CNO Discusses Q3 Capital Actions

In a recent announcement, CNO Financial Group Inc. (CNO) discussed capital actions undertaken during the third quarter of 2013. These capital actions include share repurchases and debt repayment.

During the third quarter of 2013, CNO Financial bought back approximately 2.6 million shares for $37.3 million at an average price of $14.43 per share under its repurchase program. This repurchase accounts for 1.2% of the total outstanding shares of the company after the second quarter of 2013. As of Jun 30, 2013 CNO Financial had 219.4 million shares under its authorization.

Taking into consideration the repurchase, CNO Financial bought back shares worth $221.6 million so far this year. In line with the second quarter guidance, CNO Financial is expected to spend $250–$300 million on share repurchases in 2013. The company paid dividends worth $6.7 million in the third quarter.

CNO Financial’s financial strength allows it to continue with its buyback program and dividend payouts. Cash from operations, generated by CNO Financial in the first half of 2013 improved substantially year-over-year. We expect this to consistently cushion future buybacks and help the company achieve its long term Return on Equity goal of 9% by 2015.

Apart from repurchase activities, CNO Financial also undertook a principal payment of $12.5 million during the third quarter of 2013 to fulfill the terms of its senior secured credit agreement. This prepayment was made on the pre-determined date i.e. Sep 30, 2013 in line with the previously provided guidance. The next scheduled installment payment of $12.5 million is due on the last day of December this year.

As of Jun 30, 2013, CNO Financial’s debt-to-total capital ratio, excluding accumulated other comprehensive income (loss), declined 180 basis points over 2012-end to 18.9% due to the company’s recapitalization plan. We expect the current debt repayment to improve its debt-to-capital ratio further and reduce interest expenses, thereby bolstering bottom line improvement.

CNO Financial is scheduled to report its third quarter 2013 results on Oct 28, 2013 after the closing bell. The Zacks Consensus Estimate for the third quarter of 2013 is pegged at 28 cents per share, representing a year-over- year improvement of 6.2%.

CNO Financial currently carries a Zacks Rank #3 (Hold). Other stocks that are worth considering are AXA Group (AXAHY), Eastern Insurance Holdings Inc. (EIHI) and FBL Financial Group Inc. (FFG). All the three stocks carry a favorable Zacks Rank #1 (Strong Buy).

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