0001224608cno:ValuationTechniqueRecoveryMethodMembersrt:MinimumMemberus-gaap:FairValueInputsLevel3Membercno:MeasurementInputExpectedRecoveryPercentageMember2023-09-30
Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
þ☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017
2023
o☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the transition period from ___ to ___ 


Commission File Number 001-31792


CNO Financial Group, Inc.

Delaware 75-3108137
State of Incorporation IRS Employer Identification No.
  
11825 N. Pennsylvania Street  
Carmel,Indiana46032 (317)817-6100
Address of principal executive offices Telephone

Securities registered pursuant to Section 12(b) of the Act:
DelawareTitle of each class75-3108137Trading SymbolName of each exchange on which registered
State of IncorporationCommon Stock, par value $0.01 per shareIRS Employer Identification No.CNONew York Stock Exchange
Rights to purchase Series E Junior Participating Preferred StockNew York Stock Exchange
11825 N. Pennsylvania Street5.125% Subordinated Debentures due 2060
Carmel, Indiana  46032CNOpA(317) 817-6100
Address of principal executive officesTelephoneNew York Stock Exchange



Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:  Yes [ X ]☒  No [   ]☐


Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes [ X ]☒  No [   ]☐


Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of "large accelerated filer", "accelerated filer", "smaller reporting company", and "emerging growth company" in Rule 12b-2 of the Exchange Act.  Large accelerated filer [ X ]☒  Accelerated filer [   ]☐ Non-accelerated filer [   ]☐ Smaller reporting company [   ]☐ Emerging growth company [   ]☐


If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [   ]☐


Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):  Yes [   ]☐ No [ X ]☒

Shares of common stock outstanding as of October 19, 2017:  167,762,323






TABLE OF CONTENTS

25, 2023:  112,170,646





TABLE OF CONTENTS
PART I - FINANCIAL INFORMATIONPage
Item 1.Financial Statements (unaudited)
3
5
6
7
89
910
Item 2.
Management's Discussion and Analysis of Consolidated Financial Condition and Results of Operations
5977
5977
6179
6383
6485
82
Liquidity and Capital Resources
8896
96102
105109
107112
Item 3.
108112
Item 4.
108112
PART II - OTHER INFORMATION
Item 1.
109113
Item 1A.
109113
Item 2.
110113
Item 5.
110114
Item 6.
111115



2


PART I - FINANCIAL INFORMATION


ITEM 1. FINANCIAL STATEMENTS.






CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Dollars in millions)
(unaudited)


ASSETS

September 30,
2023		December 31,
2022
 (As recast)
Investments:  
Fixed maturities, available for sale, at fair value (net of allowance for credit losses: September 30, 2023 - $69.4 and December 31, 2022 - $56.0; amortized cost: September 30, 2023 - $23,899.5 and December 31, 2022 - $23,384.2)$20,305.2 $20,353.4 
Equity securities at fair value95.5 135.3 
Mortgage loans (net of allowance for credit losses: September 30, 2023 - $10.9 and December 31, 2022 - $8.0)1,971.3 1,411.9 
Policy loans126.4 121.6 
Trading securities221.2 207.9 
Investments held by variable interest entities (net of allowance for credit losses: September 30, 2023 - $2.9 and December 31, 2022 - $5.5; amortized cost: September 30, 2023 - $880.6 and December 31, 2022 - $1,134.2)858.1 1,077.6 
Other invested assets1,119.9 1,034.7 
Total investments24,697.6 24,342.4 
Cash and cash equivalents - unrestricted460.8 575.7 
Cash and cash equivalents held by variable interest entities122.0 69.2 
Accrued investment income252.3 235.6 
Present value of future profits186.2 203.7 
Deferred acquisition costs1,897.5 1,770.9 
Reinsurance receivables (net of allowance for credit losses: September 30, 2023 - $3.0 and December 31, 2022 - $2.0)4,053.2 4,223.4 
Market risk benefit asset89.3 65.3 
Income tax assets, net1,039.8 1,063.4 
Assets held in separate accounts2.9 2.7 
Other assets705.8 580.8 
Total assets$33,507.4 $33,133.1 
 September 30,
2017		 December 31,
2016
    
Investments:   
Fixed maturities, available for sale, at fair value (amortized cost:  September 30, 2017 - $20,092.5; December 31, 2016 - $19,803.1)$22,129.9
 $21,096.2
Equity securities at fair value (cost: September 30, 2017 - $688.7; December 31, 2016 - $580.7)713.3
 584.2
Mortgage loans1,667.8
 1,768.0
Policy loans114.6
 112.0
Trading securities294.4
 363.4
Investments held by variable interest entities1,382.5
 1,724.3
Other invested assets752.1
 589.5
Total investments27,054.6
 26,237.6
Cash and cash equivalents - unrestricted765.9
 478.9
Cash and cash equivalents held by variable interest entities105.9
 189.3
Accrued investment income268.0
 239.6
Present value of future profits368.5
 401.8
Deferred acquisition costs1,023.8
 1,044.7
Reinsurance receivables2,195.5
 2,260.4
Income tax assets, net567.4
 789.7
Assets held in separate accounts4.8
 4.7
Other assets350.2
 328.5
Total assets$32,704.6
 $31,975.2


(continued on next page)

















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

3
Table of Contents





CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET, continued
(Dollars in millions)
(unaudited)


LIABILITIES AND SHAREHOLDERS' EQUITY

September 30,
2023		December 31,
2022
 (As recast)
Liabilities:  
Liabilities for insurance products:  
Policyholder account balances$15,481.8 $15,234.2 
Future policy benefits10,829.9 11,240.2 
Market risk benefit liability3.1 11.3 
Liability for life insurance policy claims60.8 64.1 
Unearned and advanced premiums221.2 235.0 
Liabilities related to separate accounts2.9 2.7 
Other liabilities869.6 693.9 
Investment borrowings2,089.4 1,639.5 
Borrowings related to variable interest entities918.5 1,104.6 
Notes payable – direct corporate obligations1,140.1 1,138.8 
Total liabilities31,617.3 31,364.3 
Commitments and Contingencies
Shareholders' equity:  
Common stock ($0.01 par value, 8,000,000,000 shares authorized, shares issued and outstanding: September 30, 2023 – 112,163,169; December 31, 2022 – 114,343,070)1.1 1.1 
Additional paid-in capital1,965.3 2,033.8 
Accumulated other comprehensive loss(1,956.7)(1,957.3)
Retained earnings1,880.4 1,691.2 
Total shareholders' equity1,890.1 1,768.8 
Total liabilities and shareholders' equity$33,507.4 $33,133.1 

 September 30,
2017		 December 31,
2016
    
Liabilities:   
Liabilities for insurance products:   
Policyholder account balances$11,113.5
 $10,912.7
Future policy benefits11,374.1
 10,953.3
Liability for policy and contract claims519.5
 500.6
Unearned and advanced premiums262.4
 282.5
Liabilities related to separate accounts4.8
 4.7
Other liabilities789.1
 611.4
Investment borrowings1,646.9
 1,647.4
Borrowings related to variable interest entities1,198.2
 1,662.8
Notes payable – direct corporate obligations914.4
 912.9
Total liabilities27,822.9
 27,488.3
Commitments and Contingencies

 

Shareholders' equity: 
  
Common stock ($0.01 par value, 8,000,000,000 shares authorized, shares issued and outstanding:  September 30, 2017 – 167,762,323; December 31, 2016 – 173,753,614)1.7
 1.7
Additional paid-in capital3,094.5
 3,212.1
Accumulated other comprehensive income933.6
 622.4
Retained earnings851.9
 650.7
Total shareholders' equity4,881.7
 4,486.9
Total liabilities and shareholders' equity$32,704.6
 $31,975.2































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



4
Table of Contents

CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in millions, except per share data)
(unaudited)
Three months endedNine months ended
September 30,September 30,
 2023202220232022
(As recast)(As recast)
Revenues:
Insurance policy income$626.0 $623.2 $1,879.8 $1,873.8 
Net investment income:    
General account assets324.8 289.0 925.1 884.2 
Policyholder and other special-purpose portfolios(33.0)(20.9)109.4 (184.0)
Investment gains (losses):  
Realized investment gains (losses)(21.6)(8.2)(58.0)3.6 
Other investment losses(7.7)(9.5)(21.2)(102.8)
Total investment losses(29.3)(17.7)(79.2)(99.2)
Fee revenue and other income59.0 31.7 141.2 128.4 
Total revenues947.5 905.3 2,976.3 2,603.2 
Benefits and expenses:
Insurance policy benefits399.1 396.1 1,574.7 1,032.2 
Liability for future policy benefits remeasurement loss(.1)(5.0)8.8 2.3 
Change in fair value of market risk benefits(33.8)(34.9)(36.6)(117.9)
Interest expense62.6 37.6 174.9 89.2 
Amortization of deferred acquisition costs and present value of future profits57.0 53.5 168.5 158.5 
Other operating costs and expenses247.1 230.1 775.3 670.9 
Total benefits and expenses731.9 677.4 2,665.6 1,835.2 
Income before income taxes215.6 227.9 310.7 768.0 
Income tax expense on period income48.3 52.0 70.5 175.4 
Net income$167.3 $175.9 $240.2 $592.6 
Earnings per common share:
Basic:
Weighted average shares outstanding112,689,000 114,354,000 113,836,000 116,170,000 
Net income$1.48 $1.54 $2.11 $5.10 
Diluted:   
Weighted average shares outstanding114,462,000 115,928,000 115,613,000 118,072,000 
Net income$1.46 $1.52 $2.08 $5.02 
  Three months ended Nine months ended
  September 30, September 30,
  2017 2016 2017 2016
Revenues:        
Insurance policy income $659.3
 $649.0
 $1,987.2
 $1,947.0
Net investment income:      
  
General account assets 325.9
 301.7
 960.3
 888.5
Policyholder and other special-purpose portfolios 52.7
 43.1
 171.8
 82.7
Realized investment gains (losses):      
  
Net realized investment gains (losses), excluding impairment losses 34.5
 12.8
 74.8
 55.4
Other-than-temporary impairments:        
Total other-than-temporary impairment losses (4.7) (1.2) (17.3) (24.8)
Portion of other-than-temporary impairment losses recognized in accumulated other comprehensive income —
 —
 (.9) —
Net impairment losses recognized (4.7) (1.2) (18.2) (24.8)
Loss on dissolution of variable interest entities (.6) —
 (4.3) (7.3)
Total realized gains 29.2
 11.6
 52.3
 23.3
Fee revenue and other income 12.2
 10.5
 35.5
 38.7
Total revenues 1,079.3
 1,015.9
 3,207.1
 2,980.2
Benefits and expenses:        
Insurance policy benefits 638.1
 609.8
 1,941.6
 1,861.2
Loss on reinsurance transaction —
 75.4
 —
 75.4
Interest expense 30.1
 29.4
 92.3
 86.0
Amortization 58.2
 64.7
 181.3
 181.6
Loss on extinguishment of borrowings related to a variable interest entity 5.5
 —
 5.5
 —
Other operating costs and expenses 217.5
 187.3
 631.3
 603.5
Total benefits and expenses 949.4
 966.6
 2,852.0
 2,807.7
Income before income taxes 129.9
 49.3
 355.1
 172.5
Income tax expense (benefit):        
Tax expense on period income 44.1
 16.9
 123.6
 61.7
Valuation allowance for deferred tax assets and other tax items (15.0) 13.8
 (15.0) (13.2)
Net income $100.8
 $18.6
 $246.5
 $124.0
Earnings per common share:        
Basic:        
Weighted average shares outstanding 168,684,000
 174,247,000
 170,890,000
 177,640,000
Net income $.60
 $.11
 $1.44
 $.70
Diluted:        
Weighted average shares outstanding 170,982,000
 175,723,000
 172,800,000
 179,373,000
Net income $.59
 $.11
 $1.43
 $.69














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

5
Table of Contents

CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
(Dollars in millions)
(unaudited)

Three months endedNine months ended
September 30,September 30,
2023202220232022
(As recast)(As recast)
Net income$167.3 $175.9 $240.2 $592.6 
Other comprehensive income (loss), before tax:
Unrealized losses on investments(922.4)(1,407.2)(569.1)(6,128.2)
Adjustment to discount rate for liability for future policy benefits627.0 862.6 520.9 3,241.4 
Adjustment to instrument-specific credit risk for market risk benefits(3.0).3 (4.4)11.0 
Reclassification adjustments:
For net realized investment losses included in net income12.0 1.0 52.1 36.0 
Other comprehensive loss before tax(286.4)(543.3)(.5)(2,839.8)
Income tax benefit related to items of accumulated other comprehensive loss63.2 121.3 1.1 628.3 
Other comprehensive income (loss), net of tax(223.2)(422.0).6 (2,211.5)
Comprehensive income (loss)$(55.9)$(246.1)$240.8 $(1,618.9)

 Three months ended Nine months ended
 September 30, September 30,
 2017 2016 2017 2016
Net income$100.8
 $18.6
 $246.5
 $124.0
Other comprehensive income, before tax:       
Unrealized gains for the period120.9
 228.3
 794.5
 1,329.2
Adjustment to present value of future profits and deferred acquisition costs(1.8) (11.3) (25.3) (119.6)
Amount related to premium deficiencies assuming the net unrealized gains (losses) had been realized(31.0) (82.8) (243.0) (493.4)
Reclassification adjustments:       
For net realized investment (gains) losses included in net income(27.7) (14.6) (44.0) (24.2)
For amortization of the present value of future profits and deferred acquisition costs related to net realized investment gains (losses) included in net income.7
 .2
 1.0
 .9
Unrealized gains on investments61.1
 119.8
 483.2
 692.9
Change related to deferred compensation plan—
 —
 —
 8.6
Other comprehensive income before tax61.1
 119.8
 483.2
 701.5
Income tax expense related to items of accumulated other comprehensive income(22.0) (42.1) (172.0) (248.8)
Other comprehensive income, net of tax39.1
 77.7
 311.2
 452.7
Comprehensive income$139.9
 $96.3
 $557.7
 $576.7


















































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



6
Table of Contents

CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(Dollars in millions)millions, shares in thousands)
(unaudited)
Common stock
Additional
paid-in		Accumulated other comprehensiveRetained
 SharesAmountcapitalincome (loss)earningsTotal
Balance, June 30, 2022 (as recast)114,795 $1.1 $2,032.7 $(1,415.8)$1,509.9 $2,127.9 
Net income— — — — 175.9 175.9 
Other comprehensive loss, net of tax— — — (422.0)— (422.0)
Common stock repurchased(561)— (10.0)— — (10.0)
Dividends on common stock— — — — (16.3)(16.3)
Employee benefit plans, net of shares used to pay tax withholdings133 — 7.9 — — 7.9 
Balance, September 30, 2022 (as recast)114,367 $1.1 $2,030.6 $(1,837.8)$1,669.5 $1,863.4 
Balance, June 30, 2023113,674 $1.1 $1,997.9 $(1,733.5)$1,730.3 $1,995.8 
Net income— — — — 167.3 167.3 
Other comprehensive loss, net of tax— — — (223.2)— (223.2)
Common stock repurchased(1,646)— (40.0)— — (40.0)
Dividends on common stock— — — — (17.2)(17.2)
Employee benefit plans, net of shares used to pay tax withholdings135 — 7.4 — — 7.4 
Balance, September 30, 2023112,163 $1.1 $1,965.3 $(1,956.7)$1,880.4 $1,890.1 
 
Common stock and
additional
paid-in capital
 
Accumulated other
 comprehensive income
 Retained earnings Total
Balance, December 31, 2015$3,388.6
 $402.8
 $347.1
 $4,138.5
Net income—
 —
 124.0
 124.0
Change in unrealized appreciation (depreciation) of investments and other (net of applicable income tax expense of $248.1)—
 451.5
 —
 451.5
Change in noncredit component of impairment losses on fixed maturities, available for sale (net of applicable income tax expense of $.7)—
 1.2
 —
 1.2
Cost of common stock repurchased(203.0) —
 —
 (203.0)
Dividends on common stock—
 —
 (40.8) (40.8)
Stock options, restricted stock and performance units22.4
 —
 —
 22.4
Balance, September 30, 2016$3,208.0
 $855.5
 $430.3
 $4,493.8
        
Balance, December 31, 2016$3,213.8
 $622.4
 $650.7
 $4,486.9
Cumulative effect of accounting change.9
 —
 (.6) .3
Net income—
 —
 246.5
 246.5
Change in unrealized appreciation (depreciation) of investments (net of applicable income tax expense of $170.9)—
 309.1
 —
 309.1
Change in noncredit component of impairment losses on fixed maturities, available for sale (net of applicable income tax expense of $1.1)—
 2.1
 —
 2.1
Cost of common stock repurchased(140.1) —
 —
 (140.1)
Dividends on common stock—
 —
 (44.7) (44.7)
Stock options, restricted stock and performance units21.6
 —
 —
 21.6
Balance, September 30, 2017$3,096.2
 $933.6
 $851.9
 $4,881.7











































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


7
Table of Contents

CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY, continued
(Dollars in millions, shares in thousands)
(unaudited)

Common stock
Additional
paid-in		Accumulated other comprehensiveRetained
 SharesAmountcapitalincome (loss)earningsTotal
Balance, December 31, 2021 (as recast)120,377 $1.2 $2,184.2 $373.7 $1,125.6 $3,684.7 
Net income— — — — 592.6 592.6 
Other comprehensive loss, net of tax— — — (2,211.5)— (2,211.5)
Common stock repurchased(7,168)(.1)(169.9)— — (170.0)
Dividends on common stock— — — — (48.7)(48.7)
Employee benefit plans, net of shares used to pay tax withholdings1,158 — 16.3 — — 16.3 
Balance, September 30, 2022 (as recast)114,367 $1.1 $2,030.6 $(1,837.8)$1,669.5 $1,863.4 
Balance, December 31, 2022 (as recast)114,343 $1.1 $2,033.8 $(1,957.3)$1,691.2 $1,768.8 
Net income— — — — 240.2 240.2 
Other comprehensive income, net of tax— — — .6 — .6 
Common stock repurchased(3,625)— (85.1)— — (85.1)
Dividends on common stock— — — — (51.0)(51.0)
Employee benefit plans, net of shares used to pay tax withholdings1,445 — 16.6 — — 16.6 
Balance, September 30, 2023112,163 $1.1 $1,965.3 $(1,956.7)$1,880.4 $1,890.1 



























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


8
Table of Contents
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in millions)
(unaudited)

Nine months ended
September 30,
 20232022
Cash flows from operating activities:  
Insurance policy income$1,713.4 $1,724.9 
Net investment income979.5 832.2 
Fee revenue and other income167.0 110.4 
Insurance policy benefits(1,215.2)(1,243.4)
Interest expense(155.3)(65.8)
Deferrable policy acquisition costs(277.6)(248.5)
Other operating costs(759.7)(754.6)
Income taxes(45.9)(20.7)
Net cash from operating activities406.2 334.5 
Cash flows from investing activities:  
Sales of investments992.5 2,764.9 
Maturities and redemptions of investments1,026.8 1,265.1 
Purchases of investments(2,897.1)(5,521.1)
Net purchases of trading securities(37.2)(37.4)
Other(30.3)(39.4)
Net cash used by investing activities(945.3)(1,567.9)
Cash flows from financing activities:  
Issuance of common stock11.1 6.6 
Payments to repurchase common stock(95.8)(180.2)
Common stock dividends paid(51.4)(48.7)
Proceeds from financing arrangements78.2 — 
Amounts received for deposit products1,537.6 2,457.8 
Withdrawals from deposit products(1,265.8)(1,071.0)
Issuance of investment borrowings:
Federal Home Loan Bank895.5 210.0 
Payments on investment borrowings:
Federal Home Loan Bank(445.6)(285.9)
Related to variable interest entities(186.8)(33.4)
Net cash provided by financing activities477.0 1,055.2 
Net decrease in cash and cash equivalents(62.1)(178.2)
Cash and cash equivalents - unrestricted and held by variable interest entities, beginning of period644.9 731.7 
Cash and cash equivalents - unrestricted and held by variable interest entities, end of period$582.8 $553.5 

 Nine months ended
 September 30,
 2017 2016
Cash flows from operating activities:   
Insurance policy income$1,859.4
 $1,837.9
Net investment income898.9
 877.7
Fee revenue and other income35.5
 38.7
Cash and cash equivalents received upon recapture of reinsurance—
 73.6
Insurance policy benefits(1,491.7) (1,439.6)
Interest expense(81.0) (66.5)
Deferrable policy acquisition costs(183.4) (179.4)
Other operating costs(546.0) (552.1)
Income taxes(58.0) (5.5)
Net cash from operating activities433.7
 584.8
Cash flows from investing activities: 
  
Sales of investments1,742.5
 2,225.7
Maturities and redemptions of investments2,543.0
 1,529.5
Purchases of investments(4,076.8) (4,196.7)
Net sales (purchases) of trading securities94.8
 (31.0)
Change in cash and cash equivalents held by variable interest entities83.4
 216.7
Other(23.6) (17.8)
Net cash provided (used) by investing activities363.3
 (273.6)
Cash flows from financing activities: 
  
Issuance of common stock6.0
 6.9
Payments to repurchase common stock(142.3) (210.0)
Common stock dividends paid(44.5) (40.9)
Amounts received for deposit products1,067.2
 992.1
Withdrawals from deposit products(920.8) (891.5)
Issuance of investment borrowings:   
Federal Home Loan Bank332.0
 432.7
Related to variable interest entities387.3
 477.1
Payments on investment borrowings:   
Federal Home Loan Bank(332.6) (333.3)
Related to variable interest entities(862.3) (470.6)
Net cash used by financing activities(510.0) (37.5)
Net increase in cash and cash equivalents287.0
 273.7
Cash and cash equivalents, beginning of period478.9
 432.3
Cash and cash equivalents, end of period$765.9
 $706.0























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

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CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________





BUSINESS AND BASIS OF PRESENTATION

The following notes should be read together with the notes to the consolidated financial statements included in our 2016 Annual Report on Form 10-K.


CNO Financial Group, Inc., a Delaware corporation ("CNO"), is a holding company for a group of insurance companies operating throughout the United States that develop, market and administer health insurance, annuity, individual life insurance and other insurance 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 three distribution channels: careerexclusive agents, independent producers (some of whom sell one or more of our product lines exclusively) and direct marketing.


Our unaudited consolidated financial statements reflect normal recurring adjustments that, in the opinion of management, are necessary for a fair statement of our financial position, results of operations and cash flows for the periods presented.  As permitted by rules and regulations of the Securities and Exchange Commission (the "SEC") applicable to quarterly reports on Form 10-Q, we have condensed or omitted certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP").  We have reclassified certain amounts from the prior periods to conform to the 2017 presentation.  These reclassifications have no effect on net income or shareholders' equity.  Results for interim periods are not necessarily indicative of the results that may be expected for a full year.


Effective January 1, 2023, we adopted Accounting Standards Update 2018-12 ("ASU 2018-12") related to targeted improvements to the accounting for long-duration insurance contracts, with a transition date of January 1, 2021 (the "Transition Date"). The adoption of ASU 2018-12 impacted accounting and presentation related to long-duration insurance contracts and certain related balances for the years ended December 31, 2022 and 2021. Amounts within these interim financial statements, which were previously presented, have been recast to conform with the current accounting and presentation under ASU 2018-12. Disclosures of the impacts of ASU 2018-12 as of the Transition Date are included within the tables in the note to the consolidated financial statements entitled "Recently Adopted Accounting Standards."

Except for balances affected by the adoption of ASU 2018-12, the December 31, 2022 consolidated balance sheet at December 31, 2016, presented herein, has beendata was derived from the audited consolidated financial statements at that date but does not include all ofincluded in our 2022 Annual Report on Form 10-K. Accordingly, these interim consolidated financial statements should be read together with the information and footnotes required by GAAP for completeconsolidated financial statements.statements included in our 2022 Annual Report on Form 10-K.


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 and guaranty fund assessment accruals.  If our future experience differs from these estimates and assumptions, our financial statements wouldcould be materially affected.


The accompanying financial statements are unaudited and 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.


SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The following summarizes the significant accounting policies that have been added or updated as a result of the adoption of ASU 2018-12:

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.
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CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________

Such costs consist primarily of commissions, underwriting, sales and contract issuance and processing expenses. 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 the initial deposit 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 no longer subject to recovery testing after the adoption of ASU 2018-12.

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 of the bankruptcy reorganization of Conseco, Inc. (the "Predecessor")). The present value of future profits is amortized in the same manner as described above for deferred acquisition costs, although such balances are subject to periodic recovery testing.

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.

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. 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 accumulated 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 accumulated account deposits, plus interest credited, less policyholder withdrawals and, if applicable, charges assessed. This balance also includes liabilities for the funding agreement-backed notes ("FABN").

Total liabilities 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):

September 30,
2023		December 31,
2022
Fixed indexed annuity insurance liabilities:
Host contract liability$8,284.5 $7,856.4 
Embedded derivatives at fair value1,213.4 1,297.0 
Total fixed indexed annuity insurance liabilities$9,497.9 $9,153.4 

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CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________

For presentation in the consolidated balance sheet, the total fixed indexed annuity insurance liability balance is bifurcated between: (i) policyholder account balances (which is the total of all current balances accruing to the policyholder under the terms and conditions of the policies assuming the contracts will continue in force); and (ii) the difference between the total fixed indexed annuity insurance liabilities summarized above and the policyholder account balances, which is classified as future policy benefits. These classifications are summarized below (dollars in millions):

September 30,
2023		December 31,
2022
Policyholder account balances$9,960.6 $9,644.8 
Future policy benefits(462.7)(491.4)
Total fixed indexed annuity insurance liabilities$9,497.9 $9,153.4 

When the total policyholder account balance exceeds the total fixed indexed annuity insurance liabilities, a negative future policy benefit balance will occur.

