FINANCIAL SUMMARY
Quarter End
(Amounts in millions, except per share data)
(Unaudited)

Net operating income, a non-GAAP^(a) financial measure, is used consistently by CNO's management to evaluate the operating performance of the company and is a measure commonly used in the life insurance industry.  It differs from net income primarily because it excludes certain non-operating items such as net realized investment gains (losses) from sales and change in the allowance for credit losses, changes in fair values of embedded derivatives and market risk benefits and the liability for a deferred compensation plan, and certain significant and unusual items included in net income.  Management believes an analysis of net operating income is important in understanding the profitability and operating trends of the Company's business.  Net income is the most directly comparable GAAP measure.

Per diluted share

Quarter ended

Quarter ended

September 30,

September 30,

2024

2023

% change

2024

2023

% change

Income from insurance products ^(b)

1.21

$            0.76

59

$     129.2

$      86.8

49

Fee income

(0.03)

(0.03)

—

(2.7)

(2.9)

(7)

Investment income not allocated to product lines ^(c)

0.42

0.33

27

45.5

38.4

18

Expenses not allocated to product lines

(0.17)

0.07

n/m

(18.5)

7.5

n/m

Operating earnings before taxes

1.43

1.13

153.5

129.8

Income tax expense on operating income

(0.32)

(0.25)

28

(34.3)

(28.5)

20

Net operating income (1)

1.11

0.88

26

119.2

101.3

18

Net realized investment losses from sales, impairments
and change in allowance for credit losses

(0.10)

(0.17)

(11.1)

(20.1)

Net change in market value of investments recognized in earnings

0.11

(0.08)

12.3

(9.2)

Changes in fair value of embedded derivative liabilities and market risk benefits

(1.19)

0.95

(127.1)

109.4

Other

(0.15)

0.05

(16.6)

5.7

Non-operating income (loss) before taxes

(1.33)

0.75

(142.5)

85.8

Income tax benefit (expense) on non-operating income

0.31

(0.17)

32.6

(19.8)

Net non-operating income (loss)

(1.02)

0.58

(109.9)

66.0

Net income

$           0.09

$            1.46

$         9.3

$    167.3

Weighted average diluted shares outstanding

107.1

114.5

n/m - not meaningful

(a)

GAAP is defined as accounting principles generally accepted in the United States of America.

(b)

Income from insurance products is the sum of the insurance margins of the annuity, health and life product lines, less expenses allocated to the insurance product lines.  It excludes the income from our fee income business, investment income not allocated to product lines, net expenses not allocated to product lines (primarily holding company expenses) and income taxes.  Insurance margin is management's measure of the profitability of its annuity, health and life segments' performance and consists of insurance policy income plus allocated investment income less insurance policy benefits, interest credited, commissions, advertising expense and amortization of acquisition costs.

(c)

Investment income not allocated to product lines represents net investment income less: (i) equity returns credited to policyholder account balances; (ii) the investment income allocated to our product lines; (iii) interest expense on notes payable, investment borrowings and financing arrangements; (iv) expenses related to the funding agreement-backed notes ("FABN") program; and (v) certain expenses related to benefit plans that are offset by special-purpose investment income; plus (vi) the impact of annual option forfeitures related to fixed indexed annuity surrenders.

FINANCIAL SUMMARY (continued)

Management vs. GAAP Measures

(Dollars in millions, except per share data)

(Unaudited)

Shareholders' equity, excluding accumulated other comprehensive income (loss), and book value per share, excluding accumulated other comprehensive income (loss), are non-GAAP measures that are utilized by management to view the business without the effect of accumulated other comprehensive income (loss) which is primarily attributable to fluctuations in interest rates associated with fixed maturities, available for sale.  Management views the business in this manner because the Company has the ability and generally, the intent, to hold investments to maturity and meaningful trends can be more easily identified without the fluctuations.  In addition, shareholders' equity excludes net operating loss carryforwards in our non-GAAP return on equity measures as such assets are not discounted and, accordingly, will not provide a return to shareholders until after it is realized as a reduction to taxes that would otherwise be paid.  Management believes that excluding this value from the equity component of this measure enhances the understanding of the effect these non-discounted assets have on operating returns.

