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CNO > SEC Filings for CNO > Form 8-K on 1-Jul-2014All Recent SEC Filings

Show all filings for CNO FINANCIAL GROUP, INC.

Form 8-K for CNO FINANCIAL GROUP, INC.


1-Jul-2014

Completion of Acquisition or Disposition of Assets, Financial Statement


Item 2.01. Completion of Acquisition or Disposition of Assets.

On July 1, 2014, CNO Financial Group, Inc. (the "Company") announced that it completed the previously announced sale of Conseco Life Insurance Company ("CLIC", an indirect wholly owned subsidiary of CNO) to Wilton Reassurance Company ("Wilton Re"). The transaction results in net proceeds of approximately $220 million based upon the estimated balance sheet of CLIC as of June 30, 2014 and after anticipated transaction costs and intercompany transactions completed in connection with the closing. Concurrent with the sale of CLIC, Bankers Life and Casualty Company ("Bankers Life", an indirect wholly owned subsidiary of CNO) recaptured the life insurance business written by Bankers Life that had been reinsured to Wilton Re. A copy of the Company's press release is attached hereto as Exhibit 99.1.



Item 9.01. Financial Statements and Exhibits.

(b) Pro Forma Financial Information.

CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

On July 1, 2014, CNO Financial Group, Inc. (the "Company") announced that it completed the previously announced sale of Conseco Life Insurance Company ("CLIC", an indirect wholly owned subsidiary of CNO) to Wilton Reassurance Company ("Wilton Re"). Concurrent with the sale of CLIC, Bankers Life and Casualty Company ("Bankers Life", an indirect wholly owned subsidiary of CNO) recaptured the life insurance business written by Bankers Life that had been reinsured to Wilton Re.

The unaudited pro forma consolidated statement of operations of the Company for the three months ended March 31, 2014, and for the year ended December 31, 2013, presents the consolidated operating results of CNO as if the sale of CLIC and the Bankers Life reinsurance recapture had occurred on January 1, 2013. The unaudited pro forma consolidated balance sheet of the Company as of March 31, 2014, gives effect to the sale of CLIC and the Bankers Life reinsurance recapture as if they had occurred on March 31, 2014.


                   CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
                 PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
                   for the three months ended March 31, 2014
                  (Dollars in millions, except per share data)

                                                 Actual                             Pro forma
                                                March 31,                           March 31,
                                                  2014         Adjustments            2014
Revenues:
Insurance policy income                       $     685.9     $     (53.5 )  (i)  $     641.2
                                                                      8.8   (ii)
Net investment income:
General account assets                              348.1           (51.0 )  (i)        300.9
                                                                      1.9   (ii)
                                                                      1.9   (iii)
Policyholder and reinsurer accounts and
other special-purpose portfolios                     20.9              .1    (i)         21.0
Realized investment gains                            23.4            (2.1 )  (i)         21.3
Fee revenue and other income                          6.4               -                 6.4
Total revenues                                    1,084.7           (93.9 )             990.8
Benefits and expenses:
Insurance policy benefits                           690.3           (83.6 )  (i)        614.1
                                                                      7.4   (ii)
Loss on sale of subsidiary                          278.6          (278.6 ) (iv)            -
Interest expense                                     24.6            (4.7 )  (i)         19.9
Amortization                                         66.7            (2.0 )  (i)         66.0
                                                                      1.3   (ii)
Other operating costs and expenses                  194.1            (5.8 )  (i)        189.3
                                                                      1.0   (ii)
Total benefits and expenses                       1,254.3          (365.0 )             889.3
Income (loss) before income taxes                  (169.6 )         271.1               101.5
Income tax expense:
Tax expense on period income                         39.0            (2.6 )  (v)         36.4
Valuation allowance for deferred tax assets
and other tax items                                  19.4           (19.4 ) (iv)            -
Net income (loss)                             $    (228.0 )   $     293.1         $      65.1
Earnings per common share:
Basic:
Weighted average shares outstanding                 220.3                               220.3
Net income (loss)                             $     (1.03 )                       $       .30
Diluted:
Weighted average shares outstanding                 220.3                               226.1
Net income (loss)                             $     (1.03 )                       $       .29

The accompanying notes are an integral part of the pro forma consolidated financial statements.


                   CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
                 PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
                      for the year ended December 31, 2013
                  (Dollars in millions, except per share data)

                                                  Actual                                Pro forma
                                               December 31,                           December 31,
                                                   2013          Adjustments              2013
Revenues:
Insurance policy income                       $     2,744.7     $     (218.3 )  (i)  $     2,564.2
                                                                        37.8   (ii)
Net investment income:
General account assets                              1,405.8           (210.2 )  (i)        1,209.4
                                                                         6.2   (ii)
                                                                         7.6   (iii)
Policyholder and reinsurer accounts and
other special-purpose portfolios                      258.2             (7.9 )  (i)          250.3
Realized investment gains                              33.4             (6.0 )  (i)           27.4
Fee revenue and other income                           34.0             (5.1 )  (i)           28.9
Total revenues                                      4,476.1           (395.9 )             4,080.2
Benefits and expenses:
Insurance policy benefits                           2,839.7           (339.1 )  (i)        2,530.1
                                                                        29.5   (ii)
Loss related to reinsurance transaction                98.4                -                  98.4
Interest expense                                      105.3            (19.3 )  (i)           86.0
Amortization                                          296.3             (8.8 )  (i)          291.6
                                                                         4.1   (ii)
Loss on extinguishment of debt                         65.4                -                  65.4
Other operating costs and expenses                    766.2            (41.0 )  (i)          729.6
                                                                         4.4   (ii)
Total benefits and expenses                         4,171.3           (370.2 )             3,801.1
Income before income taxes                            304.8            (25.7 )               279.1
Income tax expense:
Tax expense on period income                          128.3             (9.0 )  (v)          119.3
Valuation allowance for deferred tax assets
and other tax items                                  (301.5 )              -                (301.5 )
Net income                                    $       478.0     $      (16.7 )       $       461.3
Earnings per common share:
Basic:
Weighted average shares outstanding                   221.6                                  221.6
Net income                                    $        2.16                          $        2.08
Diluted:
Weighted average shares outstanding                   232.7                                  232.7
Net income                                    $        2.06                          $        1.99

The accompanying notes are an integral part of the pro forma consolidated financial statements.


