)
|
||||
Change in noncredit component of impairment losses on fixed maturities, available for sale (net of applicable income tax benefit of $.3)
|
—
|
|
|
(1.1
|
)
|
|
—
|
|
|
(1.1
|
)
|
||||
Cost of common stock repurchased
|
(100.9
|
)
|
|
—
|
|
|
—
|
|
|
(100.9
|
)
|
||||
Dividends on common stock
|
—
|
|
|
—
|
|
|
(65.1
|
)
|
|
(65.1
|
)
|
||||
Stock options, restricted stock and performance units
|
22.5
|
|
|
—
|
|
|
—
|
|
|
22.5
|
|
||||
Balance, December 31, 2018
|
$
|
2,996.6
|
|
|
$
|
177.7
|
|
|
$
|
196.6
|
|
|
$
|
3,370.9
|
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Cash flows from operating activities:
|
|
|
|
|
|
|
||||||
Insurance policy income
|
|
$
|
2,433.4
|
|
|
$
|
2,483.2
|
|
|
$
|
2,457.0
|
|
Net investment income
|
|
1,321.2
|
|
|
1,256.3
|
|
|
1,213.9
|
|
|||
Fee revenue and other income
|
|
62.1
|
|
|
48.3
|
|
|
50.5
|
|
|||
Cash and cash equivalents received upon recapture of reinsurance
|
|
—
|
|
|
—
|
|
|
73.6
|
|
|||
Insurance policy benefits
|
|
(1,910.7
|
)
|
|
(1,973.1
|
)
|
|
(1,916.0
|
)
|
|||
Payment to reinsurer pursuant to long-term care business reinsured
|
|
(365.0
|
)
|
|
—
|
|
|
—
|
|
|||
Interest expense
|
|
(141.1
|
)
|
|
(120.5
|
)
|
|
(106.0
|
)
|
|||
Deferrable policy acquisition costs
|
|
(261.8
|
)
|
|
(236.1
|
)
|
|
(242.7
|
)
|
|||
Other operating costs
|
|
(788.5
|
)
|
|
(747.4
|
)
|
|
(747.9
|
)
|
|||
Income taxes
|
|
(31.8
|
)
|
|
(77.4
|
)
|
|
(6.7
|
)
|
|||
Net cash from operating activities
|
|
317.8
|
|
|
633.3
|
|
|
775.7
|
|
|||
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
||||
Sales of investments
|
|
3,210.2
|
|
|
2,460.7
|
|
|
2,828.9
|
|
|||
Maturities and redemptions of investments
|
|
2,469.0
|
|
|
3,324.6
|
|
|
2,507.2
|
|
|||
Purchases of investments
|
|
(6,205.8
|
)
|
|
(6,141.0
|
)
|
|
(6,159.8
|
)
|
|||
Net sales (purchases) of trading securities
|
|
25.9
|
|
|
108.9
|
|
|
(84.2
|
)
|
|||
Other
|
|
(25.0
|
)
|
|
(23.4
|
)
|
|
(22.5
|
)
|
|||
Net cash used by investing activities
|
|
(525.7
|
)
|
|
(270.2
|
)
|
|
(930.4
|
)
|
|||
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
||||
Issuance of common stock
|
|
3.9
|
|
|
8.3
|
|
|
8.4
|
|
|||
Payments to repurchase common stock
|
|
(108.0
|
)
|
|
(168.3
|
)
|
|
(210.0
|
)
|
|||
Common stock dividends paid
|
|
(64.8
|
)
|
|
(59.6
|
)
|
|
(54.8
|
)
|
|||
Amounts received for deposit products
|
|
1,588.5
|
|
|
1,445.9
|
|
|
1,386.7
|
|
|||
Withdrawals from deposit products
|
|
(1,312.3
|
)
|
|
(1,232.6
|
)
|
|
(1,181.6
|
)
|
|||
Issuance of investment borrowings:
|
|
|
|
|
|
|
||||||
Federal Home Loan Bank
|
|
150.0
|
|
|
432.0
|
|
|
432.7
|
|
|||
Related to variable interest entities
|
|
277.6
|
|
|
981.6
|
|
|
493.2
|
|
|||
Payments on investment borrowings:
|
|
|
|
|
|
|
||||||
Federal Home Loan Bank
|
|
(150.9
|
)
|
|
(432.7
|
)
|
|
(333.5
|
)
|
|||
Related to variable interest entities and other
|
|
(276.8
|
)
|
|
(1,248.6
|
)
|
|
(514.9
|
)
|
|||
Net cash provided (used) by financing activities
|
|
107.2
|
|
|
(274.0
|
)
|
|
26.2
|
|
|||
Net increase (decrease) in cash and cash equivalents
|
|
(100.7
|
)
|
|
89.1
|
|
|
(128.5
|
)
|
|||
Cash and cash equivalents - unrestricted and held by variable interest entities, beginning of year
|
|
757.3
|
|
|
668.2
|
|
|
796.7
|
|
|||
Cash and cash equivalents - unrestricted and held by variable interest entities, end of year
|
|
$
|
656.6
|
|
|
$
|
757.3
|
|
|
$
|
668.2
|
|
•
|
Bankers Life,
which underwrites, 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, financial and investment advisors, and sales managers supported by a network of community-based sales offices. The Bankers Life segment includes primarily the business of Bankers Life. Bankers Life also has various distribution and marketing agreements with other insurance companies to use Bankers Life's career agents to distribute Medicare Advantage and prescription drug plan products in exchange for a fee.
|
•
|
Washington National,
which underwrites, 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, Inc. and through independent marketing organizations and insurance agencies including worksite marketing. The products being marketed are underwritten by Washington National Insurance Company ("Washington National"). This segment's business also includes certain closed blocks of annuities and Medicare supplement policies which are no longer being actively marketed by this segment and were primarily issued or acquired 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").
|
•
|
Long-term care in run-off
consists of: (i) the long-term care business that was recaptured due to the termination of certain reinsurance agreements effective September 30, 2016 (such business is not actively marketed and was issued or acquired by Washington National and Bankers Conseco Life Insurance Company ("BCLIC"); and (ii) certain legacy (prior to 2003) comprehensive and nursing home long-term care policies which were ceded in September 2018 (such business is not actively marketed and was issued by Bankers Life).
|
•
|
Premium rate increases - If premium rate increases reflect a change in our previous rate increase assumptions, the new assumptions are not reflected prospectively in our reserves. Instead, the additional premium revenue resulting from the rate increase is recognized as earned and original assumptions continue to be used to determine changes to liabilities for insurance products unless a premium deficiency exists.
|
•
|
Benefit reductions - A policyholder may choose reduced coverage with a proportionate reduction in premium, when permitted by our contracts. This option does not require additional underwriting. Benefit reductions are treated as a partial lapse of coverage, and the balance of our reserves and deferred insurance acquisition costs is reduced in proportion to the reduced coverage.
|
•
|
Non-forfeiture benefits offered in conjunction with a rate increase - In some cases, non-forfeiture benefits are offered to policyholders who wish to lapse their policies at the time of a significant rate increase. In these cases, exercise of this option is treated as an extinguishment of the original contract and issuance of a new contract. The balance of our reserves and deferred insurance acquisition costs are released, and a reserve for the new contract is established.
|
Market value of investments
|
$
|
504.7
|
|
Insurance liabilities
|
(552.2
|
)
|
|
Write-off of reinsurance receivables
|
(17.9
|
)
|
|
Estimated transaction expenses
|
(10.0
|
)
|
|
Pre-tax loss
|
(75.4
|
)
|
|
Tax benefit
|
26.4
|
|
|
Increase in valuation allowance for deferred tax assets
|
(4.1
|
)
|
|
After-tax loss
|
$
|
(53.1
|
)
|
Amount
|
|
Maturity
|
|
Interest rate at
|
||
borrowed
|
|
date
|
|
December 31, 2018
|
||
$
|
50.0
|
|
|
February 2019
|
|
Variable rate – 2.719%
|
21.8
|
|
|
July 2019
|
|
Variable rate – 2.969%
|
|
15.0
|
|
|
October 2019
|
|
Variable rate – 3.022%
|
|
50.0
|
|
|
May 2020
|
|
Variable rate – 2.975%
|
|
21.8
|
|
|
June 2020
|
|
Fixed rate – 1.960%
|
|
25.0
|
|
|
September 2020
|
|
Variable rate – 3.449%
|
|
100.0
|
|
|
September 2020
|
|
Variable rate – 3.166%
|
|
50.0
|
|
|
September 2020
|
|
Variable rate – 3.166%
|
|
75.0
|
|
|
September 2020
|
|
Variable rate – 2.923%
|
|
100.0
|
|
|
October 2020
|
|
Variable rate – 2.518%
|
|
50.0
|
|
|
December 2020
|
|
Variable rate – 3.047%
|
|
100.0
|
|
|
July 2021
|
|
Variable rate – 2.986%
|
|
100.0
|
|
|
July 2021
|
|
Variable rate – 2.956%
|
|
57.7
|
|
|
August 2021
|
|
Variable rate – 3.112%
|
|
28.2
|
|
|
August 2021
|
|
Fixed rate – 2.550%
|
|
125.0
|
|
|
August 2021
|
|
Variable rate – 2.986%
|
|
50.0
|
|
|
September 2021
|
|
Variable rate – 3.229%
|
|
22.0
|
|
|
May 2022
|
|
Variable rate – 3.057%
|
|
100.0
|
|
|
May 2022
|
|
Variable rate – 2.952%
|
|
10.0
|
|
|
June 2022
|
|
Variable rate – 3.381%
|
|
50.0
|
|
|
July 2022
|
|
Variable rate – 2.790%
|
|
50.0
|
|
|
July 2022
|
|
Variable rate – 2.867%
|
|
50.0
|
|
|
July 2022
|
|
Variable rate – 2.889%
|
|
50.0
|
|
|
August 2022
|
|
Variable rate – 2.979%
|
|
50.0
|
|
|
December 2022
|
|
Variable rate – 3.038%
|
|
50.0
|
|
|
December 2022
|
|
Variable rate – 3.038%
|
|
23.9
|
|
|
March 2023
|
|
Fixed rate – 2.160%
|
|
50.0
|
|
|
July 2023
|
|
Variable rate – 2.845%
|
|
100.0
|
|
|
July 2023
|
|
Variable rate – 2.845%
|
|
20.4
|
|
|
June 2025
|
|
Fixed rate – 2.940%
|
|
$
|
1,645.8
|
|
|
|
|
|
•
|
Under the current standard, liabilities for future policy benefits for long-duration products are established based on assumptions set at the issue date which are not changed unless there is a premium deficiency. Under the new standard, mortality, morbidity, persistency and expense assumptions must be reviewed for potential changes at least annually. For these assumption changes, the liability for future policy benefits is recomputed and a cumulative catch-up adjustment is recorded in current year income. The interest rate used to discount future cash flows will be based on the current yield of an upper-medium grade fixed income instrument and must be updated each reporting period; changes in the liability resulting from interest rate changes are recorded in accumulated other comprehensive income. Under current methods, the interest rate is based on expected yields on the underlying investment portfolio estimated at the issue date.
|
•
|
We will no longer be permitted to include a provision for adverse deviation in calculations of the liability for future policy benefits.
|
•
|
Since assumptions are updated regularly, there is no longer a need for premium deficiency testing.
|
•
|
The new guidance introduces the concept of market risk benefits for product features such as guaranteed minimum death or income benefits, which must be accounted for at fair value.
|
•
|
Deferred acquisition costs will generally be amortized on a constant level basis over the expected term of the contracts. Amortization based on estimated gross profits or gross margins will no longer be permitted. Deferred acquisition costs will no longer need to be tested for impairment and no interest is accreted. Adjustments for the change in amortization that would have occurred if fixed maturity securities, available for sale, had been sold at their aggregate fair value and the proceeds reinvested at current yields (commonly referred to as "shadow adjustments") will no longer be required.
|
•
|
Significant additional annual and interim disclosures will be required including requirements for disaggregated rollforwards of the liability for future policy benefits, policyholder account balances, market risk benefits and deferred acquisition costs, as well as qualitative and quantitative information about expected cash flows, estimates and assumptions.
|
(i)
|
Require equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. However, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.
|
(ii)
|
Simplify the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment. When a qualitative assessment indicates that impairment exists, an entity is required to measure the investment at fair value.
|
(iii)
|
Eliminate the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet.
|
(iv)
|
Require public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes.
|
(v)
|
Require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments.
|
(vi)
|
Require separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements.
|
(vii)
|
Clarify that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity's other deferred tax assets.