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-to-gross 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.

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 as described above.

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 which were issued prior to September 10, 2003 (the effective date of the bankruptcy reorganization of our Predecessor) 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 at the original contract issuance 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
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CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________

net to gross 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 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 to gross ratio and accretion of interest cost on the liability is recorded through net income. 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.

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 include 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 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.

Reinsurance

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.

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CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________

RECENTLY ADOPTED ACCOUNTING STANDARDS

We adopted ASU 2018-12 effective January 1, 2023. The new guidance: (i) improves the timeliness of recognizing changes in the liability for future benefits and modifies the rate used to discount future cash flows; (ii) simplifies and improves the accounting for certain market-based options or guarantees associated with deposit (or account balance) contracts; (iii) simplifies the amortization of deferred acquisition costs; and (iv) requires enhanced disclosures, including disaggregated rollforwards of the liability for future policy benefits, policyholder account liabilities, MRBs and deferred acquisition costs. Additionally, qualitative and quantitative information about expected cash flows, estimates and assumptions is required. The new measurement guidance for traditional and limited-payment contract liabilities and the new guidance for the amortization of deferred acquisition costs was adopted on a modified retrospective transition approach. For contracts in-force at the Transition Date, we continue to use the existing locked-in investment yield interest rate assumption to calculate the net premium ratio, rather than the upper-medium grade fixed-income corporate instrument yield. However, for balance sheet remeasurement purposes, the current upper-medium grade fixed-income corporate instrument yield is used at transition through accumulated other comprehensive income (loss) and subsequently through other comprehensive income. For MRBs, we use the required retrospective application and were able to use hindsight to measure fair value components to the extent assumptions in a prior period are unobservable or otherwise unavailable.

We selected the modified retrospective transition method, except for MRBs where we are required to use the full retrospective approach. Pursuant to ASU 2018-12, the account balances subject to the guidance were recast on the Transition Date. The following summarizes the impact of adoption on the Transition Date (dollars in millions):

January 1, 2021
Amounts prior
to adoption ofEffect of
ASU 2018-12adoptionAs recast
Present value of future profits$249.4 $10.2 $259.6 
Deferred acquisition costs1,027.8 458.0 1,485.8 
Reinsurance receivables4,584.3 144.1 4,728.4 
Market risk benefit asset— 2.5 2.5 
Income tax assets, net199.4 607.0 806.4 
Total assets35,339.9 1,221.8 36,561.7 
Policyholder account balances12,540.6 (172.9)12,367.7 
Future policy benefits11,744.2 3,960.7 15,704.9 
Market risk benefit liability— 114.8 114.8 
Liability for policy and contract claims561.8 (470.1)91.7 
Total liabilities29,855.7 3,432.5 33,288.2 
Retained earnings752.3 (130.9)(a)621.4 
Accumulated other comprehensive income (loss)2,186.1 (2,079.8)106.3 
Total shareholders' equity5,484.2 (2,210.7)3,273.5 

_____________________
(a)     The impact to retained earnings was primarily related to certain long-term care product cohorts where the present value of expected benefits exceeded the reserve at the Transition Date plus the present value of future gross premiums. As a result, the net premium ratio was capped at 100 percent with an immediate increase in the reserve for such cohorts.
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CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________

The following summarizes the impact of adoption on previously reported balances as of December 31, 2022 and as of and for the three and nine months ended September 30, 2022 (dollars in millions, except per share data):

December 31, 2022
As previouslyEffect of
reportedadoptionAs recast
Present value of future profits$212.2 $(8.5)$203.7 
Deferred acquisition costs1,913.4 (142.5)1,770.9 
Reinsurance receivables4,241.7 (18.3)4,223.4 
Market risk benefit asset— 65.3 65.3 
Income tax assets, net1,165.5 (102.1)1,063.4 
Total assets33,339.2 (206.1)33,133.1 
Policyholder account balances14,858.3 375.9 15,234.2 
Future policy benefits11,809.1 (568.9)11,240.2 
Market risk benefit liability— 11.3 11.3 
Liability for policy and contract claims456.5 (392.4)64.1 
Total liabilities31,938.4 (574.1)31,364.3 
Retained earnings1,459.0 232.2 1,691.2 
Accumulated other comprehensive income (loss)(2,093.1)135.8 (1,957.3)
Total shareholders' equity1,400.8 368.0 1,768.8 

Three months ended
September 30, 2022
As previouslyEffect of
reportedadoptionAs recast
Insurance policy benefits$412.2 $(16.1)$396.1 
Liability for future policy benefits remeasurement loss— (5.0)(5.0)
Change in fair value of market risk benefits— (34.9)(34.9)
Amortization87.5 (34.0)53.5 
Other operating costs and expenses230.8 (.7)230.1 
Total benefits and expenses768.1 (90.7)677.4 
Income before income taxes137.2 90.7 227.9 
Income tax expense32.2 19.8 52.0 
Net income105.070.9175.9 
Earnings per common share - basic$0.92 $0.62 $1.54 
Earnings per common share - diluted0.91 0.61 1.52 

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CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________

Nine months ended
September 30, 2022
As previouslyEffect of
reportedadoptionAs recast
Insurance policy benefits$1,099.1 $(66.9)$1,032.2 
Liability for future policy benefits remeasurement loss— 2.3 2.3 
Change in fair value of market risk benefits— (117.9)(117.9)
Amortization279.5 (121.0)158.5 
Other operating costs and expenses673.5 (2.6)670.9 
Total benefits and expenses2,141.3 (306.1)1,835.2 
Income before income taxes461.9 306.1 768.0 
Income tax expense108.5 66.9 175.4 
Net income353.4239.2592.6 
Earnings per common share - basic$3.04 $2.06 $5.10 
Earnings per common share - diluted2.99 2.03 5.02 

As of September 30, 2022
As previouslyEffect of
reportedadoptionAs recast
Retained earnings$1,431.9 $237.6 1,669.5 
Accumulated other comprehensive loss(2,165.7)327.9 (1,837.8)
Total shareholders' equity1,297.9 565.5 1,863.4 



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CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________

The following tables detail the January 1, 2021 transition adjustments by providing a rollforward of the ending reported balances as of December 31, 2020 to the opening balances as of January 1, 2021 for insurance-related balances, accumulated other comprehensive income and retained earnings (dollars in millions):
January 1, 2021
Asset accounts
Present value of future profitsDeferred acquisition costsReinsurance receivablesMarket risk benefit assetIncome tax assets, net
Amounts prior to adoption of ASU 2018-12$249.4 $1,027.8 $4,584.3 $— $199.4 
Unwinding amounts related to unrealized gains (losses)10.2 458.0 — — — 
Changes in measurement of assets— — (81.6)— — 
Change in discount rates— — 225.7 — — 
Changes in market benefit reserve basis— — — 2.5 — 
Tax impacts of changes recognized in accumulated other comprehensive income— — — — 570.3 
Tax impacts of changes recognized in retained earnings— — — — 36.7 
Amounts, as recast$259.6 $1,485.8 $4,728.4 $2.5 $806.4 

January 1, 2021
Liability accounts
Policyholder account balancesFuture policy benefitsMarket risk benefit liabilityLiability for policy and contract claims
Amounts prior to adoption of ASU 2018-12$12,540.6 $11,744.2 $— $561.8 
Unwinding amounts related to unrealized gains (losses)— (197.5)— — 
Changes in remeasurement of future policy benefits— 31.1 — — 
Changes in classification of liabilities (1)(172.9)643.0 — (470.1)
Reclass to market risk benefit liability— (66.6)66.6 — 
Changes in market risk benefit reserve basis— — 48.2 — 
Change in discount rates— 3,550.7 — — 
Amounts, as recast$12,367.7 $15,704.9 $114.8 $91.7 
_____________________
(1) Amount includes certain reclassifications to conform with the revised presentation of ASU 2018-12, such as reclassifying claims and benefits payable on long-duration health contracts to the liability for future policy benefits.

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CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________

January 1, 2021
Shareholders' equity accounts
Accumulated other comprehensive incomeRetained earnings
Amounts prior to adoption of ASU 2018-12$2,186.1 $752.3 
Unwinding amounts related to unrealized gains (losses)665.7 — 
Changes in measurement of assets and liabilities— (112.7)
Change in market risk benefit reserve basis9.2 (54.9)
Tax impacts of changes recognized in retained earnings— 36.7 
Change in discount rates(3,325.0)— 
Tax impacts of changes recognized in accumulated other comprehensive income570.3 — 
Amounts, as recast$106.3 $621.4 

INVESTMENTS


We classify our fixed maturity securities into one of two categories: (i) "available for sale" (which we carry at estimated fair value with any unrealized gain or loss, net of tax and related adjustments, recorded as a component of shareholders' equity); or (ii) "trading" (which we carry at estimated fair value with changes in such value recognized as either net investment income (classified as investment income from policyholder and other special-purpose portfolios) or investment gains (losses)).


OurtradingTrading securities include: (i) investments purchased with the intent of selling in the near term to generate income; (ii) investments supporting certain insurance liabilities (including investments backing the market strategies of our multibucket annuity products); and (iii)(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 and investments supporting insurance liabilities is recognized in income from policyholder and other special-purpose portfolios (a component of net investment income). The change in fair value of securities with embedded derivatives is recognized in realizedother investment gains (losses). Investment income related to investments supporting certain insurance liabilities is substantially offset by the change in insurance policy benefits related to certain products.


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CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________



Accumulated other comprehensive income is primarily comprised of the net effect of unrealized appreciation (depreciation) onWe review our investments.  These amounts, included in shareholders' equity as of September 30, 2017 and December 31, 2016, were as follows (dollars in millions):

 September 30,
2017		 December 31,
2016
Net unrealized appreciation (depreciation) on fixed maturity securities, available for sale, on which an other-than-temporary impairment loss has been recognized$2.4
 $(1.1)
Net unrealized gains on all other investments2,058.9
 1,311.9
Adjustment to present value of future profits (a)(98.1) (106.2)
Adjustment to deferred acquisition costs(287.9) (223.5)
Adjustment to insurance liabilities(224.5) (13.5)
Deferred income tax liabilities(517.2) (345.2)
Accumulated other comprehensive income$933.6
 $622.4
________
(a)The present value of future profits is the value assigned to the right to receive future cash flows from contracts existing at September 10, 2003, the date Conseco, Inc., an Indiana corporation, emerged from bankruptcy.

At September 30, 2017, adjustments to the present value of future profits, deferred acquisition costs, insurance liabilities and deferred tax assets included $(86.7) million, $(135.8) million, $(224.5) million and $159.1 million, respectively, for premium deficiencies that would exist on certain blocks of business (primarily long-term care products) if unrealized gains on the assets backing such products had been realized and the proceeds from the sales of such assets were invested at then current yields.

At September 30, 2017, the amortized cost, gross unrealized gains and losses, estimated fair value, other-than-temporary impairments in accumulated other comprehensive income of fixed maturities, available for sale and equity securities were as follows (dollars in millions):
 Amortized cost Gross unrealized gains Gross unrealized losses Estimated fair value Other-than-temporary impairments included in accumulated other comprehensive income
Corporate securities$13,145.4
 $1,537.6
 $(33.0) $14,650.0
 $(3.6)
United States Treasury securities and obligations of United States government corporations and agencies145.4
 26.9
 —
 172.3
 —
States and political subdivisions1,857.2
 220.7
 (.9) 2,077.0
 —
Debt securities issued by foreign governments58.1
 3.1
 (.1) 61.1
 —
Asset-backed securities2,608.6
 180.6
 (3.1) 2,786.1
 —
Collateralized debt obligations236.5
 1.4
 —
 237.9
 —
Commercial mortgage-backed securities1,311.6
 37.4
 (10.1) 1,338.9
 —
Mortgage pass-through securities2.0
 .2
 —
 2.2
 —
Collateralized mortgage obligations727.7
 77.3
 (.6) 804.4
 (1.1)
Total fixed maturities, available for sale$20,092.5
 $2,085.2
 $(47.8) $22,129.9
 $(4.7)
Equity securities$688.7
 $27.2
 $(2.6) $713.3
  


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CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________


At December 31, 2016, the amortized cost, gross unrealized gains and losses, estimated fair value, other-than-temporary impairments in accumulated other comprehensive income of fixed maturities, available for sale, and equity securities were as follows (dollars in millions):
 Amortized cost Gross unrealized gains Gross unrealized losses Estimated fair value Other-than-temporary impairments included in accumulated other comprehensive income
Corporate securities$12,549.9
 $1,100.0
 $(139.0) $13,510.9
 $(3.6)
United States Treasury securities and obligations of United States government corporations and agencies143.8
 20.5
 —
 164.3
 —
States and political subdivisions1,811.8
 186.7
 (9.6) 1,988.9
 (3.0)
Debt securities issued by foreign governments37.1
 .2
 (.4) 36.9
 —
Asset-backed securities2,641.5
 84.3
 (15.5) 2,710.3
 —
Collateralized debt obligations230.0
 1.0
 (.3) 230.7
 —
Commercial mortgage-backed securities1,531.0
 33.1
 (27.9) 1,536.2
 —
Mortgage pass-through securities2.3
 .2
 —
 2.5
 —
Collateralized mortgage obligations855.7
 61.4
 (1.6) 915.5
 (1.4)
Total fixed maturities, available for sale$19,803.1
 $1,487.4
 $(194.3) $21,096.2
 $(8.0)
Equity securities$580.7
 $11.5
 $(8.0) $584.2
  

The following table sets forth the amortized cost and estimated fair value of fixed maturities, available for sale, at September 30, 2017, by contractual maturity.  Actual maturities will differ from contractual maturities because certain borrowers may have the right to call or prepay obligations with or without penalties.  Structured securities (such as asset-backed securities, collateralized debt obligations, commercial mortgage-backed securities, mortgage pass-through securities and collateralized mortgage obligations, 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$398.1
 $406.1
Due after one year through five years2,004.8
 2,131.7
Due after five years through ten years1,562.8
 1,671.1
Due after ten years11,240.4
 12,751.5
Subtotal15,206.1
 16,960.4
Structured securities4,886.4
 5,169.5
Total fixed maturities, available for sale$20,092.5
 $22,129.9


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CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________


The following table sets forth the amortized cost and estimated fair value of fixed maturities, available for sale, at December 31, 2016, by contractual maturity.

 
Amortized
cost
 
Estimated
fair
value
 (Dollars in millions)
Due in one year or less$354.7
 $359.8
Due after one year through five years2,243.8
 2,399.5
Due after five years through ten years1,549.1
 1,620.8
Due after ten years10,395.0
 11,320.9
Subtotal14,542.6
 15,701.0
Structured securities5,260.5
 5,395.2
Total fixed maturities, available for sale$19,803.1
 $21,096.2
Net Realized Investment Gains (Losses)

The following table sets forth the net realized investment gains (losses) for the periods indicated (dollars in millions):

 Three months ended Nine months ended
 September 30, September 30,
 2017 2016 2017 2016
Fixed maturity securities, available for sale:       
Gross realized gains on sale$32.3
 $7.3
 $60.4
 $127.1
Gross realized losses on sale(8.5) (2.8) (16.4) (84.4)
Impairments:       
Total other-than-temporary impairment losses(3.2) —
 (10.0) (6.3)
Other-than-temporary impairment losses recognized in accumulated other comprehensive income—
 —
 (.9) —
Net impairment losses recognized(3.2) —
 (10.9) (6.3)
Net realized investment gains from fixed maturities20.6
 4.5
 33.1
 36.4
Equity securities7.7
 17.2
 9.6
 21.3
Commercial mortgage loans—
 —
 1.0
 —
Impairments of other investments(1.5) (1.2) (7.3) (18.5)
Loss on dissolution of variable interest entities(.6) —
 (4.3) (7.3)
Other (a)3.0
 (8.9) 20.2
 (8.6)
Net realized investment gains$29.2
 $11.6
 $52.3
 $23.3
_________________
(a)Changes in the estimated fair value of trading securities that we have elected the fair value option (and are still held as of the end of the respective periods) were $13.0 million and $.8 million for the nine months ended September 30, 2017 and 2016, respectively.

During the first nine months of 2017, we recognized net realized investment gains of $52.3 million, which were comprised of: (i) $60.1 million of net gains from the sales of investments; (ii) $4.3 million of losses on the dissolution of variable interest entities ("VIEs"); (iii) the increase in fair value of certain fixed maturity investments with embedded derivatives of $12.3 million; (iv) the increase in fair value of embedded derivatives related to a modified coinsurance agreement of $2.4 million; and (v) $18.2 million of writedowns of investments for other than temporary declines in fair value recognized through net income.

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CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________



During the first nine months of 2016, we recognized net realized investment gains of $23.3 million, which were comprised of: (i) $48.1 million of net gains from the sales of investments; (ii) a $7.3 million loss on the dissolution of a VIE; (iii) the increase in fair value of certain fixed maturity investments with embedded derivatives of $.6 million; (iv) the increase in fair value of embedded derivatives related to a modified coinsurance agreement of $6.7 million; and (v) $24.8 million of writedowns of investments for other than temporary declines in fair value recognized through net income.

During the first nine months of 2017 and 2016, certain VIEs that were required to be consolidated were dissolved. We recognized a loss of $4.3 million and $7.3 million during the first nine months of 2017 and 2016, respectively, representing the difference between the carrying value of the investment borrowings of such VIEs and the contractual distributions required following the liquidation of the underlying assets.

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.

During the first nine months of 2017, the $16.4 million of gross realized losses on sales of $290.8 million of fixed maturity securities available for sale included: (i) $9.7 million relatedwith unrealized losses to determine whether such impairments are the result of credit losses. We analyze various corporate securities; (ii) $3.1 million relatedfactors to commercial mortgage-backed securities; and (iii) $3.6 million related to various other investments. Securities are generally sold at a loss following unforeseen issue-specific events or conditions or shifts in perceived relative values.  These reasons includemake such determinations including, but are not limited to: (i) changes inactions taken by rating agencies; (ii) default by the investment environment; (ii) expectation thatissuer; (iii) the market value could deteriorate; (iii) our desire to reduce our exposure to an asset class, an issuer or an industry; (iv) prospective or actual changes in credit quality; or (v) changes in expected portfolio cash flows.

During the first nine months of 2017, we recognized $18.2 million of impairment losses recorded in earnings which included: (i) $5.7 million of writedowns on fixed maturities in the energy sector; (ii) $5.2 million of writedowns related to a mortgage loan; and (iii) $7.3 million of writedowns on other investments. Factors considered in determining the writedowns of investments in the first nine months of 2017 included changes in the estimated recoverable valuesignificance of the assets related to each investment and the timing of and complexities related to the recovery process.

During the first nine months of 2016, we recognized $24.8 million of impairment losses recorded in earnings which included: (i) $6.3 million of writedowns on fixed maturities of a single issuer in the energy sector; (ii) $3.7 million of writedowns on a direct loan due to borrower specific events; (iii) $12.7 million of writedowns on a privately placed preferred stock ofdecline; (iv) an entity formed to construct and operate a chemical plant; (iv) $.9 million of writedowns related to a real estate investment; and (v) $1.2 million of writedowns of investments held by VIEs due to other-than-temporary declines in value.

We regularly evaluate allassessment of our investments with unrealized losses for possible impairment.  Our assessment of whether unrealized losses are "other than temporary" requires significant judgment.  Factors considered include:  (i) the extent to which fair value is less than the cost basis; (ii) the length of time that the fair value has been less than cost; (iii) whether the unrealized loss is event driven, credit-driven or a result of changes in market interest rates or risk premium; (iv) the near-term prospects for specific events, developments or circumstances likely to affect the value of the investment; (v) the investment's rating and whether the investment is investment-grade and/or has been downgraded since its purchase; (vi) whether the issuer is current on all payments in accordance with the contractual terms of the investment and is expected to meet all of its obligations under the terms of the investment; (vii) whether we intend to sell the investment or it is more likely than not that circumstances will require us to sell the investment before recovery occurs; (viii) the underlying current and prospective asset and enterprise values of the issuer and the extent to which the recoverability of the carrying value of our investment may be affected by changes in such values; (ix) projections of, and unfavorable changes in, cash flows on structured securities including mortgage-backed and asset-backed securities; (x) our best estimate of the value of any collateral; and (xi) other objective and subjective factors.

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.

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CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________



Impairment losses on equity securities are recognized in net income.  The manner in which impairment losses on fixed maturity securities, available for sale, are recognized in the financial statements is dependent on the facts and circumstances related to the specific security.  If we intend to sell a security or it is more likely than not that we would be required to sell a security before the recovery of its amortized cost, the security is other-than-temporarily impaired and the full amount of the impairment is recognized as a loss through earnings.  If we do not expect to recover the amortized cost basis, we do not planintent to sell the security before recovering the security's amortized cost; (v) an economic analysis of the issuer's industry; and if it is not more likely than not that we would be required to sell(vi) the financial strength, liquidity, and recoverability of the issuer. We perform a security before the recovery of its amortized cost, less any current periodby security review each quarter to evaluate whether a credit loss the recognition of the other-than-temporary impairment is bifurcated.  We recognize the credit loss portion in net income and the noncredit loss portion in accumulated other comprehensive income.has occurred.


We estimate the amount ofIn determining the credit loss component, of a fixed maturity security impairment aswe discount the difference between amortized cost and the present value of the expectedestimated cash flows on a security by security basis. We consider the impact of macroeconomic conditions on inputs used to measure the security.  The present value is determined using the best estimateamount of future cash flows discounted at the effective interest rate implicit to the security at the date of purchase or the current yield to accrete an asset-backed or floating-rate security.  The methodology and assumptions for establishing the best estimate of future cash flows vary depending on the type of security.

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 overcollateralization, excess spread, subordination and guarantees. For corporate bonds, cash flow estimates are derived from scenario-based outcomesby considering asset type, rating, time to maturity, and applying an expected loss rate.

If a portion of expected corporate restructurings or the dispositiondecline is due to credit-related factors, we separate the credit loss component of assets using bond specific facts and circumstances. The previous amortized cost basis less the impairment recognizedfrom the amount related to all other factors. The credit loss component is recorded as an allowance and reported in net income becomes the security's new cost basis.  We accrete the new cost basisother investment gains (losses) (limited to the difference between estimated future cash flows over the expected remaining life of the security, except when the securityfair value and amortized cost). The impairment related to all other factors (non-credit factors) is in default or considered nonperforming.

The remaining noncredit impairment, which is recordedreported in accumulated other comprehensive income is the difference between the security's estimated fair value and our best estimate of future cash flows discounted at the effective interest rate prior(loss) along with unrealized gains (losses) related to impairment.  The remaining noncredit impairment typically represents changes in the market interest rates, current market liquidity and risk premiums.  As of September 30, 2017, other-than-temporary impairments included in accumulated other comprehensive income totaled $4.7 million (before taxes and related amortization).

The following table summarizes the amount of credit losses recognized in earnings on fixed maturity securities,investments, available for sale, held atnet 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 beginning ofcost basis is not adjusted. When we determine a security is uncollectable, the period,remaining amortized cost will be written off.
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 a portion ofit is more likely than not we will be required to sell before anticipated recovery, the other-than-temporary impairment was also recognized in accumulated other comprehensive income for the three and nine months ended September 30, 2017 and 2016 (dollars in millions):

18
 Three months ended Nine months ended
 September 30, September 30,
 2017 2016 2017 2016
Credit losses on fixed maturity securities, available for sale, beginning of period$(4.9) $(2.6) $(5.5) $(2.6)
Add: credit losses on other-than-temporary impairments not previously recognized—
 —
 —
 —
Less: credit losses on securities sold—
 .1
 1.6
 .1
Less: credit losses on securities impaired due to intent to sell (a)—
 —
 —
 —
Add: credit losses on previously impaired securities—
 —
 (1.0) —
Less: increases in cash flows expected on previously impaired securities—
 —
 —
 —
Credit losses on fixed maturity securities, available for sale, end of period$(4.9) $(2.5) $(4.9) $(2.5)

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CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________



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.
__________
(a)Represents securities for which the amount previously recognized in accumulated other comprehensive income was recognized in earnings because we intend to sell the security or we more likely than not will be required to sell the security before recovery of its amortized cost basis.

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.