                   CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
                      PRO FORMA CONSOLIDATED BALANCE SHEET
                                 March 31, 2014
                             (Dollars in millions)

                                                Actual                           Pro forma
                                              March 31,                          March 31,
                                                 2014        Adjustments            2014
ASSETS
Investments                                  $ 23,804.8     $     154.9   (vii) $ 23,959.7
Cash and cash equivalents - unrestricted          285.4           223.7   (vi)       481.1
                                                                  (28.0 ) (vii)
Cash and cash equivalents held by variable
interest entities                                 140.3               -              140.3
Accrued investment income                         259.3               -              259.3
Present value of future profits and deferred
acquisition costs                               1,268.1            29.9   (vii)    1,298.0
Reinsurance receivables                         3,072.8          (154.9 ) (vii)    2,917.9
Income tax assets, net                            870.7            (2.8 ) (vii)      867.9
Assets held in separate accounts                   10.0               -               10.0
Other assets                                      401.0               -              401.0
Assets of subsidiary being sold                 4,346.3        (4,346.3 ) (vi)           -
Total assets                                 $ 34,458.7     $  (4,123.5 )       $ 30,335.2
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities for insurance products           $ 21,535.6     $         -         $ 21,535.6
Other liabilities                                 727.4            (6.1 ) (vii)      721.3
Payable to reinsurer                                  -               -                  -
Investment borrowings                           1,499.4               -            1,499.4
Borrowings related to variable interest
entities                                        1,019.4               -            1,019.4
Notes payable - direct corporate obligations      844.1               -              844.1
Liabilities of subsidiary being sold            4,122.6        (4,122.6 ) (vi)           -
Total liabilities                              29,748.5        (4,128.7 )         25,619.8
Commitments and Contingencies
Shareholders' equity:
Common stock ($0.01 par value, 8,000,000,000
shares authorized, shares issued and
outstanding: March 31, 2014 - 219,266,947;
December 31, 2013 - 220,323,823)                    2.2               -                2.2
Additional paid-in capital                      4,054.7               -            4,054.7
Accumulated other comprehensive income            766.2               -              766.2
Retained earnings (accumulated deficit)          (112.9 )           5.2   (vii)     (107.7 )
Total shareholders' equity                      4,710.2             5.2            4,715.4
Total liabilities and shareholders' equity   $ 34,458.7     $  (4,123.5 )       $ 30,335.2

The accompanying notes are an integral part of the pro forma consolidated financial statements.


CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

Adjustments to the pro forma consolidated statement of operations are summarized below:

(i) Amounts reflect the financial results of CLIC being sold to Wilton Re.

(ii) Amounts reflect the recapture by Bankers Life of a traditional life block previously reinsured to Wilton Re.

(iii) Net investment income has been adjusted to reflect the assumed higher invested assets resulting from the cash proceeds of $223.7 million from the sale of CLIC. The assumed investment yield was 3.4 percent.

(iv) Amounts eliminate the loss on sale of subsidiary and related tax impact as such amounts are assumed to have occurred prior to January 1, 2013.

(v) Reflects the tax adjustment for the pro forma adjustments at the approximate rate for the specific items.

Adjustments to the pro forma consolidated balance sheet are summarized below:

(vi) Amounts reflect the estimated net cash proceeds to be received and the assets and liabilities of CLIC to be sold as summarized below:

Estimated net cash proceeds                $   223.7
Net assets sold:
Investments                                $ 3,925.6
Cash and cash equivalents - unrestricted        50.0
Accrued investment income                       47.7
Present value of future profits                 15.8
Deferred acquisition costs                      39.0
Reinsurance receivables                        159.6
Income tax assets, net                          91.0
Other assets                                    17.6
Assets of subsidiary being sold              4,346.3
Liabilities for insurance products           3,234.1
Other liabilities                               33.1
Investment borrowings                          383.5
Loss accrual                                   471.9
Liabilities of subsidiary being sold         4,122.6
Net assets sold                            $   223.7


CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

(vii) Amounts reflect the recapture of a block of traditional life insurance by Bankers Life, as if the recapture had occurred on March 31, 2014. The block had previously been 50 percent coinsured under an agreement with Wilton Re pursuant to which Bankers Life continued to service and administer the block. Bankers Life recaptured the 50 percent of the liabilities for insurance products previously ceded, and will recognize 100 percent of the profits from the block as they emerge over time.

The following summarizes the net pro forma impacts of the reinsurance recapture (dollars in millions):

Recapture fee paid by Bankers Life                               $ (28.0 )
Net assets received in recapture:
Investments                                                        154.9
Present value of future profits and deferred acquisition costs      29.9
Other liabilities                                                    6.1
Reinsurance receivables                                           (154.9 )
Net assets received                                                 36.0
Pro forma gain before taxes                                          8.0
Tax expense                                                          2.8
Pro forma net income                                             $   5.2

(d) Exhibits.

The following material is furnished as an exhibit to this Current Report on Form 8-K:

99.1 Press release of CNO Financial Group, Inc. dated July 1, 2014.


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