|
|
January 1, 2018
|
||||||||||
|
Amounts prior to effect of adoption of authoritative guidance
|
|
Effect of adoption of authoritative guidance
|
|
As adjusted
|
||||||
|
|
|
|
|
|
||||||
Accumulated other comprehensive income
|
$
|
1,212.1
|
|
|
$
|
(16.3
|
)
|
|
$
|
1,195.8
|
|
Retained earnings
|
560.4
|
|
|
16.3
|
|
|
576.7
|
|
|||
Total shareholders' equity
|
4,847.5
|
|
|
—
|
|
|
4,847.5
|
|
|
2017
|
||||||||||||||||||
|
Amounts prior to effect of adoption of authoritative guidance
|
|
Restricted cash
|
|
COLI death benefits
|
|
Distributions received from equity method investments
|
|
As adjusted
|
||||||||||
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Net investment income
|
$
|
1,229.6
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
26.7
|
|
|
$
|
1,256.3
|
|
Other operating costs
|
(740.9
|
)
|
|
—
|
|
|
(6.5
|
)
|
|
—
|
|
|
(747.4
|
)
|
|||||
Net cash flow from operating activities
|
613.1
|
|
|
—
|
|
|
(6.5
|
)
|
|
26.7
|
|
|
633.3
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Sales of investments
|
2,487.4
|
|
|
—
|
|
|
—
|
|
|
(26.7
|
)
|
|
2,460.7
|
|
|||||
Change in cash and cash equivalents held by variable interest entities
|
10.4
|
|
|
(10.4
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Other
|
(29.9
|
)
|
|
—
|
|
|
6.5
|
|
|
—
|
|
|
(23.4
|
)
|
|||||
Net cash provided (used) by investing activities
|
(239.6
|
)
|
|
(10.4
|
)
|
|
6.5
|
|
|
(26.7
|
)
|
|
(270.2
|
)
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Net increase (decrease) in cash and cash equivalents
|
99.5
|
|
|
(10.4
|
)
|
|
—
|
|
|
—
|
|
|
89.1
|
|
|||||
Cash and cash equivalents - unrestricted and held by variable interest entities, beginning of period
|
478.9
|
|
|
189.3
|
|
|
—
|
|
|
—
|
|
|
668.2
|
|
|||||
Cash and cash equivalents - unrestricted and held by variable interest entities, end of period
|
578.4
|
|
|
178.9
|
|
|
—
|
|
|
—
|
|
|
757.3
|
|
|
2016
|
||||||||||||||
|
Amounts prior to effect of adoption of authoritative guidance
|
|
Restricted cash
|
|
Distributions received from equity method investments
|
|
As adjusted
|
||||||||
Cash flows from operating activities:
|
|
|
|
|
|
|
|
||||||||
Net investment income
|
$
|
1,201.0
|
|
|
$
|
—
|
|
|
$
|
12.9
|
|
|
$
|
1,213.9
|
|
Net cash flow from operating activities
|
762.8
|
|
|
—
|
|
|
12.9
|
|
|
775.7
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Cash flows from investing activities:
|
|
|
|
|
|
|
|
||||||||
Sales of investments
|
2,841.8
|
|
|
—
|
|
|
(12.9
|
)
|
|
2,828.9
|
|
||||
Change in cash and cash equivalents held by variable interest entities
|
175.1
|
|
|
(175.1
|
)
|
|
—
|
|
|
—
|
|
||||
Net cash provided (used) by investing activities
|
(742.4
|
)
|
|
(175.1
|
)
|
|
(12.9
|
)
|
|
(930.4
|
)
|
||||
|
|
|
|
|
|
|
|
||||||||
Net increase (decrease) in cash and cash equivalents
|
46.6
|
|
|
(175.1
|
)
|
|
—
|
|
|
(128.5
|
)
|
||||
Cash and cash equivalents - unrestricted and held by variable interest entities, beginning of period
|
432.3
|
|
|
364.4
|
|
|
—
|
|
|
796.7
|
|
||||
Cash and cash equivalents - unrestricted and held by variable interest entities, end of period
|
478.9
|
|
|
189.3
|
|
|
—
|
|
|
668.2
|
|
|
January 1, 2017
|
||||||||||||||
|
|
|
Effect of Adoption of Authoritative Guidance
|
|
|
||||||||||
|
Amounts prior to effect of adoption of authoritative guidance
|
|
Election to account for forfeitures as they occur
|
|
Recognition of excess tax benefits
|
|
As adjusted
|
||||||||
|
|
|
|
|
|
|
|
||||||||
Income tax assets
|
$
|
1,029.9
|
|
|
$
|
.3
|
|
|
$
|
15.7
|
|
|
$
|
1,045.9
|
|
Valuation allowance for deferred income tax assets
|
(240.2
|
)
|
|
—
|
|
|
(15.7
|
)
|
|
(255.9
|
)
|
||||
Income tax assets, net
|
789.7
|
|
|
.3
|
|
|
—
|
|
|
790.0
|
|
||||
Total assets
|
31,975.2
|
|
|
.3
|
|
|
—
|
|
|
31,975.5
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Additional paid-in capital
|
3,212.1
|
|
|
.9
|
|
|
—
|
|
|
3,213.0
|
|
||||
Retained earnings
|
650.7
|
|
|
(.6
|
)
|
|
—
|
|
|
650.1
|
|
||||
Total shareholders' equity
|
4,486.9
|
|
|
.3
|
|
|
—
|
|
|
4,487.2
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Total liabilities and shareholders' equity
|
31,975.2
|
|
|
.3
|
|
|
—
|
|
|
31,975.5
|
|
|
Amortized
cost
|
|
Gross
unrealized
gains
|
|
Gross
unrealized
losses
|
|
Estimated
fair
value
|
|
Other-than-temporary impairments included in accumulated other comprehensive income
|
||||||||||
Investment grade (a):
|
|
|
|
|
|
|
|
|
|
||||||||||
Corporate securities
|
$
|
10,306.1
|
|
|
$
|
402.4
|
|
|
$
|
(319.2
|
)
|
|
$
|
10,389.3
|
|
|
$
|
—
|
|
United States Treasury securities and obligations of United States government corporations and agencies
|
152.9
|
|
|
22.1
|
|
|
(.2
|
)
|
|
174.8
|
|
|
—
|
|
|||||
States and political subdivisions
|
1,725.8
|
|
|
144.6
|
|
|
(2.6
|
)
|
|
1,867.8
|
|
|
—
|
|
|||||
Debt securities issued by foreign governments
|
60.3
|
|
|
.9
|
|
|
(1.7
|
)
|
|
59.5
|
|
|
—
|
|
|||||
Asset-backed securities
|
1,513.2
|
|
|
21.9
|
|
|
(6.7
|
)
|
|
1,528.4
|
|
|
—
|
|
|||||
Collateralized debt obligations
|
325.3
|
|
|
—
|
|
|
(13.5
|
)
|
|
311.8
|
|
|
—
|
|
|||||
Commercial mortgage-backed securities
|
1,445.0
|
|
|
16.6
|
|
|
(20.4
|
)
|
|
1,441.2
|
|
|
—
|
|
|||||
Mortgage pass-through securities
|
1.5
|
|
|
.1
|
|
|
—
|
|
|
1.6
|
|
|
—
|
|
|||||
Collateralized mortgage obligations
|
347.6
|
|
|
11.4
|
|
|
(3.9
|
)
|
|
355.1
|
|
|
(.2
|
)
|
|||||
Total investment grade fixed maturities, available for sale
|
15,877.7
|
|
|
620.0
|
|
|
(368.2
|
)
|
|
16,129.5
|
|
|
(.2
|
)
|
|||||
Below-investment grade (a) (b):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Corporate securities
|
862.4
|
|
|
2.3
|
|
|
(51.0
|
)
|
|
813.7
|
|
|
—
|
|
|||||
Asset-backed securities
|
1,038.9
|
|
|
108.4
|
|
|
(.9
|
)
|
|
1,146.4
|
|
|
—
|
|
|||||
Collateralized debt obligations
|
12.7
|
|
|
—
|
|
|
(1.7
|
)
|
|
11.0
|
|
|
—
|
|
|||||
Commercial mortgage-backed securities
|
77.9
|
|
|
.2
|
|
|
(1.3
|
)
|
|
76.8
|
|
|
—
|
|
|||||
Collateralized mortgage obligations
|
238.2
|
|
|
32.3
|
|
|
(.2
|
)
|
|
270.3
|
|
|
(.3
|
)
|
|||||
Total below-investment grade fixed maturities, available for sale
|
2,230.1
|
|
|
143.2
|
|
|
(55.1
|
)
|
|
2,318.2
|
|
|
(.3
|
)
|
|||||
Total fixed maturities, available for sale
|
$
|
18,107.8
|
|
|
$
|
763.2
|
|
|
$
|
(423.3
|
)
|
|
$
|
18,447.7
|
|
|
$
|
(.5
|
)
|
(a)
|
Investment ratings are assigned the second lowest rating by Nationally Recognized Statistical Rating Organizations ("NRSROs") (Moody's Investor Services, Inc. ("Moody's"), S&P Global Ratings ("S&P") or Fitch Ratings ("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
|
(b)
|
Certain structured securities rated below-investment grade by NRSROs may be assigned a NAIC 1 or NAIC 2 designation based on the cost basis of the security relative to estimated recoverable amounts as determined by the NAIC. Refer to the table below for a summary of our fixed maturity securities, available for sale, by NAIC designations.
|
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
|
|
$
|
8,836.9
|
|
|
$
|
9,311.7
|
|
|
50.5
|
%
|
2
|
|
8,353.6
|
|
|
8,270.0
|
|
|
44.8
|
|
||
Total NAIC 1 and 2 (investment grade)
|
|
17,190.5
|
|
|
17,581.7
|
|
|
95.3
|
|
||
3
|
|
674.1
|
|
|
641.4
|
|
|
3.5
|
|
||
4
|
|
218.0
|
|
|
200.3
|
|
|
1.1
|
|
||
5
|
|
19.7
|
|
|
18.9
|
|
|
.1
|
|
||
6
|
|
5.5
|
|
|
5.4
|
|
|
—
|
|
||
Total NAIC 3,4,5 and 6 (below-investment grade)
|
|
917.3
|
|
|
866.0
|
|
|
4.7
|
|
||
|
|
$
|
18,107.8
|
|
|
$
|
18,447.7
|
|
|
100.0
|
%
|
|
Amortized
cost
|
|
Gross
unrealized
gains
|
|
Gross
unrealized
losses
|
|
Estimated
fair
value
|
|
Other-than-temporary impairments included in accumulated other comprehensive income
|
||||||||||
Investment grade:
|
|
|
|
|
|
|
|
|
|
||||||||||
Corporate securities
|
$
|
12,419.3
|
|
|
$
|
1,670.7
|
|
|
$
|
(14.6
|
)
|
|
$
|
14,075.4
|
|
|
$
|
—
|
|
United States Treasury securities and obligations of United States government corporations and agencies
|
146.4
|
|
|
31.5
|
|
|
(.2
|
)
|
|
177.7
|
|
|
—
|
|
|||||
States and political subdivisions
|
1,819.9
|
|
|
234.8
|
|
|
(.4
|
)
|
|
2,054.3
|
|
|
—
|
|
|||||
Debt securities issued by foreign governments
|
79.5
|
|
|
3.8
|
|
|
(.2
|
)
|
|
83.1
|
|
|
—
|
|
|||||
Asset-backed securities
|
1,730.7
|
|
|
39.7
|
|
|
(3.2
|
)
|
|
1,767.2
|
|
|
—
|
|
|||||
Collateralized debt obligations
|
257.1
|
|
|
2.3
|
|
|
—
|
|
|
259.4
|
|
|
—
|
|
|||||
Commercial mortgage-backed securities
|
1,304.1
|
|
|
33.2
|
|
|
(9.1
|
)
|
|
1,328.2
|
|
|
—
|
|
|||||
Mortgage pass-through securities
|
1.8
|
|
|
.2
|
|
|
—
|
|
|
2.0
|
|
|
—
|
|
|||||
Collateralized mortgage obligations
|
293.9
|
|
|
16.4
|
|
|
(.2
|
)
|
|
310.1
|
|
|
(.2
|
)
|
|||||
Total investment grade fixed maturities, available for sale
|
18,052.7
|
|
|
2,032.6
|
|
|
(27.9
|
)
|
|
20,057.4
|
|
|
(.2
|
)
|
|||||
Below-investment grade:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Corporate securities
|
867.0
|
|
|
28.4
|
|
|
(12.4
|
)
|
|
883.0
|
|
|
—
|
|
|||||
States and political subdivisions
|
2.0
|
|
|
—
|
|
|
—
|
|
|
2.0
|
|
|
—
|
|
|||||
Asset-backed securities
|
1,355.2
|
|
|
132.9
|
|
|
(.9
|
)
|
|
1,487.2
|
|
|
—
|
|
|||||
Commercial mortgage-backed securities
|
49.9
|
|
|
.6
|
|
|
(1.2
|
)
|
|
49.3
|
|
|
—
|
|
|||||
Collateralized mortgage obligations
|
375.3
|
|
|
56.8
|
|
|
(.1
|
)
|
|
432.0
|
|
|
(.8
|
)
|
|||||
Total below-investment grade fixed maturities, available for sale
|
2,649.4
|
|
|
218.7
|
|
|
(14.6
|
)
|
|
2,853.5
|
|
|
(.8
|
)
|
|||||
Total fixed maturities, available for sale
|
$
|
20,702.1
|
|
|
$
|
2,251.3
|
|
|
$
|
(42.5
|
)
|
|
$
|
22,910.9
|
|
|
$
|
(1.0
|
)
|
Equity securities
|
$
|
420.0
|
|
|
$
|
23.6
|
|
|
$
|
(3.0
|
)
|
|
$
|
440.6
|
|
|
|
|
2018
|
|
2017
|
||||
Net unrealized appreciation on fixed maturity securities, available for sale, on which an other-than-temporary impairment loss has been recognized
|
$
|
1.2
|
|
|
$
|
2.6
|
|
Net unrealized gains on all other investments
|
271.3
|
|
|
2,227.3
|
|
||
Adjustment to present value of future profits (a)
|
(4.5
|
)
|
|
(94.0
|
)
|
||
Adjustment to deferred acquisition costs
|
(38.3
|
)
|
|
(292.6
|
)
|
||
Adjustment to insurance liabilities
|
(2.5
|
)
|
|
(295.8
|
)
|
||
Deferred income tax liabilities
|
(49.5
|
)
|
|
(335.4
|
)
|
||
Accumulated other comprehensive income
|
$
|
177.7
|
|
|
$
|
1,212.1
|
|
(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 our Predecessor emerged from bankruptcy.
|
|
Amortized
cost
|
|
Estimated
fair
value
|
||||
|
(Dollars in millions)
|
||||||
Due in one year or less
|
$
|
405.6
|
|
|
$
|
409.8
|
|
Due after one year through five years
|
1,346.8
|
|
|
1,377.1
|
|
||
Due after five years through ten years
|
1,648.2
|
|
|
1,625.7
|
|
||
Due after ten years
|
9,706.9
|
|
|
9,892.5
|
|
||
Subtotal
|
13,107.5
|
|
|
13,305.1
|
|
||
Structured securities
|
5,000.3
|
|
|
5,142.6
|
|
||
Total fixed maturities, available for sale
|
$
|
18,107.8
|
|
|
$
|
18,447.7
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
General account assets:
|
|
|
|
|
|
||||||
Fixed maturities
|
$
|
1,100.3
|
|
|
$
|
1,133.8
|
|
|
$
|
1,081.4
|
|
Equity securities
|
22.8
|
|
|
22.5
|
|
|
19.4
|
|
|||
Mortgage loans
|
82.0
|
|
|
91.5
|
|
|
91.0
|
|
|||
Policy loans
|
8.0
|
|
|
7.7
|
|
|
7.3
|
|
|||
Other invested assets
|
79.2
|
|
|
47.2
|
|
|
26.4
|
|
|||
Cash and cash equivalents
|
10.9
|
|
|
5.9
|
|
|
2.0
|
|
|||
Policyholder and other special-purpose portfolios:
|
|
|
|
|
|
||||||
Trading securities (a)
|
8.5
|
|
|
12.8
|
|
|
12.2
|
|
|||
Options related to fixed index products:
|
|
|
|
|
|
||||||
Option income (loss)
|
122.3
|
|
|
110.3
|
|
|
(40.1
|
)
|
|||
Change in value of options
|
(165.3
|
)
|
|
52.2
|
|
|
69.3
|
|
|||
Other special-purpose portfolios
|
61.0
|
|
|
90.6
|
|
|
79.7
|
|
|||
Gross investment income
|
1,329.7
|
|
|
1,574.5
|
|
|
1,348.6
|
|
|||
Less investment expenses
|
23.5
|
|
|
23.2
|
|
|
23.4
|
|
|||
Net investment income
|
$
|
1,306.2
|
|
|
$
|
1,551.3
|
|
|
$
|
1,325.2
|
|
(a)
|
Changes in the estimated fair value for trading securities still held as of the end of the respective years and included in net investment income were
nil
,
$3.8 million
and
$(.2) million
for the years ended
December 31, 2018
,
2017
and
2016
, respectively.
|
|
2018
|
|
2017
|
|
2016
|
||||||
Fixed maturity securities, available for sale:
|
|
|
|
|
|
||||||
Gross realized gains on sale
|
$
|
65.7
|
|
|
$
|
68.0
|
|
|
$
|
137.7
|
|
Gross realized losses on sale
|
(65.8
|
)
|
|
(24.2
|
)
|
|
(95.2
|
)
|
|||
Impairments:
|
|
|
|
|
|
||||||
Total other-than-temporary impairment losses
|
(.5
|
)
|
|
(12.5
|
)
|
|
(15.2
|
)
|
|||
Other-than-temporary impairment losses recognized in accumulated other comprehensive income
|
—
|
|
|
(.9
|
)
|
|
3.6
|
|
|||
Net impairment losses recognized
|
(.5
|
)
|
|
(13.4
|
)
|
|
(11.6
|
)
|
|||
Net realized investment gains (losses) from fixed maturities
|
(.6
|
)
|
|
30.4
|
|
|
30.9
|
|
|||
Equity securities, including change in fair value (a)
|
(38.2
|
)
|
|
11.6
|
|
|
20.9
|
|
|||
Mortgage loans
|
(1.3
|
)
|
|
1.1
|
|
|
—
|
|
|||
Impairments of other investments
|
(2.1
|
)
|
|
(9.4
|
)
|
|
(20.7
|
)
|
|||
Loss on dissolution of variable interest entities
|
—
|
|
|
(4.3
|
)
|
|
(7.3
|
)
|
|||
Other (a) (b)
|
30.9
|
|
|
20.9
|
|
|
(15.5
|
)
|
|||
Net realized investment gains (losses) before net realized gains on the transfer of assets related to reinsurance transaction
|
(11.3
|
)
|
|
50.3
|
|
|
8.3
|
|
|||
Net realized gains on the transfer of assets related to reinsurance transaction
|
363.4
|
|
|
—
|
|
|
—
|
|
|||
Net realized investment gains (losses)
|
$
|
352.1
|
|
|
$
|
50.3
|
|
|
$
|
8.3
|
|
(a)
|
Changes in the estimated fair value of trading securities that we have elected the fair value option and equity securities (and are still held as of the end of the respective years) were
$(31.9) million
,
$12.8 million
and
$(.5) million
for the years ended
December 31, 2018
,
2017
and
2016
, respectively.
|
(b)
|
In April 2016, the Company announced that it had invested in a non-controlling minority interest in Tennenbaum Capital Partners, LLC ("TCP"), a Los Angeles-based investment management firm. In August 2018, Blackrock, Inc. announced the completion of its acquisition of TCP. The sale of our interest in TCP resulted in a significant portion of the net realized gains in 2018.
