CNO Financial Group Reports First Quarter 2014 Results

CARMEL, Ind., May 6, 2014 /PRNewswire/ — CNO Financial Group, Inc. (NYSE:
CNO) today announced first quarter of 2014 operating earnings (1) of $59.9
million, or 27 cents per diluted share compared to $45.6 million, or 19 cents
per diluted share, in the first quarter of 2013. CNO reported a net loss for the
first quarter of 2014 of $228.0 million, or $1.03 per diluted share, driven by
the loss of $298.0 million, or $1.35 per diluted share, from the previously
announced transaction to sell 100% of the common stock of Conseco Life Insurance
Company (“CLIC”).

“We are pleased to report that CNO continues to deliver strong performance with
growth in operating earnings per share, sales and collected premiums,” CEO Ed
Bonach said. “In addition, the pending sale of CLIC and the recently completed
long-term care 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 large, growing, underserved middle-income market.”

First Quarter 2014 Highlights

— Sales, as defined by total new annualized premium (“NAP”) (2): $101.9
million, up 4% from 1Q13
— Collected premium from our continuing operating segments (3): $815.7
million up 2% from 1Q13
— Net income (loss) per diluted share: $(1.03) in 1Q14 (including $(1.35)
from the loss on the pending sale of CLIC) compared to 5 cents in 1Q13
(including (24) cents from the loss on extinguishment of debt)
— Net operating income (1) per diluted share: 27 cents compared to 19
cents in 1Q13
— Consolidated risk-based capital ratio was 427%, reflecting statutory
operating earnings of $92.2 million and net dividends to the holding
company of $40 million
— Unrestricted cash and investments held by our holding company were $306
million at March 31, 2014, after $58.8 million of common stock
repurchases, dividends and debt payments

Quarterly Segment Operating Results

Three
months
ended

March 31,
———

2014 2013
—- —-

(Dollars in
millions,
except per
share
data)

EBIT (5):

Bankers Life $84.2 $62.1

Washington National 31.1 34.0

Colonial Penn (6.2) (5.4)

Other CNO Business:

Loss from the long-term care
business reinsured in 4Q13 – (2.7)

Overhead expense of CLIC
expected to continue after
the sale – (4.6)
—-

EBIT from business segments
continuing after the CLIC
sale 109.1 83.4

Corporate Operations,
excluding corporate interest
expense (6.0) 3.0
—- —

EBIT from operations
continuing after the CLIC
sale 103.1 86.4

Corporate interest expense (11.1) (15.1)
—– —-

Operating earnings before
taxes 92.0 71.3

Tax expense on operating
income 32.1 25.7
—- —-

Net operating income (1) 59.9 45.6

Earnings of CLIC being sold
(net of taxes) 6.7 5.5

Loss on operations of CLIC
being sold (including impact
of taxes) (298.0) –

Net realized investment gains
(net of related amortization
and taxes) 13.6 8.0

Fair value changes in
embedded derivative
liabilities (net of related
amortization and taxes) (7.2) 1.3

Equity in earnings of certain
non-strategic investments
and earnings attributable to
non-controlling interests
(net of taxes) (3.0) (1.8)

Loss on extinguishment of
debt (net of taxes) – (57.2)

Valuation allowance for
deferred tax assets and
other tax items – 10.5

Net income (loss) $(228.0) $11.9
===== ===

Per diluted share:*

Net operating income $.27 $.19

Earnings of CLIC being sold
(net of taxes) .03 .02

Loss on operations of CLIC
being sold (including impact
of taxes) (1.35) –

Net realized investment gains
(net of related amortization
and taxes) .06 .04

Fair value changes in
embedded derivative
liabilities (net of related
amortization and taxes) (.03) .01

Equity in earnings of certain
non-strategic investments
and earnings attributable to
non-controlling interests
(net of taxes) (.01) (.01)

Loss on extinguishment of
debt (net of taxes) – (.24)

Valuation allowance for
deferred tax assets and
other tax items – .04
— —

Net income (loss) $(1.03) $.05
===== ====

* The weighted average diluted shares used to calculate 1Q14 earnings per share
amounts exclude 5.8 million of equivalent shares, since such shares are
anti-dilutive due to the net loss recognized in the quarter.