Quarter ended

September 30,

Trailing twelve months return on equity ^(a)

11.8 %

14.5 %

Trailing twelve months operating return on equity as adjusted to exclude accumulated other comprehensive
income (loss) and net operating loss carryforwards (a non-GAAP financial measure) ⁽⁵⁾

11.7 %

8.5 %

Trailing twelve months operating return, excluding significant items, on equity as adjusted to exclude
accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-GAAP
financial measure) ⁽⁵⁾

10.5 %

8.0 %

Shareholders' equity

$     2,687.8

$    1,890.1

Accumulated other comprehensive loss

1,116.0

1,956.7

Shareholders' equity, excluding accumulated other comprehensive loss

3,803.8

3,846.8

Net operating loss carryforwards

(273.9)

(102.6)

Shareholders' equity, excluding accumulated other comprehensive loss and net operating loss carryforwards

$     3,529.9

$    3,744.2

Book value per diluted share

$        25.32

$       16.58

Accumulated other comprehensive loss

10.52

17.17

Book value per diluted share, excluding accumulated other comprehensive loss (a non-GAAP financial measure) ⁽²⁾

$        35.84

$       33.75

(a)

Calculated using average shareholders' equity for the measurement period.

INVESTMENT PORTFOLIO

(Dollars in millions)

Fixed maturities, available for sale, at amortized cost by asset class as of September 30, 2024 are as follows:

Investment
grade

Below
investment
grade

Total

Corporate securities

$     13,083.3

$          641.9

$     13,725.2

Certificates of deposit

470.0

—

470.0

United States Treasury securities and obligations of the United States government and agencies

210.8

—

210.8

States and political subdivisions

3,213.6

9.6

3,223.2

Foreign governments

103.2

—

103.2

Asset-backed securities

1,479.4

99.1

1,578.5

Agency residential mortgage-backed securities

812.5

—

812.5

Non-agency residential mortgage-backed securities

1,252.0

418.0

(a)

1,670.0

Collateralized loan obligations

1,083.2

—

1,083.2

Commercial mortgage-backed securities

2,285.8

84.0

2,369.8

Total

$     23,993.8

$       1,252.6

$     25,246.4

(a)

Certain structured securities rated below investment grade by Nationally Recognized Statistical Rating Organizations 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 National Association of Insurance Commissioners (NAIC).

CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(Dollars in millions)

(unaudited)

September 30,
2024

December 31,
2023

ASSETS

Investments:

Fixed maturities, available for sale, at fair value (net of allowance for credit losses:
September 30, 2024 - $25.9 and December 31, 2023 - $42.9; amortized cost: September 30,
2024 - $25,246.4 and December 31, 2023 - $23,699.2)

$           23,724.7

$           21,506.2

Equity securities at fair value

120.5

96.9

Mortgage loans (net of allowance for credit losses: September 30, 2024 - $16.5 and
December 31, 2023 - $15.4)

2,372.7

2,064.1

   Policy loans

133.3

128.5

   Trading securities

217.4

222.7

Investments held by variable interest entities (net of allowance for credit losses: September 30,
2024 - $1.8 and December 31, 2023 - $3.1; amortized cost: September 30, 2024 - $258.8 and
December 31, 2023 - $787.6)

250.1

768.6

Other invested assets

1,595.5

1,353.4

   Total investments

28,414.2

26,140.4

Cash and cash equivalents - unrestricted

1,164.7

774.5

Cash and cash equivalents held by variable interest entities

80.6

114.5

Accrued investment income

276.2

251.5

Present value of future profits

165.7

180.7

Deferred acquisition costs

2,100.9

1,944.4

Reinsurance receivables (net of allowance for credit losses: September 30, 2024 - $3.0 and
December 31, 2023 - $3.0)