|
|
|
|
At date of sale
|
||||||
|
Number
of issuers |
|
Amortized cost
|
|
Fair value
|
||||
Less than 6 months prior to sale
|
5
|
|
$
|
56.3
|
|
|
$
|
44.0
|
|
Greater than 12 months prior to sale
|
1
|
|
.1
|
|
|
—
|
|
||
|
6
|
|
$
|
56.4
|
|
|
$
|
44.0
|
|
|
Year ended
|
||||||||||
|
December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Credit losses on fixed maturity securities, available for sale, beginning of period
|
$
|
(2.8
|
)
|
|
$
|
(5.5
|
)
|
|
$
|
(2.6
|
)
|
Add: credit losses on other-than-temporary impairments not previously recognized
|
—
|
|
|
—
|
|
|
(3.0
|
)
|
|||
Less: credit losses on securities sold
|
2.6
|
|
|
4.7
|
|
|
.1
|
|
|||
Less: credit losses on securities impaired due to intent to sell (a)
|
—
|
|
|
—
|
|
|
—
|
|
|||
Add: credit losses on previously impaired securities
|
—
|
|
|
(2.0
|
)
|
|
—
|
|
|||
Less: increases in cash flows expected on previously impaired securities
|
—
|
|
|
—
|
|
|
—
|
|
|||
Credit losses on fixed maturity securities, available for sale, end of period
|
$
|
(.2
|
)
|
|
$
|
(2.8
|
)
|
|
$
|
(5.5
|
)
|
(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.
|
|
Amortized
cost
|
|
Estimated
fair
value
|
||||
|
(Dollars in millions)
|
||||||
Due in one year or less
|
$
|
61.3
|
|
|
$
|
61.0
|
|
Due after one year through five years
|
285.4
|
|
|
278.9
|
|
||
Due after five years through ten years
|
1,081.1
|
|
|
1,028.8
|
|
||
Due after ten years
|
4,633.4
|
|
|
4,317.8
|
|
||
Subtotal
|
6,061.2
|
|
|
5,686.5
|
|
||
Structured securities
|
2,137.8
|
|
|
2,089.2
|
|
||
Total
|
$
|
8,199.0
|
|
|
$
|
7,775.7
|
|
|
Number
of issuers |
|
Cost
basis |
|
Unrealized
loss |
|
Estimated
fair value |
||||||
Less than 6 months
|
4
|
|
$
|
18.4
|
|
|
$
|
(4.5
|
)
|
|
$
|
13.9
|
|
Greater than or equal to 6 months and less than 12 months
|
2
|
|
12.1
|
|
|
(4.6
|
)
|
|
7.5
|
|
|||
|
|
|
$
|
30.5
|
|
|
$
|
(9.1
|
)
|
|
$
|
21.4
|
|
|
|
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
|
|
$
|
2.0
|
|
|
$
|
—
|
|
|
$
|
19.2
|
|
|
$
|
(.2
|
)
|
|
$
|
21.2
|
|
|
$
|
(.2
|
)
|
States and political subdivisions
|
|
91.3
|
|
|
(1.3
|
)
|
|
33.3
|
|
|
(1.3
|
)
|
|
124.6
|
|
|
(2.6
|
)
|
||||||
Debt securities issued by foreign governments
|
|
16.8
|
|
|
(.7
|
)
|
|
15.1
|
|
|
(1.0
|
)
|
|
31.9
|
|
|
(1.7
|
)
|
||||||
Corporate securities
|
|
4,702.9
|
|
|
(280.9
|
)
|
|
805.9
|
|
|
(89.3
|
)
|
|
5,508.8
|
|
|
(370.2
|
)
|
||||||
Asset-backed securities
|
|
572.4
|
|
|
(3.7
|
)
|
|
238.0
|
|
|
(4.0
|
)
|
|
810.4
|
|
|
(7.7
|
)
|
||||||
Collateralized debt obligations
|
|
318.9
|
|
|
(15.2
|
)
|
|
—
|
|
|
—
|
|
|
318.9
|
|
|
(15.2
|
)
|
||||||
Commercial mortgage-backed securities
|
|
560.3
|
|
|
(6.2
|
)
|
|
281.1
|
|
|
(15.4
|
)
|
|
841.4
|
|
|
(21.6
|
)
|
||||||
Collateralized mortgage obligations
|
|
46.1
|
|
|
(.6
|
)
|
|
72.4
|
|
|
(3.5
|
)
|
|
118.5
|
|
|
(4.1
|
)
|
||||||
Total fixed maturities, available for sale
|
|
$
|
6,310.7
|
|
|
$
|
(308.6
|
)
|
|
$
|
1,465.0
|
|
|
$
|
(114.7
|
)
|
|
$
|
7,775.7
|
|
|
$
|
(423.3
|
)
|
|
|
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
|
|
$
|
28.2
|
|
|
$
|
(.2
|
)
|
|
$
|
.7
|
|
|
$
|
—
|
|
|
$
|
28.9
|
|
|
$
|
(.2
|
)
|
States and political subdivisions
|
|
18.3
|
|
|
(.1
|
)
|
|
14.9
|
|
|
(.3
|
)
|
|
33.2
|
|
|
(.4
|
)
|
||||||
Debt securities issued by foreign governments
|
|
7.7
|
|
|
(.1
|
)
|
|
5.4
|
|
|
(.1
|
)
|
|
13.1
|
|
|
(.2
|
)
|
||||||
Corporate securities
|
|
470.5
|
|
|
(6.8
|
)
|
|
359.7
|
|
|
(20.2
|
)
|
|
830.2
|
|
|
(27.0
|
)
|
||||||
Asset-backed securities
|
|
601.4
|
|
|
(2.0
|
)
|
|
122.2
|
|
|
(2.1
|
)
|
|
723.6
|
|
|
(4.1
|
)
|
||||||
Collateralized debt obligations
|
|
3.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3.0
|
|
|
—
|
|
||||||
Commercial mortgage-backed securities
|
|
276.8
|
|
|
(1.7
|
)
|
|
218.2
|
|
|
(8.6
|
)
|
|
495.0
|
|
|
(10.3
|
)
|
||||||
Collateralized mortgage obligations
|
|
20.5
|
|
|
(.2
|
)
|
|
11.5
|
|
|
(.1
|
)
|
|
32.0
|
|
|
(.3
|
)
|
||||||
Total fixed maturities, available for sale
|
|
$
|
1,426.4
|
|
|
$
|
(11.1
|
)
|
|
$
|
732.6
|
|
|
$
|
(31.4
|
)
|
|
$
|
2,159.0
|
|
|
$
|
(42.5
|
)
|
Equity securities
|
|
$
|
58.7
|
|
|
$
|
(1.7
|
)
|
|
$
|
21.2
|
|
|
$
|
(1.3
|
)
|
|
$
|
79.9
|
|
|
$
|
(3.0
|
)
|
|
Par
value
|
|
Amortized
cost
|
|
Estimated
fair value
|
||||||
Below 4 percent
|
$
|
1,826.2
|
|
|
$
|
1,688.5
|
|
|
$
|
1,731.4
|
|
4 percent – 5 percent
|
1,868.9
|
|
|
1,764.6
|
|
|
1,812.5
|
|
|||
5 percent – 6 percent
|
1,160.0
|
|
|
1,080.4
|
|
|
1,121.0
|
|
|||
6 percent – 7 percent
|
178.5
|
|
|
167.1
|
|
|
173.8
|
|
|||
7 percent – 8 percent
|
69.9
|
|
|
70.5
|
|
|
74.2
|
|
|||
8 percent and above
|
229.1
|
|
|
229.2
|
|
|
229.7
|
|
|||
Total structured securities
|
$
|
5,332.6
|
|
|
$
|
5,000.3
|
|
|
$
|
5,142.6
|
|
|
|
|
Estimated fair value
|
|||||||
Type
|
Amortized
cost
|
|
Amount
|
|
Percent
of fixed
maturities
|
|||||
Pass-throughs, sequential and equivalent securities
|
$
|
514.3
|
|
|
$
|
546.3
|
|
|
3.0
|
%
|
Planned amortization classes, target amortization classes and accretion-directed bonds
|
64.4
|
|
|
72.0
|
|
|
.4
|
|
||
Commercial mortgage-backed securities
|
1,522.9
|
|
|
1,518.0
|
|
|
8.2
|
|
||
Asset-backed securities
|
2,552.1
|
|
|
2,674.8
|
|
|
14.5
|
|
||
Collateralized debt obligations
|
338.0
|
|
|
322.8
|
|
|
1.8
|
|
||
Other
|
8.6
|
|
|
8.7
|
|
|
—
|
|
||
Total structured securities
|
$
|
5,000.3
|
|
|
$
|
5,142.6
|
|
|
27.9
|
%
|
|
|
|
Estimated fair
value
|
||||||||
Loan-to-value ratio (a)
|
Carrying value
|
|
Mortgage loans
|
|
Collateral
|
||||||
Less than 60%
|
$
|
918.2
|
|
|
$
|
936.9
|
|
|
$
|
2,425.1
|
|
60% to 70%
|
315.2
|
|
|
318.2
|
|
|
496.7
|
|
|||
Greater than 70% to 80%
|
173.2
|
|
|
176.1
|
|
|
236.3
|
|
|||
Greater than 80% to 90%
|
13.7
|
|
|
13.1
|
|
|
16.5
|
|
|||
Greater than 90%
|
32.2
|
|
|
31.1
|
|
|
34.5
|
|
|||
Total
|
$
|
1,452.5
|
|
|
$
|
1,475.4
|
|
|
$
|
3,209.1
|
|
(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.
|
•
|
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 cash equivalents 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 credit rating, maturity, corporate credit spreads, reported trades and other inputs that are observable or derived from observable information in the marketplace or are supported by transactions executed in the marketplace. Financial assets in this category primarily include: certain publicly registered 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 investments; most short-term investments; and non-exchange-traded derivatives such as call options. 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.
|
•
|
Investments held by VIEs
|
•
|
Other invested assets - derivatives
|
|
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
|
$
|
—
|
|
|
$
|
11,044.4
|
|
|
$
|
158.6
|
|
|
$
|
11,203.0
|
|
United States Treasury securities and obligations of United States government corporations and agencies
|
—
|
|
|
174.8
|
|
|
—
|
|
|
174.8
|
|
||||
States and political subdivisions
|
—
|
|
|
1,867.8
|
|
|
—
|
|
|
1,867.8
|
|
||||
Debt securities issued by foreign governments
|
—
|
|
|
58.5
|
|
|
1.0
|
|
|
59.5
|
|
||||
Asset-backed securities
|
—
|
|
|
2,662.8
|
|
|
12.0
|
|
|
2,674.8
|
|
||||
Collateralized debt obligations
|
—
|
|
|
322.8
|
|
|
—
|
|
|
322.8
|
|
||||
Commercial mortgage-backed securities
|
—
|
|
|
1,518.0
|
|
|
—
|
|
|
1,518.0
|
|
||||
Mortgage pass-through securities
|
—
|
|
|
1.6
|
|
|
—
|
|
|
1.6
|
|
||||
Collateralized mortgage obligations
|
—
|
|
|
625.4
|
|
|
—
|
|
|
625.4
|
|
||||
Total fixed maturities, available for sale
|
—
|
|
|
18,276.1
|
|
|
171.6
|
|
|
18,447.7
|
|
||||
Equity securities - corporate securities
|
181.1
|
|
|
100.4
|
|
|
9.5
|
|
|
291.0
|
|
||||
Trading securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Asset-backed securities
|
—
|
|
|
86.5
|
|
|
—
|
|
|
86.5
|
|
||||
Commercial mortgage-backed securities
|
—
|
|
|
93.6
|
|
|
—
|
|
|
93.6
|
|
||||
Collateralized mortgage obligations
|
—
|
|
|
53.0
|
|
|
—
|
|
|
53.0
|
|
||||
Total trading securities
|
—
|
|
|
233.1
|
|
|
—
|
|
|
233.1
|
|
||||
Investments held by variable interest entities - corporate securities
|
—
|
|
|
1,468.4
|
|
|
—
|
|
|
1,468.4
|
|
||||
Other invested assets - derivatives
|
—
|
|
|
26.6
|
|
|
—
|
|
|
26.6
|
|
||||
Assets held in separate accounts
|
—
|
|
|
4.4
|
|
|
—
|
|
|
4.4
|
|
||||
Total assets carried at fair value by category
|
$
|
181.1
|
|
|
$
|
20,109.0
|
|
|
$
|
181.1
|
|
|
$
|
20,471.2
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Future policy benefits - embedded derivatives associated with fixed index annuity products
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,289.0
|
|
|
$
|
1,289.0
|
|
|
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
|
$
|
—
|
|
|
$
|
14,728.0
|
|
|
$
|
230.4
|
|
|
$
|
14,958.4
|
|
United States Treasury securities and obligations of United States government corporations and agencies
|
—
|
|
|
177.7
|
|
|
—
|
|
|
177.7
|
|
||||
States and political subdivisions
|
—
|
|
|
2,056.3
|
|
|
—
|
|
|
2,056.3
|
|
||||
Debt securities issued by foreign governments
|
—
|
|
|
79.2
|
|
|
3.9
|
|
|
83.1
|
|
||||
Asset-backed securities
|
—
|
|
|
3,230.2
|
|
|
24.2
|
|
|
3,254.4
|
|
||||
Collateralized debt obligations
|
—
|
|
|
259.4
|
|
|
—
|
|
|
259.4
|
|
||||
Commercial mortgage-backed securities
|
—
|
|
|
1,377.5
|
|
|
—
|
|
|
1,377.5
|
|
||||
Mortgage pass-through securities
|
—
|
|
|
2.0
|
|
|
—
|
|
|
2.0
|
|
||||
Collateralized mortgage obligations
|
—
|
|
|
742.1
|
|
|
—
|
|
|
742.1
|
|
||||
Total fixed maturities, available for sale
|
—
|
|
|
22,652.4
|
|
|
258.5
|
|
|
22,910.9
|
|
||||
Equity securities - corporate securities
|
287.8
|
|
|
131.6
|
|
|
21.2
|
|
|
440.6
|
|
||||
Trading securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate securities
|
—
|
|
|
21.6
|
|
|
—
|
|
|
21.6
|
|
||||
United States Treasury securities and obligations of United States government corporations and agencies
|
—
|
|
|
.5
|
|
|
—
|
|
|
.5
|
|
||||
Asset-backed securities
|
—
|
|
|
95.8
|
|
|
—
|
|
|
95.8
|
|
||||
Collateralized debt obligations
|
—
|
|
|
2.7
|
|
|
—
|
|
|
2.7
|
|
||||
Commercial mortgage-backed securities
|
—
|
|
|
92.5
|
|
|
—
|
|
|
92.5
|
|
||||
Collateralized mortgage obligations
|
—
|
|
|
68.7
|
|
|
—
|
|
|
68.7
|
|
||||
Equity securities
|
2.8
|
|
|
—
|
|
|
—
|
|
|
2.8
|
|
||||
Total trading securities
|
2.8
|
|
|
281.8
|
|
|
—
|
|
|
284.6
|
|
||||
Investments held by variable interest entities - corporate securities
|
—
|
|
|
1,522.0
|
|
|
4.9
|
|
|
1,526.9
|
|
||||
Other invested assets - derivatives
|
—
|
|
|
170.2
|
|
|
—
|
|
|
170.2
|
|
||||
Assets held in separate accounts
|
—
|
|
|
5.0
|
|
|
—
|
|
|
5.0
|
|
||||
Total assets carried at fair value by category
|
$
|
290.6
|
|
|
$
|
24,763.0
|
|
|
$
|
284.6
|
|
|
$
|
25,338.2
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Future policy benefits - embedded derivatives associated with fixed index annuity products
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,334.8
|
|
|
$
|
1,334.8
|
|
|
December 31, 2018
|
||||||||||||||||||
|
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
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,624.5
|
|
|
$
|
1,624.5
|
|
|
$
|
1,602.1
|
|
Policy loans
|
—
|
|
|
—
|
|
|
119.7
|
|
|
119.7
|
|
|
119.7
|
|
|||||
Other invested assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Company-owned life insurance
|
—
|
|
|
171.7
|
|
|
—
|
|
|
171.7
|
|
|
171.7
|
|
|||||
Cash and cash equivalents:
|
|
|
|
|
|
|
|
|
|
||||||||||
Unrestricted
|
594.2
|
|
|
—
|
|
|
—
|
|
|
594.2
|
|
|
594.2
|
|
|||||
Held by variable interest entities
|
62.4
|
|
|
—
|
|
|
—
|
|
|
62.4
|
|
|
62.4
|
|
|||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Policyholder account balances
|
—
|
|
|
—
|
|
|
11,594.1
|
|
|
11,594.1
|
|
|
11,594.1
|
|
|||||
Investment borrowings
|
—
|
|
|
1,645.9
|
|
|
—
|
|
|
1,645.9
|
|
|
1,645.8
|
|
|||||
Borrowings related to variable interest entities
|
—
|
|
|
1,399.8
|
|
|
—
|
|
|
1,399.8
|
|
|
1,417.2
|
|
|||||
Notes payable – direct corporate obligations
|
—
|
|
|
896.3
|
|
|
—
|
|
|
896.3
|
|
|
916.8
|
|
|
December 31, 2017
|
||||||||||||||||||
|
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
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,677.3
|
|
|
$
|
1,677.3
|
|
|
$
|
1,650.6
|
|
Policy loans
|
—
|
|
|
—
|
|
|
116.0
|
|
|
116.0
|
|
|
116.0
|
|
|||||
Other invested assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Company-owned life insurance
|
—
|
|
|
182.3
|
|
|
—
|
|
|
182.3
|
|
|
182.3
|
|
|||||
Cash and cash equivalents:
|
|
|
|
|
|
|
|
|
|
||||||||||
Unrestricted
|
578.4
|
|
|
—
|
|
|
—
|
|
|
578.4
|
|
|
578.4
|
|
|||||
Held by variable interest entities
|
178.9
|
|
|
—
|
|
|
—
|
|
|
178.9
|
|
|
178.9
|
|
|||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Policyholder account balances
|
—
|
|
|
—
|
|
|
11,220.7
|
|
|
11,220.7
|
|
|
11,220.7
|
|
|||||
Investment borrowings
|
—
|
|
|
1,648.8
|
|
|
—
|
|
|
1,648.8
|
|
|
1,646.7
|
|
|||||
Borrowings related to variable interest entities
|
—
|
|
|
1,432.9
|
|
|
—
|
|
|
1,432.9
|
|
|
1,410.7
|
|
|||||
Notes payable – direct corporate obligations
|
—
|
|
|
962.3
|
|
|
—
|
|
|
962.3
|
|
|
914.6
|
|
|
|
December 31, 2018
|
|
|
||||||||||||||||||||||||||||
|
|
Beginning balance as of December 31, 2017
|
|
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 (a)
|
|
Transfers out of Level 3 (a)
|
|
Ending balance as of December 31, 2018
|
|
Amount of total gains (losses) for the year ended December 31, 2018 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
|
|
$
|
230.4
|
|
|
$
|
(24.6
|
)
|
|
$
|
.2
|
|
|
$
|
(5.3
|
)
|
|
$
|
12.7
|
|
|
$
|
(54.8
|
)
|
|
$
|
158.6
|
|
|
$
|
(.5
|
)
|
Debt securities issued by foreign governments
|
|
3.9
|
|
|
(2.9
|
)
|
|
(.1
|
)
|
|
.1
|
|
|
—
|
|
|
—
|
|
|
1.0
|
|
|
—
|
|
||||||||
Asset-backed securities
|
|
24.2
|
|
|
(11.5
|
)
|
|
—
|
|
|
(.7
|
)
|
|
—
|
|
|
—
|
|
|
12.0
|
|
|
—
|
|
||||||||
Total fixed maturities, available for sale
|
|
258.5
|
|
|
(39.0
|
)
|
|
.1
|
|
|
(5.9
|
)
|
|
12.7
|
|
|
(54.8
|
)
|
|
171.6
|
|
|
(.5
|
)
|
||||||||
Equity securities - corporate securities
|
|
21.2
|
|
|
(10.9
|
)
|
|
(.8
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9.5
|
|
|
—
|
|
||||||||
Investments held by variable interest entities - corporate securities
|
|
4.9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4.9
|
)
|
|
—
|
|
|
—
|
|
||||||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Future policy benefits - embedded derivatives associated with fixed index annuity products
|
|
(1,334.8
|
)
|
|
(62.0
|
)
|
|
107.8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,289.0
|
)
|
|
107.8
|
|
(a)
|
Transfers into Level 3 are the result of unobservable inputs utilized within valuation methodologies for assets that were previously valued using observable inputs. Transfers out of Level 3 are due to the use of observable inputs in valuation methodologies as well as the utilization of pricing service information for certain assets that the Company is able to validate.