The following table summarizes the financial impact of a significant item on our
1Q14 net operating income (dollars in millions, except per share amounts):

Three months ended

March 31, 2014*
————–

Actual Significant Excluding
results item significant
item
—– ——- ——-

Net Operating Income (1):

Bankers Life $84.2 $ – $84.2

Washington National 31.1 – 31.1

Colonial Penn (6.2) – (6.2)
—- — —-

EBIT from business segments continuing after the CLIC 109.1 – 109.1

sale

Corporate Operations, excluding corporate interest (6.0) 3.0 (3.0)

expense

EBIT from operations continuing after the CLIC sale (5) 103.1 3.0 106.1

Corporate interest expense (11.1) – (11.1)
—– — —–

Operating earnings before taxes 92.0 3.0 95.0

Tax expense on operating income 32.1 1.1 33.2
—-

Net operating income $59.9 $1.9 $61.8
===== ==== =====

Net operating income per diluted share $.27 $.01 $.28
==== ==== ====

The significant item in 1Q14 is an accrual adjustment primarily related to
incentive compensation which impacted the Corporate Operations segment.

* See page 9 for the table of Net Operating Income Excluding Significant Item
for the three months ended March 31, 2013.

Segment Results

These results reflect changes we made to our segment reporting due to the CLIC
operations being sold, as further described in our Form 8-K dated April 22,
2014.

Bankers Life markets and distributes a variety of insurance products to
middle-income Americans at or near retirement through a dedicated field force of
career agents. NAP in 1Q14 was $63.1 million, up 4 percent from 1Q13 reflecting
higher sales of life and annuity products. Increased sales of Medicare Advantage
policies, which are not included in NAP, contributed to higher fee income in the
quarter. Collected premiums were up 2% in 1Q14 compared to 1Q13, driven by
strong sales. Increased agent productivity offset a 3% decrease in average agent
count, reflecting our emphasis on increasing sales generated per agent.

Pre-tax operating earnings in 1Q14 compared to 1Q13 were up $22.1 million, or 36
percent. Earnings in 1Q14 continued to reflect favorable reserve developments in
the Medicare supplement block, favorable mortality and increased earnings from
favorable annuity margins.

Pre-tax operating earnings in 1Q14 included approximately $2 million of overhead
expenses that were allocated to the Other CNO Business segment in previous
quarters and are expected to continue after the completion of the sale of CLIC.

Pre-tax operating earnings in 1Q13 reflect an out-of-period adjustment related
to the long-term care block which reduced earnings by $9.2 million.

Washington National markets and distributes supplemental health and life
insurance to middle-income consumers through a wholly-owned subsidiary and
independent insurance agencies. NAP in 1Q14 was $22.0 million, up 7 percent from
1Q13 primarily driven by strong supplemental health sales in both the worksite
and individual markets. Collected premiums from the segment’s supplemental
health block were up 5 percent in 1Q14 compared to 1Q13, driven by strong sales
and persistency.

Pre-tax operating earnings in 1Q14 compared to 1Q13 were down $2.9 million, or 9
percent primarily resulting from unfavorable annuity margins and approximately
$2 million of overhead expenses that were allocated to the Other CNO Business
segment in previous quarters and are expected to continue after the completion
of the sale of CLIC.

Colonial Penn markets primarily graded benefit and simplified issue life
insurance directly to customers through television advertising, direct mail, the
internet and telemarketing. NAP in 1Q14 was $16.8 million, down 1 percent from
1Q13, reflecting timing differences in lead generation efforts. Collected
premiums were up 7 percent in 1Q14 compared to 1Q13, driven by growth in the
block.

Pre-tax operating earnings (loss) in 1Q14 reflected higher marketing expenses as
a result of higher television advertising costs as compared to 1Q13, partially
offset by favorable mortality. In-force EBIT was $10.3 million, up 17 percent
from 1Q13, reflecting the growth in the block.

