ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
In this section, we review the consolidated financial condition of CNO and its consolidated results of operations for the years ended December 31, 2025, 2024 and 2023 and, where appropriate, factors that may affect future financial performance. Please read this discussion in conjunction with the consolidated financial statements and notes included in this Form 10-K.
OVERVIEW
We are a holding company for a group of insurance companies that develop, market and administer health insurance, annuity, individual life insurance and other insurance and financial services products. We focus on serving middle-income pre-retiree and retired Americans, which we believe are attractive, underserved, high growth markets. We sell our products through exclusive agents, independent producers (some of whom sell one or more of our product lines exclusively) and direct marketing.
We view our operations as three insurance product lines (annuity, health and life) and the investment and fee income segments. Our segments are aligned based on their common characteristics, comparability of profit margins and the way the CODM makes operating decisions and assesses the performance of the business.
Our insurance product line segments (annuity, health and life) include marketing, underwriting and administration of the policies our insurance subsidiaries sell. The business written in each of the three product categories through all of our insurance subsidiaries is aggregated allowing management and investors to assess the performance of each product category. When analyzing profitability of these segments, we use insurance product margin as the measure of profitability, which is: (i) insurance policy income; and (ii) net investment income allocated to the insurance product lines; less (i) insurance policy benefits; (ii) interest credited to policyholders; (iii) amortization of deferred acquisition costs and present value of future profits, (iv) non-deferred commissions; and (v) advertising expense. Net investment income is allocated to the product lines using the book yield of investments backing the block of business, which is applied to net insurance liabilities for the block in each period. Net insurance liabilities for the purpose of allocating investment income to product lines are equal to: (i) policyholder account values for interest sensitive products; (ii) total reserves before the fair value adjustments reflected in accumulated other comprehensive income (loss), if applicable, for all other products; less (iii) amounts related to reinsured business; (iv) deferred acquisition costs; (v) the present value of future profits; and (vi) the value of unexpired options credited to insurance liabilities.
Income from insurance products is the sum of the insurance product 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. Management believes insurance product margin and income from insurance products provides an additional understanding of the business and a more meaningful analysis of the results of our insurance product lines.
We market our products through the Consumer and Worksite Divisions that reflect the customers served by the Company. The Consumer and Worksite Divisions are primarily focused on marketing insurance products, several types of which are sold in both divisions and underwritten in the same manner.
The Consumer Division serves individual consumers, engaging with them on the phone, virtually, online, face-to-face with agents, or through a combination of sales channels. This structure unifies consumer capabilities into a single division and integrates the strength of our agent sales forces with one of the largest direct-to-consumer insurance businesses with proven experience in advertising, web/digital and call center support.
The Worksite Division focuses on the sale of voluntary insurance benefits, including supplemental health and life insurance products in the workplace for businesses, associations, and other membership groups, interacting with customers at their place of employment and virtually.
The investment segment involves the management of our capital resources, including investments and the management of corporate debt and liquidity. Our measure of profitability of this segment is the total net investment income not allocated to the insurance products. 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 note ("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. Investment income not allocated to product lines includes investment income on investments in excess of amounts allocated to product lines, investments held by our holding companies, the spread we earn from our FHLB investment borrowing and FABN programs and variable components of investment income (including call and prepayment income, adjustments to returns on structured securities due to cash flow changes, income (loss) from Company-owned life insurance ("COLI") and alternative investment income not allocated to product lines), net of interest expense on corporate debt and financing arrangements. The spread earned from our FHLB investment borrowing and FABN programs includes the investment income on the matched assets less: (i) interest on investment borrowings related to the FHLB investment borrowing program; (ii) interest credited on funding agreements; and (iii) amortization of deferred acquisition costs related to the FABN program.
Our fee income segment includes the earnings generated from sales of third-party insurance products (primarily Medicare Advantage), services provided to employers through our Worksite division and the operations of our broker-dealer and registered investment advisor. In November 2025, we announced our intention to exit the fee services business within our Worksite Division to sharpen our focus on the core insurance business. As a result, beginning in fourth quarter of 2025, the net results of this business are no longer presented within the fee income segment, but are presented within net loss related to divested business within non-operating income. The resulting fee income metric is the fee income segment's measure of profitability.
Expenses not allocated to product lines primarily include the expenses of our corporate operations, excluding interest expense on debt.
The following summarizes our earnings for each of the three years ended December 31, 2025 (dollars in millions, except per share data):
| | | | | | | | | | | | | | | | | |
| 2025 | | 2024 | | 2023 |
| Insurance product margin | | | | | |
| Annuity margin | $ | 238.6 | | | $ | 274.2 | | | $ | 235.0 | |
| Health margin | 556.6 | | | 516.8 | | | 494.3 | |
| Life margin | 272.4 | | | 249.0 | | | 229.7 | |
| Total insurance product margin | 1,067.6 | | | 1,040.0 | | | 959.0 | |
| Allocated expenses | (611.3) | | | (615.3) | | | (599.0) | |
| Income from insurance products | 456.3 | | | 424.7 | | | 360.0 | |
| Fee income | 15.2 | | | 30.0 | | | 31.0 | |
| Investment income not allocated to product lines | 169.4 | | | 167.9 | | | 120.2 | |
| Expenses not allocated to product lines | (87.7) | | | (71.8) | | | (51.7) | |
| Operating earnings before taxes | 553.2 | | | 550.8 | | | 459.5 | |
| Income tax expense on operating income | (114.0) | | | (121.5) | | | (103.4) | |
| Net operating income (a) | 439.2 | | | 429.3 | | | 356.1 | |
Net realized investment losses from disposals, impairments and change in allowance for credit losses | (69.0) | | | (72.7) | | | (62.7) | |
| Net change in market value of investments recognized in earnings | 14.3 | | | 22.8 | | | (6.3) | |
| Fair value changes related to agent deferred compensation plan | (1.7) | | | 6.6 | | | (3.5) | |
| Changes in fair value of embedded derivative liabilities and market risk benefits | (64.0) | | | 46.3 | | | (29.9) | |
Expenses related to TechMod initiative | (20.3) | | | — | | | — | |
Goodwill and other asset impairment | (101.9) | | | — | | | — | |
| Net loss related to divested business | (17.3) | | | — | | | — | |
| Other | 0.1 | | | (13.9) | | | (0.3) | |
Net non-operating loss before taxes | (259.8) | | | (10.9) | | | (102.7) | |
| | | | | |
Income tax benefit on non-operating loss | (49.9) | | | (2.4) | | | (23.1) | |
| | | | | |
Net non-operating loss | (209.9) | | | (8.5) | | | (79.6) | |
| Net income | $ | 229.3 | | | $ | 420.8 | | | $ | 276.5 | |
| | | | | |
| Per diluted share: | | | | | |
| Net operating income | $ | 4.40 | | | $ | 3.97 | | | $ | 3.09 | |
Net non-operating loss | (2.10) | | | (0.08) | | | (0.69) | |
| Net income | $ | 2.30 | | | $ | 3.89 | | | $ | 2.40 | |
__________(a)Management believes that an analysis of net income applicable to common stock before: (i) net realized investment gains or losses from disposals, 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 ("MRBs") 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; (viii) costs related to our three-year project to modernize certain elements of our technology ("TechMod") that are incremental to normal spend and will not recur following implementation, net of taxes; (ix) goodwill and other asset impairment expenses, net of taxes; (x) gains or losses related to divested business, net of taxes; and (xi) other non-operating items including 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. The income tax expense or benefit allocated to the items included in net non-operating income (loss) represents the current and deferred income tax expense or benefit allocated to the items included in non-operating earnings. Management believes this information provides a better understanding of the
business and a more meaningful analysis of results of our insurance product lines. The table above reconciles the non-GAAP measure to the corresponding GAAP measure.
In addition, management uses these non-GAAP financial measures in its budgeting process, financial analysis of segment performance and in assessing the allocation of resources. We believe these non-GAAP financial measures enhance an investor's understanding of our financial performance and allows them to make more informed judgments about the Company as a whole. These measures also highlight operating trends that might not otherwise be apparent. However, net operating income is not a measurement of financial performance under GAAP and should not be considered as an alternative to cash flow from operating activities, as measures of liquidity, or as an alternative to net income as measures of our operating performance or any other measures of performance derived in accordance with GAAP. In addition, net operating income should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Net operating income has limitations as an analytical tool, and you should not consider such measure either in isolation or as a substitute for analyzing our results as reported under GAAP. Our definition and calculation of net operating income are not necessarily comparable to other similarly titled measures used by other companies due to different methods of calculation.
CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of various assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as revenues and expenses during the reporting period. Management has made estimates in the past that we believed to be appropriate but were subsequently revised as actual experience developed differently than expected. If our future experience differs materially from these estimates and assumptions, our results of operations and financial condition could be materially affected.
We base our estimates on historical experience and other assumptions that we believe are reasonable under the circumstances. We continually evaluate the information used to make these estimates as our business and the economic environment change. The use of estimates is pervasive throughout our financial statements. The accounting policies and estimates we consider most critical are summarized below. Additional information on our accounting policies is included in the note to our consolidated financial statements entitled "Summary of Significant Accounting Policies".
Investment Valuation
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and, therefore, represents an exit price, not an entry price. We carry certain assets and liabilities at fair value on a recurring basis, including fixed maturities, equity securities, trading securities, investments held by VIEs, derivatives, separate account assets and embedded derivatives related to fixed indexed annuity products. We carry our COLI, which is invested in a series of mutual funds, at its cash surrender value which approximates fair value. In addition, we disclose fair value for certain financial instruments, including mortgage loans, policy loans, cash and cash equivalents, insurance liabilities for interest-sensitive products and funding agreements, investment borrowings, notes payable and borrowings related to VIEs.
The degree of judgment utilized in measuring the fair value of financial instruments is largely dependent on the level to which pricing is based on observable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our view of market assumptions in the absence of observable market information. Financial instruments with readily available active quoted prices would be considered to have fair values based on the highest level of observable inputs, and little judgment would be utilized in measuring fair value. Financial instruments that rarely trade would often have fair value based on a lower level of observable inputs, and more judgment would be utilized in measuring fair value. We categorize our financial instruments carried at fair value into a three-level hierarchy based on the observability of inputs. The three-level hierarchy for fair value measurements is described in the note to the consolidated financial statements entitled "Fair Value Measurements."
The following summarizes investments on our consolidated balance sheet carried at fair value by pricing source and fair value hierarchy level as of December 31, 2025 (dollars in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Quoted prices in active markets for identical assets (Level 1) | | Significant observable inputs (Level 2) | | Significant unobservable inputs (Level 3) | | Total fair value |
| Priced by third-party pricing services | | $ | 176.5 | | | $ | 23,737.9 | | | $ | — | | | $ | 23,914.4 | |
| Priced by independent broker quotations | | — | | | 351.1 | | | 164.4 | | | 515.5 | |
| Priced by matrices | | — | | | — | | | — | | | — | |
Priced by other methods (a) | | — | | | 654.3 | | | 85.3 | | | 739.6 | |
| Total | | $ | 176.5 | | | $ | 24,743.3 | | | $ | 249.7 | | | $ | 25,169.5 | |
| | | | | | | | |
| Percent of total | | 0.7 | % | | 98.3 | % | | 1.0 | % | | 100.0 | % |
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(a) Primarily represents instruments that are modeled using market observable inputs, securities valued based on recent trades, or reports provided by third party asset managers.
When an available for sale fixed maturity security's fair value is below the amortized cost, the security is considered impaired. If a portion of the decline is due to credit-related factors, we separate the credit loss component of the impairment from the amount related to all other factors. The credit loss component is recorded as an allowance and reported in net investment gains (losses) (limited to the difference between estimated fair value and amortized cost). The impairment related to all other factors (non-credit factors) is reported in accumulated other comprehensive income (loss) along with unrealized gains (losses) related to fixed maturity investments, available for sale, net of tax and related adjustments. The allowance is adjusted for any additional credit losses and subsequent recoveries. When recognizing an allowance associated with a credit loss, the cost basis is not adjusted. When we determine a security is uncollectible, the remaining amortized cost will be written off.
In determining the credit loss component, we discount the estimated cash flows on a security by security basis. We consider the impact of macroeconomic conditions on inputs used to measure the amount of credit loss. For most structured securities, cash flow estimates are based on bond-specific facts and circumstances that may include collateral characteristics, expectations of delinquency and default rates, loss severity, prepayment speeds and structural support, including over-collateralization, excess spread, subordination and guarantees. For corporate bonds, cash flow estimates are derived by considering asset type, rating, time to maturity, and applying an expected loss rate.
If we intend to sell an impaired fixed maturity security, available for sale, or identify an impaired fixed maturity security, available for sale, for which is it more likely than not we will be required to sell before anticipated recovery, the difference between the fair value and the amortized cost is included in net investment gains (losses) and the fair value becomes the new amortized cost. The new cost basis is not adjusted for any subsequent recoveries in fair value.
Future events may occur, or additional information may become available, which may necessitate future realized losses in our portfolio. Significant losses could have a material adverse effect on our consolidated financial statements in future periods.
For more information on our investment portfolio and our critical accounting estimates related to investments, see the note to our consolidated financial statements entitled "Investments".
Present Value of Future Profits and Deferred Acquisition Costs
Amortization of the present value of future profits and deferred acquisition costs is calculated using the same contract groupings (or cohorts), partial withdrawal rate, mortality, surrender and lapse assumptions that are used in calculating the liability for future policy benefits, and these assumptions are reviewed and updated at least annually.
Present value of future profits and deferred acquisition costs are sensitive to unexpected terminations, due to higher mortality, surrender and lapse experience than expected. Such changes are recognized in the current period as a reduction of the capitalized balances. The effect of changes in assumptions related to future mortality and lapses are recognized prospectively over the remaining contract term. The carrying values of deferred acquisition costs are not subject to recovery testing.
Income Taxes
Our income tax expense includes deferred income taxes arising from temporary differences between the financial reporting and tax bases of assets and liabilities and NOLs. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply in the years in which temporary differences are expected to be recovered or paid. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in earnings in the period when the changes are enacted.
A reduction of the net carrying amount of deferred tax assets by establishing a valuation allowance is required if, based on the available evidence, it is more likely than not that such assets will not be realized. In assessing the need for a valuation allowance, all available evidence, both positive and negative, shall be considered to determine whether, based on the weight of that evidence, a valuation allowance for deferred tax assets is needed. This assessment requires significant judgment and considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of carryforward periods, and tax planning strategies.
We evaluate the need to establish a valuation allowance for our deferred income tax assets on an ongoing basis using a deferred tax valuation model. Our model is adjusted to reflect changes in our projections of future taxable income including changes resulting from the Tax Cuts and Job Act, investment strategies, the impact of the sale or reinsurance of business, the recapture of business previously ceded and tax planning strategies. Our estimates of future taxable income are based on evidence we consider to be objectively verifiable. At December 31, 2025, our projection of future taxable income for purposes of determining the valuation allowance is based on our estimates of such future taxable income through the date our NOLs expire. Such estimates are subject to numerous risks and uncertainties and the extent to which actual impacts differ from the assumptions used in our deferred tax valuation model. Based on our assessment, we have concluded that it is more likely than not that our net deferred tax assets of $711.7 million will be realized through future taxable earnings.
Recovery of our deferred tax asset is dependent on achieving the level of future taxable income projected in our deferred tax valuation model and failure to do so could result in the recognition of a valuation allowance in a future period. The recognition of a valuation allowance would increase income tax expense and reduce shareholders' equity, and such an increase could have a significant impact upon our earnings in the future.
We had $976.4 million of federal NOLs as of December 31, 2025, as summarized below (dollars in millions):
| | | | | | | | |
| | Net operating loss |
| Year of expiration | | carryforwards |
| | |
| | |
| | |
| | |
| | |
| | |
2032 through 2035 | | $ | 16.5 | |
| No expiration date | | 959.9 | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| Total federal NOLs | | $ | 976.4 | |
| | |
Our non-life NOLs with no expiration date of $832.4 million can be used to offset 35 percent of life insurance company taxable income and 80 percent of non-life company taxable income. Our non-life NOLs with expiration dates can be used to offset 35 percent of life insurance company taxable income and 100 percent of non-life company taxable income until all non-life NOLs are utilized or expire. Our life NOLs with no expiration date of $127.5 million can be used to offset 80% of life company taxable income, subject to certain limitations in the Code. In March 2025, the Company executed a consent agreement with the IRS that provided formal approval for the tax method change for allocating indirect costs (pursuant to the Code) to self-constructed real estate assets. As a result, the Company recharacterized the remaining $797.6 million of capitalized indirect costs under the prior accounting method to a NOL with no expiration date.
Liabilities for Insurance Products
At December 31, 2025, the total balance of our liabilities for insurance products was $31.1 billion. These liabilities are generally payable over an extended period of time and the profitability of the related products is dependent on the pricing of the products and other factors. Liabilities for insurance products are calculated using management's best judgments, based on our past experience and standard actuarial tables, of mortality, morbidity, lapse rates, investment experience and expense levels. Differences between our expectations when we sold these products and our actual experience could positively or negatively impact future earnings.
Our liabilities for future policy benefits are measured using the net premium ratio approach as described in the note to the consolidated financial statements entitled "Summary of Significant Accounting Policies".
The liability for future policy benefits is determined based on numerous assumptions. The most significant assumptions for our life and annuity business are mortality and lapse/withdrawal rates which are based on our experience and, in cases of limited experience, industry experience. Mortality and lapse/withdrawal rates also take into consideration future expectations in policyholder behavior that may vary from past experience. For our health business, mortality rates, lapse rates, morbidity assumptions and future rate increases are based on our experience and, in cases of limited experience, industry experience. Such assumptions also consider future expectations in policyholder behavior that may vary from past experience. In addition, the liability for future policy benefits is measured using estimated discount rates. The assumptions and estimates that we use often depend on judgment regarding the likelihood of future events and are inherently uncertain. The liability for unpaid policy claims on health contracts is classified as future policy benefits on the consolidated balance sheet. The liability for unpaid policy claims on life insurance contracts is classified as the liability for life insurance policy claims on the consolidated balance sheet.
Cash flow assumptions related to our insurance contracts are established when a policy is issued and are evaluated each quarter to determine if assumption updates are required. A more detailed review of assumptions is performed annually. Changes to our cash flow assumptions are recognized in the liability for future policy benefits remeasurement (gain) loss in the consolidated statement of operations. Actual experience is reflected in the calculation of future policy benefits each quarter, and changes in the liability due to actual experience are also recognized in the liability for future policy benefits remeasurement (gain) loss in the consolidated statement of operations.
Discount rates used to calculate net premiums are locked in at policy inception and provide the basis to recognize interest expense in the consolidated statement of operations. Discount rates used to measure the carrying value of the liability for future policy benefits in the consolidated balance sheet are updated each reporting period, and differences between the liability balances calculated using the locked-in rate and the updated discount rates are recognized in accumulated other comprehensive income (loss). For additional discussion on the determination of discount rates, see the note to the consolidated financial statements entitled "Summary of Significant Accounting Policies".
The table presented below summarizes our estimates of the immediate impacts to pre-tax income resulting from hypothetical revisions to certain assumptions and is for illustrative purposes only as such hypothetical revisions are not currently required or anticipated. We have assumed that revisions to assumptions resulting in the adjustments summarized below would occur equally among policy types, ages and durations within each product classification. Any actual adjustment would be dependent on the specific policies affected and, therefore, may differ from the estimates summarized below. In addition, the impact of actual adjustments would reflect the net effect of all changes in assumptions during the period. The impacts also assume no management actions. For example, higher morbidity could result in higher expected rate increases, which would create some level of offset to the morbidity impacts.
| | | | | | |
| Change in assumptions | Estimated adjustment to income before income taxes based on revisions to certain assumptions |
| (dollars in millions) |
| Annuities | | |
| Fixed indexed and fixed interest annuity products: | | |
| 5% increase to assumed mortality | $ | 1 | | |
| 5% decrease to assumed mortality | (1) | | |
| 10% increase to assumed lapse rate | (6) | | |
| 10% decrease to assumed lapse rate | 7 | | |
| 50 basis point increase in interest rates (a) | 73 | | |
| 50 basis point decrease in interest rates (a) | (80) | | |
| Other annuities: | | |
| 5% increase to assumed mortality | 4 | | |
| 5% decrease to assumed mortality | (5) | | |
| Health | | |
| Medicare supplement: | | |
| 5% increase to assumed mortality | 2 | | |
| 5% decrease to assumed mortality | (2) | | |
| 10% increase to assumed lapse rate | 3 | | |
| 10% decrease to assumed lapse rate | (3) | | |
| 10% increase to assumed morbidity | (68) | | |
| 10% decrease to assumed morbidity | 68 | | |
| Supplemental health: | | |
| 5% increase to assumed mortality | 12 | | |
| 5% decrease to assumed mortality | (12) | | |
| 10% increase to assumed lapse rate | 30 | | |
| 10% decrease to assumed lapse rate | (30) | | |
| 10% increase to assumed morbidity | (30) | | |
| 10% decrease to assumed morbidity | 31 | | |
| Long-term care: | | |
| 5% increase to assumed mortality | 37 | | |
| 5% decrease to assumed mortality | (41) | | |
| 10% increase to assumed lapse rate | 22 | | |
| 10% decrease to assumed lapse rate | (23) | | |
| 10% increase to assumed morbidity | (88) | | |
| 10% decrease to assumed morbidity | 82 | | |
| Life | | |
| Traditional life: | | |
| 5% increase to assumed mortality | (49) | | |
| 5% decrease to assumed mortality | 50 | | |
| 10% increase to assumed lapse rate | 7 | | |
| 10% decrease to assumed lapse rate | (7) | | |
| Interest-sensitive life products: | | |
| 5% increase to assumed mortality | (5) | | |
| 5% decrease to assumed mortality | 5 | | |
| 10% increase to assumed lapse rate | 1 | | |
| 10% decrease to assumed lapse rate | (1) | | |
_____________________
(a) The estimated impact of the hypothetical 50 basis point increase or decrease in interest rates related to our fixed indexed and fixed interest annuity products would be reflected in our pre-tax non-operating earnings.
The following summarizes the persistency of our major blocks of insurance business summarized by line of business:
| | | | | | | | | | | | | | | | | |
| Years ended December 31, |
| 2025 | | 2024 | | 2023 |
| Annuity: | | | | | |
| Fixed indexed annuities (1) | 89.1 | % | | 88.1 | % | | 89.7 | % |
| Fixed interest annuities (1) | 84.6 | | | 82.9 | | | 83.4 | |
| Other annuities (2) | 96.9 | | | 90.6 | | | 97.2 | |
| Health: | | | | | |
| Medicare supplement (3) | 85.8 | | | 84.1 | | | 84.3 | |
| Supplemental health (3) | 86.6 | | | 88.0 | | | 88.5 | |
| Long-term care (3) | 91.1 | | | 91.1 | | | 90.5 | |
| Life: | | | | | |
| Traditional life (3) | 82.8 | | | 84.1 | | | 83.9 | |
| Interest-sensitive life (3) | 87.4 | | | 88.7 | | | 89.1 | |
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(1) Based on the total amount of death benefits, surrender values and partial withdrawals divided by the average account value.
(2) Based on total reserves released at death divided by average account value.
(3) Based on number of inforce policies.
Market Risk Benefits
MRBs are contracts or contract features that both provide protection to the contract holder from other-than-nominal capital market risk and expose the Company to other-than-nominal capital market risk. Many of our fixed indexed annuity products include a GLWB that is considered a MRB. MRBs are measured at fair value using an option-based valuation model based on amount of exposure, market data, company experience and other factors. Changes in fair value are recognized in earnings each period with the exception of the portion of the change in fair value due to a change in the instrument-specific credit risk, which is recognized in other comprehensive income (loss). MRBs in an asset position are presented separately from those in a liability position as there is no legal right of offset between contracts.
The cost of MRBs may rise in volatile or declining equity markets or in a low interest rate environment. Market conditions including, but not limited to, changes in interest rates, equity indices, market volatility, variations in actuarial assumptions regarding policyholder behavior, mortality and risk margins related to non-capital market inputs, may result in significant fluctuations in the estimated fair value of the guarantees that could affect net income and changes in our nonperformance risk could materially affect other comprehensive income (loss).
Goodwill and Intangible Assets
In February 2021, we acquired DirectPath, LLC ("DirectPath", now known as Optavise, LLC subsequent to its name change in April 2022). In April 2019, we acquired Web Benefits Design Corporation ("WBD"), which was subsequently merged into Optavise, LLC during 2023. Optavise, LLC provides personalized benefits education, advocacy and transparency, and communications services that help employers reduce healthcare costs and assist employees with making informed benefits decisions. Optavise, LLC goodwill and other intangible assets arising from the acquisitions were reflected in our Fee income segment.
Intangible assets with definite lives are amortized over their estimated useful lives and are reviewed for impairment if indicators of impairment arise. When such indicators are present, intangible assets are first tested for recoverability in accordance with Accounting Standards Codification ("ASC") 360, Property, Plant, and Equipment. If the assets are not recoverable, an impairment loss is recorded, measured as the difference between the assets' fair value and their carrying value. Goodwill is tested annually for impairment and whenever indicators of impairment arise in accordance with ASC 350, Intangibles - Goodwill and Other. The Company first performs a qualitative assessment to determine whether it is more likely than not a goodwill impairment exists, and if an indication of potential impairment results from the qualitative
assessment, a quantitative assessment is performed. The Company prepares a quantitative assessment to determine the fair value of the reporting unit by using a combination of the present value of expected future cash flows and a market approach based on revenue-multiple data from peer companies and relevant observable market transactions, if available. If an impairment is identified, an impairment is recorded by the amount that the carrying value exceeds the fair value of the reporting unit up to the carrying amount of goodwill.
Macroeconomic, industry and market conditions, both current and future expected financial performance, and relevant entity-specific events that occurred during the three months ended September 30, 2025 caused us to consider whether there were any interim indicators of impairment related to the Optavise, LLC business within our fee income segment. Optavise, LLC provides personalized benefits education, advocacy and transparency, and communications services that help employers reduce healthcare costs and assist employees with making informed benefit decisions. As a result of this evaluation, we identified that the valuation of Optavise, LLC would more likely than not be impacted by the recent decline in value of comparable publicly traded companies. This, combined with lower than anticipated revenue in the quarter and trends for future periods led us to conclude that there were indicators of impairment and we accordingly prepared a quantitative assessment. The Company determined the fair value of the reporting unit by using a combination of the present value of expected future cash flows and a market approach based on earnings multiple data from peer companies, using unobservable level 3 inputs.
As a result of the quantitative assessment performed, the Company concluded that goodwill of $69.5 million and other assets, primarily intangible assets, of $27.2 million were fully impaired as of September 30, 2025. We recognized an additional impairment charge of $5.2 million related to other long-lived assets as a result of exiting the fee services side of the Worksite business during the fourth quarter of 2025, as previously announced. The total impairment charge of $101.9 million is included in the accompanying consolidated statement of operations for the year ended December 31, 2025. No material assets remain on Optavise, LLC after the effect of these impairments.
RESULTS OF OPERATIONS
The following tables and narratives summarize the operating results of our segments (dollars in millions):
| | | | | | | | | | | | | | | | | | | |
| | 2025 | | 2024 | | 2023 | | |
| Insurance product margin | | | | | | | |
| Annuity: | | | | | | | |
| Insurance policy income | $ | 39.3 | | | $ | 35.5 | | | $ | 28.4 | | | |
| Net investment income | 621.3 | | | 565.0 | | | 516.3 | | | |
| Insurance policy benefits | (25.0) | | | 15.2 | | | (29.0) | | | |
| Interest credited | (293.5) | | | (253.8) | | | (209.4) | | | |
| Amortization and non-deferred commissions (a) | (103.5) | | | (87.7) | | | (71.3) | | | |
| Annuity margin | 238.6 | | | 274.2 | | | 235.0 | | | |
| Health: | | | | | | | |
| Insurance policy income | 1,661.4 | | | 1,618.3 | | | 1,594.6 | | | |
| Net investment income | 301.9 | | | 299.6 | | | 296.7 | | | |
| Insurance policy benefits | (1,241.8) | | | (1,239.6) | | | (1,234.9) | | | |
| Amortization and non-deferred commissions (a) | (164.9) | | | (161.5) | | | (162.1) | | | |
| Health margin | 556.6 | | | 516.8 | | | 494.3 | | | |
| Life: | | | | | | | |
| Insurance policy income | 921.9 | | | 904.7 | | | 882.5 | | | |
| Net investment income | 151.1 | | | 147.1 | | | 144.8 | | | |
| Insurance policy benefits | (568.2) | | | (576.0) | | | (570.0) | | | |
| Interest credited | (53.7) | | | (51.5) | | | (49.3) | | | |
| Amortization and non-deferred commissions (a) | (111.0) | | | (98.0) | | | (85.8) | | | |
| Advertising expense | (67.7) | | | (77.3) | | | (92.5) | | | |
| Life margin | 272.4 | | | 249.0 | | | 229.7 | | | |
| Total insurance product margin | 1,067.6 | | | 1,040.0 | | | 959.0 | | | |
| Allocated expenses: | | | | | | | |
| Branch office expenses | (68.1) | | | (65.7) | | | (64.9) | | | |
| Other allocated expenses | (543.2) | | | (549.6) | | | (534.1) | | | |
| Income from insurance products | 456.3 | | | 424.7 | | | 360.0 | | | |
| Fee income | 15.2 | | | 30.0 | | | 31.0 | | | |
| Investment income not allocated to product lines | 169.4 | | | 167.9 | | | 120.2 | | | |
| Expenses not allocated to product lines | (87.7) | | | (71.8) | | | (51.7) | | | |
| Operating earnings before taxes | 553.2 | | | 550.8 | | | 459.5 | | | |
| Income tax expense on operating income | (114.0) | | | (121.5) | | | (103.4) | | | |
| Net operating income | $ | 439.2 | | | $ | 429.3 | | | $ | 356.1 | | | |
____________
(a)Amortization and non-deferred commissions are comprised of: (i) the amortization of deferred acquisition costs and present value of future profits; and (ii) commission expenses that are not directly related to the successful acquisition of new or renewal insurance contracts and, therefore, are not eligible to be deferred. Such non-deferred commissions are included in other operating costs and expenses on the consolidated statement of operations.
General: CNO is the top tier holding company for a group of insurance companies that develop, market and administer health insurance, annuity, individual life insurance and other insurance and financial services products. We view our operations by segments, which consist of insurance product lines. These products are distributed by our two divisions. The Consumer Division serves individual consumers, engaging with them on the phone, virtually, online, face-to-face with agents, or through a combination of sales channels. The Worksite Division focuses on the sale of voluntary benefit life and health insurance products in the workplace for businesses, associations, and other membership groups, interacting with customers at their place of employment and virtually.
Insurance product margin is management's measure of the profitability of its annuity, health and life product lines' 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. Income from insurance products is the sum of the insurance product 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. Management believes insurance product margin and income from insurance products provides an additional understanding of the business and a more meaningful analysis of the results of our insurance product lines.
Net investment income is allocated to the product lines using the book yield of investments backing the block of business, which is applied to the average net insurance liabilities for the block in each period. Net insurance liabilities for the purpose of allocating investment income to product lines are equal to: (i) policyholder account values for interest sensitive products; (ii) total reserves before the fair value adjustments reflected in accumulated other comprehensive income (loss), if applicable, for all other products; less (iii) amounts related to reinsured business; (iv) deferred acquisition costs; (v) the present value of future profits; and (vi) the value of unexpired options credited to insurance liabilities. 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 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. Investment income not allocated to product lines includes investment income on investments in excess of amounts allocated to product lines, investments held by our holding companies, the spread we earn from our FHLB investment borrowing and FABN programs and variable components of investment income (including call and prepayment income, adjustments to returns on structured securities due to cash flow changes, income (loss) from COLI and alternative investment income not allocated to product lines), net of interest expense on corporate debt and financing arrangements. The spread earned from our FHLB investment borrowing and FABN programs includes the investment income on the matched assets less: (i) interest on investment borrowings related to the FHLB investment borrowing program; (ii) interest credited on funding agreements, and (iii) amortization of deferred acquisition costs related to the FABN program.
Comprehensive Annual Actuarial Review: We perform an annual review of our experience and assumptions including, but not limited to, assumptions related to mortality rates, morbidity rates, surrender rates, earned rates, credited rates and expenses. In addition, we also review and update our assumptions on a more frequent basis to the extent current conditions or circumstances warrant changes that could be significant to our operating results. The impacts of the review have had a significant impact on our earnings.
We performed our 2025 comprehensive annual actuarial review, resulting in a net favorable impact of $21.4 million to net income, including a net favorable impact of $41.3 million to insurance product margins included in pre-tax operating income. The most significant insurance product margin impacts related to fixed indexed annuities, supplemental health and Medicare supplement products, which were favorably (unfavorably) impacted by $13.8 million, $24.8 million, and $(9.2) million, respectively. The fixed indexed annuities changes primarily related to higher surrender assumptions on the MRB liability. The supplemental health changes primarily related to lower persistency assumptions. The Medicare supplement changes primarily related to higher morbidity. In addition, the comprehensive annual actuarial review unfavorably impacted pre-tax non-operating income by $14.3 million related to changes in the fair value of embedded derivative liabilities on our fixed indexed annuities. The primary changes related to increases in the surrender rate assumptions.
We performed our 2024 comprehensive annual actuarial review, resulting in a net unfavorable impact of $12.1 million to net income, including a net favorable impact to insurance product margins included in pre-tax operating income of $27.3 million. The most significant impacts related to fixed indexed annuities and Medicare supplement products which were favorably (unfavorably) impacted by $36.2 million and $(9.4) million, respectively. The primary fixed indexed
annuities changes related to higher mortality assumptions. The primary Medicare supplement changes related to higher morbidity and higher persistency assumptions. In addition, the comprehensive annual actuarial review unfavorably impacted pre-tax non-operating income by $42.8 million related to changes in the fair value of embedded derivative liabilities and market risk benefits on our fixed indexed annuities. The primary changes related to higher earned rate assumptions.
We performed our 2023 comprehensive annual actuarial review, resulting in a net favorable impact of $16.7 million to net income, including a net favorable impact to insurance product margins included in pre-tax operating income of $33.9 million. The most significant impacts related to supplemental health and Medicare supplement products which were favorably (unfavorably) impacted by $41.9 million and $(10.6) million, respectively. The primary supplemental health changes related to lower morbidity and higher surrender assumptions. The primary Medicare supplement changes related to higher near-term morbidity and higher persistency assumptions. In addition, the comprehensive annual actuarial review unfavorably impacted pre-tax non-operating income by $12.4 million related to changes in the fair value of embedded derivative liabilities and market risk benefits on our fixed indexed annuities.
The following tables summarize the favorable (unfavorable) impacts of our comprehensive annual actuarial reviews on pre-tax operating income for the years ended December 31, 2025, 2024 and 2023 (dollars in millions):
| | | | | | | | | | | | | | | | | | | | |
Insurance policy benefits | | | | | | |
| Line of business | | 2025 | | 2024 | | 2023 |
| | | | | | |
| | | | | | |
| Fixed indexed annuities | | $ | 13.8 | | | $ | 36.2 | | | $ | 9.4 | |
Other annuities | | 2.8 | | | — | | | 3.5 | |
| Supplemental health | | 24.8 | | | 0.3 | | | 41.9 | |
| Medicare supplement | | (9.2) | | | (9.4) | | | (10.6) | |
| Long-term care | | 5.5 | | | 0.9 | | | (9.0) | |
| Traditional life | | 0.8 | | | (4.5) | | | (5.2) | |
| Interest-sensitive life | | 2.8 | | | 3.8 | | | 3.9 | |
Impact on pre-tax operating income | | $ | 41.3 | | | $ | 27.3 | | | $ | 33.9 | |
Summary of Operating Results: Net operating income was $439.2 million in 2025, compared to $429.3 million in 2024 and $356.1 million in 2023.
Operating return on equity ("operating ROE") (a non-GAAP measure) is equal to the trailing four quarters of net operating income divided by average shareholders' equity, excluding accumulated other comprehensive loss and net operating loss carryforwards. Our operating ROE, excluding significant items, was 11.4 percent, 11.4 percent, and 8.6 percent for the years ended December 31, 2025, 2024, and 2023, respectively. We continue to target an improvement in run‑rate operating ROE of 200 basis points through 2027, off a 2024 run-rate of approximately 10 percent.
Insurance product margin was $1,067.6 million, $1,040.0 million and $959.0 million in 2025, 2024 and 2023, respectively. Excluding significant items primarily related to our comprehensive annual actuarial review, the insurance product margin was $1,019.5 million, $1,012.7 million and $925.1 million in 2025, 2024 and 2023, respectively. Fluctuations by product line are discussed in greater detail in the narratives that follow.
The effective tax rate for 2025, 2024 and 2023 was 21.9 percent, 22.0 percent and 22.5 percent, respectively.
Total allocated and unallocated expenses are summarized in the table below. Expenses not allocated to product lines include certain significant items listed in the table below. Total allocated and unallocated expenses as adjusted for the significant items are summarized below (dollars in millions):
| | | | | | | | | | | | | | | | | |
| 2025 | | 2024 | | 2023 |
| Expenses allocated to product lines | $ | 611.3 | | | $ | 615.3 | | | $ | 599.0 | |
| Expenses not allocated to product lines | 87.7 | | | 71.8 | | | 51.7 | |
| Net recoveries (expenses) related to significant legal and regulatory matters | — | | | — | | | 21.7 | |
| Unfavorable impact related to a fixed asset impairment | — | | | (2.9) | | | — | |
| Adjusted total | $ | 699.0 | | | $ | 684.2 | | | $ | 672.4 | |
Our expense ratio was 18.9 percent, 19.2 percent, and 19.4 percent for the years ended December 31, 2025, 2024 and 2023, respectively. The expense ratio is defined as total allocated and unallocated expenses (excluding any significant items) divided by the sum of insurance policy income and net investment income allocated to products.
The fee income segment is summarized below (dollars in millions):
| | | | | | | | | | | | | | | | | |
| 2025 | | 2024 | | 2023 |
| Consumer Division fee income: | | | | | |
| Fee revenue | $ | 163.8 | | | $ | 156.3 | | | $ | 140.8 | |
| Operating cost and expenses | (130.3) | | | (108.7) | | | (90.3) | |
| Net Consumer Division fee income | 33.5 | | | 47.6 | | | 50.5 | |
| Worksite Division fee income: | | | | | |
| Fee revenue | 21.5 | | | 34.2 | | | 36.8 | |
| Operating cost and expenses | (39.8) | | | (51.8) | | | (56.3) | |
| Net Worksite Division fee income | (18.3) | | | (17.6) | | | (19.5) | |
| Total fee income segment: | | | | | |
| Fee revenue | 185.3 | | | 190.5 | | | 177.6 | |
| Operating cost and expenses | (170.1) | | | (160.5) | | | (146.6) | |
| Net fee income | $ | 15.2 | | | $ | 30.0 | | | $ | 31.0 | |
Net fee income decreased $14.8 million in 2025 as compared to 2024 primarily from decreased fee income recognized on Medicare Advantage third-party products, including unfavorable experience adjustments of $4.1 million in 2025 compared to favorable experience adjustments of $2.6 million in 2024. The experience adjustments are largely reflected in the first quarter. In addition, we updated our Medicare Advantage assumptions in the fourth quarter of 2025 to primarily reflect lower persistency, including higher exchanges between carriers, resulting in an unfavorable impact to income of $5.6 million.
Beginning in the fourth quarter of 2025, as a result of exiting the fee services business within our Worksite Division, the net results of this business are no longer reflected within operating income, but are reflected within non-operating income.
Margin from Annuity Products (dollars in millions):
| | | | | | | | | | | | | | | | | |
| | 2025 | | 2024 | | 2023 |
| Annuity margin: | | | | | |
| Fixed indexed annuities | | | | | |
| Insurance policy income | $ | 27.6 | | | $ | 28.0 | | | $ | 19.7 | |
| Net investment income | 512.2 | | | 458.7 | | | 410.3 | |
| Insurance policy benefits | (6.9) | | | 14.2 | | | (10.1) | |
| Interest credited | (242.3) | | | (205.1) | | | (161.9) | |
| Amortization and non-deferred commissions | (94.6) | | | (80.0) | | | (65.8) | |
| Margin from fixed indexed annuities | $ | 196.0 | | | $ | 215.8 | | | $ | 192.2 | |
| Average net insurance liabilities | $ | 10,582.5 | | | $ | 9,848.9 | | | $ | 9,337.3 | |
| Margin/average net insurance liabilities | 1.85 | % | | 2.19 | % | | 2.06 | % |
| Fixed interest annuities | | | | | |
| Insurance policy income | $ | 2.1 | | | $ | 1.2 | | | $ | 1.0 | |
| Net investment income | 86.9 | | | 84.1 | | | 83.6 | |
| Insurance policy benefits | 0.7 | | | 0.1 | | | (0.5) | |
| Interest credited | (48.5) | | | (46.6) | | | (45.2) | |
| Amortization and non-deferred commissions | (8.4) | | | (7.2) | | | (5.0) | |
| Margin from fixed interest annuities | $ | 32.8 | | | $ | 31.6 | | | $ | 33.9 | |
| Average net insurance liabilities | $ | 1,591.4 | | | $ | 1,578.3 | | | $ | 1,612.0 | |
| Margin/average net insurance liabilities | 2.06 | % | | 2.00 | % | | 2.10 | % |
| Other annuities | | | | | |
| Insurance policy income | $ | 9.6 | | | $ | 6.3 | | | $ | 7.7 | |
| Net investment income | 22.2 | | | 22.2 | | | 22.4 | |
| Insurance policy benefits | (18.8) | | | 0.9 | | | (18.4) | |
| Interest credited | (2.7) | | | (2.1) | | | (2.3) | |
| Amortization and non-deferred commissions | (0.5) | | | (0.5) | | | (0.5) | |
| Margin from other annuities | $ | 9.8 | | | $ | 26.8 | | | $ | 8.9 | |
| Average net insurance liabilities | $ | 397.0 | | | $ | 422.3 | | | $ | 458.8 | |
| Margin/average net insurance liabilities | 2.47 | % | | 6.35 | % | | 1.94 | % |
| Total annuity margin | $ | 238.6 | | | $ | 274.2 | | | $ | 235.0 | |
| Average net insurance liabilities | $ | 12,570.9 | | | $ | 11,849.5 | | | $ | 11,408.1 | |
| Margin/average net insurance liabilities | 1.90 | % | | 2.31 | % | | 2.06 | % |
The favorable impacts of our comprehensive annual actuarial review (reflected in insurance policy benefits) on annuity product margins are summarized below (dollars in millions):
| | | | | | | | | | | | | | | | | |
| 2025 | | 2024 | | 2023 |
| Fixed indexed annuities | $ | 13.8 | | | $ | 36.2 | | | $ | 9.4 | |
| Fixed interest annuities | — | | | — | | | — | |
| Other annuities | 2.8 | | | — | | | 3.5 | |
| | | | | |
Margin, excluding impact of comprehensive annual actuarial review: | | | | | |
| Fixed indexed annuities | 182.2 | | | 179.6 | | | 182.8 | |
| Fixed interest annuities | 32.8 | | | 31.6 | | | 33.9 | |
| Other annuities | 7.0 | | | 26.8 | | | 5.4 | |
Margin from fixed indexed annuities was $196.0 million in 2025 compared to $215.8 million in 2024 and $192.2 million in 2023. The margin adjusted to exclude the favorable impacts of the comprehensive annual actuarial review previously discussed was $182.2 million, $179.6 million and $182.8 million in 2025, 2024 and 2023, respectively. The adjusted margin increased in the current period primarily due to growth in the block, partially offset by higher amortization. Growth in the block is being partially offset by spread compression driven by increased surrenders of higher spread products. The adjusted margin decreased from 2023 to 2024 primarily due to additional amortization resulting from higher surrenders partially offset by increased surrender charge income. Net insurance liabilities (equal to (i) policyholder account values for interest sensitive products; (ii) total reserves before the fair value adjustments reflected in accumulated other comprehensive income (loss), if applicable, for all other products; less (iii) amounts related to reinsured business; (iv) deferred acquisition costs; (v) the present value of future profits; and (vi) the value of unexpired options credited to insurance liabilities) were $10,582.5 million, $9,848.9 million and $9,337.3 million in 2025, 2024 and 2023, respectively. The growth in net insurance liabilities was driven by deposits and reinvested returns in excess of withdrawals, which results in higher net investment income allocated. The earned yield was 4.84 percent in 2025, up from 4.66 percent in 2024 and 4.39 percent in 2023, reflecting higher portfolio yields.
Net investment income and interest credited exclude the change in market values of the underlying options supporting the fixed indexed annuity products and corresponding offsetting amount credited to policyholder account balances. Such amounts were $106.5 million, $231.8 million and $118.3 million in 2025, 2024 and 2023, respectively.
Margin from fixed interest annuities was $32.8 million in 2025 compared to $31.6 million in 2024 and $33.9 million in 2023. The margin increased in 2025 primarily due to growth in the block and decreased in 2024 primarily due to additional amortization from higher policy surrenders. The reduction in the size of the block in 2024 was largely offset by increased yields. Average net insurance liabilities were $1,591.4 million, $1,578.3 million and $1,612.0 million in 2025, 2024 and 2023, respectively, driven by withdrawals in excess of deposits and reinvested returns. The earned yield increased to 5.46% percent in 2025, reflecting higher portfolio yields compared to 5.33 percent in 2024 and 5.19 percent in 2023.
Margin from other annuities was $9.8 million in 2025 compared to $26.8 million in 2024 and $8.9 million in 2023. The margin adjusted to exclude the favorable impacts of the comprehensive annual actuarial review previously discussed was $7.0 million in 2025, $26.8 million in 2024, and $5.4 million in 2023. The margin on this relatively small block of business is sensitive to annuitant mortality related to contracts with life contingencies. An increase in mortality in this block will result in a decrease in insurance liabilities and insurance policy benefits. The adjusted margin decreased in the current period due to higher mortality in 2024.
Margin from Health Products (dollars in millions):
| | | | | | | | | | | | | | | | | |
| | 2025 | | 2024 | | 2023 |
| Health margin: | | | | | |
| Supplemental health | | | | | |
| Insurance policy income | $ | 744.8 | | | $ | 725.1 | | | $ | 711.2 | |
| Net investment income | 161.1 | | | 157.7 | | | 155.3 | |
| Insurance policy benefits | (487.9) | | | (504.2) | | | (466.1) | |
| Amortization and non-deferred commissions | (112.6) | | | (108.8) | | | (106.0) | |
| Margin from supplemental health | $ | 305.4 | | | $ | 269.8 | | | $ | 294.4 | |
| Margin/insurance policy income | 41 | % | | 37 | % | | 41 | % |
| Medicare supplement | | | | | |
| Insurance policy income | $ | 627.0 | | | $ | 620.5 | | | $ | 619.9 | |
| Net investment income | 4.8 | | | 5.3 | | | 4.9 | |
| Insurance policy benefits | (488.2) | | | (472.4) | | | (464.7) | |
| Amortization and non-deferred commissions | (37.5) | | | (39.5) | | | (43.2) | |
| Margin from Medicare supplement | $ | 106.1 | | | $ | 113.9 | | | $ | 116.9 | |
| Margin/insurance policy income | 17 | % | | 18 | % | | 19 | % |
| Long-term care | | | | | |
| Insurance policy income | $ | 289.6 | | | $ | 272.7 | | | $ | 263.5 | |
| Net investment income | 136.0 | | | 136.6 | | | 136.5 | |
| Insurance policy benefits | (265.7) | | | (263.0) | | | (304.1) | |
| Amortization and non-deferred commissions | (14.8) | | | (13.2) | | | (12.9) | |
| Margin from long-term care | $ | 145.1 | | | $ | 133.1 | | | $ | 83.0 | |
| Margin/insurance policy income | 50 | % | | 49 | % | | 31 | % |
| Total health margin | $ | 556.6 | | | $ | 516.8 | | | $ | 494.3 | |
| Margin/insurance policy income | 34 | % | | 32 | % | | 31 | % |
The favorable (unfavorable) impacts of our comprehensive annual actuarial review (reflected in insurance policy benefits) on health product margins are summarized below (dollars in millions):
| | | | | | | | | | | | | | | | | |
| 2025 | | 2024 | | 2023 |
| Supplemental health | $ | 24.8 | | | $ | 0.3 | | | $ | 41.9 | |
| Medicare supplement | (9.2) | | | (9.4) | | | (10.6) | |
| Long-term care | 5.5 | | | 0.9 | | | (9.0) | |
| | | | | |
Margin, excluding impact of comprehensive annual actuarial review: | | | | | |
| Supplemental health | 280.6 | | | 269.5 | | | 252.5 | |
| Medicare supplement | 115.3 | | | 123.3 | | | 127.5 | |
| Long-term care | 139.6 | | | 132.2 | | | 92.0 | |
Margin from supplemental health business was $305.4 million in 2025 compared to $269.8 million in 2024 and $294.4 million in 2023. The margin adjusted to exclude the favorable impacts of the comprehensive annual actuarial review previously discussed was $280.6 million, $269.5 million and $252.5 million in 2025, 2024 and 2023, respectively. The adjusted margin as a percentage of insurance policy income was 38 percent in 2025 compared to 37 percent in 2024 and 36 percent in 2023. The increase in the supplemental health adjusted margin in 2025, compared to 2024 and 2023, reflects growth in the block and lower morbidity.