Accumulated other comprehensive income (loss), included in shareholders' equity as of September 30, 2023 and December 31, 2022, is comprised of the following (dollars in millions):
September 30,
2023		December 31,
2022
Net unrealized losses on investments having no allowance for credit losses$(1,506.2)$(1,247.0)
Unrealized losses on investments with an allowance for credit losses(2,038.5)(1,780.7)
Change in discount rates for liability for future policy benefits1,021.6 500.7 
Change in instrument-specific credit risk for market risk benefits7.8 12.2 
Deferred income tax assets558.6 557.5 
Accumulated other comprehensive loss$(1,956.7)$(1,957.3)


At September 30, 2023, 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 costGross unrealized gainsGross unrealized lossesAllowance for credit lossesEstimated fair value
Corporate securities$13,312.1 $10.7 $(2,297.1)$(66.8)$10,958.9 
United States Treasury securities and obligations of United States government corporations and agencies194.2 — (28.8)— 165.4 
States and political subdivisions2,848.5 7.0 (547.8)(1.7)2,306.0 
Foreign governments93.3 — (16.6)(.7)76.0 
Asset-backed securities1,500.2 .2 (141.0)(.2)1,359.2 
Agency residential mortgage-backed securities627.9 .6 (12.6)— 615.9 
Non-agency residential mortgage-backed securities1,695.8 33.7 (204.3)— 1,525.2 
Collateralized loan obligations1,077.7 1.9 (20.1)— 1,059.5 
Commercial mortgage-backed securities2,549.8 .6 (311.3)— 2,239.1 
Total fixed maturities, available for sale$23,899.5 $54.7 $(3,579.6)$(69.4)$20,305.2 


19
Table of Contents
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________

At December 31, 2022, 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 costGross unrealized gainsGross unrealized lossesAllowance for credit lossesEstimated fair value
Corporate securities$13,649.1 $29.9 $(1,911.9)$(54.4)$11,712.7 
United States Treasury securities and obligations of United States government corporations and agencies171.7 — (13.0)— 158.7 
States and political subdivisions2,846.9 19.3 (476.8)(.9)2,388.5 
Foreign governments86.3 .1 (11.3)(.4)74.7 
Asset-backed securities1,435.7 1.0 (149.4)(.3)1,287.0 
Agency residential mortgage-backed securities174.3 1.4 (.7)— 175.0 
Non-agency residential mortgage-backed securities1,700.4 40.0 (191.9)— 1,548.5 
Collateralized loan obligations825.2 .3 (39.6)— 785.9 
Commercial mortgage-backed securities2,494.6 .1 (272.3)— 2,222.4 
Total fixed maturities, available for sale$23,384.2 $92.1 $(3,066.9)$(56.0)$20,353.4 

The following table sets forth the amortized cost and estimated fair value of fixed maturities, available for sale, at September 30, 2023, 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$171.9 $161.9 
Due after one year through five years2,217.5 2,069.5 
Due after five years through ten years1,729.0 1,551.7 
Due after ten years12,329.7 9,723.2 
Subtotal16,448.1 13,506.3 
Structured securities7,451.4 6,798.9 
Total fixed maturities, available for sale$23,899.5 $20,305.2 


20
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CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________

The following table sets forth the amortized cost and estimated fair value of fixed maturities, available for sale, at December 31, 2022, by contractual maturity.
Amortized
cost		Estimated
fair
value
 (Dollars in millions)
Due in one year or less$112.0 $110.8 
Due after one year through five years1,913.7 1,790.2 
Due after five years through ten years2,098.9 1,910.4 
Due after ten years12,629.4 10,523.2 
Subtotal16,754.0 14,334.6 
Structured securities6,630.2 6,018.8 
Total fixed maturities, available for sale$23,384.2 $20,353.4 

Gross Unrealized Investment Losses


Our investment strategy is to maximize, over a sustained period and within acceptable parameters of quality and risk, investment income and total investment return 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 following table summarizes the gross unrealized losses and fair values of our investments with unrealized losses that arefor which an allowance for credit losses has not deemed to be other-than-temporarily impaired,been recorded, aggregated by investment category and length of time that such securities have been in a continuous unrealized loss position, at September 30, 20172023 (dollars in millions):


 Less than 12 months12 months or greaterTotal
Description of securitiesFair
value		Unrealized
losses		Fair
value		Unrealized
losses		Fair
value		Unrealized
losses
Corporate securities$591.1 $(42.3)$2,938.4 $(631.8)$3,529.5 $(674.1)
United States Treasury securities and obligations of United States government corporations and agencies131.9 (24.7)33.5 (4.1)165.4 (28.8)
States and political subdivisions181.9 (12.9)436.5 (145.7)618.4 (158.6)
Foreign governments6.5 (.5)23.3 (2.8)29.8 (3.3)
Asset-backed securities212.8 (4.1)1,050.6 (133.6)1,263.4 (137.7)
Agency residential mortgage-backed securities505.8 (12.3)7.1 (.3)512.9 (12.6)
Non-agency residential mortgage-backed securities245.1 (6.6)1,014.5 (197.7)1,259.6 (204.3)
Collateralized loan obligations114.4 (.4)642.6 (19.7)757.0 (20.1)
Commercial mortgage-backed securities223.3 (4.3)1,927.6 (307.0)2,150.9 (311.3)
Total fixed maturities, available for sale$2,212.8 $(108.1)$8,074.1 $(1,442.7)$10,286.9 $(1,550.8)


21
  Less than 12 months 12 months or greater Total
Description of securities 
Fair
value
 
Unrealized
losses
 
Fair
value
 
Unrealized
losses
 
Fair
value
 
Unrealized
losses
United States Treasury securities and obligations of United States government corporations and agencies $20.3
 $—
 $.6
 $—
 $20.9
 $—
States and political subdivisions 35.1
 (.6) 19.3
 (.3) 54.4
 (.9)
Debt securities issued by foreign governments 10.5
 (.1) —
 —
 10.5
 (.1)
Corporate securities 666.9
 (7.8) 400.4
 (25.2) 1,067.3
 (33.0)
Asset-backed securities 276.7
 (1.3) 79.6
 (1.8) 356.3
 (3.1)
Collateralized debt obligations 24.0
 —
 —
 —
 24.0
 —
Commercial mortgage-backed securities 226.2
 (1.3) 221.9
 (8.8) 448.1
 (10.1)
Collateralized mortgage obligations 72.8
 (.5) 11.6
 (.1) 84.4
 (.6)
Total fixed maturities, available for sale $1,332.5
 $(11.6) $733.4
 $(36.2) $2,065.9
 $(47.8)
Equity securities $37.4
 $(.8) $89.7
 $(1.8) $127.1
 $(2.6)


15
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CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________



The following table summarizes the gross unrealized losses and fair values of our investments with unrealized losses that arefor which an allowance for credit losses has not deemed to be other-than-temporarily impaired,been recorded, aggregated by investment category and length of time that such securities have been in a continuous unrealized loss position, at December 31, 20162022 (dollars in millions):


 Less than 12 months12 months or greaterTotal
Description of securitiesFair
value		Unrealized
losses		Fair
value		Unrealized
losses		Fair
value		Unrealized
losses
Corporate securities$2,830.8 $(329.4)$370.4 $(129.3)$3,201.2 $(458.7)
United States Treasury securities and obligations of United States government corporations and agencies134.4 (9.6)21.9 (3.4)156.3 (13.0)
States and political subdivisions667.0 (124.8)132.1 (58.5)799.1 (183.3)
Foreign governments35.0 (3.5)2.1 (.3)37.1 (3.8)
Asset-backed securities914.0 (90.1)258.1 (53.4)1,172.1 (143.5)
Agency residential mortgage-backed securities59.7 (.7)— — 59.7 (.7)
Non-agency residential mortgage-backed securities861.6 (89.7)335.4 (102.2)1,197.0 (191.9)
Collateralized loan obligations553.0 (27.4)184.2 (12.2)737.2 (39.6)
Commercial mortgage-backed securities1,581.4 (160.0)593.3 (112.3)2,174.7 (272.3)
Total fixed maturities, available for sale$7,636.9 $(835.2)$1,897.5 $(471.6)$9,534.4 $(1,306.8)
  Less than 12 months 12 months or greater Total
Description of securities 
Fair
value
 
Unrealized
losses
 
Fair
value
 
Unrealized
losses
 
Fair
value
 
Unrealized
losses
United States Treasury securities and obligations of United States government corporations and agencies $8.0
 $—
 $—
 $—
 $8.0
 $—
States and political subdivisions 176.3
 (7.8) 18.3
 (1.8) 194.6
 (9.6)
Debt securities issued by foreign governments 18.9
 (.4) —
 —
 18.9
 (.4)
Corporate securities 1,907.6
 (75.5) 559.6
 (63.5) 2,467.2
 (139.0)
Asset-backed securities 692.9
 (8.5) 262.5
 (7.0) 955.4
 (15.5)
Collateralized debt obligations 38.3
 (.1) 30.8
 (.2) 69.1
 (.3)
Commercial mortgage-backed securities 525.2
 (16.6) 154.0
 (11.3) 679.2
 (27.9)
Collateralized mortgage obligations 73.6
 (.6) 34.6
 (1.0) 108.2
 (1.6)
Total fixed maturities, available for sale $3,440.8
 $(109.5) $1,059.8
 $(84.8) $4,500.6
 $(194.3)
Equity securities $239.4
 $(8.0) $—
 $—
 $239.4
 $(8.0)


Based on management's current assessment of investments with unrealized losses at September 30, 2017,2023, the Company believes the issuers of the securities will continue to meet their obligations (or with respect to equity-type securities, the investment value will recover to its cost basis).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, our intent on an individual security may change, 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.



22
Table of Contents
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________

The following table summarizes changes in the allowance for credit losses related to fixed maturities, available for sale, for the three months ended September 30, 2023 (dollars in millions):

Corporate securitiesStates and political subdivisionsForeign governmentsAsset-backed securitiesTotal
Allowance at June 30, 2023$64.4 $1.0 $.5 $.2 $66.1 
Additions for securities for which credit losses were not previously recorded1.2 — — .1 1.3 
Additions for purchased securities with deteriorated credit— — — — — 
Additions (reductions) for securities where an allowance was previously recorded1.5 .7 .2 (.1)2.3 
Reduction for securities sold during the period(.3)— — — (.3)
Reduction for securities for which the Company made the decision to sell where an allowance was previously recorded— — — — — 
Write-offs— — — — — 
Recoveries of previously written-off amount— — — — — 
Allowance at September 30, 2023$66.8 $1.7 $.7 $.2 $69.4 

The following table summarizes changes in the allowance for credit losses related to fixed maturities, available for sale, for the nine months ended September 30, 2023 (dollars in millions):

Corporate securitiesStates and political subdivisionsForeign governmentsAsset-backed securitiesTotal
Allowance at December 31, 2022$54.4 $.9 $.4 $.3 $56.0 
Additions for securities for which credit losses were not previously recorded5.9 .2 .1 — 6.2 
Additions for purchased securities with deteriorated credit— — — — — 
Additions (reductions) for securities where an allowance was previously recorded9.2 .6 .2 (.1)9.9 
Reduction for securities sold during the period(2.7)— — — (2.7)
Reduction for securities for which the Company made the decision to sell where an allowance was previously recorded— — — — — 
Write-offs— — — — — 
Recoveries of previously written-off amount— — — — — 
Allowance at September 30, 2023$66.8 $1.7 $.7 $.2 $69.4 



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CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________

The following table summarizes changes in the allowance for credit losses related to fixed maturities, available for sale, for the three months ended September 30, 2022 (dollars in millions):

Corporate securitiesStates and political subdivisionsForeign governmentsAsset-backed securitiesTotal
Allowance at June 30, 2022$52.2 $1.1 $.7 $.2 $54.2 
Additions for securities for which credit losses were not previously recorded7.2 .2 .1 .1 7.6 
Additions for purchased securities with deteriorated credit— — — — — 
Additions (reductions) for securities where an allowance was previously recorded(6.9).5 — — (6.4)
Reduction for securities sold during the period(3.3)(.1)— — (3.4)
Reduction for securities for which the Company made the decision to sell where an allowance was previously recorded— — — — — 
Write-offs— — — — — 
Recoveries of previously written-off amount— — — — — 
Allowance at September 30, 2022$49.2 $1.7 $.8 $.3 $52.0 


The following table summarizes changes in the allowance for credit losses related to fixed maturities, available for sale, for the nine months ended September 30, 2022 (dollars in millions):

Corporate securitiesStates and political subdivisionsForeign governmentsAsset-backed securitiesTotal
Allowance at December 31, 2021$7.4 $— $.2 $— $7.6 
Additions for securities for which credit losses were not previously recorded39.8 .7 .5 .2 41.2 
Additions for purchased securities with deteriorated credit— — — — — 
Additions (reductions) for securities where an allowance was previously recorded11.8 1.1 .1 .1 13.1 
Reduction for securities sold during the period(9.8)(.1)— — (9.9)
Reduction for securities for which the Company made the decision to sell where an allowance was previously recorded— — — — — 
Write-offs— — — — — 
Recoveries of previously written-off amount— — — — — 
Allowance at September 30, 2022$49.2 $1.7 $.8 $.3 $52.0 


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CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________

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 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 mortgage loan balance was comprised of commercial and residential mortgage loans. At September 30, 2023, we held commercial mortgage loan investments with an amortized cost and fair value of $1,410.6 million and $1,217.8 million, respectively. There were no commercial mortgage loans in process of foreclosure. At September 30, 2023, we held residential mortgage loan investments with an amortized cost and fair value of $571.6 million and $572.4 million, respectively. At September 30, 2023, there were five residential mortgage loans that were noncurrent with a carrying value of $2.3 million (of which, four loans with a carrying value of $2.0 million were in 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 September 30, 2023 (dollars in millions):
Estimated fair
value
Loan-to-value ratio (a)20232022202120202019PriorTotal amortized costMortgage loansCollateral
Less than 60%$163.6 $147.3 $115.1 $36.7 $73.8 $482.3 $1,018.8 $880.8 $3,789.7 
60% to less than 70%47.1 87.3 11.1 5.6 — 36.8 187.9 165.5 287.0 
70% to less than 80%19.5 77.8 24.8 — — 40.1 162.2 138.7 214.1 
80% to less than 90%— — — — — 17.4 17.4 15.8 20.8 
90% or greater— — — — — 24.3 24.3 17.0 25.1 
Total$230.2 $312.4 $151.0 $42.3 $73.8 $600.9 $1,410.6 $1,217.8 $4,336.7 
________________
(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.

The following table summarizes changes in the allowance for credit losses related to mortgage loans for the three months ended September 30, 2023 and 2022 (dollars in millions):

Three months ended
September 30,
20232022
Allowance at the beginning of the period$10.3 $4.9 
Current period provision for expected credit losses.6 .4 
Initial allowance recognized for purchased financial assets with credit deterioration— — 
Write-offs charged against the allowance— — 
Recoveries of amounts previously written off— — 
Allowance at the end of the period$10.9 $5.3 


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CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________

The following table summarizes changes in the allowance for credit losses related to mortgage loans for the nine months ended September 30, 2023 and 2022 (dollars in millions):

Nine months ended
September 30,
20232022
Allowance at the beginning of the period$8.0 $5.6 
Current period provision for expected credit losses2.9 (.3)
Initial allowance recognized for purchased financial assets with credit deterioration— — 
Write-offs charged against the allowance— — 
Recoveries of amounts previously written off— — 
Allowance at the end of the period$10.9 $5.3 

Total Investment Gains (Losses)

The following table sets forth the total investment gains (losses) for the periods indicated (dollars in millions):

Three months endedNine months ended
September 30,September 30,
 2023202220232022
Realized investment gains (losses): 
Gross realized gains on sales of fixed maturities, available for sale$1.3 $18.1 $11.4 $96.4 
Gross realized losses on sales of fixed maturities, available for sale(9.8)(24.4)(45.8)(81.3)
Equity securities, net— — (.6)(8.3)
Other, net(13.1)(1.9)(23.0)(3.2)
Total realized investment gains (losses)(21.6)(8.2)(58.0)3.6 
Change in allowance for credit losses (a)(2.3)7.5 (13.7)(46.9)
Change in fair value of equity securities (b)(.9)(.7)(.5)(2.4)
Other changes in fair value (c)(4.5)(16.3)(7.0)(53.5)
Other investment losses(7.7)(9.5)(21.2)(102.8)
Total investment losses$(29.3)$(17.7)$(79.2)$(99.2)
_________________
(a)    Changes in the allowance for credit losses includes $1.6 million and $5.7 million in the three months ended September 30, 2023 and 2022, respectively, and $2.6 million and $(2.8) million in the nine months ended September 30, 2023 and 2022, respectively, related to investments held by variable interest entities ("VIEs").
(b)    Changes in the estimated fair value of equity securities (that are still held as of the end of the respective periods) were $(0.7) million and $(6.9) million for the nine months ended September 30, 2023 and 2022, respectively.
(c)    Changes in the estimated fair value of trading securities that we have elected the fair value option (that are still held as of the end of the respective periods) were $(8.0) million and $(36.6) million in the nine months ended September 30, 2023 and 2022, respectively.

During the first nine months of 2023, we recognized net investment losses of $79.2 million, which were comprised of: (i) $50.5 million of net losses from the sales of investments; (ii) $1.1 million of losses related to equity securities, including the change in fair value; (iii) $11.4 million of losses related to certain fixed maturity investments with embedded derivatives, including the change in fair value; (iv) the decrease in fair value of embedded derivatives related to a modified coinsurance agreement of $2.5 million; and (v) an increase in the allowance for credit losses of $13.7 million.

During the first nine months of 2022, we recognized net investment losses of $99.2 million, which were comprised of: (i) $11.9 million of net gains from the sales of investments; (ii) $10.7 million of losses related to equity securities, including the
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CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________

change in fair value; (iii) the decrease in fair value of certain fixed maturity investments with embedded derivatives of $37.4 million; (iv) the decrease in fair value of embedded derivatives related to a modified coinsurance agreement of $16.1 million; and (v) an increase in the allowance for credit losses of $46.9 million.

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.

At September 30, 2023, there were no fixed maturity investments in default.

During the first nine months of 2023, the $45.8 million of gross realized losses on sales of $527.0 million of fixed maturity securities, available for sale, included: (i) $37.8 million related to various corporate securities; (ii) $6.0 million related to commercial mortgage-backed securities; and (iii) $2.0 million related to various other investments. Securities are generally sold at a loss following unforeseen issuer-specific events or conditions or shifts in perceived relative values.  These reasons include but are not limited to: (i) changes in the investment environment; (ii) expectation that the market value could deteriorate; (iii) our desire to reduce our exposure to an asset class, an issuer or an industry; (iv) prospective or actual changes in credit quality; (v) better match certain characteristics of our investment portfolio with the corresponding characteristics of our insurance liabilities; or (vi) changes in expected portfolio cash flows.

During the first nine months of 2022, the $81.3 million of gross realized losses on sales of $1,321.7 million of fixed maturity securities, available for sale, included: (i) $54.3 million related to various corporate securities; (ii) $14.0 million related to non-agency residential mortgage-backed securities; (iii) $7.3 million related to states and political subdivisions; and (iv) $5.7 million related to various other investments.

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.

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CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________

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 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 the first nine months of 2023, we reviewed the actual mortality, lapse, and morbidity experience and determined that no changes to assumptions for future cash flows were necessary. This is consistent with the impact in the "Effect of actual variances from expected experience" line items in the tables below, which indicate our actual experience did not deviate significantly from our expectations.

The following tables summarize balances and changes in the liability for future policy benefits for traditional and limited-payment contracts for the nine months ended September 30, 2023 (dollars in millions):
Nine months ended
September 30, 2023
Supplemental healthMedicare supplementLong-term careTraditional lifeOther annuities
Present value of expected net premiums ("PVENP"), beginning of period$2,781.3 $2,800.6 $1,034.1 $2,175.0 $— 
Effect of changes in discount rate assumptions, beginning of period188.4 196.4 23.2 137.1 — 
Beginning PVENP at original discount rate2,969.7 2,997.0 1,057.3 2,312.1 — 
Effect of changes in cash flow assumptions— — — — — 
Effect of actual variances from expected experience(40.9)(4.2)20.7 (47.0)— 
Adjusted beginning of period PVENP2,928.8 2,992.8 1,078.0 2,265.1 — 
Issuances205.1 238.9 56.3 300.7 4.7 
Interest accrual96.7 91.3 37.1 70.0 — 
Net premiums collected(267.0)(324.5)(120.6)(301.5)(4.7)
Ending PVENP at original discount rate2,963.6 2,998.5 1,050.8 2,334.3 — 
Effect of changes in discount rate assumptions, end of period(295.1)(274.1)(53.4)(188.6)— 
PVENP, end of period$2,668.5 $2,724.4 $997.4 $2,145.7 $— 

Present value of expected future policy benefits ("PVEFPB"), beginning of period$5,886.8 $3,033.1 $4,158.1 $4,417.9 $310.9 
Effect of changes in discount rate assumptions, beginning of period483.3 212.0 28.5 336.6 15.4 
Beginning PVEFPB at original discount rate6,370.1 3,245.1 4,186.6 4,754.5 326.3 
Effect of changes in cash flow assumptions— — — — — 
Effect of actual variances from expected experience(46.9)7.4 30.3 (59.1)1.8 
Adjusted beginning of period PVEFPB6,323.2 3,252.5 4,216.9 4,695.4 328.1 
Issuances205.3 238.9 56.5 307.8 4.7 
Interest accrual222.6 99.3 167.3 154.3 11.1 
Benefit payments(314.2)(362.1)(214.0)(325.8)(25.8)
Ending PVEFPB at original discount rate6,436.9 3,228.6 4,226.7 4,831.7 318.1 
Effect of changes in discount rate assumptions, end of period(801.6)(295.5)(252.1)(510.9)(30.9)
PVEFPB, end of period$5,635.3 $2,933.1 $3,974.6 $4,320.8 $287.2 

Net liability for future policy benefits$2,966.8 $208.7 $2,977.2 $2,175.1 $287.2 
Flooring impact— .2 — — — 
Adjusted net liability for future policy benefits2,966.8 208.9 2,977.2 2,175.1 287.2 
Related reinsurance recoverable(1.3)— (330.4)(182.2)— 
Net liability for future policy benefits, net of reinsurance recoverable$2,965.5 $208.9 $2,646.8 $1,992.9 $287.2 
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CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________

The following tables summarize balances and changes in the liability for future policy benefits for traditional and limited-payment contracts for the nine months ended September 30, 2022 (dollars in millions):

Nine months ended
September 30, 2022
Supplemental healthMedicare supplementLong-term careTraditional lifeOther annuities
PVENP, beginning of period$3,496.8 $3,454.0 $1,313.4 $2,483.7 $— 
Effect of changes in discount rate assumptions, beginning of period(525.6)(341.8)(183.2)(239.4)— 
Beginning PVENP at original discount rate2,971.2 3,112.2 1,130.2 2,244.3 — 
Effect of changes in cash flow assumptions— — — — — 
Effect of actual variances from expected experience(24.0)(32.7)(14.5)(43.6)— 
Adjusted beginning of period PVENP2,947.2 3,079.5 1,115.7 2,200.7 — 
Issuances234.2 204.7 70.9 397.6 5.6 
Interest accrual92.4 88.3 38.4 61.6 — 
Net premiums collected(265.0)(346.3)(127.1)(300.7)(5.6)
Ending PVENP at original discount rate3,008.8 3,026.2 1,097.9 2,359.2 — 
Effect of changes in discount rate assumptions, end of period(273.5)(260.3)(43.8)(205.1)— 
PVENP, end of period$2,735.3 $2,765.9 $1,054.1 $2,154.1 $— 

PVEFPB, beginning of period$7,688.0 $3,750.5 $5,501.6 $5,395.7 $431.9 
Effect of changes in discount rate assumptions, beginning of period(1,414.8)(373.8)(1,291.2)(767.3)(88.4)
Beginning PVEFPB at original discount rate6,273.2 3,376.7 4,210.4 4,628.4 343.5 
Effect of changes in cash flow assumptions— — — — — 
Effect of actual variances from expected experience(25.9)(35.1)(23.7)(48.8)(4.1)
Adjusted beginning of period PVEFPB6,247.3 3,341.6 4,186.7 4,579.6 339.4 
Issuances234.7 204.0 70.9 407.6 6.4 
Interest accrual216.3 96.7 167.6 144.4 11.4 
Benefit payments(312.4)(362.9)(198.1)(363.2)(27.4)
Ending PVEFPB at original discount rate6,385.9 3,279.4 4,227.1 4,768.4 329.8 
Effect of changes in discount rate assumptions, end of period(699.7)(280.6)(157.7)(496.7)(25.3)
PVEFPB, end of period$5,686.2 $2,998.8 $4,069.4 $4,271.7 $304.5 

Net liability for future policy benefits$2,950.9 $232.9 $3,015.3 $2,117.6 $304.5 
Flooring impact37.6 .3 16.3 9.3 — 
Adjusted net liability for future policy benefits2,988.5 233.2 3,031.6 2,126.9 304.5 
Related reinsurance recoverable(3.0)— (318.0)(196.1)— 
Net liability for future policy benefits, net of reinsurance recoverable$2,985.5 $233.2 $2,713.6 $1,930.8 $304.5 

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CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________


The following table reconciles the net liability for future policy benefits to the amount presented in the consolidated balance sheet (dollars in millions):

September 30, 2023September 30, 2022
Balances included in the future policy benefits rollforwards:
Supplemental health$2,966.8 $2,988.5 
Medicare supplement208.9 233.2 
Long-term care2,977.2 3,031.6 
Traditional life2,175.1 2,126.9 
Other annuities287.2 304.5 
Reserves excluded from rollforward (1)2,574.0 2,616.1 
Deferred profit liability60.8 50.4 
Amount of reserves above (below) policyholder account balances (2)(454.7)(569.8)
Future loss reserves (3)34.6 34.1 
Future policy benefits$10,829.9 $10,815.5 

_______________
(1) Primarily comprised of blocks of business that are 100% ceded.
(2) Such amount represents the difference between: (i) the total insurance liabilities for our fixed indexed annuities (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.
(3) In certain instances, 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.

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CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________

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 the first nine months of 2023, we reviewed the nonmarket assumptions used to calculate MRBs and determined that such assumptions were appropriate.