|
(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 year ended
December 31, 2018
(dollars in millions):
|
|
Purchases
|
|
Sales
|
|
Issuances
|
|
Settlements
|
|
Purchases, sales, issuances and settlements, net
|
||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Fixed maturities, available for sale:
|
|
|
|
|
|
|
|
|
|
||||||||||
Corporate securities
|
$
|
32.4
|
|
|
$
|
(57.0
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(24.6
|
)
|
Debt securities issued by foreign governments
|
3.0
|
|
|
(5.9
|
)
|
|
—
|
|
|
—
|
|
|
(2.9
|
)
|
|||||
Asset-backed securities
|
—
|
|
|
(11.5
|
)
|
|
—
|
|
|
—
|
|
|
(11.5
|
)
|
|||||
Total fixed maturities, available for sale
|
35.4
|
|
|
(74.4
|
)
|
|
—
|
|
|
—
|
|
|
(39.0
|
)
|
|||||
Equity securities - corporate securities
|
—
|
|
|
(10.9
|
)
|
|
—
|
|
|
—
|
|
|
(10.9
|
)
|
|||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Future policy benefits - embedded derivatives associated with fixed index annuity products
|
(177.6
|
)
|
|
16.5
|
|
|
16.7
|
|
|
82.4
|
|
|
(62.0
|
)
|
|
December 31, 2017
|
|
|
||||||||||||||||||||||||||||
|
Beginning balance as of December 31, 2016
|
|
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 (a)
|
|
Transfers out of Level 3 (a)
|
|
Ending balance as of December 31, 2017
|
|
Amount of total gains (losses) for the year ended December 31, 2017 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
|
$
|
258.5
|
|
|
$
|
(70.4
|
)
|
|
$
|
5.8
|
|
|
$
|
5.3
|
|
|
$
|
31.2
|
|
|
$
|
—
|
|
|
$
|
230.4
|
|
|
$
|
(8.0
|
)
|
Debt securities issued by foreign governments
|
3.9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3.9
|
|
|
—
|
|
||||||||
Asset-backed securities
|
60.4
|
|
|
(4.3
|
)
|
|
—
|
|
|
.7
|
|
|
—
|
|
|
(32.6
|
)
|
|
24.2
|
|
|
—
|
|
||||||||
Collateralized debt obligations
|
5.4
|
|
|
(2.5
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2.9
|
)
|
|
—
|
|
|
—
|
|
||||||||
Commercial mortgage-backed securities
|
32.0
|
|
|
(1.2
|
)
|
|
.1
|
|
|
(.1
|
)
|
|
—
|
|
|
(30.8
|
)
|
|
—
|
|
|
—
|
|
||||||||
Total fixed maturities, available for sale
|
360.2
|
|
|
(78.4
|
)
|
|
5.9
|
|
|
5.9
|
|
|
31.2
|
|
|
(66.3
|
)
|
|
258.5
|
|
|
(8.0
|
)
|
||||||||
Equity securities - corporate securities
|
25.2
|
|
|
(8.5
|
)
|
|
6.3
|
|
|
(1.8
|
)
|
|
—
|
|
|
—
|
|
|
21.2
|
|
|
—
|
|
||||||||
Investments held by variable interest entities - corporate securities
|
—
|
|
|
4.9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4.9
|
|
|
—
|
|
||||||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Future policy benefits - embedded derivatives associated with fixed index annuity products
|
(1,092.3
|
)
|
|
(267.5
|
)
|
|
25.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,334.8
|
)
|
|
25.0
|
|
(a)
|
Transfers into Level 3 are the result of unobservable inputs utilized within valuation methodologies for assets that were previously valued using observable inputs. Transfers out of Level 3 are due to the use of observable inputs in valuation methodologies as well as the utilization of pricing service information for certain assets that the Company is able to validate.
|
(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 year ended
December 31, 2017
(dollars in millions):
|
|
Purchases
|
|
Sales
|
|
Issuances
|
|
Settlements
|
|
Purchases, sales, issuances and settlements, net
|
||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Fixed maturities, available for sale:
|
|
|
|
|
|
|
|
|
|
||||||||||
Corporate securities
|
$
|
76.6
|
|
|
$
|
(147.0
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(70.4
|
)
|
Asset-backed securities
|
—
|
|
|
(4.3
|
)
|
|
—
|
|
|
—
|
|
|
(4.3
|
)
|
|||||
Collateralized debt obligations
|
—
|
|
|
(2.5
|
)
|
|
—
|
|
|
—
|
|
|
(2.5
|
)
|
|||||
Commercial mortgage-backed securities
|
—
|
|
|
(1.2
|
)
|
|
—
|
|
|
—
|
|
|
(1.2
|
)
|
|||||
Total fixed maturities, available for sale
|
76.6
|
|
|
(155.0
|
)
|
|
—
|
|
|
—
|
|
|
(78.4
|
)
|
|||||
Equity securities - corporate securities
|
—
|
|
|
(8.5
|
)
|
|
—
|
|
|
—
|
|
|
(8.5
|
)
|
|||||
Investments held by variable interest entities - corporate securities
|
8.9
|
|
|
(4.0
|
)
|
|
—
|
|
|
—
|
|
|
4.9
|
|
|||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Future policy benefits - embedded derivatives associated with fixed index annuity products
|
(178.9
|
)
|
|
5.4
|
|
|
(159.3
|
)
|
|
65.3
|
|
|
(267.5
|
)
|
|
Fair value at December 31, 2018
|
|
Valuation techniques
|
|
Unobservable inputs
|
|
Range (weighted average)
|
||
Assets:
|
|
|
|
|
|
|
|
||
Corporate securities (a)
|
$
|
91.1
|
|
|
Discounted cash flow analysis
|
|
Discount margins
|
|
1.55% - 9.52% (4.47%)
|
Corporate securities (b)
|
4.8
|
|
|
Recovery method
|
|
Percent of recovery expected
|
|
61.03%
|
|
Asset-backed securities (c)
|
11.9
|
|
|
Discounted cash flow analysis
|
|
Discount margins
|
|
2.30%
|
|
Equity securities (d)
|
1.2
|
|
|
Market comparables
|
|
EBITDA multiples
|
|
1.1X
|
|
Equity securities (e)
|
8.3
|
|
|
Recovery method
|
|
Percent of recovery expected
|
|
59.27% - 100.00% (59.52%)
|
|
Other assets categorized as Level 3 (f)
|
63.8
|
|
|
Unadjusted third-party price source
|
|
Not applicable
|
|
Not applicable
|
|
Total
|
181.1
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
||
Future policy benefits (g)
|
1,289.0
|
|
|
Discounted projected embedded derivatives
|
|
Projected portfolio yields
|
|
5.11% - 5.15% (5.11%)
|
|
|
|
|
|
|
Discount rates
|
|
2.20% - 4.02% (2.75%)
|
||
|
|
|
|
|
Surrender rates
|
|
1.30% - 37.30% (12.40%)
|
(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)
|
Corporate securities - The significant unobservable input used in the fair value measurement of these corporate securities is percentage of recovery expected. Significant increases (decreases) in percentage of recovery expected in isolation would result in a significantly higher (lower) fair value measurement.
|
(c)
|
Asset-backed securities - The significant unobservable input used in the fair value measurement of these 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.
|
(d)
|
Equity securities - The significant unobservable input used in the fair value measurement of these equity securities is multiples of earnings before interest, taxes, depreciation and amortization ("EBITDA"). Generally, increases (decreases) in the EBITDA multiples would result in higher (lower) fair value measurements.
|
(e)
|
Equity securities - The significant unobservable input used in the fair value measurement of these equity securities is percentage of recovery expected. Significant increases (decreases) in percentage of recovery expected in isolation would result in a significantly higher (lower) fair value measurement.
|
(f)
|
Other assets categorized as Level 3 - For these assets, there were no adjustments to quoted market prices obtained from third-party pricing sources.
|
(g)
|
Future policy benefits - The significant unobservable inputs used in the fair value measurement of our embedded derivatives associated with fixed index annuity 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 risk free rates (U.S. Treasury rates for similar durations) adjusted for our non-performance risk and risk margins for non-capital market inputs. 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, 2017
|
|
Valuation techniques
|
|
Unobservable inputs
|
|
Range (weighted average)
|
||
Assets:
|
|
|
|
|
|
|
|
||
Corporate securities (a)
|
$
|
149.2
|
|
|
Discounted cash flow analysis
|
|
Discount margins
|
|
1.45% - 71.29% (6.96%)
|
Corporate securities (b)
|
2.8
|
|
|
Recovery method
|
|
Percent of recovery expected
|
|
0% - 21.73% (18.42%)
|
|
Asset-backed securities (c)
|
24.2
|
|
|
Discounted cash flow analysis
|
|
Discount margins
|
|
1.80% - 3.71% (2.67%)
|
|
Equity securities (d)
|
1.1
|
|
|
Market comparables
|
|
EBITDA multiples
|
|
1.1X
|
|
Equity securities (e)
|
20.1
|
|
|
Recovery method
|
|
Percent of recovery expected
|
|
59.1%
|
|
Other assets categorized as Level 3 (f)
|
87.2
|
|
|
Unadjusted third-party price source
|
|
Not applicable
|
|
Not applicable
|
|
Total
|
284.6
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
||
Future policy benefits (g)
|
1,334.8
|
|
|
Discounted projected embedded derivatives
|
|
Projected portfolio yields
|
|
5.15% - 5.61% (5.60%)
|
|
|
|
|
|
|
Discount rates
|
|
0.92% - 2.51% (2.00%)
|
||
|
|
|
|
|
Surrender rates
|
|
1.20% - 46.40% (12.30%)
|
(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)
|
Corporate securities - The significant unobservable input used in the fair value measurement of these corporate securities is percentage of recovery expected. Significant increases (decreases) in percentage of recovery expected in isolation would result in a significantly higher (lower) fair value measurement.
|
(c)
|
Asset-backed securities - The significant unobservable input used in the fair value measurement of these 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.
|
(d)
|
Equity securities - The significant unobservable input used in the fair value measurement of these equity securities is EBITDA multiples. Generally, increases (decreases) in EBITDA multiples would result in higher (lower) fair value measurements.
|
(e)
|
Equity securities - The significant unobservable input used in the fair value measurement of these equity securities is percentage of recovery expected. Significant increases (decreases) in percentage of recovery expected in isolation would result in a significantly higher (lower) fair value measurement.
|
(f)
|
Other assets categorized as Level 3 - For these assets, there were no adjustments to quoted market prices obtained from third-party pricing sources.
|
(g)
|
Future policy benefits - The significant unobservable inputs used in the fair value measurement of our embedded derivatives associated with fixed index annuity 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 risk free rates (U.S. Treasury rates for similar durations) adjusted for our non-performance risk and risk margins for non-capital market inputs. 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.