Our supplemental health products (including specified disease, accident and hospital indemnity products) generally provide fixed or limited benefits. For example, payments under cancer insurance policies are generally made directly to, or at the direction of, the policyholder following diagnosis of, or treatment for, a covered type of cancer. Approximately two-thirds of our supplemental health policies inforce (based on policy count) are sold with return of premium or cash value riders. The return of premium rider generally provides that after a policy has been inforce for a
specified number of years or upon the policyholder reaching a specified age, we will pay to the policyholder, or a beneficiary under the policy, the aggregate amount of all premiums paid under the policy, without interest, less the aggregate amount of all claims incurred under the policy. The cash value rider is similar to the return of premium rider, but also provides for payment of a graded portion of the return of premium benefit if the policy terminates before the return of premium benefit is earned. Accordingly, the net cash flows from these products generally result in the accumulation of amounts in the early years of a policy (reflected in our earnings as reserve increases which is a component of insurance policy benefits) which will be paid out as benefits in later policy years (reflected in our earnings as reserve decreases which offset the recording of benefit payments). As the policies age, insurance policy benefits will typically increase, but the increase in benefits will be partially offset by investment income earned on the accumulated assets.
Margin from Medicare supplement business was $106.1 million in 2025 compared to $113.9 million in 2024 and $116.9 million in 2023. The Medicare supplement margin adjusted to exclude the impacts of the comprehensive annual actuarial review previously discussed was $115.3 million, $123.3 million and $127.5 million in 2025, 2024 and 2023, respectively. The adjusted margin as a percentage of insurance policy income was 18 percent, 20 percent and 21 percent in 2025, 2024 and 2023, respectively. Insurance policy income was $627.0 million in 2025 compared to $620.5 million in 2024 and $619.9 million in 2023. The decrease in the adjusted margin in 2025, as compared to 2024, is primarily due to modestly higher claims in 2025 compared to 2024, partially offset by growth in the block. The decrease in the adjusted margin in 2024 compared to 2023, was primarily due to higher claims in 2024 compared to 2023. Claim experience will fluctuate from period to period. We are able to re-rate our Medicare Supplement business annually. Each year we review experience and regulatory requirements to arrive at appropriate rate actions. We file rate increase requests with individual states and historically have received approvals generally aligned with our requests.
Medicare supplement sales were very strong in the fourth quarter, reflecting a growing shift in consumer preferences from Medicare Advantage to Medicare Supplement, reversing a decade-long trend. Most of these sales were on policies with effective dates in January 2026 and therefore, will be reflected in our 2026 results. We continue to invest in both our Medicare supplement products and Medicare Advantage distribution to meet our customers' needs and preferences. We receive fee income when Medicare Advantage policies of other carriers are sold, which is recorded in our Fee income segment.
Medicare supplement business consists of both individual and group policies. Government regulations generally require we attain and maintain a ratio of total benefits incurred to total premiums earned (excluding changes in policy benefits reserves which is a component of insurance policy benefits) of not less than 65 percent on individual products and not less than 75 percent on group products. The ratio is determined after three years from the original issuance of the policy and over the lifetime of the policy and measured in accordance with U.S. statutory accounting principles. Since the insurance product liabilities we establish for Medicare supplement business are subject to significant estimates, the ultimate claim liability we incur for a particular period is likely to be different than our initial estimate. Changes to our estimates are reflected in insurance policy benefits in the period the change is determined.
Margin from Long-term care products was $145.1 million in 2025 compared to $133.1 million in 2024 and $83.0 million in 2023. The margin adjusted to exclude the impacts of the comprehensive annual actuarial review previously discussed was $139.6 million, $132.2 million and $92.0 million in 2025, 2024 and 2023, respectively. The adjusted margin as a percentage of insurance policy income and excluding the impacts of the annual actuarial review was 48 percent, 48 percent and 35 percent in 2025, 2024 and 2023, respectively. The increase in margin in 2025 is primarily due to growth in the business from sales of our short duration Long-Term Care Fundamental product and continued favorable claims experience. The increase in margin from 2023 to 2024 was due to higher claim experience in 2023. Claim experience will fluctuate from period to period. The average benefit period for policies sold in 2025 is 13 months and 99 percent are policies with two years or less in benefits. In addition, effective October 1, 2024, we retain 100 percent of our long-term care new business as we discontinued ceding 25 percent of long-term care new business under a reinsurance agreement (this did not impact the inforce business that we previously ceded). As a result, margins increased modestly in 2025 and we expect to grow more in future years as earnings emerge from the sales.
Margin from Life Products (dollars in millions):
| | | | | | | | | | | | | | | | | |
| | 2025 | | 2024 | | 2023 |
| Life margin: | | | | | |
| Interest-sensitive life | | | | | |
| Insurance policy income | $ | 193.4 | | | $ | 187.9 | | | $ | 181.1 | |
| Net investment income | 55.9 | | | 53.2 | | | 51.5 | |
| Insurance policy benefits | (79.7) | | | (71.8) | | | (65.7) | |
| Interest credited | (53.2) | | | (50.9) | | | (48.7) | |
| Amortization and non-deferred commissions | (22.1) | | | (20.5) | | | (19.5) | |
| Margin from interest-sensitive life | $ | 94.3 | | | $ | 97.9 | | | $ | 98.7 | |
| Average net insurance liabilities | $ | 1,113.4 | | | $ | 1,067.2 | | | $ | 1,038.2 | |
| Interest margin | $ | 2.7 | | | $ | 2.3 | | | $ | 2.8 | |
| Interest margin/average net insurance liabilities | 0.24 | % | | 0.22 | % | | 0.27 | % |
| Underwriting margin | $ | 91.6 | | | $ | 95.6 | | | $ | 95.9 | |
| Underwriting margin/insurance policy income | 47 | % | | 51 | % | | 53 | % |
| Traditional life | | | | | |
| Insurance policy income | 728.5 | | | 716.8 | | | $ | 701.4 | |
| Net investment income | 95.2 | | | 93.9 | | | 93.3 | |
| Insurance policy benefits | (488.5) | | | (504.2) | | | (504.3) | |
| Interest credited | (0.5) | | | (0.6) | | | (0.6) | |
| Amortization and non-deferred commissions | (88.9) | | | (77.5) | | | (66.3) | |
| Advertising expense | (67.7) | | | (77.3) | | | (92.5) | |
| Margin from traditional life | $ | 178.1 | | | $ | 151.1 | | | $ | 131.0 | |
| Margin/insurance policy income | 24 | % | | 21 | % | | 19 | % |
| Margin excluding advertising expense/insurance policy income | 34 | % | | 32 | % | | 32 | % |
| Total life margin | $ | 272.4 | | | $ | 249.0 | | | $ | 229.7 | |
The favorable (unfavorable) impacts of our comprehensive annual actuarial review (reflected in insurance policy benefits) as well as a model refinement during the first quarter of 2025 impacting life product margins are summarized below (dollars in millions). The model refinement related to traditional life reserves, which increased margins $6.8 million.
| | | | | | | | | | | | | | | | | |
| 2025 | | 2024 | | 2023 |
| Interest-sensitive life | $ | 2.8 | | | $ | 3.8 | | | $ | 3.9 | |
| Traditional life | 7.6 | | | (4.5) | | | (5.2) | |
| | | | | |
Margin, excluding impact of comprehensive annual actuarial review and other adjustments: | | | | | |
| Interest-sensitive life | 91.5 | | | 94.1 | | 94.8 |
| Traditional life | 170.5 | | | 155.6 | | 136.2 |
Margin from interest-sensitive life business was $94.3 million in 2025 compared to $97.9 million in 2024 and $98.7 million in 2023. The interest-sensitive life margins adjusted to exclude the impacts of the comprehensive annual actuarial review previously discussed were $91.5 million, $94.1 million and $94.8 million in 2025, 2024 and 2023, respectively. The decrease in the adjusted margin in 2025 and 2024 compared to 2023 reflects higher insurance policy benefits.
The interest margin was $2.7 million in 2025 compared to $2.3 million in 2024 and $2.8 million in 2023. Allocated net investment income reflects earned yields of 5.02 percent, 4.99 percent and 4.96 percent in 2025, 2024 and 2023, respectively. The fluctuating interest margin reflects growth in the block and compressed spreads in 2024, which lessened
in 2025. Interest credited to policyholders may be changed annually but is subject to minimum guaranteed rates and, as a result, any reduction in our earned rate may not be fully reflected in the rate credited to policyholders.
Net investment income and interest credited excludes the change in market values of the underlying options supporting the fixed indexed life products and corresponding offsetting amount credited to policyholder account balances. Such amounts were $12.5 million, $21.9 million and $13.2 million in 2025, 2024 and 2023, respectively.
Margin from traditional life business was $178.1 million in 2025 compared to $151.1 million in 2024 and $131.0 million in 2023. The traditional life margins adjusted to exclude the impacts of the comprehensive annual actuarial review and a model refinement related to traditional life reserves previously discussed were $170.5 million, $155.6 million and $136.2 million in 2025, 2024 and 2023, respectively. The increase in the adjusted margin in 2025 compared to 2024 and 2023 primarily reflects lower advertising expense and growth in the business.
Allocated net investment income reflects earned yields of 4.74 percent, 4.68 percent and 4.71 percent in 2025, 2024 and 2023, respectively.
Advertising expense was $67.7 million in 2025 compared to $77.3 million in 2024 and $92.5 million in 2023. We are disciplined with our marketing expenditures and will increase or decrease our marketing spend depending on the current economics of the purchase or other factors, including the effectiveness of advertising spend. Lower advertising expenses reflect a shift to lower cost and more effective advertising alternatives, which include web, digital, and third-party distribution channels.
Investment Income Not Allocated to Product Lines (dollars in millions):
| | | | | | | | | | | | | | | | | | | | |
| | 2025 | | 2024 | | 2023 |
| Investment income not allocated: | | | | | | |
| Excluding variable components: | | | | | | |
| From general account assets | | $ | 105.0 | | | $ | 129.2 | | | $ | 108.3 | |
| Other investment income | | 22.5 | | | 36.6 | | | 9.3 | |
| Spread income: | | | | | | |
| FHLB program: | | | | | | |
| Investment income | | 150.4 | | | 161.2 | | | 147.4 | |
| Interest expense (a) | | (111.2) | | | (123.2) | | | (104.7) | |
| Net spread income on FHLB program | | 39.2 | | | 38.0 | | | 42.7 | |
| FABN program: | | | | | | |
| Investment income | | 151.7 | | | 96.7 | | | 59.0 | |
| Expenses (a)(b) | | (117.6) | | | (64.0) | | | (30.4) | |
| Net spread income on FABN program | | 34.1 | | | 32.7 | | | 28.6 | |
| Interest expense on corporate debt (a) | | (92.5) | | | (91.8) | | | (62.7) | |
| Interest expense on financing arrangements (a) | | (3.7) | | | (4.7) | | | (2.4) | |
| Total excluding variable components | | 104.6 | | | 140.0 | | | 123.8 | |
| Variable components: | | | | | | |
| Net income from assets supporting deferred compensation plans: | | | | | | |
| Investment income | | 28.8 | | | 27.9 | | | 28.7 | |
| Expenses (a) | | (26.7) | | | (24.3) | | | (22.2) | |
| Net income from assets supporting deferred compensation plans | | 2.1 | | | 3.6 | | | 6.5 | |
| Alternative investment income (loss): | | | | | | |
| Total alternative income | | 64.5 | | | 13.6 | | | (1.8) | |
| Allocated to product lines | | (22.9) | | | (28.2) | | | (30.5) | |
| Allocated to FABN program | | (0.7) | | | (0.7) | | | — | |
| Excess alternative investment income (loss) | | 40.9 | | | (15.3) | | | (32.3) | |
| Trading account income | | 5.7 | | | 4.9 | | | 6.5 | |
| Hedge variance related to fixed indexed products (a) | | 0.8 | | | 2.2 | | | (2.5) | |
| Impact of annual option forfeitures related to fixed indexed annuity surrenders (a) | | 14.4 | | | 26.0 | | | 7.1 | |
| Impacts of change in projected cash flows, prepayment and call income and other | | 0.9 | | | 6.5 | | | 11.1 | |
| Total variable components | | 64.8 | | | 27.9 | | | (3.6) | |
| Total investment income not allocated to product lines | | $ | 169.4 | | | $ | 167.9 | | | $ | 120.2 | |
| | | | | | |
| Reconciliation to net investment income: | | | | | | |
| Total investment income not allocated to product lines | | $ | 169.4 | | | $ | 167.9 | | | $ | 120.2 | |
| Investment income on variable interest entities reported as non-operating income | | 23.3 | | | 33.5 | | | 74.8 | |
| Add back amounts reported as benefits and expenses | | 336.5 | | | 279.8 | | | 217.9 | |
| Change in market values of the underlying options supporting fixed indexed products | | 119.9 | | | 255.9 | | | 129.0 | |
| Amounts allocated to products | | 1,074.3 | | | 1,011.7 | | | 957.8 | |
| Net investment income | | $ | 1,723.4 | | | $ | 1,748.8 | | | $ | 1,499.7 | |
(a) Amounts reported as benefits and expenses
(b) Comprised of interest credited and amortization of deferred acquisition costs
The above table reconciles investment income not allocated to product lines to net investment income. Such amounts will generally fluctuate from period to period based on the performance of our alternative investments (which are typically reported one quarter in arrears); the earnings related to the investments underlying our COLI; the spread we earn from our FHLB investment borrowing and FABN programs; the level of prepayment income (including call premiums) and trading account income; and the impact of annual option forfeitures related to fixed indexed annuity surrenders. Dividends of $12.3 million and $28.1 million were received in the fourth quarter of 2025 and 2024, respectively, related to a single equity investment. Alternative investment income improved significantly in 2025 compared to 2024 and 2024 compared to 2023. Interest expense increased in 2025 on higher average debt outstanding. Other fluctuations between periods are primarily related to fluctuations in other variable components including the level of prepayment income and the impact of annual option forfeitures resulting from surrenders of in-the-money options.
Net Non-Operating Income (Loss):
The following summarizes our net non-operating loss for each of the three years ended December 31, 2025 (dollars in millions):
| | | | | | | | | | | | | | | | | |
| | 2025 | | 2024 | | 2023 |
Net realized investment gains (losses) from disposals, impairments and change in allowance for credit losses | $ | (69.0) | | | $ | (72.7) | | | $ | (62.7) | |
| Net change in market value of investments recognized in earnings | 14.3 | | | 22.8 | | | (6.3) | |
| Fair value changes related to agent deferred compensation plan | (1.7) | | | 6.6 | | | (3.5) | |
| Changes in fair value of embedded derivative liabilities and market risk benefits | (64.0) | | | 46.3 | | | (29.9) | |
Expenses related to TechMod | (20.3) | | | — | | | — | |
| Goodwill and intangible asset impairment | (101.9) | | | — | | | — | |
Net loss related to divested business | (17.3) | | | — | | | — | |
Other | 0.1 | | | (13.9) | | | (0.3) | |
Net non-operating loss before taxes | $ | (259.8) | | | $ | (10.9) | | | $ | (102.7) | |
Net realized investment losses were $69.0 million in 2025, net of an increase in the allowance for credit losses of $6.2 million which were recorded in earnings. Net realized investment losses were $72.7 million in 2024, net of reductions in the allowance for credit losses of $9.4 million which were recorded in earnings. Net realized investment losses were $62.7 million in 2023, net of reductions in the allowance for credit losses of $8.1 million which were recorded in earnings.
During 2025, 2024 and 2023, we recognized an increase (decrease) in earnings of $14.3 million, $22.8 million and $(6.3) million, respectively, due to the net change in market value of investments recognized in earnings. The change in value will fluctuate from period to period based on market conditions.
During 2025, 2024 and 2023, we recognized an increase (decrease) in earnings of $(1.7) million, $6.6 million and $(3.5) million, respectively, for the mark-to-market change in the agent deferred compensation plan liability which was impacted by changes in the underlying actuarial assumptions used to value the liability. We recognize the mark-to-market change in the estimated value of this liability through earnings as assumptions change.
During 2025, 2024 and 2023, we recognized an increase (decrease) in earnings of $(64.0) million, $46.3 million and $(29.9) million, respectively, resulting from changes in the fair value of embedded derivative liabilities and MRBs related to our fixed indexed annuities. Excluding the net unfavorable impacts of the annual actuarial review previously discussed, we recognized an increase (decrease) in earnings of $(49.7) million, $89.1 million and $(17.5) million in 2025, 2024 and 2023, respectively. Such amounts include the impacts of changes in market interest rates and equity impacts used to determine the estimated fair values of the embedded derivatives and MRBs.
During 2025, we incurred $20.3 million of expense related to TechMod, a three-year project beginning in 2025 to modernize certain elements of our technology, which was initially disclosed in February 2025.
Macroeconomic, industry and market conditions, both current and future expected financial performance, and relevant entity-specific events that occurred during the three months ended September 30, 2025 caused us to consider whether there were any interim indicators of impairment related to the Optavise, LLC business within our fee income segment. Optavise, LLC provides personalized benefits education, advocacy and transparency, and communications services that help employers reduce healthcare costs and assist employees with making informed benefit decisions. As a result of this evaluation, we identified that the valuation of Optavise, LLC would more likely than not be impacted by the recent decline in value of comparable publicly traded companies. This, combined with lower than anticipated revenue in the quarter and trends for future periods led us to conclude that there were indicators of impairment and we accordingly prepared a quantitative assessment. The Company determined the fair value of the reporting unit by using a combination of the present value of expected future cash flows and a market approach based on earnings multiple data from peer companies, using unobservable level 3 inputs. As a result of the quantitative assessment performed, the Company concluded that goodwill of $69.5 million and other assets, primarily intangible assets, of $27.2 million were fully impaired as of September 30, 2025. We recognized an additional impairment charge of $5.2 million related to other long-lived assets as a result of exiting the fee services side of the Worksite business during the fourth quarter of 2025, as previously announced. The total impairment charge of $101.9 million is included in the accompanying consolidated statement of operations for the year ended December 31, 2025.
In the fourth quarter of 2025, we incurred a $17.3 million loss related to our exit from the fee services side of the Worksite business. In addition to exit costs, this loss includes operating losses for the quarter. Operating losses prior to the fourth quarter of 2025 were reported in operating income as a component of fee income. We expect the exit to be substantially complete in the first half of 2026.
In 2024, other non-operating items included a charge of $8.7 million primarily related to a five percent workforce reduction and transition costs for outsourcing certain operations activities. At the same time, we added roles to enhance support of our Consumer and Worksite divisions and that added technology expertise in areas such as AI, robotics and automation. Other non-operating items also include earnings attributable to VIEs that we are required to consolidate, net of affiliated amounts. Such earnings are not indicative of, and are unrelated to, the Company's underlying fundamentals.
PREMIUM COLLECTIONS
In accordance with GAAP, insurance policy income in our consolidated statement of operations consists of premiums earned for traditional insurance policies that have life contingencies or morbidity features. For annuity and interest-sensitive life contracts, premiums collected are not reported as revenues, but as deposits to insurance liabilities. We recognize revenues for these products over time in the form of investment income and surrender or other charges.
Agents, insurance brokers and marketing organizations who market our products and prospective purchasers of our products use the financial strength ratings of our insurance subsidiaries as an important factor in determining whether to market or purchase. Ratings have the most impact on our Worksite sales of supplemental health and life products since such ratings are often an important factor considered by employers. The current financial strength ratings of our primary insurance subsidiaries from Fitch, S&P, Moody's and AM Best are "A", "A-", "A3" and "A", respectively. For a description of these ratings and additional information on our ratings, see "Consolidated Financial Condition - Financial Strength Ratings of our Insurance Subsidiaries."
We set premium rates on our health insurance policies based on facts and circumstances known at the time we issue the policies using assumptions about numerous variables, including but not limited to, the actuarial probability of a policyholder incurring a claim, the probable size of the claim, and the interest rate earned on our investment of premiums. We also consider historical claims information, industry statistics, the rates of our competitors and other factors. If our actual claims experience is less favorable than we anticipated and we are unable to raise our premium rates, our financial results may be adversely affected. We generally cannot raise our health insurance premiums in any state until we obtain the approval of the state insurance regulator. We review the adequacy of our premium rates regularly and file for rate increases on our products when we believe such rates are too low. It is likely that we will not be able to obtain approval for all requested premium rate increases. If such requests are denied in one or more states, our net income may decrease. If such requests are approved, increased premium rates may reduce the volume of our new sales and may cause existing policyholders to lapse their policies. If the healthier policyholders allow their policies to lapse, this would reduce our premium income and profitability in the future.
Total premium collections were as follows (dollars in millions):
| | | | | | | | | | | | | | | | | |
| | 2025 | | 2024 | | 2023 |
| Premiums collected by product: | | | | | |
| Annuities: | | | | | |
| Fixed indexed (first-year) | $ | 1,710.7 | | | $ | 1,541.7 | | | $ | 1,373.8 | |
| Fixed indexed (renewal) | 29.2 | | | 1.0 | | | 0.1 | |
| Subtotal - fixed indexed annuities | 1,739.9 | | | 1,542.7 | | | 1,373.9 | |
| Fixed interest (first-year) | 191.7 | | | 236.5 | | | 197.0 | |
| Fixed interest (renewal) | 2.6 | | | 2.6 | | | 2.7 | |
| Subtotal - fixed interest annuities | 194.3 | | | 239.1 | | | 199.7 | |
| Other annuities (first-year) | 9.1 | | | 8.8 | | | 9.6 | |
| Total annuities | 1,943.3 | | | 1,790.6 | | | 1,583.2 | |
| Health: | | | | | |
| Supplemental health (first-year) | 94.1 | | | 87.0 | | | 81.6 | |
| Supplemental health (renewal) | 650.4 | | | 638.7 | | | 625.0 | |
| Subtotal – supplemental health | 744.5 | | | 725.7 | | | 706.6 | |
| Medicare supplement (first-year) | 56.2 | | | 44.5 | | | 39.0 | |
| Medicare supplement (renewal) | 570.6 | | | 581.2 | | | 570.4 | |
| Subtotal - Medicare supplement | 626.8 | | | 625.7 | | | 609.4 | |
| Long-term care (first-year) | 38.4 | | | 31.9 | | | 19.4 | |
| Long-term care (renewal) | 253.8 | | | 244.3 | | | 242.4 | |
| Subtotal - long-term care | 292.2 | | | 276.2 | | | 261.8 | |
| Total health | 1,663.5 | | | 1,627.6 | | | 1,577.8 | |
| Life insurance: | | | | | |
| Interest-sensitive (first-year) | 44.4 | | | 40.4 | | | 40.8 | |
| Interest-sensitive (renewal) | 211.4 | | | 203.7 | | | 196.2 | |
| Subtotal - interest-sensitive | 255.8 | | | 244.1 | | | 237.0 | |
| Traditional (first-year) | 138.2 | | | 141.3 | | | 145.8 | |
| Traditional (renewal) | 590.5 | | | 575.1 | | | 554.2 | |
| Subtotal - traditional | 728.7 | | | 716.4 | | | 700.0 | |
| Total life insurance | 984.5 | | | 960.5 | | | 937.0 | |
| Collections on annuity, health and life products: | | | | | |
| Total first-year premium collections | 2,282.8 | | | 2,132.1 | | | 1,907.0 | |
| Total renewal premium collections | 2,308.5 | | | 2,246.6 | | | 2,191.0 | |
| Total collections on insurance products | $ | 4,591.3 | | | $ | 4,378.7 | | | $ | 4,098.0 | |
Annuities include fixed indexed, fixed interest and other annuities sold to the senior market. Annuity collections were $1,943.3 million in 2025, compared to $1,790.6 million in 2024 and $1,583.2 million in 2023. Premium collections from fixed indexed annuities increased 12.8 percent to $1,739.9 million in 2025 compared to 2024. Premium collections from fixed interest annuities decreased 18.7 percent to $194.3 million in 2025 compared to 2024.
Health products include supplemental health, Medicare supplement and long-term care products. Premiums collected on supplemental health products (including specified disease, accident and hospital indemnity insurance products) were $744.5 million in 2025, compared to $725.7 million in 2024 and $706.6 million in 2023. Such increases are primarily due to new sales and steady persistency.
Collected premiums on Medicare supplement policies were $626.8 million, $625.7 million and $609.4 million in 2025, 2024 and 2023, respectively. Medicare supplement sales were very strong in the fourth quarter of 2025, reflecting a growing shift in consumer preferences from Medicare Advantage to Medicare Supplement, reversing a decade-long trend. Most of these sales were on policies with effective dates of January 1, 2026 and will be reflected as collected premiums in 2026. We receive fee income when Medicare Advantage policies of other providers are sold, which is recorded in our Fee income segment. We continue to invest in both our Medicare supplement products and Medicare Advantage distribution to ensure we are well-positioned to meet our customers' needs and preferences. In addition, we have grown our Medicare supplement sales over the last several years.
Collected premiums on long-term care products were $292.2 million, $276.2 million, and $261.8 million in 2025, 2024, and 2023, respectively. The increase in collected premiums is driven by increased sales. In addition, we ceded 25 percent of most new sales to a third party under a reinsurance agreement from 2009 through September 30, 2024. Effective October, 1, 2024, we discontinued ceding 25 percent of long-term care new business under the reinsurance agreement.
Life products include interest-sensitive and traditional life products. Life premiums were $984.5 million, $960.5 million and $937.0 million in 2025, 2024 and 2023, respectively. Premiums collected reflect both recent sales activity and steady persistency.
INVESTMENTS
Our investment strategy is to: (i) provide largely stable investment income from a diversified high quality fixed income portfolio; (ii) mitigate the effect of changing interest rates through active asset/liability management; (iii) provide liquidity to meet our cash obligations to policyholders and others; (iv) manage capital efficiency through active strategic asset allocation and investment management; and (v) use outside managers in specialized investment classes to add value to our overall strategy. Consistent with this strategy, investments in fixed maturity securities and mortgage loans made up 91 percent of our $30.0 billion investment portfolio at December 31, 2025. The remainder of the invested assets were trading securities, investments held by VIEs, equity securities, policy loans and other invested assets.
The following table summarizes the composition of our investment portfolio as of December 31, 2025 (dollars in millions):
| | | | | | | | | | | |
| Carrying value | | Percent of total investments |
| Fixed maturities, available for sale | $ | 23,886.8 | | | 80 | % |
| Equity securities | 389.2 | | | 1 | |
| Mortgage loans | 3,256.8 | | | 11 | |
| Policy loans | 140.9 | | | — | |
| Trading securities | 294.8 | | | 1 | |
| Investments held by variable interest entities | 293.0 | | | 1 | |
| Other invested assets | 1,737.0 | | | 6 | |
| Total investments | $ | 29,998.5 | | | 100 | % |
The following table summarizes investment yields earned over the past three years on the investments allocated to our product lines. General account investments exclude the value of options.
| | | | | | | | | | | | | | | | | |
| 2025 | | 2024 | | 2023 |
| (dollars in millions) |
| Weighted average investments at amortized cost allocated to product lines | $ | 21,890.1 | | | $ | 21,085.8 | | | $ | 20,567.5 | |
| Allocated investment income | 1,074.3 | | | 1,011.8 | | | 957.8 | |
| Average yield on allocated investments | 4.91 | % | | 4.80 | % | | 4.66 | % |
Insurance statutes regulate the types of investments that our insurance subsidiaries are permitted to make and limit the amount of funds that may be used for any one type of investment. In addition, we have internal management
compliance limits on various exposures and activities which are typically more restrictive than insurance statutes. In light of these statutes and regulations and our capital management strategy, we generally seek to invest in (i) highly rated securities such as United States government and government-agency securities and corporate securities rated investment grade by established nationally recognized rating organizations; (ii) securities of comparable investment quality, if not rated; or (iii) a limited quantity of other investments which offer differentiated return characteristics.
Fixed Maturities, Available for Sale
The following table summarizes the carrying values and gross unrealized losses of our fixed maturity securities, available for sale, by category as of December 31, 2025 (dollars in millions):
| | | | | | | | | | | | | | | | | | | | | | | |
| Carrying value | | Percent of fixed maturities | | Gross unrealized losses | | Percent of gross unrealized losses |
States and political subdivisions | $ | 2,954.7 | | | 12.4 | % | | $ | 378.9 | | | 18.1 | % |
Commercial mortgage-backed securities | 2,047.0 | | | 8.6 | | | 114.7 | | | 5.5 | |
| Banks | 1,820.8 | | | 7.6 | | | 150.6 | | | 7.2 | |
Asset-backed securities | 1,747.3 | | | 7.3 | | | 47.4 | | | 2.3 | |
Non-agency residential mortgage-backed securities | 1,585.7 | | | 6.6 | | | 90.9 | | | 4.4 | |
| Insurance | 1,383.1 | | | 5.8 | | | 162.1 | | | 7.8 | |
| Utilities | 1,196.2 | | | 5.0 | | | 141.9 | | | 6.8 | |
Collateralized loan obligations | 1,142.5 | | | 4.8 | | | 2.7 | | | 0.1 | |
Healthcare/pharma | 1,087.2 | | | 4.6 | | | 205.1 | | | 9.8 | |
| Brokerage | 1,013.0 | | | 4.2 | | | 61.5 | | | 2.9 | |
| Technology | 866.0 | | | 3.6 | | | 150.0 | | | 7.2 | |
Agency residential mortgage-backed securities | 849.5 | | | 3.6 | | | — | | | — | |
Cable/media | 682.4 | | | 2.9 | | | 88.2 | | | 4.2 | |
Food/beverage | 667.3 | | | 2.8 | | | 78.7 | | | 3.8 | |
Energy/pipelines | 594.8 | | | 2.5 | | | 34.1 | | | 1.6 | |
| Transportation | 405.9 | | | 1.7 | | | 44.9 | | | 2.1 | |
| Real Estate/REIT | 393.2 | | | 1.6 | | | 31.2 | | | 1.5 | |
| Chemicals | 252.2 | | | 1.1 | | | 31.2 | | | 1.5 | |
Capital goods | 245.2 | | | 1.0 | | | 26.8 | | | 1.3 | |
| Autos | 244.5 | | | 1.0 | | | 18.2 | | | 0.9 | |
| Education | 202.6 | | | 0.8 | | | 58.6 | | | 2.8 | |
Metals and mining | 196.4 | | | 0.8 | | | 9.9 | | | 0.5 | |
| Other | 2,309.3 | | | 9.7 | | | 161.3 | | | 7.7 | |
| Total fixed maturities, available for sale | $ | 23,886.8 | | | 100.0 | % | | $ | 2,088.9 | | | 100.0 | % |
The following table summarizes the gross unrealized losses of our fixed maturity securities, available for sale, by category and ratings category as of December 31, 2025 (dollars in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Investment grade | | Below-investment grade | | |
| AAA/AA/A | | BBB | | BB | | B+ and below | | Total gross unrealized losses |
| States and political subdivisions | $ | 371.0 | | | $ | 5.9 | | | $ | 0.2 | | | $ | 1.8 | | | $ | 378.9 | |
| Healthcare/pharmaceuticals | 156.3 | | | 47.9 | | | 0.1 | | | 0.8 | | | 205.1 | |
| Insurance | 101.0 | | | 58.7 | | | 2.4 | | | — | | | 162.1 | |
| Banks | 104.0 | | | 46.6 | | | — | | | — | | | 150.6 | |
| Technology | 90.5 | | | 57.7 | | | 1.5 | | | 0.3 | | | 150.0 | |
| Utilities | 94.8 | | | 46.8 | | | 0.3 | | | — | | | 141.9 | |
| Commercial mortgage-backed securities | 76.3 | | | 23.1 | | | 14.6 | | | 0.7 | | | 114.7 | |
| Non-agency residential mortgage-backed securities | 81.1 | | | 8.4 | | | 0.2 | | | 1.2 | | | 90.9 | |
| Cable/media | 7.9 | | | 67.2 | | | 12.7 | | | 0.4 | | | 88.2 | |
| Food/beverage | 30.9 | | | 47.7 | | | 0.1 | | | — | | | 78.7 | |
| Brokerage | 40.9 | | | 20.4 | | | 0.2 | | | — | | | 61.5 | |
| Education | 53.3 | | | 5.3 | | | — | | | — | | | 58.6 | |
| Asset-backed securities | 16.3 | | | 29.5 | | | 1.4 | | | 0.2 | | | 47.4 | |
| Transportation | 23.9 | | | 19.0 | | | — | | | 2.0 | | | 44.9 | |
| Energy | 8.4 | | | 25.6 | | | 0.1 | | | — | | | 34.1 | |
| Chemicals | 2.8 | | | 26.9 | | | 1.5 | | | — | | | 31.2 | |
| Real estate/REITs | 21.6 | | | 9.5 | | | — | | | 0.1 | | | 31.2 | |
| United States Treasury securities and obligations of United States government corporations and agencies | 30.2 | | | — | | | — | | | — | | | 30.2 | |
| Retail | 24.7 | | | 1.4 | | | 0.8 | | | — | | | 26.9 | |
| Capital goods | 20.6 | | | 6.2 | | | — | | | — | | | 26.8 | |
| Consumer products | 10.3 | | | 1.2 | | | 9.4 | | | 0.4 | | | 21.3 | |
| Aerospace/defense | 7.2 | | | 13.8 | | | — | | | — | | | 21.0 | |
| Building materials | 5.4 | | | 12.9 | | | — | | | — | | | 18.3 | |
| Autos | 4.3 | | | 13.9 | | | — | | | — | | | 18.2 | |
| Telecom | 0.1 | | | 11.7 | | | — | | | — | | | 11.8 | |
| Foreign governments | 5.4 | | | 5.3 | | | — | | | — | | | 10.7 | |
| Metals and mining | 3.0 | | | 6.8 | | | 0.1 | | | — | | | 9.9 | |
| Entertainment/hotels | 6.2 | | | 0.3 | | | 0.1 | | | — | | | 6.6 | |
| Paper | — | | | 6.2 | | | — | | | — | | | 6.2 | |
| Business services | 0.2 | | | 3.5 | | | — | | | — | | | 3.7 | |
| Packaging | — | | | 3.0 | | | — | | | — | | | 3.0 | |
| Collateralized loan obligations | 2.5 | | | 0.2 | | | — | | | — | | | 2.7 | |
| Other | 1.2 | | | 0.1 | | | 0.3 | | | — | | | 1.6 | |
| | | | | | | | | |
| | | | | | | | | |
| Total fixed maturities, available for sale | $ | 1,402.3 | | | $ | 632.7 | | | $ | 46.0 | | | $ | 7.9 | | | $ | 2,088.9 | |
Investment ratings are assigned the second lowest rating by Nationally Recognized Statistical Rating Organizations (Moody's, S&P or Fitch), or if not rated by such firms, the rating assigned by the NAIC. NAIC designations of "1" or "2" include fixed maturities generally rated investment grade (rated "Baa3" or higher by Moody's or rated "BBB-" or higher by S&P and Fitch). NAIC designations of "3" through "6" are referred to as below-investment grade (which generally are rated "Ba1" or lower by Moody's or rated "BB+" or lower by S&P and Fitch). References to investment grade or below-investment grade throughout our consolidated financial statements are determined as described above. The following table sets forth fixed maturity investments at December 31, 2025, classified by ratings (dollars in millions):
| | | | | | | | | | | | | | | | | |
| | | Estimated fair value |
| Investment rating | Amortized cost | | Amount | | Percent of fixed maturities |
| AAA | $ | 2,573.8 | | | $ | 2,518.2 | | | 11 | % |
| AA | 5,730.7 | | | 5,248.1 | | | 22 | |
| A | 7,787.7 | | | 7,044.6 | | | 29 | |
| BBB+ | 2,204.1 | | | 2,041.6 | | | 9 | |
| BBB | 4,172.2 | | | 3,883.3 | | | 16 | |
| BBB- | 2,229.4 | | | 2,107.2 | | | 9 | |
| Investment grade | 24,697.9 | | | 22,843.0 | | | 96 | |
| BB+ | 241.1 | | | 223.3 | | | 1 | |
| BB | 280.6 | | | 266.6 | | | 1 | |
| BB- | 178.7 | | | 168.3 | | | 1 | |
| B+ and below | 378.1 | | | 385.6 | | | 1 | |
| Below-investment grade | 1,078.5 | | | 1,043.8 | | | 4 | |
| Total fixed maturity securities | $ | 25,776.4 | | | $ | 23,886.8 | | | 100 | % |
We continually evaluate the creditworthiness of each issuer whose securities we hold. We pay special attention to large investments, investments which have significant risk characteristics and to those securities whose fair values have declined materially for reasons other than changes in general market conditions. We evaluate the realizable value of the investment, the specific condition of the issuer and the issuer's ability to comply with the material terms of the security. We review the historical and recent operational results and financial position of the issuer, information about its industry, information about factors affecting the issuer's performance and other information. 40|86 Advisors employs experienced securities analysts in a broad variety of specialty areas who compile and review such data.
During 2025, we recognized net investment losses of $54.7 million, which were comprised of: (i) $59.7 million of net losses from the sales of investments; (ii) $1.4 million of gains related to equity securities, including the change in fair value; (iii) the net increase in fair value of certain other invested assets and fixed maturity investments with embedded derivatives of $8.0 million; (iv) the increase in fair value of embedded derivatives related to a modified coinsurance agreement of $1.8 million; and (v) net increase in the allowance for credit losses and investment write-downs of $6.2 million.
During 2025, we sold $1,562.5 million of fixed maturity investments which resulted in gross realized investment losses (before income taxes) of $79.5 million. Securities are generally sold at a loss following unforeseen sector or issuer-specific events or conditions, shifts in perceived credit quality relative values, or in connection with strategic asset repositioning related to changes in market conditions.
Our investment portfolio is subject to the risk of declines in realizable value. However, we attempt to mitigate this risk through the diversification and active management of our portfolio.
The Company reports accrued investment income separately from fixed maturities, available for sale, and has elected not to measure an allowance for credit losses for accrued investment income. Accrued investment income is written off through net investment income at the time the issuer of the bond defaults or is expected to default on payments.
At December 31, 2025, the amortized cost and carrying value of fixed maturities that were non-income producing totaled $5.7 million and $3.5 million, respectively.
Other Investments
At December 31, 2025, we held commercial mortgage loan investments with an amortized cost of $1,795.8 million (or 6.0 percent of total invested assets) and a fair value of $1,699.1 million. Our commercial mortgage loan portfolio is primarily comprised of large commercial mortgage loans. Approximately 16.1 percent, 6.8 percent, 5.9 percent, and 5.0 percent of the commercial mortgage loan balance were on properties located in California, Florida, Maryland, and Illinois, respectively. No other state comprised greater than five percent of the mortgage loan balance. At December 31, 2025, there were no commercial mortgage loans in process of foreclosure.
The following table shows the distribution of our commercial mortgage loan portfolio by property type as of December 31, 2025 (dollars in millions):
| | | | | | | | | | | |
| Number of loans | | Amortized cost |
| Multi-family | 44 | | | $ | 675.4 | |
| Industrial | 45 | | | 441.9 | |
| Retail | 43 | | | 290.5 | |
| Office building | 24 | | | 194.7 | |
| Other | 25 | | | 193.3 | |
| Total commercial mortgage loans | 181 | | | $ | 1,795.8 | |
The following table shows our commercial mortgage loan portfolio by loan size as of December 31, 2025 (dollars in millions):
| | | | | | | | | | | |
| Number of loans | | Amortized cost |
| Under $5 million | 62 | | | $ | 180.8 | |
| $5 million to less than $10 million | 44 | | | 325.2 | |
| $10 million to less than $20 million | 56 | | | 811.4 | |
$20 million and over | 19 | | | 478.4 | |
| Total commercial mortgage loans | 181 | | | $ | 1,795.8 | |
The following table summarizes the distribution of maturities of our commercial mortgage loans as of December 31, 2025 (dollars in millions):
| | | | | | | | | | | |
| Number of loans | | Amortized cost |
| 2026 | 15 | | | $ | 189.4 | |
| 2027 | 12 | | | 67.8 | |
| 2028 | 12 | | | 119.4 | |
| 2029 | 10 | | | 91.7 | |
2030 | 14 | | | 181.9 | |
after 2030 | 118 | | | 1,145.6 | |
| Total commercial mortgage loans | 181 | | | $ | 1,795.8 | |
The following table provides the amortized cost by year of origination and estimated fair value of our outstanding commercial mortgage loans and the underlying collateral as of December 31, 2025 (dollars in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | Estimated fair value |
| Loan-to-value ratio (a) | 2025 | | 2024 | | 2023 | | 2022 | | 2021 | | Prior | | Total amortized cost | | Mortgage loans | | Collateral |
Less than 60% | $ | 273.5 | | | $ | 169.1 | | | $ | 197.8 | | | $ | 141.3 | | | $ | 123.3 | | | $ | 449.9 | | | $ | 1,354.9 | | | $ | 1,291.0 | | | $ | 4,329.0 | |
60% to less than 70% | 118.0 | | | 15.0 | | | 17.7 | | | 37.6 | | | 7.5 | | | 26.0 | | | 221.8 | | | 209.3 | | | 336.7 | |
70% to less than 80% | 18.8 | | | — | | | 59.7 | | | 52.0 | | | — | | | 22.6 | | | 153.1 | | | 138.1 | | | 206.5 | |
80% to less than 90% | 10.0 | | | — | | | — | | | 46.4 | | | — | | | — | | | 56.4 | | | 53.1 | | | 70.1 | |
| 90% or greater | — | | | — | | | — | | | — | | | 7.7 | | | 1.9 | | | 9.6 | | | 7.6 | | | 9.8 | |
| Total | $ | 420.3 | | | $ | 184.1 | | | $ | 275.2 | | | $ | 277.3 | | | $ | 138.5 | | | $ | 500.4 | | | $ | 1,795.8 | | | $ | 1,699.1 | | | $ | 4,952.1 | |
________________
(a)Loan-to-value ratios are calculated as the ratio of: (i) the amortized cost of the commercial mortgage loans; to (ii) the estimated fair value of the underlying collateral.
At December 31, 2025, we held residential mortgage loan investments with an amortized cost of $1,481.9 million and a fair value of $1,497.8 million. Our primary credit quality indicator for these investments is whether the loan is current or non-current. We define non-current loans as those that are 90 or more days past due and/or in nonaccrual status. As of December 31, 2025, there were 31 residential mortgage loans that were non-current with an amortized cost of $20.7 million (of which five loans with an amortized cost of $2.6 million were in foreclosure). At December 31, 2024, we held residential mortgage loan investments with an amortized cost of $1,018.6 million and a fair value of $1,031.8 million.
The allowance for credit losses related to mortgage loans was $20.9 million at December 31, 2025, and increased $7.3 million in 2025.
At December 31, 2025, we held $294.8 million of trading securities. We carry trading securities at estimated fair value; changes in fair value are reflected in the statement of operations. Our trading securities include: (i) investments purchased with the intent of selling in the near term to generate income; and (ii) certain fixed maturity securities containing embedded derivatives for which we have elected the fair value option. Investment income from trading securities backing certain insurance liabilities is substantially offset by the change in insurance policy benefits related to certain products and agreements.
Other invested assets include options backing our fixed indexed annuity and life insurance products, COLI, FHLB common stock and certain nontraditional investments, including investments in limited partnerships, limited liability companies and real estate investments.
At December 31, 2025, we held investments with an amortized cost of $294.1 million and an estimated fair value of $293.0 million related to VIEs that we are required to consolidate. The investment portfolio held by the VIEs is primarily comprised of commercial bank loans, the borrowers for which are almost entirely rated below-investment grade. Refer to the note to the consolidated financial statements entitled "Investments in Variable Interest Entities" for additional information on these investments.
2026 OUTLOOK
We expect operating earnings per diluted share to be in the range of $4.25 to $4.45, excluding any significant items in the year. We expect our expense ratio to be in the range of 18.8 percent to 19.2 percent, with a quarterly trend similar to 2025, starting on the high end in the first quarter of the year and then grading down throughout the year. We expect improved results in net investment income not allocated to product lines, which assumes higher returns on our alternative investments. We expect fee income of approximately $30 million for the year with roughly a third in the first quarter, minimal contribution in the second and third quarters, and the balance in the fourth quarter. Fee income will benefit from the exit of the Worksite fee services business as explained below. We expect the effective tax rate to be approximately 22.5 percent.
In November 2025, the Company announced its intention to exit the fee services business within its Worksite Division to sharpen its focus on the core insurance business. The Worksite fee services business includes benefits administration technology, education, advocacy, and communications services. The exit is expected to be substantially complete in the first half of 2026. Once complete, the Company expects the exit from this business to reduce annual fee revenue by roughly $30.0 million (less than 1 percent of total revenue) and increase annual pre-tax income by roughly $20 million.
We continue to target an improvement in run-rate operating ROE of 200 basis points through 2027, off a 2024 run-rate of approximately 10 percent.
We expect free cash flows to be in the range of $200 million to $250 million. We expect to continue to manage to: (i) a consolidated RBC ratio in the range of 360 percent to 390 percent for our U.S. based insurance subsidiaries; (ii) minimum holding company liquidity of $150 million; and (iii) a target debt to total capital, excluding accumulated other comprehensive loss, in the range of 25 percent to 28 percent.
In the second quarter of 2025, we began TechMod, a three-year initiative to modernize certain elements of our technology, enabling continued growth of the business over the long-term. The initiative is expected to cost approximately $170 million over three years, including approximately $76 million in 2026. The substantial majority of the costs will be expensed as incurred, but will be excluded from operating earnings, and included as a component of non-operating earnings. The expenses excluded from operating earnings will be discrete expenses, one-time in nature, related to the three-year initiative, and largely paid to third parties as well as some asset write-offs. The remainder of the costs will either be expensed as incurred and included in operating earnings or capitalized and amortized through operating earnings. The outlook metrics previously described include the expected impact of this initiative.
LIQUIDITY AND CAPITAL RESOURCES
Changes in the Consolidated Balance Sheet
Changes in our consolidated balance sheet between December 31, 2025 and December 31, 2024, primarily reflect: (i) our net income for 2025; (ii) changes in accumulated other comprehensive income (loss); and (iii) payments to repurchase common stock of $319.9 million.
Our capital structure as of December 31, 2025 and December 31, 2024 was as follows (dollars in millions):
| | | | | | | | | | | |
| December 31, 2025 | | December 31, 2024 |
| Total capital: | | | |
| Corporate notes payable | $ | 1,335.6 | | | $ | 1,833.5 | |
Shareholders' equity: | | | |
| Common stock | 0.9 | | | 1.0 | |
| Additional paid-in capital | 1,336.3 | | | 1,632.5 | |
| Accumulated other comprehensive income (loss) | (1,115.0) | | | (1,371.4) | |
| Retained earnings | 2,416.0 | | | 2,253.1 | |
| Total shareholders’ equity | 2,638.2 | | | 2,515.2 | |
| Total capital | $ | 3,973.8 | | | $ | 4,348.7 | |
The following table summarizes certain financial ratios as of and for the years ended December 31, 2025 and December 31, 2024:
| | | | | | | | | | | |
| December 31, 2025 | | December 31, 2024 |
| Book value per common share | $ | 27.92 | | | $ | 24.75 | |
| Book value per common share, excluding accumulated other comprehensive income (loss) (a) | $ | 39.72 | | | $ | 38.25 | |
| Debt to total capital ratios: | | | |
| Corporate debt to total capital | 33.6 | % | | 42.2 | % |
| Corporate debt to total capital, excluding accumulated other comprehensive income (loss) (a) | 26.2 | % | | 32.1 | % |
_____________________
(a)This non-GAAP measure differs from the corresponding GAAP measure presented immediately above, because accumulated other comprehensive 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 accumulated other comprehensive loss. Such volatility is often caused by changes in the estimated fair value of our investment portfolio resulting from changes in general market interest rates rather than the business decisions made by management. However, this measure does not replace the corresponding GAAP measure.