Recognizing the accounting standard related to deferred acquisition costs, the
amount of our investment in new business during a particular period will have a
significant impact on this segment’s results. We expect this segment to report a
pre-tax loss of approximately $5 million in 2014.

Corporate Operations includes our investment advisory subsidiary and corporate
expenses.

Pre-tax earnings (loss) in 1Q14 compared to 1Q13 reflect higher expenses in 1Q14
and higher investment results in 1Q13, primarily related to the investments
underlying our Company-owned life insurance (which supports a deferred
compensation program for certain agents).

Pre-tax earnings (loss) in 1Q14 reflected higher expenses of $3 million
primarily related to accrual adjustments for incentive compensation.

Pre-tax earnings in 1Q13, included earnings on the investments underlying our
Company-owned life insurance of $4.6 million (compared to $1.0 million in 1Q14),
reflecting the favorable market conditions in 1Q13.

Non-Operating Items Related to Operations of CLIC Being Sold

We entered into a definitive agreement to sell 100% of the common stock of CLIC
to Wilton Reassurance Company (“Wilton Re”) in 1Q14. The sale of CLIC is subject
to customary closing conditions and certain regulatory approvals, and is
expected to close mid-year 2014. The estimated loss on the disposition of $298.0
million was recognized in 1Q14. The estimated loss will be further adjusted
through the date of closing to reflect changes in CLIC’s statutory capital and
surplus.

The transaction meets the criteria for held for sale accounting. As a result,
the assets and liabilities of CLIC being sold are included as single line items
in the asset and liability sections of our consolidated balance sheet as of
March 31, 2014.

The earnings related to the CLIC business being sold to Wilton Re are also
reflected as non-operating items. Such earnings, net of taxes, were $6.7 million
in 1Q14 and $5.5 million in 1Q13.

Other Non-Operating Items

Net realized investment gains in 1Q14 were $13.6 million (net of related
amortization and taxes) including total other-than-temporary impairment losses
of $11.9 million recorded in earnings. Impairment losses in 1Q14 reflect the
writedown of a commercial mortgage loan and certain legacy investments in
private companies. Net realized investment gains in 1Q13 were $8.0 million (net
of related amortization and taxes), with no other-than-temporary impairment
losses.

During 1Q14 and 1Q13, we recognized an increase (decrease) in earnings of $(7.2)
million and $1.3 million, respectively, resulting from changes in the estimated
fair value of embedded derivative liabilities related to our fixed index
annuities, net of related amortization and income taxes. Such amounts reflect
the changes in market interest rates used to determine the derivative’s
estimated fair value.

The results for 1Q13 included a $57.2 million loss on extinguishment of debt,
net of taxes, related to the completion of a tender offer pursuant to which we
purchased $59.3 million aggregate principal amount of our 7.0% Convertible
Senior Debentures due 2016.

In 1Q13, we reduced the valuation allowance for deferred tax assets by $10.5
million resulting from the utilization of capital loss carryforwards during the
period.

Statutory (based on non-GAAP measures) and GAAP Capital Information

Our consolidated statutory risk-based capital ratio was 427% at March 31, 2014,
reflecting 1Q14 consolidated statutory operating earnings of $92.2 million and
the payment of net dividends to the holding company of $40 million during the
quarter.

During the first quarter of 2014, we repurchased $41.0 million of securities
under our repurchase program (including $8 million of repurchases settled in
2Q14). We repurchased 2.2 million common shares at an average cost of $18.63 per
share. CNO anticipates repurchasing securities at the higher end of the
previously announced range of $225 million to $300 million during 2014, absent
compelling alternatives. As of March 31, 2014, we had 219.3 million shares
outstanding and had authority to repurchase up to an additional $356.4 million
of our common stock.

During 1Q14, we also paid common stock dividends of $13.3 million.