|
|
Withdrawal assumption
|
|
Morbidity assumption
|
|
Mortality assumption
|
|
Interest rate assumption
|
|
2018
|
|
2017
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
Long-term care
|
Company experience
|
|
Company experience
|
|
Company experience
|
|
6%
|
|
$
|
5,277.9
|
|
|
$
|
5,669.0
|
|
Traditional life insurance contracts
|
Company experience
|
|
Company experience
|
|
(a)
|
|
5%
|
|
2,461.6
|
|
|
2,401.2
|
|
||
Accident and health contracts
|
Company experience
|
|
Company experience
|
|
Company experience
|
|
5%
|
|
2,944.5
|
|
|
2,812.0
|
|
||
Interest-sensitive life insurance contracts
|
Company experience
|
|
Company experience
|
|
Company experience
|
|
5%
|
|
30.3
|
|
|
44.9
|
|
||
Annuities and supplemental contracts with life contingencies
|
Company experience
|
|
Company experience
|
|
(b)
|
|
4%
|
|
368.1
|
|
|
594.2
|
|
||
Total
|
|
|
|
|
|
|
|
|
$
|
11,082.4
|
|
|
$
|
11,521.3
|
|
(a)
|
Principally, modifications of: (i) the 1965 ‑ 70 and 1975 - 80 Basic Tables; and (ii) the 1941, 1958 and 1980 Commissioners' Standard Ordinary Tables; as well as Company experience.
|
(b)
|
Principally, modifications of: (i) the 1971 Individual Annuity Mortality Table; (ii) the 1983 Table "A"; and (iii) the Annuity 2000 Mortality Table; as well as Company experience.
|
|
|
2018
|
|
2017
|
||||
Fixed index annuities
|
|
$
|
6,657.8
|
|
|
$
|
5,942.2
|
|
Other annuities
|
|
3,793.8
|
|
|
4,183.8
|
|
||
Interest-sensitive life insurance contracts
|
|
1,142.5
|
|
|
1,094.7
|
|
||
Total
|
|
$
|
11,594.1
|
|
|
$
|
11,220.7
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Balance, beginning of year
|
$
|
1,828.2
|
|
|
$
|
1,777.6
|
|
|
$
|
1,731.8
|
|
Less reinsurance (receivables) payables
|
15.1
|
|
|
14.0
|
|
|
(130.0
|
)
|
|||
Net balance, beginning of year
|
1,843.3
|
|
|
1,791.6
|
|
|
1,601.8
|
|
|||
Incurred claims related to:
|
|
|
|
|
|
||||||
Current year
|
1,480.0
|
|
|
1,548.1
|
|
|
1,526.4
|
|
|||
Prior years (a)
|
(41.5
|
)
|
|
(26.7
|
)
|
|
96.6
|
|
|||
Total incurred
|
1,438.5
|
|
|
1,521.4
|
|
|
1,623.0
|
|
|||
Interest on claim reserves
|
71.8
|
|
|
78.4
|
|
|
75.3
|
|
|||
Paid claims related to:
|
|
|
|
|
|
||||||
Current year
|
(849.4
|
)
|
|
(845.5
|
)
|
|
(837.2
|
)
|
|||
Prior years
|
(630.6
|
)
|
|
(702.6
|
)
|
|
(671.3
|
)
|
|||
Total paid
|
(1,480.0
|
)
|
|
(1,548.1
|
)
|
|
(1,508.5
|
)
|
|||
Reserves ceded pursuant to reinsurance transaction
|
(956.7
|
)
|
|
—
|
|
|
—
|
|
|||
Net balance, end of year
|
916.9
|
|
|
1,843.3
|
|
|
1,791.6
|
|
|||
Add reinsurance receivables (payables)
|
951.1
|
|
|
(15.1
|
)
|
|
(14.0
|
)
|
|||
Balance, end of year
|
$
|
1,868.0
|
|
|
$
|
1,828.2
|
|
|
$
|
1,777.6
|
|
(a)
|
The reserves and liabilities we establish are necessarily based on estimates, assumptions and prior years' statistics. Such amounts will fluctuate based upon the estimation procedures used to determine the amount of unpaid losses. It is possible that actual claims will exceed our reserves and have a material adverse effect on our results of operations and financial condition.
|
|
2018
|
|
2017
|
|
2016
|
||||||
Current tax expense (benefit)
|
$
|
(2.8
|
)
|
|
$
|
90.8
|
|
|
$
|
(45.2
|
)
|
Deferred tax expense
|
93.1
|
|
|
72.0
|
|
|
173.0
|
|
|||
Valuation allowance applicable to current year income
|
8.9
|
|
|
(15.3
|
)
|
|
(14.0
|
)
|
|||
Income tax expense calculated based on annual effective tax rate
|
99.2
|
|
|
147.5
|
|
|
113.8
|
|
|||
Tax benefit on long-term care reinsurance transaction
|
(147.9
|
)
|
|
—
|
|
|
—
|
|
|||
Income tax expense on discrete items:
|
|
|
|
|
|
||||||
Change in valuation allowance
|
95.7
|
|
|
(13.4
|
)
|
|
40.7
|
|
|||
Impact of federal tax reform
|
—
|
|
|
310.6
|
|
|
—
|
|
|||
Change in valuation allowance related to federal tax reform
|
—
|
|
|
(138.1
|
)
|
|
—
|
|
|||
IRS settlement
|
—
|
|
|
—
|
|
|
(170.4
|
)
|
|||
Other items
|
3.2
|
|
|
(1.7
|
)
|
|
10.9
|
|
|||
Total income tax expense (benefit)
|
$
|
50.2
|
|
|
$
|
304.9
|
|
|
$
|
(5.0
|
)
|
|
2018
|
|
2017
|
||||
Deferred tax assets:
|
|
|
|
||||
Net federal operating loss carryforwards
|
$
|
685.1
|
|
|
$
|
489.6
|
|
Net state operating loss carryforwards
|
14.5
|
|
|
9.3
|
|
||
Investments
|
—
|
|
|
4.3
|
|
||
Insurance liabilities
|
283.9
|
|
|
415.8
|
|
||
Other
|
46.3
|
|
|
48.9
|
|
||
Gross deferred tax assets
|
1,029.8
|
|
|
967.9
|
|
||
Deferred tax liabilities:
|
|
|
|
|
|
||
Investments
|
(10.1
|
)
|
|
—
|
|
||
Present value of future profits and deferred acquisition costs
|
(171.1
|
)
|
|
(165.4
|
)
|
||
Accumulated other comprehensive income
|
(50.2
|
)
|
|
(337.2
|
)
|
||
Gross deferred tax liabilities
|
(231.4
|
)
|
|
(502.6
|
)
|
||
Net deferred tax assets before valuation allowance
|
798.4
|
|
|
465.3
|
|
||
Valuation allowance
|
(193.7
|
)
|
|
(89.1
|
)
|
||
Net deferred tax assets
|
604.7
|
|
|
376.2
|
|
||
Current income taxes prepaid (accrued)
|
25.3
|
|
|
(9.3
|
)
|
||
Income tax assets, net
|
$
|
630.0
|
|
|
$
|
366.9
|
|
Balance, December 31, 2015
|
$
|
213.5
|
|
|
Increase in 2016
|
26.7
|
|
(a)
|
|
Balance, December 31, 2016
|
240.2
|
|
|
|
Decrease in 2017
|
(166.8
|
)
|
(b)
|
|
Cumulative effect of accounting change
|
15.7
|
|
(c)
|
|
Balance, December 31, 2017
|
89.1
|
|
|
|
Increase in 2018
|
104.6
|
|
(d)
|
|
Balance, December 31, 2018
|
$
|
193.7
|
|
|
(a)
|
The
2016
increase to the deferred tax valuation allowance primarily resulted from additional non-life NOLs due to the settlement with the Internal Revenue Service (the "IRS").
|
(b)
|
The
2017
decrease to the deferred tax valuation allowance includes: (i)
$138.1 million
related to a reduction in the federal corporate income tax rate and other changes from the Tax Reform Act; (ii)
$13.4 million
of reductions to the deferred tax valuation allowance primarily related to the recognition of capital gains; and (iii)
$15.3 million
of reductions in the deferred tax valuation allowance reflecting higher current year taxable income than previously reflected in our deferred tax valuation model.
|
(c)
|
Effective January 1, 2017, the Company adopted new authoritative guidance related to several aspects of the accounting for share-based payment transactions, including the income tax consequences. Under the new guidance, any excess tax benefits are recognized as an income tax benefit in the income statement. The new guidance is applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings for all tax benefits that were not previously recognized because the related tax deduction had not reduced taxes payable. The Company had NOL carryforwards of
$15.7 million
related to deductions for stock options and restricted stock on the date of adoption. However, a corresponding valuation allowance of
$15.7 million
was recognized as a result of adopting this guidance. Therefore, there was no impact to our consolidated financial statements related to the initial adoption of this provision of the new guidance.
|
(d)
|
The
2018
increase to the deferred tax valuation allowance includes: (i) an increase of
$104.8 million
due to the life NOLs generated by the tax loss on the long-term care reinsurance transaction; and (ii) other changes netting to
$(.2) million
.
|
|
|
Net operating loss
|
||
Year of expiration
|
|
carryforwards
|
||
2023
|
|
$
|
1,751.9
|
|
2025
|
|
85.2
|
|
|
2026
|
|
149.9
|
|
|
2027
|
|
10.8
|
|
|
2028
|
|
80.3
|
|
|
2029
|
|
213.2
|
|
|
2030
|
|
.3
|
|
|
2031
|
|
.2
|
|
|
2032
|
|
44.4
|
|
|
2033
|
|
.6
|
|
|
2034
|
|
.9
|
|
|
2035
|
|
.8
|
|
|
Total federal non-life NOLs
|
|
2,338.5
|
|
|
Post 2017 life NOLs with no expiration
|
|
923.9
|
|
|
Total federal NOLs
|
|
$
|
3,262.4
|
|
|
2018
|
|
2017
|
||||
4.500% Senior Notes due May 2020
|
$
|
325.0
|
|
|
$
|
325.0
|
|
5.250% Senior Notes due May 2025
|
500.0
|
|
|
500.0
|
|
||
Revolving Credit Agreement (as defined below)
|
100.0
|
|
|
100.0
|
|
||
Unamortized debt issuance costs
|
(8.2
|
)
|
|
(10.4
|
)
|
||
Direct corporate obligations
|
$
|
916.8
|
|
|
$
|
914.6
|
|
•
|
incur certain subsidiary indebtedness without also guaranteeing the Notes;
|
•
|
create liens;
|
•
|
enter into sale and leaseback transactions;
|
•
|
issue, sell, transfer or otherwise dispose of any shares of capital stock of any Insurance Subsidiary (as defined in the Indenture); and
|
•
|
consolidate or merge with or into other companies or transfer all or substantially all of the Company’s assets.
|
•
|
subsidiary debt;
|
•
|
liens;
|
•
|
restrictive agreements;
|
•
|
restricted payments during the continuance of an event of default;
|
•
|
disposition of assets and sale and leaseback transactions;
|
•
|
transactions with affiliates;
|
•
|
change in business;
|
•
|
fundamental changes;
|
•
|
modification of certain agreements; and
|
•
|
changes to fiscal year.
|
•
|
non-payment;
|
•
|
breach of representations, warranties or covenants;
|
•
|
cross-default and cross-acceleration;
|
•
|
bankruptcy and insolvency events;
|
•
|
judgment defaults;
|
•
|
actual or asserted invalidity of documentation with respect to the Revolving Credit Agreement;
|
•
|
change of control; and
|
•
|
customary ERISA defaults.
|
Year ending December 31,
|
|
|
||
2019
|
$
|
100.0
|
|
(a)
|
2020
|
325.0
|
|
|
|
2021
|
—
|
|
|
|
2022
|
—
|
|
|
|
2023
|
—
|
|
|
|
Thereafter
|
500.0
|
|
|
|
|
$
|
925.0
|
|
|
(a)
|
The maturity date of the Revolving Credit Agreement is the earlier of October 13, 2022 and the date that is six months prior to the maturity date of the Company’s
4.50%
senior notes due 2020, which is November 30, 2019.
|
2019
|
$
|
22.2
|
|
2020
|
18.7
|
|
|
2021
|
14.3
|
|
|
2022
|
11.0
|
|
|
2023
|
8.7
|
|
|
Thereafter
|
1.4
|
|
|
Total
|
$
|
76.3
|
|
|
2018
|
|
2017
|
||
Benefit obligations:
|
|
|
|
||
Discount rate
|
4.25
|
%
|
|
3.75
|
%
|
Net periodic cost:
|
|
|
|
||
Discount rate
|
3.75
|
%
|
|
4.25
|
%
|
2019
|
$
|
7.5
|
|
2020
|
7.8
|
|
|
2021
|
8.0
|
|
|
2022
|
8.3
|
|
|
2023
|
8.6
|
|
|
2024 - 2028
|
45.7
|
|
|
|
Fair value
|
||||||
|
|
2018
|
|
2017
|
||||
Assets:
|
|
|
|
|
||||
Other invested assets:
|
|
|
|
|
||||
Fixed index call options
|
|
$
|
26.6
|
|
|
$
|
170.2
|
|
Reinsurance receivables
|
|
(6.5
|
)
|
|
(1.4
|
)
|
||
Total assets
|
|
$
|
20.1
|
|
|
$
|
168.8
|
|
Liabilities:
|
|
|
|
|
||||
Future policy benefits:
|
|
|
|
|
||||
Fixed index products
|
|
$
|
1,289.0
|
|
|
$
|
1,334.8
|
|
Total liabilities
|
|
$
|
1,289.0
|
|
|
$
|
1,334.8
|
|
|
|
Measurement
|
|
December 31, 2017
|
|
Additions
|
|
Maturities/terminations
|
|
December 31, 2018
|
||||||||
Fixed index annuities - embedded derivative
|
|
Policies
|
|
104,689
|
|
|
12,189
|
|
|
(8,048
|
)
|
|
108,830
|
|
||||
Fixed index call options
|
|
Notional (a)
|
|
$
|
3,005.8
|
|
|
$
|
3,043.2
|
|
|
$
|
(3,028.5
|
)
|
|
$
|
3,020.5
|
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Net investment income from policyholder and other special-purpose portfolios:
|
|
|
|
|
|
|
||||||
Fixed index call options
|
|
$
|
(43.0
|
)
|
|
$
|
162.5
|
|
|
$
|
29.2
|
|
Net realized gains (losses):
|
|
|
|
|
|
|
||||||
Interest rate futures
|
|
—
|
|
|
—
|
|
|
(1.1
|
)
|
|||
Embedded derivative related to modified coinsurance agreement
|
|
(5.1
|
)
|
|
2.8
|
|
|
.8
|
|
|||
Total
|
|
(5.1
|
)
|
|
2.8
|
|
|
(.3
|
)
|
|||
Insurance policy benefits:
|
|
|
|
|
|
|
||||||
Embedded derivative related to fixed index annuities
|
|
107.8
|
|
|
25.0
|
|
|
60.8
|
|
|||
Total
|
|
$
|
59.7
|
|
|
$
|
190.3
|
|
|
$
|
89.7
|
|
|
|
|
|
|
|
|
|
|
Gross amounts not offset in the balance sheet
|
|
|
||||||||||||||
|
|
|
Gross amounts recognized
|
|
Gross amounts offset in the balance sheet
|
|
Net amounts of assets presented in the balance sheet
|
|
Financial instruments
|
|
Cash collateral received
|
|
Net amount
|
||||||||||||
December 31, 2018:
|
|
|
|||||||||||||||||||||||
|
Fixed index call options
|
|
$
|
26.6
|
|
|
$
|
—
|
|
|
$
|
26.6
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
26.6
|
|
December 31, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Fixed index call options
|
|
170.2
|
|
|
—
|
|
|
170.2
|
|
|
—
|
|
|
—
|
|
|
170.2
|
|
|
2018
|
|
2017
|
|
2016
|
|||
Balance, beginning of year
|
166,858
|
|
|
173,754
|
|
|
184,029
|
|
Treasury stock purchased and retired
|
(5,486
|
)
|
|
(7,808
|
)
|
|
(11,688
|
)
|
Stock options exercised (a)
|
378
|
|
|
725
|
|
|
978
|
|
Restricted and performance stock vested (b)
|
452
|
|
|
187
|
|
|
435
|
|
Balance, end of year
|
162,202
|
|
|
166,858
|
|
|
173,754
|
|
(a)
|
In
2018
, such amount was reduced by
69 thousand
shares which were tendered to the Company for the payment of the exercise price and required federal and state tax withholdings.
|
(b)
|
In
2018
,
2017
and
2016
, such amount was reduced by
242 thousand
,
103 thousand
and
191 thousand
shares, respectively, 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.