The reduction in the debt to total capital ratios from December 31, 2024 was primarily due to the repayment of the 2025 Notes during the second quarter of 2025.
Contractual Obligations
The Company's significant contractual obligations as of December 31, 2025, were as follows (dollars in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Payment due in |
| Total | | 2026 | | 2027-2028 | | 2029-2030 | | Thereafter |
| Insurance liabilities (a) | $ | 64,362.0 | | | $ | 4,789.5 | | | $ | 10,561.1 | | | $ | 8,143.8 | | | $ | 40,867.6 | |
| Notes payable (b) | 2,097.3 | | | 84.7 | | | 159.4 | | | 617.3 | | | 1,235.9 | |
| Investment borrowings (c) | 2,629.3 | | | 449.7 | | | 1,686.1 | | | 493.5 | | | — | |
Borrowings related to variable interest entities (d) | 381.6 | | | 16.0 | | | 32.0 | | | 88.0 | | | 245.6 | |
| Postretirement plans (e) | 234.3 | | | 8.8 | | | 17.8 | | | 17.8 | | | 189.9 | |
| Operating leases | 104.4 | | | 25.4 | | | 37.3 | | | 20.6 | | | 21.1 | |
| Commitments to purchase/fund investments | 1,392.1 | | | 1,392.1 | | | — | | | — | | | — | |
| Financing arrangements | 48.6 | | | 19.0 | | | 29.6 | | | — | | | — | |
| Other contractual commitments (f) | 684.6 | | | 144.5 | | | 268.9 | | | 271.2 | | | — | |
| Total | $ | 71,934.2 | | | $ | 6,929.7 | | | $ | 12,792.2 | | | $ | 9,652.2 | | | $ | 42,560.1 | |
________________
(a) These cash flows represent our estimates of the payments we expect to make to our policyholders, without consideration of future premiums or reinsurance recoveries. These estimates are based on numerous assumptions (depending on the product type) related to mortality, morbidity, lapses, withdrawals, future premiums, future deposits, interest rates on investments, credited rates, expenses and other factors which affect our future payments. The cash flows presented are undiscounted for interest. As a result, total outflows for all years exceed the corresponding liabilities of $31.1 billion included in our consolidated balance sheet as of December 31, 2025. As such payments are based on numerous assumptions, the actual payments may vary significantly from the amounts shown.
In estimating the payments we expect to make to our policyholders, we considered the following:
•For products such as immediate annuities and structured settlement annuities without life contingencies, the payment obligation is fixed and determinable based on the terms of the policy.
•For products such as universal life, ordinary life, long-term care, supplemental health and deferred annuities, the future payments are not due until the occurrence of an insurable event (such as death or disability) or a triggering event (such as a surrender or partial withdrawal). We estimated these payments using actuarial models based on historical experience and our expectation of the future payment patterns which is consistent with the assumptions used in our reserve calculations for these blocks of business.
•For insurance products such as Medicare supplement insurance, the future payments relate only to amounts necessary to settle all outstanding claims, including those that have been incurred but not reported as of the balance sheet date. We estimated these payments based on our historical experience and our expectation of future payment patterns which is consistent with the assumptions used in our reserve calculations for these blocks of business.
•The average interest rate we assumed would be credited to our total insurance liabilities (excluding interest rate bonuses for the first policy year only and excluding the effect of credited rates attributable to variable or fixed indexed products) over the term of the contracts was 4.3 percent.
(b) Includes projected interest payments based on interest rates, as applicable, as of December 31, 2025. Refer to the note to the consolidated financial statements entitled "Notes Payable - Direct Corporate Obligations" for additional information on notes payable.
(c) These borrowings represent collateralized borrowings from the FHLB and projected interest payments on such borrowings.
(d) These borrowings represent the securities issued by VIEs and include projected interest payments based on interest rates, as applicable, as of December 31, 2025.
(e) Includes benefits expected to be paid pursuant to our deferred compensation plan and postretirement plans based on numerous actuarial assumptions and interest credited at 5.25 percent.
(f) Includes obligations to third parties for information technology services, software maintenance and license agreements and consulting services.
It is possible that the ultimate outcomes of various uncertainties could affect our liquidity in future periods. For example, the following events could have a material adverse effect on our cash flows:
•An adverse decision in pending or future litigation.
•An inability to obtain rate increases on certain of our insurance products.
•Worse than anticipated claims experience.
•Lower than expected dividends and/or surplus debenture interest payments from our insurance subsidiaries (resulting from inadequate earnings or capital or regulatory requirements).
•An inability to meet and/or maintain the covenants in our Revolving Credit Agreement.
•A significant increase in policy surrender levels.
•A significant increase in investment defaults.
•An inability of our reinsurers to meet their financial obligations.
While we actively manage the relationship between the duration and cash flows of our invested assets and the estimated duration and cash flows of benefit payments arising from contract liabilities, there could be significant variations in the timing of such cash flows. Although we believe our current estimates properly project future claim experience, if these estimates prove to be wrong, and our experience worsens (as it did in some prior periods), our future liquidity could be adversely affected.
Liquidity for Insurance Operations
Our insurance companies generally receive adequate cash flows from premium collections and investment income to meet their obligations. Life insurance, long-term care and supplemental health insurance and annuity liabilities are generally long-term in nature. Life and annuity policyholders may, however, withdraw funds or surrender their policies, subject to any applicable penalty provisions; there are generally no withdrawal or surrender benefits for long-term care insurance. We actively manage the relationship between the duration of our invested assets and the estimated duration of benefit payments arising from contract liabilities.
Three of the Company's insurance subsidiaries (Bankers Life, Washington National and Colonial Penn) are members of the FHLB. As members of the FHLB, our insurance subsidiaries have the ability to borrow on a collateralized basis from the FHLB. We are required to hold certain minimum amounts of FHLB common stock as a condition of membership in the FHLB, and additional amounts based on the amount of the borrowings. At December 31, 2025, the carrying value of the FHLB common stock was $109.3 million. As of December 31, 2025, collateralized borrowings from the FHLB totaled $2.4 billion and the proceeds were used to purchase matched variable rate fixed maturity securities. The borrowings are classified as investment borrowings in the accompanying consolidated balance sheet. The borrowings are collateralized by investments with an estimated fair value of $3.5 billion at December 31, 2025, which are maintained in custodial accounts for the benefit of the FHLB.
Bankers Life has a FABN program pursuant to which Bankers Life may issue funding agreements to a Delaware statutory trust organized in series (the "Trust") to generate spread-based earnings. The maximum aggregate principal amount of funding agreements permitted to be outstanding at any one time under the FABN program is $4 billion. Bankers Life issued funding agreements each to a series of the Trust in a principal amount of $350 million and $400 million, respectively, in September and December 2025 and $750 million, $400 million, and $450 million, respectively, in June, September and December 2024. During January 2025, a $400 million funding agreement was repaid at maturity. The aggregate principal amount of funding agreements outstanding at December 31, 2025 was $3.4 billion. The activity related to the funding agreements is reported in investment income not allocated to product lines.
State laws generally give state insurance regulatory agencies broad authority to protect policyholders in their jurisdictions. Regulators have used this authority in the past to restrict the ability of our insurance subsidiaries to pay any dividends or other amounts without prior approval. We cannot be assured that the regulators will not seek to assert greater supervision and control over our insurance subsidiaries' businesses and financial affairs.
Our estimated consolidated statutory RBC ratio of our U.S. based insurance subsidiaries was 380 percent at December 31, 2025, compared to 383 percent at December 31, 2024. In 2025, the RBC ratio reflected: (i) our estimated consolidated statutory operating income of $48.8 million (ii) insurance company dividends, net of capital contributions to the holding company of $318.4 million; (iii) the impact of the reinsurance transaction with our Bermuda reinsurance subsidiary described below; and (iv) an increase in required capital primarily due to growth of our insurance business and expansion of the FABN program. Our RBC ratio at December 31, 2025, was within our targeted statutory RBC ratio range of 360 to 390 percent and the minimum 350 percent that is reflected in our risk appetite statement that we share and discuss with rating agencies and insurance regulators. We believe that the 360 to 390 percent RBC ratio target range continues to adequately support our financial strength and credit ratings.
In 2023, we formed CNO Bermuda Re, which is an indirect wholly owned subsidiary of CNO. CNO Bermuda Re is registered by and subject to the supervision of the BMA as a Class C insurer under the Bermuda Insurance Act 1978 and its related rules and regulations, each as amended. Pursuant to the CLMA (as amended), CDOC will contribute funds to CNO Bermuda Re in the event: (i) CNO Bermuda Re's statutory economic capital and surplus is less than 150 percent of its enhanced capital requirement at the end of any calendar quarter; or (ii) CNO Bermuda Re's liquid assets are insufficient to meet its contractual obligations to ceding insurers, in each case, unless one or more ceding insurers has provided notice of recapture pursuant to the terms of the applicable reinsurance agreement between it and CNO Bermuda Re and such recapture will cause CNO Bermuda Re to meet (i) and (ii). Further, CNO Bermuda Re may not pay any dividends or make
any capital distributions to its parent within the five years following the 2023 reinsurance transaction unless approved by the BMA. CNO Bermuda Re is subject to regulation in Bermuda where the BMA has broad supervisory and administrative powers relating to granting and revoking licenses to transact reinsurance business, the approval of specific reinsurance transactions, capital requirements and solvency standards, limitations on dividends or distributions to shareholders, the nature of and limitations on investments, and the filing of financial statements in accordance with prescribed or permitted accounting practices. Future regulatory changes made by the BMA or other events may impact the capital efficiency of the reinsurance structures and could require the holding company to contribute additional capital to CNO Bermuda Re or the ceding reinsurers to recapture the ceded business.
CNO Bermuda Re executed its second transaction, reinsuring $1.9 billion of inforce supplemental health statutory reserves from our subsidiary, Washington National, effective October 1, 2025, under a coinsurance agreement. Additionally, 50 percent of new supplemental health business written by Washington National will be ceded to CNO Bermuda Re as part of the agreement.
During 2025, the financial statements of four of our U.S. based insurance subsidiaries prepared in accordance with statutory accounting practices prescribed or permitted by regulatory authorities reflected asset adequacy reserves. Total asset adequacy reserves for Bankers Life, Washington National, Bankers Conseco Life Insurance Company, and CLTX were $95.0 million, $51.0 million, $34.5 million, and $4.0 million, respectively, at December 31, 2025. Due to differences between statutory and GAAP insurance liabilities, we were not required to recognize a similar asset adequacy reserve in our consolidated financial statements prepared in accordance with GAAP. The determination of the need for and amount of asset adequacy reserves is subject to numerous actuarial assumptions and state requirements.
Our insurance subsidiaries transfer exposure to certain risk to others through reinsurance arrangements. When we obtain reinsurance, we are still liable for those transferred risks in the event the reinsurer defaults on its obligations. The failure, insolvency, inability or unwillingness of one or more of the Company's reinsurers to perform in accordance with the terms of its reinsurance agreement could negatively impact our earnings or financial position and our consolidated statutory RBC ratio.
Financial Strength Ratings of our Insurance Subsidiaries
Financial strength ratings provided by Fitch, S&P, Moody's and AM Best are the rating agency's opinions of the ability of our insurance subsidiaries to pay policyholder claims and obligations when due.
On October 21, 2025, Fitch affirmed its "A" financial strength ratings of our primary insurance subsidiaries and the outlook for these ratings remains stable. An insurer rated "A", in Fitch's opinion, indicates a low expectation of ceased or interrupted payments and indicates strong capacity to meet policyholder and contract obligations. This capacity may, nonetheless, be more vulnerable to changes in circumstances or in economic conditions than is the case for higher ratings. Fitch ratings for the industry range from "AAA Exceptionally Strong" to "D Distressed" and some companies are not rated. Pluses and minuses show the relative standing within a category. Fitch has 24 possible ratings. There are five ratings above the "A" rating of our primary insurance subsidiaries and 18 ratings that are below that rating.
S&P affirmed its "A-" financial strength ratings of our primary insurance subsidiaries on June 24, 2025. The outlook for these ratings is stable. S&P financial strength ratings range from "AAA" to "D" and some companies are not rated. An insurer rated "A", in S&P's opinion, has strong financial security characteristics, but is somewhat more likely to be affected by adverse business conditions than are insurers with higher ratings. Pluses and minuses show the relative standing within a category. S&P has 22 possible ratings. There are six ratings above the "A-" rating of our primary insurance subsidiaries and 15 ratings that are below that rating.
Moody's affirmed its "A3" financial strength ratings of our primary insurance subsidiaries on June 18, 2025. The outlook for these ratings remains stable. Moody's financial strength ratings range from "Aaa" to "C". These ratings may be supplemented with numbers "1", "2", or "3" to show relative standing within a category. In Moody's view, an insurer rated "A" offers good financial security, however, certain elements may be present which suggests a susceptibility to impairment sometime in the future. Moody's has 21 possible ratings. There are six ratings above the "A3" rating of our primary insurance subsidiaries and 14 ratings that are below that rating.
On February 26, 2025, AM Best affirmed its "A" financial strength ratings of our primary insurance subsidiaries and the outlook for these ratings is stable. The "A" rating is assigned to companies that have an excellent ability, in AM Best's
opinion, to meet their ongoing obligations to policyholders. AM Best ratings for the industry currently range from "A++ (Superior)" to "D (In Liquidation)" and some companies are not rated. AM Best has 13 possible ratings. There are two ratings above the "A" rating of our primary insurance subsidiaries and ten ratings that are below that rating.
Rating agencies have increased the frequency and scope of their credit reviews and requested additional information from the companies that they rate, including us. They may also adjust upward the capital and other requirements employed in their rating models for maintenance of certain ratings levels. We cannot predict what actions rating agencies may take, or what actions we may take in response. Accordingly, downgrades and outlook revisions related to us or the life insurance industry may occur in the future at any time and without notice by any rating agency. These could increase policy surrenders and withdrawals, adversely affect relationships with our distribution channels, reduce new sales, reduce our ability to borrow and increase our future borrowing costs.
Liquidity of the Holding Companies
Availability and Sources and Uses of Holding Company Liquidity; Limitations on Ability of Insurance Subsidiaries to Make Dividend and Surplus Debenture Interest Payments to the Holding Companies; Limitations on Holding Company Activities
CNO and CDOC are holding companies with no business operations of their own; they depend on their operating subsidiaries for cash to make principal and interest payments on debt, and to pay administrative expenses and income taxes. CNO and CDOC receive cash from insurance subsidiaries, consisting of dividends and distributions, interest payments on surplus debentures and tax-sharing payments, as well as cash from non-insurance subsidiaries consisting of dividends, distributions, loans and advances. The principal non-insurance subsidiaries that provide cash to CNO and CDOC are 40|86 Advisors, which receives fees from the insurance subsidiaries for investment services, and CNO Services, LLC ("CNO Services") which receives fees from the insurance subsidiaries for providing administrative services. The agreements between our insurance subsidiaries and CNO Services and 40|86 Advisors, respectively, were previously approved by the domestic insurance regulator for each insurance company, and any payments thereunder do not require further regulatory approval. Refer to "- Liquidity for Insurance Operations" above regarding the CLMA and limitations on CNO Bermuda Re's ability to pay dividends or other capital distributions to CDOC.
At December 31, 2025, CNO, CDOC and our other non-insurance subsidiaries held $351.4 million of unrestricted cash and cash equivalents which was above our minimum target level of $150 million.
The following table sets forth the aggregate amount of dividends (net of paid or accrued capital contributions) and other distributions that our insurance subsidiaries paid to our non-insurance subsidiaries in each of the last three fiscal years (dollars in millions):
| | | | | | | | | | | | | | | | | |
| Years ended December 31, |
| 2025 | | 2024 | | 2023 |
| Dividends (net of contributions) from insurance subsidiaries | $ | 250.4 | | | $ | 129.0 | | | $ | 227.1 | |
| Surplus debenture interest | 75.9 | | | 84.4 | | | 82.0 | |
| Fees for services provided pursuant to service agreements | 124.4 | | | 119.7 | | | 116.1 | |
| Total dividends and other distributions paid by insurance subsidiaries | $ | 450.7 | | | $ | 333.1 | | | $ | 425.2 | |
The ability of our U.S. based insurance subsidiaries to pay dividends is subject to state insurance department regulations and is based on the financial statements of our insurance subsidiaries prepared in accordance with statutory accounting practices prescribed or permitted by regulatory authorities, which differ from GAAP. These regulations generally permit dividends to be paid from statutory earned surplus of the insurance company without regulatory approval for any 12-month period in amounts equal to the greater of (or in some states, the lesser of): (i) statutory net gain from operations or net income for the prior year; or (ii) 10 percent of statutory capital and surplus as of the end of the preceding year. However, as Washington National and CLTX, the immediate U.S. based insurance subsidiaries of CDOC, have significant negative earned surplus, any dividend payments from the insurance subsidiaries require the prior approval of the director or commissioner of the applicable state insurance department. Washington National and CLTX receive funds to pay dividends primarily from: (i) the earnings of their direct businesses; (ii) tax sharing payments received from subsidiaries (if applicable); and (iii) with respect to CLTX, dividends received from subsidiaries. Bankers Conseco Life Insurance Company, Bankers Life and Colonial Penn are wholly-owned subsidiaries of CLTX. Colonial Penn has
significant negative earned surplus, and would therefore require prior approval to pay a dividend. Colonial Penn has not paid dividends in recent years. Bankers Life has negative earned surplus in 2025 and would require prior approval to pay a dividend. Bankers Conseco Life Insurance Company has minimal earned surplus, but consistently have positive earnings. As a result, a limited amount of dividends can be paid without prior approval. CNO Bermuda Re may not pay any dividends or make any capital distributions to its parent within the five years following the 2023 reinsurance transaction unless approved by the BMA. In 2025, our U.S. based insurance subsidiaries paid dividends to CDOC totaling $458.4 million. We expect to receive regulatory approval for future dividends from our subsidiaries, but there can be no assurance that such payments will be approved or that the financial condition of our insurance subsidiaries will not change, making future approvals less likely. During 2025, CDOC made capital contributions of $140.0 million to its insurance subsidiaries and $68.0 million to CNO Bermuda Re.
CDOC holds surplus debentures from CLTX with an aggregate principal amount of $749.6 million. Interest payments on those surplus debentures do not require additional approval provided the RBC ratio of CLTX exceeds 100 percent (but do require prior written notice to the Texas Department of Insurance). The estimated RBC ratio of CLTX was 323 percent at December 31, 2025. CDOC also holds a surplus debenture from Colonial Penn with a principal balance of $160.0 million. Interest payments on that surplus debenture require prior approval by the Pennsylvania Insurance Department. Dividends and other payments from our non-insurance subsidiaries, including 40|86 Advisors and CNO Services, to CNO or CDOC do not require approval by any regulatory authority or other third party. However, insurance regulators may prohibit payments by our insurance subsidiaries to parent companies if they determine that such payments could be adverse to our policyholders or contract holders.
A significant deterioration in the financial condition, earnings or cash flow of the material subsidiaries of CNO or CDOC for any reason could hinder such subsidiaries' ability to pay cash dividends or other disbursements to CNO and/or CDOC, which, in turn, could limit CNO's ability to meet debt service requirements and satisfy other financial obligations. In addition, we may choose to retain capital in our insurance subsidiaries or to contribute additional capital to our insurance subsidiaries to maintain or strengthen their surplus or fund reinsurance transactions, and these decisions could limit the amount available at our top tier insurance subsidiaries to pay dividends to the holding companies.
At December 31, 2025, there were no amounts outstanding under our $250 million Revolving Credit Agreement and there are no scheduled repayments of our direct corporate obligations until May 2029.
The scheduled principal and interest payments on our direct corporate obligations are as follows (dollars in millions):
| | | | | | | | | | | |
| Principal | | Interest (a) |
| 2026 | $ | — | | | $ | 84.7 | |
| 2027 | — | | | 79.7 | |
| 2028 | — | | | 79.7 | |
| 2029 | 500.0 | | (b) | 64.3 | |
2030 | — | | (c) | 53.0 | |
2031 and thereafter | 850.0 | | (d) | 385.8 | |
| $ | 1,350.0 | | | $ | 747.2 | |
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(a)Based on interest rates as of December 31, 2025.
(b)Such amount includes $500 million of 5.250% Notes due 2029.
(c)The maturity date of the Revolving Credit Agreement is May 8, 2030.
(d)Such amount includes $700 million of 6.450% Notes due 2034 and $150 million of Subordinated Debentures.
Free cash flow is a measure of holding company liquidity and is calculated as: (i) dividends, management fees and surplus debenture interest payments received from our subsidiaries; plus (ii) earnings on corporate investments; less (iii) interest expense, corporate expenses and net tax payments. In 2025, we generated $365.5 million of such free cash flow. The Company expects to deploy its free cash flow into investments to accelerate profitable growth, common stock dividends and share repurchases. The amount and timing of future share repurchases (if any) will be based on business and market conditions and other factors including, but not limited to, available free cash flow, the current price of our common stock and investment opportunities. In 2025, we repurchased 8.1 million shares of common stock for $319.9 million under our securities repurchase program. The Company had remaining repurchase authority of $420.4 million as of
December 31, 2025. The Company's Board of Directors authorized the repurchase of an additional $500.0 million of the Company's outstanding shares of common stock in February 2025.
In 2025, 2024 and 2023, dividends declared on common stock totaled $66.4 million ($0.67 per common share), $67.5 million ($0.63 per common share) and $67.9 million ($0.59 per common share), respectively. In May 2025, the Company increased its quarterly common stock dividend to $0.17 per share from $0.16 per share.
On October 21, 2025, Fitch affirmed its "BBB+" and "BBB" ratings on our issuer credit and senior unsecured debt ratings, respectively. The outlook for these rating is stable. In Fitch's view, an obligation rated "BBB" indicates that expectations of default risk are currently low. The capacity for payment of financial commitments is considered adequate but adverse business or economic conditions are more likely to impair this capacity. Pluses and minuses show the relative standing within a category. Fitch has a total of 24 possible ratings ranging from "AAA" to "D". There are seven ratings above CNO's BBB+ rating and 16 ratings that are below its rating. There are eight ratings above CNO's "BBB" rating and 15 ratings that are below its rating.
S&P affirmed its "BBB-" rating on our issuer credit and senior unsecured debt on June 24, 2025. The outlook for these ratings is stable. In S&P's view, an obligation rated "BBB" exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation. Pluses and minuses show the relative standing within a category. S&P has a total of 22 possible ratings ranging from "AAA (Extremely Strong)" to "D (Payment Default)". There are nine ratings above CNO's "BBB-" rating and 12 ratings that are below its rating.
Moody's affirmed its "Baa3" rating on our senior unsecured debt on June 18, 2025. The outlook for these ratings remains stable. In Moody's view, obligations rated "Baa" are subject to moderate credit risk and may possess certain speculative characteristics. A rating is supplemented with numerical modifiers "1", "2" or "3" to show the relative standing within a category. Moody's has a total of 21 possible ratings ranging from "Aaa" to "C". There are nine ratings above CNO's "Baa3" rating and 11 ratings that are below its rating.
On February 26, 2025, AM Best affirmed its "bbb" rating on our issuer credit and senior unsecured debt and the outlook for these ratings is stable. In AM Best's view, a company rated "bbb" has an adequate ability to meet the terms of its obligations; however, the issuer is more susceptible to changes in economic or other conditions. Pluses and minuses show the relative standing within a category. AM Best has a total of 21 possible ratings ranging from "aaa (Exceptional)" to "c (In default)". There are eight ratings above CNO's "bbb" rating and 12 ratings that are below its rating.
Outlook
We believe that the existing cash available to the holding company, the cash flows to be generated from operations and other transactions will be sufficient to allow us to meet our debt service obligations, pay corporate expenses and satisfy other financial obligations. However, our cash flow is affected by a variety of factors, many of which are outside of our control, including insurance regulatory issues, competition, financial markets and other general business conditions. We cannot provide assurance that we will possess sufficient income and liquidity to meet all of our debt service requirements and other holding company obligations. For additional discussion regarding the liquidity and other risks that we face, see "Part 1 - Item 1A. Risk Factors".
MARKET-SENSITIVE INSTRUMENTS AND RISK MANAGEMENT
Our spread-based insurance business is subject to several inherent risks arising from movements in interest rates, especially if we fail to anticipate or respond to such movements. First, interest rate changes can cause compression of our net spread between interest earned on investments and interest credited on customer deposits, thereby adversely affecting our results. Second, if interest rate changes produce an unanticipated increase in surrenders of our spread-based products, we may be forced to sell invested assets at a loss in order to fund such surrenders. Many of our products include surrender charges, market interest rate adjustments or other features to encourage persistency; however, at December 31, 2025, approximately $3.9 billion of our total insurance liabilities could be surrendered by the policyholder without penalty. Finally, changes in interest rates can have significant effects on our investment portfolio. We use asset/liability management strategies that are designed to mitigate the effect of interest rate changes on our profitability. However, there can be no assurance that management will be successful in implementing such strategies and sustaining adequate investment spreads.
We seek to invest our assets allocated to our insurance products in a manner that will fund future obligations to policyholders and meet profitability objectives, subject to appropriate risk considerations. We seek to meet this objective through investments that: (i) have similar cash flow characteristics with the liabilities they support; (ii) are diversified (including by types of obligors); and (iii) are predominantly investment-grade in quality.
Our investment strategy is to manage, over a sustained period and within acceptable parameters of quality and risk, capital efficiency through active strategic asset allocation and investment management. Accordingly, we may sell securities at a gain or a loss to enhance the projected total return of the portfolio as market opportunities change, to reflect changing perceptions of risk, or to better match certain characteristics of our investment portfolio with the corresponding characteristics of our insurance liabilities.
The profitability of many of our products depends on the spread between the interest earned on investments and the rates credited on our insurance liabilities. In addition, changes in competition and other factors, including the level of surrenders and withdrawals, may limit our ability to adjust or to maintain crediting rates at levels necessary to avoid narrowing of spreads under certain market conditions. As of December 31, 2025, approximately 13 percent of our insurance liabilities had interest rates that may be reset annually, 43 percent had a fixed explicit interest rate for the duration of the contract, 40 percent are fixed indexed products where the income earned is subject to a participation rate that typically may be changed annually, and the remainder had no explicit interest rates.
At December 31, 2025, $1,289.0 million and $414.5 million of our annuity and universal life account values, respectively, net of amounts ceded, were at minimum guaranteed crediting rates. The weighted average crediting rates at December 31, 2025, related to such annuity and universal life account values, that were at the minimum guaranteed crediting rate were 2.61 percent and 4.09 percent, respectively.
At December 31, 2025, the weighted average yield, computed on the cost basis of investments allocated to our product lines, was approximately 4.9 percent, and the average interest rate credited or accruing to our total insurance liabilities (excluding interest rate bonuses for the first policy year only and excluding the effect of credited rates attributable to variable or fixed indexed products) was 4.3 percent. Such 4.3 percent rate includes interest credited to annuity and universal life products as well as the rates assumed in our calculations of reserves for health and traditional life products which are set based on investment yields at policy issuance and are locked-in in accordance with current accounting requirements. Refer to "Part 1 - Item 1A. Risk Factors - A return to a prolonged low interest rate environment may negatively impact our results of operations, financial position and cash flows" for additional information on interest rate risks.
We simulate the cash flows expected from our existing insurance business under various interest rate scenarios. These simulations help us to measure the potential gain or loss in fair value of our interest rate-sensitive investments and to manage the relationship between the interest sensitivity of our assets and liabilities. When the estimated durations of assets and liabilities are similar, absent other factors, a change in the value of assets related to changes in interest rates should be largely offset by a change in the value of liabilities. At December 31, 2025, the estimated duration of our fixed income securities (as modified to reflect estimated prepayments and call premiums) and the estimated duration of our insurance liabilities were approximately 7.5 years and 8.1 years, respectively. We estimate that our fixed maturity securities and short-term investments would decline in fair value by $691.7 million if interest rates were to increase by 10 percent from their levels at December 31, 2025. Our simulations incorporate numerous assumptions, require significant estimates and assume an immediate change in interest rates without any management of the investment portfolio in reaction to such change. Consequently, potential changes in value of our financial instruments indicated by the simulations will likely be different from the actual changes experienced under given interest rate scenarios, and the differences may be material. Because we actively manage our investments and liabilities, our net exposure to interest rates can vary over time.
We are subject to the risk that our investments will decline in value if interest rates rise.
The Company is subject to risk resulting from fluctuations in market prices of our equity securities. In general, these investments have more year-to-year price variability than our fixed maturity investments. However, returns over longer time frames have been consistently higher. We manage this risk by limiting our equity securities to a relatively small portion of our total investments.
Our investment in options backing our equity-linked products is closely matched with our obligation to fixed indexed annuity holders. Fair value changes associated with that investment are substantially offset by an increase or decrease in the amounts added to policyholder account liabilities for fixed indexed products.
Inflation
Inflation rates may impact the financial statements and operating results in several areas. Inflation influences interest rates, which in turn impact the fair value of the investment portfolio and yields on new investments. Inflation also impacts a portion of our insurance policy benefits affected by increased medical coverage costs. Operating expenses, including payrolls, are impacted to a certain degree by the inflation rate. Refer to "Part I - Item 1A. Risk Factors - Inflation levels could have adverse consequences for us, the insurance industry and the U.S. economy generally" for additional information on inflation.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The information included under the caption "Market-Sensitive Instruments and Risk Management" in Item 7. "Management's Discussion and Analysis of Consolidated Financial Condition and Results of Operations" is incorporated herein by reference.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS.
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Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of CNO Financial Group, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of CNO Financial Group, Inc. and its subsidiaries (the "Company") as of December 31, 2025 and 2024, and the related consolidated statements of operations, of comprehensive income (loss), of shareholders' equity and of cash flows for each of the three years in the period ended December 31, 2025, including the related notes and financial statement schedules listed in the index appearing under Item 15(a)(2) (collectively referred to as the "consolidated financial statements"). We also have audited the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Valuation of market risk benefits (MRBs) associated with fixed indexed annuity products
As described in Notes 2, 4, and 5 to the consolidated financial statements, the total fair value of the fixed indexed annuity products MRB liabilities was $48.1 million as of December 31, 2025. Certain of the Company’s fixed indexed annuity products include a guaranteed lifetime withdrawal benefit (GLWB) that is considered a MRB. MRBs are measured at fair value using an option-based valuation model based on amount of exposure, market data, Company experience and other factors. The calculation of MRBs includes market assumptions (interest rate, equity returns, volatility and dividend yields) and non-market assumptions (mortality rates, surrender and withdrawal rates, GLWB utilization and spreads). The non-market assumptions related to mortality rates, surrenders and withdrawal rates, and GLWB utilization are significant unobservable inputs and are based on actuarial estimates and past experience.
The principal considerations for our determination that performing procedures relating to the valuation of MRBs associated with fixed indexed annuity products is a critical audit matter are (i) the significant judgment by management when developing the valuation of MRBs associated with fixed indexed annuity products, (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to surrender rates and GLWB utilization, and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s valuation of MRBs associated with fixed indexed annuity products, including controls over management’s development of the significant assumptions related to surrender rates and GLWB utilization. These procedures also included, among others, (i) testing management’s process for developing the valuation of MRBs associated with fixed indexed annuity products, (ii) evaluating the appropriateness of the model used by management (iii) testing the completeness and accuracy of the underlying data provided by management, and (iv) the involvement of professionals with specialized skill and knowledge to assist in evaluating the reasonableness of the significant assumptions related to surrender rates and GLWB utilization used in the valuation based on industry knowledge as well as historical Company data and experience.
/s/ PricewaterhouseCoopers LLP
Indianapolis, Indiana
February 24, 2026
We have served as the Company’s auditor since 1983.
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31, 2025 and 2024
(Dollars in millions)
ASSETS
| | | | | | | | | | | |
| 2025 | | 2024 |
| | | | |
| Investments: | | | |
Fixed maturities, available for sale, at fair value (net of allowance for credit losses: 2025 - $36.0 and 2024 - $37.1; amortized cost: 2025 - $25,776.4 and 2024 - $25,151.0) | $ | 23,886.8 | | | $ | 22,730.1 | |
| Equity securities at fair value | 389.2 | | | 272.4 | |
Mortgage loans (net of allowance for credit losses: 2025 - $20.9 and 2024 - $13.6) | 3,256.8 | | | 2,506.3 | |
| Policy loans | 140.9 | | | 135.3 | |
| Trading securities | 294.8 | | | 304.2 | |
Investments held by variable interest entities (net of allowance for credit losses: 2025 - $0.6 and 2024 - $1.3; amortized cost: 2025 - $294.1 and 2024 - $437.0) | 293.0 | | | 433.8 | |
| Other invested assets | 1,737.0 | | | 1,491.5 | |
| Total investments | 29,998.5 | | | 27,873.6 | |
| Cash and cash equivalents - unrestricted | 956.1 | | | 1,656.7 | |
| Cash and cash equivalents held by variable interest entities | 27.4 | | | 341.0 | |
| Accrued investment income | 286.0 | | | 286.4 | |
| Present value of future profits | 143.6 | | | 161.0 | |
| Deferred acquisition costs | 2,397.3 | | | 2,158.6 | |
Reinsurance receivables (net of allowance for credit losses: 2025 - $1.0 and 2024 - $3.0) | 3,677.5 | | | 3,854.7 | |
| | | |
| Income tax assets, net | 713.3 | | | 814.1 | |
| Assets held in separate accounts | 2.8 | | | 3.3 | |
| Other assets | 588.1 | | | 699.9 | |
| Total assets | $ | 38,790.6 | | | $ | 37,849.3 | |
(continued on next page)
The accompanying notes are an integral part
of the consolidated financial statements.
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET, continued
December 31, 2025 and 2024
(Dollars in millions)
LIABILITIES AND SHAREHOLDERS' EQUITY
| | | | | | | | | | | |
| 2025 | | 2024 |
| | | | |
| Liabilities: | | | |
| Liabilities for insurance products: | | | |
| Policyholder account balances | $ | 18,912.6 | | | $ | 17,594.2 | |
| Future policy benefits | 11,898.0 | | | 11,705.5 | |
| Market risk benefit liability | 48.1 | | | 60.0 | |
| Liability for life insurance policy claims | 58.4 | | | 61.1 | |
| Unearned and advanced premiums | 228.0 | | | 226.8 | |
| Liabilities related to separate accounts | 2.8 | | | 3.3 | |
| Other liabilities | 952.8 | | | 1,163.3 | |
| Investment borrowings | 2,441.7 | | | 2,188.8 | |
| Borrowings related to variable interest entities | 274.4 | | | 497.6 | |
| Notes payable – direct corporate obligations | 1,335.6 | | | 1,833.5 | |
| Total liabilities | 36,152.4 | | | 35,334.1 | |
Commitments and Contingencies (Note 8) | | | |
| Shareholders' equity: | | | |
Common stock ($0.01 par value, 8,000,000,000 shares authorized, shares issued and outstanding: 2025 - 94,484,339 and 2024 - 101,618,957) | 0.9 | | | 1.0 | |
| Additional paid-in capital | 1,336.3 | | | 1,632.5 | |
| Accumulated other comprehensive loss | (1,115.0) | | | (1,371.4) | |
| Retained earnings | 2,416.0 | | | 2,253.1 | |
| Total shareholders' equity | 2,638.2 | | | 2,515.2 | |
| Total liabilities and shareholders' equity | $ | 38,790.6 | | | $ | 37,849.3 | |
The accompanying notes are an integral part
of the consolidated financial statements.
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
for the years ended December 31, 2025, 2024 and 2023
(Dollars in millions, except per share data)
| | | | | | | | | | | | | | | | | | | | |
| | | 2025 | | 2024 | | 2023 |
| Revenues: | | | | | | |
| Insurance policy income | | $ | 2,622.6 | | | $ | 2,558.5 | | | $ | 2,505.5 | |
Net investment income: | | | | | | |
| General account assets | | 1,542.4 | | | 1,419.4 | | | 1,250.2 | |
| Policyholder and other special-purpose portfolios | | 181.0 | | | 329.4 | | | 249.5 | |
| Investment gains (losses): | | | | | | |
Realized investment losses | | (59.6) | | | (75.6) | | | (69.3) | |
Other investment gains | | 4.9 | | | 25.7 | | | 0.3 | |
Total investment losses | | (54.7) | | | (49.9) | | | (69.0) | |
| Fee revenue and other income | | 196.1 | | | 192.1 | | | 210.6 | |
| Total revenues | | 4,487.4 | | | 4,449.5 | | | 4,146.8 | |
| Benefits and expenses: | | | | | | |
| Insurance policy benefits | | 2,548.2 | | | 2,450.3 | | | 2,331.1 | |
| Liability for future policy benefits remeasurement loss | | (70.7) | | | (41.1) | | | (21.2) | |
| Change in fair value of market risk benefits | | (12.4) | | | (60.5) | | | (34.2) | |
| Interest expense | | 230.9 | | | 254.4 | | | 238.6 | |
Amortization of deferred acquisition costs and present value of future profits | | 278.0 | | | 251.2 | | | 227.4 | |
Goodwill and other asset impairment | | 101.9 | | | — | | | — | |
Gain on extinguishment of borrowings related to variable interest entities | | (1.5) | | | — | | | — | |
| Other operating costs and expenses | | 1,119.6 | | | 1,055.3 | | | 1,048.3 | |
| Total benefits and expenses | | 4,194.0 | | | 3,909.6 | | | 3,790.0 | |
| Income before income taxes | | 293.4 | | | 539.9 | | | 356.8 | |
| | | | | | |
| Income tax expense | | 64.1 | | | 119.1 | | | 80.3 | |
| | | | | | |
| Net income | | $ | 229.3 | | | $ | 420.8 | | | $ | 276.5 | |
| Earnings per common share: | | | | | | |
| Basic: | | | | | | |
| Weighted average shares outstanding | | 97,763,000 | | | 106,144,000 | | | 113,275,000 | |
| Net income | | $ | 2.35 | | | $ | 3.96 | | | $ | 2.44 | |
| Diluted: | | | | | | |
| Weighted average shares outstanding | | 99,822,000 | | | 108,116,000 | | | 115,124,000 | |
| Net income | | $ | 2.30 | | | $ | 3.89 | | | $ | 2.40 | |
The accompanying notes are an integral part
of the consolidated financial statements.
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
for the years ended December 31, 2025, 2024 and 2023
(Dollars in millions)
| | | | | | | | | | | | | | | | | |
| 2025 | | 2024 | | 2023 |
| Net income | $ | 229.3 | | | $ | 420.8 | | | $ | 276.5 | |
Other comprehensive income, before tax: | | | | | |
| Unrealized gains (losses) on investments | 470.8 | | | (294.4) | | | 823.6 | |
| Adjustment to discount rate for liability for future policy benefits | (203.4) | | | 491.1 | | | (367.3) | |
| Adjustment to instrument-specific credit risk for market risk benefits | (0.5) | | | (3.4) | | | (7.4) | |
| Reclassification adjustments: | | | | | |
For net realized investment losses included in net income | 64.0 | | | 70.3 | | | 37.9 | |
Other comprehensive income before tax | 330.9 | | | 263.6 | | | 486.8 | |
Income tax expense related to items of accumulated other comprehensive income | (74.5) | | | (58.2) | | | (106.3) | |
Other comprehensive income, net of tax | 256.4 | | | 205.4 | | | 380.5 | |
Comprehensive income | $ | 485.7 | | | $ | 626.2 | | | $ | 657.0 | |
The accompanying notes are an integral part
of the consolidated financial statements.
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(Dollars in millions)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common stock | | Additional paid-in | | Accumulated other comprehensive | | Retained | | |
| | Shares | | Amount | | capital | | income (loss) | | earnings | | Total |
| | | | | | | | | | | |
| | | | | | | | | | | |
Balance, December 31, 2022 | 114,343 | | | $ | 1.1 | | | $ | 2,033.8 | | | $ | (1,957.3) | | | $ | 1,691.2 | | | $ | 1,768.8 | |
| Net income | — | | | — | | | — | | | — | | | 276.5 | | | 276.5 | |
| Other comprehensive income, net of tax | — | | | — | | | — | | | 380.5 | | | — | | | 380.5 | |
| | | | | | | | | | | |
| Common stock repurchased | (6,557) | | | — | | | (165.1) | | | — | | | — | | | (165.1) | |
| Dividends on common stock | — | | | — | | | — | | | — | | | (67.9) | | | (67.9) | |
| Employee benefit plans, net of shares used to pay tax withholdings | 1,572 | | | — | | | 22.8 | | | — | | | — | | | 22.8 | |
| Balance, December 31, 2023 | 109,358 | | | 1.1 | | | 1,891.5 | | | (1,576.8) | | | 1,899.8 | | | 2,215.6 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Net income | — | | | — | | | — | | | — | | | 420.8 | | | 420.8 | |
| Other comprehensive income, net of tax | — | | | — | | | — | | | 205.4 | | | — | | | 205.4 | |
| Common stock repurchased | (8,943) | | | (.1) | | | (281.5) | | | — | | | — | | | (281.6) | |
| Dividends on common stock | — | | | — | | | — | | | — | | | (67.5) | | | (67.5) | |
| Employee benefit plans, net of shares used to pay tax withholdings | 1,204 | | | — | | | 22.5 | | | — | | | — | | | 22.5 | |
| Balance, December 31, 2024 | 101,619 | | | 1.0 | | | 1,632.5 | | | (1,371.4) | | | 2,253.1 | | | 2,515.2 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Net income | — | | | — | | | — | | | — | | | 229.3 | | | 229.3 | |
| Other comprehensive income, net of tax | — | | | — | | | — | | | 256.4 | | | — | | | 256.4 | |
| | | | | | | | | | | |
| Common stock repurchased | (8,147) | | | (0.1) | | | (319.8) | | | — | | | — | | | (319.9) | |
| Dividends on common stock | — | | | — | | | — | | | — | | | (66.4) | | | (66.4) | |
| Employee benefit plans, net of shares used to pay tax withholdings | 1,012 | | | — | | | 23.6 | | | — | | | — | | | 23.6 | |
| Balance, December 31, 2025 | 94,484 | | | $ | 0.9 | | | $ | 1,336.3 | | | $ | (1,115.0) | | | $ | 2,416.0 | | | $ | 2,638.2 | |
The accompanying notes are an integral part
of the consolidated financial statements.
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
for the years ended December 31, 2025, 2024 and 2023
(Dollars in millions)
| | | | | | | | | | | | | | | | | | | | |
| | | 2025 | | 2024 | | 2023 |
| Cash flows from operating activities: | | | | | | |
| Insurance policy income | | $ | 2,402.5 | | | $ | 2,348.4 | | | $ | 2,285.2 | |
| Net investment income | | 1,502.9 | | | 1,414.8 | | | 1,328.9 | |
| Fee revenue and other income | | 179.6 | | | 168.7 | | | 205.3 | |
| | | | | | |
| Insurance policy benefits | | (1,628.5) | | | (1,604.4) | | | (1,611.1) | |
| | | | | | |
| Interest expense | | (230.3) | | | (259.2) | | | (232.5) | |
| Deferrable policy acquisition costs | | (499.3) | | | (445.7) | | | (377.9) | |
| Other operating costs | | (1,013.5) | | | (939.8) | | | (955.9) | |
| Income taxes | | (37.7) | | | (55.1) | | | (59.1) | |
| Net cash provided by operating activities | | 675.7 | | | 627.7 | | | 582.9 | |
| Cash flows from investing activities: | | | | | | |
| Sales of investments | | 3,274.5 | | | 3,240.2 | | | 1,388.6 | |
| Maturities and redemptions of investments | | 3,520.9 | | | 2,175.2 | | | 1,397.0 | |
| Purchases of investments | | (8,459.5) | | | (6,803.0) | | | (3,591.9) | |
| Net purchases of trading securities | | — | | | (87.5) | | | (29.4) | |
Other, net | | (3.2) | | | (13.5) | | | (36.6) | |
| Net cash used by investing activities | | (1,667.3) | | | (1,488.6) | | | (872.3) | |
| Cash flows from financing activities: | | | | | | |
| Issuance of notes payable, net | | — | | | 691.0 | | | — | |
| Payments on notes payable | | (500.0) | | | — | | | — | |
| | | | | | |
| Issuance of common stock | | 11.6 | | | 11.2 | | | 13.2 | |
| Payments to repurchase common stock | | (331.4) | | | (300.2) | | | (166.1) | |
| Common stock dividends paid | | (66.2) | | | (67.7) | | | (68.1) | |
| Amounts received for deposit products | | 3,234.1 | | | 3,932.2 | | | 2,111.7 | |
| Withdrawals from deposit products | | (2,385.7) | | | (1,961.5) | | | (1,696.2) | |
| Proceeds from financing arrangements | | — | | | — | | | 80.3 | |
| Payments on financing arrangements | | (15.4) | | | (14.4) | | | (6.2) | |
| Issuance of investment borrowings: | | | | | | |
| Federal Home Loan Bank | | 776.8 | | | 612.2 | | | 995.5 | |
| Related to variable interest entities | | — | | | 276.0 | | | — | |
| Payments on investment borrowings: | | | | | | |
| Federal Home Loan Bank | | (523.8) | | | (612.7) | | | (445.8) | |
| Related to variable interest entities and other | | (222.6) | | | (596.5) | | | (284.8) | |
| | | | | | |
| | | | | | |
Net cash (used) provided by financing activities | | (22.6) | | | 1,969.6 | | | 533.5 | |
Net (decrease) increase in cash and cash equivalents | | (1,014.2) | | | 1,108.7 | | | 244.1 | |
| Cash and cash equivalents - unrestricted and held by variable interest entities, beginning of year | | 1,997.7 | | | 889.0 | | | 644.9 | |
| Cash and cash equivalents - unrestricted and held by variable interest entities, end of year | | $ | 983.5 | | | $ | 1,997.7 | | | $ | 889.0 | |
The accompanying notes are an integral part
of the consolidated financial statements.
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
1. BUSINESS AND BASIS OF PRESENTATION
CNO Financial Group, Inc., a Delaware corporation ("CNO"), is a holding company for a group of insurance companies that develop, market and administer health insurance, annuity, individual life insurance and other insurance and financial services products. The terms "CNO Financial Group, Inc.", "CNO", the "Company", "we", "us", and "our" as used in these financial statements refer to CNO and its subsidiaries. Such terms, when used to describe insurance business and products, refer to the insurance business and products of CNO's insurance subsidiaries.
We focus on serving middle-income pre-retiree and retired Americans, which we believe are attractive, underserved, high growth markets. We sell our products through exclusive agents, independent producers (some of whom sell one or more of our product lines exclusively) and direct marketing.
We prepare our financial statements in accordance with accounting principles generally accepted in the United States of America ("GAAP").
When we prepare financial statements in conformity with GAAP, we are required to make estimates and assumptions that significantly affect reported amounts of various assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting periods. For example, we use significant estimates and assumptions to calculate values for deferred acquisition costs, the present value of future profits, fair value measurements of certain investments (including derivatives), allowance for credit losses and other-than-temporary impairments of investments, assets and liabilities related to income taxes, liabilities for insurance products, liabilities related to litigation, guaranty fund assessment accruals, goodwill and intangible assets, and fee revenue. If our future experience differs from these estimates and assumptions, our financial statements could be materially affected.
