CNO Financial 4Q Net Drops 21% in Part From Change in Agent Deferred Compensation Plan Liability
February 11, 2015 by Thomas Harman, associate editor, BestWeek: Tom.Harman@ambest.com
CARMEL, Ind. – CNO Financial Group’s fourth-quarter 2014 net income fell 21% to $83.9 million, while full-year net income fell 89% to $51.4 million.
Net income and operating earnings reflect an unfavorable after-tax, mark-to-market change in the agent deferred compensation plan liability, which was impacted by the use of a new mortality table and the low interest rate environment, the company said in a statement. The company also reported a $2.3 million fourth-quarter loss in net realized investments, compared with a $9.1 million gain in the same period in 2013.
“For the year, we made important progress on several fronts, in particular further reducing risk with the sale of [Conseco Life Insurance Co.], returning capital to shareholders, investing in our franchise, and growing our core businesses with increases in sales, collected premiums, annuity account values and operating earnings,” said CNO Chief Executive Officer Ed Bonach in a statement.
CNO’s Bankers Life & Casualty Co. and Washington National Insurance Co. market and distribute supplemental health and life insurance to middle-income consumers, the latter through a wholly owned subsidiary and independent insurance agencies. And Colonial Penn Life Insurance Co. markets graded benefit and simplified issue life insurance.
For Bankers Life, fourth-quarter sales were $73.6 million, flat with the same period in 2013. For the full year, Bankers Life sales were $261.6 million, an increase of 1% from 2013. Bankers Life sales were impacted by a 3% drop in average producing agent count in 2014. However, the average producing agent count increased during the fourth quarter of 2014, a reflection of improved recruiting, CNO said. CNO expects the segment to grow from between 3% and 5% in 2015.
Washington National fourth-quarter sales were $26.3 million, also flat with the same period in 2013. Washington National sales for the full year were $99.2 million, up 6% from 2013. Collected premiums from the segment’s supplemental health block were up 5% in the fourth quarter of 2014, compared with a year earlier. CNO expects Washington National’s sales to grow from between 5% to 7% in 2015.
Colonial Penn fourth-quarter sales were at $14.9 million, up 6% from the fourth quarter of 2013, reflecting increased sales of graded benefit and simplified issue life insurance products, the company said. For all of 2014, sales were $64.6 million, a 4% increase over 2013. Colonial Penn sales are expected to grow between 6% and 8% in 2015, the statement said.
In the third-quarter, the release of a tax valuation allowance resulted in a drop in net income to $117.4 million, down from $283 million for the same period in 2013 (Best’s News Service, Oct. 29, 2014).
Operating companies of CNO Financial Group currently have Best’s Financial Strength Ratings of B++ (Good).
On the morning of Feb. 11, shares of CNO Financial Group (NYSE: CNO) were trading at $16.79 per share, 0.59% below the prior close.
