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CNO Financial (CNO) Up on Q3 Earnings Beat, Revenues Down Y/Y

Shares of CNO Financial Group, Inc. CNO have inched up marginally since it reported third-quarter 2022 earnings on Oct 31. Earnings outpaced the Zacks Consensus Estimate on the back of higher annuity premiums, strong performance of its direct-to-consumer and worksite businesses, and reduced benefits and expenses. However, a decline in insurance policy income and variable investment income partially offset the upside.

Q3 Update

CNO Financial reported third-quarter 2022 adjusted earnings per share (EPS) of 49 cents, which beat the Zacks Consensus Estimate by 2.1%. However, the bottom line plunged 32% year over year.

Total revenues of $905.3 million dropped 6.5% year over year in the quarter under review. The top line outpaced the consensus mark by a whisker.

Insurance policy income dipped 1% year over year to $623.2 million. Our estimate for the metric stands at $610.3 million.

CNO Financial Group, Inc. Price, Consensus and EPS Surprise

CNO Financial Group, Inc. Price, Consensus and EPS Surprise
CNO Financial Group, Inc. Price, Consensus and EPS Surprise

CNO Financial Group, Inc. price-consensus-eps-surprise-chart | CNO Financial Group, Inc. Quote

Net investment income of $268.1 million dropped 13% year over year in the third quarter, while our estimate for the metric stands at $297.5 million.

Annuity collected premiums improved 11% year over year to $370 million.

New annualized premiums for health and life products amounted to $87.3 million, up 3% year over year.

Total benefits and expenses of $768.1 million declined 8.6% year over year, attributable to lower insurance policy benefits, and other operating costs and expenses. Our estimate for the metric suggests a 6.6% decline in the metric during the third quarter from the year-ago quarter’s reading.

Financial Update (as of Sep 30, 2022)

CNO Financial exited the third quarter with unrestricted cash and cash equivalents of $498 million, which plunged 32.9% year over year.

Total assets of $33,037.3 million decreased 7.5% year over year.

Total shareholders’ equity fell 75.2% year over year to $1,297.9 million.

Book value per share plunged 72.9% year over year to $11.19 in the third quarter.

Adjusted operating return on equity of 10.2% deteriorated 130 basis points (bps) year over year.

Debt-to-capital ratio deteriorated 2,890 bps year over year to 46.7% at the third-quarter end.

Share Repurchase and Dividend Update

CNO Financial rewarded its shareholders with $26.1 million in the form of share buybacks worth $10 million and dividends of $16.1 million.

Q422 View

Fee income is predicted to remain seasonally stronger in the fourth quarter of 2022.

Expenses (excluding significant items) are estimated to be on par with the year-to-date third-quarter trend.

2022 Outlook

Management anticipates growth in sales this year.

Investment income, allocated to products, is forecast to stay moderately up, while the earlier estimate projected the metric to remain relatively flat to modestly up. Investment income, not allocated to products, is likely to remain lower than the 2021 figure.

Earlier, fee income was expected to witness an uptrend in 2022 from the 2021 level.

Expenses (excluding significant items) were estimated to be decently higher than the 2021 figure.

Free cash flow is expected to be lower than the 2021 level.

Zacks Rank

CNO Financial currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performances of Some Other Insurers

Of the insurance industry players that have reported third-quarter results so far, Arch Capital Group Ltd. ACGL, Chubb Limited CB and RLI Corporation RLI beat the respective Zacks Consensus Estimate for earnings.

Arch Capital reported a third-quarter 2022 operating income per share of 28 cents, which beat the Zacks Consensus Estimate by 16.7%. The bottom line, however, decreased 62.2% year over year. ACGL’s gross premiums written improved 20.4% year over year to $3.9 billion. Net premiums written climbed 31.2% year over year to $2.7 billion on higher premiums written across its Insurance and Reinsurance segments. Net investment income increased 45.9% year over year to $128.6 million and beat our estimate of $94.2 million.

Chubb’s third-quarter 2022 core operating income of $3.17 per share outpaced the Zacks Consensus Estimate by 4.9%. The bottom line also improved 20.1% from the year-ago quarter’s figure. Net premiums written improved 14.4% year over year to $12 billion in the quarter. Adjusted net investment income of CB was a record $1.05 billion, up 12.1%.

RLI’s third-quarter 2022 operating earnings of 50 cents per share beat the Zacks Consensus Estimate by 51.5% but declined 23.1% from the prior-year quarter’s level. Operating revenues of RLI were $312.7 million, up 15.3% year over year. The top line, however, missed the Zacks Consensus Estimate by 1.3%. RLI’s net investment income increased 19.2% year over year to $21.3 million.

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