The accompanying financial statements include the accounts of the Company and its subsidiaries. Our consolidated financial statements exclude transactions between us and our consolidated affiliates, or among our consolidated affiliates.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Investments
Fixed maturity securities include available for sale bonds and redeemable preferred stocks. We carry these investments at estimated fair value. We record any unrealized gain or loss, net of tax and related adjustments, as a component of shareholders' equity. When the fair value option is elected, unrealized gains and losses are recognized in other investment gains (losses) in the consolidated statement of operations.
Equity securities include investments in common stock, exchange-traded funds and non-redeemable preferred stock. We carry these investments at estimated fair value. Changes in the fair value of equity securities are recognized in net income.
Mortgage loans held in our investment portfolio are carried at amortized unpaid balance, net of allowance for estimated credit losses. Interest income is accrued on the principal amount of the loan based on the loan's contractual interest rate. Payment terms specified for mortgage loans may include a prepayment penalty for unscheduled payoff of the investment. Prepayment penalties are recognized as investment income when received. The allowance for estimated credit losses is measured using a loss-rate method on an individual asset basis. Inputs used include asset-specific characteristics, current economic conditions, historical loss information and reasonable and supportable forecasts about future economic conditions.
Policy loans are stated at current unpaid principal balances. Policy loans are collateralized by the cash surrender value of the life insurance policy. Interest income is recorded as earned using the contractual interest rate.
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
Trading securities include: (i) investments purchased with the intent of selling in the near term to generate income; and (ii) certain fixed maturity securities containing embedded derivatives for which we have elected the fair value option. The change in fair value of the income generating investments is recognized in income from policyholder and other special-purpose portfolios in the consolidated statement of operations. The change in fair value of securities with embedded derivatives is recognized in other investment gains (losses) in the consolidated statement of operations.
Other invested assets include: (i) call options purchased in an effort to offset or hedge the effects of certain policyholder benefits related to our fixed indexed annuity and life insurance products; (ii) company-owned life insurance ("COLI"); (iii) investments in the common stock of the Federal Home Loan Bank ("FHLB"); and (iv) certain non-traditional investments. We carry the call options at estimated fair value as further described in the section of this note entitled "Accounting for Derivatives". We carry COLI at its cash surrender value, which approximates its net realizable value. Non-traditional investments include investments in certain limited partnerships and limited liability companies, which are accounted for using the equity method. In accounting for limited partnerships and limited liability companies, we consistently use the most recently available financial information provided by the general partner or manager of each of these investments, which is typically reported to us one quarter in arrears. Our share of earnings in our equity method investments is recorded within net investment income in the consolidated statement of operations.
Interest income on fixed maturity securities is recognized when earned using a constant effective yield method giving effect to amortization of premiums and accretion of discounts. Prepayment fees are recognized when earned. Dividends on equity securities are recognized on the ex-dividend date.
When we sell a security (other than trading securities), we report the difference between the sale proceeds and amortized cost (determined based on specific identification) as a realized investment gain or loss.
When an available for sale fixed maturity security's fair value is below the amortized cost, the security is considered impaired. If a portion of the decline is due to credit-related factors, we separate the credit loss component of the impairment from the amount related to all other factors. The credit loss component is recorded as an allowance and reported in other investment gains (losses) (limited to the difference between estimated fair value and amortized cost). The impairment related to all other factors (non-credit factors) is reported in accumulated other comprehensive income (loss) along with unrealized gains related to fixed maturity investments, available for sale, net of tax and related adjustments. The allowance is adjusted for any additional credit losses and subsequent recoveries. When recognizing an allowance associated with a credit loss, the cost basis is not adjusted. When we determine a security is uncollectible, the remaining amortized cost will be written off.
In determining the credit loss component, we discount the estimated cash flows on a security by security basis. We consider the impact of macroeconomic conditions on inputs used to measure the amount of credit loss. For most structured securities, cash flow estimates are based on bond-specific facts and circumstances that may include collateral characteristics, expectations of delinquency and default rates, loss severity, prepayment speeds and structural support, including over-collateralization, excess spread, subordination and guarantees. For corporate bonds, cash flow estimates are derived by considering asset type, rating, time to maturity, and applying an expected loss rate.
If we intend to sell an impaired fixed maturity security, available for sale, or identify an impaired fixed maturity security, available for sale, for which it is more likely than not we will be required to sell before anticipated recovery, the difference between the fair value and the amortized cost is included in other investment gains (losses) and the fair value becomes the new amortized cost. The new cost basis is not adjusted for any subsequent recoveries in fair value.
The Company reports accrued investment income separately from fixed maturities, available for sale, and has elected not to measure an allowance for credit losses for accrued investment income. Accrued investment income is written off through net investment income at the time the issuer of the bond defaults or is expected to default on payments.
Cash and Cash Equivalents
Cash and cash equivalents include invested cash and other investments purchased with original maturities of less than three months. Cash and cash equivalents are carried at amortized cost, which approximates estimated fair value. It is
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
the Company's policy to offset negative cash balances with positive balances in other accounts with the same counterparty when agreements are in place permitting legal right of offset.
Deferred Acquisition Costs, Present Value of Future Profits and Sales Inducements
Deferred acquisition costs represent policy acquisition costs that have been capitalized and are subject to amortization. Capitalized costs are incremental costs directly related to the successful acquisition of new or renewal insurance contracts. Such costs consist primarily of commissions, underwriting, sales and contract issuance, advertising, and processing expenses. All other costs not eligible for capitalization, including certain advertising, market research, agent training, product development, unsuccessful sales and underwriting efforts, as well as indirect costs, are expensed as incurred. Contracts are grouped by contract type and issue year into cohorts consistent with the grouping used in estimating the associated liability. Deferred acquisition costs are amortized on a constant level basis for the grouped contracts over the expected term of the related contracts to approximate straight-line amortization. For life and health insurance products, the constant level basis used is policy counts. For all annuity products, the constant level basis used is premiums in force. The constant level bases used for amortization are projected using mortality and lapse assumptions that are based on our experience, industry data, and other factors and are consistent with those used for the liability for future policy benefits. If those projected assumptions change in future periods, they will be reflected in the cohort level amortization basis at the time. Unexpected lapses, due to higher mortality and lapse experience than expected, are recognized in the current period as a reduction of the capitalized balances. Changes in future estimates are recognized prospectively over the remaining expected contract term. The carrying amount of deferred acquisition costs is not subject to recovery testing.
The present value of future profits is the value assigned to the right to receive future cash flows from policyholder insurance contracts existing at September 10, 2003 (the "Effective Date", the effective date of the bankruptcy reorganization of Conseco, Inc., an Indiana corporation (our "Predecessor")). The present value of future profits is amortized in the same manner as described above for deferred acquisition costs.
Certain of our annuity products offer sales inducements to contract holders in the form of enhanced crediting rates or bonus payments in the initial period of the contract. Certain of our life insurance products offer persistency bonuses credited to the contract holder's balance after the policy has been outstanding for a specified period of time. These enhanced rates and persistency bonuses are considered sales inducements in accordance with GAAP. Such amounts are deferred and amortized in the same manner as deferred acquisition costs and are classified as deferred acquisition costs in the consolidated balance sheet. Unlike deferred acquisition costs, such amounts are considered contractual cash flows and, as a result, are subject to periodic recovery testing.
Goodwill and Intangible Assets
In February 2021, we acquired DirectPath, LLC ("DirectPath", now known as Optavise, LLC subsequent to its name change in April 2022). In April 2019, we acquired Web Benefits Design Corporation ("WBD"), which was subsequently merged into Optavise, LLC during 2023. Optavise, LLC provides personalized benefits education, advocacy and transparency, and communications services that help employers reduce healthcare costs and assist employees with making informed benefits decisions. Optavise, LLC goodwill and other intangible assets arising from the acquisitions were reflected in our Fee income segment.
Intangible assets with definite lives are amortized over their estimated useful lives and are reviewed for impairment if indicators of impairment arise. When such indicators are present, intangible assets are first tested for recoverability in accordance with Accounting Standards Codification ("ASC") 360, Property, Plant, and Equipment. If the assets are not recoverable, an impairment loss is recorded, measured as the difference between the assets' fair value and their carrying value. Goodwill is tested annually for impairment and whenever indicators of impairment arise in accordance with ASC 350, Intangibles - Goodwill and Other. The Company first performs a qualitative assessment to determine whether it is more likely than not a goodwill impairment exists, and if an indication of potential impairment results from the qualitative assessment, a quantitative assessment is performed. The Company prepares a quantitative assessment to determine the fair value of the reporting unit by using a combination of the present value of expected future cash flows and a market approach based on revenue-multiple data from peer companies and relevant observable market transactions, if available. If an
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
impairment is identified, an impairment is recorded by the amount that the carrying value exceeds the fair value of the reporting unit up to the carrying amount of goodwill.
Macroeconomic, industry and market conditions, both current and future expected financial performance, and relevant entity-specific events that occurred during the three months ended September 30, 2025 caused us to consider whether there were any interim indicators of impairment related to the Optavise, LLC business within our fee income segment. Optavise, LLC provides personalized benefits education, advocacy and transparency, and communications services that help employers reduce healthcare costs and assist employees with making informed benefit decisions. As a result of this evaluation, we identified that the valuation of Optavise, LLC would more likely than not be impacted by the recent decline in value of comparable publicly traded companies. This, combined with lower than anticipated revenue in the quarter and trends for future periods led us to conclude that there were indicators of impairment and we accordingly prepared a quantitative assessment. The Company determined the fair value of the reporting unit by using a combination of the present value of expected future cash flows and a market approach based on earnings multiple data from peer companies, using unobservable level 3 inputs.
As a result of the quantitative assessment performed, the Company concluded that goodwill of $69.5 million and other assets, primarily intangible assets, of $27.2 million were fully impaired as of September 30, 2025. Goodwill and intangible assets were included within other assets on the consolidated balance sheet. We recognized an additional impairment charge of $5.2 million related to other long-lived assets as a result of exiting the fee services side of the Worksite business during the fourth quarter of 2025. The total impairment charge of $101.9 million is included in the accompanying consolidated statement of operations for the year ended December 31, 2025. No material assets remain on Optavise, LLC after the effect of these impairments.
Market Risk Benefits
Market risk benefits ("MRBs") are contracts or contract features that both provide protection to the contract holder from other-than-nominal capital market risk and expose the Company to other-than-nominal capital market risk. Many of our fixed indexed annuity products include a guaranteed living withdrawal benefit ("GLWB") that is considered a MRB. MRBs are measured at fair value using an option-based valuation model based on amount of exposure, market data, Company experience and other factors. The calculation of MRBs includes market assumptions (interest rate, equity returns, volatility and dividend yields) and non-market assumptions (mortality rates, surrender and partial withdrawal rates, GLWB utilization and non-performance risk spread). Changes in fair value are recognized in earnings each period with the exception of the portion of the change in fair value due to a change in the instrument-specific credit risk, which is recognized in other comprehensive income (loss). MRBs in an asset position are presented separately from those in a liability position as there is no legal right of offset between contracts.
Policyholder Account Balances
Policyholder account balances represent the contract value that has accrued to the benefit of the policyholder as of the balance sheet date. It includes the policyholder account values adjusted for the amount of reserves above (below) policyholder account values. Policyholder account values include accumulated account deposits, plus interest credited, less policyholder withdrawals and, if applicable, charges assessed. This balance also includes liabilities for the funding agreements associated with our funding agreement-backed notes ("FABN") program.
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
Total policyholder account balances for insurance products related to our fixed indexed annuities are comprised of: (i) the liability related to the host contract; and (ii) the fair market value of the embedded derivatives as summarized below (dollars in millions):
| | | | | | | | | | | |
| December 31, 2025 | | December 31, 2024 |
| Fixed indexed annuity insurance liabilities: | | | |
| Host contract liability | $ | 9,818.8 | | | $ | 8,972.6 | |
| Embedded derivatives at fair value | 1,600.6 | | | 1,471.6 | |
| Total fixed indexed annuity insurance liabilities | $ | 11,419.4 | | | $ | 10,444.2 | |
Liability for Future Policy Benefits
The liability for future policy benefits is the present value of estimated future policy benefits to be paid to or on behalf of policyholders and certain related expenses (where the timing and amount of payment depends on policyholder mortality or morbidity), less the present value of estimated future net premiums to be collected from policyholders (where net premiums are gross premiums multiplied by the net premium ratio discussed below). The liability for future policy benefits is accrued over time as premium revenue is recognized. The liability is estimated using current assumptions that include discount rates, mortality, morbidity, lapse/withdrawal rates and expenses. Such assumptions are based on our historical experience, industry data, and other factors that are inherently uncertain.
The liability for future policy benefits is established using a net premium ratio approach where net premiums (the portion of gross premiums required to fund expected insurance benefits and claims settlement expenses) under the contract are accrued each period as the liability for future policy benefits. The net premium ratio used to accrue the liability for future policy benefits in each period is determined by using the historical and present value of expected future benefits and claim adjustment expenses for the cohort divided by the historical and present value of expected future gross premiums for the cohort.
Our long duration insurance contracts are grouped into annual calendar-year cohorts primarily based on the contractual issue date, marketing distribution channel, legal entity and product type. Single premium contracts are grouped into separate cohorts from other traditional products. Riders are generally combined with the base policy. Insurance contracts issued prior to the Effective Date are grouped by marketing distribution channel, legal entity and product type in a single issue year cohort. The liability is adjusted for differences between actual and expected experience. We review our historical and future cash flow assumptions quarterly and update the net premium ratio used to calculate the liability each time the assumptions are changed. Each quarter, we update our estimates of cash flows expected over the entire life of a group of contracts using actual historical experience and current future cash flow assumptions. These updated cash flows are used to calculate the revised net premiums and net premium ratio, which are used to derive an updated liability for future policy benefits as of the beginning of the current reporting period, discounted using the discount rate in effect at contract inception (the "locked-in discount rate"). This amount is then compared to the carrying amount of the liability as of that same date, before the updating of cash flow assumptions, to determine the current period change in liability estimate. This current period change in the liability is the liability remeasurement gain or loss and is presented as a separate component of benefit expense in the consolidated statement of operations. In subsequent periods, the revised net premiums are used to measure the liability for future policy benefits, subject to future revisions.
If a cohort is in a loss position where the liability for future policy benefits plus the present value of expected future gross premiums is determined to be insufficient to provide for expected future policy benefits and claim settlement costs, the net premium ratio is capped at 100 percent. When this occurs, all changes in expected benefits resulting from both actual experience deviations and changes in future assumptions are recognized immediately.
The locked-in discount rate is generally based on expected investment returns at contract inception for contracts issued prior to January 1, 2021 and the upper medium grade fixed income corporate instrument yield ("A" credit rated corporate bond yield) at contract inception for contracts issued after January 1, 2021. The contract inception date for
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
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contracts issued by the Predecessor is September 10, 2003. The discount rate in effect at contract inception is locked-in for the calculation of the net premium ratio and accretion of interest cost on the liability is recorded within insurance policy benefits or the liability for future policy benefits remeasurement loss in our consolidated statement of operations. However, for balance sheet remeasurement purposes, the discount rate is updated using the current rate at each reporting period with the impact resulting from such updates recorded in other comprehensive income (loss).
We develop discount rate curves for discounting cash flows to calculate the liability for future policy benefits based on the duration characteristics of the underlying liabilities. For liability cash flows that are projected beyond the duration of market-observable A-credit-rated fixed income instruments, we use the last market-observable yield level and use linear interpolation to determine yield assumptions for durations that do not have market-observable yields.
Liability for Life Insurance Policy Claims
The liability for life insurance policy claims includes life policy and contract claims, including incurred but not reported claims. The liability for these claims is based on our estimated ultimate cost to settle all claims that have been incurred as of the reporting date. Such amounts are estimated based on an analysis of historical patterns of claims, which are continually reviewed and updated. Adjustments resulting from differences between our estimates and actual payments are recognized in the period the estimates are made or claims are paid.
Deferred Profit Liability
For limited-payment products, gross premiums received in excess of net premiums are deferred at initial recognition as a deferred profit liability ("DPL"). Gross premiums are measured using assumptions consistent with those used in the measurement of the liability for future policy benefits, including discount rate, mortality, lapses and expenses.
The DPL is amortized and recognized in insurance policy benefits in proportion to insurance in force for life insurance contracts and expected future benefit payments for annuity contracts. Interest is accreted on the balance of the DPL using the discount rate determined at contract issuance. We review and update the estimate of cash flows for the DPL at the same time, and where applicable, using the same assumptions as the estimate of cash flows for the liability for future policy benefits. When cash flows are updated, the updated estimates are used to recalculate the DPL at contract issuance. The recalculated DPL as of the beginning of the current reporting period is compared to the carrying amount of the DPL as of the beginning of the current reporting period and any difference is recognized as either a charge or credit to insurance policy benefits.
Recognition of Insurance Policy Income and Related Benefits and Expenses on Insurance Contracts
For interest-sensitive life and annuity contracts that do not involve significant mortality or morbidity risk and funding agreements, the amounts collected from policyholders are considered deposits and are not included in revenue. Revenues for these contracts consist of charges for policy administration, cost of insurance charges and surrender charges assessed against policyholders' account balances. Such revenues are recognized when the service or coverage is provided, or when the policy is surrendered.
Premiums from individual life products (other than interest-sensitive life contracts) and health products are recognized when due. When premiums are due over a significantly shorter period than the period over which benefits are provided, any gross premium in excess of the net premium (i.e., the portion of the gross premium required to provide for all expected future benefits and expenses) is deferred and recognized into revenue in a constant relationship to insurance in force. Benefits are recorded as an expense when they are incurred.
We establish claim reserves based on our estimate of the loss to be incurred on reported claims plus estimates of incurred but unreported claims based on our past experience.
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Notes to Consolidated Financial Statements
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Accounting for Certain Marketing Agreements and Other Fee Income
Bankers Life and Casualty Company ("Bankers Life") has entered into various distribution and marketing agreements with other insurance companies to use Bankers Life's exclusive agents to distribute prescription drug and Medicare Advantage plans. These agreements allow Bankers Life to offer these products to current and potential future policyholders without investment in management and infrastructure. We receive fee income related to the plans sold through our distribution channels and incur distribution expenses paid to our agents who sell such products.
The recognition of fee revenue and the distribution expenses paid to our agents results from approval of an application by the third-party insurance companies, which we define as our customers. We recognize the net lifetime revenue expected to be earned on these sales, but only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur and when such net lifetime revenue can be reasonably estimated. The assumptions and constraints used to recognize such net revenue are based on available historical data. To the extent we make changes to the assumptions we use to calculate revenue on these products, we will recognize the impact of the changes in the period in which the change is made. When sufficient historical data is not available or when we cannot otherwise reasonably estimate net lifetime revenue, revenue is recognized when payment is made.
In addition, services provided by Optavise, LLC and revenues from the operations of our broker-dealer and registered investment advisor are recorded as fee revenue and other income in our consolidated statement of operations.
Total revenues related to these arrangements was $192.2 million, $190.5 million, and $177.6 million for the years ended December 31, 2025, 2024, and 2023, respectively. We typically collect payment related to these contract assets within one to five years. The contract asset balance was $127.6 million and $111.0 million for the years ended December 31, 2025 and 2024, respectively.
Reinsurance
In the normal course of business, we seek to limit our loss exposure on any single insured or to certain groups of policies by ceding reinsurance to other insurance enterprises. We currently retain no more than $0.8 million of mortality risk on any one policy. We diversify the risk of reinsurance loss by using a number of reinsurers that have strong claims-paying ratings. In each case, the ceding CNO subsidiary is directly liable for claims reinsured in the event the assuming company is unable to pay. We have determined that each of our reinsurance agreements provide indemnification against loss or liability relating to insurance risk in accordance with applicable accounting standards. Such reinsurance permits recovery of the reinsured losses from reinsurers, although it does not discharge our primary liability as the direct insurer of the risks reinsured.
The reinsurance recoverable for traditional and limited-payment contracts is generally measured using a net premium ratio approach to accrue the projected net gain or loss on reinsurance in proportion to the gross premiums of the underlying reinsured cohorts. Such amount is adjusted on a quarterly basis for actual experience and at least once a year for any changes in cash flow assumptions.
Ceded premiums and other costs of ceding business to reinsurers totaled $166.4 million, $183.1 million and $195.2 million for the years ended December 31, 2025, 2024 and 2023, respectively. We deduct this cost from insurance policy income. Reinsurance recoveries netted against insurance policy benefits totaled $365.7 million, $395.5 million and $409.5 million for the years ended December 31, 2025, 2024 and 2023, respectively.
From time to time, we assume insurance from other companies. Any costs associated with the assumption of insurance are amortized consistent with the method used to amortize deferred acquisition costs. Reinsurance premiums assumed totaled $14.1 million, $15.5 million and $16.6 million for the years ended December 31, 2025, 2024 and 2023, respectively. Insurance policy benefits related to reinsurance assumed totaled $22.6 million, $26.1 million and $21.8 million for the years ended December 31, 2025, 2024 and 2023, respectively.
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
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Income Taxes
Our income tax expense includes deferred income taxes arising from temporary differences between the financial reporting and tax bases of assets and liabilities and net operating loss ("NOL") carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply in the years in which temporary differences are expected to be recovered or paid. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in earnings in the period when the changes are enacted.
A reduction of the net carrying amount of deferred tax assets by establishing a valuation allowance is required if, based on the available evidence, it is more likely than not that such assets will not be realized. In assessing the need for a valuation allowance, all available evidence, both positive and negative, shall be considered to determine whether, based on the weight of that evidence, a valuation allowance for deferred tax assets is needed. This assessment requires significant judgment and considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of carryforward periods, our experience with operating loss and tax credit carryforwards expiring unused, and tax planning strategies. We evaluate the need to establish a valuation allowance for our deferred income tax assets on an ongoing basis. The realization of our deferred tax assets depends upon generating sufficient future taxable income of the appropriate type during the periods in which our temporary differences become deductible and before our NOLs expire.
Investments in Variable Interest Entities
We have concluded that we are the primary beneficiary with respect to certain variable interest entities ("VIEs"), which are consolidated in our financial statements. All of the VIEs are collateralized loan trusts that were established to issue securities to finance the purchase of commercial bank loans and other permitted investments. The assets held by the trusts are legally isolated and not available to the Company. The liabilities of the VIEs are expected to be satisfied from the cash flows generated by the underlying loans held by the trusts, not from the assets of the Company. The Company has no financial obligation to the VIEs beyond its investment in each VIE.
The investment portfolios held by the VIEs are primarily comprised of commercial bank loans to corporate obligors which are almost entirely rated below-investment grade. Refer to the note to the consolidated financial statements entitled "Investments in Variable Interest Entities" for additional information about VIEs.
In addition, the Company, in the normal course of business, makes passive investments in structured securities issued by non-consolidated VIEs for which the Company is not the investment manager. These structured securities include asset-backed securities, agency residential mortgage-backed securities, non-agency residential mortgage-backed securities, collateralized loan obligations and commercial mortgage-backed securities. Our maximum exposure to loss on these securities is limited to our cost basis in the investment. We have determined that we are not the primary beneficiary of these structured securities due to the relative size of our investment in comparison to the total principal amount of the individual structured securities and the level of credit subordination which reduces our obligation to absorb gains or losses.
At December 31, 2025, we held investments of $688.4 million in various limited partnerships and limited liability companies, in which we are not the primary beneficiary. These investments are included within other invested assets on the consolidated balance sheet and typically reported to us one quarter in arrears. At December 31, 2025, we had unfunded commitments to these partnerships totaling $910.7 million. Our maximum exposure to loss on these investments is limited to the amount of our investment and any unfunded commitments.
Investment Borrowings
Three of the Company's insurance subsidiaries (Bankers Life, Washington National Insurance Company ("Washington National") and Colonial Penn Life Insurance Company) are members of the FHLB. As members of the FHLB, our insurance subsidiaries have the ability to borrow on a collateralized basis from the FHLB. We are required to hold certain minimum amounts of FHLB common stock as a condition of membership in the FHLB, and additional amounts based on the amount of the borrowings. At December 31, 2025, the carrying value of the FHLB common stock was $109.3 million. As of December 31, 2025, collateralized borrowings from the FHLB totaled $2,441.7 million and the
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
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proceeds were used to purchase matched variable rate fixed maturity securities with similar durations. The borrowings are classified as investment borrowings in the accompanying consolidated balance sheet. The borrowings are collateralized by investments with an estimated fair value of $3,476.5 million at December 31, 2025, which are maintained in a custodial account for the benefit of the FHLB. Substantially all of such investments are classified as fixed maturities, available for sale, in our consolidated balance sheet.
The following summarizes the terms of the borrowings from the FHLB by our insurance subsidiaries (dollars in millions):
| | | | | | | | | | | | | | |
| Amount | | Maturity | | Interest rate at |
| borrowed | | date | | December 31, 2025 |
| $ | 50.0 | | | January 2026 | | Variable rate – 4.397% |
| 50.0 | | | January 2026 | | Variable rate – 4.327% |
| 100.0 | | | January 2026 | | Variable rate – 4.092% |
| 5.0 | | | May 2026 | | Variable rate – 4.136% |
| 21.8 | | | May 2026 | | Variable rate – 3.982% |
| 50.0 | | | May 2026 | | Variable rate – 3.980% |
| 10.0 | | | November 2026 | | Variable rate – 4.184% |
| 75.0 | | | December 2026 | | Variable rate – 4.026% |
| 75.0 | | | January 2027 | | Variable rate – 4.276% |
| 50.0 | | | January 2027 | | Variable rate – 4.368% |
| 50.0 | | | January 2027 | | Variable rate – 4.160% |
| 100.0 | | | February 2027 | | Variable rate – 4.192% |
| 50.0 | | | April 2027 | | Variable rate – 3.991% |
| 50.0 | | | May 2027 | | Variable rate – 4.001% |
| 100.0 | | | June 2027 | | Variable rate – 4.080% |
| 10.0 | | | June 2027 | | Variable rate – 4.303% |
| 15.5 | | | July 2027 | | Variable rate – 4.143% |
| 50.0 | | | July 2027 | | Variable rate – 4.361% |
| 12.5 | | | September 2027 | | Variable rate – 4.236% |
| 57.7 | | | November 2027 | | Variable rate – 4.133% |
| 100.0 | | | December 2027 | | Variable rate – 4.109% |
| 100.0 | | | December 2027 | | Variable rate – 4.232% |
| 50.0 | | | December 2027 | | Variable rate – 4.153% |
| 75.0 | | | January 2028 | | Variable rate – 4.163% |
| 134.5 | | | January 2028 | | Variable rate – 4.153% |
| 50.0 | | | January 2028 | | Variable rate – 4.408% |
| 50.0 | | | January 2028 | | Variable rate – 4.149% |
| 100.0 | | | January 2028 | | Variable rate – 4.303% |
| 100.0 | | | February 2028 | | Variable rate – 4.339% |
| 21.0 | | | February 2028 | | Variable rate – 4.069% |
| 22.0 | | | February 2028 | | Variable rate – 4.290% |
| 100.0 | | | February 2028 | | Variable rate – 4.212% |
| 27.0 | | | July 2028 | | Variable rate – 4.173% |
| 15.0 | | | July 2028 | | Variable rate – 4.090% |
| 35.0 | | | August 2028 | | Variable rate – 4.100% |
| 12.5 | | | September 2028 | | Variable rate – 4.332% |
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
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| | | | | | | | | | | | | | |
| 42.2 | | | May 2029 | | Variable rate – 4.323% |
| 50.0 | | | August 2029 | | Variable rate – 4.263% |
| 50.0 | | | April 2030 | | Variable rate - 4.513% |
| 50.0 | | | May 2030 | | Variable rate - 4.311% |
| 50.0 | | | May 2030 | | Variable rate - 4.459% |
| 100.0 | | | May 2030 | | Variable rate - 4.430% |
| 125.0 | | | September 2030 | | Variable rate - 4.210% |
| $ | 2,441.7 | | | | | |
Generally, variable and fixed rate borrowings are pre-payable. As of December 31, 2025, the aggregate prepayment penalty on such outstanding borrowings was not material.
Interest expense of $111.2 million, $123.2 million and $104.7 million for the years ended December 31, 2025, 2024 and 2023, respectively, was recognized related to total borrowings from the FHLB.
Accounting for Derivatives
Our fixed indexed annuity products provide a guaranteed minimum rate of return and a higher potential return that is based on a percentage (the "participation rate") of the amount of increase in the value of a particular index, such as the Standard & Poor's 500 Index, over a specified period. We are generally able to change the participation rate at the beginning of each index period (typically on each policy anniversary date), subject to contractual minimums. The Company accounts for the options attributed to the policyholder for the estimated life of the contract as embedded derivatives. We are required to record the embedded derivatives related to our fixed indexed annuity products at estimated fair value.
The value of the embedded derivative is based on the estimated cost to fulfill our commitment to fixed indexed annuity policyholders by purchasing a series of annual forward options over the duration of the policy that back the potential return based on a percentage of the amount of increase in the value of the appropriate index. In estimating the future cost to purchase the options, we are required to make assumptions regarding: (i) future index values to determine both the future notional amounts at each anniversary date and the future prices of the forward starting options; (ii) future annual participation rates; and (iii) non-economic factors related to policy persistency.
The value of the embedded derivatives is determined based on the present value of estimated future option costs discounted using a risk-free rate adjusted for our non-performance risk and risk margins for non-capital market inputs. The non-performance risk adjustment is determined by taking into consideration publicly available information related to spreads in the secondary market for debt with credit ratings similar to ours. These observable spreads are then adjusted to reflect the priority of these liabilities and the claim paying ability of the issuing insurance subsidiaries. Changes in fair value of such embedded derivatives are included in insurance policy benefits in the consolidated statement of operations.
Risk margins are established to capture non-capital market risks which represent the additional compensation a market participant would require to assume the risks related to the uncertainties regarding the embedded derivatives, including future policyholder behavior related to persistency. The determination of the risk margin is highly judgmental given the lack of a market to assume the risks solely related to the embedded derivatives of our fixed indexed annuity products.
The determination of the appropriate risk-free rate and non-performance risk is sensitive to the economic and interest rate environment. Accordingly, the value of the derivative is volatile due to external market sensitivities, which may materially affect net income. Additionally, changes in the judgmental assumptions regarding the appropriate risk margin can significantly impact the value of the derivative.
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
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We typically buy call options (including call spreads) referenced to the applicable indices in an effort to offset or hedge potential increases to policyholder benefits resulting from increases in the particular index to which the policy's return is linked.
We purchase certain fixed maturity securities that contain embedded derivatives that are required to be held at fair value on the consolidated balance sheet. We have elected the fair value option to carry the entire security at fair value with changes in fair value reported in other investment gains (losses) in the consolidated statement of operations.
Revision of Prior Period Amounts
As previously disclosed in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2025, certain amounts presented in the prior years' consolidated statement of operations for the year ended December 31, 2024, consolidated balance sheet as of December 31, 2024, consolidated statement of shareholders’ equity as of December 31, 2024 and related footnotes thereto have been corrected to conform with the current period presentation.
The Company identified an immaterial overstatement of its policy holder account balances and insurance policy benefits recorded for the year ended December 31, 2024 and the quarter ended March 31, 2025 related to the calculation of the embedded derivative for its flexible premium bonus indexed annuity product. This error caused the embedded derivative to be overstated as of these periods by $21.6 million and $31.7 million, respectively. The correction of these errors had no impact on our statement of cash flows or segment results for the periods reported.
In addition, the consolidated balance sheet for the year ended December 31, 2024 has been revised to correct immaterial errors related to the classification of non-redeemable preferred stock and to reflect an unsettled investment trade by one of our VIEs. To correct for these errors, fixed maturities, available for sale, at fair value was decreased by $110.4 million with a corresponding increase to equity securities at fair value, and investments held by variable interest entities increased $1.5 million with a corresponding increase to other liabilities.
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
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The Company assessed the materiality of these errors on prior period consolidated financial statements and determined that such financial statements were not materially misstated. Accordingly, the Company corrected these immaterial errors in this Annual Report on Form 10-K. The following tables present the impact of the correction of the immaterial errors related to the overstatement of policyholder account balances and insurance policy benefits recorded, the classification of non-redeemable preferred stock and to reflect an unsettled investment trade by one of our variable interest entities for the year ended December 31, 2024 and for the three months ended March 31, 2025 (in millions):
| | | | | | | | | | | | | | | | | | | | |
| Consolidated Balance Sheet |
| | December 31, 2024 |
| | As Previously Reported | | Adjustments | | As Revised |
Investments | | | | | | |
Fixed maturities, available for sale, at fair value | | $ | 22,840.5 | | | $ | (110.4) | | | $ | 22,730.1 | |
Equity securities at fair value | | 162.0 | | | 110.4 | | | 272.4 | |
Investments held by variable interest entities | | 432.3 | | | 1.5 | | | 433.8 | |
Total investments | | 27,872.1 | | | 1.5 | | | 27,873.6 | |
Income tax assets, net | | 818.9 | | | (4.8) | | | 814.1 | |
Total assets | | 37,852.6 | | | (3.3) | | | 37,849.3 | |
| | | | | | |
Liabilities: | | | | | | |
Policyholder account balances | | 17,615.8 | | | (21.6) | | | 17,594.2 | |
Other liabilities | | 1,161.8 | | | 1.5 | | | 1,163.3 | |
Total Liabilities | | 35,354.2 | | | (20.1) | | | 35,334.1 | |
| | | | | | |
Shareholders' equity: | | | | | | |
Retained earnings | | 2,236.3 | | | 16.8 | | | 2,253.1 | |
Total shareholders' equity | | 2,498.4 | | | 16.8 | | | 2,515.2 | |
Total liabilities and shareholders' equity | | 37,852.6 | | | (3.3) | | | 37,849.3 | |
| | | | | | | | | | | | | | | | | | | | |
Consolidated Statement of Operations |
| | Year ended December 31, 2024 |
| | As previously reported | | Adjustments | | As Revised |
Insurance policy benefits | | $ | 2,471.9 | | | $ | (21.6) | | | $ | 2,450.3 | |
Total benefits and expenses | | 3,931.2 | | | (21.6) | | | 3,909.6 | |
Income before income taxes | | 518.3 | | | 21.6 | | | 539.9 | |
Income tax expense | | 114.3 | | | 4.8 | | | 119.1 | |
Net income | | 404.0 | | | 16.8 | | | 420.8 | |
| | | | | | |
Basic earnings per common share | | $ | 3.81 | | | $ | 0.15 | | | $ | 3.96 | |
Diluted earnings per common share | | $ | 3.74 | | | $ | 0.15 | | | $ | 3.89 | |
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
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| | | | | | | | |
Consolidated Statement of Shareholders' Equity |
| | Retained earnings |
Balance, December 31, 2024 | | $ | 2,236.3 | |
Correction of immaterial error | | 16.8 | |
Balance, December 31, 2024 (as revised) | | $ | 2,253.1 | |
| | |
Balance, March 31, 2025 | | $ | 2,233.6 | |
Correction of immaterial error | | 24.6 | |
Balance, March 31, 2025 (as revised) | | $ | 2,258.2 | |
The following table presents line items for prior period impacts to the Company's consolidated statement of operations that have been affected by the immaterial error discussed above and that will be revised in conjunction with future filings (in millions):
| | | | | | | | | | | | | | | | | | | | |
| | Three months ended March 31, 2025 |
| | As previously reported | | Adjustments | | As Revised |
Insurance policy benefits | | $ | 580.1 | | | $ | (10.1) | | | $ | 570.0 | |
Total benefits and expenses | | 986.4 | | | (10.1) | | | 976.3 | |
Income before income taxes | | 17.7 | | | 10.1 | | | 27.8 | |
Income tax expense | | 4.0 | | | 2.3 | | | 6.3 | |
Net income | | 13.7 | | | 7.8 | | | 21.5 | |
| | | | | | |
Basic earnings per common share | | $ | 0.14 | | | $ | 0.07 | | | $ | 0.21 | |
Diluted earnings per common share | | $ | 0.13 | | | $ | 0.08 | | | $ | 0.21 | |
Adopted Accounting Standards
We adopted Accounting Standards Update 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures ("ASU 2023-09") retrospectively effective January 1, 2025. ASU 2023-09 is intended to improve the effectiveness of income tax disclosures by requiring, among other things, the disclosure on an annual basis of: (i) specific categories in the rate reconciliation; and (ii) additional information for reconciling items that meet a quantitative threshold. In addition, ASU 2023-09 requires disclosure (on an annual basis) of the following information about income taxes paid: (i) the amount of income taxes paid (net of refunds received) disaggregated by federal (national), state, and foreign taxes; and (ii) the amount of income taxes paid (net of refunds received) disaggregated by individual jurisdictions in which income taxes paid (net of refunds received) is equal to or greater than 5 percent of total income taxes paid (net of refunds received). The adoption of ASU 2023-09 modified our disclosures but did not have an impact on our financial position or results of operations.
Recently Issued Accounting Standards
In November 2025, the FASB issued Accounting Standards Update 2025-08, Financial Instruments – Credit Losses (Topic 326): Purchased Loans ("ASU 2025-08"). This update establishes a new category of acquired loans ("Purchased Seasoned Loans") subject to the gross-up approach. ASU 2025-08 is effective for annual periods beginning after December 15, 2026 and interim reporting periods within those annual reporting periods. Early adoption is permitted. ASU 2025-08 should be applied prospectively. We are currently evaluating the effect of ASU 2025-08 on our consolidated financial statements and related disclosures.
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
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In September 2025, the FASB issued Accounting Standards Update 2025-06, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software ("ASU 2025-06"). This update removes all references to prescriptive and sequential software development stages, and adds that entities are required to start capitalizing software costs when both of the following occur: 1) management has authorized and committed to funding the software project, and 2) it is probable that the project will be completed and the software will be used to perform the function intended. The update also removes Subtopic 350-50, Website Development Costs, and incorporates that guidance within Subtopic 350-40. ASU 2025-06 is effective for annual periods beginning after December 15, 2027 and interim reporting periods within those annual reporting periods. Early adoption is permitted. Entities will have the option to apply the updates prospectively, under a modified transition approach that is based on the status of the project and whether software costs were capitalized before the date of adoption, or retrospectively. We are currently evaluating the effect of ASU 2025-06 on our consolidated financial statements and related disclosures.
In July 2025, the FASB issued Accounting Standards Update 2025-05, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets ("ASU 2025-05"). This update provides a practical expedient for entities when estimating expected credit losses to assume that current conditions as of the balance sheet date do not change for the remaining life of the asset. ASU 2025-05 is effective for annual periods beginning after December 15, 2025 and interim reporting periods within those annual reporting periods. Early adoption is permitted. ASU 2025-05 should be applied prospectively. We are currently evaluating the effect of ASU 2025-05 on our consolidated financial statements and related disclosures.
In November 2024, the FASB issued Accounting Standards Update 2024-03, Income Statement—Reporting
Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement
Expenses ("ASU 2024-03"), which requires disclosure of additional information about specific expense categories in the
notes to the financial statements. ASU 2024-03 is effective for annual periods beginning after December 15, 2026 and for
interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. ASU 2024-03 may be
applied retrospectively or prospectively. The adoption of ASU 2024-03 will modify our disclosures but will not have an impact on our financial position or results of operations. We do not expect the impact to our disclosures to be material.
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
3. INVESTMENTS
At December 31, 2025, the amortized cost, gross unrealized gains, gross unrealized losses, allowance for credit losses and estimated fair value of fixed maturities, available for sale, were as follows (dollars in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Amortized cost | | Gross unrealized gains | | Gross unrealized losses | | Allowance for credit losses | | Estimated fair value |
| Investment grade (a): | | | | | | | | | |
| Corporate securities | $ | 13,876.5 | | | $ | 129.4 | | | $ | (1,379.6) | | | $ | (24.7) | | | $ | 12,601.6 | |
Certificates of deposit | — | | | — | | | — | | | — | | | — | |
| United States Treasury securities and obligations of United States government corporations and agencies | 207.2 | | | 0.1 | | | (30.2) | | | — | | | 177.1 | |
| States and political subdivisions | 3,289.0 | | | 24.9 | | | (376.9) | | | (0.6) | | | 2,936.4 | |
| Foreign governments | 130.9 | | | 0.9 | | | (10.7) | | | (0.6) | | | 120.5 | |
| Asset-backed securities | 1,734.1 | | | 14.0 | | | (45.8) | | | (0.1) | | | 1,702.2 | |
| Agency residential mortgage-backed securities | 838.3 | | | 11.4 | | | (0.2) | | | — | | | 849.5 | |
| Non-agency residential mortgage-backed securities | 1,400.3 | | | 16.2 | | | (89.5) | | | — | | | 1,327.0 | |
| Collateralized loan obligations | 1,142.4 | | | 2.8 | | | (2.7) | | | — | | | 1,142.5 | |
| Commercial mortgage-backed securities | 2,079.2 | | | 6.4 | | | (99.4) | | | — | | | 1,986.2 | |
| Total investment grade fixed maturities, available for sale | 24,697.9 | | | 206.1 | | | (2,035.0) | | | (26.0) | | | 22,843.0 | |
| Below-investment grade (a) (b): | | | | | | | | | |
| Corporate securities | 692.3 | | | 7.7 | | | (33.6) | | | (5.5) | | | 660.9 | |
| States and political subdivisions | 22.4 | | | 0.2 | | | (2.0) | | | (2.3) | | | 18.3 | |
| | | | | | | | | |
| Asset-backed securities | 46.7 | | | — | | | (1.6) | | | — | | | 45.1 | |
| | | | | | | | | |
| Non-agency residential mortgage-backed securities | 238.8 | | | 21.3 | | | (1.4) | | | — | | | 258.7 | |
| | | | | | | | | |
| Commercial mortgage-backed securities | 78.3 | | | — | | | (15.3) | | | (2.2) | | | 60.8 | |
| Total below-investment grade fixed maturities, available for sale | 1,078.5 | | | 29.2 | | | (53.9) | | | (10.0) | | | 1,043.8 | |
| Total fixed maturities, available for sale | $ | 25,776.4 | | | $ | 235.3 | | | $ | (2,088.9) | | | $ | (36.0) | | | $ | 23,886.8 | |
_______________
(a)Investment ratings are assigned the second lowest rating by Nationally Recognized Statistical Rating Organizations ("NRSROs") (Moody's Investor Services, Inc. ("Moody's"), S&P Global Ratings ("S&P") or Fitch Ratings ("Fitch")), or if not rated by such firms, the rating assigned by the National Association of Insurance Commissioners (the "NAIC"). NAIC designations of "1" or "2" include fixed maturities generally rated investment grade (rated "Baa3" or higher by Moody's or rated "BBB-" or higher by S&P and Fitch). NAIC designations of "3" through "6" are referred to as below-investment grade (which generally are rated "Ba1" or lower by Moody's or rated "BB+" or lower by S&P and Fitch). References to investment grade or below-investment grade throughout our consolidated financial statements are determined as described above.
(b)Certain structured securities rated below-investment grade by NRSROs 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 NAIC. Refer to the table below for a summary of our fixed maturity securities, available for sale, by NAIC designations.
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
The NAIC evaluates the fixed maturity investments of insurers for regulatory and capital assessment purposes and assigns securities to one of six credit quality categories called NAIC designations, which are used by insurers when preparing their annual statements based on U.S. statutory accounting principles. The NAIC designations are generally similar to the credit quality designations of the NRSROs for marketable fixed maturity securities, except for certain structured securities. However, certain structured securities rated below investment grade by the NRSROs can be assigned NAIC 1 or NAIC 2 designations depending on the cost basis of the holding relative to estimated recoverable amounts as determined by the NAIC. The following summarizes the NAIC designations and NRSRO equivalent ratings:
| | | | | | | | |
| NAIC Designation | | NRSRO Equivalent Rating |
| 1 | | AAA/AA/A |
| 2 | | BBB |
| 3 | | BB |
| 4 | | B |
| 5 | | CCC and lower |
| 6 | | In or near default |
A summary of our fixed maturity securities, available for sale, by NAIC designations (or for fixed maturity securities held by non-regulated entities, based on NRSRO ratings) as of December 31, 2025 is as follows (dollars in millions):
| | | | | | | | | | | | | | | | | | | | |
| NAIC designation | | Amortized cost | | Estimated fair value | | Percentage of total estimated fair value |
| 1 | | $ | 16,409.6 | | | $ | 15,136.9 | | | 63.4 | % |
| 2 | | 8,512.2 | | | 7,946.0 | | | 33.3 | |
| Total NAIC 1 and 2 (investment grade) | | 24,921.8 | | | 23,082.9 | | | 96.7 | |
| 3 | | 694.6 | | | 657.7 | | | 2.7 | |
| 4 | | 132.5 | | | 125.2 | | | 0.5 | |
| 5 | | 20.8 | | | 16.5 | | | 0.1 | |
| 6 | | 6.7 | | | 4.5 | | | — | |
| Total NAIC 3,4,5 and 6 (below-investment grade) | | 854.6 | | | 803.9 | | | 3.3 | |
| | $ | 25,776.4 | | | $ | 23,886.8 | | | 100.0 | % |
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
At December 31, 2024, the amortized cost, gross unrealized gains, gross unrealized losses, allowance for credit losses and estimated fair value of fixed maturities, available for sale, were as follows (dollars in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Amortized cost | | Gross unrealized gains | | Gross unrealized losses | | Allowance for credit losses | | Estimated fair value |
| Investment grade: | | | | | | | | | |
| Corporate securities | $ | 12,993.9 | | | $ | 55.3 | | | $ | (1,630.0) | | | $ | (22.5) | | | $ | 11,396.7 | |
Certificates of deposit | 470.0 | | | 18.3 | | | — | | | — | | | 488.3 | |
| United States Treasury securities and obligations of United States government corporations and agencies | 214.8 | | | — | | | (28.6) | | | — | | | 186.2 | |
| States and political subdivisions | 3,238.3 | | | 12.1 | | | (434.6) | | | (0.5) | | | 2,815.3 | |
| Foreign governments | 107.2 | | | 0.1 | | | (15.3) | | | (0.9) | | | 91.1 | |
| Asset-backed securities | 1,475.1 | | | 7.5 | | | (56.5) | | | (0.1) | | | 1,426.0 | |
| Agency residential mortgage-backed securities | 819.8 | | | 5.3 | | | (5.5) | | | — | | | 819.6 | |
| Non-agency residential mortgage-backed securities | 1,253.4 | | | 11.6 | | | (121.6) | | | — | | | 1,143.4 | |
| Collateralized loan obligations | 1,015.2 | | | 5.6 | | | (4.0) | | | — | | | 1,016.8 | |
| Commercial mortgage-backed securities | 2,275.3 | | | 3.7 | | | (157.8) | | | — | | | 2,121.2 | |
| Total investment grade fixed maturities, available for sale | 23,863.0 | | | 119.5 | | | (2,453.9) | | | (24.0) | | | 21,504.6 | |
| Below-investment grade: | | | | | | | | | |
| Corporate securities | 678.2 | | | 4.9 | | | (30.4) | | | (8.6) | | | 644.1 | |
| States and political subdivisions | 23.6 | | | 0.1 | | | (1.8) | | | (2.9) | | | 19.0 | |
| | | | | | | | | |
| Asset-backed securities | 99.5 | | | 0.8 | | | (9.9) | | | — | | | 90.4 | |
| | | | | | | | | |
| Non-agency residential mortgage-backed securities | 382.9 | | | 22.0 | | | (9.2) | | | — | | | 395.7 | |
| | | | | | | | | |
| Commercial mortgage-backed securities | 103.8 | | | — | | | (25.9) | | | (1.6) | | | 76.3 | |
| Total below-investment grade fixed maturities, available for sale | 1,288.0 | | | 27.8 | | | (77.2) | | | (13.1) | | | 1,225.5 | |
| Total fixed maturities, available for sale | $ | 25,151.0 | | | $ | 147.3 | | | $ | (2,531.1) | | | $ | (37.1) | | | $ | 22,730.1 | |
Below-Investment Grade Securities
At December 31, 2025, the amortized cost of the Company's below-investment grade fixed maturity securities, available for sale, was $1,078.5 million, or 4.2 percent of the Company's fixed maturity portfolio. The estimated fair value of the below-investment grade portfolio was $1,043.8 million, or 96.8 percent of the amortized cost. Based on the credit quality ratings assigned by the NAIC: (i) the amortized cost of our below-investment grade fixed maturities was $854.6 million, or 3.3 percent of our fixed maturity portfolio; and (ii) the estimated fair value of such below-investment grade fixed maturities was $803.9 million or 94.1 percent of the amortized cost.