The following table presents the balance of and changes in MRBs associated with our fixed indexed annuities (dollars in millions):

Nine months ended
September 30,
20232022
Net liability (asset), beginning of period$(54.0)$86.2 
Effect of changes in the instrument-specific credit risk, beginning of period12.2 12.1 
Balance, beginning of period, before effect of changes in the instrument-specific credit risk(41.8)98.3 
Issuances(.4)(1.5)
Interest accrual15.8 11.6 
Attributed fees collected— — 
Benefit payments— — 
Effect of changes in interest rates(36.2)(140.3)
Effect of changes in equity markets4.1 (7.9)
Effect of changes in equity index volatility(17.5)20.6 
Actual policyholder behavior different from expected behavior2.5 .1 
Effect of changes in future expected policyholder behavior - other— — 
Effect of changes in future expected policyholder behavior - risk margin— — 
Effect of changes in assumptions(4.9)(.4)
Net liability (asset), end of period, before effect of changes in the instrument-specific credit risk(78.4)(19.5)
Effect of changes in the instrument-specific credit risk, end of period(7.8)(23.1)
Net asset, end of period(86.2)(42.6)
Reinsurance recoverable, end of period— — 
Net asset, end of period, net of reinsurance$(86.2)$(42.6)
Balance reported as an asset$89.3 $56.3 
Balance reported as a liability3.1 13.7 
Net asset$(86.2)$(42.6)
Net amount at risk$51.0 $51.7 
Weighted average attained age of contract holders6968



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CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________


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)
Nine months endedNine months ended
September 30,September 30,
2023202220232022
Other annuities$5.7 $6.8 $11.1 $11.4 
Supplemental health530.3 519.8 125.9 123.9 
Medicare supplement453.4 487.7 8.0 8.4 
Long-term care243.1 245.6 130.2 129.2 
Traditional life534.6 518.9 84.3 82.8 
Total$1,767.1 $1,778.8 $359.5 $355.7 

_____________________
(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):

September 30, 2023September 30, 2022
UndiscountedDiscounted (a)UndiscountedDiscounted (a)
Other annuities
Expected future gross premiums$— $— $— $— 
Expected future benefits and expenses385.9 287.2 409.3 304.5 
Supplemental health
Expected future gross premiums9,031.2 5,287.4 8,866.2 5,310.3 
Expected future benefits and expenses10,163.1 5,635.3 10,948.7 5,686.2 
Medicare supplement
Expected future gross premiums5,589.1 3,756.3 5,521.0 3,857.2 
Expected future benefits and expenses4,387.4 2,933.1 4,318.6 2,998.8 
Long-term care
Expected future gross premiums2,967.0 2,054.0 2,974.1 2,097.9 
Expected future benefits and expenses7,483.6 3,974.6 7,546.5 4,069.4 
Traditional life
Expected future gross premiums5,542.6 3,840.1 5,448.2 3,835.7 
Expected future benefits and expenses7,478.6 4,320.8 7,250.8 4,271.7 

_____________________
(a) Calculated at the discount rates at period end.

Loss expense as a result of net premium ratio capping was not material in both the nine months ended September 30, 2023 and 2022.
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CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________


The following table provides the weighted average durations (under locked-in rates) of the liability for future policy benefits in years:

September 30,
2023		September 30,
2022
Other annuities9.79.7
Supplemental health11.712.0
Medicare supplement6.06.1
Long-term care10.310.7
Traditional life10.410.8

The following table provides the weighted average interest rates for the liability for future policy benefits:

September 30,
2023		September 30,
2022
Other annuities
Interest accretion rate4.79 %4.71 %
Current discount rate6.10 %5.76 %
Supplemental health
Interest accretion rate5.02 %5.06 %
Current discount rate6.09 %5.72 %
Medicare supplement
Interest accretion rate4.28 %4.21 %
Current discount rate5.88 %5.50 %
Long-term care
Interest accretion rate5.66 %5.69 %
Current discount rate6.13 %5.83 %
Traditional life
Interest accretion rate4.77 %4.76 %
Current discount rate6.11 %5.77 %


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CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________


The following tables present the balances of and changes in the liability for policyholder account balances (dollars in millions):
Nine months ended
September 30, 2023
Fixed indexed annuitiesFixed interest annuitiesOther annuitiesInterest-sensitive lifeFunding agreementsOther (a)
Balance, beginning of period excluding contracts 100% ceded$9,490.4 $1,663.1 $127.1 $1,209.6 $1,410.8 $395.5 
Issuances (funds collected from new business)996.6 139.5 — 30.0 — — 
Premiums received (premiums collected from inforce business).3 2.1 21.5 152.4 — 201.0 
Policy charges(14.4)(.7)— (140.4)— — 
Surrenders and withdrawals(538.4)(124.7)(30.3)(24.3)(24.2)(216.6)
Benefit payments(185.0)(80.8)(4.6)(19.6)— (.1)
Interest credited52.7 34.2 1.8 30.5 21.6 2.0 
Other17.0 (.2)(.3)(.4)— — 
Balance, end of period excluding contracts 100% ceded9,819.2 1,632.5 115.2 1,237.8 1,408.2 381.8 
Balance, end of period for contracts 100% ceded141.4 602.2 26.2 107.0 — 10.3 
Balance, end of period$9,960.6 $2,234.7 $141.4 $1,344.8 $1,408.2 $392.1 
Balance, end of period, reinsurance ceded(141.4)(602.2)(26.2)(125.2)— (24.3)
Balance, end of period, net of reinsurance$9,819.2 $1,632.5 $115.2 $1,219.6 $1,408.2 $367.8 
Weighted average crediting rate1.7 %2.8 %2.4 %4.0 %2.0 %0.8 %
Net amount at risk (b)$— $— $— $27,851.0 $— $— 
Cash surrender value, net of reinsurance$9,152.8 $1,609.4 $115.2 $997.8 $— $367.8 

_______________
(a) Predominantly consists of retained asset accounts associated with our traditional life and supplemental health blocks.
(b) Represents the amount of insurance policy benefit expense that we would incur if death claims were filed on all annuity and interest-sensitive life contracts at the balance sheet date.


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CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________


Nine months ended
September 30, 2022
Fixed indexed annuitiesFixed interest annuitiesOther annuitiesInterest-sensitive lifeFunding agreementsOther (a)
Balance, beginning of period excluding contracts 100% ceded$8,681.0 $1,806.1 $131.2 $1,163.9 $502.0 $368.0 
Issuances (funds collected from new business)1,111.9 52.2 — 31.4 899.0 — 
Premiums received (premiums collected from inforce business).2 2.9 25.9 143.5 — 196.2 
Policy charges(10.4)(.6)— (135.4)— — 
Surrenders and withdrawals(388.6)(113.0)(26.0)(20.3)(14.3)(175.4)
Benefit payments(192.5)(102.9)(4.3)(19.1)— — 
Interest credited102.8 34.3 1.8 34.9 21.3 1.9 
Other15.5 .3 — — — — 
Balance, end of period excluding contracts 100% ceded9,319.9 1,679.3 128.6 1,198.9 1,408.0 390.7 
Balance, end of period for contracts 100% ceded158.7 644.4 26.5 114.0 — 10.7 
Balance, end of period$9,478.6 $2,323.7 $155.1 $1,312.9 $1,408.0 $401.4 
Balance, end of period, reinsurance ceded(158.7)(644.4)(26.5)(134.9)— (25.2)
Balance, end of period, net of reinsurance$9,319.9 $1,679.3 $128.6 $1,178.0 $1,408.0 $376.2 
Weighted average crediting rate1.4 %2.6 %2.2 %4.3 %2.0 %0.8 %
Net amount at risk (b)$— $— $— $26,029.5 $— $— 
Cash surrender value, net of reinsurance$8,684.3 $1,669.3 $128.6 $954.7 $— $376.2 
_________________
(a) Predominantly consists of retained asset accounts associated with our traditional life and supplemental health blocks.
(b) Represents the amount of insurance policy benefit expense that we would incur if death claims were filed on all annuity and interest-sensitive life contracts at the balance sheet date.


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CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________

The following table reconciles the liability for policyholder account balances to the amount presented in the consolidated balance sheet (dollars in millions):

September 30, 2023September 30, 2022
Amounts included in the liability for policyholder account balances rollforwards:
Fixed indexed annuities$9,960.6 $9,478.6 
Fixed interest annuities2,234.7 2,323.7 
Other annuities141.4 155.1 
Interest-sensitive life1,344.8 1,312.9 
Funding agreements1,408.2 1,408.0 
Other392.1 401.4 
Total$15,481.8 $15,079.7 

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Notes to Consolidated Financial Statements
(unaudited)
___________________

The following tables present the 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):

September 30, 2023
Range of guaranteed minimum crediting rates (a)At guaranteed minimum1-50 basis points above51-150 basis points aboveGreater than 150 basis points aboveTotal
Fixed interest annuities
0.00%-2.99%$122.3 $257.4 $183.4 $79.1 $642.2 
3.00%-4.99%1,475.8 27.1 — — 1,502.9 
5.00% and greater89.6 — — — 89.6 
Subtotal1,687.7 284.5 183.4 79.1 2,234.7 
Other annuities
0.00%-2.99%36.4 25.3 — — 61.7 
3.00%-4.99%46.4 — — — 46.4 
5.00% and greater33.3 — — — 33.3 
Subtotal116.1 25.3 — — 141.4 
Interest-sensitive life
0.00%-2.99%22.0 37.2 298.5 305.1 662.8 
3.00%-4.99%451.2 50.5 157.5 .5 659.7 
5.00% and greater21.8 .5 — — 22.3 
Subtotal495.0 88.2 456.0 305.6 1,344.8 
Funding agreements
0.00%-2.99%1,408.2 — — — 1,408.2 
3.00%-4.99%— — — — — 
5.00% and greater— — — — — 
Subtotal1,408.2 — — — 1,408.2 
Other
0.00%-2.99%17.5 351.2 — — 368.7 
3.00%-4.99%23.2 — — — 23.2 
5.00% and greater.2 — — — .2 
Subtotal40.9 351.2 — — 392.1 
Total
0.00%-2.99%1,606.4 671.1 481.9 384.2 3,143.6 
3.00%-4.99%1,996.6 77.6 157.5 .5 2,232.2 
5.00% and greater144.9 .5 — — 145.4 
Total policyholder account balances, excluding fixed indexed annuities$3,747.9 $749.2 $639.4 $384.7 5,521.2 
Fixed indexed annuity account balances9,960.6 
Total policyholder account balances$15,481.8 
____________________
(a)     Excludes the account balances related to our fixed indexed annuity contracts which do not have a minimum crediting rate since returns are based on an index.
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Notes to Consolidated Financial Statements
(unaudited)
___________________

September 30, 2022
Range of guaranteed minimum crediting rates (a)At guaranteed minimum1-50 basis points above51-150 basis points aboveGreater than 150 basis points aboveTotal
Fixed interest annuities
0.00%-2.99%$163.8 $319.6 $29.9 $44.1 $557.4 
3.00%-4.99%1,651.7 22.4 .1 — 1,674.2 
5.00% and greater92.1 — — — 92.1 
Subtotal1,907.6 342.0 30.0 44.1 2,323.7 
Other annuities
0.00%-2.99%49.2 30.2 — — 79.4 
3.00%-4.99%39.8 — — — 39.8 
5.00% and greater35.9 — — — 35.9 
Subtotal124.9 30.2 — — 155.1 
Interest-sensitive life
0.00%-2.99%8.1 — .6 619.2 627.9 
3.00%-4.99%404.1 103.0 154.8 .2 662.1 
5.00% and greater22.4 .5 — — 22.9 
Subtotal434.6 103.5 155.4 619.4 1,312.9 
Funding agreements
0.00%-2.99%1,408.0 — — — 1,408.0 
3.00%-4.99%— — — — — 
5.00% and greater— — — — — 
Subtotal1,408.0 — — — 1,408.0 
Other
0.00%-2.99%18.2 358.7 — — 376.9 
3.00%-4.99%24.1 — — — 24.1 
5.00% and greater.4 — — — .4 
Subtotal42.7 358.7 — — 401.4 
Total
0.00%-2.99%1,647.3 708.5 30.5 663.3 3,049.6 
3.00%-4.99%2,119.7 125.4 154.9 .2 2,400.2 
5.00% and greater150.8 .5 — — 151.3 
Total policyholder account balances, excluding fixed indexed annuities$3,917.8 $834.4 $185.4 $663.5 5,601.1 
Fixed indexed annuity account balances9,478.6 
Total policyholder account balances$15,079.7 
____________________
(a)     Excludes the account balances related to our fixed indexed annuity contracts which do not have a minimum crediting rate since returns are based on an index.
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Notes to Consolidated Financial Statements
(unaudited)
___________________

DEFERRED ACQUISITION COSTS, PRESENT VALUE OF FUTURE PROFITS AND SALES INDUCEMENTS

Changes in deferred acquisition costs were as follows (dollars in millions):

Nine months ended
September 30, 2023
Fixed indexed annuitiesFixed interest annuitiesSupplemental healthMedicare supplementLong-term careInterest-sensitive lifeTraditional lifeFunding agreementsTotal
Beginning of period$365.6 $19.6 $378.8 $161.2 $137.9 $212.2 $409.1 $6.0 $1,690.4 
Capitalizations65.5 8.0 43.8 17.7 11.3 27.5 86.9 — 260.7 
Amortization expense(34.1)(2.8)(23.2)(21.0)(11.5)(10.7)(37.9)(1.2)(142.4)
End of period$397.0 $24.8 $399.4 $157.9 $137.7 $229.0 $458.1 $4.8 $1,808.7 

Nine months ended
September 30, 2022
Fixed indexed annuitiesFixed interest annuitiesSupplemental healthMedicare supplementLong-term careInterest-sensitive lifeTraditional lifeFunding agreementsTotal
Beginning of period$313.0 $19.0 $357.5 $170.2 $136.4 $196.3 $357.6 $3.3 $1,553.3 
Capitalizations68.6 2.6 37.0 15.7 12.7 22.1 69.8 4.2 232.7 
Amortization expense(29.7)(2.6)(21.7)(22.4)(11.5)(10.4)(31.6)(1.1)(131.0)
End of period$351.9 $19.0 $372.8 $163.5 $137.6 $208.0 $395.8 $6.4 $1,655.0 

Changes in the present value of future profits were as follows (dollars in millions):

Nine months ended
September 30, 2023
Supplemental healthMedicare supplementLong-term careTraditional lifeFixed indexed annuitiesFixed interest annuitiesTotal
Beginning of period$154.0 $27.5 $6.2 $14.8 $.8 $.4 $203.7 
Amortization expense(9.8)(5.3)(.8)(1.4)(.1)(.1)(17.5)
End of period$144.2 $22.2 $5.4 $13.4 $.7 $.3 $186.2 

Nine months ended
September 30, 2022
Supplemental healthMedicare supplementLong-term careTraditional lifeFixed indexed annuitiesFixed interest annuitiesTotal
Beginning of period$168.1 $36.5 $7.3 $16.9 $.9 $.4 $230.1 
Amortization expense(10.6)(6.9)(.9)(1.6)(.1)— (20.1)
End of period$157.5 $29.6 $6.4 $15.3 $.8 $.4 $210.0 

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Notes to Consolidated Financial Statements
(unaudited)
___________________


Changes in sales inducements were as follows (dollars in millions):

Nine months ended
September 30, 2023
Fixed indexed annuitiesFixed interest annuitiesTotal
Beginning of period$76.0 $4.5 $80.5 
Capitalizations16.3 .6 16.9 
Amortization expense(8.0)(.6)(8.6)
End of period$84.3 $4.5 $88.8 


Nine months ended
September 30, 2022
Fixed indexed annuitiesFixed interest annuitiesTotal
Beginning of period$63.0 $5.0 $68.0 
Capitalizations15.5 .3 15.8 
Amortization expense(6.7)(.7)(7.4)
End of period$71.8 $4.6 $76.4 

EARNINGS PER SHARE


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):

Three months endedNine months ended
September 30,September 30,
 2023202220232022
Net income for basic and diluted earnings per share$167.3 $175.9 $240.2 $592.6 
Shares:  
Weighted average shares outstanding for basic earnings per share112,689 114,354 113,836 116,170 
Effect of dilutive securities on weighted average shares:  
Amounts related to employee benefit plans1,773 1,574 1,777 1,902 
Weighted average shares outstanding for diluted earnings per share114,462 115,928 115,613 118,072 
 Three months ended Nine months ended
 September 30, September 30,
 2017 2016 2017 2016
Net income for basic and diluted earnings per share$100.8
 $18.6
 $246.5
 $124.0
Shares: 
  
    
Weighted average shares outstanding for basic earnings per share168,684
 174,247
 170,890
 177,640
Effect of dilutive securities on weighted average shares: 
  
    
Stock options, restricted stock and performance units2,298
 1,476
 1,910
 1,733
Weighted average shares outstanding for diluted earnings per share170,982
 175,723
 172,800
 179,373


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CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________



Basic earnings per common share is computed by dividing net income (loss) 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).

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CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________

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 management 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 and interest credited to policyholders; and (ii) amortization, 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 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 balances for annuity 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 reinsurance 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 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 help provide a better 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 Company manages itsConsumer 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 worksite and group sales 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 throughwhile further capitalizing on the following operating segments: Bankers Life, Washington Nationalstrength of our wholly-owned subsidiary, Optavise, LLC ("Optavise"), a national provider of year-round technology-driven employee benefits management services.

The Consumer and Colonial Penn,Worksite Divisions are primarily focused on marketing insurance products, several types of which are definedsold in both divisions and underwritten in the same manner. Sales of group underwritten policies are currently not significant, but are expected to increase within the Worksite Division.

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 Federal Home Loan Bank ("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 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 basismatched assets less: (i) interest on
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CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________

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 by Optavise and the operations of our broker/dealer and registered investment advisor.

Expenses not allocated to product distribution; andlines include the expenses of our corporate operations, comprised of holding company activities and certain noninsurance company businesses. In the fourth quarter of 2016, we began reporting the long-term care block recaptured from Beechwood Re Ltd ("BRe") effective September 30, 2016, as an additional business segment.excluding interest expense on debt.


We measure segment performance by excluding net realizedtotal investment gains (losses), changes in fair value of embedded derivative liabilities and MRBs, fair value changes in embedded derivative liabilities (net of related amortization), fair value changes and an amendment to the agent deferred compensation plan, loss on reinsurance transaction, income taxes and other non-operating items consisting primarily of 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 net realized investment gains (losses), and a long-term focus is necessary to maintain profitability over the life of the business.


The net realized investmentInvestment gains (losses), changes in fair value of embedded derivative liabilities and MRBs, fair value changes in embedded derivative liabilities (net of related amortization), fair value changes and an amendment to the agent deferred compensation plan loss on reinsurance transaction 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.  Net realized investmentInvestment gains (losses) and changes in fair value changes inof embedded derivative liabilities (net of related amortization)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):

Three months endedNine months ended
September 30,September 30,
 2023202220232022
Revenues:  
Annuity:  
Insurance policy income$7.2 $6.3 $20.4 $17.1 
Net investment income131.0 121.1 384.1 356.4 
Total annuity revenues138.2 127.4 404.5 373.5 
Health:
Insurance policy income397.8 403.5 1,196.3 1,213.7 
Net investment income74.2 73.3 222.5 219.6 
Total health revenues472.0 476.8 1,418.8 1,433.3 
Life:
Insurance policy income221.0 213.4 663.1 643.0 
Net investment income36.3 35.4 108.7 106.1 
Total life revenues257.3 248.8 771.8 749.1 
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)(54.6)(34.9)26.3 (199.2)
Investment income not allocated to product lines86.2 59.6 234.3 187.4 
Fee revenue and other income:
Fee income27.9 30.6 108.6 102.0 
Amounts netted in expenses not allocated to product lines32.1 1.8 35.2 28.9 
Total segment revenues$959.1 $910.1 $2,999.5 $2,675.0 

(continued on next page)
17
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CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________



Operating information by segment was as follows (dollars in millions):

 Three months ended Nine months ended
 September 30, September 30,
 2017 2016 2017 2016
Revenues:       
Bankers Life:       
Insurance policy income:       
Annuities$3.7
 $6.8
 $15.5
 $17.4
Health307.2
 310.3
 926.9
 933.3
Life103.7
 96.6
 310.4
 295.8
Net investment income (a)270.6
 244.7
 800.4
 686.8
Fee revenue and other income (a)11.3
 9.6
 32.5
 23.5
Total Bankers Life revenues696.5
 668.0
 2,085.7
 1,956.8
Washington National: 
  
    
Insurance policy income: 
  
    
Annuities.5
 1.2
 1.6
 2.3
Health160.4
 156.9
 480.3
 469.1
Life6.5
 6.3
 20.1
 18.6
Net investment income (a)68.0
 67.1
 201.9
 191.3
Fee revenue and other income (a).3
 .4
 .8
 1.0
Total Washington National revenues235.7
 231.9
 704.7
 682.3
Colonial Penn: 
  
    
Insurance policy income: 
  
    
Health.5
 .6
 1.6
 2.0
Life72.6
 70.3
 217.5
 208.5
Net investment income (a)11.0
 11.1
 33.1
 33.0
Fee revenue and other income (a).3
 .2
 .9
 .8
Total Colonial Penn revenues84.4
 82.2
 253.1
 244.3
Long-term care in run-off:       
Insurance policy income - health4.2
 —
 13.3
 —
Net investment income (a)                                                                                           6.8
 —
 26.5
 —
Total Long-term care in run-off revenues11.0
 —
 39.8
 —
Corporate operations: 
  
    
Net investment income7.0
 6.7
 24.8
 16.6
Fee and other income1.8
 2.5
 6.5
 7.6
Total corporate revenues8.8
 9.2
 31.3
 24.2
Total revenues$1,036.4
 $991.3
 $3,114.6
 $2,907.6


(continued on nextfrom previous page)

Three months endedNine months ended
September 30,September 30,
 2023202220232022
Expenses:
Annuity:
Insurance policy benefits$9.8 $6.5 $29.1 $22.8 
Interest credited53.4 44.8 152.1 128.7 
Amortization and non-deferred commissions18.0 16.0 51.9 45.9 
Total annuity expenses81.2 67.3 233.1 197.4 
Health:
Insurance policy benefits308.5 310.8 949.3 943.8 
Amortization and non-deferred commissions40.3 42.7 121.6 125.5 
Total health expenses348.8 353.5 1,070.9 1,069.3 
Life:
Insurance policy benefits140.7 138.7 430.7 419.5 
Interest credited12.1 12.6 36.4 36.3 
Amortization, non-deferred commissions and advertising expense44.7 41.8 139.6 131.4 
Total life expenses197.5 193.1 606.7 587.2 
Allocated expenses153.2 150.5 460.2 447.5 
Expenses not allocated to product lines24.6 17.9 67.1 56.9 
Market value changes of options credited to fixed indexed annuity and life policyholders(54.6)(34.9)26.3 (199.2)
Amounts netted in investment income not allocated to product lines:
Interest expense45.1 25.9 122.3 64.3 
Interest credited7.2 7.2 21.6 21.3 
Impact of annual option forfeitures related to fixed indexed annuity surrenders(2.5)1.1 (3.9)— 
Amortization.4 .3 1.2 1.1 
Other expenses(2.4)(2.0)11.2 (18.0)
Expenses netted in fee revenue:
Commissions and other operating expenses30.8 29.2 95.4 87.5 
Total segment expenses829.3 809.1 2,712.1 2,315.3 
Pre-tax measure of profitability:
Annuity margin57.0 60.1 171.4 176.1 
Health margin123.2 123.3 347.9 364.0 
Life margin59.8 55.7 165.1 161.9 
Total insurance product margin240.0 239.1 684.4 702.0 
Allocated expenses(153.2)(150.5)(460.2)(447.5)
Income from insurance products86.8 88.6 224.2 254.5 
Fee income(2.9)1.4 13.2 14.5 
Investment income not allocated to product lines38.4 27.1 81.9 118.7 
Expenses not allocated to product lines7.5 (16.1)(31.9)(28.0)
Operating earnings before taxes129.8 101.0 287.4 359.7 
Income tax expense on operating income28.5 23.1 65.2 82.2 
Net operating income$101.3 $77.9 $222.2 $277.5 



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CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________




(continued from previous page)A reconciliation of segment revenues and expenses to consolidated revenues and expenses and net income is as follows (dollars in millions):
Three months endedNine months ended
September 30,September 30,
 2023202220232022
Total segment revenues$959.1 $910.1 $2,999.5 $2,675.0 
Total investment losses(29.3)(17.7)(79.2)(99.2)
Revenues related to earnings attributable to VIEs17.7 12.9 56.0 27.4 
Consolidated revenues947.5 905.3 2,976.3 2,603.2 
Total segment expenses829.3 809.1 2,712.1 2,315.3 
Insurance policy benefits - changes in fair value of embedded derivative liabilities and market risk benefits(109.4)(130.6)(94.7)(456.6)
Expenses attributable to VIEs17.8 11.9 54.0 26.2 
Fair value changes related to agent deferred compensation plan(6.8)(12.0)(6.8)(48.7)
Other expenses1.0 (1.0)1.0 (1.0)
Consolidated expenses731.9 677.4 2,665.6 1,835.2 
Income before tax215.6 227.9 310.7 768.0 
Income tax expense on period income48.3 52.0 70.5 175.4 
Net income167.3 $175.9 $240.2 $592.6 


44
 Three months ended Nine months ended
 September 30, September 30,
 2017 2016 2017 2016
Expenses:       
Bankers Life:       
Insurance policy benefits$437.2
 $427.1
 $1,307.7
 $1,240.9
Amortization38.7
 43.8
 126.3
 135.3
Interest expense on investment borrowings5.3
 3.5
 14.3
 9.4
Other operating costs and expenses108.4
 105.5
 328.2
 312.2
Total Bankers Life expenses589.6
 579.9
 1,776.5
 1,697.8
Washington National: 
  
    
Insurance policy benefits144.7
 144.5
 436.7
 422.0
Amortization14.3
 14.3
 43.9
 44.5
Interest expense on investment borrowings1.7
 .9
 4.5
 2.5
Other operating costs and expenses47.5
 47.0
 145.0
 140.3
Total Washington National expenses208.2
 206.7
 630.1
 609.3
Colonial Penn: 
  
    
Insurance policy benefits47.7
 50.3
 150.8
 151.3
Amortization3.9
 3.7
 11.9
 11.3
Interest expense on investment borrowings.3
 .1
 .7
 .4
Other operating costs and expenses23.5
 27.2
 73.0
 84.2
Total Colonial Penn expenses75.4
 81.3
 236.4
 247.2
Long-term care in run-off:       
Insurance policy benefits                                                                                 11.4
 —
 36.6
 —
Other operating costs and expenses                                                                                 .6
 —
 2.1
 —
Total Long-term care in run-off expenses12.0
 —
 38.7
 —
Corporate operations: 
  
    
Interest expense on corporate debt11.7
 11.5
 34.8
 34.3
Other operating costs and expenses23.7
 13.6
 68.3
 43.7
Total corporate expenses35.4
 25.1
 103.1
 78.0
Total expenses920.6
 893.0
 2,784.8
 2,632.3
Pre-tax operating earnings by segment: 
  
    
Bankers Life106.9
 88.1
 309.2
 259.0
Washington National27.5
 25.2
 74.6
 73.0
Colonial Penn9.0
 .9
 16.7
 (2.9)
Long-term care in run-off(1.0) —
 1.1
 —
Corporate operations(26.6) (15.9) (71.8) (53.8)
Pre-tax operating earnings$115.8
 $98.3
 $329.8
 $275.3
___________________
(a)It is not practicable to provide additional components of revenue by product or services.

