CNO Financial Group Announces Sale of Closed Block Life Insurance Subsidiary to Wilton Re

CARMEL, Ind., March 20, 2014 /PRNewswire/ — CNO Financial Group, Inc. (NYSE:
CNO) today announced that it has entered into a definitive agreement to sell
100% of the common stock of Conseco Life Insurance Company (“CLIC”), a wholly
owned life insurance subsidiary consisting primarily of closed block
interest-sensitive and traditional life insurance and annuities, to Wilton
Reassurance Company (“Wilton Re”). The transaction, when completed, will reduce
statutory run-off reserves by $3.4 billion. These reserves are reported in the
Other CNO Business segment.

As part of the agreement, Bankers Life and Casualty Company (“Bankers Life”), a
wholly owned life insurance subsidiary, will recapture approximately $160
million of traditional life reserves previously reinsured to Wilton Re, paying
$28 million.

CNO also announced that its board of directors has approved an increase in the
quarterly dividend to $0.06 per share on the Company’s common shares,
representing a 100% increase. The dividend will be payable March 24, 2014, to
shareholders of record at the close of business on March 14, 2014.

“The disposition of these low returning and historically volatile closed-blocks
of business marks another significant milestone for the company,” said Ed
Bonach, CEO. “The divestiture of CLIC and the recently announced LTC reinsurance
transaction enable us to shed the legacy of the past and devote our attention to
our core business segments and meeting the needs of the fast growing and
under-served middle-income market. These transactions will unlock stranded
capital, be accretive to ROE, reduce the risk profile of the company and further
support the decision to double our common stock dividend.”

The purchase price consists of the value ascribed to the closed blocks of
business plus CLIC’s statutory capital and surplus at closing. CLIC’s capital
and surplus is expected to benefit by approximately $36 million from certain
intercompany transactions which will transfer accident and health business out
of CLIC prior to closing. Based on CLIC’s capital and surplus as of December 31,
2013 and the expected benefit from the intercompany transactions, the purchase
price would be approximately $237 million. The proceeds will be further adjusted
to reflect CLIC’s actual statutory capital and surplus at the time of closing.

CNO estimates that the announced transactions will result in a pro forma* GAAP
after tax loss of approximately $303 million and a reduction to shareholders’
equity of approximately $447 million (including the impact of the reduction to
net unrealized gains included in accumulated other comprehensive income). The
transactions will increase deployable capital and are expected to have no
material impact to leverage as a portion of the proceeds are required to pay
down debt.

The sale of CLIC is subject to customary closing conditions and certain
regulatory approvals, and is expected to close mid-year 2014.

RBC Capital Markets, LLC serves as financial advisor and Willkie Farr &
Gallagher LLP serves as legal counsel for CNO in this transaction.

The company will host a conference call to discuss today’s announcement at 10:00
a.m. (EST) today, March 3, 2014. There will be a live webcast of the
presentation, including presentation materials, available on the Investors
section of the company’s website Participants should go to
the website at least 15 minutes before the event to register and download any
necessary software. The call-in numbers for the conference call are as follows:

Live Call
(888) 251-7470 (Domestic)
(706) 679-1704 (International)
Conference ID: 5049290

(855) 859-2056 (Domestic)
(404) 537-3406 (International)
Conference ID: 5049290

* Refer to the accompanying table for assumptions used to estimate the pro forma

About CNO Financial Group
CNO Financial Group, Inc. (NYSE: CNO) is a holding company. Our insurance
subsidiaries – principally Bankers Life and Casualty Company, Colonial Penn Life
Insurance Company and Washington National Insurance Company – primarily serve
middle-income pre-retiree and retired Americans by helping them protect against
financial adversity and provide for a more secure retirement. For more
information, visit CNO online at

-Table Follows-


The pro forma impacts are calculated as if the sale of CLIC and the recapture of
a traditional life block by Bankers Life had been completed on December 31,
2013. Actual results will vary based on the fair value of CLIC’s investment
portfolio and its statutory capital and surplus on the closing date. The pro
forma amounts were determined as follows (dollars in millions):

Pro forma net loss:

Loss on sale of CLIC:

Cash proceeds received (a) $237

Net assets sold (527)

Subtotal (290)

Reinsurance recapture:

Amount paid by Bankers Life (28)

Net assets received 29

Subtotal 1

Transaction expenses and
other (9)

Loss before income taxes (298)

Income tax expense (b) 5

Pro forma loss $(303)

Pro forma reduction to
shareholders’ equity:

Pro forma net loss as
summarized above $(303)

Decrease in accumulated
other comprehensive

income related to the
unrealized gains in

CLIC’s investment portfolio (144)

Pro forma reduction to

equity $(447)

(a) Includes $36 million from
certain intercompany
transactions which will
transfer accident and
health business out of
CLIC to Washington
National Insurance
Company prior to closing.