3,906.7

4,040.7

Market risk benefit asset

96.4

75.4

Income tax assets, net

788.7

936.2

Assets held in separate accounts

3.3

3.1

Other assets

648.0

641.1

Total assets

$           37,645.4

$           35,102.5

LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities:

Liabilities for insurance products:

   Policyholder account balances

$           17,240.5

$           15,667.8

   Future policy benefits

12,179.6

11,928.2

   Market risk benefit liability

1.0

7.4

   Liability for life insurance policy claims

59.9

62.1

   Unearned and advanced premiums

217.4

218.9

   Liabilities related to separate accounts

3.3

3.1

Other liabilities

951.0

848.8

Investment borrowings

2,188.9

2,189.3

Borrowings related to variable interest entities

283.1

820.8

Notes payable – direct corporate obligations

1,832.9

1,140.5

   Total liabilities

34,957.6

32,886.9

Commitments and Contingencies

Shareholders' equity:

Common stock ($0.01 par value, 8,000,000,000 shares authorized, shares issued and
outstanding: September 30, 2024 – 103,922,954; December 31, 2023 – 109,357,540)

1.0

1.1

Additional paid-in capital

1,715.9

1,891.5

Accumulated other comprehensive loss

(1,116.0)

(1,576.8)

Retained earnings

2,086.9

1,899.8

   Total shareholders' equity

2,687.8

2,215.6

   Total liabilities and shareholders' equity

$           37,645.4

$           35,102.5

CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS

(Dollars in millions, except per share data)

(unaudited)

Three months ended

Nine months ended

September 30,

September 30,

2024

2023

2024

2023

Revenues:

Insurance policy income

$              645.0

$             626.0

$          1,914.9

$           1,879.8

Net investment income:

   General account assets

366.3

324.8

1,019.9

925.1

   Policyholder and other special-purpose portfolios

87.6

(33.0)

312.3

109.4

Investment gains (losses):

   Realized investment losses

(13.1)

(21.6)

(49.4)

(58.0)

   Other investment gains (losses)

14.3

(7.7)

41.2

(21.2)

Total investment gains (losses)

1.2

(29.3)

(8.2)

(79.2)

Fee revenue and other income

29.5

59.0

113.4

141.2

Total revenues

1,129.6

947.5

3,352.3

2,976.3

Benefits and expenses:

Insurance policy benefits

726.2

399.1

1,926.4

1,574.7

Liability for future policy benefits remeasurement (gain) loss

7.3

(0.1)

(29.1)

8.8

Change in fair value of market risk benefits

(16.1)

(33.8)

(30.0)

(36.6)

Interest expense

68.0

62.6

192.4

174.9

Amortization of deferred acquisition costs and present value of future profits 

64.0

57.0

185.9

168.5

Other operating costs and expenses

269.2

247.1

798.9

775.3

Total benefits and expenses

1,118.6

731.9

3,044.5

2,665.6

Income before income taxes

11.0

215.6

307.8

310.7

Income tax expense

1.7

48.3

69.9

70.5

Net income

$                  9.3

$             167.3

$             237.9

$             240.2

Earnings per common share:

Basic:

Weighted average shares outstanding

105,101,000

112,689,000

107,265,000

113,836,000

Net income

$                  .09

$               1.48

$               2.22

$               2.11

Diluted:

Weighted average shares outstanding

107,131,000

114,462,000

109,078,000

115,613,000

Net income

$                  .09

$               1.46

$               2.18

$               2.08

NOTES

(1)