Below-investment grade corporate debt securities typically have different characteristics than investment grade corporate debt securities. Based on historical performance, probability of default by the borrower is significantly greater for below-investment grade corporate debt securities and in many cases severity of loss is relatively greater as such securities are generally unsecured and often subordinated to other indebtedness of the issuer. Also, issuers of below-investment grade corporate debt securities frequently have higher levels of debt relative to investment-grade issuers, hence, all other things being equal, are generally more sensitive to adverse economic conditions. The Company attempts to reduce the overall risk related to its investment in below-investment grade securities, as in all investments, through careful credit analysis, strict investment policy guidelines, and diversification by issuer and/or guarantor and by industry.
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
Contractual Maturity
The following table sets forth the amortized cost and estimated fair value of fixed maturities, available for sale, at December 31, 2025, by contractual maturity. Actual maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties. Structured securities (such as asset-backed securities, agency residential mortgage-backed securities, non-agency residential mortgage-backed securities, collateralized loan obligations and commercial mortgage-backed securities, collectively referred to as "structured securities") frequently include provisions for periodic principal payments and permit periodic unscheduled payments.
| | | | | | | | | | | |
| Amortized cost | | Estimated fair value |
| | (Dollars in millions) |
| Due in one year or less | $ | 251.2 | | | $ | 250.2 | |
| Due after one year through five years | 2,144.1 | | | 2,149.2 | |
| Due after five years through ten years | 2,945.1 | | | 2,984.3 | |
| Due after ten years | 12,878.0 | | | 11,131.1 | |
| Subtotal | 18,218.4 | | | 16,514.8 | |
| Structured securities | 7,558.0 | | | 7,372.0 | |
| Total fixed maturities, available for sale | $ | 25,776.4 | | | $ | 23,886.8 | |
Investments with Unrealized Losses
The following table sets forth the amortized cost and estimated fair value of those fixed maturities, available for sale, with unrealized losses at December 31, 2025, by contractual maturity. Actual maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties. Structured securities frequently include provisions for periodic principal payments and permit periodic unscheduled payments.
| | | | | | | | | | | |
| Amortized cost | | Estimated fair value |
| | (Dollars in millions) |
| Due in one year or less | $ | 109.6 | | | $ | 108.0 | |
| Due after one year through five years | 764.8 | | | 745.1 | |
| Due after five years through ten years | 762.3 | | | 730.9 | |
| Due after ten years | 10,592.8 | | | 8,778.8 | |
| Subtotal | 12,229.5 | | | 10,362.8 | |
| Structured securities | 3,459.2 | | | 3,201.0 | |
| Total | $ | 15,688.7 | | | $ | 13,563.8 | |
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
The following summarizes the investments in our portfolio rated below-investment grade not deemed to have credit losses which have been continuously in an unrealized loss position exceeding 20 percent of the cost basis for the period indicated as of December 31, 2025 (dollars in millions):
| | | | | | | | | | | | | | | | | | | | | | | | |
| Number of issuers | | Cost basis | | Unrealized loss | | Estimated fair value | |
| Less than 6 months | 1 | | $ | 3.0 | | | $ | (0.7) | | | $ | 2.3 | | |
| Greater than or equal to 6 months and less than 12 months | — | | — | | | — | | | — | | |
| Greater than 12 months | 4 | | 27.1 | | | (10.0) | | | 17.1 | | |
| Total | | | $ | 30.1 | | | $ | (10.7) | | | $ | 19.4 | | |
The following table summarizes the gross unrealized losses and fair values of our investments with unrealized losses for which an allowance for credit losses has not been recorded, aggregated by investment category and length of time that such securities have been in a continuous unrealized loss position, at December 31, 2025 (dollars in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Less than 12 months | | 12 months or greater | | Total |
| Description of securities | | Fair value | | Unrealized losses | | Fair value | | Unrealized losses | | Fair value | | Unrealized losses |
| Corporate securities | | $ | 734.9 | | | $ | (44.3) | | | $ | 2,645.8 | | | $ | (426.7) | | | $ | 3,380.7 | | | $ | (471.0) | |
| United States Treasury securities and obligations of United States government corporations and agencies | | 0.4 | | | — | | | 153.9 | | | (30.2) | | | 154.3 | | | (30.2) | |
| States and political subdivisions | | 275.6 | | | (8.5) | | | 806.0 | | | (127.6) | | | 1,081.6 | | | (136.1) | |
| Foreign governments | | 3.1 | | | — | | | 24.3 | | | (2.7) | | | 27.4 | | | (2.7) | |
| Asset-backed securities | | 187.8 | | | (1.8) | | | 487.7 | | | (44.9) | | | 675.5 | | | (46.7) | |
| Agency residential mortgage-backed securities | | 59.8 | | | — | | | 13.8 | | | (0.2) | | | 73.6 | | | (0.2) | |
| Non-agency residential mortgage-backed securities | | 131.4 | | | (0.9) | | | 703.3 | | | (90.0) | | | 834.7 | | | (90.9) | |
| Collateralized loan obligations | | 227.3 | | | (0.9) | | | 62.9 | | | (1.8) | | | 290.2 | | | (2.7) | |
| Commercial mortgage-backed securities | | 243.7 | | | (2.1) | | | 1,067.2 | | | (112.6) | | | 1,310.9 | | | (114.7) | |
| Total fixed maturities, available for sale | | $ | 1,864.0 | | | $ | (58.5) | | | $ | 5,964.9 | | | $ | (836.7) | | | $ | 7,828.9 | | | $ | (895.2) | |
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
The following table summarizes the gross unrealized losses and fair values of our investments with unrealized losses for which an allowance for credit losses has not been recorded, aggregated by investment category and length of time that such securities have been in a continuous unrealized loss position, at December 31, 2024 (dollars in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Less than 12 months | | 12 months or greater | | Total |
| Description of securities | | Fair value | | Unrealized losses | | Fair value | | Unrealized losses | | Fair value | | Unrealized losses |
| Corporate securities | | $ | 1,200.8 | | | $ | (35.5) | | | $ | 4,029.2 | | | $ | (740.3) | | | $ | 5,230.0 | | | $ | (775.8) | |
| United States Treasury securities and obligations of United States government corporations and agencies | | 44.7 | | | (3.8) | | | 141.5 | | | (24.8) | | | 186.2 | | | (28.6) | |
| States and political subdivisions | | 831.9 | | | (20.5) | | | 896.1 | | | (212.1) | | | 1,728.0 | | | (232.6) | |
| Foreign governments | | 17.4 | | | (1.0) | | | 10.0 | | | (1.0) | | | 27.4 | | | (2.0) | |
| Asset-backed securities | | 124.8 | | | (1.2) | | | 807.9 | | | (64.3) | | | 932.7 | | | (65.5) | |
| Agency residential mortgage-backed securities | | 297.1 | | | (5.3) | | | 3.1 | | | (0.2) | | | 300.2 | | | (5.5) | |
| Non-agency residential mortgage-backed securities | | 128.0 | | | (1.4) | | | 884.6 | | | (129.4) | | | 1,012.6 | | | (130.8) | |
| Collateralized loan obligations | | 162.9 | | | (0.7) | | | 66.9 | | | (3.2) | | | 229.8 | | | (3.9) | |
| Commercial mortgage-backed securities | | 174.5 | | | (1.2) | | | 1,642.7 | | | (182.5) | | | 1,817.2 | | | (183.7) | |
| Total fixed maturities, available for sale | | $ | 2,982.1 | | | $ | (70.6) | | | $ | 8,482.0 | | | $ | (1,357.8) | | | $ | 11,464.1 | | | $ | (1,428.4) | |
Based on management's current assessment of investments with unrealized losses at December 31, 2025, the Company believes the issuers of the securities will continue to meet their obligations. While we do not have the intent to sell securities with unrealized losses and it is not more likely than not that we will be required to sell securities with unrealized losses prior to their anticipated recovery based upon market or other unforeseen developments. In such instances, if a loss is recognized from a sale subsequent to a balance sheet date due to these unexpected developments, the loss is recognized in the period in which we had the intent to sell the security before its anticipated recovery.
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
The following table summarizes changes in the allowance for credit losses related to fixed maturities, available for sale, for each of the three years ended December 31, 2025 (dollars in millions):
| | | | | | | | | | | | | | | | | |
| Corporate securities | | Other | | Total |
Allowance at December 31, 2022 | $ | 54.4 | | | $ | 1.6 | | | $ | 56.0 | |
| Additions for securities for which credit losses were not previously recorded | 7.3 | | | 0.4 | | | 7.7 | |
| Additions (reductions) for securities where an allowance was previously recorded | (7.3) | | | (0.6) | | | (7.9) | |
Reduction for securities disposed during the period | (12.7) | | | (0.2) | | | (12.9) | |
Allowance at December 31, 2023 | 41.7 | | | 1.2 | | | 42.9 | |
| Additions for securities for which credit losses were not previously recorded | 8.9 | | | 1.9 | | | 10.8 | |
| Additions (reductions) for securities where an allowance was previously recorded | (9.2) | | | 3.0 | | | (6.2) | |
Reduction for securities disposed during the period | (10.3) | | | (0.1) | | | (10.4) | |
Allowance at December 31, 2024 | 31.1 | | | 6.0 | | | 37.1 | |
| Additions for securities for which credit losses were not previously recorded | 9.0 | | | 0.1 | | | 9.1 | |
| Additions (reductions) for securities where an allowance was previously recorded | (5.2) | | | (0.3) | | | (5.5) | |
Reduction for securities disposed during the period | (4.7) | | | — | | | (4.7) | |
Allowance at December 31, 2025 | $ | 30.2 | | | $ | 5.8 | | | $ | 36.0 | |
Structured Securities
At December 31, 2025, fixed maturity investments included structured securities with an estimated fair value of $7.4 billion (or 30.9 percent of all fixed maturity securities). The yield characteristics of structured securities generally differ in some respects from those of traditional corporate fixed income securities or government securities. For example, interest and principal payments on structured securities may occur more frequently, often monthly. In many instances, we are subject to variability in the amount and timing of principal and interest payments. For example, in many cases, partial prepayments may occur at the option of the issuer and prepayment rates are influenced by a number of factors that cannot be predicted with certainty, including: the relative sensitivity of prepayments on the underlying assets backing the security to changes in interest rates and asset values; the availability of alternative financing; a variety of economic, geographic and other factors; the timing, pace and proceeds of liquidations of defaulted collateral; and various security-specific structural considerations (for example, the repayment priority of a given security in a securitization structure). In addition, the total amount of payments for non-agency structured securities may be affected by changes to cumulative default rates or loss severities of the related collateral.
Historically, the rate of prepayments on structured securities has tended to increase when prevailing interest rates have declined significantly in absolute terms and also relative to the interest rates on the underlying collateral. The yields recognized on structured securities purchased at a discount to par will generally increase (relative to the stated rate) when the underlying collateral prepays faster than expected. The yields recognized on structured securities purchased at a premium will decrease (relative to the stated rate) when the underlying collateral prepays faster than expected. When interest rates decline, the proceeds from prepayments may be reinvested at lower rates than we were earning on the prepaid securities. When interest rates increase, prepayments may decrease below expected levels. When this occurs, the average maturity and duration of structured securities increases, decreasing the yield on structured securities purchased at discounts and increasing the yield on those purchased at a premium because of a decrease in the annual amortization of premium.
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
For structured securities included in fixed maturities, available for sale, that were purchased at a discount or premium, we recognize investment income using an effective yield based on anticipated future prepayments and the estimated final maturity of the securities. Actual prepayment experience is periodically reviewed and effective yields are recalculated when differences arise between the prepayments originally anticipated and the actual prepayments received and currently anticipated. For credit sensitive mortgage-backed and asset-backed securities, and for securities that can be prepaid or settled in a way that we would not recover substantially all of our investment, the effective yield is recalculated on a prospective basis. Under this method, the amortized cost basis in the security is not immediately adjusted and a new yield is applied prospectively. For all other structured and asset-backed securities, the effective yield is recalculated when changes in assumptions are made, and reflected in our income on a retrospective basis. Under this method, the amortized cost basis of the investment in the securities is adjusted to the amount that would have existed had the new effective yield been applied since the acquisition of the securities. Such adjustments were not significant in 2025.
For purchased credit impaired securities, at acquisition, the difference between the undiscounted expected future cash flows and the recorded investment in the securities represents the initial accretable yield, which is accreted into net investment income over the securities' remaining lives on a level-yield basis. Subsequently, effective yields recognized on purchased credit impaired securities are recalculated and adjusted prospectively to reflect changes in the contractual benchmark interest rates on variable rate securities and any significant increases in undiscounted expected future cash flows arising due to reasons other than interest rate changes. Significant decreases in expected cash flows arising from credit events would result in impairment if such security's fair value is below amortized cost.
The amortized cost and estimated fair value of structured securities at December 31, 2025, summarized by type of security, were as follows (dollars in millions):
| | | | | | | | | | | | | | | | | |
| | | | Estimated fair value |
| Type | Amortized cost | | Amount | | Percent of fixed maturities |
| Asset-backed securities | $ | 1,780.8 | | | $ | 1,747.3 | | | 7.3 | % |
| Agency residential mortgage-backed securities | 838.3 | | | 849.5 | | | 3.6 | |
| Non-agency residential mortgage-backed securities | 1,639.1 | | | 1,585.7 | | | 6.6 | |
| Collateralized loan obligations | 1,142.3 | | | 1,142.5 | | | 4.8 | |
| Commercial mortgage-backed securities | 2,157.5 | | | 2,047.0 | | | 8.6 | |
| | | | | |
| Total structured securities | $ | 7,558.0 | | | $ | 7,372.0 | | | 30.9 | % |
Residential mortgage-backed securities ("RMBS") include transactions collateralized by agency-guaranteed and non-agency mortgage obligations. Non-agency RMBS investments are primarily categorized by underlying borrower credit quality: Prime, Alt-A, Non-Qualified Mortgage ("Non-QM"), and Subprime. Prime borrowers typically default with the lowest frequency, Alt-A and Non-QM default at higher rates, and Subprime borrowers default with the highest frequency. In addition to borrower credit categories, RMBS investments include Re-Performing Loan ("RPL") and Credit Risk Transfer ("CRT") transactions. RPL transactions include borrowers with prior difficulty meeting the original mortgage terms and were subsequently modified, resulting in a sustainable payback arrangement. CRT securities are collateralized by Government-Sponsored Enterprise conforming mortgages and Prime borrowers, but without an agency guarantee against default losses.
Commercial mortgage-backed securities ("CMBS") are secured by commercial real estate mortgages, generally income producing properties that are managed for profit. Property types include, but are not limited to, hospitals, hotels, multi-family dwellings including apartments, nursing homes, office buildings, restaurants, retail centers and warehouses. While most CMBS have call protection features whereby underlying borrowers may not prepay their mortgages for stated periods of time without incurring prepayment penalties, recoveries on defaulted collateral may result in involuntary prepayments.
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
Mortgage Loans
Mortgage loans are carried at amortized unpaid balance, net of allowance for estimated credit losses. Interest income is accrued on the principal amount of the loan based on the loan's contractual interest rate. Payment terms specified for mortgage loans may include a prepayment penalty for unscheduled payoff of the investment. Prepayment penalties are recognized as investment income when received.
The mortgage loan balance was comprised of commercial and residential mortgage loans. At December 31, 2025, we held commercial mortgage loan investments with an amortized cost and fair value of $1,795.8 million and $1,699.1 million, respectively. Approximately 16.1 percent, 6.8 percent, 5.9 percent and 5.0 percent of the commercial mortgage loan balance were on properties located in California, Florida, Maryland, and Illinois, respectively. No other state comprised greater than five percent of the commercial mortgage loan balance. At December 31, 2025, there were no commercial mortgage loans in process of foreclosure.
The following table provides the amortized cost by year of origination and estimated fair value of our outstanding commercial mortgage loans and the underlying collateral as of December 31, 2025 (dollars in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | Estimated fair value |
| Loan-to-value ratio (a) | 2025 | | 2024 | | 2023 | | 2022 | | 2021 | | Prior | | Total amortized cost | | Mortgage loans | | Collateral |
Less than 60% | $ | 273.5 | | | $ | 169.1 | | | $ | 197.8 | | | $ | 141.3 | | | $ | 123.3 | | | $ | 449.9 | | | $ | 1,354.9 | | | $ | 1,291.0 | | | $ | 4,329.0 | |
60% to less than 70% | 118.0 | | | 15.0 | | | 17.7 | | | 37.6 | | | 7.5 | | | 26.0 | | | 221.8 | | | 209.3 | | | 336.7 | |
70% to less than 80% | 18.8 | | | — | | | 59.7 | | | 52.0 | | | — | | | 22.6 | | | 153.1 | | | 138.1 | | | 206.5 | |
80% to less than 90% | 10.0 | | | — | | | — | | | 46.4 | | | — | | | — | | | 56.4 | | | 53.1 | | | 70.1 | |
90% or greater | — | | | — | | | — | | | — | | | 7.7 | | | 1.9 | | | 9.6 | | | 7.6 | | | 9.8 | |
| Total | $ | 420.3 | | | $ | 184.1 | | | $ | 275.2 | | | $ | 277.3 | | | $ | 138.5 | | | $ | 500.4 | | | $ | 1,795.8 | | | $ | 1,699.1 | | | $ | 4,952.1 | |
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(a)Loan-to-value ratios are calculated as the ratio of: (i) the amortized cost of the commercial mortgage loans; to (ii) the estimated fair value of the underlying collateral.
At December 31, 2025, we held residential mortgage loan investments with an amortized cost and fair value of of $1,481.9 million and $1,497.8 million, respectively. We consider current or non-current loan status as our primary credit quality indicator in conjunction with other quantitative and qualitative factors. We define non-current loans as those that are 90 or more days past due and/or in nonaccrual status. At December 31, 2025, there were 31 residential mortgage loans that were non-current with an amortized cost of $20.7 million (of which five loans with an amortized cost of $2.6 million were in foreclosure).
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
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The allowance for estimated credit losses is measured using a loss-rate method on an individual asset basis. Inputs used include asset-specific characteristics, current economic conditions, historical loss information and reasonable and supportable forecasts about future economic conditions. The following table summarizes changes in the allowance for credit losses related to mortgage loans for each of the three years ended December 31, 2025 (dollars in millions): | | | | | | | | |
| | Mortgage loans |
Allowance for credit losses at December 31, 2022 | | $ | 8.0 | |
| Current period provision for expected credit losses | | 7.4 | |
Allowance for credit losses at December 31, 2023 | | 15.4 | |
| Current period provision for expected credit losses | | (1.8) | |
Allowance for credit losses at December 31, 2024 | | 13.6 | |
| Current period provision for expected credit losses | | 7.3 | |
Allowance for credit losses at December 31, 2025 | | $ | 20.9 | |
Investment Disclosures
Life insurance companies are required to maintain certain investments on deposit with state regulatory authorities. Such assets had an aggregate fair value of $36.3 million and $38.2 million at December 31, 2025 and 2024, respectively.
The Company had no fixed maturity investments that were in excess of 10 percent of shareholders' equity at December 31, 2025 and 2024.
Net Investment Income
Net investment income consisted of the following (dollars in millions):
| | | | | | | | | | | | | | | | | |
| 2025 | | 2024 | | 2023 |
| General account assets: | | | | | |
| Fixed maturities | $ | 1,272.7 | | | $ | 1,222.1 | | | $ | 1,142.9 | |
| Equity securities | 30.6 | | | 35.0 | | | 1.7 | |
| Mortgage loans | 161.8 | | | 126.5 | | | 97.4 | |
| Policy loans | 9.5 | | | 9.0 | | | 8.6 | |
| Other invested assets | 76.1 | | | 26.8 | | | 8.2 | |
| Cash and cash equivalents | 36.2 | | | 39.0 | | | 20.9 | |
| Policyholder and other special-purpose portfolios: | | | | | |
| Trading securities | 5.7 | | | 5.0 | | | 6.5 | |
| Options related to fixed indexed products: | | | | | |
| Option income (loss) | 96.4 | | | 243.6 | | | (48.3) | |
| Change in value of options | 23.6 | | | 12.2 | | | 177.3 | |
| Other special-purpose portfolios | 55.3 | | | 68.7 | | | 114.0 | |
| Gross investment income | 1,767.9 | | | 1,787.9 | | | 1,529.2 | |
| Less investment expenses | 44.5 | | | 39.1 | | | 29.5 | |
| Net investment income | $ | 1,723.4 | | | $ | 1,748.8 | | | $ | 1,499.7 | |
At December 31, 2025, the amortized cost and carrying value of fixed maturities that were non-income producing during 2025 totaled $5.7 million and $3.5 million, respectively.
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
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Total Investment Gains (Losses)
The following table sets forth the total investment gains (losses) for the periods indicated (dollars in millions):
| | | | | | | | | | | | | | | | | |
| | 2025 | | 2024 | | 2023 |
| Realized investment gains (losses): | | | | | |
| Gross realized gains on sales of fixed maturities, available for sale | $ | 20.6 | | | $ | 11.5 | | | $ | 13.4 | |
| Gross realized losses on sales of fixed maturities, available for sale | (79.5) | | | (54.9) | | | (58.9) | |
| Equity securities, net | 0.1 | | | — | | | (0.6) | |
| Other, net | (0.8) | | | (32.2) | | | (23.2) | |
| Total realized investment gains (losses) | (59.6) | | | (75.6) | | | (69.3) | |
Change in allowance for credit losses and write-downs | (6.2) | | | (2.6) | | | 8.1 | |
Change in fair value of equity securities (a) | 1.3 | | | (0.4) | | | 0.4 | |
| | | | | |
| | | | | |
Other changes in fair value (b) (c) | 9.8 | | | 24.8 | | | (8.2) | |
Gain on dissolution of variable interest entities | — | | | 3.9 | | | — | |
| Other investment gains (losses) | 4.9 | | | 25.7 | | | 0.3 | |
| Total investment gains (losses) | $ | (54.7) | | | $ | (49.9) | | | $ | (69.0) | |
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(a) Changes in the estimated fair value of equity securities (that were still held as of the end of the respective years) were $3.4 million, $(0.3) million and $0.1 million for the years ended December 31, 2025, 2024 and 2023, respectively.
(b) Changes in the estimated fair value of fixed maturity investments with embedded derivatives that we have elected the fair value option (that were still held as of the end of the respective years) were $10.9 million, $3.7 million and $(2.0) million for the years ended December 31, 2025, 2024 and 2023, respectively.
(c) Other changes in fair value are comprised of (i) the net increase (decrease) in fair value of certain other invested assets and fixed maturity investments with embedded derivatives, including the change in fair value, of $8.0 million, $24.4 million, and $(8.5) million for the years ended December 31, 2025, 2024, and 2023, respectively; and (ii) the increase in fair value of embedded derivatives related to a modified coinsurance agreement of $1.8 million, $0.4 million, and $0.3 million for the years ended December 31, 2025, 2024, and 2023, respectively.
During 2025, the $79.5 million of realized losses on sales of $1,562.5 million of fixed maturity securities, available for sale, primarily related to various corporate securities. Securities are generally sold at a loss following unforeseen sector or issuer-specific events or conditions, shifts in perceived credit quality relative values, or in connection with strategic asset repositioning related to changes in market conditions.
During 2024, the $54.9 million of realized losses on sales of $1,432.0 million of fixed maturity securities, available for sale, primarily related to various corporate securities, commercial mortgage-backed securities, and various other investments.
During 2023, the $58.9 million of realized losses on sales of $712.2 million of fixed maturity securities, available for sale, primarily related to various corporate securities, commercial mortgage-backed securities, and (iv) various other investments.
Our fixed maturity investments are generally purchased in the context of various long-term strategies, including funding insurance liabilities, so we do not generally seek to generate short-term realized gains through the purchase and sale of such securities. In certain circumstances, including those in which securities are selling at prices which exceed our view of their underlying economic value, or when it is possible to reinvest the proceeds to better meet our long-term asset-liability objectives, we may sell certain securities.
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
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The following summarizes the investments sold at a loss during 2025 which had been continuously in an unrealized loss position exceeding 20 percent of the amortized cost basis prior to the sale for the period indicated (dollars in millions):
| | | | | | | | | | | | | | | | | |
| | | At date of sale |
| Number of issuers | | Amortized cost | | Fair value |
| Less than 6 months prior to sale | 8 | | $ | 55.8 | | | $ | 41.5 | |
| Greater than or equal to 6 months and less than 12 months prior to sale | 2 | | 4.3 | | | 3.5 | |
| Greater than 12 months prior to sale | 6 | | 42.6 | | | 29.0 | |
| | | | $ | 102.7 | | | $ | 74.0 | |
Future events may occur, or additional information may become available, which may necessitate future realized losses in our portfolio. Significant losses could have a material adverse effect on our consolidated financial statements in future periods.
4. FAIR VALUE MEASUREMENTS
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and, therefore, represents an exit price, not an entry price. We carry certain assets and liabilities at fair value on a recurring basis, including fixed maturities, equity securities, trading securities, investments held by VIEs, derivatives, separate account assets and embedded derivatives. We carry our COLI, which is invested in a series of mutual funds, at its cash surrender value, which approximates fair value. In addition, we disclose fair value for certain financial instruments that are not carried at fair value, including mortgage loans, policy loans, cash and cash equivalents, insurance liabilities for interest-sensitive products and funding agreements, investment borrowings, notes payable and borrowings related to VIEs.
The degree of judgment utilized in measuring the fair value of financial instruments is largely dependent on the level to which pricing is based on observable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our view of market assumptions in the absence of observable market information. Financial instruments with readily available active quoted prices would be considered to have fair values based on the highest level of observable inputs, and little judgment would be utilized in measuring fair value. Financial instruments that rarely trade would often have fair value based on a lower level of observable inputs, and more judgment would be utilized in measuring fair value.
Valuation Hierarchy
There is a three-level hierarchy for valuing assets or liabilities at fair value based on whether inputs are observable or unobservable.
•Level 1 – includes assets and liabilities valued using inputs that are unadjusted quoted prices in active markets for identical assets or liabilities. Our Level 1 assets primarily include cash and cash equivalents and exchange-traded securities.
•Level 2 – includes assets and liabilities valued using inputs that are quoted prices for similar assets in an active market, quoted prices for identical or similar assets in a market that is not active, observable inputs, or observable inputs that can be corroborated by market data. Level 2 assets and liabilities include those financial instruments that are valued by independent pricing services using models or other valuation methodologies. These models consider various inputs such as credit rating, maturity, corporate credit spreads, reported trades and other inputs that are observable or derived from observable information in the marketplace or are supported by transactions executed in the marketplace. Financial assets in this category primarily include: certain publicly registered and privately placed corporate fixed maturity securities; certain government or agency securities; certain mortgage and asset-backed securities; certain equity securities; most investments held by our consolidated VIEs; and derivatives
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
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such as call options. Financial liabilities in this category include investment borrowings, notes payable and borrowings related to VIEs.
•Level 3 – includes assets and liabilities valued using unobservable inputs that are used in model-based valuations that contain management assumptions. Level 3 assets and liabilities include those financial instruments whose fair value is estimated based on broker-dealer quotes, pricing services or internally developed models or methodologies utilizing significant inputs not based on, or corroborated by, readily available market information. Financial assets in this category include certain corporate securities, certain structured securities, mortgage loans, policy loans, and other less liquid securities. Financial liabilities in this category include our insurance liabilities for interest-sensitive products, which includes embedded derivatives (including embedded derivatives related to our fixed indexed annuity products and to a modified coinsurance arrangement), and funding agreements since their values include significant unobservable inputs, including actuarial assumptions.
At each reporting date, we classify assets and liabilities into the three input levels based on the lowest level of input that is significant to the measurement of fair value for each asset and liability reported at fair value. This classification is impacted by a number of factors, including the type of financial instrument, whether the financial instrument is new to the market and not yet established, the characteristics specific to the transaction and overall market conditions. Our assessment of the significance of a particular input to the fair value measurement and the ultimate classification of each asset and liability requires judgment and is subject to change from period to period based on the observability of the valuation inputs.
The vast majority of our assets carried at fair value use Level 2 inputs for the determination of fair value. These fair values are obtained primarily from independent pricing services, which use Level 2 inputs for the determination of fair value. Our Level 2 assets are valued as follows:
•Fixed maturities available for sale, equity securities and trading securities
Corporate securities are generally priced using market and income approaches using independent pricing services. Inputs generally consist of trades of identical or similar securities, quoted prices in inactive markets, issuer rating, benchmark yields, maturity and credit spreads.
U.S. Treasuries and obligations of U.S. Government corporations and agencies are generally priced using the market approach. Inputs generally consist of trades of identical or similar securities, quoted prices in inactive markets and maturity.
States and political subdivisions are generally priced using the market approach using independent pricing services. Inputs generally consist of trades of identical or similar securities, quoted prices in inactive markets, new issuances and credit spreads.
Foreign governments are generally priced using the market approach using independent pricing services. Inputs generally consist of trades of identical or similar securities, quoted prices in inactive markets, new issuances, benchmark yields, credit spreads and issuer rating.
Asset-backed securities, agency and non-agency residential mortgage-backed securities, collateralized loan obligations and commercial mortgage-backed securities are generally priced using market and income approaches using independent pricing services. Inputs generally consist of quoted prices in inactive markets, spreads on actively traded securities, expected prepayments, expected default rates, expected recovery rates and issue specific information including, but not limited to, collateral type, seniority and vintage.
Equity securities are generally priced using the market approach. Inputs generally consist of trades of identical or similar securities, quoted prices in inactive markets, issuer rating, benchmark yields, maturity and credit spreads.
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
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•Investments held by VIEs
Corporate securities are generally priced using market and income approaches using independent pricing services. Inputs generally consist of trades of identical or similar securities, quoted prices in inactive markets, issuer rating, benchmark yields, maturity, and credit spreads.
•Other invested assets - derivatives
The fair value measurements for derivative instruments, including embedded derivatives requiring bifurcation, are determined based on the consideration of several inputs including closing exchange or over-the-counter market price quotes, time value and volatility factors underlying options, market interest rates and non-performance risk.
Third-party pricing services normally derive security prices through recently reported trades for identical or similar securities making adjustments through the reporting date based upon observable market information. If there are no recently reported trades, the third-party pricing services may use matrix or model processes to develop a security price where future cash flow expectations are discounted at an estimated risk-adjusted market rate. The number of prices obtained for a given security is dependent on the Company's analysis of such prices as further described below.
As the Company is responsible for the determination of fair value, we have control processes designed to ensure that the fair values received from third-party pricing sources are reasonable and the valuation techniques and assumptions used appear reasonable and consistent with prevailing market conditions. Additionally, when inputs are provided by third-party pricing sources, we have controls in place to review those inputs for reasonableness. As part of these controls, we perform monthly quantitative and qualitative analysis on the prices received from third parties to determine whether the prices are reasonable estimates of fair value. The Company's analysis includes: (i) a review of the methodology used by third-party pricing services; (ii) where available, a comparison of multiple pricing services' valuations for the same security; (iii) a review of month to month price fluctuations; (iv) a review to ensure valuations are not unreasonably dated; and (v) back testing to compare actual purchase and sale transactions with valuations received from third parties. As a result of such procedures, the Company may conclude a particular price received from a third party is not reflective of current market conditions. In those instances, we may request additional pricing quotes or apply internally developed valuations. However, the number of such instances is insignificant and the aggregate change in value of such investments is not materially different from the original prices received.
The categorization of the fair value measurements of our investments priced by independent pricing services was based upon the Company's judgment of the inputs or methodologies used by the independent pricing services to value different asset classes. The Company categorizes such fair value measurements based upon asset classes and the underlying observable or unobservable inputs used to value such investments.
For securities that are not priced by pricing services and may not be reliably priced using pricing models, we obtain broker quotes. These broker quotes are non-binding and represent an exit price, but assumptions used to establish the fair value may not be observable and therefore represent Level 3 inputs. Approximately 93 percent of our Level 3 fixed maturity securities and trading securities were valued using unadjusted broker quotes or broker-provided valuation inputs. The remaining Level 3 fixed maturity investments do not have readily determinable market prices and/or observable inputs. For these securities, we use internally developed valuations. Key assumptions used to determine fair value for these securities may include risk premiums, projected performance of underlying collateral and other factors involving significant assumptions which may not be reflective of an active market. For certain investments, we use a matrix or model process to develop a security price where future cash flow expectations are discounted at an estimated market rate. The pricing matrix incorporates term interest rates as well as a spread level based on the issuer's credit rating, other factors relating to the issuer, and the security's maturity. In some instances issuer-specific spread adjustments, which can be positive or negative, are made based upon internal analysis of security specifics such as liquidity, deal size, and time to maturity.
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
The categorization of fair value measurements, by input level, for our financial instruments carried at fair value on a recurring basis at December 31, 2025 is as follows (dollars in millions):
| | | | | | | | | | | | | | | | | | | | | | | |
| | Quoted prices in active markets for identical assets or liabilities (Level 1) | | Significant other observable inputs (Level 2) | | Significant unobservable inputs (Level 3) | | Total |
| Assets: | | | | | | | |
| Fixed maturities, available for sale: | | | | | | | |
| Corporate securities | $ | — | | | $ | 13,130.7 | | | $ | 131.8 | | | $ | 13,262.5 | |
| Certificates of deposit | — | | | — | | | — | | | — | |
| United States Treasury securities and obligations of United States government corporations and agencies | — | | | 177.1 | | | — | | | 177.1 | |
| States and political subdivisions | — | | | 2,954.7 | | | — | | | 2,954.7 | |
| Foreign governments | — | | | 120.5 | | | — | | | 120.5 | |
| Asset-backed securities | — | | | 1,710.8 | | | 36.5 | | | 1,747.3 | |
| Agency residential mortgage-backed securities | — | | | 849.5 | | | — | | | 849.5 | |
| Non-agency residential mortgage-backed securities | — | | | 1,585.7 | | | — | | | 1,585.7 | |
| Collateralized loan obligations | — | | | 1,142.5 | | | — | | | 1,142.5 | |
| Commercial mortgage-backed securities | — | | | 2,043.5 | | | 3.5 | | | 2,047.0 | |
| Total fixed maturities, available for sale | — | | | 23,715.0 | | | 171.8 | | | 23,886.8 | |
| Equity securities - corporate securities | 176.5 | | | 117.0 | | | 73.7 | | | 367.2 | |
| Trading securities: | | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Asset-backed securities | — | | | 38.7 | | | — | | | 38.7 | |
| Agency residential mortgage-backed securities | — | | | 97.5 | | | — | | | 97.5 | |
| Non-agency residential mortgage-backed securities | — | | | 44.2 | | | — | | | 44.2 | |
| Collateralized loan obligations | — | | | 9.7 | | | — | | | 9.7 | |
| Commercial mortgage-backed securities | — | | | 104.7 | | | — | | | 104.7 | |
| | | | | | | |
| | | | | | | |
| Total trading securities | — | | | 294.8 | | | — | | | 294.8 | |
| Investments held by variable interest entities - corporate securities | — | | | 293.0 | | | — | | | 293.0 | |
| Other invested assets: | | | | | | | |
| Derivatives | — | | | 323.5 | | | — | | | 323.5 | |
| Residual tranches | — | | | — | | | 4.2 | | | 4.2 | |
| Total other invested assets | — | | | 323.5 | | | 4.2 | | | 327.7 | |
| | | | | | | |
| Assets held in separate accounts | — | | | 2.8 | | | — | | | 2.8 | |
Total assets carried at fair value by category | $ | 176.5 | | | $ | 24,746.1 | | | $ | 249.7 | | | $ | 25,172.3 | |
Equity securities measured at net asset value | | | | | | | 22.0 | |
Total assets carried at fair value | | | | | | | $ | 25,194.3 | |
| | | | | | | |
| Liabilities: | | | | | | | |
| Market risk benefit liability | $ | — | | | $ | — | | | $ | 48.1 | | | $ | 48.1 | |
| Embedded derivatives associated with fixed indexed annuity products | — | | | — | | | 1,600.6 | | | 1,600.6 | |
Total liabilities carried at fair value | $ | — | | | $ | — | | | $ | 1,648.7 | | | $ | 1,648.7 | |
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
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The categorization of fair value measurements, by input level, for our financial instruments carried at fair value on a recurring basis at December 31, 2024 is as follows (dollars in millions):
| | | | | | | | | | | | | | | | | | | | | | | |
| | Quoted prices in active markets for identical assets or liabilities (Level 1) | | Significant other observable inputs (Level 2) | | Significant unobservable inputs (Level 3) | | Total |
| Assets: | | | | | | | |
| Fixed maturities, available for sale: | | | | | | | |
| Corporate securities | $ | — | | | $ | 11,912.8 | | | $ | 128.0 | | | $ | 12,040.8 | |
| Certificates of deposit | — | | | 488.3 | | | — | | | 488.3 | |
| United States Treasury securities and obligations of United States government corporations and agencies | — | | | 186.2 | | | — | | | 186.2 | |
| States and political subdivisions | — | | | 2,834.3 | | | — | | | 2,834.3 | |
| Foreign governments | — | | | 91.1 | | | — | | | 91.1 | |
| Asset-backed securities | — | | | 1,496.6 | | | 19.8 | | | 1,516.4 | |
| Agency residential mortgage-backed securities | — | | | 819.6 | | | — | | | 819.6 | |
| Non-agency residential mortgage-backed securities | — | | | 1,539.1 | | | — | | | 1,539.1 | |
| Collateralized loan obligations | — | | | 1,012.8 | | | 4.0 | | | 1,016.8 | |
| Commercial mortgage-backed securities | — | | | 2,193.4 | | | 4.1 | | | 2,197.5 | |
| Total fixed maturities, available for sale | — | | | 22,574.2 | | | 155.9 | | | 22,730.1 | |
| Equity securities - corporate securities | 64.0 | | | 134.9 | | | 73.4 | | | 272.3 | |
| Trading securities: | | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Asset-backed securities | — | | | 40.6 | | | — | | | 40.6 | |
| Collateralized loan obligations | — | | | 9.5 | | | — | | | 9.5 | |
| Agency residential mortgage-backed securities | — | | | 97.1 | | | — | | | 97.1 | |
| Non-agency residential mortgage-backed securities | — | | | 53.3 | | | — | | | 53.3 | |
| Commercial mortgage-backed securities | — | | | 103.7 | | | — | | | 103.7 | |
| | | | | | | |
| Total trading securities | — | | | 304.2 | | | — | | | 304.2 | |
| Investments held by variable interest entities - corporate securities | — | | | 433.8 | | | — | | | 433.8 | |
| Other invested assets: | | | | | | | |
| Derivatives | — | | | 279.0 | | | — | | | 279.0 | |
| Residual tranches | — | | | 1.5 | | | 95.4 | | | 96.9 | |
| Total other invested assets | — | | | 280.5 | | | 95.4 | | | 375.9 | |
| | | | | | | |
| Assets held in separate accounts | — | | | 3.3 | | | — | | | 3.3 | |
| Total assets carried at fair value by category | $ | 64.0 | | | $ | 23,730.9 | | | $ | 324.7 | | | $ | 24,119.6 | |
| | | | | | | |
| Liabilities: | | | | | | | |
| Market risk benefit liability | $ | — | | | $ | — | | | $ | 60.0 | | | $ | 60.0 | |
| Embedded derivatives associated with fixed indexed annuity products | — | | | — | | | 1,471.6 | | | 1,471.6 | |
Total liabilities carried at fair value | $ | — | | | $ | — | | | $ | 1,531.6 | | | $ | 1,531.6 | |
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
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The following table presents additional information about assets measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value as of December 31, 2025 (dollars in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | Fixed Maturities | | Equity Securities | | | | Other Invested Assets | | Total |
| Beginning of period | $ | 155.9 | | | $ | 73.4 | | | | | $ | 95.4 | | | $ | 324.7 | |
| Gains (losses) included in net income | (1.0) | | | 0.3 | | | | | 0.1 | | | (0.6) | |
| Gains (losses) included in accumulated other comprehensive loss | (0.3) | | | — | | | | | — | | | (0.3) | |
Purchases, sales, issuances and settlements (a) | | | | | | | | | |
| Purchases | 56.7 | | | — | | | | | 1.4 | | | 58.1 | |
| Sales | (2.6) | | | — | | | | | — | | | (2.6) | |
Transfers into Level 3 (b) | 13.1 | | | — | | | | | — | | | 13.1 | |
Transfers out of Level 3 (b) | (50.0) | | | — | | | | | (92.7) | | | (142.7) | |
| End of period | $ | 171.8 | | | $ | 73.7 | | | | | $ | 4.2 | | | $ | 249.7 | |
| | | | | | | | | |
| Change in unrealized gains or losses for the period included in net income for assets held at the end of the reporting period | $ | (1.0) | | | $ | 0.3 | | | | | $ | 0.1 | | | $ | (0.6) | |
| Change in unrealized gains or losses for the period included in other comprehensive loss for assets held at the end of the reporting period | $ | (0.3) | | | $ | — | | | | | $ | — | | | $ | (0.3) | |
_________
(a)Purchases, sales, issuances and settlements represent the activity that occurred during the period that results in a change of the asset but does not represent changes in fair value for the instruments held at the beginning of the period. Such activity primarily consists of purchases and sales of fixed maturity and equity securities. There were no issuances or settlements during the year ended December 31, 2025.
(b)Transfers into Level 3 are the result of unobservable inputs utilized within valuation methodologies for assets that were previously valued using observable inputs. Transfers out of Level 3 are due to the use of observable inputs in valuation methodologies as well as the utilization of independent pricing service information for certain assets that the Company is able to validate. Transfers out of Level 3 other invested assets include $92.7 million of residual tranches that are valued based on our ownership share of the equity of the investee, as reported to us by the General Partner. These are not held at fair value and have been transferred out of Level 3.
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
The following table presents additional information about assets measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value as of December 31, 2024 (dollars in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | Fixed Maturities | | Equity Securities | | | | Other Invested Assets | | Total |
| Beginning of period | $ | 197.9 | | | $ | 72.7 | | | | | $ | 31.5 | | | $ | 302.1 | |
| Gains (losses) included in net income | (4.2) | | | 0.7 | | | | | 19.1 | | | 15.6 | |
| Gains (losses) included in accumulated other comprehensive loss | (2.6) | | | — | | | | | — | | | (2.6) | |
Purchases, sales, issuances and settlements (a) | | | | | | | | | |
| Purchases | 64.4 | | | — | | | | | 44.5 | | | 108.9 | |
| Sales | (47.2) | | | — | | | | | (7.2) | | | (54.4) | |
Transfers into Level 3 (b) | 4.8 | | | — | | | | | 7.5 | | | 12.3 | |
Transfers out of Level 3 (b) | (57.2) | | | — | | | | | — | | | (57.2) | |
| End of period | $ | 155.9 | | | $ | 73.4 | | | | | $ | 95.4 | | | $ | 324.7 | |
| | | | | | | | | |
| Change in unrealized gains or losses for the period included in net income for assets held at the end of the reporting period | $ | (1.7) | | | $ | 0.8 | | | | | $ | 19.1 | | | $ | 18.2 | |
| Change in unrealized gains or losses for the period included in other comprehensive loss for assets held at the end of the reporting period | $ | (8.3) | | | $ | — | | | | | $ | — | | | $ | (8.3) | |
____________
(a)Purchases, sales, issuances and settlements represent the activity that occurred during the period that results in a change of the asset but does not represent changes in fair value for the instruments held at the beginning of the period. Such activity primarily consists of purchases and sales of fixed maturity and equity securities. There were no issuances or settlements during the year ended December 31, 2024.
(b)Transfers into Level 3 are the result of unobservable inputs utilized within valuation methodologies for assets that were previously valued using observable inputs. Transfers out of Level 3 are due to the use of observable inputs in valuation methodologies as well as the utilization of independent pricing service information for certain assets that the Company is able to validate.
Realized and unrealized investment gains and losses presented in the preceding tables represent gains and losses during the time the applicable financial instruments were classified as Level 3. Realized and unrealized gains (losses) on Level 3 assets are primarily reported in either net investment income for policyholder and other special-purpose portfolios or investment gains (losses) within the consolidated statement of operations; or accumulated other comprehensive income (loss) within shareholders' equity based on the appropriate accounting treatment for the instrument. The amount presented for gains (losses) included in our net income for assets still held as of the reporting date primarily represents: (i) the change in the allowance for credit losses for fixed maturities, available for sale; and (ii) changes in fair value of equity securities and trading securities that are held as of the reporting date. The amount presented for gains (losses) included in accumulated other comprehensive income (loss) for assets still held as of the reporting date primarily represents changes in the fair value of fixed maturities, available for sale, that are held as of the reporting date.
At December 31, 2025, 66.5 percent of our Level 3 fixed maturities, available for sale, were investment grade and 76.7 percent of our Level 3 fixed maturities, available for sale, consisted of corporate securities.
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
The following table summarizes changes in the value of our embedded derivatives associated with fixed indexed annuity products (classified in policyholder account balances as presented in the note to the consolidated financial statements entitled "Derivatives") which are measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value (dollars in millions):
| | | | | | | | | | | |
| 2025 | | 2024 |
| Balance at beginning of the period | $ | 1,471.6 | | | $ | 1,376.7 | |
| Premiums less benefits | (36.4) | | | (62.6) | |
| Change in fair value, net | 165.4 | | | 157.5 | |
| Balance at end of the period | $ | 1,600.6 | | | $ | 1,471.6 | |
The change in fair value, net for each period in our embedded derivatives is included in the insurance policy benefits line item in the consolidated statement of operations.
The following table provides additional information about the significant unobservable (Level 3) inputs developed internally by the Company to determine fair value for certain assets and liabilities carried at fair value at December 31, 2025 (dollars in millions):
| | | | | | | | | | | | | | | | | | | | | | | |
| Fair value at December 31, 2025 | | Valuation techniques | | Unobservable inputs | | Range (weighted average) (a) |
| Assets: | | | | | | | |
| | | | | | | |
| Corporate securities (c) | $ | 0.5 | | | Recovery method | | % Recovery expected | | 50.00% |
| | | | | | | |
Asset-backed securities (b) | 7.6 | | | Discounted cash flow analysis | | Discount margins | | 1.61% |
Asset-backed securities (c) | 3.5 | | | Recovery method | | % Recovery expected | | 61.24% |
Equity securities (d) | 64.5 | | | Market comparables | | EBITDA multiples | | 10.9X |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Total assets | $ | 76.1 | | | | | | | |
| Liabilities: | | | | | | | |
Market risk benefit liability (e) | $ | 48.1 | | | Discounted cash flow analysis | | Surrender rates | | 0.46% - 17.68% (3.44%) |
| | | | Partial withdrawal rates | | 0.00% - 3.00% (0.96%) |
| | | | | Mortality | | 0.03% - 39.75% (3.63%) |
| | | | | GLWB utilization | | 5.92% - 47.62% (25.07%) |
| | | | | Non-performance risk spread | | 0.09% - 0.31% (N/A) |
Embedded derivatives related to fixed indexed annuity products (f) | 1,600.6 | | | Discounted projected embedded derivatives | | Surrender rates | | 0.46% - 23.36% (6.11%) |
| | | Partial withdrawal rates | | 0.00% - 4.50% (2.78%) |
| | | | | Mortality | | 0.03% - 39.75% (4.05%) |
| | | | | GLWB utilization | | 5.92% -47.62% (25.07%) |
| | | | | Option budget | | 0.90% - 3.38% (2.64%) |
| | | | | Non-performance risk spread | | 0.09% - 0.31% (N/A) |
Total liabilities | $ | 1,648.7 | | | | | | | |
__________________
(a) The weighted average is based on the relative fair value of the related assets or liabilities.
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
(b) Asset-backed securities - The significant unobservable input used in the fair value measurement of these asset-backed securities is discount margin added to the applicable risk-free rate. Significant increases (decreases) in discount margin in isolation would have resulted in a significantly lower (higher) fair value measurement.
(c) Corporate and asset-backed securities - The significant unobservable input used in the fair value measurement of these securities is percentage of recovery expected. Significant increases (decreases) in percentage of recovery expected in isolation would have resulted in a significantly higher (lower) fair value measurement.
