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Why Is CNO (CNO) Down 15.6% Since Last Earnings Report?

Zacks Equity Research

It has been about a month since the last earnings report for CNO Financial (CNO). Shares have lost about 15.6% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is CNO due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

CNO Financial's Q2 Earnings Meet Estimates, Fall Y/Y

CNO Financial reported second-quarter 2018 adjusted earnings per share of 48 cents, in line with the Zacks Consensus Estimate. Meanwhile, the bottom line dipped 2% year over year, mainly due to lower revenues.

Further, in the quarter under review, CNO Financial’s total revenues declined 6.3% year over year to $980 million, mainly due to lower insurance policy income and net investment income. However, the metric beat the Zacks Consensus Estimate by 6.9%.

Quarterly Operational Update

Total collected premiums were $962.2 million, up 1.5% from the prior-year quarter’s level, mainly driven by Bankers Life segment.

New annualized premiums for life and health products amounted to $85.2 million, up 4.2% from the year-ago period.

First-year collected premiums totaled $421 million, up 22% from the year-earlier quarter’s tally, primarily banking on the contribution by Bankers Life segment.

Quarterly Segment Update

Bankers Life

Total collected premiums were $705.2 million, up 8% year over year, aided by annuity.

New annualized premiums for life and health products increased 1.3% year over year to $39.4 million.

Washington National

Total collected premiums of $176.9 million were up 4.6% year over year.

New Annualized premiums from life and health products were $26.2 million, up 0.7% from the year-ago figure.

Colonial Penn

Total collected premiums were $76.7 million, up 4% year over year.

New annualized premiums were $19.6 million, up 16% from the amount recorded in the comparable quarter last year.

Long-Term Care in Run-Off

Total collected premiums were $3.4 million, down 92.8% year over year.

The long-term care business was ceded under a 100% indemnity coinsurance agreement in the third quarter of 2018.

Financial Update

Unrestricted cash and investments held by CNO Financial’s holding company were $264 million as of Jun 30, 2019, up 20% from 2018 end.

Debt-to-capital ratio was 18.9% as of Jun 30, 2019 compared with 21.4% at the end of 2018.

Securities Repurchase and Divided Update

In the second quarter of 2019, the company returned shares worth $72.4 million and dividend worth $17.4 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -5.77% due to these changes.

VGM Scores

At this time, CNO has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise CNO has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.



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