United States securities and exchange commission logo
September 20, 2023
Paul McDonough
Chief Financial Officer
CNO Financial Group, Inc.
11825 N. Pennsylvania Street
Carmel, Indiana 46032
Re: CNO Financial
Group, Inc.
Form 10-K for the
Fiscal Year Ended December 31, 2022
Filed February 24,
2023
Form 10-Q for the
Quarterly Period Ended June 30, 2023
Filed August 9,
2023
File No. 001-31792
Dear Paul McDonough:
We have limited our review of your filings to the financial
statements and related
disclosures and have the following comments. In some of our comments, we
may ask you to
provide us with information so we may better understand your disclosure.
Please respond to these comments within ten business days by
providing the requested
information or advise us as soon as possible when you will respond. If
you do not believe our
comments apply to your facts and circumstances, please tell us why in
your response.
After reviewing your
response to these comments, we may have additional comments.
Form 10-Q for the Quarterly Period Ended June 30, 2023
Summary of Significant Accounting Policies, page 10
1. Please tell us and
revise future filings to more clearly describe how your annuities are
accounted for during
the accumulation and payout phase. Please describe the key
attributes of each
phase and describe the specific liabilities and revenue line items that are
used to present the key
recognition events. To supplement your disclosure, please provide
us with an accounting
analysis of the life cycle of a typical fixed index annuity, detailing
the journal entries
recorded with appropriate commentary at issuance and throughout the
accumulation and payout
phase. Please include the accounting for embedded derivatives,
market risk benefits in
an asset and liability position and include details regarding the
periodic unlocking
exercises. Please include appropriate reference to the applicable
accounting guidance
supporting your journal entries at each stage of the life cycle.
Paul McDonough
FirstName LastNamePaul
CNO Financial Group, Inc.McDonough
Comapany 20,
September NameCNO
2023 Financial Group, Inc.
September
Page 2 20, 2023 Page 2
FirstName LastName
Liability for future policy benefits, page 11
2. We note your disclosure that, this liability also includes the
amount of total reserves
above (below) policyholder account balances for our fixed indexed
annuity products due
to the valuation of the related embedded derivative. Please tell us
and revise future
filings to quantify this amount for each period presented and, if
true, disclose that the
change in this amount is recognized as Insurance policy benefits
in the statement of
operations. Additionally, please tell us and in future filings revise
the Policyholder
account balance policy disclosure to clearly describe the portion of
the embedded
derivative liability that is presented in this line item and revise
the table on page 44 to
more clearly describe in which balance sheet line items the fair value
of the embedded
derivative liability is presented.
Liabilities for Insurance Products, page 28
3. Please tell us and revise future filings to clarify the difference
between Issuances and
Premiums Received in the rollforward of the liability for
policyholder account balances
on page 34.
Form 10-K for the Fiscal Year Ended December 31, 2022
Annuities, page 9
4. Please tell us and revise future filings to clarify how premiums are
paid for your fixed
index annuities (e.g., lump sum or installments) and the magnitude of
each.
5. Please tell us and revise future filings to clarify the available
payout options for your fixed
index annuities (e.g., lump sum, fixed payments for a fixed amount of
time, lifetime
payments, etc.) and the magnitude of each payment option selected.
Overview, page 48
6. We note your disclosure on page 65 that, 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 $(181.3) million, $195.5 million
and $32.3 million
in 2022, 2021 and 2020, respectively. Please provide us with and
revise future filings to
include an analysis of the earnings impact, for each period presented,
of the embedded
derivative and related items if meaningful to the analysis (e.g.,
interest credited to policy
holder account balances, amortization of DAC, etc.) and the derivative
options used to
hedge the embedded derivative. The analysis should detail the specific
line items in
which each earnings impact is recognized in your GAAP financial
statements and in your
non-GAAP financial measures net operating income and non-operating
income.
7. We note your disclosure on page 50 in note (a) that fair value
changes due to fluctuations
in the interest rates used to discount embedded derivative liabilities
related to our fixed
Paul McDonough
FirstName LastNamePaul
CNO Financial Group, Inc.McDonough
Comapany 20,
September NameCNO
2023 Financial Group, Inc.
September
Page 3 20, 2023 Page 3
FirstName LastName
indexed annuities is excluded from your segment measure. Please
tell us and revise
future filings as needed to clarify, if all changes in fair value of
embedded derivative
liabilities are excluded, or if it is only the portion related to
changes in the discount rate.
Additionally, please explain why you exclude the change in fair value
of the embedded
derivative liabilities from your segment measure but include the
change in fair value of
the derivative call options which are used to hedge the embedded
derivative liability.
8. To the extent that the adjustments included in the non-GAAP
reconciliation on page 50
are presented net of tax, please revise future filings to show the
adjustments on a gross
basis and show the tax impact of adjustments in a separate line item
with a clear
explanation of how the amount was measured. Also, revise your
discussion of the non-
GAAP measure as needed to clarify the measurement of each adjustment.
Please refer to
question 102.11 of the C&DIs on Non-GAAP Financial Measures for
guidance.
Results of Operations, page 59
9. Please tell us and enhance your disclosure in future filings to more
fully describe the line
item labeled amortization and non-deferred commissions, specifically
detailing what non-
deferred commissions are and where they are presented in the
consolidated statement of
operations so a reader can better understand the nature of these
adjustments and how they
relate to your consolidated operating results.
Margin from fixed indexed annuities, page 64
10. We note insurance policy benefits totaled ($106.2) million, $33.7
million and $108.8
million for 2022, 2021 and 2020. Please tell us and revise future
filings to more clearly
discuss what activity this represents and describe the key drivers
resulting in the
variability during the periods presented.
Consolidated Statement of Operations, page 93
11. Please tell us and revise future filings to detail the amount and
nature of material items
disclosed as Amortization on the face of the Consolidated
Statement of Operations.
Note 4 Fair Value Measurements, page 121
12. We note your disclosure on page 131 that the change in fair value, net
for each period in
your embedded derivatives is included in the consolidated statement of
operations. Please
tell us and revise future filings here and in the summary of
significant accounting policies
to disclose in which line item(s) the net change in fair value of your
embedded derivatives
is presented.
Note 10 Derivatives, page 149
13. Please tell us and revise future filings to disclose the location and
amount of gains and
losses on your embedded derivatives in the table on the bottom of page
149. Refer to
ASC 815-10-50-4A for guidance.
Paul McDonough
CNO Financial Group, Inc.
September 20, 2023
Page 4
Note 14 Statutory Information (Based on Non-GAAP Measures), page 156
14. Please tell us and revise future filings to disclose the amount of
statutory capital and
surplus necessary to satisfy regulatory requirements. Refer to ASC
944-505-50-1.
In closing, we remind you that the company and its management are
responsible for the
accuracy and adequacy of their disclosures, notwithstanding any review,
comments, action or
absence of action by the staff.
You may contact Michael Volley at 202-551-3437 or Benjamin Phippen at
202-551-3697
with any questions.
FirstName LastNamePaul McDonough Sincerely,
Comapany NameCNO Financial Group, Inc.
Division of
Corporation Finance
September 20, 2023 Page 4 Office of
Finance
FirstName LastName