Management believes that an analysis of net income applicable to common stock before: (i) net realized investment gains or losses from sales, impairments and the change in allowance for credit losses, net of taxes; (ii) net change in market value of investments recognized in earnings, net of taxes; (iii) changes in fair value of embedded derivative liabilities and market risk benefits related to our fixed indexed annuities, net of taxes; (iv) fair value changes related to the agent deferred compensation plan, net of taxes; (v) gains or losses related to material reinsurance transactions, net of taxes; (vi) loss on extinguishment of debt, net of taxes; (vii) changes in the valuation allowance for deferred tax assets and other tax items; and (viii) other non-operating items consisting primarily of earnings attributable to variable interest entities, net of taxes ("net operating income," a non-GAAP financial measure) is important to evaluate the financial performance of the company, and is a key measure commonly used in the life insurance industry.  Management uses this measure to evaluate performance because the items excluded from net operating income can be affected by events that are unrelated to the company's underlying fundamentals.  A reconciliation of net operating income to net income applicable to common stock is provided in the table on page 2.  Additional information concerning this non-GAAP measure is included in our periodic filings with the Securities and Exchange Commission that are available in the "Investors - SEC Filings" section of CNO's website, CNOinc.com.

(2)

Book value per diluted share reflects the potential dilution that could occur if outstanding stock options were exercised and restricted stock and performance units were vested.  The dilution from options, restricted shares and performance units is calculated using the treasury stock method.  Under this method, we assume the proceeds from the exercise of the options (or the unrecognized compensation expense with respect to restricted stock and performance units) will be used to purchase shares of our common stock at the closing market price on the last day of the period.  In addition, the calculation of this non-GAAP measure differs from the corresponding GAAP measure because accumulated other comprehensive income (loss) 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 the unrealized appreciation (depreciation) of our investments.

(3)

The calculation of this non-GAAP measure differs from the corresponding GAAP measure because accumulated other comprehensive income (loss) 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 the unrealized appreciation (depreciation) of our investments.

(4)

Measured by new annualized premiums for life and health products, which includes 10% of single premium whole life deposits and 100% of all other premiums (excluding annuities).  Sales of third-party products are excluded.

(5)

The following summarizes the calculations of: (i) operating return on equity as adjusted to exclude accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-GAAP financial measure); (ii) operating return, excluding significant items, as adjusted to exclude accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-GAAP financial measure); and (iii) return on equity are as follows (dollars in millions):

Trailing twelve months ended

3Q24

3Q23

Net operating income

$        425.2

$     305.1

Net operating income, excluding significant items

$        380.0

$     287.7

Net income

$        274.2

$     278.2

Average common equity, excluding accumulated other

comprehensive income (loss) and net operating loss

carryforwards (a non-GAAP financial measure)

$     3,620.8

$  3,582.8

Average common shareholders' equity

$     2,325.3

$  1,918.3

Operating return on equity as adjusted to exclude accumulated

other comprehensive income (loss) and net operating loss

carryforwards (a non-GAAP financial measure)

11.7 %

8.5 %

Operating return, excluding significant items, on equity as adjusted

to exclude accumulated other comprehensive income (loss) and

net operating loss carryforwards (a non-GAAP financial measure)

10.5 %

8.0 %

Return on equity

11.8 %

14.5 %

The following summarizes: (i) net operating income; (ii) significant items; (iii) net operating income, excluding significant items; and (iv) net income (loss) (dollars in millions):

Net operating

Net operating

income,

income,

excluding

Net

excluding

significant

income -

Net operating

Significant

significant

items - trailing

Net

trailing

income

items

items (a)

four quarters

income (loss)

four quarters

4Q22

$                  82.9

$                  (0.5)

(b)

$                  82.4

$                342.5

$                  38.0

$                630.6

1Q23

58.6

—

58.6

336.6

(0.8)

446.4

2Q23

62.3

—

62.3

281.2

73.7

286.8

3Q23

101.3

(16.9)

(c)

84.4

287.7

167.3

278.2

4Q23

133.9

(26.4)

(d)

107.5

312.8

36.3

276.5

1Q24

57.5

—

57.5

311.7

112.3

389.6

2Q24

114.6

—

114.6

364.0

116.3

432.2

3Q24

119.2

(18.8)

(e)

100.4

380.0

9.3

274.2

(a)  See note (6) for additional information.

(b)  Comprised of $.7 million of the net favorable impact arising from our comprehensive annual actuarial review, net of tax expense of $.2 million.