|
|
Shares
|
|
Weighted average exercise price
|
|
Weighted average remaining life (in years)
|
|
Aggregate intrinsic value
|
|||||
Outstanding at the beginning of the year
|
5,121
|
|
|
$
|
15.95
|
|
|
|
|
|
||
Options granted
|
2,112
|
|
|
21.03
|
|
|
|
|
|
|||
Exercised
|
(447
|
)
|
|
(10.94
|
)
|
|
|
|
$
|
3.1
|
|
|
Forfeited or terminated
|
(247
|
)
|
|
(20.29
|
)
|
|
|
|
|
|||
Outstanding at the end of the year
|
6,539
|
|
|
17.77
|
|
|
5.8
|
|
$
|
44.4
|
|
|
Options exercisable at the end of the year
|
3,247
|
|
|
|
|
3.5
|
|
$
|
26.7
|
|
||
Available for future grant
|
5,296
|
|
|
|
|
|
|
|
|
Shares
|
|
Weighted average exercise price
|
|
Weighted average remaining life (in years)
|
|
Aggregate intrinsic value
|
|||||
Outstanding at the beginning of the year
|
5,354
|
|
|
$
|
14.73
|
|
|
|
|
|
||
Options granted
|
729
|
|
|
21.06
|
|
|
|
|
|
|||
Exercised
|
(237
|
)
|
|
(17.81
|
)
|
|
|
|
$
|
5.2
|
|
|
Forfeited or terminated
|
(725
|
)
|
|
(11.43
|
)
|
|
|
|
|
|||
Outstanding at the end of the year
|
5,121
|
|
|
15.95
|
|
|
5.4
|
|
$
|
37.2
|
|
|
Options exercisable at the end of the year
|
2,440
|
|
|
|
|
3.0
|
|
$
|
19.2
|
|
||
Available for future grant
|
7,488
|
|
|
|
|
|
|
|
|
Shares
|
|
Weighted average exercise price
|
|
Weighted average remaining life (in years)
|
|
Aggregate intrinsic value
|
|||||
Outstanding at the beginning of the year
|
5,199
|
|
|
$
|
13.32
|
|
|
|
|
|
||
Options granted
|
1,706
|
|
|
17.45
|
|
|
|
|
|
|||
Exercised
|
(978
|
)
|
|
(8.70
|
)
|
|
|
|
$
|
6.1
|
|
|
Forfeited or terminated
|
(573
|
)
|
|
(20.41
|
)
|
|
|
|
|
|||
Outstanding at the end of the year
|
5,354
|
|
|
14.73
|
|
|
5.9
|
|
$
|
37.1
|
|
|
Options exercisable at the end of the year
|
2,187
|
|
|
|
|
2.7
|
|
$
|
15.1
|
|
||
Available for future grant
|
4,620
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
|
Grants
|
|
Grants
|
|
Grants
|
||||||
Weighted average risk-free interest rates
|
2.9
|
%
|
|
2.2
|
%
|
|
1.4
|
%
|
|||
Weighted average dividend yields
|
1.9
|
%
|
|
1.5
|
%
|
|
1.6
|
%
|
|||
Volatility factors
|
27
|
%
|
|
32
|
%
|
|
36
|
%
|
|||
Weighted average expected life (in years)
|
6.4
|
|
|
6.3
|
|
|
6.3
|
|
|||
Weighted average fair value per share
|
$
|
5.49
|
|
|
$
|
6.20
|
|
|
$
|
5.48
|
|
|
|
|
|
Options outstanding
|
|
Options exercisable
|
||||||||||
Range of exercise prices
|
|
Number outstanding
|
|
Remaining life (in years)
|
|
Average exercise price
|
|
Number exercisable
|
|
Average exercise price
|
||||||
$6.77 - $7.51
|
|
339
|
|
|
0.2
|
|
$
|
7.50
|
|
|
339
|
|
|
$
|
7.50
|
|
$10.88 - $16.22
|
|
635
|
|
|
1.2
|
|
10.99
|
|
|
634
|
|
|
10.98
|
|
||
$16.42 - $21.57
|
|
5,565
|
|
|
6.7
|
|
19.17
|
|
|
2,274
|
|
|
17.54
|
|
||
|
|
6,539
|
|
|
|
|
|
|
3,247
|
|
|
|
|
Shares
|
|
Weighted average grant date fair value
|
|||
Non-vested shares, beginning of year
|
535
|
|
|
$
|
19.65
|
|
Granted
|
434
|
|
|
22.36
|
|
|
Vested
|
(216
|
)
|
|
(19.28
|
)
|
|
Forfeited
|
(18
|
)
|
|
(21.56
|
)
|
|
Non-vested shares, end of year
|
735
|
|
|
21.31
|
|
|
Total shareholder return awards
|
|
Operating return on equity awards
|
||
Awards outstanding at December 31, 2015
|
549
|
|
|
549
|
|
Granted in 2016
|
254
|
|
|
254
|
|
Additional shares issued pursuant to achieving certain performance criteria (a)
|
87
|
|
|
65
|
|
Shares vested in 2016
|
(261
|
)
|
|
(239
|
)
|
Forfeited
|
(59
|
)
|
|
(59
|
)
|
Awards outstanding at December 31, 2016
|
570
|
|
|
570
|
|
Granted in 2017
|
226
|
|
|
226
|
|
Additional shares issued pursuant to achieving certain performance criteria (a)
|
—
|
|
|
30
|
|
Shares vested in 2017
|
—
|
|
|
(144
|
)
|
Forfeited
|
(167
|
)
|
|
(53
|
)
|
Awards outstanding at December 31, 2017
|
629
|
|
|
629
|
|
Granted in 2018
|
160
|
|
|
160
|
|
Additional shares issued pursuant to achieving certain performance criteria (a)
|
—
|
|
|
123
|
|
Shares vested in 2018
|
(160
|
)
|
|
(318
|
)
|
Forfeited
|
(61
|
)
|
|
(26
|
)
|
Awards outstanding at December 31, 2018
|
568
|
|
|
568
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Net income (loss) for diluted earnings per share
|
$
|
(315.0
|
)
|
|
$
|
175.6
|
|
|
$
|
358.2
|
|
Shares:
|
|
|
|
|
|
|
|
||||
Weighted average shares outstanding for basic earnings per share
|
165,457
|
|
|
170,025
|
|
|
176,638
|
|
|||
Effect of dilutive securities on weighted average shares:
|
|
|
|
|
|
|
|||||
Stock options, restricted stock and performance units
|
—
|
|
|
2,119
|
|
|
1,685
|
|
|||
Weighted average shares outstanding for diluted earnings per share
|
165,457
|
|
|
172,144
|
|
|
178,323
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Direct premiums collected
|
$
|
4,150.3
|
|
|
$
|
4,013.4
|
|
|
$
|
3,942.7
|
|
Reinsurance assumed
|
27.8
|
|
|
30.2
|
|
|
33.8
|
|
|||
Reinsurance ceded
|
(156.2
|
)
|
|
(114.4
|
)
|
|
(132.9
|
)
|
|||
Premiums collected, net of reinsurance
|
4,021.9
|
|
|
3,929.2
|
|
|
3,843.6
|
|
|||
Change in unearned premiums
|
6.5
|
|
|
19.0
|
|
|
6.2
|
|
|||
Less premiums on interest-sensitive life and products without mortality and morbidity risk which are recorded as additions to insurance liabilities
|
(1,588.5
|
)
|
|
(1,445.9
|
)
|
|
(1,386.7
|
)
|
|||
Premiums on traditional products with mortality or morbidity risk
|
2,439.9
|
|
|
2,502.3
|
|
|
2,463.1
|
|
|||
Fees and surrender charges on interest-sensitive products
|
153.2
|
|
|
145.0
|
|
|
138.0
|
|
|||
Insurance policy income
|
$
|
2,593.1
|
|
|
$
|
2,647.3
|
|
|
$
|
2,601.1
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Commission expense
|
$
|
122.8
|
|
|
$
|
115.6
|
|
|
$
|
110.5
|
|
Salaries and wages
|
233.2
|
|
|
237.3
|
|
|
231.0
|
|
|||
Other
|
458.2
|
|
|
488.6
|
|
|
454.8
|
|
|||
Total other operating costs and expenses
|
$
|
814.2
|
|
|
$
|
841.5
|
|
|
$
|
796.3
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Balance, beginning of year
|
$
|
359.6
|
|
|
$
|
401.8
|
|
|
$
|
449.0
|
|
Amortization
|
(45.1
|
)
|
|
(54.4
|
)
|
|
(62.2
|
)
|
|||
Effect of reinsurance transaction
|
(60.4
|
)
|
|
—
|
|
|
—
|
|
|||
Amounts related to changes in unrealized investment gains (losses) on fixed maturities, available for sale
|
89.5
|
|
|
12.2
|
|
|
15.0
|
|
|||
Balance, end of year
|
$
|
343.6
|
|
|
$
|
359.6
|
|
|
$
|
401.8
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Balance, beginning of year
|
$
|
1,026.8
|
|
|
$
|
1,044.7
|
|
|
$
|
1,083.3
|
|
Additions
|
261.8
|
|
|
236.1
|
|
|
242.7
|
|
|||
Amortization
|
(219.2
|
)
|
|
(184.9
|
)
|
|
(191.1
|
)
|
|||
Effect of reinsurance transaction
|
(1.2
|
)
|
|
—
|
|
|
—
|
|
|||
Amounts related to changes in unrealized investment gains (losses) on fixed maturities, available for sale
|
254.3
|
|
|
(69.1
|
)
|
|
(90.2
|
)
|
|||
Balance, end of year
|
$
|
1,322.5
|
|
|
$
|
1,026.8
|
|
|
$
|
1,044.7
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Cash flows from operating activities:
|
|
|
|
|
|
||||||
Net income (loss)
|
$
|
(315.0
|
)
|
|
$
|
175.6
|
|
|
$
|
358.2
|
|
Adjustments to reconcile net income to net cash from operating activities:
|
|
|
|
|
|
|
|||||
Amortization and depreciation
|
292.2
|
|
|
265.4
|
|
|
275.0
|
|
|||
Income taxes
|
18.4
|
|
|
227.5
|
|
|
(11.7
|
)
|
|||
Insurance liabilities
|
207.8
|
|
|
464.7
|
|
|
332.8
|
|
|||
Accrual and amortization of investment income
|
14.9
|
|
|
(294.9
|
)
|
|
(111.3
|
)
|
|||
Deferral of policy acquisition costs
|
(261.7
|
)
|
|
(236.1
|
)
|
|
(242.7
|
)
|
|||
Net realized investment (gains) losses
|
11.3
|
|
|
(50.3
|
)
|
|
(8.3
|
)
|
|||
Net realized gains on the transfer of assets related to reinsurance transaction
|
(363.4
|
)
|
|
—
|
|
|
—
|
|
|||
Loss related to reinsurance transactions
|
1,067.6
|
|
|
—
|
|
|
75.4
|
|
|||
Payment to reinsurer pursuant to long-term care business reinsured
|
(365.0
|
)
|
|
—
|
|
|
—
|
|
|||
Cash and cash equivalents received upon recapture of reinsurance
|
—
|
|
|
—
|
|
|
73.6
|
|
|||
Loss on extinguishment of borrowings related to variable interest entities
|
3.8
|
|
|
9.5
|
|
|
—
|
|
|||
Other
|
6.9
|
|
|
71.9
|
|
|
34.7
|
|
|||
Net cash from operating activities
|
$
|
317.8
|
|
|
$
|
633.3
|
|
|
$
|
775.7
|
|
Investments transferred
|
$
|
(3,582.1
|
)
|
(a)
|
Cash paid to reinsurer
|
(365.0
|
)
|
|
|
Accrued interest on investments transferred
|
(51.6
|
)
|
|
|
Present value of future profits and deferred acquisition costs written-off
|
(61.6
|
)
|
|
|
Reinsurance receivables
|
2,818.0
|
|
|
|
Transaction expenses and other
|
(14.6
|
)
|
|
|
Release of future loss reserve
|
189.3
|
|
|
|
Subtotal
|
(1,067.6
|
)
|
|
|
Realized gains on investments transferred
|
363.4
|
|
|
|
Pre-tax loss related to reinsurance transaction
|
$
|
(704.2
|
)
|
|
(a)
|
Such non-cash amounts are not included in the consolidated statement of cash flows.
|
|
2018
|
|
2017
|
|
2016
|
||||||
Stock options, restricted stock and performance units
|
$
|
24.7
|
|
|
$
|
21.4
|
|
|
$
|
23.0
|
|
Market value of investments recaptured in connection with the termination of reinsurance agreements with BRe
|
—
|
|
|
—
|
|
|
431.1
|
|
|
2018
|
|
2017
|
||||
Statutory capital and surplus
|
$
|
1,652.8
|
|
|
$
|
1,904.4
|
|
Asset valuation reserve
|
233.3
|
|
|
246.8
|
|
||
Interest maintenance reserve
|
425.0
|
|
|
487.0
|
|
||
Total
|
$
|
2,311.1
|
|
|
$
|
2,638.2
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Revenues:
|
|
|
|
|
|
||||||
Bankers Life:
|
|
|
|
|
|
||||||
Insurance policy income:
|
|
|
|
|
|
||||||
Annuities
|
$
|
18.5
|
|
|
$
|
20.3
|
|
|
$
|
22.0
|
|
Health
|
1,023.3
|
|
|
1,038.2
|
|
|
1,035.2
|
|
|||
Life
|
416.7
|
|
|
415.2
|
|
|
393.0
|
|
|||
Net investment income (a)
|
762.9
|
|
|
918.2
|
|
|
751.5
|
|
|||
Fee revenue and other income (a)
|
51.9
|
|
|
44.1
|
|
|
34.4
|
|
|||
Total Bankers Life revenues
|
2,273.3
|
|
|
2,436.0
|
|
|
2,236.1
|
|
|||
Washington National:
|
|
|
|
|
|
|
|
||||
Insurance policy income:
|
|
|
|
|
|
|
|
||||
Annuities
|
1.4
|
|
|
2.1
|
|
|
2.9
|
|
|||
Health
|
658.9
|
|
|
642.9
|
|
|
627.9
|
|
|||
Life
|
27.3
|
|
|
26.4
|
|
|
25.0
|
|
|||
Net investment income (a)
|
259.8
|
|
|
270.2
|
|
|
259.3
|
|
|||
Fee revenue and other income (a)
|
.9
|
|
|
1.0
|
|
|
1.3
|
|
|||
Total Washington National revenues
|
948.3
|
|
|
942.6
|
|
|
916.4
|
|
|||
Colonial Penn:
|
|
|
|
|
|
|
|
||||
Insurance policy income:
|
|
|
|
|
|
|
|
||||
Health
|
1.7
|
|
|
2.1
|
|
|
2.6
|
|
|||
Life
|
296.9
|
|
|
289.7
|
|
|
278.8
|
|
|||
Net investment income (a)
|
44.6
|
|
|
44.4
|
|
|
44.2
|
|
|||
Fee revenue and other income (a)
|
1.8
|
|
|
1.3
|
|
|
1.1
|
|
|||
Total Colonial Penn revenues
|
345.0
|
|
|
337.5
|
|
|
326.7
|
|
|||
Long-term care in run-off:
|
|
|
|
|
|
|
|
||||
Insurance policy income - health
|
148.4
|
|
|
210.4
|
|
|
213.7
|
|
|||
Net investment income (a)
|
172.7
|
|
|
223.7
|
|
|
194.7
|
|
|||
Total Long-term care in run-off revenues
|
321.1
|
|
|
434.1
|
|
|
408.4
|
|
|||
Corporate operations:
|
|
|
|
|
|
|
|
||||
Net investment income
|
(5.6
|
)
|
|
35.5
|
|
|
16.6
|
|
|||
Fee revenue and other income
|
6.7
|
|
|
8.5
|
|
|
10.0
|
|
|||
Total corporate revenues
|
1.1
|
|
|
44.0
|
|
|
26.6
|
|
|||
Total revenues
|
$
|
3,888.8
|
|
|
$
|
4,194.2
|
|
|
$
|
3,914.2
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Expenses:
|
|
|
|
|
|
||||||
Bankers Life:
|
|
|
|
|
|
||||||
Insurance policy benefits
|
$
|
1,311.9
|
|
|
$
|
1,474.9
|
|
|
$
|
1,283.2
|
|
Amortization
|
171.3
|
|
|
153.3
|
|
|
163.9
|
|
|||
Interest expense on investment borrowings
|
29.7
|
|
|
19.8
|
|
|
13.2
|
|
|||
Other operating costs and expenses
|
419.8
|
|
|
420.5
|
|
|
400.2
|
|
|||
Total Bankers Life expenses
|
1,932.7
|
|
|
2,068.5
|
|
|
1,860.5
|
|
|||
Washington National:
|
|
|
|
|
|
|
|
||||
Insurance policy benefits
|
556.5
|
|
|
581.1
|
|
|
561.7
|
|
|||
Amortization
|
55.8
|
|
|
58.8
|
|
|
59.1
|
|
|||
Interest expense on investment borrowings
|
10.8
|
|
|
6.3
|
|
|
3.7
|
|
|||
Other operating costs and expenses
|
203.3
|
|
|
198.1
|
|
|
189.0
|
|
|||
Total Washington National expenses
|
826.4
|
|
|
844.3
|
|
|
813.5
|
|
|||
Colonial Penn:
|
|
|
|
|
|
|
|
||||
Insurance policy benefits
|
207.2
|
|
|
199.6
|
|
|
201.9
|
|
|||
Amortization
|
17.8
|
|
|
16.3
|
|
|
15.3
|
|
|||
Interest expense on investment borrowings
|
1.4
|
|
|
.9
|
|
|
.6
|
|
|||
Other operating costs and expenses
|
103.8
|
|
|
98.1
|
|
|
107.2
|
|
|||
Total Colonial Penn expenses
|
330.2
|
|
|
314.9
|
|
|
325.0
|
|
|||
Long-term care in run-off:
|
|
|
|
|
|
|
|
||||
Insurance policy benefits
|
271.3
|
|
|
344.2
|
|
|
355.0
|
|
|||
Amortization
|
7.0
|
|
|
10.3
|
|
|
12.6
|
|
|||
Other operating costs and expenses
|
19.9
|
|
|
26.5
|
|
|
22.4
|
|
|||
Total Long-term care in run-off expenses
|
298.2
|
|
|
381.0
|
|
|
390.0
|
|
|||
Corporate operations:
|
|
|
|
|
|
|
|
||||
Interest expense on corporate debt
|
48.0
|
|
|
46.5
|
|
|
45.8
|
|
|||
Other operating costs and expenses
|
72.1
|
|
|
84.3
|
|
|
69.1
|
|
|||
Total corporate expenses
|
120.1
|
|
|
130.8
|
|
|
114.9
|
|
|||
Total expenses
|
3,507.6
|
|
|
3,739.5
|
|
|
3,503.9
|
|
|||
Pre-tax operating earnings by segment:
|
|
|
|
|
|
|
|
||||
Bankers Life
|
340.6
|
|
|
367.5
|
|
|
375.6
|
|
|||
Washington National
|
121.9
|
|
|
98.3
|
|
|
102.9
|
|
|||
Colonial Penn
|
14.8
|
|
|
22.6
|
|
|
1.7
|
|
|||
Long-term care in run-off
|
22.9
|
|
|
53.1
|
|
|
18.4
|
|
|||
Corporate operations
|
(119.0
|
)
|
|
(86.8
|
)
|
|
(88.3
|
)
|
|||
Pre-tax operating earnings
|
$
|
381.2
|
|
|
$
|
454.7
|
|
|
$
|
410.3
|
|
(a)
|
It is not practicable to provide additional components of revenue by product or services.