Book value per diluted share, excluding accumulated other comprehensive income
(loss) (6), was $17.52 at March 31, 2014, compared to $18.62 at December 31,
2013. The decrease primarily reflects the loss recognized on the transaction to
sell CLIC, partially offset by our 1Q14 operating earnings.

Our debt-to-total capital ratio, excluding accumulated other comprehensive
income (4) at March 31, 2014, was 17.6 percent, an increase of 70 basis points
from December 31, 2013, reflecting the decrease to capital from the loss
recognized on the transaction to sell CLIC and debt repayments of $12.5 million.
Unrestricted cash and investments held by our holding company were $306 million
at March 31, 2014, compared to $309 million at December 31, 2013.

Conference Call

The Company will host a conference call to discuss results on April 28, 2014 at
11:00 a.m. Eastern Time. The webcast can be accessed through the Investors
section of the company’s website: http://ir.CNOinc.com. Participants should go
to the website at least 15 minutes before the event to register and download any
necessary audio software. During the call, we will be referring to a
presentation that will be available the morning of the call at the Investors
section of the company’s website.

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 www.CNOinc.com.

– Tables Follow –

CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(Dollars in millions)

(unaudited)

March
31, December 31,
2014 2013
—- —-

ASSETS

Investments:

Fixed maturities,
available for sale, at
fair value (amortized
cost: March 31, 2014 – $20,143.8 $23,178.3

$18,465.6; December 31, 2013 – $21,860.6)

Equity securities at
fair value (cost: March
31, 2014 -$260.5;
December 31, 2013 –
$237.9) 277.6 249.3

Mortgage loans 1,501.7 1,729.5

Policy loans 102.6 277.0

Trading securities 235.5 247.6

Investments held by
variable interest
entities 1,134.1 1,046.7

Other invested assets 409.5 423.3
—– —–

Total investments 23,804.8 27,151.7

Cash and cash
equivalents –
unrestricted 285.4 699.0

Cash and cash
equivalents held by
variable interest
entities 140.3 104.3

Accrued investment
income 259.3 286.9

Present value of future
profits 527.7 679.3

Deferred acquisition
costs 740.4 968.1

Reinsurance receivables 3,072.8 3,392.1

Income tax assets, net 870.7 1,147.2

Assets held in separate
accounts 10.0 10.3

Other assets 401.0 341.7

Assets of CLIC being
sold 4,346.3 –
——- —

Total assets $34,458.7 $34,780.6
======= =======

LIABILITIES AND SHAREHOLDERS’
EQUITY

Liabilities:

Liabilities for insurance
products:

Policyholder account
balances $10,625.3 $12,776.4

Future policy benefits 10,138.6 11,222.5

Liability for policy and
contract claims 482.2 566.0

Unearned and advanced
premiums 279.5 300.6

Liabilities related to
separate accounts 10.0 10.3

Other liabilities 727.4 590.6

Payable to reinsurer – 590.3

Investment borrowings 1,499.4 1,900.0

Borrowings related to
variable interest
entities 1,019.4 1,012.3

Notes payable – direct
corporate obligations 844.1 856.4

Liabilities of CLIC
being sold 4,122.6 –
——- —

Total liabilities 29,748.5 29,825.4
——– ——–

Commitments and Contingencies

Shareholders’ equity:

Common stock ($0.01 par
value, 8,000,000,000
shares authorized,
shares issued and 2.2 2.2

outstanding: March 31, 2014 –
219,266,947; December 31, 2013
– 220,323,823)

Additional paid-in
capital 4,054.7 4,092.8

Accumulated other
comprehensive income 766.2 731.8

Retained earnings
(accumulated deficit) (112.9) 128.4
—— —–

Total shareholders’
equity 4,710.2 4,955.2
——- ——-

Total liabilities and
shareholders’ equity $34,458.7 $34,780.6
======= =======

CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS

(Dollars in millions, except per share data)

(unaudited)

Three months ended

March 31,
———

2014 2013
—- —-

Revenues:

Insurance policy income $685.9 $691.2

Net investment income:

General account assets 348.1 351.9

Policyholder and
reinsurer accounts and
other special-purpose
portfolios 20.9 77.7

Realized investment gains
(losses):

Net realized investment
gains, excluding
impairment losses 35.3 15.3

Other-than-temporary impairment
losses:

Total other-than-
temporary impairment
losses (11.9) –

Portion of other-than-
temporary impairment
losses recognized in
accumulated other
comprehensive income – –
— —

Net impairment losses
recognized (11.9) –

Total realized gains
(losses) 23.4 15.3
—- —-

Fee revenue and other
income 6.4 6.5
— —

Total revenues 1,084.7 1,142.6
——- ——-

Benefits and expenses:

Insurance policy
benefits 690.3 754.1

Loss on sale of
subsidiary 278.6 –

Interest expense 24.6 27.3

Amortization 66.7 79.3

Loss on extinguishment
of debt – 57.7

Other operating costs
and expenses 194.1 189.6
—– —–

Total benefits and
expenses 1,254.3 1,108.0
——- ——-

Income (loss) before
income taxes (169.6) 34.6

Income tax expense (benefit):

Tax expense on period
income 39.0 33.2

Valuation allowance for
deferred tax assets
and other tax items 19.4 (10.5)
—- —–

Net income (loss) $(228.0) $11.9
======= =====

Earnings per common share:

Basic:

Weighted average shares
outstanding 220,307,000 222,081,000
=========== =========

Net income (loss) $(1.03) $.05
====== ====

Diluted:

Weighted average shares
outstanding 220,307,000 243,467,000
=========== =========

Net income (loss) $(1.03) $.05
====== ====

CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES

EBIT FROM BUSINESS SEGMENTS

SUMMARIZED BY IN-FORCE AND NEW BUSINESS (7)

(Dollars in millions)

Three
months
ended

March 31,
———

2014 2013
—- —-

EBIT (5) from In-force and New
Business

Bankers Life segment:

In-Force Business $122.4 $96.1

New Business (38.2) (34.0)
—– —–

Total $84.2 $62.1
===== =====

Washington National segment:

In-Force Business $33.9 $37.3

New Business (2.8) (3.3)
—- —-

Total $31.1 $34.0
===== =====

Colonial Penn segment:

In-Force Business $10.3 $8.8

New Business (16.5) (14.2)
—– —–

Total $(6.2) $(5.4)
==== ====

Other CNO Business:

In-Force Business $ – $(7.3)

New Business – –
— —

Total $ – $(7.3)
== === ====

Total Business segments:

In-Force Business $166.6 $134.9

New Business (57.5) (51.5)

Total EBIT from business
segments continuing after
the CLIC sale $109.1 $83.4
==== =====

CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES

NET OPERATING INCOME EXCLUDING SIGNIFICANT ITEM*

(Dollars in millions, except per share data)

Three months ended

March 31, 2013*
————–

Actual Significant Excluding
results item significant
item
—– ——– ——–

Net Operating Income (1):

Bankers Life $62.1 $9.2 $71.3

Washington National 34.0 – 34.0

Colonial Penn (5.4) – (5.4)

Other CNO Business:

Losses from the long-term care business reinsured (2.7) – (2.7)

effective December 31, 2013

Overhead expense of CLIC expected to continue (4.6) – (4.6)

after the completion of the sale

EBIT from business segments continuing 83.4 9.2 92.6

after the CLIC sale

Corporate Operations, excluding corporate interest 3.0 – 3.0

expense

EBIT from operations continuing after the CLIC sale (5) 86.4 9.2 95.6

Corporate interest expense (15.1) – (15.1)
—– — —–

Operating earnings before taxes 71.3 9.2 80.5

Tax expense on operating income 25.7 3.2 28.9
—-

Net operating income $45.6 $6.0 $51.6
===== ==== =====

Net operating income per diluted share $.19 $.03 $.22
==== ==== ====

* This table summarizes the financial impact of a significant item (as described
in the segment results section of this press release) on our 1Q13 net operating
income.

CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES

COLLECTED PREMIUMS

FROM CONTINUING OPERATING SEGMENTS

(Dollars in millions)

Three
months
ended

March 31,
———

2014 2013
—- —-

Bankers Life segment:

Medicare supplement $179.4 $185.2

Long-term care 123.7 135.4

PDP and other health 8.8 12.9

Supplemental health 3.6 1.6

Life 94.0 89.5

Annuity 190.5 165.6
—– —–

Total 600.0 590.2
—– —–

Washington National segment:

Supplemental health 125.9 120.3

Medicare supplement and
other health 21.7 27.4

Life 6.5 6.3

Annuity .6 .9
— —

Total 154.7 154.9
—– —–

Colonial Penn segment:

Life 60.1 56.1

Supplemental health .9 1.1
— —

Total 61.0 57.2
—- —-

Total collected premiums
from continuing operating
segements $815.7 $802.3
==== ====

NEW ANNUALIZED PREMIUMS (2)

(Dollars in millions)

Three
months
ended

March 31,
———

2014 2013
—- —-

Bankers Life segment:

Medicare supplement $19.0 $19.1

Long-term care 4.6 6.1

Supplemental health 2.2 2.8

Life 26.0 22.5

Annuity 11.3 10.0
—- —-

Total 63.1 60.5
—- —-

Washington National
segment:

Supplemental health 21.3 19.2

Life .7 1.4
— —

Total 22.0 20.6
—- —-

Colonial Penn segment:

Life 16.8 17.0
—- —-

Total 16.8 17.0
—- —-

Total new annualized
premiums $101.9 $98.1
==== ===

CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES

BENEFIT RATIOS ON MAJOR HEALTH LINES OF BUSINESS

Three months
ended

March 31,
———

2014 2013
—- —-

Bankers Life segment:

Medicare Supplement:

Earned premium $195 million $188 million

Benefit ratio (8) 67.7% 68.5%

Long-Term Care:

Earned premium $129 million $135 million

Benefit ratio (8) 131.9% 129.4%

Interest-adjusted benefit
ratio (a non-GAAP
measure) (9) 81.0% 81.7%

Washington National
segment:

Medicare Supplement:

Earned premium $23 million $27 million

Benefit ratio (8) 63.9% 65.0%

Supplemental health:

Earned premium $125 million $118 million

Benefit ratio (8) 79.2% 79.3%

Interest-adjusted benefit
ratio (a non-GAAP
measure) (9) 53.2% 53.1%

NOTES

(1) Management believes that an analysis of Net income applicable to common
stock before: (i) the loss on the operations of CLIC being sold; (ii) the
earnings of CLIC being sold; (iii) loss on reinsurance transaction; (iv) net
realized investment gains or losses, net of related amortization and taxes; (v)
fair value changes due to fluctuations in the interest rates used to discount
embedded derivative liabilities related to our fixed index annuities, net of
related amortization and taxes; (vi) equity in earnings of certain non-strategic
investments and earnings attributable to non-controlling interests, net of
taxes; (vii) loss on extinguishment of debt, net of taxes; and (viii) changes in
the valuation allowance for deferred tax assets (“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. Management uses this measure to evaluate performance because the items
excluded from net operating income can be affected by events that are unrelated
to the company’s underlying fundamentals. Net realized investment gains or
losses include: (i) gains or losses on the sales of investments; (ii)
other-than-temporary impairments recognized through net income; and (iii)
changes in fair value of certain fixed maturity investments with embedded
derivatives. A reconciliation of Net operating income to Net income applicable
to common stock is provided in the table on page 2. Additional information
concerning this non-GAAP measure is included in our periodic filings with the
Securities and Exchange Commission that are available in the “Investors – SEC
Filings” section of CNO’s website, www.CNOinc.com.

(2) Measured by new annualized premium, which includes 6% of annuity and 10% of
single premium whole life deposits and 100% of all other premiums. Medicare
Advantage sales are not comparable to other sales and are therefore excluded in
all periods.