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CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________




A reconciliation of segment revenues and expenses to consolidated revenues and expenses and net income (loss) is as follows (dollars in millions):

 Three months ended Nine months ended
 September 30, September 30,
 2017 2016 2017 2016
Total segment revenues                                                                                            $1,036.4
 $991.3
 $3,114.6
 $2,907.6
Net realized investment gains                                       29.2
 11.6
 52.3
 23.3
Revenues related to VIEs13.7
 13.0
 40.2
 39.3
Fee revenue related to transition and support services agreements—
 —
 —
 10.0
Consolidated revenues                                                                                       1,079.3
 1,015.9
 3,207.1
 2,980.2
        
Total segment expenses                                                                                            920.6
 893.0
 2,784.8
 2,632.3
Insurance policy benefits - fair value changes in embedded derivative liabilities(2.9) (12.1) 9.8
 47.0
Amortization related to fair value changes in embedded derivative liabilities.6
 2.7
 (1.8) (10.4)
Amortization related to net realized investment gains.7
 .2
 1.0
 .9
Expenses related to VIEs17.0
 13.7
 44.8
 40.5
Fair value changes and amendment related to agent deferred compensation plan13.4

(6.3) 13.4
 12.0
Loss on reinsurance transaction—
 75.4
 —
 75.4
Expenses related to transition and support services agreements—
 —
 —
 10.0
Consolidated expenses                                                                                       949.4
 966.6
 2,852.0
 2,807.7
Income before tax129.9
 49.3
 355.1
 172.5
Income tax expense (benefit):       
Tax expense on period income44.1
 16.9
 123.6
 61.7
Valuation allowance for deferred tax assets and other tax items(15.0) 13.8
 (15.0) (13.2)
Net income$100.8
 $18.6
 $246.5
 $124.0


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CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________


ACCOUNTING FOR 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
September 30,
2023		December 31, 2022
Assets:
Other invested assets:
Fixed indexed call options$150.0 $56.7 
Reinsurance receivables(20.3)(17.8)
Total assets$129.7 $38.9 
Liabilities:
Embedded derivatives related to fixed indexed annuities at fair value:
Policyholder account balances$1,676.1 $1,788.4 
Future policy benefits(462.7)(491.4)
Total liabilities$1,213.4 $1,297.0 

  Fair value
  September 30,
2017		 December 31, 2016
Assets:    
Other invested assets:    
Fixed index call options $142.2
 $111.9
Reinsurance receivables (1.8) (4.2)
Total assets $140.4
 $107.7
Liabilities:    
Future policy benefits:    
Fixed index products $1,249.3
 $1,092.3
Total liabilities $1,249.3
 $1,092.3
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 approximately $85 million in underlying investments held by the ceding reinsurer at September 30, 2023.


Our fixed indexindexed 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.  Typically, on each policy anniversary date, a new index period begins.  We are generally able to change the participation rate at the beginning of each index period during a(typically on each policy year,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. These accounting requirements often create volatility in the earnings from these products. 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.  The notional amount of these options was $2.9$3.0 billion and $2.5$2.8 billion at September 30, 20172023 and December 31, 2016,2022, respectively.

From time to time, we utilize United States Treasury interest rate futures primarily to hedge interest rate risk related to anticipated mortgage loan transactions.

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 approximately $125 million in underlying investments held by the ceding reinsurer.


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 recognized in net income.



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CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________



The following table provides the pre-tax gains (losses)impact recognized in net income for derivative instruments, which are not designated as hedges for the periods indicated (dollars in millions):

Three months endedNine months ended
September 30,September 30,
2023202220232022
Net investment income (loss) from policyholder and other special-purpose portfolios:
Fixed indexed call options$(55.0)$(34.7)$24.9 $(165.7)
Total investment gains (losses):
Embedded derivative related to modified coinsurance agreement(2.2)(4.4)(2.5)(50.8)
Total revenues from derivative instruments, not designated as hedges(57.2)(39.1)22.4 (216.5)
Insurance policy benefits:
Embedded derivatives related to fixed indexed annuities(125.8)(129.1)(37.7)(525.5)
Net pre-tax impact$68.6 $90.0 $60.1 $309.0 
  Three months ended Nine months ended
  September 30, September 30,
  2017 2016 2017 2016
Net investment income from policyholder and other special-purpose portfolios:        
Fixed index call options $30.6
 $17.0
 $95.4
 $10.9
Net realized gains (losses):        
Interest rate futures —
 —
 —
 (1.1)
Embedded derivative related to modified coinsurance agreement .3
 .1
 2.4
 6.7
Total .3
 .1
 2.4
 5.6
Insurance policy benefits:        
Embedded derivative related to fixed index annuities —
 18.3
 —
 (33.3)
Total $30.9
 $35.4
 $97.8
 $(16.8)


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 September 30, 2017,2023, all of our counterparties were rated "A-""A" or higher by S&P Global Ratings ("S&P").

We also enter into exchange-traded interest rate future contracts. The contracts are marked to market and margined on a daily basis. The Company has minimal exposure to credit-related losses in the event of nonperformance.


The Company and its subsidiaries are parties to master netting arrangements with its counterparties related to entering into various derivative contracts. Exchange-traded derivatives require margin accounts which we offset.


The following table summarizes information related to derivatives with master netting arrangements or collateral as of September 30, 20172023 and December 31, 20162022 (dollars in millions):

Gross amounts not offset in the balance sheet
Gross amounts recognizedGross amounts offset in the balance sheetNet amounts of assets presented in the balance sheetNon-cash collateralCash collateral receivedNet amount
September 30, 2023:
Fixed indexed call options$150.0 $— $150.0 $28.5 $— $121.5 
December 31, 2022:
Fixed indexed call options56.7 — 56.7 — — 56.7 

         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 Financial instruments Cash collateral received Net amount
September 30, 2017:  
 Fixed index call options $142.2
 $—
 $142.2
 $—
 $—
 $142.2
December 31, 2016:            
 Fixed index call options 111.9
 —
 111.9
 —
 —
 111.9


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CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________


REINSURANCE


The cost of reinsurance ceded totaled $27.1$46.7 million and $32.2$51.2 million in the third quarters of 20172023 and 2016,2022, respectively, and $79.9$144.7 million and $97.3$152.3 million in the first nine months of 20172023 and 2016,2022, respectively.  We deduct this cost from insurance policy income.  Reinsurance recoveries netted against insurance policy benefits totaled $22.6$98.3 million and $31.7$95.1 million in the third quarters of 20172023 and 2016,2022, respectively, and $69.1$320.1 million and $113.3$296.0 million in the first nine months of 20172023 and 2016,2022, 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 $7.4$4.2 million and $8.3$4.7 million in the third quarters of 20172023 and 2016,2022, respectively, and $23.1$12.6 million and $25.8$14.2 million in the
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CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________

first nine months of 2023 and 2022, respectively. Insurance policy benefits related to reinsurance assumed totaled $5.8 million and $7.2 million in the third quarters of 2023 and 2022, respectively, and $16.3 million and $19.7 million in the first nine months of 20172023 and 2016,2022, respectively.


INCOME TAXES


The Company's interim tax expense is based upon the estimated annual effective tax rate for the respective period. Under authoritative guidance, certain items are required to be excluded from the estimated annual effective tax rate calculation. Such items include changes in judgment about the realizability of deferred tax assets resulting from changes in projections of income expected to be available in future years, and items deemed to be unusual, infrequent, or that can notcannot be reliably estimated. In these cases, the actual tax expense or benefit applicable to that item is treated discretely and is reported in the same period as the related item. The components of income tax expense are as follows (dollars in millions):


Three months endedNine months ended
September 30,September 30,
 2023202220232022
Current tax expense$6.3 $14.9 $40.0 $19.9 
Deferred tax expense42.0 37.1 30.5 155.5 
Total income tax expense$48.3 $52.0 $70.5 $175.4 
 Three months ended Nine months ended
 September 30, September 30,
 2017 2016 2017 2016
Current tax expense$25.9
 $46.8
 $68.5
 $51.6
Deferred tax expense (benefit)18.2
 (29.9) 55.1
 10.1
Valuation allowance applicable to current year income(2.2) (10.5) (2.2) (10.5)
Income tax expense calculated based on estimated annual effective tax rate41.9
 6.4
 121.4
 51.2
Income tax expense on discrete items:       
Change in valuation allowance(12.8) 16.0
 (12.8) (11.0)
Other items—
 8.3
 —
 8.3
Total income tax expense$29.1
 $30.7
 $108.6
 $48.5


A reconciliation of the U.S. statutory corporate tax rate to the estimated annual effective rate, before discrete items, reflected in the consolidated statement of operations is as follows:
Nine months ended
September 30,
 20232022
U.S. statutory corporate rate21.0 %21.0 %
Non-taxable income and nondeductible benefits, net(.4)(.1)
State taxes2.1 1.9 
Effective tax rate22.7 %22.8 %



47
 Nine months ended
 September 30,
 2017 2016
U.S. statutory corporate rate35.0 % 35.0 %
Valuation allowance(.6) (6.1)
Non-taxable income and nondeductible benefits, net(1.5) (1.0)
State taxes1.3
 1.8
Estimated annual effective tax rate34.2 % 29.7 %


23
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CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________



The effective tax rate for the nine months ended September 30, 2017 and 2016 included reductions in the deferred tax valuation allowance of $2.2 million and $10.5 million, respectively, reflecting higher current year expected taxable income than previously reflected in our deferred tax valuation allowance model in each year.

Our total tax expense for the nine months ended September 30, 2017, includes $12.8 million of reductions to the deferred tax valuation allowance primarily related to the recognition of capital gains. Our total tax expense for the nine months ended September 30, 2016, includes $11.0 million of reductions to the deferred tax valuation allowance related to adjustments to future expected taxable income reflected in our deferred tax valuation allowance model and $8.3 million of increased tax expense primarily related to IRS exam adjustments. The reduction to the deferred tax valuation allowance primarily relates to higher expected non-life income consistent with our current investment strategies, the impacts of the recapture of certain reinsurance agreements and IRS examination adjustments.

Effective January 1, 2017, the Company adopted new authoritative guidance related to several aspects of the accounting for share-based payment transactions, including the income tax consequences. Under the new guidance, any excess tax benefits are recognized as an income tax benefit in the income statement. The new guidance is applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings for all tax benefits that were not previously recognized because the related tax deduction had not reduced taxes payable. The Company had NOL carryforwards of $15.7 million related to deductions for stock options and restricted stock on the date of adoption. However, a corresponding valuation allowance of $15.7 million was recognized as a result of adopting this guidance. Therefore, there was no impact to our consolidated financial statements related to the initial adoption of this provision of the new guidance.

The components of the Company's income tax assets and liabilities are summarized below (dollars in millions):

September 30,
2023		December 31,
2022
Deferred tax assets:  
Net federal operating loss carryforwards$100.1 $166.0 
Net state operating loss carryforwards2.5 2.5 
Insurance liabilities312.8 298.5 
Indirect costs allocable to self-constructed real estate assets244.5 214.8 
Accumulated other comprehensive loss552.6 552.4 
Other2.9 7.3 
Gross deferred tax assets1,215.4 1,241.5 
Deferred tax liabilities:  
Investments(30.8)(37.2)
Present value of future profits and deferred acquisition costs(158.6)(148.9)
Gross deferred tax liabilities(189.4)(186.1)
Net deferred tax assets1,026.0 1,055.4 
Current income taxes prepaid13.8 8.0 
Income tax assets, net$1,039.8 $1,063.4 
 September 30,
2017		 December 31,
2016
Deferred tax assets:   
Net federal operating loss carryforwards$841.8
 $882.9
Net state operating loss carryforwards12.2
 12.3
Investments13.7
 17.8
Insurance liabilities678.9
 668.4
Other60.1
 66.3
Gross deferred tax assets1,606.7
 1,647.7
Deferred tax liabilities: 
  
Present value of future profits and deferred acquisition costs(275.0) (277.8)
Accumulated other comprehensive income(516.9) (344.1)
Gross deferred tax liabilities(791.9) (621.9)
Net deferred tax assets before valuation allowance814.8
 1,025.8
Valuation allowance(240.9) (240.2)
Net deferred tax assets573.9
 785.6
Current income taxes prepaid (accrued)(6.5) 4.1
Income tax assets, net$567.4
 $789.7


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 carryforwards ("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 beare considered to determine whether, based on the weight of

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CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________


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.

Based on our assessment, it appears more likely than not that $573.9 million of our net deferred tax assets of $814.8 million will be realized through future taxable earnings. Accordingly, we have establishedbasis using a deferred tax valuation allowance of $240.9 million at September 30, 2017 ($230.9 million of which relates to our net federal operating loss carryforwards and $10.0 million relates to state operating loss carryforwards). We will continue to assess the need for a valuation allowance in the future. If future results are less than projected, an increase to the valuation allowance may be required to reduce the deferred tax asset, which could have a material impact on our results of operations in the period in which it is recorded.
We use a deferred tax valuation model to assess the need for a valuation allowance.model. Our model is adjusted to reflect changes in our projections of future taxable income including changes resulting from investment strategies, the impact of the sale or reinsurance of business and the recapture of business previously ceded.income. Our estimates of future taxable income are based on evidence we consider to be objective andobjectively verifiable.

Our At September 30, 2023, our projection of future taxable income for purposes of determining the valuation allowance is based on our adjusted average annualestimates 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 assumed to increase by 3 percent for the next five years, and levelmore likely than not that all our deferred tax assets of $1,026.0 million will be realized through future taxable income is assumed thereafter. In the projections used for our analysis, our adjusted average taxable income of approximately $335 million consisted of $85 million of non-life taxable income and $250 million of life taxable income.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 an increase in the recognition of a valuation allowance in a future period.  Any future increase in theThe recognition of a valuation allowance may result in additionalwould increase income tax expense and reduce shareholders' equity, and such an increase could have a significant impact upon our earnings in the future.


The Internal Revenue Code (the "Code") limits the extent to which losses realized by a non-life entity (or entities) may offset income from a life insurance company (or companies) to the lesser of: (i) 35 percent of the income of the life insurance company; or (ii) 35 percent of the total loss of the non-life entities (including NOLs of the non-life entities). There is no similar
48
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________

limitation on the extent to which losses realized by a life insurance entity (or entities) may offset income from a non-life entity (or entities). This limitation is the primary reason a valuation allowance for NOLs is required.


Section 382 of the Code imposes limitations on a corporation's ability to use its NOLs when the company undergoes ana 50 percent ownership change.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 additional 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 (1.93(3.17 percent at September 30, 2017)2023), and the annual restriction could limit our ability to use a substantial portion of our NOLs to offset future taxable income.  We regularly monitor ownership change (as calculated for purposes of Section 382) and, as of September 30, 2017,2023, we were below the 50 percent ownership change level that would trigger further impairment ofcould limit our ability to utilize our NOLs.



25
TableWe have $476.6 million of Contents
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________


Asfederal non-life NOLs as of September 30, 2017, we had $2.4 billion of federal NOLs (all of which were non-life NOLs). The following table summarizes the expiration dates of our loss carryforwards2023, as summarized below (dollars in millions):

Net operating loss
Year of expirationcarryforwards
2026$125.1 
202710.8 
202880.3 
2029213.2 
2030.3 
2031.2 
203244.4 
2033.6 
2034.9 
2035.8 
Total federal non-life NOLs$476.6 

  Net operating loss
Year of expiration carryforwards
2023 $1,818.5
2025 85.2
2026 149.9
2027 10.8
2028 80.3
2029 213.2
2030 .3
2031 .2
2032 44.4
2033 .6
2034 .9
2035 .8
Total federal NOLs $2,405.1
Our non-life NOLs 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.

We also had deferred tax assets related to NOLs for state income taxes of $12.2 million and $12.3$2.5 million at both September 30, 20172023 and December 31, 2016, respectively.2022.  The related state NOLs are available to offset future state taxable income in certain states through 2025.and are expected to be fully utilized prior to expiration.

All of the life NOLs were utilized by December 31, 2016. Accordingly, we began making estimated federal tax payments equal to the prescribed federal tax rate applied to 65 percent of our life insurance company taxable income due to the limitations on the extent to which we can use non-life NOLs to offset life insurance company taxable income. Under current law, we will continue to pay tax on 65 percent of our life insurance company taxable income until all non-life NOLs are utilized or expire.


The Internal Revenue Service ("IRS") is conducting an examination of 2013our 2016 through 2014. In connection with this exam, we have agreed to extend the2018 tax returns. The federal statute of limitation for 2013limitations remains open with respect to tax years 2016 through September 30, 2018.2022. The Company’s various state income tax returns are generally open for tax years beginning in 2014, 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 the tax auditaudits cannot be predicted with certainty. If the Company’s tax audit isaudits are not resolved in a manner consistent with management’s expectations, the Company may be required to adjust its provision for income taxes.




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CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________




NOTES PAYABLE - DIRECT CORPORATE OBLIGATIONS


The following notes payable were direct corporate obligations of the Company as of September 30, 20172023 and December 31, 20162022 (dollars in millions):

September 30,
2023		December 31,
2022
5.250% Senior Notes due May 2025$500.0 $500.0 
5.250% Senior Notes due May 2029500.0 500.0 
5.125% Subordinated Debentures due November 2060150.0 150.0 
Revolving Credit Agreement (as defined below)— — 
Unamortized debt issue costs(9.9)(11.2)
Direct corporate obligations$1,140.1 $1,138.8 
 September 30,
2017		 December 31,
2016
4.500% Senior Notes due May 2020$325.0
 $325.0
5.250% Senior Notes due May 2025500.0
 500.0
Revolving Credit Agreement (as defined below)100.0
 100.0
Unamortized debt issue costs(10.6) (12.1)
Direct corporate obligations$914.4
 $912.9


Revolving Credit Agreement

On May 19, 2015, the Company entered into aThe $250.0 million revolving credit agreement with KeyBank National Association, as administrative agent (the "Agent"), and the lenders from time to time party thereto (the "Revolving Credit Agreement"). On May 19, 2015, the Company made an initial drawing of $100.0 million under the Revolving Credit Agreement, resulting in $50.0 million available for additional borrowings.

The interest rates with respect to loans under the Revolving Credit Agreement are based on, at the Company's option, a floating base rate (defined as a per annum rate equal to the highest of:, among other things, (i) the federal funds rate plus 0.50%; (ii) the "prime rate" of the Agent; and (iii) the eurodollar rate for a one-month interest period plus an applicable margin of initially 1.00% per annum), or a eurodollar rate plus an applicable margin of initially 2.00% per annum. At September 30, 2017, the interest rate on the amounts outstanding under the Revolving Credit Agreement was 3.24 percent. In addition, the daily average undrawn portion of the Revolving Credit Agreement accrues a commitment fee payable quarterly in arrears. The applicable margin for, and the commitment fee applicable to, the Revolving Credit Agreement, will be adjusted from time to time pursuant to a ratings based pricing grid.

The Revolving Credit Agreement requires the Company to maintain (each as calculated in accordance with the Revolving 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 percent of total capitalization) of not more than 30.035.0 percent (such ratio was 19.221.5 percent at September 30, 2017); (ii) an aggregate ratio of total adjusted capital to company action level risk-based capital for the Company's insurance subsidiaries of not less than 250 percent (such ratio was estimated to be 450 percent at September 30, 2017)2023); and (iii)(ii) a minimum consolidated net worth of not less than the sum of (x) $2,674 million plus (y) 50.0%25.0 percent of the net equity proceeds received by the Company from the issuance and sale of equity interests in the Company (the Company's consolidated net worth was $3,948.1$3,846.8 million at September 30, 20172023 compared to the minimum requirement of $2,683.8$2,696.5 million).

As further described in the note to the consolidated financial statements entitled "Subsequent Event", The maturity date of the Revolving Credit Agreement was amendedis July 16, 2026. The Revolving Credit Agreement contains certain other restrictive covenants with which the Company must comply. The interest rate applicable to loans under the Revolving Credit Agreement is calculated as the Secured Overnight Financing Rate ("SOFR") (plus a credit spread adjustment of 0.10 percent for all available interest periods) or the base rate, at the Company’s option, plus a margin based on the Company’s unsecured debt rating. The margins under the Revolving Credit Agreement range from 1.375 percent to 2.125 percent, in the case of loans at the SOFR, and restated0.375 percent to 1.125 percent, in October 2017.


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CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________


Scheduled Repayment of our Direct Corporate Obligations

loans at the base rate. The scheduled repayment of our direct corporate obligations was as follows at commitment fee under the Revolving Credit Agreement is based on the Company's unsecured debt rating. There were no amounts outstanding under the Revolving Credit Agreement during the nine months ended September 30, 2017 (dollars in millions):2023.


Year ending September 30, 
2018$—
2019100.0
2020325.0
2021—
2022—
Thereafter500.0
 $925.0

INVESTMENT BORROWINGS


Three of the Company's insurance subsidiaries (Washington National Insurance Company ("Washington National"), Bankers(Bankers Life and Casualty Company ("Bankers Life"), Washington National Insurance Company ("Washington National") and Colonial Penn Life Insurance Company ("Colonial Penn")) are members of the Federal Home Loan Bank ("FHLB").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 September 30, 2017,2023, the carrying value of the FHLB common stock was $71.2 million.$90.1 million.  As of September 30, 2017,2023, collateralized borrowings from the FHLB totaled $1.6$2.1 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 $2.0$2.5 billion at September 30, 2017,2023, 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.  