|
|
2018
|
|
2017
|
|
2016
|
||||||
Total segment revenues
|
$
|
3,888.8
|
|
|
$
|
4,194.2
|
|
|
$
|
3,914.2
|
|
Net realized investment gains (losses)
|
(11.3
|
)
|
|
50.3
|
|
|
8.3
|
|
|||
Net realized gains on the transfer of assets related to reinsurance transaction
|
363.4
|
|
|
—
|
|
|
—
|
|
|||
Revenues related to earnings attributable to VIEs
|
67.4
|
|
|
52.7
|
|
|
52.6
|
|
|||
Fee revenue related to transition and support services agreements
|
5.2
|
|
|
—
|
|
|
10.0
|
|
|||
Consolidated revenues
|
4,313.5
|
|
|
4,297.2
|
|
|
3,985.1
|
|
|||
|
|
|
|
|
|
||||||
Total segment expenses
|
3,507.6
|
|
|
3,739.5
|
|
|
3,503.9
|
|
|||
Insurance policy benefits - fair value changes in embedded derivative liabilities
|
(68.3
|
)
|
|
2.9
|
|
|
(11.3
|
)
|
|||
Amortization related to fair value changes in embedded derivative liabilities
|
12.8
|
|
|
(.4
|
)
|
|
1.7
|
|
|||
Amortization related to net realized investment gains (losses)
|
(.4
|
)
|
|
1.0
|
|
|
.7
|
|
|||
Expenses attributable to VIEs
|
65.8
|
|
|
61.5
|
|
|
54.6
|
|
|||
Fair value changes and amendment related to agent deferred compensation plan
|
(11.9
|
)
|
|
12.2
|
|
|
(3.1
|
)
|
|||
Loss related to reinsurance transactions
|
1,067.6
|
|
|
—
|
|
|
75.4
|
|
|||
Expenses related to transition and support services agreements
|
5.1
|
|
|
—
|
|
|
10.0
|
|
|||
Consolidated expenses
|
4,578.3
|
|
|
3,816.7
|
|
|
3,631.9
|
|
|||
Income (loss) before tax
|
(264.8
|
)
|
|
480.5
|
|
|
353.2
|
|
|||
Income tax expense (benefit):
|
|
|
|
|
|
||||||
Tax expense (benefit) on period income (loss)
|
(57.6
|
)
|
|
162.8
|
|
|
127.8
|
|
|||
Valuation allowance for deferred tax assets and other tax items
|
107.8
|
|
|
142.1
|
|
|
(132.8
|
)
|
|||
Net income (loss)
|
$
|
(315.0
|
)
|
|
$
|
175.6
|
|
|
$
|
358.2
|
|
|
2018
|
|
2017
|
||||
Assets:
|
|
|
|
||||
Bankers Life
|
$
|
17,457.0
|
|
|
$
|
17,474.5
|
|
Washington National
|
7,385.0
|
|
|
7,674.3
|
|
||
Colonial Penn
|
1,031.3
|
|
|
1,059.3
|
|
||
Long-term care in run-off
|
3,419.9
|
|
|
4,353.3
|
|
||
Corporate operations
|
2,146.6
|
|
|
2,548.9
|
|
||
Total assets
|
$
|
31,439.8
|
|
|
$
|
33,110.3
|
|
Liabilities:
|
|
|
|
||||
Bankers Life
|
$
|
15,262.0
|
|
|
$
|
14,747.6
|
|
Washington National
|
6,079.2
|
|
|
6,101.5
|
|
||
Colonial Penn
|
940.0
|
|
|
921.0
|
|
||
Long-term care in run-off
|
3,348.8
|
|
|
3,864.4
|
|
||
Corporate operations
|
2,438.9
|
|
|
2,628.3
|
|
||
Total liabilities
|
$
|
28,068.9
|
|
|
$
|
28,262.8
|
|
Segment
|
Present value of future profits
|
|
Deferred acquisition costs
|
|
Insurance liabilities
|
||||||
2018
|
|
|
|
|
|
||||||
Bankers Life
|
$
|
86.5
|
|
|
$
|
863.2
|
|
|
$
|
13,714.6
|
|
Washington National
|
226.9
|
|
|
342.7
|
|
|
5,556.1
|
|
|||
Colonial Penn
|
30.2
|
|
|
116.6
|
|
|
845.7
|
|
|||
Long-term care in run-off
|
—
|
|
|
—
|
|
|
3,340.3
|
|
|||
Total
|
$
|
343.6
|
|
|
$
|
1,322.5
|
|
|
$
|
23,456.7
|
|
2017
|
|
|
|
|
|
||||||
Bankers Life
|
$
|
81.1
|
|
|
$
|
606.5
|
|
|
$
|
13,257.2
|
|
Washington National
|
243.7
|
|
|
310.8
|
|
|
5,590.7
|
|
|||
Colonial Penn
|
34.8
|
|
|
109.5
|
|
|
834.4
|
|
|||
Long-term care in run-off
|
—
|
|
|
—
|
|
|
3,856.7
|
|
|||
Total
|
$
|
359.6
|
|
|
$
|
1,026.8
|
|
|
$
|
23,539.0
|
|
2018
|
1st Qtr.
|
|
2nd Qtr.
|
|
3rd Qtr.
|
|
4th Qtr.
|
||||||||
Revenues
|
$
|
1,007.8
|
|
|
$
|
1,046.3
|
|
|
$
|
1,481.2
|
|
|
$
|
778.2
|
|
Income (loss) before income taxes
|
$
|
108.1
|
|
|
$
|
129.8
|
|
|
$
|
(539.8
|
)
|
|
$
|
37.1
|
|
Income tax expense (benefit)
|
23.8
|
|
|
27.6
|
|
|
(10.0
|
)
|
|
8.8
|
|
||||
Net income (loss)
|
$
|
84.3
|
|
|
$
|
102.2
|
|
|
$
|
(529.8
|
)
|
|
$
|
28.3
|
|
Earnings per common share:
|
|
|
|
|
|
|
|
||||||||
Basic:
|
|
|
|
|
|
|
|
||||||||
Net income (loss)
|
$
|
.50
|
|
|
$
|
.62
|
|
|
$
|
(3.22
|
)
|
|
$
|
.17
|
|
Diluted:
|
|
|
|
|
|
|
|
||||||||
Net income (loss)
|
$
|
.50
|
|
|
$
|
.61
|
|
|
$
|
(3.22
|
)
|
|
$
|
.17
|
|
|
|
|
|
|
|
|
|
||||||||
2017
|
1st Qtr.
|
|
2nd Qtr.
|
|
3rd Qtr.
|
|
4th Qtr. (a)
|
||||||||
Revenues
|
$
|
1,070.7
|
|
|
$
|
1,057.1
|
|
|
$
|
1,079.3
|
|
|
$
|
1,090.1
|
|
Income before income taxes
|
$
|
96.7
|
|
|
$
|
128.5
|
|
|
$
|
129.9
|
|
|
$
|
125.4
|
|
Income tax expense
|
34.4
|
|
|
45.1
|
|
|
29.1
|
|
|
196.3
|
|
||||
Net income (loss)
|
$
|
62.3
|
|
|
$
|
83.4
|
|
|
$
|
100.8
|
|
|
$
|
(70.9
|
)
|
Earnings per common share:
|
|
|
|
|
|
|
|
||||||||
Basic:
|
|
|
|
|
|
|
|
||||||||
Net income (loss)
|
$
|
.36
|
|
|
$
|
.49
|
|
|
$
|
.60
|
|
|
$
|
(.42
|
)
|
Diluted:
|
|
|
|
|
|
|
|
||||||||
Net income (loss)
|
$
|
.36
|
|
|
$
|
.48
|
|
|
$
|
.59
|
|
|
$
|
(.42
|
)
|
(a)
|
In the fourth quarter of 2017, our net loss reflected the unfavorable impact of
$172.5 million
related to the Tax Reform Act which was enacted in December 2017.
|
|
December 31, 2018
|
||||||||||
|
VIEs
|
|
Eliminations
|
|
Net effect on
consolidated
balance sheet
|
||||||
Assets:
|
|
|
|
|
|
||||||
Investments held by variable interest entities
|
$
|
1,468.4
|
|
|
$
|
—
|
|
|
$
|
1,468.4
|
|
Notes receivable of VIEs held by subsidiaries
|
—
|
|
|
(142.8
|
)
|
|
(142.8
|
)
|
|||
Cash and cash equivalents held by variable interest entities
|
62.4
|
|
|
—
|
|
|
62.4
|
|
|||
Accrued investment income
|
2.3
|
|
|
—
|
|
|
2.3
|
|
|||
Income tax assets, net
|
15.3
|
|
|
—
|
|
|
15.3
|
|
|||
Other assets
|
5.3
|
|
|
(2.6
|
)
|
|
2.7
|
|
|||
Total assets
|
$
|
1,553.7
|
|
|
$
|
(145.4
|
)
|
|
$
|
1,408.3
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|||
Other liabilities
|
$
|
53.9
|
|
|
$
|
(5.3
|
)
|
|
$
|
48.6
|
|
Borrowings related to variable interest entities
|
1,417.2
|
|
|
—
|
|
|
1,417.2
|
|
|||
Notes payable of VIEs held by subsidiaries
|
155.2
|
|
|
(155.2
|
)
|
|
—
|
|
|||
Total liabilities
|
$
|
1,626.3
|
|
|
$
|
(160.5
|
)
|
|
$
|
1,465.8
|
|
|
December 31, 2017
|
||||||||||
|
VIEs
|
|
Eliminations
|
|
Net effect on
consolidated
balance sheet
|
||||||
Assets:
|
|
|
|
|
|
||||||
Investments held by variable interest entities
|
$
|
1,526.9
|
|
|
$
|
—
|
|
|
$
|
1,526.9
|
|
Notes receivable of VIEs held by insurance subsidiaries
|
—
|
|
|
(155.5
|
)
|
|
(155.5
|
)
|
|||
Cash and cash equivalents held by variable interest entities
|
178.9
|
|
|
—
|
|
|
178.9
|
|
|||
Accrued investment income
|
2.6
|
|
|
(.1
|
)
|
|
2.5
|
|
|||
Income tax assets, net
|
.7
|
|
|
—
|
|
|
.7
|
|
|||
Other assets
|
10.0
|
|
|
(1.5
|
)
|
|
8.5
|
|
|||
Total assets
|
$
|
1,719.1
|
|
|
$
|
(157.1
|
)
|
|
$
|
1,562.0
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|||
Other liabilities
|
$
|
158.3
|
|
|
$
|
(4.4
|
)
|
|
$
|
153.9
|
|
Borrowings related to variable interest entities
|
1,410.7
|
|
|
—
|
|
|
1,410.7
|
|
|||
Notes payable of VIEs held by insurance subsidiaries
|
167.6
|
|
|
(167.6
|
)
|
|
—
|
|
|||
Total liabilities
|
$
|
1,736.6
|
|
|
$
|
(172.0
|
)
|
|
$
|
1,564.6
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Revenues:
|
|
|
|
|
|
||||||
Net investment income – policyholder and other special-purpose portfolios
|
$
|
81.5
|
|
|
$
|
69.8
|
|
|
$
|
78.9
|
|
Fee revenue and other income
|
7.6
|
|
|
5.9
|
|
|
6.4
|
|
|||
Total revenues
|
89.1
|
|
|
75.7
|
|
|
85.3
|
|
|||
Expenses:
|
|
|
|
|
|
||||||
Interest expense
|
59.9
|
|
|
50.2
|
|
|
53.1
|
|
|||
Other operating expenses
|
2.1
|
|
|
1.8
|
|
|
1.5
|
|
|||
Total expenses
|
62.0
|
|
|
52.0
|
|
|
54.6
|
|
|||
Income before net realized investment losses and income taxes
|
27.1
|
|
|
23.7
|
|
|
30.7
|
|
|||
Net realized investment losses
|
(3.6
|
)
|
|
(5.6
|
)
|
|
(20.4
|
)
|
|||
Loss on extinguishment of borrowings
|
(3.8
|
)
|
|
(9.5
|
)
|
|
—
|
|
|||
Income before income taxes
|
$
|
19.7
|
|
|
$
|
8.6
|
|
|
$
|
10.3
|
|
|
Amortized
cost
|
|
Estimated
fair
value
|
||||
|
(Dollars in millions)
|
||||||
Due after one year through five years
|
$
|
621.9
|
|
|
$
|
594.5
|
|
Due after five years through ten years
|
912.3
|
|
|
873.9
|
|
||
Total
|
$
|
1,534.2
|
|
|
$
|
1,468.4
|
|
|
Amortized
cost
|
|
Estimated
fair
value
|
||||
|
(Dollars in millions)
|
||||||
Due after one year through five years
|
$
|
615.6
|
|
|
$
|
587.0
|
|
Due after five years through ten years
|
904.7
|
|
|
866.3
|
|
||
Total
|
$
|
1,520.3
|
|
|
$
|
1,453.3
|
|
ITEM 9.