(c)  Comprised of $21.7 million of legal recoveries, net of expenses and increased legal accruals, net of tax expense of $4.8 million.

(d)  Comprised of $33.9 million of the net favorable impact arising from our comprehensive annual actuarial review, net of tax expense of $7.5 million.

(e)  Comprised of $27.3 million of the net favorable impact arising from our comprehensive annual actuarial review and $2.9 million of the unfavorable impact related to a fixed asset impairment, net of tax expense of $5.6 million.

A reconciliation of pre-tax operating earnings (a non-GAAP financial measure) to net income is as follows (dollars in millions):

Twelve months ended

3Q24

3Q23

Pre-tax operating earnings (a non-GAAP financial measure)

$           549.0

$            394.4

Income tax expense

(123.8)

(89.3)

Net operating income

425.2

305.1

Non-operating items:

Net realized investment losses from sales, impairments and change in allowance for credit losses

(36.2)

(91.3)

Net change in market value of investments recognized in earnings

38.2

(24.1)

Changes in fair value of embedded derivative liabilities and market risk benefits

(170.9)

78.3

Fair value changes related to the agent deferred compensation plan

(10.3)

7.0

Other

(15.9)

(5.1)

Non-operating loss before taxes

(195.1)

(35.2)

    Income tax benefit on non-operating loss

44.1

8.3

Net non-operating loss

(151.0)

(26.9)

Net income

$           274.2

$            278.2

A reconciliation of consolidated capital, excluding accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-GAAP financial measure) to common shareholders' equity, is as follows (dollars in millions):

1Q22

2Q22

3Q22

4Q22

Consolidated capital, excluding accumulated other comprehensive

income (loss) and net operating loss carryforwards

(a non-GAAP financial measure)

$    3,141.7

$    3,329.0

$    3,510.3

$    3,557.1

Net operating loss carryforwards

238.2

214.7

190.9

169.0

Accumulated other comprehensive loss

(561.5)

(1,415.8)

(1,837.8)

(1,957.3)

Common shareholders' equity

$    2,818.4

$    2,127.9

$    1,863.4

$    1,768.8

1Q23

2Q23

3Q23

4Q23

Consolidated capital, excluding accumulated other comprehensive

income (loss) and net operating loss carryforwards

(a non-GAAP financial measure)

$    3,543.8

$    3,603.0

$    3,744.2

$    3,712.8

Net operating loss carryforwards

152.4

126.3

102.6

79.6

Accumulated other comprehensive loss

(1,664.4)

(1,733.5)

(1,956.7)

(1,576.8)

Common shareholders' equity

$    2,031.8

$    1,995.8

$    1,890.1

$    2,215.6

1Q24

2Q24

3Q24

Consolidated capital, excluding accumulated other comprehensive

income (loss) and net operating loss carryforwards

(a non-GAAP financial measure)

$    3,536.8

$    3,596.7

$    3,529.9

Net operating loss carryforwards

311.2

296.5

273.9

Accumulated other comprehensive loss

(1,480.3)

(1,464.3)

(1,116.0)

Common shareholders' equity

$    2,367.7

$    2,428.9

$    2,687.8

A reconciliation of consolidated capital, excluding accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-GAAP financial measure) to common shareholders' equity, is as follows (dollars in millions):

Trailing four quarter average

3Q24

3Q23

Consolidated capital, excluding accumulated other comprehensive

income (loss) and net operating loss carryforwards

(a non-GAAP financial measure)

$        3,620.8

$        3,582.8

Net operating loss carryforwards

218.9

148.6

Accumulated other comprehensive loss

(1,514.4)

(1,813.1)

Common shareholders' equity

$        2,325.3

$        1,918.3

(6)

The tables below summarize the financial impact of significant items on our net operating income.  Management believes that identifying the impact of these items enhances the understanding of our operating results (dollars in millions, except per share data).