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CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________



The following summarizes the terms of the borrowings from the FHLB by our insurance subsidiaries (dollars in millions):

AmountMaturityInterest rate at
borroweddateSeptember 30, 2023
$100.0 April 2024Variable rate – 5.628%
22.0 May 2024Variable rate – 5.743%
15.5 July 2024Fixed rate – 1.990%
27.0 August 2024Fixed rate – .640%
21.7 May 2025Variable rate – 5.728%
18.2 June 2025Fixed rate – 2.940%
12.5 June 2025Variable rate – 5.880%
125.0 September 2025Variable rate – 5.660%
100.0 October 2025Variable rate – 5.878%
100.0 October 2025Variable rate – 5.878%
57.7 October 2025Variable rate – 5.843%
50.0 November 2025Variable rate – 5.854%
12.5 December 2025Variable rate – 5.896%
50.0 January 2026Variable rate – 5.808%
50.0 January 2026Variable rate – 5.857%
100.0 January 2026Variable rate – 5.803%
15.0 January 2026Variable rate – 5.977%
21.8 May 2026Variable rate – 5.693%
50.0 May 2026Variable rate – 5.580%
75.0 December 2026Variable rate – 5.767%
75.0 January 2027Variable rate – 5.663%
50.0 January 2027Variable rate – 5.758%
50.0 January 2027Variable rate – 5.813%
100.0 February 2027Variable rate – 5.788%
50.0 April 2027Variable rate – 5.674%
50.0 May 2027Variable rate – 5.684%
100.0 June 2027Variable rate – 5.680%
10.0 June 2027Variable rate – 5.903%
50.0 July 2027Variable rate – 6.044%
50.0 July 2027Variable rate – 6.064%
100.0 August 2027Variable rate – 6.048%
75.0 January 2028Variable rate – 5.788%
50.0 January 2028Variable rate – 5.798%
50.0 January 2028Variable rate – 5.868%
34.5 February 2028Variable rate – 5.908%
21.0 February 2028Variable rate – 5.788%
100.0 February 2028Variable rate – 5.808%
15.0 July 2028Variable rate – 5.690%
35.0 August 2028Variable rate – 5.700%
$2,089.4 

51
Amount Maturity Interest rate at
borrowed date September 30, 2017
$50.0
 February 2018 Variable rate – 1.404%
50.0
 August 2018 Variable rate – 1.435%
50.0
 January 2019 Variable rate – 1.724%
50.0
 February 2019 Variable rate – 1.404%
100.0
 March 2019 Variable rate – 1.714%
21.8
 July 2019 Variable rate – 1.727%
15.0
 October 2019 Variable rate – 1.830%
50.0
 May 2020 Variable rate – 1.754%
21.8
 June 2020 Fixed rate – 1.960%
25.0
 September 2020 Variable rate – 1.953%
100.0
 September 2020 Variable rate – 1.897%
50.0
 September 2020 Variable rate – 1.894%
75.0
 September 2020 Variable rate – 1.453%
100.0
 October 2020 Variable rate – 1.409%
50.0
 December 2020 Variable rate – 1.932%
100.0
 July 2021 Variable rate – 1.854%
100.0
 July 2021 Variable rate – 1.824%
28.2
 August 2021 Fixed rate – 2.550%
57.7
 August 2021 Variable rate - 1.842%
125.0
 August 2021 Variable rate – 1.717%
50.0
 September 2021 Variable rate – 1.857%
22.0
 May 2022 Variable rate – 1.668%
100.0
 May 2022 Variable rate – 1.666%
10.0
 June 2022 Variable rate – 1.931%
50.0
 July 2022 Variable rate – 1.675%
50.0
 July 2022 Variable rate – 1.693%
50.0
 July 2022 Variable rate – 1.694%
50.0
 August 2022 Variable rate – 1.702%
24.9
 March 2023 Fixed rate – 2.160%
20.5
 June 2025 Fixed rate – 2.940%
$1,646.9
    

The variable rate borrowings are pre-payable on each interest reset date without penalty.  The fixed rate borrowings are pre-payable subject to payment of a yield maintenance fee based on prevailing market interest rates.  At September 30, 2017, the aggregate yield maintenance fee to prepay all fixed rate borrowings was $3.2 million.

Interest expense of $19.5 million and $12.3 million in the first nine months of 2017 and 2016, respectively, was recognized related to total borrowings from the FHLB.


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CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________



Generally, the variable and fixed rate borrowings are pre-payable.  At September 30, 2023, the aggregate prepayment penalty on such outstanding borrowings was not material.

Interest expense of $74.2 million and $17.4 million in the first nine months of 2023 and 2022, respectively, was recognized related to total borrowings from the FHLB, reflecting both higher interest rates on the variable rate investment borrowings and higher average borrowings outstanding in the 2023 period.

CHANGES IN COMMON STOCK


Changes in the number of shares of common stock outstanding were as follows (shares in thousands):

Balance, December 31, 2016173,754
Treasury stock purchased and retired(6,701)
Stock options exercised524
Restricted and performance stock vested185
(a)
Balance, September 30, 2017167,762
____________________
(a)
Such amount was reduced by 103 thousand shares which were tendered to the Company for the payment of required federal and state tax withholdings owed on the vesting of restricted and performance stock.

In the first nine months of 2017,2023, we repurchased 6.73.6 million shares of common stock for $140.1$85.1 million under our securities repurchase program.program (including $0.8 million of repurchases settled in the fourth quarter of 2023). In May 2017,2023, the Company announced that itsCompany's Board of Directors approved an additional $300.0$500.0 million to repurchase the Company's outstanding shares of common stock. The Company had remaining repurchase authority of $412.6$601.8 million as of September 30, 2017.2023.


In the first nine months of 2017,2023, we issued 1.4 million shares of common stock, net of shares withheld to pay tax withholdings, pursuant to employee benefit plans.

In the first nine months of 2023, dividends declared on common stock totaled $44.7$51.0 million ($0.26($0.44 per common share). In May 2017,2023, the Company increased its quarterly common stock dividend to $0.09$0.15 per share from $0.08$0.14 per share.


SALES INDUCEMENTS

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.  Sales inducements deferred totaled $1.5 million and $2.8 million during the nine months ended September 30, 2017 and 2016, respectively.  Amounts amortized totaled $6.6 million and $7.1 million during the nine months ended September 30, 2017 and 2016, respectively.  The unamortized balance of deferred sales inducements was $44.3 million and $49.4 million at September 30, 2017 and December 31, 2016, respectively.  The balance of insurance liabilities for persistency bonus benefits was $.4 million and $.5 million at September 30, 2017 and December 31, 2016, respectively.

OUT-OF-PERIOD ADJUSTMENTS

In the third quarter of 2017, we recorded the net effect of an out-of-period adjustment related to the calculation of certain life insurance liabilities in our Colonial Penn segment which decreased insurance policy benefits by $2.5 million, increased tax expense by $.9 million and increased our net income by $1.6 million (or 1 cent per diluted share). In the second quarter of 2017, we recorded the net effect of an out-of-period adjustment related to the calculation of certain long-term care insurance liabilities in our Bankers Life segment which decreased insurance policy benefits by $1.7 million, increased tax expense by $.6 million and increased our net income by $1.1 million (or 1 cent per diluted share). We evaluated these adjustments taking into account both qualitative and quantitative factors and considered the impact of these adjustments in relation to each period, as well as the periods in which they originated. The impact of recognizing these adjustments in prior years was not significant to any individual period. Management believes these adjustments are immaterial to the consolidated financial statements and all previously issued financial statements.

RECENTLY ISSUED ACCOUNTING STANDARDS

Pending Accounting Standards

In May 2014, the Financial Accounting Standards Board (the "FASB") issued authoritative guidance for recognizing revenue from contracts with customers. Certain contracts with customers are specifically excluded from this guidance,

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CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________


including insurance contracts. The core principle of the new guidance is that an entity should recognize revenue when it transfers promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also requires additional disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The guidance will be effective for the Company on January 1, 2018 and permits two methods of transition upon adoption; full retrospective and modified retrospective. Under the full retrospective method, prior periods would be restated under the new revenue standard, providing for comparability in all periods presented. Under the modified retrospective method, prior periods would not be restated. Instead, revenues and other disclosures for pre-2018 periods would be provided in the notes to the financial statements as previously reported under the current revenue standard. The new guidance will impact our accounting for various distribution and marketing agreements with other insurance companies pursuant to which Bankers Life's career agents distribute third party products including prescription drug and Medicare Advantage plans. The revenue associated with these distribution agreements has been less than 1 percent of our total revenue. Our annual fee income earned during a calendar year will not change, but the amount recognized during each quarterly period will vary based on the sales of such products in each period. Accordingly, the adoption of this guidance is not expected to have a material impact on our consolidated financial statements. The Company expects to adopt the new guidance using the modified retrospective method.

In January 2016, the FASB issued authoritative guidance related to the recognition and measurement of financial assets and financial liabilities which made targeted improvements to GAAP as follows:

(i)Require equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. However, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.
(ii)Simplify the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment. When a qualitative assessment indicates that impairment exists, an entity is required to measure the investment at fair value.
(iii)Eliminate the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet.
(iv)Require public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes.
(v)Require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments.
(vi)Require separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements.
(vii)Clarify that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity's other deferred tax assets.

An entity should apply this guidance by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The amendments related to equity securities without readily determinable fair values (including disclosure requirements) should be applied prospectively to equity investments that exist as of the date of adoption of the guidance. The guidance will be effective for the Company for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption of the guidance is not permitted; except that item (v) above is permitted to be adopted early as of the beginning of the fiscal year of adoption. The Company currently holds equity securities classified as available for sale securities that are measured at fair value with changes in fair value recognized through accumulated other comprehensive income. Upon adoption of this guidance, changes in fair value of such equity securities will be recognized through net income. Based upon the equity securities held at September 30, 2017, the estimated impact of the new guidance, assuming it was adopted on October 1, 2017, would be a cumulative effect adjustment that would increase retained earnings by approximately $15 million with a corresponding decrease to accumulated other comprehensive income of approximately $15 million. The Company may experience an increase in volatility in the income statement due to the requirement to measure equity investments at fair value with changes in fair value recognized in income. In addition, the Company will be required to modify certain disclosures upon adoption.

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Notes to Consolidated Financial Statements
(unaudited)
___________________



In February 2016, the FASB issued authoritative guidance related to accounting for leases, requiring lessees to report most leases on their balance sheets, regardless of whether the lease is classified as a finance lease or an operating lease. For lessees, the initial lease liability is equal to the present value of future lease payments, and a corresponding asset, adjusted for certain items, is also recorded. Expense recognition for lessees will remain similar to current accounting requirements for capital and operating leases. The accounting applied by a lessor is largely unchanged from that applied under previous GAAP. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The guidance will be effective for the Company for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company has not yet determined the expected impact of adoption of this guidance on its consolidated financial position, results of operations or cash flows.

In June 2016, the FASB issued authoritative guidance related to the measurement of credit losses on financial instruments. The new guidance replaces the incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to form credit loss estimates. The guidance will be effective for the Company for fiscal years beginning in 2020, including interim periods within the fiscal year. Early adoption is permitted as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company has not yet determined the expected impact of adoption of this guidance on its consolidated financial position, results of operations or cash flows.

In August 2016, the FASB issued authoritative guidance related to how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The guidance addresses eight specific cash flow issues including debt prepayment or debt extinguishment costs, proceeds from the settlement of corporate-owned life insurance policies, distributions received from equity method investees, and others. The guidance will be effective for the Company for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. The adoption of this guidance will result in reclassifications to certain cash receipts and payments within our consolidated statement of cash flows, but will have no impact on our consolidated financial position, results of operations or cash flows.

In November 2016, the FASB issued authoritative guidance to address the diversity in practice that currently exists regarding the classification and presentation of changes in restricted cash on the statement of cash flows. The new guidance requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. Entities will also be required to disclose information about the nature of their restricted cash and restricted cash equivalents. Additionally, if cash, cash equivalents, restricted cash and restricted cash equivalents are presented in more than one line item in the statement of financial position, entities will be required to present a reconciliation, either on the face of the statement of cash flows or disclosed in the notes, of the totals in the statement of cash flows to the related line item captions in the statement of financial position. The guidance will be effective for the Company for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The adoption of this guidance will impact the presentation of our consolidated statement of cash flows and related cash flow disclosures, but will have no impact on our consolidated financial position, results of operations or cash flows.

In January 2017, the FASB issued authoritative guidance that removes Step 2 of the goodwill impairment test under current guidance, which requires a hypothetical purchase price allocation. The new guidance requires an impairment charge to be recognized for the amount by which the carrying amount exceeds the reported unit's fair value. Upon adoption, the guidance is to be applied prospectively. The guidance will be effective for the Company on January 1, 2020, with early adoption permitted. The adoption of this guidance is not expected to have a material impact on the Company's consolidated financial position, results of operations or cash flows.

In March 2017, the FASB issued authoritative guidance related to the premium amortization on purchased callable debt securities. The guidance shortens the amortization period for certain callable debt securities held at a premium. Specifically, the new guidance requires the premium to be amortized to the earliest call date. The guidance does not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The guidance will be effective for the Company for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption

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Notes to Consolidated Financial Statements
(unaudited)
___________________


is permitted, including adoption in an interim period. If an entity early adopts the guidance in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The guidance should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. The Company has not yet determined the expected impact of adoption of this guidance on our consolidated financial position, results of operations or cash flows.

In May 2017, the FASB issued authoritative guidance related to which changes to the terms or conditions of a share-based award require an entity to apply modification accounting. The guidance will be effective for the Company in 2018. The guidance is to be applied prospectively to an award modified on or after the adoption date. The adoption of this guidance is not expected to have a material impact to the Company's consolidated financial position, results of operations or cash flows.

In August 2017, the FASB issued authoritative guidance related to derivatives and hedging. The new guidance expands and refines hedge accounting for both nonfinancial and financial risk components and aligns the recognition and presentation of the effects of the hedging instruments and the hedged item in the financial statements. The new guidance also includes certain targeted improvements to ease the application of current guidance related to the assessment of hedge effectiveness. The guidance will be effective for the Company for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The Company has not yet determined the expected impact of adoption of this guidance on its consolidated financial position, results of operations or cash flows.

Adopted Accounting Standards

In March 2016, the FASB issued authoritative guidance that clarifies the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. An entity performing the assessment under this guidance is required to assess the embedded call (put) options solely in accordance with a four-step decision sequence. The guidance is effective for the Company on January 1, 2017. The adoption of this guidance had no effect on our consolidated financial statements.

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Notes to Consolidated Financial Statements
(unaudited)
___________________


In March 2016, the FASB issued authoritative guidance related to several aspects of the accounting for share-based payment transactions, including the income tax consequences, accounting policy for forfeiture rate assumptions, classification of awards as either equity or liabilities and classification on the statement of cash flows. The new guidance requires all income tax effects of stock-based compensation awards to be recognized in the income statement when the awards vest or are settled. The new guidance also allows an employer to withhold shares upon settlement of an award to satisfy the employer's tax withholding requirements up to the highest marginal tax rate applicable to employees, without resulting in liability classification of the award. Current guidance strictly limits the withholding to the employer's minimum statutory tax withholding requirement. The guidance was effective for the Company on January 1, 2017. The impact of adoption was as follows (dollars in millions):
 January 1, 2017
   Effect of Adoption of Authoritative Guidance  
 Amounts prior to effect of adoption of authoritative guidance Election to account for forfeitures as they occur Recognition of excess tax benefits As adjusted
        
Income tax assets$1,029.9
 $.3
 $15.7
 $1,045.9
Valuation allowance for deferred income tax assets(240.2) —
 (15.7) (255.9)
Income tax assets, net789.7
 .3
 —
 790.0
Total assets31,975.2
 .3
 —
 31,975.5
        
Additional paid-in capital3,212.1
 .9
 —
 3,213.0
Retained earnings650.7
 (.6) —
 650.1
Total shareholders' equity4,486.9
 .3
 —
 4,487.2
        
Total liabilities and shareholders' equity31,975.2
 .3
 —
 31,975.5

 Nine months ended
 September 30, 2016
 Amounts prior to effect of adoption of authoritative guidance Effect of adoption of authoritative guidance As adjusted
Cash flows from operating activities:     
Other operating costs$(555.4) $3.3
 $(552.1)
Net cash flow from operating activities581.5
 3.3
 584.8
      
Cash flows from financing activities:     
Payments to repurchase common stock(206.7) (3.3) (210.0)
Net cash used by financing activities(34.2) (3.3) (37.5)
      
Net increase in cash and cash equivalents273.7
 —
 273.7


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Notes to Consolidated Financial Statements
(unaudited)
___________________


In October 2016, the FASB issued authoritative guidance to amend the consolidation guidance on how a reporting entity that is the single decision maker of a VIE should treat indirect interests in the entity held through related parties that are under common control with the reporting entity when determining whether it is the primary beneficiary of that VIE. The guidance is effective for the Company on January 1, 2017. The adoption of this guidance had no impact on our consolidated financial statements.

LITIGATION AND OTHER LEGAL PROCEEDINGS


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.  In addition, 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 September 29, 2016, Washington National and Bankers Conseco Life Insurance Company ("BCLIC") commenced an arbitration proceeding seeking compensatory, consequential and punitive damages against BRe based upon BRe’s incurable material breaches of the long-term care reinsurance agreements, conversion, fraud, and breaches of fiduciary duties and the obligation to deal honestly and in good faith. BRe filed a counterclaim against Washington National and BCLIC in the arbitration alleging damages relating to the reinsurance agreements and their termination. In addition, on September 29, 2016, a complaint was filed by BCLIC and Washington National in the United States District Court for the Southern District of New York, Bankers Conseco Life Insurance Company and Washington National Insurance Company v. Moshe M. Feuer, Scott Taylor and David Levy, Case No. 16-cv-7646, alleging, among other claims, fraud/fraudulent concealment, and violation of the Racketeer Influenced and Corrupt Organizations Act. These allegations relate to the long-term care reinsurance agreements between BRe and Washington National and BCLIC, respectively, and emanate from the undisclosed relationships between and among the defendants (who were the principal owners and officers of BRe) and Platinum Partners, LP ("Platinum") and its affiliates. On April 27, 2017, an amended complaint was filed adding Beechwood Capital Group, LLC as a defendant. Feuer, Taylor and Levy have moved to compel arbitration of Washington National's and BCLIC's claims. Washington National and BCLIC intend to vigorously pursue their claims for damages and other remedies in the arbitration and the litigation described above.


35
52
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________




By public notice dated July 26, 2017, the Cayman Islands Monetary Authority advised that, effective July 25, 2017, two individuals (the "Controllers") had been appointed pursuant to Section 24(2)(h) of the Cayman Islands Insurance Law to assume control of the affairs of BRe.  According to the public notice, effective with their appointment, the Controllers assumed immediate control of the affairs of BRe and have all the powers necessary to administer the affairs of BRe including power to terminate its insurance business.  The Controllers are responsible for assessing the financial position of BRe and submitting a report to the Cayman Islands Monetary Authority by a date to be specified.  We are in the process of assessing the potential impact of this action on the proceedings described in the foregoing paragraph.

On July 20, 2007, a complaint was filed in the Hamilton County, Indiana Circuit Court, Signature Estates of Indiana, Inc. d/b/a Gordon Marketing, Stephens-Matthews Marketing, Inc., Shields Brokerage, Inc. and Edwin A. Hildebrand d/b/a Hildebrand Insurance Services v.April 9, 2019, Bankers Conseco MedicalLife Insurance Company Conseco Medical Insurance Company a/k/a("BCLIC") and Washington National commenced an action entitled Bankers Conseco Life Insurance Company and Washington National Insurance Company Cause No. 29D02- 0707-PL-790.  v. Wilmington Trust, National Association, in the Supreme Court of the State of New York, County of New York, Commercial Division (the "Wilmington Action").  BCLIC and Washington National seek an unspecified amount of damages, costs, attorney's fees, and other relief as the court deems appropriate. In the Wilmington Action, BCLIC and Washington National assert claims against Wilmington Trust, National Association ("Wilmington") for breaching its express contractual obligations under four trust agreements pursuant to which Wilmington was the trustee in regard to trust assets ceded as part of reinsurance agreements with Beechwood Re Ltd. ("BRe"), as well as for breaching its fiduciary duties to BCLIC and Washington National. The Court granted Wilmington's motion to dismiss this litigation. BCLIC and Washington National appealed the Court's decision. On April 20, 2021, the New York Appellate Division of the Supreme Court, First Judicial Department unanimously reversed the trial court and reinstated breach of contract and breach of fiduciary duty claims against Wilmington. The case has been resolved by settlement and dismissed.

On June 7, 2019, the Joint Official Liquidators of Platinum Partners Value Arbitrage Fund L.P. (in Official Liquidation) and Principal Growth Strategies, LLC, commenced suit against, among others, CNO Financial Group, Inc., BCLIC, Washington National and 40|86 Advisors, Inc. (collectively, the "CNO Parties") in Delaware Chancery Court.  Plaintiffs are independent insurance marketing organizations which previously marketed Conseco Medical Insurance Company ("CMIC") individual major medical productsseek an unspecified amount of damages, costs, attorney's fees, and which are claiming damages for allegedly fraudulent conduct by CMICother 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 BRe and recaptured assets from reinsurance trusts, in withdrawing from this business in 2002.  Theparticular, Agera securities.  Plaintiffs contend that the Agera securities were fraudulently transferred to the reinsurance trusts by other Platinum-related entities and they reliedare seeking to claw back those Agera securities, or the value of those assets, from the CNO Parties.  The CNO Parties are vigorously contesting the plaintiff's claims. The CNO Parties had removed the case to the United States District Court for the District of Delaware but on CMIC’sApril 6, 2020, the District Court granted the plaintiff's motion to remand the case back to the Delaware Chancery Court. Plaintiffs have filed an Amended Complaint and the CNO Parties have moved to dismiss the Amended Complaint. The Delaware Chancery Court denied the CNO Parties’ motions to dismiss the Amended Complaint on the basis of forum non conveniens, but granted the CNO Parties’ motion to stay the case pending the conclusion of a related matter. After the stay is lifted, the court will address the CNO Parties’ and other defendants’ motions to dismiss the Amended Complaint on numerous other grounds.

On June 28, 2019, BCLIC and Washington National commenced an action entitled Bankers Conseco Life Insurance Company and Washington National Insurance Company v. KPMG LLP, in the Supreme Court of the State of New York, County of New York, Commercial Division (the "KPMG Action").  BCLIC and Washington National seek an unspecified amount of damages, costs, attorney's fees, and other relief as the court deems appropriate. In the KPMG Action, BCLIC and Washington National assert claims against KPMG LLP ("KPMG") for aiding and abetting fraud, constructive fraud and negligent misrepresentation arising from KPMG's alleged representations thatrole in the Platinum Partners' scheme to defraud BCLIC and Washington National into reinsuring its major medical business was profitable and that CMIC was committed to it.  The Plaintiffs further allege that when CMIC exited the market, it caused agents that were previously writing business through their organizations to cease doinglong-term care business with them, thereby causing irreparable damage.  CMIC merged intoBRe. The Court granted KPMG’s motion to dismiss this litigation. BCLIC and Washington National effective July 1, 2003.appealed the Court's decision. On December 16, 2016,1, 2020, the New York Appellate Division of the Supreme Court, First Judicial Department unanimously reversed the trial court and reinstated the aiding and abetting claim against KPMG. The case has been resolved by settlement and dismissed.

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 amended 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") 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 juryclass trial verdicts were entered in favoron the alter ego allegations and the meaning of the plaintiffs, and compensatory damages aggregating $4.7 million and punitive damages aggregating $6.0 million were awardedsubject insurance policy language. The CNO Entities continue to vigorously defend the plaintiffs.  Washington National filed post-trial motions requesting the court correct errors, grant a new trial, find that punitive damages were improper, and reduce both compensatory and punitive damages.  Plaintiffs filed motions requesting pre-judgment interest and attorney fees.  On June 19, 2017, the court reduced punitive damages by $1.5 million and denied plaintiffs' motions for pre-judgment interest and attorney fees. Both sides have filed a Noticecase.
53
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to defend it vigorously.Consolidated Financial Statements

(unaudited)
___________________

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.


In August 2011, we were notified of an examination to be done on behalf of a number of states for the purpose of determining compliance with unclaimed property laws by the Company and its subsidiaries.  Such examination has included inquiries related to the use of data available on the U.S. Social Security Administration's Death Master File to identify instances where benefits under life insurance policies, annuities and retained asset accounts are payable. We are continuing to provide information to the examiners in response to their requests. A total of 38 states and the District of Columbia are currently participating in this examination.


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CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________


CONSOLIDATED STATEMENT OF CASH FLOWS

The following disclosures supplement our consolidated statement of cash flows.


The following reconciles net income to net cash from operating activities (dollars in millions):

Nine months ended
September 30,
 20232022
Cash flows from operating activities:  
Net income$240.2 $592.6 
Adjustments to reconcile net income to net cash from operating activities: 
Amortization and depreciation198.5 184.7 
Income taxes24.6 154.7 
Insurance liabilities169.5 (475.0)
Accrual, amortization and fair value changes included in investment income(54.9)132.0 
Deferral of policy acquisition costs(277.6)(248.5)
Net investment losses79.2 99.2 
Other (a)26.7 (105.2)
Net cash from operating activities$406.2 $334.5 

 Nine months ended
 September 30,
 2017 2016
Cash flows from operating activities:   
Net income$246.5
 $124.0
Adjustments to reconcile net income to net cash from operating activities:   
Amortization and depreciation200.8
 199.1
Income taxes50.6
 43.0
Insurance liabilities321.5
 310.2
Accrual and amortization of investment income(233.2) (93.4)
Deferral of policy acquisition costs(183.4) (179.4)
Net realized investment gains(52.3) (23.3)
Loss on reinsurance transaction—
 75.4
Cash and cash equivalents received upon recapture of reinsurance—
 73.6
Loss on extinguishment of borrowings related to a variable interest entity5.5
 —
Other77.7
 55.6
Net cash from operating activities$433.7
 $584.8
_____________

(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):

Nine months ended
September 30,
 20232022
Amounts related to employee benefit plans$18.4 $19.8 

54
 Nine months ended
 September 30,
 2017 2016
Stock options, restricted stock and performance units$17.8
 $18.9
Market value of investments recaptured in connection with the termination of reinsurance agreements with BRe—
 431.1


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Table of Contents
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________



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 corporate 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.


Certain of our insurance 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.