(3) Collected premiums from our core operating segments include premiums
collected in our Bankers Life, Washington National and Colonial Penn segments.
Collected premiums from all sources (including CLIC operations held for sale and
the reinsured long-term care business included in the former Other CNO Business
segment) were $851.9 million in 1Q14, up 1% from 1Q13.

(4) The calculation of this non-GAAP measure differs from the corresponding GAAP
measure because accumulated other comprehensive income (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 the unrealized appreciation (depreciation) of our investments.
The corresponding GAAP measures for debt-to-total capital were 15.2% and 14.7%
at March 31, 2014 and December 31, 2013, respectively.

(5) Management believes that an analysis of earnings before the loss on the
operations of CLIC being sold, the earnings of CLIC being sold, loss on
reinsurance transaction, net realized investment gains (losses), fair value
changes due to fluctuations in the interest rates used to discount embedded
derivative liabilities related to our fixed index annuities, equity in earnings
of certain non-strategic investments and earnings attributable to
non-controlling interests, corporate interest expense, loss on extinguishment of
debt and taxes (“EBIT,” a non-GAAP financial measure) provides a clearer
comparison of the operating results of the company quarter-over-quarter because
these items are unrelated to the company’s underlying fundamentals. A
reconciliation of EBIT to Net Income applicable to common stock is provided in
the table on page 2.

(6) Book value per diluted share reflects the potential dilution that could
occur if outstanding stock options and warrants were exercised, restricted stock
and performance units were vested and convertible securities were converted. The
dilution from options, warrants, restricted shares and performance units is
calculated using the treasury stock method. Under this method, we assume the
proceeds from the exercise of the options and warrants (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 closing market price
on the last day of the period. The dilution from convertible securities is
calculated assuming the securities were converted on the last day of the period.
In addition, the calculation of this non-GAAP measure differs from the
corresponding GAAP measure because accumulated other comprehensive income (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 the unrealized appreciation
(depreciation) of our investments. The corresponding GAAP measures for book
value per common share were $21.48 and $22.49 at March 31, 2014 and December 31,
2013, respectively.

(7) Management believes that an analysis of EBIT, separated between in-force and
new business provides increased clarity around the value drivers of our
business, particularly since the new business results are significantly impacted
by the rate of sales, mix of business and the distribution channel through which
new sales are made. EBIT from new business includes pre-tax revenues and
expenses associated with new sales of our insurance products during the first
year after the sale is completed. EBIT from in-force business includes all
pre-tax revenues and expenses associated with sales of insurance products that
were completed more than one year before the end of the reporting period. The
allocation of certain revenues and expenses between new and in-force business is
based on estimates, which we believe are reasonable.

(8) The benefit ratio is calculated by dividing the related product’s insurance
policy benefits by insurance policy income.

(9) The interest-adjusted benefit ratio (a non-GAAP measure) is calculated by
dividing the product’s insurance policy benefits less imputed interest income on
the accumulated assets backing the insurance liabilities by insurance policy
income. Interest income is an important factor in measuring the performance of
longer duration health products. The net cash flows generally cause an
accumulation of amounts in the early years of a policy (accounted for as reserve
increases), which will be paid out as benefits in later policy years (accounted
for as reserve decreases). Accordingly, as the policies age, the benefit ratio
will typically increase, but the increase in the change in reserve will be
partially offset by the imputed interest income earned on the accumulated
assets. The interest-adjusted benefit ratio reflects the effects of such
interest income offset. Since interest income is an important factor in
measuring the performance of these products, management believes a benefit
ratio, which includes the effect of interest income, is useful in analyzing
product performance. Additional information concerning this non-GAAP measure is
included in our periodic filings with the Securities and Exchange Commission
that are available in the “Investors – SEC Filings” section of CNO Financial’s
website, www.CNOinc.com.

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,” “guidance,” “outlook”
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; (xxiii) closing of the sale of Conseco Life
Insurance Company; and (xxiv) 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 forward-looking 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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