(d) Equity securities - The significant unobservable input used in the fair value measurement of these equity securities is multiples of earnings before interest, taxes, depreciation, and amortization ("EBITDA"). Generally, increases (decreases) in the EBITDA multiples would result in higher (lower) fair value measurements.
(e) Market risk benefits – Many of our fixed indexed annuity products include a GLWB that is considered a MRB. The calculation of the value of MRBs is based on significant unobservable inputs including nonmarket assumptions related to surrender rates, partial withdrawal rates, mortality and GLWB utilization. These assumptions are based on actuarial estimates and past experience. Increases in assumed surrender rates would generally decrease the value of a MRB liability. Increases in partial withdrawal rates would generally decrease the value of a MRB liability. A decrease in the mortality assumption would generally increase the MRB liability. Increases in utilization rates would generally increase the value of a MRB liability. Increases in non-performance risk spread decrease the MRB liability.
(f) Embedded derivatives related to fixed indexed annuity products are classified as policyholder account liabilities on the consolidated balance sheet. The significant unobservable inputs used in the fair value measurement of our embedded derivatives associated with fixed indexed annuity products are surrender rates, partial withdrawal rates, mortality, GLWB utilization, option budget, and non-performance risk. Assumed surrender rates, partial withdrawal rates, and mortality rates are used to project how long the contracts remain in force. Generally, the longer the contracts are assumed to be in force the higher the fair value of the embedded derivative. Increases (decreases) in utilization rates would generally increase (decrease) the value of the embedded derivative. Increases (decreases) in option budget in isolation would have resulted in a higher (lower) fair value measurement. Increases in non-performance risk spread result in a lower fair value measurement.
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
The following table provides additional information about the significant unobservable (Level 3) inputs developed internally by the Company to determine fair value for certain assets and liabilities carried at fair value at December 31, 2024 (dollars in millions):
| | | | | | | | | | | | | | | | | | | | | | | |
| Fair value at December 31, 2024 | | Valuation techniques | | Unobservable inputs | | Range (weighted average) (a) |
| Assets: | | | | | | | |
Corporate securities (c) | $ | — | | | Recovery method | | % Recovery expected | | 0.00% |
Asset-backed securities (b) | 8.1 | | | Discounted cash flow analysis | | Discount margins | | 1.49% |
Asset-backed securities (c) | 4.1 | | | Recovery method | | % Recovery expected | | 71.30% |
Equity securities (d) | 64.2 | | | Market comparables | | EBITDA multiples | | 14.0X |
| | | | | | | |
| | | | | | | |
Total assets | $ | 76.4 | | | | | | | |
| Liabilities: | | | | | | | |
Market risk benefit liability (e) | 60.0 | | | Discounted cash flow analysis | | Surrender rates | | 0.45% - 14.00% (2.09%) |
| | | | Partial withdrawal rates | | 0.00% - 3.00% (0.63%) |
| | | | | Mortality | | 0.03% - 38.41% (4.64%) |
| | | | | GLWB utilization | | 5.92% - 47.62% (24.95%) |
| | | | | Non-performance risk spread | | 0.09% - 0.35% (N/A) |
Embedded derivatives related to fixed indexed annuity products (f) | 1,471.6 | | | Discounted projected embedded derivatives | | Surrender rates | | 0.45% - 25.60% (5.81%) |
| | | Partial withdrawal rates | | 0.00% - 4.50% (2.61%) |
| | | | | Mortality | | 0.03%- 38.41% (4.12%) |
| | | | | GLWB utilization | | 5.92%- 47.62% (24.95%) |
| | | | | Option budget | | 0.90%- 3.37% (2.57%) |
| | | | | Non-performance risk spread | | 0.09%- 0.35% (N/A) |
Total liabilities | $ | 1,531.6 | | | | | | | |
| | | | | | | |
| | | | | | | |
__________________
(a) The weighted average is based on the relative fair value of the related assets or liabilities.
(b) Asset-backed securities - The significant unobservable input used in the fair value measurement of these asset-backed securities is discount margin added to the applicable risk-free rate. Significant increases (decreases) in discount margin in isolation would have resulted in a significantly lower (higher) fair value measurement.
(c) Corporate and asset-backed securities - The significant unobservable input used in the fair value measurement of these securities is percentage of recovery expected. Significant increases (decreases) in percentage of recovery expected in isolation would have resulted in a significantly higher (lower) fair value measurement.
(d) Equity securities - The significant unobservable input used in the fair value measurement of these equity securities is multiples of EBITDA. Generally, increases (decreases) in the EBITDA multiples would result in higher (lower) fair value measurements.
(e) Market risk benefits – Many of our fixed indexed annuity products include a GLWB that is considered a MRB. The calculation of the value of MRBs is based on significant unobservable inputs including nonmarket assumptions related to surrender rates, partial withdrawal rates, mortality and GLWB utilization. These assumptions are based on actuarial estimates and past experience. Increases in assumed surrender rates would generally decrease the value of a MRB liability. Increases in partial withdrawal rates would generally decrease the value of a MRB liability. A
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
decrease in the mortality assumption would generally increase the MRB liability. Increases in utilization rates would generally increase the value of a MRB liability. Increases in non-performance risk spread decrease the MRB liability.
(f) Embedded derivatives related to fixed indexed annuity products are classified as policyholder account liabilities on the consolidated balance sheet. The significant unobservable inputs used in the fair value measurement of our embedded derivatives associated with fixed indexed annuity products are surrender rates, partial withdrawal rates, mortality, GLWB utilization, option budget, and non-performance risk. Assumed surrender rates, partial withdrawal rates, and mortality rates are used to project how long the contracts remain in force. Generally, the longer the contracts are assumed to be in force the higher the fair value of the embedded derivative. Increases (decreases) in utilization rates would generally increase (decrease) the value of the embedded derivative. Increases (decreases) in option budget in isolation would have resulted in a higher (lower) fair value measurement. Increases in non-performance risk spread result in a lower fair value measurement.
The fair value of our financial instruments not carried at fair value on a recurring basis are as follows (dollars in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2025 |
| | Quoted prices in active markets for identical assets or liabilities (Level 1) | | Significant other observable inputs (Level 2) | | Significant unobservable inputs (Level 3) | | Total estimated fair value | | Total carrying amount |
| Assets: | | | | | | | | | |
| Mortgage loans | $ | — | | | $ | — | | | $ | 3,196.9 | | | $ | 3,196.9 | | | $ | 3,256.8 | |
| Policy loans | — | | | — | | | 140.9 | | | 140.9 | | | 140.9 | |
| Other invested assets: | | | | | | | | | |
| Company-owned life insurance (a) | — | | | 420.9 | | | — | | | 420.9 | | | 420.9 | |
| Cash and cash equivalents: | | | | | | | | | |
| Unrestricted | 956.1 | | | — | | | — | | | 956.1 | | | 956.1 | |
| Held by variable interest entities | 27.4 | | | — | | | — | | | 27.4 | | | 27.4 | |
Total | $ | 983.5 | | | $ | 420.9 | | | $ | 3,337.8 | | | $ | 4,742.2 | | | $ | 4,802.1 | |
| | | | | | | | | |
| Liabilities: | | | | | | | | | |
| Policyholder account balances | $ | — | | | $ | — | | | $ | 17,312.0 | | | $ | 17,312.0 | | | $ | 17,312.0 | |
| | | | | | | | | |
| Investment borrowings | — | | | 2,443.2 | | | — | | | 2,443.2 | | | 2,441.7 | |
| Borrowings related to variable interest entities | — | | | 277.1 | | | — | | | 277.1 | | | 274.4 | |
| Notes payable – direct corporate obligations | — | | | 1,365.7 | | | — | | | 1,365.7 | | | 1,335.6 | |
Total | $ | — | | | $ | 4,086.0 | | | $ | 17,312.0 | | | $ | 21,398.0 | | | $ | 21,363.7 | |
_________
(a)Includes $222.3 million of COLI purchased as an investment vehicle to fund our agent deferred compensation plan as further described in the footnote to the consolidated financial statements entitled "Agent Deferred Compensation Plan" and a $198.6 million investment in a COLI policy for key employees that is recorded in our general account assets.
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
The fair value of our financial instruments not carried at fair value on a recurring basis are as follows (dollars in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2024 |
| | Quoted prices in active markets for identical assets or liabilities (Level 1) | | Significant other observable inputs (Level 2) | | Significant unobservable inputs (Level 3) | | Total estimated fair value | | Total carrying amount |
| Assets: | | | | | | | | | |
| Mortgage loans | $ | — | | | $ | — | | | $ | 2,376.0 | | | $ | 2,376.0 | | | $ | 2,506.3 | |
| Policy loans | — | | | — | | | 135.3 | | | 135.3 | | | 135.3 | |
| Other invested assets: | | | | | | | | | |
Company-owned life insurance (a) | — | | | 402.1 | | | — | | | 402.1 | | | 402.1 | |
| Cash and cash equivalents: | | | | | | | | | |
| Unrestricted | 1,656.7 | | | — | | | — | | | 1,656.7 | | | 1,656.7 | |
| Held by variable interest entities | 341.0 | | | — | | | — | | | 341.0 | | | 341.0 | |
Total | $ | 1,997.7 | | | $ | 402.1 | | | $ | 2,511.3 | | | $ | 4,911.1 | | | $ | 5,041.4 | |
| | | | | | | | | |
| Liabilities: | | | | | | | | | |
| Policyholder account balances | $ | — | | | $ | — | | | $ | 16,122.6 | | | $ | 16,122.6 | | | $ | 16,122.6 | |
| | | | | | | | | |
| Investment borrowings | — | | | 2,189.8 | | | — | | | 2,189.8 | | | 2,188.8 | |
| Borrowings related to variable interest entities | — | | | 499.0 | | | — | | | 499.0 | | | 497.6 | |
| Notes payable – direct corporate obligations | — | | | 1,837.9 | | | — | | | 1,837.9 | | | 1,833.5 | |
Total | $ | — | | | $ | 4,526.7 | | | $ | 16,122.6 | | | $ | 20,649.3 | | | $ | 20,642.5 | |
_________
(a)Includes $212.6 million of COLI purchased as an investment vehicle to fund our agent deferred compensation plan as further described in the footnote to the consolidated financial statements entitled "Agent Deferred Compensation Plan" and a $189.5 million investment in a COLI policy for key employees that is recorded in our general account assets.
5. LIABILITIES FOR INSURANCE PRODUCTS
The liability for future policy benefits is determined based on numerous assumptions. The most significant assumptions for our life and annuity business are based on our experience and, in cases of limited experience, industry experience. Mortality and lapse/withdrawal rates also take into consideration future expectations in policyholder behavior that may vary from past experience. For our health business, mortality rates, lapse rates, morbidity assumptions and future rate increases are based on our experience and, in cases of limited experience, industry experience. Such assumptions also consider future expectations in policyholder behavior that may vary from past experience.
In 2025 and 2024, we reviewed our actual experience and updated our assumptions for future cash flows. The impact of updating these assumptions is reflected in the "Effect of changes in cash flow assumptions" line items in the tables below.
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
The following tables summarize balances and changes in the liability for future policy benefits for traditional and limited-payment contracts for the year ended December 31, 2025 (dollars in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Supplemental health | | Medicare supplement | | Long-term care | | Traditional life | | Other annuities | | Total |
| Present value of expected net premiums ("PVENP"), beginning of period | | $ | 2,643.9 | | | $ | 3,161.9 | | | $ | 1,102.8 | | | $ | 2,203.9 | | | $ | — | | | $ | 9,112.5 | |
| Effect of changes in discount rate assumptions, beginning of period | | 180.0 | | | 195.2 | | | 25.7 | | | 113.5 | | | — | | | 514.4 | |
| Beginning PVENP at original discount rate | | 2,823.9 | | | 3,357.1 | | | 1,128.5 | | | 2,317.4 | | | — | | | 9,626.9 | |
| Effect of changes in cash flow assumptions | | (63.2) | | | 182.7 | | | 31.0 | | | 2.3 | | | — | | | 152.8 | |
| Effect of actual variances from expected experience | | (68.6) | | | 79.3 | | | (36.7) | | | (125.9) | | | — | | | (151.9) | |
| Adjusted beginning of period PVENP | | 2,692.1 | | | 3,619.1 | | | 1,122.8 | | | 2,193.8 | | | — | | | 9,627.8 | |
| Issuances | | 292.0 | | | 471.8 | | | 183.8 | | | 365.1 | | | 7.5 | | | 1,320.2 | |
| Interest accrual | | 121.7 | | | 147.6 | | | 53.9 | | | 94.4 | | | — | | | 417.6 | |
| Net premiums collected | | (352.5) | | | (465.4) | | | (168.7) | | | (396.7) | | | (7.5) | | | (1,390.8) | |
| Ending PVENP at original discount rate | | 2,753.3 | | | 3,773.1 | | | 1,191.8 | | | 2,256.6 | | | — | | | 9,974.8 | |
| Effect of changes in discount rate assumptions, end of period | | (107.6) | | | (111.5) | | | 4.8 | | | (42.9) | | | — | | | (257.2) | |
| PVENP, end of period | | $ | 2,645.7 | | | $ | 3,661.6 | | | $ | 1,196.6 | | | $ | 2,213.7 | | | $ | — | | | $ | 9,717.6 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Present value of expected future policy benefits ("PVEFPB"), beginning of period | | $ | 5,828.2 | | | $ | 3,375.6 | | | $ | 4,240.1 | | | $ | 4,570.6 | | | $ | 264.5 | | | $ | 18,279.0 | |
| Effect of changes in discount rate assumptions, beginning of period | | 516.6 | | | 211.5 | | | 94.1 | | | 333.3 | | | 16.2 | | | 1,171.7 | |
| Beginning PVEFPB at original discount rate | | 6,344.8 | | | 3,587.1 | | | 4,334.2 | | | 4,903.9 | | | 280.7 | | | 19,450.7 | |
| Effect of changes in cash flow assumptions | | (87.2) | | | 192.0 | | | 25.8 | | | 1.9 | | | (2.8) | | | 129.7 | |
| Effect of actual variances from expected experience | | (79.3) | | | 86.3 | | | (61.6) | | | (153.8) | | | 2.9 | | | (205.5) | |
| Adjusted beginning of period PVEFPB | | 6,178.3 | | | 3,865.4 | | | 4,298.4 | | | 4,752.0 | | | 280.8 | | | 19,374.9 | |
| Issuances | | 295.7 | | | 471.9 | | | 183.9 | | | 373.4 | | | 7.4 | | | 1,332.3 | |
| Interest accrual | | 291.0 | | | 157.7 | | | 228.9 | | | 210.6 | | | 12.8 | | | 901.0 | |
| Benefit payments | | (421.6) | | | (510.4) | | | (291.5) | | | (458.7) | | | (29.9) | | | (1,712.1) | |
| Ending PVEFPB at original discount rate | | 6,343.4 | | | 3,984.6 | | | 4,419.7 | | | 4,877.3 | | | 271.1 | | | 19,896.1 | |
| Effect of changes in discount rate assumptions, end of period | | (359.2) | | | (120.6) | | | (10.5) | | | (199.5) | | | (11.1) | | | (700.9) | |
| PVEFPB, end of period | | $ | 5,984.2 | | | $ | 3,864.0 | | | $ | 4,409.2 | | | $ | 4,677.8 | | | $ | 260.0 | | | $ | 19,195.2 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net liability for future policy benefits | | $ | 3,338.5 | | | $ | 202.4 | | | $ | 3,212.6 | | | $ | 2,464.1 | | | $ | 260.0 | | | $ | 9,477.6 | |
| Flooring impact | | — | | | 1.1 | | | — | | | — | | | — | | | 1.1 | |
| Adjusted net liability for future policy benefits | | 3,338.5 | | | 203.5 | | | 3,212.6 | | | 2,464.1 | | | 260.0 | | | 9,478.7 | |
| Related reinsurance recoverable | | (1.8) | | | — | | | (383.1) | | | (157.8) | | | — | | | (542.7) | |
| Net liability for future policy benefits, net of reinsurance recoverable | | $ | 3,336.7 | | | $ | 203.5 | | | $ | 2,829.5 | | | $ | 2,306.3 | | | $ | 260.0 | | | $ | 8,936.0 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Adjusted net liability for future policy benefits | | | | | | | | | | | $ | 9,478.7 | |
Reserves excluded from rollforward (a) | | | | | | | | | | | 2,324.0 | |
Deferred profit liability | | | | | | | | | | | 70.5 | |
Future loss reserves (b) | | | | | | | | | | | 24.8 | |
Future policy benefits | | | | | | | | | | | $ | 11,898.0 | |
(a) Primarily comprised of blocks of business that are 100% ceded.
(b) In certain instances for interest-sensitive products, the total insurance liabilities for a particular line of business may not be deficient in the aggregate to trigger loss recognition, but the pattern of earnings may be such that profits are expected to be recognized in earlier years followed by losses in later years. In these situations, accounting standards require that an additional liability (the "future loss reserve") be recognized by an amount necessary to sufficiently offset the losses that would be recognized in later years.
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
The following tables summarize balances and changes in the liability for future policy benefits for traditional and limited-payment contracts for the year ended December 31, 2024 (dollars in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Supplemental health | | Medicare supplement | | Long-term care | | Traditional life | | Other annuities | | Total |
| PVENP, beginning of period | | $ | 2,718.2 | | | $ | 3,009.2 | | | $ | 1,055.6 | | | $ | 2,279.6 | | | $ | — | | | $ | 9,062.6 | |
| Effect of changes in discount rate assumptions, beginning of period | | 86.8 | | | 99.1 | | | (7.6) | | | 67.6 | | | — | | | 245.9 | |
| Beginning PVENP at original discount rate | | 2,805.0 | | | 3,108.3 | | | 1,048.0 | | | 2,347.2 | | | — | | | 9,308.5 | |
| Effect of changes in cash flow assumptions | | (28.4) | | | 89.8 | | | 9.6 | | | (20.0) | | | — | | | 51.0 | |
| Effect of actual variances from expected experience | | (3.6) | | | 71.2 | | | (11.3) | | | (76.4) | | | — | | | (20.1) | |
| Adjusted beginning of period PVENP | | 2,773.0 | | | 3,269.3 | | | 1,046.3 | | | 2,250.8 | | | — | | | 9,339.4 | |
| Issuances | | 275.2 | | | 406.9 | | | 190.6 | | | 371.8 | | | 5.1 | | | 1,249.6 | |
| Interest accrual | | 124.0 | | | 133.8 | | | 53.4 | | | 97.9 | | | — | | | 409.1 | |
| Net premiums collected | | (348.3) | | | (452.9) | | | (161.8) | | | (403.1) | | | (5.1) | | | (1,371.2) | |
| Ending PVENP at original discount rate | | 2,823.9 | | | 3,357.1 | | | 1,128.5 | | | 2,317.4 | | | — | | | 9,626.9 | |
| Effect of changes in discount rate assumptions, end of period | | (180.0) | | | (195.2) | | | (25.7) | | | (113.5) | | | — | | | (514.4) | |
| PVENP, end of period | | $ | 2,643.9 | | | $ | 3,161.9 | | | $ | 1,102.8 | | | $ | 2,203.9 | | | $ | — | | | $ | 9,112.5 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| PVEFPB, beginning of period | | $ | 6,023.3 | | | $ | 3,236.6 | | | $ | 4,364.6 | | | $ | 4,694.7 | | | $ | 308.9 | | | $ | 18,628.1 | |
| Effect of changes in discount rate assumptions, beginning of period | | 229.8 | | | 108.3 | | | (132.8) | | | 170.9 | | | 3.0 | | | 379.2 | |
| Beginning PVEFPB at original discount rate | | 6,253.1 | | | 3,344.9 | | | 4,231.8 | | | 4,865.6 | | | 311.9 | | | 19,007.3 | |
| Effect of changes in cash flow assumptions | | (39.2) | | | 99.8 | | | 8.2 | | | (20.7) | | | — | | | 48.1 | |
| Effect of actual variances from expected experience | | (3.8) | | | 77.5 | | | (32.4) | | | (91.8) | | | (17.9) | | | (68.4) | |
| Adjusted beginning of period PVEFPB | | 6,210.1 | | | 3,522.2 | | | 4,207.6 | | | 4,753.1 | | | 294.0 | | | 18,987.0 | |
| Issuances | | 275.9 | | | 403.3 | | | 190.9 | | | 380.8 | | | 4.9 | | | 1,255.8 | |
| Interest accrual | | 291.9 | | | 144.2 | | | 228.7 | | | 213.0 | | | 13.6 | | | 891.4 | |
| Benefit payments | | (433.1) | | | (482.6) | | | (293.0) | | | (443.0) | | | (31.8) | | | (1,683.5) | |
| Ending PVEFPB at original discount rate | | 6,344.8 | | | 3,587.1 | | | 4,334.2 | | | 4,903.9 | | | 280.7 | | | 19,450.7 | |
| Effect of changes in discount rate assumptions, end of period | | (516.6) | | | (211.5) | | | (94.1) | | | (333.3) | | | (16.2) | | | (1,171.7) | |
| PVEFPB, end of period | | $ | 5,828.2 | | | $ | 3,375.6 | | | $ | 4,240.1 | | | $ | 4,570.6 | | | $ | 264.5 | | | $ | 18,279.0 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net liability for future policy benefits | | $ | 3,184.3 | | | $ | 213.7 | | | $ | 3,137.3 | | | $ | 2,366.7 | | | $ | 264.5 | | | $ | 9,166.5 | |
| Flooring impact | | — | | | 0.6 | | | — | | | — | | | — | | | 0.6 | |
| Adjusted net liability for future policy benefits | | 3,184.3 | | | 214.3 | | | 3,137.3 | | | 2,366.7 | | | 264.5 | | | 9,167.1 | |
| Related reinsurance recoverable | | (1.4) | | | — | | | (360.8) | | | (168.1) | | | — | | | (530.3) | |
| Net liability for future policy benefits, net of reinsurance recoverable | | $ | 3,182.9 | | | $ | 214.3 | | | $ | 2,776.5 | | | $ | 2,198.6 | | | $ | 264.5 | | | $ | 8,636.8 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Adjusted net liability for future policy benefits | | | | | | | | | | | $ | 9,167.1 | |
Reserves excluded from rollforward (a) | | | | | | | | | | | 2,443.1 | |
Deferred profit liability | | | | | | | | | | | 67.9 | |
Future loss reserves (b) | | | | | | | | | | | 27.4 | |
Future policy benefits | | | | | | | | | | | $ | 11,705.5 | |
(a) Primarily comprised of blocks of business that are 100% ceded.
(b) In certain instances for interest-sensitive products, the total insurance liabilities for a particular line of business may not be deficient in the aggregate to trigger loss recognition, but the pattern of earnings may be such that profits are expected to be recognized in earlier years followed by losses in later years. In these situations, accounting standards require that an additional liability (the "future loss reserve") be recognized by an amount necessary to sufficiently offset the losses that would be recognized in later years.
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
Many of our fixed indexed annuity products include a GLWB that is considered a MRB. The calculation of MRBs includes market assumptions (interest rate, equity returns, volatility and dividend yields) and nonmarket assumptions (mortality rates, surrender and withdrawal rates, GLWB utilization and spreads). Market assumptions are updated quarterly to reflect current market conditions.
During 2025, we reviewed our non-market assumptions used to calculate the MRBs and determined updates were warranted. The impact of updating these assumptions is reflected in the Effect of changes in future expected policyholder behavior line items in the table below.
The following table presents the balance of and changes in MRBs associated with our fixed indexed annuities (dollars in millions):
| | | | | | | | | | | | | | |
| | 2025 | | 2024 |
| Net liability (asset), beginning of period | | $ | 60.0 | | | $ | 117.1 | |
| Effect of changes in the instrument-specific credit risk, beginning of period | | 1.4 | | | 4.8 | |
| Balance, beginning of period, before effect of changes in the instrument-specific credit risk | | 61.4 | | | 121.9 | |
| Issuances | | 4.2 | | | 4.3 | |
| Interest accrual | | 2.6 | | | 4.3 | |
| | | | |
| | | | |
| Effect of changes in interest rates | | (1.6) | | | (30.2) | |
| Effect of changes in equity markets | | (1.9) | | | 0.8 | |
| Effect of changes in equity index volatility | | 1.3 | | | 1.0 | |
| Actual policyholder behavior different from expected behavior | | (1.2) | | | (0.4) | |
| Effect of changes in future expected policyholder behavior - other | | (13.3) | | | (36.2) | |
| Effect of changes in future expected policyholder behavior - risk margin | | 0.1 | | | 0.2 | |
| Effect of changes in assumptions | | (2.6) | | | (4.3) | |
| Net liability (asset), end of period, before effect of changes in the instrument-specific credit risk | | 49.0 | | | 61.4 | |
| Effect of changes in the instrument-specific credit risk, end of period | | (0.9) | | | (1.4) | |
| Net liability (asset), end of period | | 48.1 | | | 60.0 | |
| Reinsurance recoverable, end of period | | — | | | — | |
| Net liability (asset), end of period, net of reinsurance | | $ | 48.1 | | | $ | 60.0 | |
| | | | |
| Balance reported as an asset | | $ | — | | | $ | — | |
| Balance reported as a liability | | 48.1 | | | 60.0 | |
| Net liability (asset) | | $ | 48.1 | | | $ | 60.0 | |
| | | | |
| Net amount at risk | | $ | 16.6 | | | $ | 21.7 | |
| Weighted average attained age of contract holders | | 70 | | 69 |
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
The following table summarizes the amount of revenue and interest related to traditional and limited-payment contracts recognized in the consolidated statement of operations (dollars in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Gross premiums (a) | | Interest accretion (b) |
| | 2025 | | 2024 | | 2023 | | 2025 | | 2024 | | 2023 |
Other annuities | | $ | 8.9 | | | $ | 5.9 | | | $ | 8.1 | | | $ | 12.8 | | | $ | 13.6 | | | $ | 14.8 | |
| Supplemental health | | 743.9 | | | 724.8 | | | 705.4 | | | 169.3 | | | 167.9 | | | 167.6 | |
| Medicare supplement | | 625.2 | | | 618.8 | | | 608.1 | | | 10.1 | | | 10.4 | | | 10.6 | |
| Long-term care | | 357.9 | | | 344.1 | | | 325.5 | | | 175.0 | | | 175.3 | | | 174.0 | |
| Traditional life | | 736.0 | | | 724.2 | | | 708.7 | | | 116.2 | | | 115.1 | | | 112.7 | |
| Total | | $ | 2,471.9 | | | $ | 2,417.7 | | | $ | 2,355.8 | | | $ | 483.4 | | | $ | 482.3 | | | $ | 479.7 | |
_____________________
(a) Such amounts are included in insurance policy income in the consolidated statement of operations.
(b) Such amounts are included in insurance policy benefits in the consolidated statement of operations.
The following table provides the amount of undiscounted and discounted expected gross premiums and expected future benefits and expenses for traditional and limited-payment contracts (dollars in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2025 | | 2024 |
| | Undiscounted | | Discounted (a) | | Undiscounted | | Discounted (a) |
Other annuities | | | | | | | | |
| Expected future gross premiums | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| Expected future benefits and expenses | | 308.5 | | | 260.0 | | | 328.4 | | | 264.5 | |
| Supplemental health | | | | | | | | |
| Expected future gross premiums | | 9,128.4 | | | 5,673.7 | | | 8,994.0 | | | 5,479.1 | |
| Expected future benefits and expenses | | 10,801.1 | | | 5,984.2 | | | 10,942.1 | | | 5,828.2 | |
| Medicare supplement | | | | | | | | |
| Expected future gross premiums | | 7,086.2 | | | 4,827.0 | | | 6,248.7 | | | 4,248.6 | |
| Expected future benefits and expenses | | 5,688.2 | | | 3,864.0 | | | 4,993.9 | | | 3,375.6 | |
| Long-term care | | | | | | | | |
| Expected future gross premiums | | 3,705.7 | | | 2,587.8 | | | 3,508.4 | | | 2,419.8 | |
| Expected future benefits and expenses | | 8,165.6 | | | 4,409.2 | | | 7,930.4 | | | 4,240.1 | |
| Traditional life | | | | | | | | |
| Expected future gross premiums | | 5,728.7 | | | 4,162.6 | | | 5,639.0 | | | 4,006.3 | |
| Expected future benefits and expenses | | 7,637.1 | | | 4,677.8 | | | 7,632.9 | | | 4,570.6 | |
_____________________
(a) Calculated at the discount rates at period end.
Loss expense as a result of net premium ratio capping was not material in each of the three years ended December 31, 2025.
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
The following table provides the weighted average durations (under locked-in discount rates) of the liability for future policy benefits in years:
| | | | | | | | | | | | | | |
| | 2025 | | 2024 |
Other annuities | | 9.5 | | 9.6 |
| Supplemental health | | 10.8 | | 11.2 |
| Medicare supplement | | 5.6 | | 6.3 |
| Long-term care | | 10.8 | | 10.7 |
| Traditional life | | 10.0 | | 10.2 |
The following table provides the weighted average interest rates for the liability for future policy benefits:
| | | | | | | | | | | | | | |
| | 2025 | | 2024 |
Other annuities | | | | |
| Interest accretion rate | | 4.86 | % | | 4.82 | % |
| Current discount rate | | 5.41 | | | 5.63 | |
| Supplemental health | | | | |
| Interest accretion rate | | 4.95 | | | 4.98 | |
| Current discount rate | | 5.34 | | | 5.62 | |
| Medicare supplement | | | | |
| Interest accretion rate | | 4.14 | | | 4.30 | |
| Current discount rate | | 5.11 | | | 5.43 | |
| Long-term care | | | | |
| Interest accretion rate | | 5.63 | | | 5.66 | |
| Current discount rate | | 5.44 | | | 5.68 | |
| Traditional life | | | | |
| Interest accretion rate | | 4.81 | | | 4.78 | |
| Current discount rate | | 5.39 | | | 5.64 | |
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
The following tables present the balances of and changes in the liability for policyholder account balances (dollars in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2025 |
| | Fixed indexed annuities | | Fixed interest annuities | | Other annuities | | Interest-sensitive life (a) | | Funding agreements | | Other (b) | | Total |
Policyholder account values, beginning of period excluding contracts 100% ceded | | $ | 10,766.3 | | | $ | 1,646.6 | | | $ | 107.4 | | | $ | 1,321.8 | | | $ | 3,021.2 | | | $ | 359.1 | | | $ | 17,222.4 | |
| Issuances (funds collected from new business) | | 1,710.7 | | | 191.7 | | | — | | | 44.4 | | | 749.4 | | | — | | | 2,696.2 | |
| Premiums received (premiums collected from inforce business) | | 28.9 | | | 2.2 | | | 30.1 | | | 219.5 | | | — | | | 265.6 | | | 546.3 | |
| Policy charges | | (27.3) | | | (1.8) | | | — | | | (201.4) | | | — | | | — | | | (230.5) | |
| Surrenders and withdrawals | | (919.8) | | | (155.3) | | | (29.8) | | | (37.9) | | | (511.2) | | | (278.4) | | | (1,932.4) | |
| Benefit payments | | (290.3) | | | (96.9) | | | (5.4) | | | (25.4) | | | — | | | — | | | (418.0) | |
| Interest credited | | 301.4 | | | 50.9 | | | 2.6 | | | 62.2 | | | 114.2 | | | 2.4 | | | 533.7 | |
| Other | | 63.1 | | | 0.1 | | | (0.4) | | | — | | | — | | | — | | | 62.8 | |
Policyholder account values, ending of period excluding contracts 100% ceded | | 11,633.0 | | | 1,637.5 | | | 104.5 | | | 1,383.2 | | | 3,373.6 | | | 348.7 | | | 18,480.5 | |
| Policyholder account values, end of period for contracts 100% ceded | | 112.3 | | | 494.2 | | | 29.6 | | | 92.7 | | | — | | | 9.7 | | | 738.5 | |
Amount of reserves above (below) policyholder account values (c) | | (325.9) | | | — | | | — | | | 19.5 | | | — | | | — | | | (306.4) | |
Policyholder account balance, end of period | | $ | 11,419.4 | | | $ | 2,131.7 | | | $ | 134.1 | | | $ | 1,495.4 | | | $ | 3,373.6 | | | $ | 358.4 | | | $ | 18,912.6 | |
| | | | | | | | | | | | | | |
| Balance, end of period, reinsurance ceded | | (107.8) | | | (494.2) | | | (29.6) | | | (110.7) | | | — | | | (22.5) | | | (764.8) | |
| Balance, end of period, net of reinsurance | | $ | 11,311.6 | | | $ | 1,637.5 | | | $ | 104.5 | | | $ | 1,384.7 | | | $ | 3,373.6 | | | $ | 335.9 | | | $ | 18,147.8 | |
| | | | | | | | | | | | | | |
| Weighted average crediting rate (d) | | 2.2 | % | | 3.0 | % | | 2.7 | % | | 4.6 | % | | 4.2 | % | | 0.8 | % | | |
| Cash surrender value, net of reinsurance | | $ | 10,880.0 | | | $ | 1,589.6 | | | $ | 104.5 | | | $ | 1,135.5 | | | $ | — | | | $ | 335.9 | | | |
_________________
(a) The amount of insurance policy benefit expense resulting from death claims that we would incur in excess of the policyholder account balance (net amount at risk) for interest-sensitive life contracts was $30,902.4 million at the balance sheet date.
(b) Predominantly consists of retained asset accounts associated with our traditional life and supplemental health blocks.
(c) Such amount represents the difference between: (i) the total insurance liabilities for our fixed indexed products (including the host contract and the related embedded derivative); and (ii) the policyholder account balances for these products. The accounting requirement to bifurcate the embedded derivative and value it at the current estimated fair value results in this amount.
(d) Excludes any impact from the amount of reserves above (below) policyholder account balances.
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2024 |
| | Fixed indexed annuities | | Fixed interest annuities | | Other annuities | | Interest-sensitive life (a) | | Funding agreements | | Other (b) | | Total |
Policyholder account values, beginning of period excluding contracts 100% ceded | | $ | 9,999.2 | | | $ | 1,636.4 | | | $ | 113.1 | | | $ | 1,255.2 | | | $ | 1,411.0 | | | $ | 381.0 | | | $ | 14,795.9 | |
| Issuances (funds collected from new business) | | 1,541.6 | | | 236.4 | | | — | | | 40.4 | | | 1,599.2 | | | — | | | 3,417.6 | |
| Premiums received (premiums collected from inforce business) | | 2.6 | | | 2.9 | | | 30.8 | | | 211.8 | | | — | | | 274.6 | | | 522.7 | |
| Policy charges | | (29.7) | | | (1.4) | | | — | | | (196.0) | | | — | | | — | | | (227.1) | |
| Surrenders and withdrawals | | (927.6) | | | (171.5) | | | (32.8) | | | (35.0) | | | (50.6) | | | (299.1) | | | (1,516.6) | |
| Benefit payments | | (274.4) | | | (103.8) | | | (5.8) | | | (23.7) | | | — | | | — | | | (407.7) | |
| Interest credited | | 399.8 | | | 48.0 | | | 2.2 | | | 69.5 | | | 61.6 | | | 2.6 | | | 583.7 | |
| Other | | 54.8 | | | (0.4) | | | (0.1) | | | (0.4) | | | — | | | — | | | 53.9 | |
Policyholder account values, ending of period excluding contracts 100% ceded | | 10,766.3 | | | 1,646.6 | | | 107.4 | | | 1,321.8 | | | 3,021.2 | | | 359.1 | | | 17,222.4 | |
| Policyholder account values, end of period for contracts 100% ceded | | 124.0 | | | 540.4 | | | 28.2 | | | 98.2 | | | — | | | 10.1 | | | 800.9 | |
Amount of reserves above (below) policyholder account values (c) | | (446.1) | | | — | | | — | | | 17.0 | | | — | | | — | | | (429.1) | |
Policyholder account balance, end of period | | $ | 10,444.2 | | | $ | 2,187.0 | | | $ | 135.6 | | | $ | 1,437.0 | | | $ | 3,021.2 | | | $ | 369.2 | | | $ | 17,594.2 | |
| | | | | | | | | | | | | | |
| Balance, end of period, reinsurance ceded | | (116.7) | | | (540.4) | | | (28.2) | | | (116.6) | | | — | | | (23.5) | | | (825.4) | |
| Balance, end of period, net of reinsurance | | $ | 10,327.5 | | | $ | 1,646.6 | | | $ | 107.4 | | | $ | 1,320.4 | | | $ | 3,021.2 | | | $ | 345.7 | | | $ | 16,768.8 | |
| | | | | | | | | | | | | | |
| Weighted average crediting rate (d) | | 2.1 | % | | 2.9 | % | | 2.6 | % | | 5.3 | % | | 3.8 | % | | 0.8 | % | | |
| Cash surrender value, net of reinsurance | | $ | 10,056.2 | | | $ | 1,607.0 | | | $ | 107.4 | | | $ | 1,074.8 | | | $ | — | | | $ | 345.7 | | | |
_________________
(a) The amount of insurance policy benefit expense resulting from death claims that we would incur in excess of the policyholder account balance (net amount at risk) for interest-sensitive life contracts was $29,490.2 million at the balance sheet date.
(b) Predominantly consists of retained asset accounts associated with our traditional life and supplemental health blocks.
(c) Such amount represents the difference between: (i) the total insurance liabilities for our fixed indexed products (including the host contract and the related embedded derivative); and (ii) the policyholder account balances for these products. The accounting requirement to bifurcate the embedded derivative and value it at the current estimated fair value results in this amount.
(d) Excludes any impact from the amount of reserves above (below) policyholder account balances.
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
The following tables present the policyholder account values by range of guaranteed minimum crediting rates and the related range of difference, in basis points, between rates being credited to policyholders and the respective guaranteed minimums (dollars in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2025 |
| Range of guaranteed minimum crediting rates (a) | | At guaranteed minimum | | 1-50 basis points above | | 51-150 basis points above | | Greater than 150 basis points above | | Total |
| Fixed interest annuities | | | | | | | | | | |
0.00%-2.99% | | $ | 81.4 | | | $ | 184.5 | | | $ | 356.7 | | | $ | 78.8 | | | $ | 701.4 | |
3.00%-4.99% | | 1,222.2 | | | 99.8 | | | 28.4 | | | 2.7 | | | 1,353.1 | |
5.00% and greater | | 77.2 | | | — | | | — | | | — | | | 77.2 | |
| Subtotal | | 1,380.8 | | | 284.3 | | | 385.1 | | | 81.5 | | | 2,131.7 | |
| Other annuities | | | | | | | | | | |
0.00%-2.99% | | 22.4 | | | 20.0 | | | — | | | — | | | 42.4 | |
3.00%-4.99% | | 58.6 | | | — | | | — | | | — | | | 58.6 | |
5.00% and greater | | 33.1 | | | — | | | — | | | — | | | 33.1 | |
| Subtotal | | 114.1 | | | 20.0 | | | — | | | — | | | 134.1 | |
| Interest-sensitive life | | | | | | | | | | |
0.00%-2.99% | | 18.6 | | | — | | | 0.4 | | | 765.0 | | | 784.0 | |
3.00%-4.99% | | 376.0 | | | 93.2 | | | 199.9 | | | 2.6 | | | 671.7 | |
5.00% and greater | | 20.0 | | | 0.2 | | | — | | | — | | | 20.2 | |
| Subtotal | | 414.6 | | | 93.4 | | | 200.3 | | | 767.6 | | | 1,475.9 | |
| Other | | | | | | | | | | |
0.00%-2.99% | | 15.9 | | | 321.9 | | | — | | | — | | | 337.8 | |
3.00%-4.99% | | 20.3 | | | — | | | — | | | — | | | 20.3 | |
5.00% and greater | | 0.3 | | | — | | | — | | | — | | | 0.3 | |
| Subtotal | | 36.5 | | | 321.9 | | | — | | | — | | | 358.4 | |
| Total | | | | | | | | | | |
0.00%-2.99% | | 138.3 | | | 526.4 | | | 357.1 | | | 843.8 | | | 1,865.6 | |
3.00%-4.99% | | 1,677.1 | | | 193.0 | | | 228.3 | | | 5.3 | | | 2,103.7 | |
5.00% and greater | | 130.6 | | | 0.2 | | | — | | | — | | | 130.8 | |
Total policyholder account values, excluding fixed indexed annuities | | $ | 1,946.0 | | | $ | 719.6 | | | $ | 585.4 | | | $ | 849.1 | | | $ | 4,100.1 | |
Fixed indexed annuity account values | | | | | | | | | | 11,745.3 | |
| Funding agreements | | | | | | | | | | 3,373.6 | |
Total policyholder account values | | | | | | | | | | 19,219.0 | |
Amount of reserves above (below) policyholder account values | | | | | | | | | | (306.4) | |
Total policyholder account balances | | | | | | | | | | $ | 18,912.6 | |
____________________
(a) Excludes the account values related to: (i) fixed indexed annuity contracts that include an index fund component with index credits tied to the performance of the index. The minimum guarantee is determined by a participation or cap rate
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
linked to an index, such as the Standard & Poor's 500 index, rather than a predetermined rate of returns; and (ii) funding agreements which have a fixed crediting rate.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2024 |
| Range of guaranteed minimum crediting rates (a) | | At guaranteed minimum | | 1-50 basis points above | | 51-150 basis points above | | Greater than 150 basis points above | | Total |
| Fixed interest annuities | | | | | | | | | | |
0.00%-2.99% | | $ | 92.5 | | | $ | 194.7 | | | $ | 233.9 | | | $ | 73.5 | | | $ | 594.6 | |
3.00%-4.99% | | 1,256.3 | | | 48.3 | | | 176.7 | | | 29.8 | | | 1,511.1 | |
5.00% and greater | | 81.3 | | | — | | | — | | | — | | | 81.3 | |
| Subtotal | | 1,430.1 | | | 243.0 | | | 410.6 | | | 103.3 | | | 2,187.0 | |
| Other annuities | | | | | | | | | | |
0.00%-2.99% | | 27.3 | | | 22.7 | | | — | | | — | | | 50.0 | |
3.00%-4.99% | | 47.9 | | | — | | | — | | | — | | | 47.9 | |
5.00% and greater | | 37.7 | | | — | | | — | | | — | | | 37.7 | |
| Subtotal | | 112.9 | | | 22.7 | | | — | | | — | | | 135.6 | |
| Interest-sensitive life | | | | | | | | | | |
0.00%-2.99% | | 15.2 | | | — | | | 0.4 | | | 718.7 | | | 734.3 | |
3.00%-4.99% | | 370.6 | | | 113.0 | | | 179.6 | | | 1.4 | | | 664.6 | |
5.00% and greater | | 20.6 | | | 0.5 | | | — | | | — | | | 21.1 | |
| Subtotal | | 406.4 | | | 113.5 | | | 180.0 | | | 720.1 | | | 1,420.0 | |
| Other | | | | | | | | | | |
0.00%-2.99% | | 16.7 | | | 330.8 | | | — | | | — | | | 347.5 | |
3.00%-4.99% | | 21.5 | | | — | | | — | | | — | | | 21.5 | |
5.00% and greater | | 0.2 | | | — | | | — | | | — | | | 0.2 | |
| Subtotal | | 38.4 | | | 330.8 | | | — | | | — | | | 369.2 | |
| Total | | | | | | | | | | |
0.00%-2.99% | | 151.7 | | | 548.2 | | | 234.3 | | | 792.2 | | | 1,726.4 | |
3.00%-4.99% | | 1,696.3 | | | 161.3 | | | 356.3 | | | 31.2 | | | 2,245.1 | |
5.00% and greater | | 139.8 | | | 0.5 | | | — | | | — | | | 140.3 | |
Total policyholder account values, excluding fixed indexed annuities | | $ | 1,987.8 | | | $ | 710.0 | | | $ | 590.6 | | | $ | 823.4 | | | 4,111.8 | |
Fixed indexed annuity account values | | | | | | | | | | 10,890.3 | |
| Funding agreements | | | | | | | | | | 3,021.2 | |
Total policyholder account values | | | | | | | | | | 18,023.3 | |
Amount of reserves above (below) policyholder account values | | | | | | | | | | (429.1) | |
Total policyholder account balances | | | | | | | | | | $ | 17,594.2 | |
____________________
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
(a) Excludes the account values related to: (i) fixed indexed annuity contracts that include an index fund component with index credits tied to the performance of the index. The minimum guarantee is determined by a participation or cap rate linked to an index, such as the Standard & Poor's 500 index, rather than a predetermined rate of returns; and (ii) funding agreements which have a fixed crediting rate.
6. INCOME TAXES
The components of income tax expense were as follows (dollars in millions):
| | | | | | | | | | | | | | | | | |
| | 2025 | | 2024 | | 2023 |
Income from continuing operations | $ | 293.4 | | | $ | 539.9 | | | $ | 356.8 | |
| | | | | |
Current tax expense (benefit): | | | | | |
U.S. | 53.4 | | | 23.3 | | | 53.1 | |
State and local | 10.3 | | | 3.1 | | | 15.2 | |
Total current tax expense (benefit) | $ | 63.7 | | | $ | 26.4 | | | $ | 68.3 | |
| | | | | |
Deferred tax expense (benefit): | | | | | |
U.S. | 1.1 | | | 82.9 | | | 14.9 | |
State and local | (0.7) | | | 9.8 | | | (2.9) | |
Total deferred tax expense (benefit) | 0.4 | | | 92.7 | | | 12.0 | |
| Total income tax expense | $ | 64.1 | | | $ | 119.1 | | | $ | 80.3 | |
A reconciliation of the U.S. statutory corporate tax rate to the effective rate reflected in the consolidated statement of operations is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2025 | | December 31, 2024 | | December 31, 2023 |
| | Amount | Percent | | Amount | Percent | | Amount | Percent |
U.S. federal statutory tax rate | $ | 61.6 | | 21.0 | % | | $ | 113.4 | | 21.0 | % | | $ | 74.9 | | 21.0 | % |
State and local income taxes, net of federal income tax effect (a) | 7.1 | | 2.4 | | | 12.9 | | 2.4 | | | 8.0 | | 2.2 | |
Tax credits | (2.1) | | (0.7) | | | (0.7) | | (0.1) | | | (1.2) | | (0.3) | |
Nontaxable or nondeductible items: | | | | | | | | |
Limitations on deduction for executive compensation (IRC §162 (m)) | 4.4 | | 1.5 | | | 3.5 | | 0.6 | | | 4.4 | | 1.2 | |
Tax benefits related to share-based compensation ("windfall benefits") | (3.7) | | (1.3) | | | (0.8) | | (0.1) | | | (1.2) | | (0.3) | |
| Tax-exempt interest and dividends received deduction | (5.7) | | (1.9) | | | (5.8) | | (1.1) | | | (3.2) | | (0.9) | |
| Tax-exempt income from company-owned life insurance | (5.5) | | (1.9) | | | (2.4) | | (0.4) | | | (2.8) | | (0.8) | |
Goodwill impairment | 6.4 | | 2.2 | | | — | | — | | | — | | — | |
All other, net (under 5%) | 1.6 | | 0.6 | | | (1.0) | | (0.3) | | | 1.4 | | 0.4 | |
| Effective tax rate | $ | 64.1 | | 21.9 | % | | $ | 119.1 | | 22.0 | % | | $ | 80.3 | | 22.5 | % |
____________________
(a) In 2025, state taxes in Illinois and Florida made up the majority (greater than 50 percent) of the tax effect in this category. In 2024, state taxes in Illinois and Indiana made up the majority of the tax effect in this category. In 2023, state taxes in Illinois, Florida, New York, and Pennsylvania made up the majority of the tax effect in this category.
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
The components of income taxes paid, net of refunds, were as follows (dollars in millions):
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2025 | | 2024 | | 2023 |
Income taxes paid, net of refunds: | | | | | |
U.S. | $ | 32.7 | | | $ | 44.3 | | | $ | 44.8 | |
State and local | 5.0 | | | 10.8 | | | 14.3 | |
Total income taxes paid, net of refunds | $ | 37.7 | | | $ | 55.1 | | | $ | 59.1 | |
Income taxes paid (net of refunds) exceeded 5 percent of total income taxes paid (net of refunds) in the following jurisdictions (dollars in millions):
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2025 | | 2024 | | 2023 |
Illinois | (a) | | $ | 3.4 | | | (a) |
Florida | (a) | | 3.0 | | | 4.3 | |
_____________
(a) Jurisdiction below the threshold for the period presented.