The following tables provide supplemental information about the assets and liabilities of the VIEs which have been consolidated in accordance with authoritative guidance (dollars in millions):
September 30, 2017 September 30, 2023
VIEs Eliminations 
Net effect on
consolidated
balance sheet
VIEsEliminationsNet effect on
consolidated
balance sheet
Assets:     Assets:   
Investments held by variable interest entities$1,382.5
 $—
 $1,382.5
Investments held by variable interest entities$858.1 $— $858.1 
Notes receivable of VIEs held by insurance subsidiaries—
 (159.9) (159.9)
Notes receivable of VIEs held by subsidiariesNotes receivable of VIEs held by subsidiaries— (113.8)(113.8)
Cash and cash equivalents held by variable interest entities105.9
 —
 105.9
Cash and cash equivalents held by variable interest entities122.0 — 122.0 
Accrued investment income2.0
 (.1) 1.9
Accrued investment income2.5 — 2.5 
Income tax assets, net(.6) —
 (.6)Income tax assets, net13.4 — 13.4 
Other assets13.3
 (1.4) 11.9
Other assets.1 (.8)(.7)
Total assets$1,503.1
 $(161.4) $1,341.7
Total assets$996.1 $(114.6)$881.5 
Liabilities: 
  
  
Liabilities:   
Other liabilities$145.9
 $(3.5) $142.4
Other liabilities$17.8 $(4.2)$13.6 
Borrowings related to variable interest entities1,198.2
 —
 1,198.2
Borrowings related to variable interest entities918.5 — 918.5 
Notes payable of VIEs held by insurance subsidiaries172.9
 (172.9) —
Notes payable of VIEs held by subsidiariesNotes payable of VIEs held by subsidiaries126.1 (126.1)— 
Total liabilities$1,517.0
 $(176.4) $1,340.6
Total liabilities$1,062.4 $(130.3)$932.1 
38
55
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________



 December 31, 2022
VIEsEliminationsNet effect on
consolidated
balance sheet
Assets:   
Investments held by variable interest entities$1,077.6 $— $1,077.6 
Notes receivable of VIEs held by subsidiaries— (113.8)(113.8)
Cash and cash equivalents held by variable interest entities69.2 — 69.2 
Accrued investment income3.5 — 3.5 
Income tax assets, net19.6 — 19.6 
Other assets2.5 (.8)1.7 
Total assets$1,172.4 $(114.6)$1,057.8 
Liabilities:   
Other liabilities$29.3 $(2.4)$26.9 
Borrowings related to variable interest entities1,104.6 — 1,104.6 
Notes payable of VIEs held by subsidiaries126.1 (126.1)— 
Total liabilities$1,260.0 $(128.5)$1,131.5 

 December 31, 2016
 VIEs Eliminations 
Net effect on
consolidated
balance sheet
Assets:     
Investments held by variable interest entities$1,724.3
 $—
 $1,724.3
Notes receivable of VIEs held by insurance subsidiaries—
 (204.2) (204.2)
Cash and cash equivalents held by variable interest entities189.3
 —
 189.3
Accrued investment income3.0
 (.1) 2.9
Income tax assets, net6.4
 (1.3) 5.1
Other assets13.1
 (1.8) 11.3
Total assets$1,936.1
 $(207.4) $1,728.7
Liabilities: 
  
  
Other liabilities$81.8
 $(6.4) $75.4
Borrowings related to variable interest entities1,662.8
 —
 1,662.8
Notes payable of VIEs held by insurance subsidiaries203.3
 (203.3) —
Total liabilities$1,947.9
 $(209.7) $1,738.2

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.  At September 30, 2017,2023, such loans had an amortized cost of $1,381.7 million;$880.6 million; gross unrealized gains of $8.4 million;$1.9 million; gross unrealized losses of $7.6 million;$21.5 million; allowance for credit losses of $2.9 million; and an estimated fair value of $1,382.5 million.$858.1 million.


The following table summarizes changes in the allowance for credit losses related to corporate securities held by VIEs for the three months ended September 30, 2023 and 2022 (dollars in millions):
Three months ended
September 30,
20232022
Allowance at the beginning of the period$4.5 $12.2 
Additions for securities for which credit losses were not previously recorded.1 .9 
Additions for purchased securities with deteriorated credit— — 
Additions (reductions) for securities where an allowance was previously recorded(.6)(5.7)
Reduction for securities sold during the period(1.1)(.9)
Reduction for securities for which the Company made the decision to sell where an allowance was previously recorded— — 
Write-offs— — 
Recoveries of previously written-off amount— — 
Allowance at the end of the period$2.9 $6.5 


56
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________

The following table summarizes changes in the allowance for credit losses related to corporate securities held by VIEs for the nine months ended September 30, 2023 and 2022 (dollars in millions):
Nine months ended
September 30,
20232022
Allowance at the beginning of the period$5.5 $3.7 
Additions for securities for which credit losses were not previously recorded.7 7.2 
Additions for purchased securities with deteriorated credit— — 
Additions (reductions) for securities where an allowance was previously recorded(.5)(2.5)
Reduction for securities sold during the period(2.8)(1.9)
Reduction for securities for which the Company made the decision to sell where an allowance was previously recorded— — 
Write-offs— — 
Recoveries of previously written-off amount— — 
Allowance at the end of the period$2.9 $6.5 


The following table sets forth the amortized cost and estimated fair value of the investments held by the VIEs at September 30, 2017,2023, 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$5.3 $4.6 
Due after one year through five years770.2 750.4 
Due after five years through ten years105.1 103.1 
Total$880.6 $858.1 
 
Amortized
cost
 
Estimated
fair
value
 (Dollars in millions)
Due in one year or less$5.9
 $5.9
Due after one year through five years499.4
 500.1
Due after five years through ten years876.4
 876.5
Total$1,381.7
 $1,382.5


During the first nine months of 2017,2023, the VIEs recognized net realized investment losses of $2.5$4.2 million, which were comprised of: (i) $2.2 million of net gains from the sales of investments; (ii) $4.3 million of losses on the dissolution of VIEs; and (iii) $.4 million of writedowns of investments for other than temporary declines in fair value recognized through net income. During the first nine months of 2016, the VIEs recognized net realized investment losses of $20.6 million, which were comprised of: (i) $12.1$6.8 million of net losses from the sales of fixed maturities; and (ii) a $7.3decrease in the allowance for credit losses of $2.6 million. Such net realized losses included gross realized losses of $6.9 million loss onfrom the dissolutionsale of a VIE; and (iii) $1.2$18.5 million of writedowns of investments for other than temporary declines in fair value recognized through net income.

At September 30, 2017, there were no investments held by the VIEs that were in default or considered nonperforming.

investments. During the first nine months of 2017, $2.22022, the VIEs recognized net investment losses of $6.7 million which were comprised of: (i) $3.9 million of net gainslosses from the sales of fixed maturities; and (ii) an increase in the allowance for credit losses of $2.8 million. Such net realized losses included gross realized losses of $3.9 million from the sale of investments included sales$55.9 million of $86.0 million which resulted in gross investment losses (before income taxes) of $2.0 million. During the first nine months of 2016, $186.6 million ofinvestments.

At September 30, 2023, there were no fixed maturity investments held by the VIEs were soldin default.

At September 30, 2023, the VIEs held: (i) investments (for which resultedan allowance for credit losses has not been recorded) with a fair value of $90.6 million and gross unrealized losses not deemed to have credit losses of $0.3 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 $447.3 million and gross investmentunrealized losses (before income taxes)not deemed to have credit losses of $20.3 million.$11.4 million that had been in an unrealized loss position for twelve months or greater.



At December 31, 2022, the VIEs held: (i) investments (for which an allowance for credit losses has not been recorded) with a fair value of $392.2 million and gross unrealized losses of $14.2 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 $477.9 million and gross unrealized losses of $17.3 million that had been in an unrealized loss position for twelve months or greater.

39
57
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________



At September 30, 2017, the VIEs held:  (i) investments with a fair value of $382.5 million and gross unrealized losses of $7.1 million that had been in an unrealized loss position for less than twelve months; and (ii) investments with a fair value of $11.0 million and gross unrealized losses of $.5 million that had been in an unrealized loss position for greater than twelve months.

At December 31, 2016, the VIEs held: (i) investments with a fair value of $93.8 million and gross unrealized losses of $.9 million that had been in an unrealized loss position for less than twelve months; and (ii) investments with a fair value of $143.9 million and gross unrealized losses of $2.9 million that had been in an unrealized loss position for greater than twelve months.

The investments held by the VIEs are evaluated for other-than-temporary declines in fair valueimpairment in a manner that is consistent with the Company's fixed maturities, available for sale.


In addition, the Company, in the normal course of business, makes passive investments in structured securities issued by VIEs for which the Company is not the investment manager.  These structured securities include asset-backed securities, collateralized debtloan obligations, commercial mortgage-backed securities, agency residential mortgage-backed securities and collateralized mortgage obligations.
non-agency residential 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 September 30, 2017,2023, we held investments in various limited partnerships and hedge funds, in which we are not the primary beneficiary, totaling $315.1$540.1 million (classified as other invested assets).  At September 30, 2017,2023, we had unfunded commitments to these partnerships and other investments of $266.2 million.totaling $523.7 million.  Our maximum exposure to loss on these investments is limited to the amount of our investment.


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Table of Contents
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________


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 company-owned life insurance policy,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.


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 tradedexchange-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; certain mutual fund investments; most short-term investments; and non-exchange-traded derivatives 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
58
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________

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, (primarily certain below-investment grade privately placed securities), certain structured securities, mortgage 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 indexindexed 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. Any transfers between levels

41
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CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________


are reported as having occurred at the beginning of the period. There were no transfers between Level 1 and Level 2 in both the first nine months of 2017 and 2016.


The vast majority of our fixed maturity and equity securities, including those held in trading portfolios and those held by consolidated VIEs, short-term and separate account 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.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.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 debtloan obligations and commercial mortgage-backed securities mortgage pass-through securities and collateralized mortgage obligations are generally priced using market and income approaches.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 (primarily comprised of non-redeemable preferred stock) 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.


•Investments held by VIEs


Corporate securities are generally priced using market and income approaches using pricing vendors. Inputs generally consist of issuer rating, benchmark yields, maturity, and credit spreads.


59
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________


•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;quotes, time value and volatility factors underlying options;options, market interest rates;rates and non-performance risk.


Third partyThird-party pricing services normally derive security prices through recently reported trades for identical or similar securities making adjustments through the reporting date based upon available market observable information.  If there are no recently reported trades, the third partythird-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 partythird-party pricing services;

42
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CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________


(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 the pricesa particular price received from a third parties areparty 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.  Such inputs typically include: benchmark yields, reported trades, broker broker/dealer quotes, issuer spreads, benchmark securities, bids, offers and other relevant data.  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 andrepresent an exit price, but assumptions used to establish the fair value may not be observable and therefore represent Level 3 inputs.  Approximately 4579 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.

For certain embedded derivatives, we use actuarial assumptions in the determination of fair value which we consider to be Level 3 inputs.



43
60
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________



The categorization of fair value measurements, by input level, for our financial instruments carried at fair value on a recurring basis at September 30, 20172023 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$— $10,831.1 $127.8 $10,958.9 
United States Treasury securities and obligations of United States government corporations and agencies— 165.4 — 165.4 
States and political subdivisions— 2,306.0 — 2,306.0 
Foreign governments— 76.0 — 76.0 
Asset-backed securities— 1,317.7 41.5 1,359.2 
Agency residential mortgage-backed securities— 615.9 — 615.9 
Non-agency residential mortgage-backed securities— 1,522.6 2.6 1,525.2 
Collateralized loan obligations— 1,059.5 — 1,059.5 
Commercial mortgage-backed securities— 2,226.8 12.3 2,239.1 
Total fixed maturities, available for sale— 20,121.0 184.2 20,305.2 
Equity securities - corporate securities22.9 — 72.6 95.5 
Trading securities:    
Asset-backed securities— 34.9 — 34.9 
Agency residential mortgage-backed securities— 3.4 — 3.4 
Non-agency residential mortgage-backed securities— 59.9 — 59.9 
Collateralized debt obligations— 8.9 — 8.9 
Commercial mortgage-backed securities— 114.1 — 114.1 
Total trading securities— 221.2 — 221.2 
Investments held by variable interest entities - corporate securities— 858.1 — 858.1 
Other invested assets:
Derivatives— 150.0 — 150.0 
Residual tranches— 13.7 12.1 25.8 
Total other invested assets— 163.7 12.1 175.8 
Market risk benefit asset— — 89.3 89.3 
Assets held in separate accounts— 2.9 — 2.9 
Total assets carried at fair value by category$22.9 $21,366.9 $358.2 $21,748.0 
Liabilities:    
Market risk benefit liability$— $— $3.1 $3.1 
Embedded derivatives associated with fixed indexed annuity products— — 1,213.4 1,213.4 
Total liabilities carried at fair value by category$— $— $1,216.5 $1,216.5 


61
 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$—
 $14,394.3
 $255.7
 $14,650.0
United States Treasury securities and obligations of United States government corporations and agencies—
 172.3
 —
 172.3
States and political subdivisions—
 2,077.0
 —
 2,077.0
Debt securities issued by foreign governments—
 57.1
 4.0
 61.1
Asset-backed securities—
 2,726.2
 59.9
 2,786.1
Collateralized debt obligations—
 237.9
 —
 237.9
Commercial mortgage-backed securities—
 1,338.9
 —
 1,338.9
Mortgage pass-through securities—
 2.2
 —
 2.2
Collateralized mortgage obligations—
 804.4
 —
 804.4
Total fixed maturities, available for sale—
 21,810.3
 319.6
 22,129.9
Equity securities - corporate securities477.8
 213.9
 21.6
 713.3
Trading securities: 
  
  
  
Corporate securities—
 21.1
 —
 21.1
United States Treasury securities and obligations of United States government corporations and agencies—
 .5
 —
 .5
Asset-backed securities—
 101.2
 —
 101.2
Collateralized debt obligations—
 2.7
 —
 2.7
Commercial mortgage-backed securities—
 93.3
 —
 93.3
Collateralized mortgage obligations—
 72.5
 —
 72.5
Equity securities3.1
 —
 —
 3.1
Total trading securities3.1
 291.3
 —
 294.4
Investments held by variable interest entities - corporate securities—
 1,377.5
 5.0
 1,382.5
Other invested assets - derivatives—
 142.2
 —
 142.2
Assets held in separate accounts—
 4.8
 —
 4.8
Total assets carried at fair value by category$480.9
 $23,840.0
 $346.2
 $24,667.1
        
Liabilities: 
  
  
  
Future policy benefits - embedded derivatives associated with fixed index annuity products$—
 $—
 $1,249.3
 $1,249.3



44
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________



The categorization of fair value measurements, by input level, for our financial instruments carried at fair value on a recurring basis at December 31, 20162022 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$— $11,584.9 $127.8 $11,712.7 
United States Treasury securities and obligations of United States government corporations and agencies— 158.7 — 158.7 
States and political subdivisions— 2,388.5 — 2,388.5 
Foreign governments— 74.7 — 74.7 
Asset-backed securities— 1,230.0 57.0 1,287.0 
Agency residential mortgage-backed securities— 175.0 — 175.0 
Non-agency residential mortgage-backed securities— 1,492.3 56.2 1,548.5 
Collateralized loan obligations— 782.5 3.4 785.9 
Commercial mortgage-backed securities— 2,207.9 14.5 2,222.4 
Total fixed maturities, available for sale— 20,094.5 258.9 20,353.4 
Equity securities - corporate securities59.6 — 75.7 135.3 
Trading securities:    
Asset-backed securities— 15.1 — 15.1 
Agency residential mortgage-backed securities— .3 — .3 
Non-agency residential mortgage-backed securities— 60.2 .5 60.7 
Commercial mortgage-backed securities— 131.8 — 131.8 
Total trading securities— 207.4 .5 207.9 
Investments held by variable interest entities - corporate securities— 1,077.6 — 1,077.6 
Other invested assets:
Derivatives— 56.7 — 56.7 
Residual tranches— — 18.3 18.3 
Total other invested assets— 56.7 18.3 75.0 
Market risk benefit asset— — 65.3 65.3 
Assets held in separate accounts— 2.7 — 2.7 
Total assets carried at fair value by category$59.6 $21,438.9 $418.7 $21,917.2 
Liabilities:    
Market risk benefit liability$— $— $11.3 $11.3 
Embedded derivatives associated with fixed indexed annuity products— — 1,297.0 1,297.0 
Total liabilities carried at fair value by category$— $— $1,308.3 $1,308.3 






62
 
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$—
 $13,252.4
 $258.5
 $13,510.9
United States Treasury securities and obligations of United States government corporations and agencies—
 164.3
 —
 164.3
States and political subdivisions—
 1,988.9
 —
 1,988.9
Debt securities issued by foreign governments—
 33.0
 3.9
 36.9
Asset-backed securities—
 2,649.9
 60.4
 2,710.3
Collateralized debt obligations—
 225.3
 5.4
 230.7
Commercial mortgage-backed securities—
 1,504.2
 32.0
 1,536.2
Mortgage pass-through securities—
 2.5
 —
 2.5
Collateralized mortgage obligations—
 915.5
 —
 915.5
Total fixed maturities, available for sale—
 20,736.0
 360.2
 21,096.2
Equity securities - corporate securities359.9
 199.1
 25.2
 584.2
Trading securities: 
  
  
  
Corporate securities—
 19.0
 —
 19.0
United States Treasury securities and obligations of United States government corporations and agencies—
 .5
 —
 .5
Asset-backed securities—
 94.3
 —
 94.3
Collateralized debt obligations—
 2.4
 —
 2.4
Commercial mortgage-backed securities—
 163.9
 —
 163.9
Collateralized mortgage obligations—
 78.4
 —
 78.4
Equity securities4.9
 —
 —
 4.9
Total trading securities4.9
 358.5
 —
 363.4
Investments held by variable interest entities - corporate securities—
 1,724.3
 —
 1,724.3
Other invested assets - derivatives—
 111.9
 —
 111.9
Assets held in separate accounts—
 4.7
 —
 4.7
Total assets carried at fair value by category$364.8
 $23,134.5
 $385.4
 $23,884.7
        
Liabilities: 
  
  
  
Future policy benefits - embedded derivatives associated with fixed index annuity products$—
 $—
 $1,092.3
 $1,092.3





45
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________



For those financial instruments disclosed at fair value, we use the following methods and assumptions to determine the estimated fair values:

Mortgage loans and policy loans.  We discount future expected cash flows based on interest rates currently being offered for similar loans with similar risk characteristics.  We aggregate loans with similar characteristics in our calculations.  The fair value of policy loans approximates their carrying value.

Company-owned life insurance is backed by a series of mutual funds and is carried at cash surrender value which approximates estimated fair value.

Cash and cash equivalents include commercial paper, invested cash and other investments purchased with original maturities of less than three months. We carry them at amortized cost, which approximates estimated fair value.

Liabilities for policyholder account balances.  The estimated fair value of insurance liabilities for policyholder account balances was approximately equal to its carrying value as interest rates credited on the vast majority of account balances approximate current rates paid on similar products and because these rates are not generally guaranteed beyond one year.

Investment borrowings, notes payable and borrowings related to variable interest entities.  For publicly traded debt, we use current fair values.  For other notes, we use discounted cash flow analyses based on our current incremental borrowing rates for similar types of borrowing arrangements.

The fair value measurements forof our financial instruments disclosed at fair value on a recurring basis are as follows (dollars in millions):
September 30, 2023
 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 valueTotal carrying amount
Assets:    
Mortgage loans$— $— $1,790.2 $1,790.2 $1,971.3 
Policy loans— — 126.4 126.4 126.4 
Other invested assets:
Company-owned life insurance— 200.5 — 200.5 200.5 
Cash and cash equivalents:
Unrestricted460.8 — — 460.8 460.8 
Held by variable interest entities122.0 — — 122.0 122.0 
Liabilities: 
Policyholder account balances— — 15,481.8 15,481.8 15,481.8 
Future policy benefits— — (462.7)(462.7)(462.7)
Investment borrowings— 2,090.3 — 2,090.3 2,089.4 
Borrowings related to variable interest entities— 929.0 — 929.0 918.5 
Notes payable – direct corporate obligations— 1,054.1 — 1,054.1 1,140.1 
 September 30, 2017
 
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$—
 $—
 $1,705.8
 $1,705.8
 $1,667.8
Policy loans—
 —
 114.6
 114.6
 114.6
Other invested assets:         
Company-owned life insurance—
 178.8
 —
 178.8
 178.8
Cash and cash equivalents:         
Unrestricted765.9
 —
 —
 765.9
 765.9
Held by variable interest entities105.9
 —
 —
 105.9
 105.9
Liabilities:         
Policyholder account balances—
 —
 11,113.5
 11,113.5
 11,113.5
Investment borrowings—
 1,650.1
 —
 1,650.1
 1,646.9
Borrowings related to variable interest entities—
 1,215.1
 —
 1,215.1
 1,198.2
Notes payable – direct corporate obligations—
 970.5
 —
 970.5
 914.4




December 31, 2022
 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 valueTotal carrying amount
Assets:    
Mortgage loans$— $— $1,273.6 $1,273.6 $1,411.9 
Policy loans— — 121.6 121.6 121.6 
Other invested assets:
Company-owned life insurance— 199.1 — 199.1 199.1 
Cash and cash equivalents:
Unrestricted575.7 — — 575.7 575.7 
Held by variable interest entities69.2 — — 69.2 69.2 
Liabilities:
Policyholder account balances— — 15,234.2 15,234.2 15,234.2 
Future policy benefits— — (491.4)(491.4)(491.4)
Investment borrowings— 1,640.5 — 1,640.5 1,639.5 
Borrowings related to variable interest entities— 1,066.3 — 1,066.3 1,104.6 
Notes payable – direct corporate obligations— 1,077.0 — 1,077.0 1,138.8 







46
63
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________



 December 31, 2016
 
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$—
 $—
 $1,800.1
 $1,800.1
 $1,768.0
Policy loans—
 —
 112.0
 112.0
 112.0
Other invested assets:         
Company-owned life insurance—
 165.0
 —
 165.0
 165.0
Cash and cash equivalents:         
Unrestricted473.6
 5.3
 —
 478.9
 478.9
Held by variable interest entities189.3
 —
 —
 189.3
 189.3
Liabilities:         
Policyholder account balances—
 —
 10,912.7
 10,912.7
 10,912.7
Investment borrowings—
 1,650.0
 —
 1,650.0
 1,647.4
Borrowings related to variable interest entities—
 1,675.2
 —
 1,675.2
 1,662.8
Notes payable – direct corporate obligations—
 931.9
 —
 931.9
 912.9



47
Table of Contents
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________


The following table presents additional information about assets and liabilities measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value for the three months ended September 30, 20172023 (dollars in millions):
 September 30, 2017   September 30, 2023 
 Beginning balance as of June 30, 2017 Purchases, sales, issuances and settlements, net (b) Total realized and unrealized gains (losses) included in net income Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss) Transfers into Level 3 (a) Transfers out of Level 3 (a) Ending balance as of September 30, 2017 Amount of total gains (losses) for the three months ended September 30, 2017 included in our net income relating to assets and liabilities still held as of the reporting date Beginning balance as of June 30, 2023Purchases, sales, issuances and settlements, net (b)Total realized and unrealized gains (losses) included in net incomeTotal realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)Transfers into Level 3 (a)Transfers out of
Level 3 (a)		Ending balance as of September 30, 2023Amount of total gains (losses) for the three months ended September 30, 2023 included in our net income relating to assets still held as of the reporting dateAmount of total gains (losses) for the three months ended September 30, 2023 included in accumulated other comprehensive income (loss) relating to assets still held as of the reporting date
Assets:                Assets:        
Fixed maturities, available for sale:                Fixed maturities, available for sale:        
Corporate securities $263.3
 $(44.8) $1.7
 $1.3
 $34.2
 $—
 $255.7
 $(3.2)Corporate securities$136.2 $6.3 $(12.8)$2.9 $1.6 $(6.4)$127.8 $(12.8)$2.1 
Debt securities issued by foreign governments 3.9
 —
 —
 .1
 —
 —
 4.0
 —
Asset-backed securities 59.6
 (1.3) —
 .7
 7.1
 (6.2) 59.9
 —
Asset-backed securities39.8 1.1 — .6 — — 41.5 — .6 
Collateralized debt obligations 2.5
 (2.5) —
 —
 —
 —
 —
 —
Collateralized mortgage obligations .2
 —
 —
 (.2) —
 —
 —
 —
Non-agency residential mortgage-backed securitiesNon-agency residential mortgage-backed securities6.0 — — .1 2.5 (6.0)2.6 — .1 
Commercial mortgage-backed securitiesCommercial mortgage-backed securities12.4 — — (.1)— — 12.3 — (.1)
Total fixed maturities, available for sale 329.5
 (48.6) 1.7
 1.9
 41.3
 (6.2) 319.6
 (3.2)Total fixed maturities, available for sale194.4 7.4 (12.8)3.5 4.1 (12.4)184.2 (12.8)2.7 
Equity securities - corporate securities 24.6
 (8.3) 6.4
 (1.1) —
 —
 21.6
 (.5)Equity securities - corporate securities72.8 — (.2)— — — 72.6 (.2)— 
Investments held by variable interest entities - corporate securities —
 —
 —
 —
 5.0
 —
 5.0
 —
Liabilities:  
  
  
  
  
  
  
  
Future policy benefits - embedded derivatives associated with fixed index annuity products (1,205.4) (56.3) 12.4
 —
 —
 —
 (1,249.3) 12.4
Other invested assets - residual tranchesOther invested assets - residual tranches7.5 3.9 — — .7 — 12.1 — — 
48
64
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________



_________
(a)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 pricing service information for certain assets that the Company is able to validate.
(b)Purchases, sales, issuances and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability 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 and changes to embedded derivative instruments related to insurance products resulting from the issuance of new contracts, or changes to existing contracts.  The following summarizes such activity for the three months ended September 30, 2017 (dollars in millions):

