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A.M. Best Affirms Credit Ratings of CNO Financial Group, Inc. and Its Life/Health Subsidiaries

CNO | May 2, 2018

A.M. Best Affirms Credit Ratings of CNO Financial Group, Inc. and Its Life/Health Subsidiaries

A.M. Best has affirmed the Financial Strength Ratings (FSR) of A- (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a-” of the life/health subsidiaries of CNO Financial Group, Inc. (CNO Financial) (headquartered in Carmel, IN) [NYSE: CNO]. Concurrently, A.M. Best has affirmed the Long-Term ICR and the Long-Term Issue Credit Ratings (Long-Term IR) of “bbb-” of CNO Financial. The outlook of these Credit Ratings (ratings) is stable. (See below for a detailed listing of the companies and ratings.)

The ratings reflect CNO Financial’s balance sheet strength, which A.M. Best categorizes as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management. The organization has maintained favorable levels of risk-adjusted capitalization at its regulated insurance entities and on a consolidated basis, and this has been accompanied by a favorable trend of earnings and good premium growth across its core lines of business. CNO Financial has reported consistent profitability ratios, which are attributable to a combination of growth in revenue at its core life/health insurance subsidiaries, favorable investment returns and expense management initiatives. A.M. Best notes that Bankers Life and Casualty Company (Bankers Life) (Chicago, IL), the group’s lead operating entity, has seen general improvement in its risk-adjusted capitalization in recent years. Furthermore, the operating subsidiaries’ capitalization has benefited from capital support from CNO Financial when needed, and also serves as a primary source of dividend capacity for the holding company to service its debt and other corporate initiatives.

CNO Financial’s adjusted financial leverage ratio remains appropriate at approximately 20% and has not changed much since the completion of its recapitalization plan several years ago. Despite the modest increase in leverage at that time, A.M. Best notes that the company’s financial leverage and interest coverage ratios remain in line with expectations. CNO Financial typically also has maintained more-than-adequate holding company liquidity, and although this was somewhat strained in the last half of 2016, the organization was able to rebuild its liquidity through a combination of temporarily suspending its stock repurchase program and dividends from some subsidiaries. The holding company currently holds adequate cash for management of interest expenses and general corporate expenses.

Finally, while CNO Financial’s annuity and life insurance sales generally have increased over the last year, A.M. Best notes the continued lower new business premium trends in some of its core lines of business, including the Medicare supplement and long-term care (LTC) product lines. The decline in LTC premium continues to be a function of the company’s shift to alternative solutions, such as short-term care products as well as the reductions in benefits. However, the premium decrease in Bankers Life’s other health products is also a function of low agent growth. A.M. Best notes that growth in annuity premiums has slowed, which had been driven primarily by indexed annuities. Furthermore, individual and group accident and health product premium has increased somewhat at Washington National Insurance Company, which has allowed CNO Financial to report good overall consolidated growth across its brands and product offerings.

The FSR of A- (Excellent) and the Long-Term ICRs of “a-” have been affirmed for the following key life/health subsidiaries of CNO Financial Group, Inc.:

Bankers Life and Casualty Company
Colonial Penn Life Insurance Company
Bankers Conseco Life Insurance Company
Washington National Insurance Company

The following Long-Term IRs have been affirmed:

CNO Financial Group, Inc.—
-- “bbb-” on $325 million 4.50% senior unsecured notes, due 2020
-- “bbb-” on $500 million 5.25% senior unsecured notes, due 2025

This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings . For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases .

A.M. Best is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

A.M. Best
Joseph Zazzera, MBA, +1 908-439-2200, ext. 5797
Director
joseph.zazzera@ambest.com
or
Sally Rosen, +1 908-439-2200, ext. 5280
Senior Director
sally.rosen@ambest.com
or
Christopher Sharkey, +1 908-439-2200, ext. 5159
Manager, Public Relations
christopher.sharkey@ambest.com
or
Jim Peavy, +1 908-439-2200, ext. 5644
Director, Public Relations
james.peavy@ambest.com