The components of the Company's income tax assets and liabilities are summarized below (dollars in millions):
| | | | | | | | | | | |
| 2025 | | 2024 |
| Deferred tax assets: | | | |
| Net federal operating loss carryforwards | $ | 205.0 | | | $ | 72.2 | |
| Net state operating loss carryforwards | 38.0 | | | 4.4 | |
| | | |
| Capital loss carryforwards | 11.3 | | | 1.2 | |
| | | |
| Insurance liabilities | 362.3 | | | 325.5 | |
| Indirect costs allocable to self-constructed real estate assets | 0.9 | | | 205.1 | |
| Accumulated other comprehensive loss | 310.3 | | | 385.1 | |
| Other | 19.2 | | | 18.2 | |
| Gross deferred tax assets | 947.0 | | | 1,011.7 | |
| Deferred tax liabilities: | | | |
| Investments | (47.9) | | | (40.8) | |
| Present value of future profits and deferred acquisition costs | (187.4) | | | (184.3) | |
| | | |
| Gross deferred tax liabilities | (235.3) | | | (225.1) | |
| Net deferred tax assets | 711.7 | | | 786.6 | |
| Current income taxes prepaid (accrued) | 1.6 | | | 27.5 | |
| Income tax assets, net | $ | 713.3 | | | $ | 814.1 | |
Effective January 1, 2024, the Company elected to change its tax method of accounting for indirect costs allocable to
self-constructed real estate assets. The change in accounting method results in a tax deduction of certain indirect costs
previously capitalized under the Company's prior method of accounting. In the second quarter of 2024, the Internal Revenue Service (the "IRS") revised the list of tax method accounting changes that require approval from the IRS to include tax method accounting changes related to indirect costs allocable to self-constructed real estate assets. Previously, only a taxpayer-initiated election was necessary and formal IRS approval was not required. The Company requested approval for its tax method change in June 2024. At December 31, 2024, the Company had not yet received approval from the IRS and was therefore required to account for the existing tax assets under the prior tax method of accounting. In March 2025, the Company executed a consent agreement with the IRS that provides formal approval for the tax method
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
change. As a result, the Company recharacterized the remaining $797.6 million of capitalized indirect costs under the prior accounting method to a NOL with no expiration date.
We evaluate the need to establish a valuation allowance for our deferred income tax assets on an ongoing basis using a deferred tax valuation model. Our model is adjusted to reflect changes in our projections of future taxable income. Our estimates of future taxable income are based on evidence we consider to be objectively verifiable. At December 31, 2025, our projection of future taxable income for purposes of determining the valuation allowance is based on our estimates of such future taxable income through the date our NOLs expire. Such estimates are subject to numerous risks and uncertainties and the extent to which actual impacts differ from the assumptions used in our deferred tax valuation model. Based on our assessment, we have concluded that it is more likely than not that our net deferred tax assets of $711.7 million will be realized through future taxable earnings.
Recovery of our deferred tax asset is dependent on achieving the level of future taxable income projected in our deferred tax valuation model and failure to do so could result in the recognition of a valuation allowance in a future period. The recognition of a valuation allowance would increase income tax expense and reduce shareholders' equity.
Section 382 of the Code imposes limitations on a corporation's ability to use its NOLs when the company undergoes a 50 percent ownership change over a three-year period. Future transactions and the timing of such transactions could cause an ownership change for Section 382 income tax purposes. Such transactions may include, but are not limited to, additional repurchases under our securities repurchase program, issuances of common stock and acquisitions or sales of shares of CNO stock by certain holders of our shares, including persons who have held, currently hold or may accumulate in the future five percent or more of our outstanding common stock for their own account. Many of these transactions are beyond our control. If an ownership change were to occur for purposes of Section 382, we would be required to calculate an annual restriction on the use of our NOLs to offset future taxable income. The annual restriction would be calculated based upon the value of CNO's equity at the time of such ownership change, multiplied by a federal long-term tax-exempt rate (3.58 percent at December 31, 2025), and the annual restriction could limit our ability to use a substantial portion of our NOLs to offset future taxable income or may defer the utilization of such NOLs. We regularly monitor ownership change (as calculated for purposes of Section 382) and, as of December 31, 2025, we were below the 50 percent ownership change level that could limit our ability to utilize our NOLs.
In 2009, the Company's Board of Directors adopted a Section 382 Rights Agreement designed to protect shareholder value by preserving the value of our tax assets primarily associated with tax NOLs under Section 382. The Section 382 Rights Agreement was adopted to reduce the likelihood of an ownership change occurring by deterring the acquisition of stock that would create "5 percent shareholders" as defined in Section 382. The Section 382 Rights Agreement has been amended five times, most recently effective November 13, 2023 (the "Fifth Amended and Restated Section 382 Rights Agreement"). The Fifth Amended and Restated Section 382 Rights Agreement extended the expiration date of the Section 382 Rights Agreement to November 13, 2026, updated the purchase price of the rights described below and provided for a new series of preferred stock relating to the rights that is substantially identical to the prior series of preferred stock. The Company's shareholders approved the Fifth Amended and Restated Section 382 Rights Agreement at the Company's 2024 annual meeting.
Under the Section 382 Rights Agreement, one right was distributed for each share of our common stock outstanding as of the close of business on January 30, 2009 and for each share issued after that date. Pursuant to the Fifth Amended and Restated Section 382 Rights Agreement, if any person or group (subject to certain exemptions) becomes an owner of more than 4.99 percent of the Company's outstanding common stock (or any other interest in the Company that would be treated as "stock" under applicable Section 382 regulations) without the approval of the Board of Directors, there would be a triggering event causing significant dilution in the voting power and economic ownership of that person or group. Shareholders who held more than 4.99 percent of the Company's outstanding common stock as of November 13, 2023 will trigger a dilutive event only if they acquire additional shares exceeding one percent of our outstanding shares without prior approval from the Board of Directors.
In 2010, our shareholders approved an amendment to CNO's certificate of incorporation designed to prevent certain transfers of common stock which could otherwise adversely affect our ability to use our NOLs (the "Original Section 382 Charter Amendment"). Subject to the provisions set forth in the Original Section 382 Charter Amendment, the transfer
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
restrictions generally will restrict any direct or indirect transfer (such as transfers of our common stock that results from the transfer of interests in other entities that own our stock) if: (i) the transferor is a person or public group (as defined in the regulations under Section 382) who directly or indirectly owns or is deemed to own 4.99% or more of our common stock; (ii) the effect of the transfer would be to increase the direct or indirect ownership of our common stock by any person or public group from less than 4.99% to 4.99% or more of our common stock; or (iii) the effect of the transfer would be to increase the percentage of our common stock owned directly or indirectly by a person or public group owning or deemed to own 4.99% or more of our common stock. The Original Section 382 Charter Amendment was amended and extended in 2013, 2016, 2019, 2022, and 2025 (the "2025 Section 382 Charter Amendment"). The expiration date for the 2025 Section 382 Charter Amendment is July 31, 2028.
We have $976.4 million of federal NOLs as of December 31, 2025, as summarized below (dollars in millions):
| | | | | | | | |
| | Net operating loss |
| Year of expiration | | carryforwards |
| | |
| | |
| | |
| | |
| | |
| | |
2032 through 2035 | | $ | 16.5 | |
| No expiration date | | 959.9 | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
Total federal NOLs | | $ | 976.4 | |
| | |
| | |
| | |
| | |
Our non-life NOLs with expiration dates can be used to offset 35 percent of life insurance company taxable income and 100 percent of non-life company taxable income until all non-life NOLs are utilized or expire. Our non-life NOLs with no expiration date of $832.4 million can be used to offset 35 percent of life insurance company taxable income and 80 percent of non-life company taxable income. Our life NOLs with no expiration date of $127.5 million can be used to offset 80% of life company taxable income, subject to certain limitations in the Code.
We also had deferred tax assets related to NOLs for state income taxes of $38.0 million at December 31, 2025, primarily resulting from the tax method change discussed previously, and $4.4 million at December 31, 2024. The related state NOLs are available to offset future state taxable income in certain states and are expected to be fully utilized prior to expiration.
The Company had a capital loss carryforward of $53.7 million and $5.6 million as of December 31, 2025 and 2024, respectively. Capital loss carryforwards can be carried forward for up to five years to offset future capital gains. We expect this carryforward to be fully utilized prior to the expiration date in 2030.
The IRS is conducting an examination of our 2016 through 2018 tax returns. The federal statute of limitations remains open with respect to tax years 2016 through 2025. The Company's various state income tax returns are generally open for tax years based on individual state statutes of limitation. Generally, for tax years which generate NOLs, capital losses or tax credit carryforwards, the statute remains open until the expiration of the statute of limitations for the tax year in which such carryforwards are utilized. The outcome of tax audits cannot be predicted with certainty. If the Company's tax audits are not resolved in a manner consistent with management's expectations, the Company may be required to adjust its provision for income taxes.
On July 4, 2025, the One Big Beautiful Bill Act of 2025 was enacted in the United States, which among other things, provides permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. These changes primarily impacted the timing of our tax deductions and did not have a material impact on our financial position or results of operations.
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
7. NOTES PAYABLE - DIRECT CORPORATE OBLIGATIONS
The following notes payable were direct corporate obligations of the Company as of December 31, 2025 and 2024 (dollars in millions):
| | | | | | | | | | | |
| 2025 | | 2024 |
6.450% Senior Notes due June 2034 | $ | 700.0 | | | $ | 700.0 | |
5.125% Subordinated Debentures due 2060 | 150.0 | | | 150.0 | |
| | | |
5.250% Senior Notes due May 2029 | 500.0 | | | 500.0 | |
5.250% Senior Notes due May 2025 | — | | | 500.0 | |
Unamortized discount on 6.450% Senior Notes due June 2034 | (2.0) | | | (2.2) | |
| Unamortized debt issuance costs | (12.4) | | | (14.3) | |
| Direct corporate obligations | $ | 1,335.6 | | | $ | 1,833.5 | |
2034 Notes
On May 13, 2024, the Company issued $700.0 million of 6.450% Senior Notes due 2034 (the "2034 Notes"). The 2034 Notes were issued under the Indenture, dated as of June 12, 2019 (the "2019 Base Indenture") as supplemented by the Third Supplemental Indenture, dated as of May 13, 2024 (the "2024 Supplemental Indenture" and, together with the Base Indenture, the "2024 Indenture"), each between the Company and U.S. Bank Trust Company, National Association (as successor in interest to U.S. Bank National Association), as trustee (the "Trustee"). The 2034 Notes mature on June 15, 2034, unless earlier repurchased by the Company, and interest on the 2034 Notes is payable at 6.450% per annum. Interest on the 2034 Notes is paid semi-annually on June 15 and December 15 of each year, beginning on December 15, 2024. The Company used a portion of the net proceeds from the issuance of the 2034 Notes for the repayment of our 2025 Notes.
The 2034 Notes are senior unsecured obligations and rank equally with the Company's other senior unsecured and unsubordinated debt from time to time outstanding, including obligations under our Revolving Credit Agreement (as defined below). The 2034 Notes are effectively subordinated to all of the Company's future indebtedness that is secured, to the extent of the value of the assets securing such indebtedness. The 2034 Notes are structurally subordinated to all existing and future indebtedness and other liabilities of the Company's subsidiaries.
The 2024 Indenture contains customary terms and covenants, including that upon certain events of default occurring and continuing, either the Trustee or the holders of not less than 25% in aggregate principal amount of the 2034 Notes then outstanding may declare the entire principal amount of all the 2034 Notes, and the interest accrued on such 2034 Notes, if any, to be immediately due and payable. In the case of certain events of bankruptcy, insolvency or reorganization relating to the Company, the principal amount of the securities together with any accrued and unpaid interest thereon will automatically be and become immediately due and payable.
Prior to March 15, 2034 (the date that is three months prior to the maturity date of the 2034 Notes) (the "Par Call Date"), the 2034 Notes are redeemable at a redemption price equal to the greater of (i) 100% of the principal amount of the 2034 Notes to be redeemed, or (ii)(a) the sum of the present values of the remaining scheduled payments of principal and interest thereon discounted to the redemption date (assuming the 2034 Notes matured on the Par Call Date) on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate (as defined in the 2024 Indenture) plus 30 basis points less (b) interest accrued to the date of redemption, plus, in either case, accrued and unpaid interest thereon to, but excluding, the redemption date. On and after the Par Call Date, the 2034 Notes are redeemable at a redemption price equal to 100% of the principal amount of the 2034 Notes to be redeemed, plus accrued and unpaid interest thereon to, but excluding, the date of redemption.
Subordinated Debentures due 2060
In November 2020, the Company issued $150.0 million of 5.125% Subordinated Debentures due 2060 (the "Debentures"). The terms of the Debentures are set forth in the Indenture, dated as of June 12, 2019 (the "2019 Base
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
Indenture") as supplemented by the Second Supplemental Indenture, dated as of November 25, 2020 (the "2020 Supplemental Indenture" and, together with the 2019 Base Indenture, the "2020 Indenture"), each between the Company and U.S. Bank National Association, as trustee (the "Trustee"). The Debentures bear interest at an annual rate of 5.125%, payable quarterly in arrears on February 25, May 25, August 25 and November 25 commencing on February 25, 2021. The Debentures mature on November 25, 2060. The Company used the net proceeds from the issuance of the Debentures for general corporate purposes.
The Debentures are unsecured and rank junior to all existing and future senior indebtedness (including the 2025 Notes, 2029 Notes and 2034 Notes each as defined above and below). In addition, the Debentures are structurally subordinated to all existing and future indebtedness and other liabilities of the Company's subsidiaries.
The Company may redeem the Debentures in whole at any time or in part from time to time on or after November 25, 2025, at a redemption price equal to their principal amount plus accrued and unpaid interest to, but excluding, the date of redemption; provided that if the Debentures are not redeemed in whole, at least $25 million aggregate principal amount of the Debentures must remain outstanding after giving effect to such redemption.
The 2020 Indenture contains covenants that will limit the ability of the Company and certain of its subsidiaries to consolidate, merge or sell, lease, transfer or otherwise dispose of its properties and assets substantially as an entirety.
An event of default with respect to the Debentures will occur only upon certain events of our bankruptcy, insolvency or receivership (as specified in the 2020 Indenture).
2029 Notes
On June 12, 2019, the Company executed the 2019 Base Indenture and the First Supplemental Indenture, dated as of June 12, 2019 (the "2019 Supplemental Indenture" and, together with the 2019 Base Indenture, the "2019 Indenture"), between the Company and the Trustee pursuant to which the Company issued $500.0 million aggregate principal amount of 5.250% Senior Notes due 2029 (the "2029 Notes").
The Company used the net proceeds from the offering of the 2029 Notes to: (i) repay all amounts outstanding under its existing Revolving Credit Agreement (as defined below); (ii) redeem and satisfy and discharge all of its outstanding 4.500% Senior Notes due May 2020 (the "2020 Notes"); and (iii) pay fees and expenses related to the foregoing. The remaining proceeds were used for general corporate purposes.
The 2029 Notes mature on May 30, 2029 and interest on the 2029 Notes is payable at 5.250% per annum. Interest on the 2029 Notes is payable semi-annually in cash in arrears on May 30 and November 30 of each year, commencing on November 30, 2019.
The 2029 Notes are senior unsecured obligations and rank equally with the Company's other senior unsecured and unsubordinated debt from time to time outstanding, including obligations under our Revolving Credit Agreement (as defined below). The 2029 Notes are effectively subordinated to all of the Company's existing and future secured indebtedness to the extent of the value of the assets securing such indebtedness. The 2029 Notes are structurally subordinated to all existing and future indebtedness and other liabilities of the Company's subsidiaries.
Prior to February 28, 2029, the Company may redeem some or all of the 2029 Notes at any time or from time to time at a "make-whole" redemption price plus accrued and unpaid interest to, but not including, the redemption date. On and after February 28, 2029, the Company may redeem some or all of the 2029 Notes at any time or from time to time at a redemption price equal to 100% of the principal amount thereof plus accrued and unpaid interest to, but not including, the redemption date.
Upon the occurrence of a Change of Control Repurchase Event (as defined in the 2019 Indenture), the Company will be required to make an offer to repurchase the 2029 Notes at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but not including, the date of repurchase. So long as the 2029 Notes are rated investment grade and there is no default under the Indenture, this covenant does not apply.
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
The 2019 Indenture contains covenants that restrict the Company's ability, with certain exceptions, to:
•create liens;
•issue, sell, transfer or otherwise dispose of any shares of capital stock of any Insurance Subsidiary (as defined in the 2019 Indenture); and
•consolidate or merge with or into other companies or transfer all or substantially all of the Company's assets.
The 2019 Indenture provides for customary events of default (subject in certain cases to customary grace and cure periods), which include nonpayment, breach of covenants in the 2019 Indenture, failure to pay at maturity or acceleration of other indebtedness, a failure to pay certain judgments and certain events of bankruptcy and insolvency. Generally, if an event of default occurs, the Trustee or holders of at least 50% in principal amount of the then outstanding 2029 Notes may declare the principal of and accrued but unpaid interest, including any additional interest, on all of the 2029 Notes to be due and payable.
2025 Notes
During May 2025, the Company used a portion of the net proceeds from the issuance of the Senior Notes due June 2034 to repay our Senior Notes due May 2025.
Credit Agreement
On May 8, 2025, the Company entered into a sixth amendment and restatement agreement (the "Credit Agreement") with respect to its existing credit agreement. The $250.0 million Credit Agreement, among other things, (i) requires the Company to maintain (each as calculated in accordance with the Credit Agreement): (i) a debt to total capitalization ratio (excluding hybrid securities, except to the extent that the aggregate amount outstanding of all such hybrid securities exceeds an amount equal to 15.0 percent of total capitalization) of not more than 35.0 percent (such ratio was 23.6 percent at December 31, 2025); and (ii) a minimum consolidated net worth of not less than the sum of $2,674.8 million plus 25.0 percent of the net equity proceeds received by the Company from the issuance and sale of equity interests in the Company, including the conversion of debt securities of the Company into Equity interests (the Company's consolidated net worth was $3,753.2 million at December 31, 2025 compared to the minimum requirement of $2,674.8 million). The maturity date of the Credit Agreement is May 8, 2030. The Credit Agreement contains certain other restrictive covenants with which the Company must comply. The interest rate applicable to loans under the Credit Agreement is calculated as the Secured Overnight Financing Rate ("SOFR") or the base rate (as defined in the Credit Agreement), at the Company's option, plus a margin based on the Company's unsecured debt rating. The applicable margins under the Credit Agreement range from 1.125 percent to 1.750 percent, in the case of loans at the SOFR, and 0.125 percent to 0.750 percent, in the case of loans at the base rate. The commitment fee under the Credit Agreement is based on the Company's unsecured debt rating. The Credit Agreement also provides that the Company may incur up to $200 million of incremental loans (which may include new term loans), subject to conditions that are set forth therein.
As of December 31, 2025, we are in compliance with the covenants of the Credit Agreement. There were no amounts outstanding under the Credit Agreement during the year ended or as of December 31, 2025.
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
Scheduled Repayment of our Direct Corporate Obligations
The scheduled repayment of our direct corporate obligations was as follows at December 31, 2025 (dollars in millions):
| | | | | |
| Year ending December 31, | |
| 2026 | $ | — | |
| 2027 | — | |
| 2028 | — | |
| 2029 | 500.0 | |
| 2030 | — | |
| 2031 and thereafter | 850.0 | |
| | $ | 1,350.0 | |
8. COMMITMENTS AND CONTINGENCIES
Legal Proceedings
The Company and its subsidiaries are involved in various legal actions in the normal course of business, in which claims for compensatory and punitive damages are asserted, some for substantial amounts. We recognize an estimated loss from these loss contingencies when we believe it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. Some of the pending matters have been filed as purported class actions and some actions have been filed in certain jurisdictions that permit punitive damage awards that are disproportionate to the actual damages incurred. The amounts sought in certain of these actions are often large or indeterminate and the ultimate outcome of certain actions is difficult to predict. In the event of an adverse outcome in one or more of these matters, there is a possibility that the ultimate liability may be in excess of the liabilities we have established and could have a material adverse effect on our business, financial condition, results of operations and cash flows. The resolution of pending or future litigation may involve modifications to the terms of outstanding insurance policies or could impact the timing and amount of rate increases, which could adversely affect the future profitability of the related insurance policies. Based upon information presently available, and in light of legal, factual and other defenses available to the Company and its subsidiaries, the Company does not believe that it is probable that the ultimate liability from either pending or threatened legal actions, after consideration of existing loss provisions, will have a material adverse effect on the Company's consolidated financial condition, operating results or cash flows. However, given the inherent difficulty in predicting the outcome of legal proceedings, there exists the possibility that such legal actions could have a material adverse effect on the Company's consolidated financial condition, operating results or cash flows.
In addition to the inherent difficulty of predicting litigation outcomes, particularly those that will be decided by a jury, some matters purport to seek substantial or an unspecified amount of damages for unsubstantiated conduct spanning several years based on complex legal theories and damages models. The alleged damages typically are indeterminate or not factually supported in the complaint, and, in any event, the Company's experience indicates that monetary demands for damages often bear little relation to the ultimate loss. In some cases, plaintiffs are seeking to certify classes in the litigation and class certification either has been denied or is pending and we have filed oppositions to class certification or sought to decertify a prior class certification. In addition, for many of these cases: (i) there is uncertainty as to the outcome of pending appeals or motions; (ii) there are significant factual issues to be resolved; and/or (iii) there are novel legal issues presented. Accordingly, the Company cannot reasonably estimate the possible loss or range of loss in excess of amounts accrued, if any, or predict the timing of the eventual resolution of these matters. The Company reviews these matters on an ongoing basis. When assessing reasonably possible and probable outcomes, the Company bases its assessment on the expected ultimate outcome following all appeals.
On June 7, 2019, Platinum Partners Value Arbitrage Fund L.P. (in Official Liquidation) ("PPVA"), the Joint Official Liquidators of PPVA (the "JOLs") and Principal Growth Strategies, LLC ("PGS") commenced suit against, among others, CNO Financial Group, Inc., Bankers Conseco Life Insurance Company ("BCLIC"), Washington National and 40|86 Advisors, Inc. (collectively, the "CNO Parties") in Delaware Chancery Court. Plaintiffs seek an unspecified amount of
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
damages, costs, attorney's fees, and other relief as the court deems appropriate. Plaintiffs allege that the CNO Parties were unjustly enriched when they terminated BCLIC and Washington National's reinsurance agreements with Beechwood Re Ltd. ("BRe") and recaptured assets from reinsurance trusts, in particular, Agera securities. Plaintiffs contend that the Agera securities were fraudulently transferred to the reinsurance trusts by other Platinum-related entities and they are seeking to claw back those Agera securities, or the value of those assets, from the CNO Parties. On January 25, 2024, the Delaware Chancery Court granted in part and denied in part the CNO Parties’ motion to dismiss the Amended Complaint. Based on the Court's ruling, PPVA and the JOLs’ claims against the CNO Parties were dismissed. On April 9, 2024, PGS filed a second amended complaint, which contains the same claims against the CNO Parties that PGS had previously asserted. The CNO Parties are vigorously contesting PGS's claims. All case deadlines are currently held in abeyance pursuant to Court order, which provides that the parties will submit a proposed revised schedule following the issuance of certain decisions by the Court.
On October 5, 2012, plaintiffs William Jeffrey Burnett and Joe H. Camp commenced an action entitled Burnett v. Conseco Life Ins. Co. against, among others, CNO Financial Group, Inc. and CNO Services, LLC (collectively, the "CNO Entities") in the United States District Court for the Central District of California on behalf of a putative class of former interest-sensitive whole life insurance policyholders who surrendered their policies or let them lapse. Plaintiffs' first mended complaint alleges that the CNO Entities are liable under an alter ego theory for Conseco Life Insurance Company's purported breach of the optional premium payment provision (the "Optional Premium Payment") and other provisions of plaintiffs' insurance policies. In January 2018, the case was transferred to the United States District Court for the Southern District of Indiana. On August 17, 2020, the Court denied the CNO Entities' motions to dismiss. On January 13, 2021, the Court granted final approval of a class action settlement between plaintiffs and co-defendant Conseco Life Insurance Company (n/k/a Wilco Life Insurance Company). The case remains pending against the CNO Entities. On March 25, 2022, the Court certified a Rule 23(b)(3) class of under 2,000 policyholders who invoked the policy's Optional Premium Payment prior to October 2008 and who surrendered their policies between October 7, 2008 and September 1, 2011. The Court's certification order acknowledged the existence of individualized issues of causation and damages, which the Court stated could be addressed in individualized proceedings following a class trial on the alter ego allegations and the meaning of the subject insurance policy language. A three-day jury trial on causation and damages as to the two class representatives commenced on June 16, 2025, and the jury returned a verdict in favor of the class representatives on June 18, 2025 for approximately $0.2 million collectively. This verdict is notional and contingent and has no preclusive effect on any follow on trials by absent class members in terms of causation and damages. The class representatives' ability to collect any damages from the CNO Entities will depend on the outcome of the bench trial on alter ego liability. The bench trial on alter ego liability was held between August 26 to September 2, 2025, but no ruling has been made yet. The parties prepared post-trial briefing, which was completed at the end of December 2025. Any liability of any kind will depend on the outcome of the alter ego trial, and in the event the court rules in favor of Plaintiffs on that issue, whether absent class members will participate in follow on trials to determine whether they are entitled to damages, and the outcome of those trials. The outcome of all trials will be subject to appeal. Any follow on trials and appeals with respect to absent class members may take years to resolve. The CNO Entities continue to vigorously defend the case.
Regulatory Examinations and Fines
Insurance companies face significant risks related to regulatory investigations and actions. Regulatory investigations generally result from matters related to sales or underwriting practices, payment of contingent or other sales commissions, claim payments and procedures, product design, product disclosure, additional premium charges for premiums paid on a periodic basis, denial or delay of benefits, charging excessive or impermissible fees on products, procedures related to canceling policies, changing the way cost of insurance charges are calculated for certain life insurance products or recommending unsuitable products to customers. We are, in the ordinary course of our business, subject to various examinations, inquiries and information requests from state, federal and other authorities. The ultimate outcome of these regulatory actions (including the costs of complying with information requests and policy reviews) cannot be predicted with certainty. In the event of an unfavorable outcome in one or more of these matters, the ultimate liability may be in excess of liabilities we have established and we could suffer significant reputational harm as a result of these matters, which could also have a material adverse effect on our business, financial condition, results of operations or cash flows.
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
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Guaranty Fund Assessments
The balance sheet at December 31, 2025, included: (i) accruals of $6.6 million, representing our estimate of all known assessments that will be levied against the Company's insurance subsidiaries by various state guaranty associations based on premiums written through December 31, 2025; and (ii) receivables of $15.3 million that we estimate will be recovered through a reduction in future premium taxes as a result of such assessments. At December 31, 2024, such guaranty fund assessment accruals were $7.8 million and such receivables were $18.3 million. These estimates are subject to change when the associations determine more precisely the losses that have occurred and how such losses will be allocated among the insurance companies. We recognized expense for such assessments of $3.1 million, $2.4 million and $2.0 million for the years ended December 31, 2025, 2024 and 2023, respectively.
Guarantees
In accordance with the terms of the employment agreements of two of the Company's former chief executives, certain wholly-owned subsidiaries of the Company are the guarantors of the former executives' nonqualified supplemental retirement benefits. The liability for such benefits was $18.4 million and $19.1 million at December 31, 2025 and 2024, respectively, and is recorded in other liabilities on the consolidated balance sheet.
Leases and Certain Other Long-Term Commitments
The Company leases office space, equipment and computer software under contractual commitments or noncancellable operating lease agreements. Total expense pursuant to these agreements was $104.7 million, $98.7 million and $96.3 million for the years ended December 31, 2025, 2024 and 2023, respectively.
The Company leases office space for certain administrative operations under agreements that expire between 2026 and 2034. We lease sales offices in various states which are generally short-term in length with remaining lease terms expiring between 2026 and 2032. Many leases include an option to extend or renew the lease term. The exercise of the renewal option is at the Company's discretion. The operating lease liability includes lease payments related to options to extend or renew the lease term only if the Company is reasonably certain of exercising those options. In determining the present value of lease payments, the Company uses its incremental borrowing rate for borrowings secured by collateral commensurate with the terms of the underlying lease. Right of use assets and liabilities are included within other assets and other liabilities, respectively, on the consolidated balance sheet.
Information related to our right of use assets are as follows (dollars in millions):
| | | | | | | | | | | |
| | 2025 | | 2024 |
| | | |
| Operating lease expense | $ | 27.4 | | | $ | 26.4 | |
| Cash paid for operating lease liability | 26.8 | | | 25.4 | |
| Right of use assets obtained in exchange for lease liabilities (non-cash transactions) | 18.5 | | | 28.1 | |
| Total right of use assets | 83.6 | | | 90.7 | |
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
Maturities of our operating lease liabilities as of December 31, 2025 are as follows (dollars in millions):
| | | | | |
| 2026 | $ | 25.4 | |
| 2027 | 20.6 | |
| 2028 | 16.7 | |
| 2029 | 12.4 | |
| 2030 | 8.2 | |
| Thereafter | 21.1 | |
| Total undiscounted lease payments | 104.4 | |
| Less interest | (11.7) | |
| Present value of lease liabilities | $ | 92.7 | |
| | | | | |
| |
| |
| |
| Weighted average remaining lease term (in years) | 5.5 |
| Weighted average discount rate | 4.19 | % |
9. AGENT DEFERRED COMPENSATION PLAN
For our agent deferred compensation plan, it is our policy to immediately recognize changes in the actuarial benefit obligation resulting from either actual experience being different than expected or from changes in actuarial assumptions.
One of our insurance subsidiaries has a noncontributory, unfunded deferred compensation plan for qualifying members of its exclusive agency force. Benefits were based on years of service and career earnings. In 2016, the agent deferred compensation plan was amended to: (i) freeze participation in the plan; (ii) freeze benefits accrued under the plan; and (iii) add a limited cashout feature. The actuarial measurement date of this deferred compensation plan is December 31. The liability recognized in the consolidated balance sheet for the agent deferred compensation plan was $122.6 million and $122.5 million at December 31, 2025 and 2024, respectively. Interest costs incurred on this plan were $6.5 million, $6.3 million and $6.5 million for the years ended December 31, 2025, 2024 and 2023, respectively. The recognition of (losses) gains were $(1.7) million, $6.5 million and $(3.6) million for the years ended December 31, 2025, 2024 and 2023, respectively, primarily resulting from: (i) changes in the discount rate assumption used to determine the deferred compensation plan liability to reflect current investment yields; and (ii) changes in mortality table assumptions. These expenses are recorded in other operating costs and expenses within the consolidated statement of operations. We purchased COLI as an investment vehicle to fund the agent deferred compensation plan. The COLI assets are not assets of the agent deferred compensation plan, and as a result, are accounted for outside the plan and are recorded in other invested assets on the consolidated balance sheet. The carrying value of the COLI assets was $222.3 million and $212.6 million at December 31, 2025 and 2024, respectively. Death benefits related to COLI and changes in the cash surrender value (which approximates net realizable value) of the COLI assets are recorded as net investment income (loss) on special-purpose portfolios and totaled $9.7 million, $11.3 million and $13.0 million for the years ended December 31, 2025, 2024 and 2023, respectively.
We used the following assumptions for the deferred compensation plan to calculate:
| | | | | | | | | | | |
| 2025 | | 2024 |
| Benefit obligations: | | | |
| Discount rate | 5.25 | % | | 5.50 | % |
| Net periodic cost: | | | |
| Discount rate | 5.50 | % | | 5.00 | % |
The discount rate is based on the yield of a hypothetical portfolio of high quality debt instruments which could effectively settle plan benefits on a present value basis as of the measurement date.
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
The benefits expected to be paid pursuant to our agent deferred compensation plan as of December 31, 2025 were as follows (dollars in millions):
| | | | | |
| 2026 | $ | 8.8 | |
| 2027 | 8.9 | |
| 2028 | 8.9 | |
| 2029 | 9.0 | |
| 2030 | 8.9 | |
| 2031 - 2035 | 42.7 | |
One of our insurance subsidiaries has another unfunded nonqualified deferred compensation program for qualifying members of its exclusive agency force. Such agents may defer a certain percentage of their net commissions into the program. In addition, annual Company contributions are made based on the agent's production and vest over a period of five to 10 years. The liability recognized in the consolidated balance sheet for this program was $124.0 million and $103.6 million at December 31, 2025 and 2024, respectively. Company contribution expenses are recorded to other operating costs and expenses in the consolidated statement of operations and totaled $4.9 million, $5.6 million and $6.2 million for the years ended December 31, 2025, 2024 and 2023, respectively. We purchased Trust-Owned Life Insurance ("TOLI") as an investment vehicle to fund the program. The TOLI assets are not assets of the program, and as a result, are accounted for outside the program and are recorded in other invested assets on the consolidated balance sheet. The carrying value of the TOLI assets was $116.2 million and $95.3 million at December 31, 2025 and 2024, respectively.
The Company has a qualified defined contribution plan for which substantially all employees are eligible. Company contributions, which match a portion of certain voluntary employee contributions to the plan, totaled $11.8 million, $11.4 million and $10.9 million for the years ended December 31, 2025, 2024 and 2023, respectively. Employer matching contributions are discretionary.
10. DERIVATIVES
Our freestanding and embedded derivatives, which are not designated as hedging instruments, are held at fair value and are summarized as follows (dollars in millions):
| | | | | | | | | | | | | | |
| | Fair value |
| | 2025 | | 2024 |
| Assets: | | | | |
| Other invested assets: | | | | |
| Fixed indexed call options | | $ | 323.5 | | | $ | 279.0 | |
| | | | |
| Reinsurance receivables | | (15.3) | | | (17.1) | |
| Total assets | | $ | 308.2 | | | $ | 261.9 | |
| Liabilities: | | | | |
| Embedded derivatives related to fixed indexed annuities at fair value: | | | | |
| Policyholder account balances | | $ | 1,600.6 | | | $ | 1,471.6 | |
| | | | |
| | | | |
We are required to establish an embedded derivative related to a modified coinsurance agreement pursuant to which we assume the risks of a block of health insurance business. The embedded derivative represents the mark-to-market adjustment for $69.5 million in underlying investments held by the ceding reinsurer at December 31, 2025.
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
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The activity associated with freestanding derivative instruments is measured as either the notional or the number of contracts. The activity associated with the fixed indexed annuity embedded derivatives are shown by the number of policies. The following table represents activity associated with derivative instruments as of the dates indicated:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Measurement | | December 31, 2024 | | Additions | | Maturities/terminations | | December 31, 2025 |
| Fixed indexed annuities - embedded derivative | | Policies | | 125,464 | | | 12,665 | | | (11,364) | | | 126,765 | |
| Fixed indexed call options | | Notional (a) | | $ | 4,158.7 | | | $ | 4,576.9 | | | $ | (4,256.3) | | | $ | 4,479.3 | |
_________________
(a) Dollars in millions.
Purchases of fixed indexed call options that are used to hedge the effects of certain policyholder benefits were $202.2 million and $179.7 million for the years ended December 31, 2025 and 2024, respectively. Sales, which generally represent option exercises, were $277.7 million and $395.6 million, respectively, for the years ended December 31, 2025 and 2024.
The following table provides the pre-tax impact recognized in net income for derivative instruments, which are not designated as hedges for the periods indicated (dollars in millions):
| | | | | | | | | | | | | | | | | | | | |
| | 2025 | | 2024 | | 2023 |
| Net investment income (loss) from policyholder and other special-purpose portfolios: | | | | | | |
| Fixed indexed call options | | $ | 120.0 | | | $ | 255.8 | | | $ | 129.0 | |
| | | | | | |
| | | | | | |
| Total investment gains (losses): | | | | | | |
| | | | | | |
| Embedded derivative related to modified coinsurance agreement | | 1.8 | | | 0.4 | | | 0.3 | |
| | | | | | |
| Total revenues from derivative instruments, not designated as hedges | | 121.8 | | | 256.2 | | | 129.3 | |
| Insurance policy benefits: | | | | | | |
| Embedded derivatives related to fixed indexed annuities | | 165.4 | | | 157.5 | | | 137.1 | |
| Net pre-tax impact | | $ | (43.6) | | | $ | 98.7 | | | $ | (7.8) | |
Derivative Counterparty Risk
If the counterparties to the call options fail to meet their obligations, we may recognize a loss. We limit our exposure to such a loss by diversifying among several counterparties believed to be strong and creditworthy. At December 31, 2025, all of our counterparties were rated "A" or higher by S&P.
The Company and its subsidiaries are parties to master netting arrangements with its counterparties related to entering into various derivative contracts.
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
The following table summarizes information related to derivatives with master netting arrangements or collateral as of December 31, 2025 and 2024 (dollars in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Gross amounts not offset in the balance sheet | | |
| | | Gross amounts recognized | | Gross amounts offset in the balance sheet | | Net amounts of assets presented in the balance sheet | | Non-cash collateral | | Cash collateral received | | Net amount |
December 31, 2025: | | |
| Fixed indexed call options | | $ | 323.5 | | | $ | — | | | $ | 323.5 | | | $ | 43.5 | | | $ | — | | | $ | 280.0 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
December 31, 2024: | | | | | | | | | | | | |
| Fixed indexed call options | | 279.0 | | | — | | | 279.0 | | | 78.0 | | | — | | | 201.0 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
11. SHAREHOLDERS' EQUITY
In May 2011, the Company announced a securities repurchase program. In 2025, 2024 and 2023, we repurchased 8.1 million, 8.9 million and 6.6 million shares, respectively, for $319.9 million, $281.6 million and $165.1 million, respectively, under the securities repurchase program. The Company's Board of Directors authorized the repurchase of an additional $500.0 million of the Company's outstanding shares of common stock in February 2025. The Company had remaining repurchase authority of $420.4 million as of December 31, 2025.
In 2025, 2024 and 2023, dividends declared on common stock totaled $66.4 million ($0.67 per common share), $67.5 million ($0.63 per common share) and $67.9 million ($0.59 per common share), respectively. In May 2025, the Company increased its quarterly common stock dividend to $0.17 per share from $0.16 per share. In May 2024, the Company increased its quarterly common stock dividend to $0.16 per share from $0.15 per share. In May 2023, the Company increased its quarterly common stock dividend to $0.15 per share from $0.14 per share.
The Company has a long-term incentive plan which permits the grant of CNO incentive or non-qualified stock options, restricted stock awards, restricted stock units, stock appreciation rights, performance shares or units and certain other equity-based awards to certain directors, officers and employees of the Company and certain other individuals who perform services for the Company (although no grants have been made to such other individuals). As of December 31, 2025, 2024 and 2023, there were 4.3 million shares, 2.9 million shares and 4.1 million shares, respectively, that were available for issuance under the plan. Our stock option awards are generally granted with an exercise price equal to the market price of the Company's stock on the date of grant and a maximum term of ten years. Our stock options granted in 2015 through 2019 generally vested on a graded basis over a three year service term and expire ten years from the date of grant. In 2018, one grant of 1.6 million of stock options vested on a graded basis over a five year service term and expires ten years from the date of grant. There have been no stock options granted since 2019. The vesting periods for our awards of restricted stock units generally range from immediate vesting to a period of three years. We record forfeitures as they occur.
A summary of the Company's stock option activity and related information for 2025 is presented below (shares in thousands; dollars in millions, except per share amounts):
| | | | | | | | | | | | | | | | | | | | | | | |
| Shares | | Weighted average exercise price | | Weighted average remaining life (in years) | | Aggregate intrinsic value |
| Outstanding at the beginning of the year | 1,791 | | | $ | 19.48 | | | | | |
| | | | | | | |
| Exercised | (400) | | | (18.33) | | | | | $ | 8.9 | |
| Forfeited or terminated | (32) | | | (20.38) | | | | | |
| Outstanding at the end of the year | 1,359 | | | 19.79 | | | 2.4 | | $ | 30.8 | |
| Options exercisable at the end of the year | 1,359 | | | | | 2.4 | | $ | 30.8 | |
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
A summary of the Company's stock option activity and related information for 2024 is presented below (shares in thousands; dollars in millions, except per share amounts):
| | | | | | | | | | | | | | | | | | | | | | | |
| Shares | | Weighted average exercise price | | Weighted average remaining life (in years) | | Aggregate intrinsic value |
| Outstanding at the beginning of the year | 2,185 | | | $ | 19.45 | | | | | |
| | | | | | | |
| Exercised | (374) | | | (19.24) | | | | | $ | 5.7 | |
| Forfeited or terminated | (20) | | | (20.38) | | | | | |
| Outstanding at the end of the year | 1,791 | | | 19.48 | | | 3.0 | | $ | 31.8 | |
| Options exercisable at the end of the year | 1,791 | | | | | 3.0 | | $ | 31.8 | |
A summary of the Company's stock option activity and related information for 2023 is presented below (shares in thousands; dollars in millions, except per share amounts):
| | | | | | | | | | | | | | | | | | | | | | | |
| Shares | | Weighted average exercise price | | Weighted average remaining life (in years) | | Aggregate intrinsic value |
| Outstanding at the beginning of the year | 2,736 | | | $ | 19.45 | | | | | |
| | | | | | | |
| Exercised | (484) | | | (19.43) | | | | | $ | 2.9 | |
| Forfeited or terminated | (67) | | | (19.62) | | | | | |
| Outstanding at the end of the year | 2,185 | | | 19.45 | | | 3.9 | | $ | 11.8 | |
| Options exercisable at the end of the year | 2,185 | | | | | 3.9 | | $ | 11.8 | |
Compensation expense related to stock options was not material for each of the three years ended December 31, 2025. Compensation expense related to stock options had no impact on either basic or diluted earnings per share in 2025 or 2024, and reduced both by less one cent in 2023. At December 31, 2025, there was no unrecognized compensation expense for non-vested stock options. Cash received by the Company from the exercise of stock options was $7.4 million, $7.2 million and $9.2 million during 2025, 2024 and 2023, respectively.
The following table summarizes information about stock options outstanding at December 31, 2025 (shares in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Options outstanding | | Options exercisable |
| Range of exercise prices | | Number outstanding | | Remaining life (in years) | | Weighted Average exercise price | | Number exercisable | | Average exercise price |
| | | | | | | | | | |
$15.08 - $21.06 | | 1,140 | | | 2.4 | | $ | 19.12 | | | 1,140 | | | $ | 19.12 | |
$23.33 | | 219 | | | 2.1 | | 23.33 | | | 219 | | | 23.33 | |
| | | | | | | | | | |
| | | | | | | | | | |
| | 1,359 | | | | | | | 1,359 | | | |
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
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The Company granted restricted stock of 0.3 million for the year ended December 31, 2025 and 0.5 million for the years ended December 31, 2024 and 2023, to certain directors, officers and employees of the Company at a weighted average fair value of $40.50 per share, $27.59 per share and $24.93 per share, respectively, based on the market value of the underlying share on the date of grant. The fair value of such grants totaled $13.5 million, $12.4 million and $11.5 million in 2025, 2024 and 2023, respectively. Such amounts are recognized as compensation expense over the vesting period of the restricted stock. A summary of the Company's non-vested restricted stock activity for 2025 is presented below (shares in thousands):
| | | | | | | | | | | |
| Shares | | Weighted average grant date fair value |
| Non-vested shares, beginning of year | 971 | | | $ | 25.12 | |
| Granted | 334 | | | 40.50 | |
| Vested | (418) | | | 26.54 | |
| Forfeited | (6) | | | 30.95 | |
| Non-vested shares, end of year | 881 | | | 30.24 | |
At December 31, 2025, the unrecognized compensation expense for non-vested restricted stock totaled $11.6 million which is expected to be recognized over a weighted average period of 1.8 years. At December 31, 2024, the unrecognized compensation expense for non-vested restricted stock totaled $10.9 million. We recognized compensation expense related to restricted stock awards totaling $12.7 million, $11.4 million and $10.9 million in 2025, 2024 and 2023, respectively. The fair value of restricted stock that vested during 2025, 2024 and 2023 was $17.4 million, $12.6 million and $10.4 million, respectively.
The Company granted performance units totaling 0.3 million for the year ended December 31, 2025 and 0.4 million in the years ended December 31, 2024 and 2023. The criteria for payment for such awards are based on certain company-wide performance levels that must be achieved within a specified performance time (generally one to three years), each as defined in the award. The performance units granted in 2025, 2024 and 2023 provide for a payout of up to 200 percent of the award if certain performance thresholds are achieved. Unless antidilutive, the diluted weighted average shares outstanding would reflect the number of performance units expected to be issued, using the treasury stock method.
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
A summary of the Company's performance units is presented below (shares in thousands):
| | | | | | | | | | | | | | | | | |
| Total shareholder return awards | | Operating return on equity awards | | Operating earnings per share awards |
Awards outstanding at December 31, 2022 | 2 | | | 611 | | | 604 | |
Granted in 2023 | — | | | 215 | | | 216 | |
| Additional shares issued pursuant to achieving certain performance criteria (a) | — | | | 221 | | | 221 | |
Shares vested in 2023 | (1) | | | (443) | | | (441) | |
| Forfeited | — | | | (9) | | | (9) | |
Awards outstanding at December 31, 2023 | 1 | | | 595 | | | 591 | |
Granted in 2024 | — | | | 197 | | | 197 | |
| Additional shares issued pursuant to achieving certain performance criteria (a) | — | | | 68 | | | 80 | |
Shares vested in 2024 | (1) | | | (258) | | | (269) | |
| Forfeited | — | | | (9) | | | (9) | |
Awards outstanding at December 31, 2024 | — | | | 593 | | | 590 | |
Granted in 2025 | — | | | 151 | | | 151 | |
| Additional shares issued pursuant to achieving certain performance criteria (a) | — | | | — | | | — | |
Shares vested in 2025 | — | | | (160) | | | (163) | |
| Forfeited | — | | | (30) | | | (27) | |
Awards outstanding at December 31, 2025 | — | | | 554 | | | 551 | |
_________________________
(a) The performance units that vested in 2023, 2024 and 2025 provided for a payout of up to 200 percent of the award if certain performance levels were achieved.
The grant date fair value of the performance units awarded is determined using the Monte Carlo valuation method, including an assumption of volatility based on historical share prices, and was $13.2 million and $11.1 million in 2025 and 2024, respectively. We recognized compensation expense of $12.3 million, $11.0 million and $11.3 million in 2025, 2024 and 2023, respectively, related to the performance units.
As further discussed in the footnote to the consolidated financial statements entitled "Income Taxes", the Company's Board of Directors adopted the Section 382 Rights Agreement in 2009 and has amended and extended the Section 382 Rights Agreement on five occasions, most recently effective November 13, 2023. The Section 382 Rights Agreement, as amended, is designed to protect shareholder value by preserving the value of our tax assets primarily associated with NOLs. At the time the Section 382 Rights Agreement was adopted, the Company declared a dividend of one preferred share purchase right (a "Right") for each outstanding share of common stock. The dividend was payable on January 30, 2009, to the shareholders of record as of the close of business on that date and a Right is also attached to each share of CNO common stock issued after that date. Pursuant to the Section 382 Rights Agreement, as amended, each Right entitles the shareholder to purchase from the Company one one-thousandth of a share of Series F Junior Participating Preferred Stock, par value $0.01 per share (the "Junior Preferred Stock"), of the Company at a price of $110.00 per one one-thousandth of a share of Junior Preferred Stock. The description and terms of the Rights are set forth in the Section 382 Rights Agreement, as amended. The Rights would become exercisable in the event any person or group (subject to certain exemptions) becomes an owner of more than 4.99 percent of the outstanding stock of CNO (a "Threshold Holder") without the approval of the Board of Directors or an existing shareholder who is currently a Threshold Holder acquires additional shares exceeding one percent of our outstanding shares without prior approval from the Board of Directors.