Three months ended

September 30, 2024

Actual
results

Significant
items

Excluding
significant

items

Insurance product margin

Annuity margin

$         91.1

$        (36.2)

(a)

$          54.9

Health margin

127.8

8.2

(a)

136.0

Life margin

63.3

0.7

(a)

64.0

Total insurance product margin

282.2

(27.3)

254.9

Allocated expenses

(153.0)

—

(153.0)

Income from insurance products

129.2

(27.3)

101.9

Fee income

(2.7)

—

(2.7)

Investment income not allocated to product lines

45.5

—

45.5

Expenses not allocated to product lines

(18.5)

2.9

(b)

(15.6)

Operating earnings before taxes

153.5

(24.4)

129.1

Income tax (expense) benefit on operating income

(34.3)

5.6

(28.7)

Net operating income

$        119.2

$        (18.8)

$        100.4

Net operating income per diluted share

$         1.11

$        (0.17)

$          0.94

(a)

Comprised of $27.3 million of the net favorable impact arising from our comprehensive annual actuarial review.

(b)

Comprised of $2.9 million of the unfavorable impact related to a fixed asset impairment.

Three months ended

December 31, 2023

Actual
results

Significant
items

Excluding
significant

items

Insurance product margin

Annuity margin

$         63.6

$        (12.9)

(a)

$          50.7

Health margin

146.4

(22.3)

(a)

124.1

Life margin

64.6

1.3

(a)

65.9

Total insurance product margin

274.6

(33.9)

240.7

Allocated expenses

(138.8)

—

(138.8)

Income from insurance products

135.8

(33.9)

101.9

Fee income

17.8

—

17.8

Investment income not allocated to product lines

38.3

—

38.3

Expenses not allocated to product lines

(19.8)

—

(19.8)

Operating earnings before taxes

172.1

(33.9)

138.2

Income tax (expense) benefit on operating income

(38.2)

7.5

(30.7)

Net operating income

$        133.9

$        (26.4)

$        107.5

Net operating income per diluted share

$         1.18

$        (0.23)

$          0.95

(a)

Comprised of $33.9 million of the net favorable impact arising from our comprehensive annual actuarial review.

Three months ended

September 30, 2023

Actual
results

Significant
items

Excluding
significant

items

Insurance product margin

Annuity margin

$         57.0

$             —

$          57.0

Health margin

123.2

—

123.2

Life margin

59.8

—

59.8

Total insurance product margin

240.0

—

240.0

Allocated expenses

(153.2)

—

(153.2)

Income from insurance products

86.8

—

86.8

Fee income

(2.9)

—

(2.9)

Investment income not allocated to product lines

38.4

—

38.4

Expenses not allocated to product lines

7.5

(21.7)

(a)

(14.2)

Operating earnings before taxes

129.8

(21.7)

108.1

Income tax (expense) benefit on operating income

(28.5)

4.8

(23.7)

Net operating income

$        101.3

$        (16.9)

$          84.4

Net operating income per diluted share

$         0.88

$        (0.14)

$          0.74

(a)

Comprised of $21.7 million of legal recoveries, net of expenses and increased legal accruals.

Three months ended

December 31, 2022

Actual
results

Significant
items

Excluding
significant

items

Insurance product margin

Annuity margin

$         50.8

$            3.2

(a)

$          54.0

Health margin

140.4

(18.3)

(a)

122.1

Life margin

43.3

14.4

(a)

57.7

Total insurance product margin

234.5

(0.7)

233.8

Allocated expenses

(149.1)

—

(149.1)

Income from insurance products

85.4

(0.7)

84.7

Fee income

9.2

—

9.2

Investment income not allocated to product lines

25.2

—

25.2

Expenses not allocated to product lines

(12.8)

—

(12.8)

Operating earnings before taxes

107.0

(0.7)

106.3

Income tax (expense) benefit on operating income

(24.1)

0.2

(23.9)

Net operating income

$         82.9

$          (0.5)

$          82.4

Net operating income per diluted share

$         0.71

$             —

$          0.71

(a)

Comprised of $0.7 million of the net favorable impact arising from our comprehensive annual actuarial review.