(b) A tax gain will be
recognized as a result of
the announced
transactions due to the
tax basis of CLIC. The
tax gain will be reduced
by non-life net
operating loss
carryforwards which are
fully offset by a
valuation allowance.
Accordingly, the tax
impacts of the announced
transactions are expected
to be minimal.

Cautionary Statement Regarding Forward-Looking Statements. Our statements, trend
analyses and other information contained in this press release relative to
markets for CNO Financial’s products and trends in CNO Financial’s operations or
financial results, as well as other statements, contain forward-looking
statements within the meaning of the federal securities laws and the Private
Securities Litigation Reform Act of 1995. Forward-looking statements typically
are identified by the use of terms such as “anticipate,” “believe,” “plan,”
“estimate,” “expect,” “project,” “intend,” “may,” “will,” “would,”
“contemplate,” “possible,” “attempt,” “seek,” “should,” “could,” “goal,”
“target,” “on track,” “comfortable with,” “optimistic” and similar words,
although some forward-looking statements are expressed differently. You should
consider statements that contain these words carefully because they describe our
expectations, plans, strategies and goals and our beliefs concerning future
business conditions, our results of operations, financial position, and our
business outlook or they state other ”forward looking” information based on
currently available information. Assumptions and other important factors that
could cause our actual results to differ materially from those anticipated in
our forward-looking statements include, among other things: (i) changes in or
sustained low interest rates causing reductions in investment income, the
margins of our fixed annuity and life insurance businesses, and sales of, and
demand for, our products; (ii) expectations of lower future investment earnings
may cause us to accelerate amortization, write down the balance of insurance
acquisition costs or establish additional liabilities for insurance products;
(iii) general economic, market and political conditions, including the
performance and fluctuations of the financial markets which may affect the value
of our investments as well as our ability to raise capital or refinance existing
indebtedness and the cost of doing so; (iv) the ultimate outcome of lawsuits
filed against us and other legal and regulatory proceedings to which we are
subject; (v) our ability to make anticipated changes to certain non-guaranteed
elements of our life insurance products; (vi) our ability to obtain adequate and
timely rate increases on our health products, including our long-term care
business; (vii) the receipt of any required regulatory approvals for dividend
and surplus debenture interest payments from our insurance subsidiaries; (viii)
mortality, morbidity, the increased cost and usage of health care services,
persistency, the adequacy of our previous reserve estimates and other factors
which may affect the profitability of our insurance products; (ix) changes in
our assumptions related to deferred acquisition costs or the present value of
future profits; (x) the recoverability of our deferred tax assets and the effect
of potential ownership changes and tax rate changes on their value; (xi) our
assumption that the positions we take on our tax return filings will not be
successfully challenged by the Internal Revenue Service; (xii) changes in
accounting principles and the interpretation thereof (including changes in
principles related to accounting for deferred acquisition costs); (xiii) our
ability to continue to satisfy the financial ratio and balance requirements and
other covenants of our debt agreements; (xiv) our ability to achieve anticipated
expense reductions and levels of operational efficiencies including improvements
in claims adjudication and continued automation and rationalization of operating
systems, (xv) performance and valuation of our investments, including the impact
of realized losses (including other-than-temporary impairment charges); (xvi)
our ability to identify products and markets in which we can compete effectively
against competitors with greater market share, higher ratings, greater financial
resources and stronger brand recognition; (xvii) our ability to generate
sufficient liquidity to meet our debt service obligations and other cash needs;
(xviii) our ability to maintain effective controls over financial reporting;
(xix) our ability to continue to recruit and retain productive agents and
distribution partners and customer response to new products, distribution
channels and marketing initiatives; (xx) our ability to achieve additional
upgrades of the financial strength ratings of CNO Financial and our insurance
company subsidiaries as well as the impact of our ratings on our business, our
ability to access capital and the cost of capital; (xxi) the risk factors or
uncertainties listed from time to time in our filings with the Securities and
Exchange Commission; (xxii) regulatory changes or actions, including those
relating to regulation of the financial affairs of our insurance companies, such
as the payment of dividends and surplus debenture interest to us, regulation of
the sale, underwriting and pricing of products, and health care regulation
affecting health insurance products; and (xxiii) changes in the Federal income
tax laws and regulations which may affect or eliminate the relative tax
advantages of some of our products or affect the value of our deferred tax
assets. Other factors and assumptions not identified above are also relevant to
the forward-looking statements, and if they prove incorrect, could also cause
actual results to differ materially from those projected. All forward-looking
statements are expressly qualified in their entirety by the foregoing cautionary
statements. Our forwardlooking statements speak only as of the date made. We
assume no obligation to update or to publicly announce the results of any
revisions to any of the forward-looking statements to reflect actual results,
future events or developments, changes in assumptions or changes in other
factors affecting the forward-looking statements.

SOURCE CNO Financial Group, Inc.

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