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
A reconciliation of net income and shares used to calculate basic and diluted earnings per share is as follows (dollars in millions and shares in thousands):
| | | | | | | | | | | | | | | | | | | |
| | 2025 | | 2024 | | 2023 | | |
| Net income for basic earnings per share | $ | 229.3 | | | $ | 420.8 | | | $ | 276.5 | | | |
| Shares: | | | | | | | |
| Weighted average shares outstanding for basic earnings per share | 97,763 | | | 106,144 | | | 113,275 | | | |
| Effect of dilutive securities on weighted average shares: | | | | | | | |
| Amounts related to employee benefit plans | 2,059 | | | 1,972 | | | 1,849 | | | |
| | | | | | | |
| | | | | | | |
| Weighted average shares outstanding for diluted earnings per share | 99,822 | | | 108,116 | | | 115,124 | | | |
Basic earnings per common share is computed by dividing net income by the weighted average number of common shares outstanding for the period. Restricted shares (including our performance units) are not included in basic earnings per share until vested. Diluted earnings per share reflect the potential dilution that could occur if outstanding stock options were exercised and restricted stock was vested. The dilution from options and restricted shares 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 average market price during the period, reducing the dilutive effect of the exercise of the options (or the vesting of the restricted stock and performance units).
Accumulated other comprehensive loss included in shareholders' equity as of December 31, 2025 and 2024, is comprised of the following (dollars in millions):
| | | | | | | | | | | |
| 2025 | | 2024 |
Net unrealized losses on investments having no allowance for credit losses (a) | $ | (661.6) | | | $ | (1,281.6) | |
| Unrealized losses on investments with an allowance for credit losses | (1,193.9) | | | (1,108.7) | |
| Change in discount rates for liability for future policy benefits | 421.1 | | | 624.5 | |
| Change in instrument-specific credit risk for market risk benefits | 0.9 | | | 1.4 | |
| Deferred income tax assets | 318.5 | | | 393.0 | |
| Accumulated other comprehensive loss | $ | (1,115.0) | | | $ | (1,371.4) | |
___________
(a) The amortized cost and fair value of fixed maturity securities, available for sale, for which we have elected the fair value option were $12.0 million and $13.0 million, respectively, as of December 31, 2025. Accordingly, the net unrealized losses associated with these investments are excluded from accumulated other comprehensive loss. There were no fixed maturity securities, available for sale, for which we have elected the fair value option as of December 31, 2024.
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
12. OTHER OPERATING STATEMENT DATA
Insurance policy income consisted of the following (dollars in millions):
| | | | | | | | | | | | | | | | | |
| 2025 | | 2024 | | 2023 |
| Direct premiums collected (a) | $ | 5,046.6 | | | $ | 4,857.8 | | | $ | 4,574.9 | |
| Reinsurance assumed | 14.0 | | | 15.5 | | | 16.6 | |
| Reinsurance ceded | (173.5) | | | (191.8) | | | (194.6) | |
| Premiums collected, net of reinsurance | 4,887.1 | | | 4,681.5 | | | 4,396.9 | |
| Change in unearned premiums | (2.4) | | | (9.1) | | | 18.5 | |
| Less premiums on interest-sensitive life and products without mortality and morbidity risk which are recorded as additions to insurance liabilities (a) | (2,484.6) | | | (2,333.0) | | | (2,111.7) | |
| Premiums on traditional products with mortality or morbidity risk | 2,400.1 | | | 2,339.4 | | | 2,303.7 | |
| Fees and surrender charges on interest-sensitive products | 222.5 | | | 219.1 | | | 201.8 | |
| Insurance policy income | $ | 2,622.6 | | | $ | 2,558.5 | | | $ | 2,505.5 | |
________________
(a) Excludes $749.4 million and $1,599.2 million of funds received from the issuance of funding agreements pursuant to our FABN program for the years ended December 31, 2025 and 2024. There were no funding agreements issued during 2023.
The five states with the largest shares of 2025 collected premiums were Florida (12 percent), Iowa (6 percent), Texas (6 percent), California (5 percent), and Pennsylvania (5 percent). No other state accounted for more than five percent of total collected premiums.
Other operating costs and expenses were as follows (dollars in millions):
| | | | | | | | | | | | | | | | | |
| 2025 | | 2024 | | 2023 |
| Commission expense | $ | 134.6 | | | $ | 121.8 | | | $ | 111.1 | |
| Salaries and wages | 305.0 | | | 304.5 | | | 290.9 | |
| Other | 680.0 | | | 629.0 | | | 646.3 | |
| Total other operating costs and expenses | $ | 1,119.6 | | | $ | 1,055.3 | | | $ | 1,048.3 | |
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
Changes in deferred acquisition costs were as follows (dollars in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2025 |
| | Fixed indexed annuities | | Fixed interest annuities | | Supplemental health | | Medicare supplement | | Long-term care | | Interest-sensitive life | | Traditional life | | Funding agreements | | Total |
| Beginning of period | | $ | 450.0 | | | $ | 35.9 | | | $ | 438.1 | | | $ | 157.4 | | | $ | 148.6 | | | $ | 256.0 | | | $ | 529.5 | | | $ | 9.9 | | | $ | 2,025.4 | |
| Capitalizations | | 111.9 | | | 12.3 | | | 73.1 | | | 30.3 | | | 32.4 | | | 38.4 | | | 132.0 | | | 3.7 | | | 434.1 | |
| Amortization expense | | (64.5) | | | (6.4) | | | (37.7) | | | (24.8) | | | (15.7) | | | (16.9) | | | (69.3) | | | (3.5) | | | (238.8) | |
| End of period | | $ | 497.4 | | | $ | 41.8 | | | $ | 473.5 | | | $ | 162.9 | | | $ | 165.3 | | | $ | 277.5 | | | $ | 592.2 | | | $ | 10.1 | | | $ | 2,220.7 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2024 |
| | Fixed indexed annuities | | Fixed interest annuities | | Supplemental health | | Medicare supplement | | Long-term care | | Interest-sensitive life | | Traditional life | | Funding agreements | | Total |
| Beginning of period | | $ | 407.6 | | | $ | 27.0 | | | $ | 408.0 | | | $ | 157.5 | | | $ | 140.3 | | | $ | 234.5 | | | $ | 471.9 | | | $ | 4.5 | | | $ | 1,851.3 | |
| Capitalizations | | 99.2 | | | 14.0 | | | 64.6 | | | 26.0 | | | 23.1 | | | 37.1 | | | 117.6 | | | 7.8 | | | 389.4 | |
| Amortization expense | | (56.8) | | | (5.1) | | | (34.5) | | | (26.1) | | | (14.8) | | | (15.6) | | | (60.0) | | | (2.4) | | | (215.3) | |
| End of period | | $ | 450.0 | | | $ | 35.9 | | | $ | 438.1 | | | $ | 157.4 | | | $ | 148.6 | | | $ | 256.0 | | | $ | 529.5 | | | $ | 9.9 | | | $ | 2,025.4 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2023 |
| | Fixed indexed annuities | | Fixed interest annuities | | Supplemental health | | Medicare supplement | | Long-term care | | Interest-sensitive life | | Traditional life | | Funding agreements | | Total |
| Beginning of period | | $ | 365.6 | | | $ | 19.6 | | | $ | 378.8 | | | $ | 161.2 | | | $ | 137.9 | | | $ | 212.2 | | | $ | 409.1 | | | $ | 6.0 | | | $ | 1,690.4 | |
| Capitalizations | | 88.9 | | | 11.3 | | | 60.6 | | | 24.1 | | | 17.5 | | | 36.8 | | | 114.3 | | | — | | | 353.5 | |
| Amortization expense | | (46.9) | | | (3.9) | | | (31.4) | | | (27.8) | | | (15.1) | | | (14.5) | | | (51.5) | | | (1.5) | | | (192.6) | |
| End of period | | $ | 407.6 | | | $ | 27.0 | | | $ | 408.0 | | | $ | 157.5 | | | $ | 140.3 | | | $ | 234.5 | | | $ | 471.9 | | | $ | 4.5 | | | $ | 1,851.3 | |
Changes in the present value of future profits were as follows (dollars in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2025 |
| | Supplemental health | | Medicare supplement | | Long-term care | | Traditional life | | Fixed indexed annuities | | Fixed interest annuities | | Total |
| Beginning of period | | $ | 128.8 | | | $ | 15.7 | | | $ | 4.4 | | | $ | 11.3 | | | $ | 0.5 | | | $ | 0.3 | | | $ | 161.0 | |
| | | | | | | | | | | | | | |
| Amortization expense | | (11.4) | | | (3.7) | | | (0.7) | | | (1.4) | | | (0.1) | | | (0.1) | | | (17.4) | |
| End of period | | $ | 117.4 | | | $ | 12.0 | | | $ | 3.7 | | | $ | 9.9 | | | $ | 0.4 | | | $ | 0.2 | | | $ | 143.6 | |
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2024 |
| | Supplemental health | | Medicare supplement | | Long-term care | | Traditional life | | Fixed indexed annuities | | Fixed interest annuities | | Total |
| Beginning of period | | $ | 141.0 | | | $ | 20.6 | | | $ | 5.2 | | | $ | 12.9 | | | $ | 0.7 | | | $ | 0.3 | | | $ | 180.7 | |
| | | | | | | | | | | | | | |
| Amortization expense | | (12.2) | | | (4.9) | | | (0.8) | | | (1.6) | | | (0.2) | | | — | | | (19.7) | |
| End of period | | $ | 128.8 | | | $ | 15.7 | | | $ | 4.4 | | | $ | 11.3 | | | $ | 0.5 | | | $ | 0.3 | | | $ | 161.0 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2023 |
| | Supplemental health | | Medicare supplement | | Long-term care | | Traditional life | | Fixed indexed annuities | | Fixed interest annuities | | Total |
| Beginning of period | | $ | 154.0 | | | $ | 27.5 | | | $ | 6.2 | | | $ | 14.8 | | | $ | 0.8 | | | $ | 0.4 | | | $ | 203.7 | |
| | | | | | | | | | | | | | |
| Amortization expense | | (13.0) | | | (6.9) | | | (1.0) | | | (1.9) | | | (0.1) | | | (0.1) | | | (23.0) | |
| End of period | | $ | 141.0 | | | $ | 20.6 | | | $ | 5.2 | | | $ | 12.9 | | | $ | 0.7 | | | $ | 0.3 | | | $ | 180.7 | |
Based on current conditions and assumptions as to future events on all policies inforce, the Company expects to amortize approximately 11 percent of the December 31, 2025 balance of the present value of future profits in 2026, 10 percent in 2027, 9 percent in 2028, 8 percent in 2029 and 7 percent in 2030.
Changes in sales inducements were as follows (dollars in millions):
| | | | | | | | | | | | | | | | | | | | |
| | 2025 |
| | Fixed indexed annuities | | Fixed interest annuities | | Total |
| Beginning of period | | $ | 128.1 | | | $ | 5.1 | | | $ | 133.2 | |
| Capitalizations | | 62.8 | | | 2.4 | | | 65.2 | |
| Amortization expense | | (20.8) | | | (1.0) | | | (21.8) | |
| End of period | | $ | 170.1 | | | $ | 6.5 | | | $ | 176.6 | |
| | | | | | | | | | | | | | | | | | | | |
| | 2024 |
| | Fixed indexed annuities | | Fixed interest annuities | | Total |
| Beginning of period | | $ | 88.5 | | | $ | 4.6 | | | $ | 93.1 | |
| Capitalizations | | 54.9 | | | 1.4 | | | 56.3 | |
| Amortization expense | | (15.3) | | | (0.9) | | | (16.2) | |
| End of period | | $ | 128.1 | | | $ | 5.1 | | | $ | 133.2 | |
| | | | | | | | | | | | | | | | | | | | |
| | 2023 |
| | Fixed indexed annuities | | Fixed interest annuities | | Total |
| Beginning of period | | $ | 76.0 | | | $ | 4.5 | | | $ | 80.5 | |
| Capitalizations | | 23.5 | | | 0.9 | | | 24.4 | |
| Amortization expense | | (11.0) | | | (0.8) | | | (11.8) | |
| End of period | | $ | 88.5 | | | $ | 4.6 | | | $ | 93.1 | |
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
13. CONSOLIDATED STATEMENT OF CASH FLOWS
The following disclosures supplement our consolidated statement of cash flows.
The following reconciles net income to net cash provided by operating activities (dollars in millions):
| | | | | | | | | | | | | | | | | |
| | 2025 | | 2024 | | 2023 |
| Cash flows from operating activities: | | | | | |
| Net income | $ | 229.3 | | | $ | 420.8 | | | $ | 276.5 | |
| Adjustments to reconcile net income to net cash from operating activities: | | | | | |
| Amortization and depreciation | 318.5 | | | 292.4 | | | 267.4 | |
| Income taxes | 26.3 | | | 63.9 | | | 21.1 | |
| Insurance liabilities | 618.1 | | | 534.7 | | | 449.7 | |
Accrual, amortization, and fair value changes included in investment income | (220.5) | | | (334.0) | | | (170.7) | |
| Deferral of policy acquisition costs | (499.3) | | | (445.7) | | | (377.9) | |
Net investment losses | 54.7 | | | 49.9 | | | 69.0 | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
Gain on extinguishment of borrowings related to variable interest entities | (1.5) | | | — | | | — | |
Goodwill and other asset impairment | 101.9 | | | — | | | — | |
| Other (a) | 48.2 | | | 45.7 | | | 47.8 | |
| Net cash from operating activities | $ | 675.7 | | | $ | 627.7 | | | $ | 582.9 | |
_____________
(a) Primarily relates to: (i) changes in other assets and liabilities related to the timing of payments and receipts; and (ii) the change in fair value of the deferred compensation plan liability.
Other non-cash items not reflected in the investing and financing activities sections of the consolidated statement of cash flows (dollars in millions):
| | | | | | | | | | | | | | | | | |
| | 2025 | | 2024 | | 2023 |
Stock options, restricted stock, performance units, and Employee Stock Purchase Program | $ | 25.9 | | | $ | 23.2 | | | $ | 23.3 | |
14. STATUTORY INFORMATION (BASED ON NON-GAAP MEASURES)
Statutory accounting practices prescribed or permitted by regulatory authorities for the Company's insurance subsidiaries differ from GAAP. The Company's U.S. based insurance subsidiaries will report the following amounts to regulatory agencies, after appropriate elimination of intercompany accounts among such subsidiaries (dollars in millions):
| | | | | | | | | | | |
| 2025 | | 2024 |
| Statutory capital and surplus | $ | 1,405.3 | | | $ | 1,458.1 | |
| Asset valuation reserve | 508.7 | | | 407.1 | |
| Interest maintenance reserve | 252.6 | | | 334.2 | |
| Total | $ | 2,166.6 | | | $ | 2,199.4 | |
Such statutory capital and surplus included investments in upstream affiliates of $42.6 million at both December 31, 2025 and 2024, which were eliminated in the consolidated financial statements prepared in accordance with GAAP.
Statutory earnings build the capital required by ratings agencies and regulators. Statutory earnings, fees and interest paid by our U.S. based insurance subsidiaries to the parent company create the "cash flow capacity" the parent company needs to meet its obligations, including debt service. The consolidated statutory net (loss) income of our U.S. based
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
insurance subsidiaries was $(14.6) million, $176.6 million and $105.0 million for the years ended December 31, 2025, 2024 and 2023, respectively. Included in net income were net realized capital losses, net of income taxes, of $63.4 million, $20.3 million and $26.3 million for the years ended December 31, 2025, 2024 and 2023, respectively. In addition, such net income included pre-tax amounts for fees and interest paid to CNO or its non-life subsidiaries of $193.9 million, $197.5 million and $190.1 million for the years ended December 31, 2025, 2024 and 2023, respectively.
Insurance regulators may prohibit the payment of dividends or other payments by our insurance subsidiaries to parent companies if they determine that such payment could be adverse to our policyholders or contract holders. Otherwise, the ability of our insurance subsidiaries to pay dividends is subject to state insurance department regulations. Insurance regulations generally permit dividends to be paid from statutory earned surplus of our U.S. based insurance subsidiaries without regulatory approval for any 12-month period in amounts equal to the greater of (or in some states, the lesser of): (i) statutory net gain from operations or statutory net income for the prior year; or (ii) 10 percent of statutory capital and surplus as of the end of the preceding year. However, as each of the immediate U.S. based insurance subsidiaries of CDOC, Inc. ("CDOC"), our wholly owned subsidiary and the immediate parent of Washington National and Conseco Life Insurance Company of Texas ("CLTX"), has negative earned surplus, any dividend payments from the insurance subsidiaries to CNO requires the prior approval of the director or commissioner of the applicable state insurance department. During 2025, our U.S. based insurance subsidiaries paid dividends of $458.4 million to CDOC. In 2025, CDOC also made capital contributions of $140.0 million to our U.S. based insurance subsidiaries.
The payment of interest on surplus debentures requires either prior written notice or approval of the director or commissioner of the applicable state insurance department. Dividends and other payments from our non-insurance subsidiaries to CNO or CDOC do not require approval by any regulatory authority or other third party.
In accordance with an order from the Florida Office of Insurance Regulation, Washington National may not distribute funds to any affiliate or shareholder, except pursuant to agreements that have been approved, without prior notice to the Florida Office of Insurance Regulation. In addition, the risk-based capital ("RBC") and other capital requirements described below can also limit, in certain circumstances, the ability of our insurance subsidiaries to pay dividends.
RBC requirements provide a tool for state insurance regulators to determine the levels of statutory capital and surplus an insurer must maintain in relation to its insurance and investment risks and the need for possible regulatory attention. The RBC requirements provide four levels of regulatory attention, varying with the ratio of the insurance company's total adjusted capital (defined as the total of its statutory capital and surplus, asset valuation reserve and certain other adjustments) to its RBC (as measured on December 31 of each year) as follows: (i) if a company's total adjusted capital is less than 100 percent but greater than or equal to 75 percent of its RBC, the company must submit a comprehensive plan to the regulatory authority proposing corrective actions aimed at improving its capital position (the "Company Action Level"); (ii) if a company's total adjusted capital is less than 75 percent but greater than or equal to 50 percent of its RBC, the regulatory authority will perform a special examination of the company and issue an order specifying the corrective actions that must be taken; (iii) if a company's total adjusted capital is less than 50 percent but greater than or equal to 35 percent of its RBC, the regulatory authority may take any action it deems necessary, including placing the company under regulatory control; and (iv) if a company's total adjusted capital is less than 35 percent of its RBC, the regulatory authority must place the company under its control. In addition, the RBC requirements provide for a trend test if a company's total adjusted capital is between 100 percent and 150 percent of its RBC at the end of the year. The trend test calculates the greater of the decrease in the margin of total adjusted capital over RBC: (i) between the current year and the prior year; and (ii) for the average of the last 3 years. It assumes that such decrease could occur again in the coming year. Any company whose trended total adjusted capital is less than 95 percent of its RBC would trigger a requirement to submit a comprehensive plan as described above for the Company Action Level. The 2025 statutory annual statements of each of our U.S. based insurance subsidiaries reflect total adjusted capital in excess of the levels that would subject our subsidiaries to any regulatory action.
In addition, although we are under no obligation to do so, we may elect to contribute additional capital or retain greater amounts of capital to strengthen the surplus of certain insurance subsidiaries. Any election to contribute or retain additional capital could impact the amounts our insurance subsidiaries pay as dividends to the holding company. The ability of our insurance subsidiaries to pay dividends is also impacted by various criteria established by rating agencies to maintain or receive higher ratings and by the capital levels that we target for our insurance subsidiaries.
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
We calculate the consolidated RBC ratio by assuming all of the assets, liabilities, capital and surplus and other aspects of the business of our U.S. based insurance subsidiaries are combined together in one insurance subsidiary, with appropriate intercompany eliminations.
CNO Bermuda Re, Ltd. ("CNO Bermuda Re") is registered by and subject to the supervision of the Bermuda Monetary Authority (the "BMA") as a Class C insurer under the Bermuda Insurance Act 1978 and its related rules and regulations, each as amended (the "Insurance Act"). The Insurance Act imposes solvency and capital requirements as well as auditing and reporting requirements. The Insurance Act requires the value of an insurer's statutory assets to exceed the value of their statutory liabilities by an amount greater than or equal to their prescribed minimum solvency margin. The minimum solvency margin that must be maintained by a Class C insurer is the greater of: (i) $0.5 million; or (ii) 1.5 percent of assets; or (iii) 25 percent of its enhanced capital requirement ("ECR") as reported at the end of the relevant year.
A Class C insurer is also required to maintain available statutory economic capital and surplus at a level equal to or in excess of its ECR, which is established by reference to either the Bermuda Solvency Capital Requirement ("BSCR") model or a Bermuda-approved internal capital model. The BSCR model is a risk-based capital model which provides a method for determining an insurer's capital requirements (statutory economic capital and surplus) by taking into account the risk characteristics of different aspects of the Class C insurer's business. The BSCR formula establishes capital requirements for certain categories of risk, including: fixed income investment risk, equity investment risk, long-term interest rate/liquidity risk, currency risk, concentration risk, certain insurance risks, credit risk, catastrophe risk, and operational risk. For each category, the capital requirement is determined by applying factors to asset, premium, reserve, creditor, probable maximum loss and operation items, with higher factors applied to items with greater underlying risk and lower factors for less risky items.
While not specifically referred to in the Insurance Act, the BMA has also established a target capital level ("TCL") for each insurer equal to 120 percent of an insurer's ECR. The TCL serves as an early warning tool for the BMA and failure to maintain statutory capital at least equal to the TCL will likely result in increased regulatory oversight. CNO Bermuda Re has entered into a Capital and Liquidity Maintenance Agreement (as amended, the "CLMA") with CDOC. Pursuant to the CLMA, CDOC will contribute funds to CNO Bermuda Re in the event: (i) CNO Bermuda Re's statutory economic capital and surplus is less than 150 percent of its ECR at the end of any calendar quarter; or (ii) CNO Bermuda Re's liquid assets are insufficient to meet its contractual obligations to ceding insurers, in each case, unless one or more ceding insurers has provided notice of recapture pursuant to the terms of the applicable reinsurance agreement between it and CNO Bermuda Re and such recapture will cause CNO Bermuda Re to meet (i) and (ii) above. Further, CNO Bermuda Re may not pay any dividends or make any capital distributions to its parent within the five years following the 2023 reinsurance transaction unless approved by the BMA.
We are in the process of completing CNO Bermuda Re's capital and solvency return in respect of the year ended December 31, 2025, which includes the BSCR. We believe that CNO Bermuda Re's level of capitalization will exceed the minimum solvency margin and result in its statutory economic capital and surplus being in excess of the TCL.
15. BUSINESS SEGMENTS
We view our operations as three insurance product lines (annuity, health and life) and the investment and fee income segments. Our segments are aligned based on their common characteristics, comparability of profit margins and the way the CODM makes operating decisions and assesses the performance of the business. Our CODM is the Chief Executive Officer.
Our insurance product line segments (annuity, health and life) include marketing, underwriting and administration of the policies our insurance subsidiaries sell. The business written in each of the three product categories through all of our insurance subsidiaries is aggregated allowing management and investors to assess the performance of each product category. When analyzing profitability of these segments, we use insurance product margin as the measure of profitability, which is: (i) insurance policy income; and (ii) net investment income allocated to the insurance product lines; less (i) insurance policy benefits and interest credited to policyholders; and (ii) amortization of deferred acquisition costs and present value of future profits, non-deferred commissions and advertising expense. Net investment income is allocated to the product lines using the book yield of investments backing the block of business, which is applied to the average net
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
insurance liabilities for the block in each period. Net insurance liabilities for the purpose of allocating investment income to product lines are equal to: (i) policyholder account values for interest sensitive products; (ii) total reserves before the fair value adjustments reflected in accumulated other comprehensive income (loss), if applicable, for all other products; less (iii) amounts related to reinsured business; (iv) deferred acquisition costs; (v) the present value of future profits; and (vi) the value of unexpired options credited to insurance liabilities.
Income from insurance products is the sum of the insurance product 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. Management believes insurance product margin and income from insurance products provides an additional understanding of the business and a more meaningful analysis of the results of our insurance product lines.
We market our products through the Consumer and Worksite Divisions that reflect the customers served by the Company. The Consumer and Worksite Divisions are primarily focused on marketing insurance products, several types of which are sold in both divisions and underwritten in the same manner.
The Consumer Division serves individual consumers, engaging with them on the phone, virtually, online, face-to-face with agents, or through a combination of sales channels. This structure unifies consumer capabilities into a single division and integrates the strength of our agent sales forces with one of the largest direct-to-consumer insurance businesses with proven experience in advertising, web/digital and call center support.
The Worksite Division focuses on the sale of voluntary insurance benefits, including supplemental health and life insurance products in the workplace for businesses, associations, and other membership groups, interacting with customers at their place of employment and virtually. With a separate Worksite Division, we are bringing a sharper focus to this high-growth business.
The investment segment involves the management of our capital resources, including investments and the management of corporate debt and liquidity. Our measure of profitability of this segment is the total net investment income not allocated to the insurance products. 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 agreements; (iv) expenses related to the 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. Investment income not allocated to product lines includes investment income on investments in excess of amounts allocated to product lines, investments held by our holding companies, the spread we earn from our FHLB investment borrowing and FABN programs and variable components of investment income (including call and prepayment income, adjustments to returns on structured securities due to cash flow changes, income (loss) from COLI and alternative investments income not allocated to product lines), net of interest expense on corporate debt and financing agreements. The spread earned from our FHLB investment borrowing and FABN programs includes the investment income on the matched assets less: (i) interest on investment borrowings related to the FHLB investment borrowing program; (ii) interest credited on funding agreements; and (iii) amortization of deferred acquisition costs related to the FABN program.
Our fee income segment includes the earnings generated from sales of third-party insurance products, services provided to employers through our Worksite division and the operations of our broker-dealer and registered investment advisor. In November 2025, we announced our intention to exit the fee services business within our Worksite Division to sharpen our focus on the core insurance business. As a result, beginning in the fourth quarter of 2025, the net results of this business are no longer presented within the fee income segment, but are presented within Net loss related to divested business as a reconciling item to net income.
Our CODM allocates resources and assesses the performance of each operating segment based on the respective product line insurance margin, investment income not allocated, and fee income metrics described above.
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
Expenses not allocated to product lines include the expenses of our corporate operations, excluding interest expense on debt.
We measure segment performance by excluding total investment gains (losses), changes in fair value of embedded derivative liabilities and MRBs, fair value changes related to the agent deferred compensation plan, income taxes and other non-operating items including earnings attributable to VIEs ("pre-tax operating earnings") because we believe that this performance measure is a better indicator of the ongoing business and trends in our business. Our primary investment focus is on investment income to support our liabilities for insurance products as opposed to the generation of investment gains (losses), and a long-term focus is necessary to maintain profitability over the life of the business.
Investment gains (losses), changes in fair value of embedded derivative liabilities and MRBs, fair value changes related to the agent deferred compensation plan and other non-operating items consisting primarily of earnings attributable to VIEs depend on market conditions or represent unusual items that do not necessarily relate to the underlying business of our segments. Investment gains (losses) and changes in fair value of embedded derivative liabilities and MRBs may affect future earnings levels since our underlying business is long-term in nature and changes in our investment portfolio may impact our ability to earn the assumed interest rates needed to maintain the profitability of our business.
Operating information by segment is as follows (dollars in millions):
| | | | | | | | | | | | | | | | | |
| | 2025 | | 2024 | | 2023 |
| Revenues: | | | | | |
| Annuity: | | | | | |
| Insurance policy income | $ | 39.3 | | | $ | 35.5 | | | $ | 28.4 | |
| Net investment income | 621.3 | | | 565.0 | | | 516.3 | |
| Total annuity revenues | 660.6 | | | 600.5 | | | 544.7 | |
| Health: | | | | | |
| Insurance policy income | 1,661.4 | | | 1,618.3 | | | 1,594.6 | |
| Net investment income | 301.9 | | | 299.6 | | | 296.7 | |
| Total health revenues | 1,963.3 | | | 1,917.9 | | | 1,891.3 | |
| Life: | | | | | |
| Insurance policy income | 921.9 | | | 904.7 | | | 882.5 | |
| Net investment income | 151.1 | | | 147.1 | | | 144.8 | |
| Total life revenues | 1,073.0 | | | 1,051.8 | | | 1,027.3 | |
| Change in market values of the underlying options supporting the fixed indexed annuity and life products (offset by market value changes credited to policyholder balances) | 119.0 | | | 253.7 | | | 131.5 | |
| Investment income not allocated to product lines | 506.6 | | | 449.9 | | | 335.6 | |
| Fee revenue and other income: | | | | | |
| Fee revenue | 185.3 | | | 190.5 | | | 177.6 | |
| Amounts netted in expenses not allocated to product lines | 3.7 | | | 3.4 | | | 36.6 | |
| Total segment revenues | $ | 4,511.5 | | | $ | 4,467.7 | | | $ | 4,144.6 | |
(continued on next page)
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
| | | | | | | | | | | | | | | | | |
| | 2025 | | 2024 | | 2023 |
| Expenses: | | | | | |
| Annuity: | | | | | |
| Insurance policy benefits | $ | 25.0 | | | $ | (15.2) | | | $ | 29.0 | |
| Interest credited | 293.5 | | | 253.8 | | | 209.4 | |
| Amortization and non-deferred commissions | 103.5 | | | 87.7 | | | 71.3 | |
| Total annuity expenses | 422.0 | | | 326.3 | | | 309.7 | |
| Health: | | | | | |
| Insurance policy benefits | 1,241.8 | | | 1,239.6 | | | 1,234.9 | |
| Amortization and non-deferred commissions | 164.9 | | | 161.5 | | | 162.1 | |
| Total health expenses | 1,406.7 | | | 1,401.1 | | | 1,397.0 | |
| Life: | | | | | |
| Insurance policy benefits | 568.2 | | | 576.0 | | | 570.0 | |
| Interest credited | 53.7 | | | 51.5 | | | 49.3 | |
Amortization and non-deferred commissions | 111.0 | | | 98.0 | | | 85.8 | |
Advertising expense | 67.7 | | | 77.3 | | | 92.5 | |
| Total life expenses | 800.6 | | | 802.8 | | | 797.6 | |
| Allocated expenses | 611.3 | | | 615.3 | | | 599.0 | |
| Expenses not allocated to product lines | 91.4 | | | 75.2 | | | 88.3 | |
| Market value changes of options credited to fixed indexed annuity and life policyholders | 119.0 | | | 253.7 | | | 131.5 | |
| Amounts netted in investment income not allocated to product lines: | | | | | |
| Interest expense | 207.4 | | | 219.7 | | | 169.8 | |
| Interest credited | 114.2 | | | 61.6 | | | 28.8 | |
| Impact of annual option forfeitures related to fixed indexed annuity surrenders | (14.4) | | | (26.0) | | | (7.1) | |
| Amortization | 3.4 | | | 2.4 | | | 1.6 | |
| Other expenses | 26.7 | | | 24.3 | | | 22.3 | |
| Expenses netted in fee revenue: | | | | | |
| Commissions and other operating expenses | 170.1 | | | 160.5 | | | 146.6 | |
| Total segment expenses | 3,958.4 | | | 3,916.9 | | | 3,685.1 | |
| Pre-tax measure of profitability: | | | | | |
| Annuity margin | 238.6 | | | 274.2 | | | 235.0 | |
| Health margin | 556.6 | | | 516.8 | | | 494.3 | |
| Life margin | 272.4 | | | 249.0 | | | 229.7 | |
| Total insurance product margin | 1,067.6 | | | 1,040.0 | | | 959.0 | |
| Allocated expenses | (611.3) | | | (615.3) | | | (599.0) | |
| Income from insurance products | 456.3 | | | 424.7 | | | 360.0 | |
Fee income margin | 15.2 | | | 30.0 | | | 31.0 | |
| Investment income not allocated to product lines | 169.4 | | | 167.9 | | | 120.2 | |
| Expenses not allocated to product lines | (87.7) | | | (71.8) | | | (51.7) | |
| Operating earnings before taxes | 553.2 | | | 550.8 | | | 459.5 | |
| Income tax expense on operating income | 114.0 | | | 121.5 | | | 103.4 | |
| Net operating income | $ | 439.2 | | | $ | 429.3 | | | $ | 356.1 | |
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
A reconciliation of segment revenues and expenses to consolidated revenues and expenses and net income is as follows (dollars in millions):
| | | | | | | | | | | | | | | | | |
| | 2025 | | 2024 | | 2023 |
| Total segment revenues | $ | 4,511.5 | | | $ | 4,467.7 | | | $ | 4,144.6 | |
| Total investment gains (losses) | (54.7) | | | (49.9) | | | (69.0) | |
| Revenues related to earnings attributable to VIEs | 23.7 | | | 31.7 | | | 71.2 | |
Fee revenue related to divested business | 6.9 | | | — | | | — | |
| Consolidated revenues | 4,487.4 | | | 4,449.5 | | | 4,146.8 | |
| | | | | |
| Total segment expenses | 3,958.4 | | | 3,916.9 | | | 3,685.1 | |
Insurance policy benefits - fair value changes in embedded derivative liabilities | 64.0 | | | (46.3) | | | 29.9 | |
| Expenses attributable to VIEs | 25.0 | | | 36.9 | | | 70.5 | |
| Fair value changes related to agent deferred compensation plan | 1.7 | | | (6.6) | | | 3.5 | |
Expenses related to TechMod initiative | 20.3 | | | — | | | — | |
Goodwill and other asset impairment | 101.9 | | | — | | | — | |
Expenses related to divested business | 24.2 | | | — | | | — | |
| Other expenses | (1.5) | | | 8.7 | | | 1.0 | |
| Consolidated expenses | 4,194.0 | | | 3,909.6 | | | 3,790.0 | |
| Income before tax | 293.4 | | | 539.9 | | | 356.8 | |
| | | | | |
| Income tax expense | 64.1 | | | 119.1 | | | 80.3 | |
| | | | | |
| Net income | $ | 229.3 | | | $ | 420.8 | | | $ | 276.5 | |
Segment balance sheet information was as follows (dollars in millions):
| | | | | | | | | | | |
| 2025 | | 2024 |
| Assets: | | | |
| Annuity | $ | 13,692.5 | | | $ | 13,001.4 | |
| Health | 9,367.1 | | | 9,116.7 | |
| Life | 4,331.3 | | | 4,194.7 | |
| Investments not allocated to product lines | 10,879.8 | | | 10,599.1 | |
Assets of our non-life companies included in the fee income segment | 161.0 | | | 257.7 | |
| Assets of our other non-life companies | 358.9 | | | 679.7 | |
| Total assets | $ | 38,790.6 | | | $ | 37,849.3 | |
| Liabilities: | | | |
| Annuity | $ | 14,445.0 | | | $ | 13,539.6 | |
| Health | 9,573.7 | | | 9,490.7 | |
| Life | 4,448.9 | | | 4,311.2 | |
| Liabilities associated with investments not allocated to product lines (a) | 7,425.3 | | | 7,541.1 | |
| Liabilities of our non-life companies included in the fee income segment | 50.5 | | | 37.0 | |
| Liabilities of our other non-life companies | 209.0 | | | 414.5 | |
| Total liabilities | $ | 36,152.4 | | | $ | 35,334.1 | |
___________
(a) Includes investment borrowings, policyholder account balances related to funding agreements, borrowings related to VIEs and notes payable - direct corporate obligations.
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
16. QUARTERLY FINANCIAL DATA (UNAUDITED)
We compute earnings per common share for each quarter independently of earnings per share for the year. The sum of the quarterly earnings per share may not equal the earnings per share for the year because of: (i) transactions affecting the weighted average number of shares outstanding in each quarter; and (ii) the uneven distribution of earnings during the year. Quarterly financial data (unaudited) were as follows (dollars in millions, except per share data):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended |
| 2025 | March 31 | | June 30 | | September 30 | | December 31 |
| Revenues | $ | 1,004.1 | | | $ | 1,151.5 | | | $ | 1,188.7 | | | $ | 1,143.1 | |
Income before income taxes | $ | 27.8 | | | $ | 118.0 | | | $ | 36.2 | | | $ | 111.4 | |
Income tax expense | 6.3 | | | 26.2 | | | 13.1 | | | 18.5 | |
Net income | $ | 21.5 | | | $ | 91.8 | | | $ | 23.1 | | | $ | 92.9 | |
| Earnings per common share: | | | | | | | |
| Basic: | | | | | | | |
Net income | $ | 0.21 | | | $ | 0.93 | | | $ | 0.24 | | | $ | 0.98 | |
| Diluted: | | | | | | | |
Net income | $ | 0.21 | | | $ | 0.91 | | | $ | 0.24 | | | $ | 0.95 | |
| | | | | | | |
| 2024 | March 31 | | June 30 | | September 30 | | December 31 |
| Revenues | $ | 1,156.5 | | | $ | 1,066.2 | | | $ | 1,129.6 | | | $ | 1,097.2 | |
Income before income taxes | $ | 146.2 | | | $ | 150.6 | | | $ | 11.0 | | | $ | 232.1 | |
Income tax expense | 33.9 | | | 34.3 | | | 1.7 | | | 49.2 | |
Net income | $ | 112.3 | | | $ | 116.3 | | | $ | 9.3 | | | $ | 182.9 | |
| Earnings per common share: | | | | | | | |
| Basic: | | | | | | | |
Net income | $ | 1.03 | | | $ | 1.08 | | | $ | 0.09 | | | $ | 1.78 | |
| Diluted: | | | | | | | |
Net income | $ | 1.01 | | | $ | 1.06 | | | $ | 0.09 | | | $ | 1.74 | |
17. INVESTMENTS IN VARIABLE INTEREST ENTITIES
We have concluded that we are the primary beneficiary with respect to certain VIEs, which are consolidated in our financial statements. In consolidating the VIEs, we consistently use the financial information most recently distributed to investors in the VIE.
All of the VIEs are collateralized loan trusts that were established to issue securities to finance the purchase of commercial bank loans and other permitted investments. The assets held by the trusts are legally isolated and not available to the Company. The liabilities of the VIEs are expected to be satisfied from the cash flows generated by the underlying loans held by the trusts, not from the assets of the Company. The scheduled repayments of the remaining principal balance of the borrowings related to the VIEs are estimated as follows: $56.7 million in 2030 and $217.7 million in 2031 and thereafter. The Company has no financial obligation to the VIEs beyond its investment in each VIE.
Interest expense of $23.5 million, $34.7 million and $68.7 million for the years ended December 31, 2025, 2024 and 2023, respectively, was recognized related to total borrowings related to the VIEs.
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
Certain of our subsidiaries are noteholders of the VIEs. Another subsidiary of the Company is the investment manager for the VIEs. As such, it has the power to direct the most significant activities of the VIEs which materially impacts the economic performance of the VIEs.
During 2025, two VIEs were liquidated, which resulted in approximately $4.8 million of realized losses related to sales of invested assets as well as a $1.5 million gain on extinguishment of debt. The impact to net income was $(3.3) million on our consolidated statement of operations for the year ended December 31, 2025. These liquidations largely resulted in a decrease in invested assets and cash of $182.6 million and $59.0 million, respectively, and a decrease in borrowings related to variable interest entities of $222.6 million. In addition, a VIE purchased $38.4 million of additional invested assets during 2025, which along with the settlement of approximately $208.6 million of investment payables from the prior year, resulted in a decrease in cash of $247.1 million on our consolidated balance sheet as of December 31, 2025.
The following tables provide supplemental information about the assets and liabilities of the VIEs which have been consolidated (dollars in millions):
| | | | | | | | | | | | | | | | | |
| | December 31, 2025 |
| VIEs | | Eliminations | | Net effect on consolidated balance sheet |
| Assets: | | | | | |
| Investments held by variable interest entities | $ | 293.0 | | | $ | — | | | $ | 293.0 | |
Other invested assets, affiliated | — | | | (107.8) | | | (107.8) | |
| Cash and cash equivalents held by variable interest entities | 27.4 | | | — | | | 27.4 | |
| Accrued investment income | 1.0 | | | — | | | 1.0 | |
| Income tax assets, net | 16.0 | | | — | | | 16.0 | |
| Other assets | 0.6 | | | (0.2) | | | 0.4 | |
| Total assets | $ | 338.0 | | | $ | (108.0) | | | $ | 230.0 | |
| Liabilities: | | | | | |
| Other liabilities | $ | 16.7 | | | $ | (0.9) | | | $ | 15.8 | |
| Borrowings related to variable interest entities | 274.4 | | | — | | | 274.4 | |
| Notes payable of VIEs held by subsidiaries | 107.8 | | | (107.8) | | | — | |
| Total liabilities | $ | 398.9 | | | $ | (108.7) | | | $ | 290.2 | |
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
| | | | | | | | | | | | | | | | | |
| | December 31, 2024 |
| VIEs | | Eliminations | | Net effect on consolidated balance sheet |
| Assets: | | | | | |
| Investments held by variable interest entities | $ | 433.8 | | | $ | — | | | $ | 433.8 | |
Other invested assets, affiliated | — | | | (130.0) | | | (130.0) | |
| Cash and cash equivalents held by variable interest entities | 341.0 | | | — | | | 341.0 | |
| Accrued investment income | 0.9 | | | — | | | 0.9 | |
| Income tax assets, net | 15.0 | | | — | | | 15.0 | |
| Other assets | 5.5 | | | (0.2) | | | 5.3 | |
| Total assets | $ | 796.2 | | | $ | (130.2) | | | $ | 666.0 | |
| Liabilities: | | | | | |
| Other liabilities | $ | 225.5 | | | $ | (0.6) | | | $ | 224.9 | |
| Borrowings related to variable interest entities | 497.6 | | | — | | | 497.6 | |
| Notes payable of VIEs held by subsidiaries | 131.2 | | | (131.2) | | | — | |
| Total liabilities | $ | 854.3 | | | $ | (131.8) | | | $ | 722.5 | |
The following table provides supplemental information about the revenues and expenses of the VIEs which have been consolidated in accordance with authoritative guidance, after giving effect to the elimination of our investment in the VIEs and investment management fees earned by a subsidiary of the Company (dollars in millions):
| | | | | | | | | | | | | | | | | |
| 2025 | | 2024 | | 2023 |
| Revenues: | | | | | |
| Net investment income – policyholder and other special-purpose portfolios | $ | 23.4 | | | $ | 40.9 | | | $ | 85.2 | |
| Fee revenue and other income | 0.3 | | | 2.6 | | | 4.4 | |
| Total revenues | 23.7 | | | 43.5 | | | 89.6 | |
| Expenses: | | | | | |
| Interest expense | 23.5 | | | 34.7 | | | 68.7 | |
Gain on extinguishment of borrowings related to variable interest entities | (1.5) | | | — | | | — | |
| Other operating expenses | 3.0 | | | 2.2 | | | 1.8 | |
| Total expenses | 25.0 | | | 36.9 | | | 70.5 | |
Income before net investment losses and income taxes | (1.3) | | | 6.6 | | | 19.1 | |
Net investment losses | (6.5) | | | (16.9) | | | (4.4) | |
| | | | | |
| Income before income taxes | $ | (7.8) | | | $ | (10.3) | | | $ | 14.7 | |
The investment portfolios held by the VIEs are primarily comprised of commercial bank loans to corporate obligors. At December 31, 2025, such investments had an amortized cost of $294.1 million; gross unrealized gains of $0.9 million; gross unrealized losses of $1.4 million; an allowance for credit losses of $0.6 million; and an estimated fair value of $293.0 million. The estimated fair value of the below-investment grade portfolio was $282.0 million, or 99 percent of the amortized cost. At December 31, 2025, the amortized cost of the below-investment grade investments held by the VIEs was $283.1 million, or 96 percent of the VIEs' investment portfolio.
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
The following table summarizes changes in the allowance for credit losses related to investments held by VIEs for each of the three years ended December 31, 2025 (dollars in millions):
| | | | | | | | |
| | Corporate securities |
Allowance at December 31, 2022 | | $ | 5.5 | |
| Additions for securities for which credit losses were not previously recorded | | 0.8 | |
| Additions (reductions) for securities where an allowance was previously recorded | | (0.3) | |
Reduction for securities disposed during the period | | (2.9) | |
Allowance at December 31, 2023 | | 3.1 | |
| Additions for securities for which credit losses were not previously recorded | | 0.8 | |
| Additions (reductions) for securities where an allowance was previously recorded | | 1.9 | |
Reduction for securities disposed during the period | | (4.5) | |
Allowance at December 31, 2024 | | 1.3 | |
| Additions for securities for which credit losses were not previously recorded | | 1.4 | |
| Additions (reductions) for securities where an allowance was previously recorded | | 1.5 | |
Reduction for securities disposed during the period | | (3.6) | |
Allowance at December 31, 2025 | | $ | 0.6 | |
The following table sets forth the amortized cost and estimated fair value of the investments held by the VIEs at December 31, 2025, by contractual maturity. Actual maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties.
| | | | | | | | | | | |
| Amortized cost | | Estimated fair value |
| | (Dollars in millions) |
| Due in one year or less | $ | — | | | $ | — | |
| Due after one year through five years | 130.2 | | | 129.2 | |
| Due after five years through ten years | 163.9 | | | 163.8 | |
| Total | $ | 294.1 | | | $ | 293.0 | |
The following table sets forth the amortized cost and estimated fair value of those investments held by the VIEs with unrealized losses at December 31, 2025, by contractual maturity. Actual maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties.
| | | | | | | | | | | |
| Amortized cost | | Estimated fair value |
| | (Dollars in millions) |
| Due in one year or less | $ | — | | | $ | — | |
| Due after one year through five years | 87.2 | | | 86.0 | |
| Due after five years through ten years | 76.8 | | | 76.0 | |
| Total | $ | 164.0 | | | $ | 162.0 | |
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
___________________
The following summarizes the investments sold at a loss during 2025, which had been continuously in an unrealized loss position exceeding 20 percent of the amortized cost basis prior to the sale for the period indicated (dollars in millions):
| | | | | | | | | | | | | | | | | |
| | | At date of sale |
| Number of issuers | | Amortized cost | | Fair value |
| Less than 6 months prior to sale | 1 | | $ | 0.9 | | | $ | 0.6 | |
| Greater than or equal to 6 months and less than 12 months prior to sale | 6 | | 4.6 | | | 2.6 | |
| Greater than 12 months prior to sale | 3 | | 2.9 | | | 1.2 | |
| | | | $ | 8.4 | | | $ | 4.4 | |
As of December 31, 2025, there was one investment with an amortized cost of $0.4 million and a fair value of $0.3 million held by the VIEs rated below-investment grade not deemed to have a credit loss with an unrealized loss of $0.1 million which has been continuously in an unrealized loss position exceeding 20 percent of the cost basis for less than six months.
During 2025, the VIEs recognized net investment losses of $6.5 million which were comprised of: (i) $7.2 million of net losses from the sales of fixed maturities; and (ii) a $0.7 million decrease in the allowance for credit losses. Such net investment losses included gross realized losses of $7.6 million from the sale of $95.5 million of investments. Sales activity in 2025 was partially driven by the liquidation of two collateralized loan trusts.
During 2024, the VIEs recognized net investment losses of $16.9 million which were comprised of: (i) $18.7 million of net losses from the sales of fixed maturities; and (ii) a $1.8 million decrease in the allowance for credit losses. Such net investment losses included gross realized losses of $23.8 million from the sale of $199.6 million of investments.
During 2023, the VIEs recognized net investment losses of $4.4 million which were comprised of: (i) $6.8 million of net losses from the sales of fixed maturities; and (ii) a $2.4 million increase in the allowance for credit losses. Such net investment losses included gross realized losses of $6.9 million from the sale of $18.5 million of investments.
At December 31, 2025, there were no fixed maturity investments held by the VIEs in default.
At December 31, 2025, the VIEs held: (i) investments (for which an allowance for credit losses has not been recorded) with a fair value of $86.7 million and gross unrealized losses of $0.9 million that had been in an unrealized loss position for less than twelve months; and (ii) investments (for which an allowance for credit losses has not been recorded) with a fair value of $34.2 million and gross unrealized losses of $0.3 million that had been in an unrealized loss position for greater than twelve months.
At December 31, 2024, the VIEs held: (i) investments (for which an allowance for credit losses has not been recorded) with a fair value of $183.2 million and gross unrealized losses of $0.9 million that had been in an unrealized loss position for less than twelve months; and (ii) investments (for which an allowance for credit losses has not been recorded) with a fair value of $25.6 million and gross unrealized losses of $0.3 million that had been in an unrealized loss position for greater than twelve months.
The investments held by the VIEs are evaluated for impairment in a manner that is consistent with the Company's fixed maturities, available for sale.