|
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
|
|
|
|
Page
|
(a)
|
1.
|
Financial Statements. See Index to Consolidated Financial Statements for a list of financial statements included in this Report.
|
|
|
2.
|
Financial Statement Schedules:
|
|
|
|
Schedule II ‑‑ Condensed Financial Information of Registrant (Parent Company)
|
|
|
|
Balance Sheet at December 31, 2018 and 2017
|
|
|
|
Statement of Operations for the years ended December 31, 2018, 2017 and 2016
|
206
|
|
|
Statement of Cash Flows for the years ended December 31, 2018, 2017 and 2016
|
207
|
|
|
Notes to Condensed Financial Information
|
208
|
|
|
Schedule IV ‑‑ Reinsurance for the years ended December 31, 2018, 2017 and 2016
|
3.
|
Exhibits. See Exhibit Index immediately preceding the Exhibits filed with this report.
|
|
By:
|
/s/ Gary C. Bhojwani
|
|
|
Gary C. Bhojwani
|
|
|
Chief Executive Officer
|
|
|
|
Signature
|
Title (Capacity)
|
Date
|
/s/ GARY C. BHOJWANI
|
Director and Chief Executive Officer
|
February 25, 2019
|
Gary C. Bhojwani
|
(Principal Executive Officer)
|
|
|
|
|
/s/ ERIK M. HELDING
|
Executive Vice President
|
February 25, 2019
|
Erik M. Helding
|
and Chief Financial Officer
|
|
|
(Principal Financial Officer)
|
|
|
|
|
/s/ JOHN R. KLINE
|
Senior Vice President
|
February 25, 2019
|
John R. Kline
|
and Chief Accounting Officer
|
|
|
(Principal Accounting Officer)
|
|
|
|
|
/s/ ELLYN L. BROWN
|
Director
|
February 25, 2019
|
Ellyn L. Brown
|
|
|
|
|
|
/s/ STEPHEN DAVID
|
Director
|
February 25, 2019
|
Stephen David
|
|
|
|
|
|
/s/ ROBERT C. GREVING
|
Director
|
February 25, 2019
|
Robert C. Greving
|
|
|
|
|
|
/s/ MARY R. HENDERSON
|
Director
|
February 25, 2019
|
Mary R. Henderson
|
|
|
|
|
|
/s/ CHARLES J. JACKLIN
|
Director
|
February 25, 2019
|
Charles J. Jacklin
|
|
|
|
|
|
/s/ DANIEL R. MAURER
|
Director
|
February 25, 2019
|
Daniel R. Maurer
|
|
|
|
|
|
/s/ NEAL C. SCHNEIDER
|
Director
|
February 25, 2019
|
Neal C. Schneider
|
|
|
|
|
|
/s/ FREDERICK J. SIEVERT
|
Director
|
February 25, 2019
|
Frederick J. Sievert
|
|
|
ASSETS
|
|||||||
|
2018
|
|
2017
|
||||
Cash and cash equivalents - unrestricted
|
$
|
205.9
|
|
|
$
|
161.1
|
|
Equity securities at fair value (cost: 2018 - $20.3; 2017 - $225.7)
|
20.0
|
|
|
243.6
|
|
||
Investment in wholly-owned subsidiaries (eliminated in consolidation)
|
4,115.6
|
|
|
5,440.7
|
|
||
Income tax assets, net
|
137.1
|
|
|
129.6
|
|
||
Receivable from subsidiaries (eliminated in consolidation)
|
4.6
|
|
|
6.3
|
|
||
Other assets
|
1.7
|
|
|
12.7
|
|
||
Total assets
|
$
|
4,484.9
|
|
|
$
|
5,994.0
|
|
|
|
|
|
||||
LIABILITIES AND SHAREHOLDERS' EQUITY
|
|||||||
Liabilities:
|
|
|
|
||||
Notes payable
|
$
|
916.8
|
|
|
$
|
914.6
|
|
Payable to subsidiaries (eliminated in consolidation)
|
135.7
|
|
|
143.0
|
|
||
Other liabilities
|
61.5
|
|
|
88.9
|
|
||
Total liabilities
|
1,114.0
|
|
|
1,146.5
|
|
||
Commitments and Contingencies
|
|
|
|
||||
Shareholders' equity:
|
|
|
|
||||
Common stock and additional paid-in capital ($0.01 par value, 8,000,000,000 shares authorized, shares issued and outstanding: 2018 - 162,201,692; 2017 - 166,857,931)
|
2,996.6
|
|
|
3,075.0
|
|
||
Accumulated other comprehensive income
|
177.7
|
|
|
1,212.1
|
|
||
Retained earnings
|
196.6
|
|
|
560.4
|
|
||
Total shareholders' equity
|
3,370.9
|
|
|
4,847.5
|
|
||
Total liabilities and shareholders' equity
|
$
|
4,484.9
|
|
|
$
|
5,994.0
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Revenues:
|
|
|
|
|
|
||||||
Net investment income
|
$
|
14.3
|
|
|
$
|
14.2
|
|
|
$
|
15.6
|
|
Net realized investment gains (losses)
|
(4.3
|
)
|
|
2.4
|
|
|
17.7
|
|
|||
Total revenues
|
10.0
|
|
|
16.6
|
|
|
33.3
|
|
|||
Expenses:
|
|
|
|
|
|
||||||
Interest expense
|
48.0
|
|
|
46.5
|
|
|
45.8
|
|
|||
Intercompany expenses (eliminated in consolidation)
|
2.9
|
|
|
1.7
|
|
|
.9
|
|
|||
Operating costs and expenses
|
40.0
|
|
|
75.4
|
|
|
48.2
|
|
|||
Total expenses
|
90.9
|
|
|
123.6
|
|
|
94.9
|
|
|||
Loss before income taxes and equity in undistributed earnings of subsidiaries
|
(80.9
|
)
|
|
(107.0
|
)
|
|
(61.6
|
)
|
|||
Income tax expense (benefit)
|
(20.8
|
)
|
|
27.4
|
|
|
(54.6
|
)
|
|||
Loss before equity in undistributed earnings of subsidiaries
|
(60.1
|
)
|
|
(134.4
|
)
|
|
(7.0
|
)
|
|||
Equity in undistributed earnings (losses) of subsidiaries (eliminated in consolidation)
|
(254.9
|
)
|
|
310.0
|
|
|
365.2
|
|
|||
Net income (loss)
|
$
|
(315.0
|
)
|
|
$
|
175.6
|
|
|
$
|
358.2
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Cash flows from operating activities
|
$
|
(107.2
|
)
|
|
$
|
(181.8
|
)
|
|
$
|
(110.7
|
)
|
Cash flows from investing activities:
|
|
|
|
|
|
||||||
Sales of investments
|
250.1
|
|
|
54.9
|
|
|
305.0
|
|
|||
Purchases of investments
|
(30.9
|
)
|
|
(123.6
|
)
|
|
(198.4
|
)
|
|||
Net sales of trading securities
|
8.3
|
|
|
9.1
|
|
|
12.0
|
|
|||
Dividends received from consolidated subsidiary, net of capital contributions of $265.0 in 2018, nil in 2017 and $200.0 in 2016*
|
(40.1
|
)
|
|
363.5
|
|
|
92.5
|
|
|||
Net cash provided by investing activities
|
187.4
|
|
|
303.9
|
|
|
211.1
|
|
|||
Cash flows from financing activities:
|
|
|
|
|
|
||||||
Issuance of common stock
|
3.9
|
|
|
8.3
|
|
|
8.4
|
|
|||
Payments to repurchase common stock
|
(108.0
|
)
|
|
(168.3
|
)
|
|
(210.0
|
)
|
|||
Common stock dividends paid
|
(64.8
|
)
|
|
(59.6
|
)
|
|
(54.8
|
)
|
|||
Issuance of notes payable to affiliates*
|
227.7
|
|
|
310.8
|
|
|
217.1
|
|
|||
Payments on notes payable to affiliates*
|
(94.2
|
)
|
|
(158.3
|
)
|
|
(83.9
|
)
|
|||
Net cash used by financing activities
|
(35.4
|
)
|
|
(67.1
|
)
|
|
(123.2
|
)
|
|||
Net increase (decrease) in cash and cash equivalents
|
44.8
|
|
|
55.0
|
|
|
(22.8
|
)
|
|||
Cash and cash equivalents, beginning of the year
|
161.1
|
|
|
106.1
|
|
|
128.9
|
|
|||
Cash and cash equivalents, end of the year
|
$
|
205.9
|
|
|
$
|
161.1
|
|
|
$
|
106.1
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Life insurance inforce:
|
|
|
|
|
|
||||||
Direct
|
$
|
27,662.8
|
|
|
$
|
27,154.3
|
|
|
$
|
27,048.1
|
|
Assumed
|
114.4
|
|
|
120.5
|
|
|
128.7
|
|
|||
Ceded
|
(3,321.3
|
)
|
|
(3,452.6
|
)
|
|
(3,604.0
|
)
|
|||
Net insurance inforce
|
$
|
24,455.9
|
|
|
$
|
23,822.2
|
|
|
$
|
23,572.8
|
|
Percentage of assumed to net
|
.5
|
%
|
|
.5
|
%
|
|
.5
|
%
|
|
2018
|
|
2017
|
|
2016
|
||||||
Insurance policy income:
|
|
|
|
|
|
||||||
Direct
|
$
|
2,556.4
|
|
|
$
|
2,576.9
|
|
|
$
|
2,553.0
|
|
Assumed
|
28.0
|
|
|
30.4
|
|
|
34.0
|
|
|||
Ceded
|
(144.5
|
)
|
|
(105.0
|
)
|
|
(123.9
|
)
|
|||
Net premiums
|
$
|
2,439.9
|
|
|
$
|
2,502.3
|
|
|
$
|
2,463.1
|
|
Percentage of assumed to net
|
1.1
|
%
|
|
1.2
|
%
|
|
1.4
|
%
|
2.1
|
3.1
|
3.2
|
3.3
|
4.1
|
4.2
|
4.3
|
4.4
|
4.5
|
4.6
|
10.1
|
10.2*
|
10.3*
|
10.4*
|
10.5*
|
10.6*
|
10.7*
|
10.8*
|
10.9*
|
10.10*
|
10.11*
|
10.12*
|
10.13
|
10.14*
|
10.15*
|
10.16*
|
Amended and Restated Employment Agreement dated as of September 30, 2016 between 40|86 Advisors, Inc. and Eric R. Johnson,
incorporated by reference to Exhibit 10.25 of our Quarterly Report on Form 10-Q for the quarter ended September 30, 2016
, as amended by Amendment dated as of August 10, 2017,
incorporated by reference to Exhibit 10.4 of our Quarterly Report on Form 10-Q for the quarter ended September 30, 2017.
|
10.17*
|
Amended and Restated Employment Agreement dated as of January 12, 2015 between CNO Services, LLC and Matthew J. Zimpfer,
incorporated by reference to Exhibit 10.22 of our Annual Report on Form 10-K for the year ended December 31, 2014
, as amended by Amendment dated as of August 21, 2017,
incorporated by reference to Exhibit 10.6 of our Quarterly Report on Form 10-Q for the quarter ended September 30, 2017.
|
10.18*
|
Amended and Restated Employment Agreement dated as of January 6, 2015 between CNO Services, LLC and Bruce Baude,
incorporated by reference to Exhibit 10.23 of our Annual Report on Form 10-K for the year ended December 31, 2014
, as amended by Amendment dated July 30, 2015,
incorporated by reference to Exhibit 10.1 of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2015
, and as further amended by Amendment dated as of August 11, 2017,
incorporated by reference to Exhibit 10.1 of our Quarterly Report on Form 10-Q for the quarter ended September 30, 2017
, and
as further amended by Amendment dated as of July 16, 2018, incorporated by reference to Exhibit 10.1 of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2018.
|
10.19
|
10.20*
|
Employment Agreement dated as of April 6, 2016 between CNO Financial Group, Inc. and Gary C. Bhojwani,
incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K filed April 12, 2016
, as amended by Amendment dated as of August 9, 2017,
incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K/A filed on August 11, 2017.
|
10.21*
|
Employment Agreement dated as of April 8, 2016 between CNO Financial Group, Inc. and Erik M. Helding,
incorporated by reference to Exhibit 10.2 of our Current Report on Form 8-K filed April 12, 2016
, as amended by Amendment dated as of August 17, 2017,
incorporated by reference to Exhibit 10.3 of our Quarterly Report on Form 10-Q for the quarter ended September 30, 2017.
|
10.22*
|
10.23*
|
10.24*
|
10.25
|
10.26
|
10.27
|
10.28
|
21
|
23.1
|
31.1
|
31.2
|
32.1
|
32.2
|
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.
|
Re:
|
Grant of Non-Qualified Stock Option
|
Very truly yours,
|
|
CNO FINANCIAL GROUP, INC.
|
|
|
By: Yvonne K. Franzese, Chief Human Resources Officer
|
|
|
|
Very truly yours,
|
|
CNO FINANCIAL GROUP, INC.
|
|
|
By: Yvonne K. Franzese, Chief Human Resources Officer
|
|
|
|
Very truly yours,
|
|
CNO FINANCIAL GROUP, INC.
|
|
|
By: Yvonne K. Franzese, Chief Human Resources Officer
|
|
|
|
1.
|
Payments Following Termination
.
|
COMPANY:
|
CNO SERVICES, LLC
|
|
/s/ Yvonne K. Franzese
|
Yvonne K. Franzese
|
Executive Vice President
|
Chief Human Resources Officer
|
|
|
EXECUTIVE:
|
|
/s/ Scott L. Goldberg
|
Scott L. Goldberg
|
|
Name
|
State or Other Jurisdiction
|
40|86 Advisors, Inc.
|
DE
|
40|86 Mortgage Capital, Inc.
|
DE
|
American Life and Casualty Marketing Division Co.
|
IA
|
Bankers Conseco Life Insurance Company
|
NY
|
Bankers Life Advisory Services, Inc.
|
IN
|
Bankers Life and Casualty Company
|
IL
|
Bankers Life Securities General Agency, Inc.
|
IN
|
Bankers Life Securities, Inc.
|
IN
|
Business Credit Administration Corp.
|
IN
|
C.P. Real Estate Services Corp.
|
NJ
|
CDOC, Inc.
|
DE
|
CNO Financial Investments Corp.
|
IL
|
CNO Management Services Company
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TX
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CNO Services, LLC
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IN
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Colonial Penn Life Insurance Company
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PA
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Conseco Life Insurance Company of Texas
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TX
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Conseco Marketing, L.L.C.
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IN
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Design Benefit Plans, Inc.
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IL
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Hawthorne Advertising Agency Incorporated
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PA
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Illinois General Investment Corp.
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DE
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Indiana General Investment Corp.
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DE
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K.F. Agency, Inc.
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IL
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K.F. Insurance Agency of Massachusetts, Inc.
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MA
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Performance Matters Associates, Inc.
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IN
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Resource Life Insurance Company
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IL
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Washington National Insurance Company
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IN
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1.
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I have reviewed this annual report on Form 10-K of CNO Financial Group, Inc.;
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2.
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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;
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3.
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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 periods presented in this report;
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4.
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The registrant's other certifying officer and I are 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:
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(a)
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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;
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(b)
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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;
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(c)
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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 based on such evaluation; and
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(d)
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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
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5.
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The registrant's other certifying officer and 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):
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(a)
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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
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(b)
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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.
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1.
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I have reviewed this annual report on Form 10-K of CNO Financial Group, Inc.;
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2.
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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;
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3.
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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 periods presented in this report;
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4.
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The registrant's other certifying officer and I are 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:
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(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;
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(b)
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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;
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(c)
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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 based on such evaluation; and
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(d)
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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
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5.
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The registrant's other certifying officer and 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):
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(a)
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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
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(b)
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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.
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(1)
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The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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(2)
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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(1)
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The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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(2)
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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