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

CNO | January 29, 2020

OLDWICK, N.J.

AM Best has affirmed the Financial Strength Rating 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. (headquartered in Carmel, IN) [NYSE: CNO]. These subsidiaries are referred to collectively as CNO Financial Group (CNO). Concurrently, AM Best has affirmed the Long-Term ICR and the Long-Term Issue Credit Ratings (Long-Term IR) of “bbb-” of CNO Financial Group, Inc. The outlook of these Credit Ratings (ratings) is stable. (See below for a detailed listing of the companies and Long-Term IRs.)

The ratings reflect CNO’s balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).

The balance sheet strength assessment reflects CNO’s strong risk-adjusted capitalization that includes a high quality investment portfolio and lower required capital on the group’s long-term care (LTC) business following a reinsurance transaction to transfer the risks of certain LTC blocks of business in 2018. CNO’s balance sheet strength also benefits from a strong liquidity profile and self-funding of redundant reserves. AM Best notes that CNO’s history of dividend payments has dampened capital growth. The operating subsidiaries serve as a primary source of dividend capacity for the holding company to service its debt and share buybacks.

Through third-quarter 2019, absent the impact of the LTC reinsurance transaction in 2018, profitability ratios have been consistent, attributable to a combination of steady revenue growth, adequate investment returns and expense management initiatives. A trend of positive earnings and modest-but-steady premium growth across CNO’s core lines of business have supported its favorable capital ratios. CNO’s overall premium levels have increased modestly in recent years, driven by strong indexed annuity sales growth, partially offset by lower premium trends in the Medicare supplement and 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 and reductions in benefits.

CNO offers a wide array of products including life and health insurance and annuities. It operates in the highly competitive life and health markets but maintains a strong market share in its niche markets through a diverse distribution system. AM Best views overall product risk as moderate. Risks associated with its LTC business have been mitigated with the reinsurance transaction in 2018, combined with the company’s current focus on short duration and less comprehensive LTC offerings.

Finally, CNO Financial Group, Inc.’s financial leverage ratio remains moderate at approximately 24%, although it has increased slightly, reflecting a modest increase in debt levels in 2019. Despite the modest increase in leverage, AM Best notes that the company’s financial leverage and interest coverage ratios remain in line with expectations. CNO Financial Group, Inc. also has typically maintained more-than-adequate holding company liquidity and adequate cash for management of interest expenses and general corporate expenses.

The FSR of A- (Excellent) and the Long-Term ICRs of “a-” have been affirmed with stable outlooks 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 with a stable outlook:

CNO Financial Group, Inc.—

-- “bbb-” on $500 million 5.25% senior unsecured notes, due 2025

-- “bbb-” on $500 million 5.25% senior unsecured notes, due 2029

This press release relates to Credit Ratings that have been published on AM 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 AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.