(a)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 pricing service information for certain assets that the Company is able to validate.
(b)Purchases, sales, issuances and settlements, net, 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.  The following summarizes such activity for the three months ended September 30, 2023 (dollars in millions):
 PurchasesSalesIssuancesSettlementsPurchases, sales, issuances and settlements, net
Assets:     
Fixed maturities, available for sale:     
Corporate securities$6.3 $— $— $— $6.3 
Asset-backed securities1.3 (.2)— — 1.1 
Total fixed maturities, available for sale7.6 (.2)— — 7.4 
Other invested assets - residual tranches3.9 — — — 3.9 


65
 Purchases Sales Issuances Settlements Purchases, sales, issuances and settlements, net
Assets:         
Fixed maturities, available for sale:         
Corporate securities$15.3
 $(60.1) $—
 $—
 $(44.8)
Asset-backed securities9.9
 (11.2) —
 —
 (1.3)
Collateralized debt obligations—
 (2.5) —
 —
 (2.5)
Total fixed maturities, available for sale25.2
 (73.8) —
 —
 (48.6)
Equity securities - corporate securities—
 (8.3) —
 —
 (8.3)
Liabilities:         
Future policy benefits - embedded derivatives associated with fixed index annuity products(41.0) 1.8
 (31.4) 14.3
 (56.3)




49
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________



The following table presents additional information about assets and liabilities measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value for the nine months ended September 30, 20172023 (dollars in millions):
 September 30, 2017   September 30, 2023 
 Beginning balance as of December 31, 2016 Purchases, sales, issuances and settlements, net (b) Total realized and unrealized gains (losses) included in net income Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss) Transfers into Level 3 (a) Transfers out of Level 3 (a) Ending balance as of September 30, 2017 Amount of total gains (losses) for the nine months ended September 30, 2017 included in our net income relating to assets and liabilities still held as of the reporting date Beginning balance as of December 31, 2022Purchases, sales, issuances and settlements, net (b)Total realized and unrealized gains (losses) included in net incomeTotal realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)Transfers into Level 3 (a)Transfers out of
Level 3 (a)		Ending balance as of September 30, 2023Amount of total gains (losses) for the nine months ended September 30, 2023 included in our net income relating to assets still held as of the reporting dateAmount of total gains (losses) for the nine months ended September 30, 2023 included in accumulated other comprehensive income (loss) relating to assets still held as of the reporting date
Assets:                Assets:        
Fixed maturities, available for sale:                Fixed maturities, available for sale:        
Corporate securities $258.5
 $(44.1) $9.5
 $.6
 $31.2
 $—
 $255.7
 $(6.5)Corporate securities$127.8 $9.1 $(1.7)$(6.9)$5.9 $(6.4)$127.8 $(1.7)$(9.2)
Debt securities issued by foreign governments 3.9
 —
 —
 .1
 —
 —
 4.0
 —
Asset-backed securities 60.4
 3.8
 —
 2.3
 4.2
 (10.8) 59.9
 —
Asset-backed securities57.0 (3.9)(.2)(1.0)— (10.4)41.5 — (1.1)
Collateralized debt obligations 5.4
 (2.5) —
 —
 —
 (2.9) —
 —
Non-agency residential mortgage-backed securitiesNon-agency residential mortgage-backed securities56.2 (.1)— .2 — (53.7)2.6 — .2 
Collateralized loan obligationsCollateralized loan obligations3.4 — — — — (3.4)— — — 
Commercial mortgage-backed securities 32.0
 —
 —
 —
 —
 (32.0) —
 —
Commercial mortgage-backed securities14.5 — — (2.2)— — 12.3 — (2.2)
Total fixed maturities, available for sale 360.2
 (42.8) 9.5
 3.0
 35.4
 (45.7) 319.6
 (6.5)Total fixed maturities, available for sale258.9 5.1 (1.9)(9.9)5.9 (73.9)184.2 (1.7)(12.3)
Equity securities - corporate securities 25.2
 (8.5) 6.3
 (1.4) —
 —
 21.6
 (.5)Equity securities - corporate securities75.7 (2.1)(1.0)— — — 72.6 (.5)— 
Investments held by variable interest entities - corporate securities —
 5.0
 —
 —
 —
 —
 5.0
 —
Liabilities:  
  
  
  
  
  
  
  
Future policy benefits - embedded derivatives associated with fixed index annuity products (1,092.3) (174.2) 17.2
 —
 —
 —
 (1,249.3) 17.2
Trading securities - non-agency residential mortgage-backed securitiesTrading securities - non-agency residential mortgage-backed securities.5 — — — — (.5)— — — 
Other invested assets - residual tranchesOther invested assets - residual tranches18.3 6.1 .4 — — (12.7)12.1 .4 — 
50
66
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________



_________
(a)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 pricing service information for certain assets that the Company is able to validate.
(b)Purchases, sales, issuances and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability 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 and changes to embedded derivative instruments related to insurance products resulting from the issuance of new contracts, or changes to existing contracts.  The following summarizes such activity for the nine months ended September 30, 2017 (dollars in millions):

(a)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 pricing service information for certain assets that the Company is able to validate.
(b)Purchases, sales, issuances and settlements, net, 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.  The following summarizes such activity for the nine months ended September 30, 2023 (dollars in millions):
 PurchasesSalesIssuancesSettlementsPurchases, sales, issuances and settlements, net
Assets:     
Fixed maturities, available for sale:     
Corporate securities$10.5 $(1.4)$— $— $9.1 
Asset-backed securities3.8 (7.7)— — (3.9)
Non-agency residential mortgage-backed securities— (.1)— — (.1)
Total fixed maturities, available for sale14.3 (9.2)— — 5.1 
Equity securities - corporate securities— (2.1)— — (2.1)
Other invested assets - residual tranches6.4 (.3)— — 6.1 


67
 Purchases Sales Issuances Settlements Purchases, sales, issuances and settlements, net
Assets:         
Fixed maturities, available for sale:         
Corporate securities$64.3
 $(108.4) $—
 $—
 $(44.1)
Asset-backed securities21.9
 (18.1) —
 —
 3.8
Collateralized debt obligations—
 (2.5) —
 —
 (2.5)
Total fixed maturities, available for sale86.2
 (129.0) —
 —
 (42.8)
Equity securities - corporate securities—
 (8.5) —
 —
 (8.5)
Investments held by variable interest entities - corporate securities5.0
 —
 —
 —
 5.0
Liabilities:         
Future policy benefits - embedded derivatives associated with fixed index annuity products(130.1) 5.3
 (95.7) 46.3
 (174.2)





51
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________



The following table presents additional information about assets and liabilities measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value for the three months ended September 30, 20162022 (dollars in millions):


 September 30, 2022
 Beginning balance as of June 30, 2022Purchases, sales, issuances and settlements, net (b)Total realized and unrealized gains (losses) included in net incomeTotal realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)Transfers into Level 3 (a)Transfers out of Level 3 (a)Ending balance as of September 30, 2022Amount of total gains (losses) for the three months ended September 30, 2022 included in our net income relating to assets still held as of the reporting dateAmount of total gains (losses) for the three months ended September 30, 2022 included in accumulated other comprehensive income (loss) relating to assets still held as of the reporting date
Assets:        
Fixed maturities, available for sale:        
Corporate securities$124.0 $2.7 $(.9)$(13.4)$9.7 $— $122.1 $(.9)$(14.2)
Asset-backed securities29.7 18.3 — (3.2)4.1 — 48.9 — (3.2)
Non-agency residential mortgage-backed securities40.5 (.1)— (2.5)13.6 (22.4)29.1 — (2.5)
Collateralized loan obligations4.4 — — — 13.4 (4.4)13.4 — — 
Commercial mortgage-backed securities16.5 — — (1.1)22.2 — 37.6 — (1.1)
Total fixed maturities, available for sale215.1 20.9 (.9)(20.2)63.0 (26.8)251.1 (.9)(21.0)
Equity securities - corporate securities8.2 — (.5)— 67.1 — 74.8 (.5)— 
Trading securities:        
Non-agency residential mortgage-backed securities3.4 — — — — (3.4)— — — 
Commercial mortgage-backed securities6.0 — — — — (6.0)— — — 
Total trading securities9.4 — — — — (9.4)— — — 
Other invested assets - residual tranches2.6 1.6 (.5)— .3 — 4.0 (.5)— 
68
 September 30, 2016  
 Beginning balance as of June 30, 2016 Purchases, sales, issuances and settlements, net (b) Total realized and unrealized gains (losses) included in net income Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss) Transfers into Level 3 (a) Transfers out of Level 3 (a) Ending balance as of September 30, 2016 Amount of total gains (losses) for the three months ended September 30, 2016 included in our net income relating to assets and liabilities still held as of the reporting date
Assets:               
Fixed maturities, available for sale:               
Corporate securities$174.6
 $118.8
 $—
 $(4.9) $—
 $—
 $288.5
 $—
Debt securities issued by foreign governments4.1
 —
 —
 —
 —
 —
 4.1
 —
Asset-backed securities39.1
 5.7
 —
 2.1
 24.6
 (15.0) 56.5
 —
Collateralized debt obligations—
 2.5
 —
 —
 —
 —
 2.5
 —
Commercial mortgage-backed securities1.1
 17.0
 —
 (.1) 14.4
 —
 32.4
 —
Collateralized mortgage obligations—
 12.0
 —
 —
 —
 —
 12.0
 —
Total fixed maturities, available for sale218.9
 156.0
 —
 (2.9) 39.0
 (15.0) 396.0
 —
Equity securities - corporate securities21.4
 3.3
 —
 (.8) —
 —
 23.9
 —
Trading securities - commercial mortgage-backed securities—
 —
 —
 (1.7) 10.0
 —
 8.3
 (1.7)
Liabilities: 
  
  
  
  
  
  
  
Future policy benefits - embedded derivatives associated with fixed index annuity products(1,127.0) (37.0) 18.3
 —
 —
 —
 (1,145.7) 18.3

52
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________



____________
(a)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 pricing service information for certain assets that the Company is able to validate.
(b)Purchases, sales, issuances and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability 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 and changes to embedded derivative instruments related to insurance products resulting from the issuance of new contracts, or changes to existing contracts.  In addition, such activity includes the investments received upon the recapture of reinsurance agreements with BRe on September 29, 2016. The following summarizes such activity for the three months ended September 30, 2016 (dollars in millions):

(a)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 pricing service information for certain assets that the Company is able to validate.
(b)Purchases, sales, issuances and settlements, net, 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.  The following summarizes such activity for the three months ended September 30, 2022 (dollars in millions):

 PurchasesSalesIssuancesSettlementsPurchases, sales, issuances and settlements, net
Assets:     
Fixed maturities, available for sale:     
Corporate securities$9.3 $(6.6)$— $— $2.7 
Asset-backed securities19.0 (.7)— — 18.3 
Non-agency residential mortgage-backed securities— (.1)— — (.1)
Total fixed maturities, available for sale28.3 (7.4)— — 20.9 
Other invested assets - residual tranches1.6 — — — 1.6 


69
 Purchases Received in reinsurance recapture Sales Issuances Settlements Purchases, sales, issuances and settlements, net
Assets:           
Fixed maturities, available for sale:           
Corporate securities$1.1
 $118.6
 $(.9) $—
 $—
 $118.8
Asset-backed securities7.0
 —
 (1.3) —
 —
 5.7
Collateralized debt obligations2.5
 —
 —
 —
 —
 2.5
Commercial mortgage-backed securities17.0
 —
 —
 —
 —
 17.0
Collateralized mortgage obligations—
 12.0
 —
 —
 —
 12.0
Total fixed maturities, available for sale27.6
 130.6
 (2.2) —
 —
 156.0
Equity securities - corporate securities1.1
 2.2
 —
 —
 —
 3.3
Liabilities:           
Future policy benefits - embedded derivatives associated with fixed index annuity products(38.5) —
 3.1
 (14.6) 13.0
 (37.0)


53
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________



The following table presents additional information about assets and liabilities measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value for the nine months ended September 30, 20162022 (dollars in millions):


 September 30, 2022
 Beginning balance as of December 31, 2021Purchases, sales, issuances and settlements, net (b)Total realized and unrealized gains (losses) included in net incomeTotal realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)Transfers into Level 3 (a)Transfers out of Level 3 (a)Ending balance as of September 30, 2022Amount of total gains (losses) for the nine months ended September 30, 2022 included in our net income relating to assets still held as of the reporting dateAmount of total gains (losses) for the nine months ended September 30, 2022 included in accumulated other comprehensive income (loss) relating to assets still held as of the reporting date
Assets:        
Fixed maturities, available for sale:        
Corporate securities$89.7 $13.0 $(.1)$(41.7)$68.6 $(7.4)$122.1 $.4 $(43.1)
Asset-backed securities26.6 26.0 — (6.4)2.7 — 48.9 — (6.4)
Non-agency residential mortgage-backed securities— 6.0 — (10.3)33.4 — 29.1 — (10.3)
Collateralized loan obligations5.0 — — (.4)13.8 (5.0)13.4 — (.4)
Commercial mortgage-backed securities19.0 28.0 — (9.4)— — 37.6 — (9.5)
Total fixed maturities, available for sale140.3 73.0 (.1)(68.2)118.5 (12.4)251.1 .4 (69.7)
Equity securities - corporate securities11.5 63.9 (.6)— — — 74.8 (.5)— 
Trading securities:        
Non-agency residential mortgage-backed securities3.5 — — — — (3.5)— — — 
Commercial mortgage-backed securities12.9 — — — — (12.9)— — — 
Total trading securities16.4 — — — — (16.4)— — — 
Investments held by variable interest entities - corporate securities2.2 (2.1)(.1)— — — — — — 
Other invested assets - residual tranches— 2.8 — (.6)1.8 — 4.0 — (.6)
70
 September 30, 2016  
 Beginning balance as of December 31, 2015 Purchases, sales, issuances and settlements, net (b) Total realized and unrealized gains (losses) included in net income Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss) Transfers into Level 3 (a) Transfers out of Level 3 (a) Ending balance as of September 30, 2016 Amount of total gains (losses) for the nine months ended September 30, 2016 included in our net income relating to assets and liabilities still held as of the reporting date
Assets:               
Fixed maturities, available for sale:               
Corporate securities$170.4
 $104.4
 $(7.0) $7.4
 $20.3
 $(7.0) $288.5
 $(5.6)
Debt securities issued by foreign governments—
 4.0
 —
 .1
 —
 —
 4.1
 —
Asset-backed securities35.9
 1.7
 —
 4.0
 28.6
 (13.7) 56.5
 —
Collateralized debt obligations—
 2.5
 —
 —
 —
 —
 2.5
 —
Commercial mortgage-backed securities1.1
 17.0
 —
 .4
 13.9
 —
 32.4
 —
Mortgage pass-through securities.1
 (.1) —
 —
 —
 —
 —
 —
Collateralized mortgage obligations—
 12.0
 —
 —
 —
 —
 12.0
 —
Total fixed maturities, available for sale207.5
 141.5
 (7.0) 11.9
 62.8
 (20.7) 396.0
 (5.6)
Equity securities - corporate securities32.0
 5.5
 (12.8) (.8) —
 —
 23.9
 (12.8)
Trading securities - commercial mortgage-backed securities39.9
 —
 —
 (1.4) —
 (30.2) 8.3
 (1.4)
Liabilities: 
  
  
  
  
  
  
  
Future policy benefits - embedded derivatives associated with fixed index annuity products(1,057.1) (55.3) (33.3) —
 —
 —
 (1,145.7) (33.3)

54
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________



____________
(a)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 pricing service information for certain assets that the Company is able to validate.
(b)Purchases, sales, issuances and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability 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 and changes to embedded derivative instruments related to insurance products resulting from the issuance of new contracts, or changes to existing contracts.  In addition, such activity includes the investments received upon the recapture of reinsurance agreements with BRe on September 29, 2016.
(a)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 pricing service information for certain assets that the Company is able to validate.
(b)Purchases, sales, issuances and settlements, net, 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.  The following summarizes such activity for the nine months ended September 30, 2016 (dollars in millions):

 Purchases Received in reinsurance recapture Sales Issuances Settlements Purchases, sales, issuances and settlements, net
Assets:           
Fixed maturities, available for sale:           
Corporate securities$1.1
 $118.6
 $(15.3) $—
 $—
 $104.4
Debt securities issued by foreign governments4.0
 —
 —
 —
 —
 4.0
Asset-backed securities7.0
 —
 (5.3) —
 —
 1.7
Collateralized debt obligations2.5
 —
 —
 —
 —
 2.5
Commercial mortgage-backed securities17.0
 —
 —
 —
 —
 17.0
Mortgage pass-through securities—
 —
 (.1) —
 —
 (.1)
Collateralized mortgage obligations—
 12.0
 —
 —
 —
 12.0
Total fixed maturities, available for sale31.6
 130.6
 (20.7) —
 —
 141.5
Equity securities - corporate securities3.3
 2.2
 —
 —
 —
 5.5
Liabilities:           
Future policy benefits - embedded derivatives associated with fixed index annuity products(101.9) —
 19.2
 (17.5) 44.9
 (55.3)

At September 30, 2017, 55 percent of our Level 3 fixed maturities, available for sale, were investment grade and 80 percent of our Level 3 fixed maturities, available for sale, consisted of corporate securities.2022 (dollars in millions):


 PurchasesSalesIssuancesSettlementsPurchases, sales, issuances and settlements, net
Assets:     
Fixed maturities, available for sale:     
Corporate securities$24.2 $(11.2)$— $— $13.0 
Asset-backed securities26.9 (.9)— — 26.0 
Non-agency residential mortgage-backed securities6.5 (.5)— — 6.0 
Commercial mortgage-backed securities28.0 — — — 28.0 
Total fixed maturities, available for sale85.6 (12.6)— — 73.0 
Equity securities - corporate securities67.0 (3.1)— — 63.9 
Investments held by variable interest entities - corporate securities— (2.1)— — (2.1)
Other invested assets - residual tranches2.8 — — — 2.8 


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 net realizedor investment gains (losses) or insurance policy benefits within the consolidated statement of operationsoperations; 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 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 September 30, 2023, 84 percent of our Level 3 fixed maturities, available for sale, were investment grade and 69 percent of our Level 3 fixed maturities, available for sale, consisted of corporate securities.
55
71
CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________




The amountfollowing table summarizes changes in the value of our embedded derivatives associated with fixed indexed annuity products (classified in policyholder account balances and future policy benefits as presented in the note to the consolidated financial statements entitled "Accounting for gains (losses) includedDerivatives") 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 our net loss for assets and liabilities still held as of the reporting date primarily represents impairments for fixed maturities, available for sale, changesmillions):

Three months endedNine months ended
September 30,September 30,
2023202220232022
Balance at beginning of the period$1,355.4 $1,371.0 $1,297.0 $1,724.1 
Premiums less benefits(16.2)12.0 (45.9)55.3 
Change in fair value, net(125.8)(129.1)(37.7)(525.5)
Balance at end of the period$1,213.4 $1,253.9 $1,213.4 $1,253.9 

The change in fair value, of trading securities and certainnet for each period in our embedded derivatives and changes in fair value of embedded derivative instrumentsis included in liabilities forthe insurance products that exist aspolicy benefits line item in the consolidated statement of the reporting date.operations.



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Notes to Consolidated Financial Statements
(unaudited)
___________________

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 September 30, 20172023 (dollars in millions):

Fair value at September 30, 2023Valuation techniquesUnobservable inputsRange (weighted average) (a)
Assets:
Corporate securities (b)$2.7 Discounted cash flow analysisDiscount margins2.22%
Corporate securities (c)2.5 Recovery methodPercent of recovery expected0.00% - 25.00% (25.00%)
Corporate securities (d)1.5 Unadjusted purchase priceNot applicableNot applicable
Asset-backed securities (e)23.6 Discounted cash flow analysisDiscount margins2.23% - 3.39% (2.98%)
Equity securities (f)63.3 Market comparablesEBITDA multiples10.7X
Equity securities (g).1 Recovery methodPercent of recovery expected0.00% - 100.00% (100.00%)
Equity securities (h)9.2 Unadjusted purchase priceNot applicableNot applicable
Other assets categorized as Level 3 (i)166.0 Unadjusted third-party price sourceNot applicableNot applicable
Market risk benefit asset (j)89.3 Discounted cash flow analysisSurrender rates1.28% - 11.05% (3.68%)
Utilization rates5.92% - 47.62% (22.54%)
Total358.2 
Liabilities:
Market risk benefit liability (j)3.1 Discounted cash flow analysisSurrender rates1.28% - 11.05% (3.68%)
Utilization rates5.92% - 47.62% (22.54%)
Embedded derivatives related to fixed indexed annuity products (k)1,213.4 Discounted projected embedded derivativesProjected portfolio yields4.30% - 4.63% (4.31%)
Discount rates3.66% - 5.55% (5.20%)
Surrender rates1.90% - 27.70% (9.20%)

(a)    The weighted average is based on the relative fair value of the related assets or liabilities.
(b)    Corporate securities - The significant unobservable input used in the fair value measurement of our corporate securities is discount margin added to a riskless market yield. Significant increases (decreases) in discount margin in isolation would have resulted in a significantly lower (higher) fair value measurement.
(c)    Corporate securities - The significant unobservable input used in the fair value measurement of these corporate 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)    Corporate securities - For these assets, there were no adjustments to the purchase price.
(e)    Asset-backed securities - The significant unobservable input used in the fair value measurement of these asset-backed securities is discount margin added to a riskless market yield. Significant increases (decreases) in discount margin in isolation would have resulted in a significantly lower (higher) fair value measurement.
(f)    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.
(g)    Equity securities - The significant unobservable input used in the fair value measurement of these equity 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.
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 Fair value at September 30, 2017 Valuation techniques Unobservable inputs Range (weighted average)
Assets:       
Corporate securities (a)$138.4
 Discounted cash flow analysis Discount margins 1.50% - 61.70% (9.10%)
Corporate securities (b)3.1
 Recovery method Percent of recovery expected 5% - 38% (17.76%)
Asset-backed securities (c)24.9
 Discounted cash flow analysis Discount margins 1.77% - 3.36% (2.54%)
Equity securities (d)21.6
 Market comparables EBITDA multiples 0.5X - 6.2X (5.9X)
Other assets categorized as Level 3 (e)158.2
 Unadjusted third-party price source Not applicable Not applicable
Total346.2
      
Liabilities:       
Future policy benefits (f)1,249.3
 Discounted projected embedded derivatives Projected portfolio yields 5.15% - 5.61% (5.59%)
     Discount rates 0.44% - 2.80% (1.94%)
     Surrender rates 0.94% - 46.48% (13.52%)

(a)Corporate securities - The significant unobservable input used in the fair value measurement of our corporate securities is discount margin added to a riskless market yield. Significant increases (decreases) in discount margin in isolation would result in a significantly lower (higher) fair value measurement.
(b)Corporate securities - The significant unobservable input used in the fair value measurement of these corporate securities is percentage of recovery expected.  Significant increases (decreases) in percentage of recovery expected in isolation would result in a significantly higher (lower) fair value measurement.
(c)Asset-backed securities - The significant unobservable input used in the fair value measurement of these asset-backed securities is discount margin added to a riskless market yield. Significant increases (decreases) in discount margin in isolation would result in a significantly lower (higher) 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)Other assets categorized as Level 3 - For these assets, there were no adjustments to quoted market prices obtained from third-party pricing sources.
(f)Future policy benefits - The significant unobservable inputs used in the fair value measurement of our embedded derivatives associated with fixed index annuity products are projected portfolio yields, discount rates and surrender rates. Increases (decreases) in projected portfolio yields in isolation would lead to a higher (lower) fair value measurement. The discount rate is based on the Treasury rate adjusted by a margin. Increases (decreases) in the discount rates would lead to a lower (higher) fair value measurement. Assumed surrender 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.


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Notes to Consolidated Financial Statements
(unaudited)
___________________



(h)    Equity securities - For these assets, there were no adjustments to the purchase price.
(i)    Other assets categorized as Level 3 - For these assets, there were no adjustments to non-binding quoted market prices obtained from third-party pricing sources.
(j)    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 are based on significant unobservable inputs including assumptions related to surrenders and utilization of policy benefits. These assumptions are based on actuarial estimates and past experience. Increases in assumed surrender rates would generally increase the value of a MRB asset or decrease the value of a MRB liability (with decreases in assumed surrender rates having the opposite impacts). Increases in utilization rates would generally decrease the value of a MRB asset or increase the value of a MRB liability (with decreases in utilization rates having the opposite impacts).
(k)    Embedded derivatives related to fixed indexed annuity products - The significant unobservable inputs used in the fair value measurement of our embedded derivatives associated with fixed indexed annuity products are projected portfolio yields, discount rates and surrender rates. Increases (decreases) in projected portfolio yields in isolation would have resulted in a higher (lower) fair value measurement. The discount rate is based on risk free rates (U.S. Treasury rates for similar durations) adjusted for our non-performance risk and risk margins for non-capital market inputs. Increases (decreases) in the discount rates would have resulted in a lower (higher) fair value measurement. Assumed surrender 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. The embedded derivatives related to fixed indexed annuity products are classified in policyholder account balances and future policy benefits as presented in the note to the consolidated financial statements entitled "Accounting for Derivatives".



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Notes to Consolidated Financial Statements
(unaudited)
___________________

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, 20162022 (dollars in millions):

 Fair value at December 31, 2016 Valuation techniques Unobservable inputs Range (weighted average)
Assets:       
Corporate securities (a)$148.5
 Discounted cash flow analysis Discount margins 1.35% - 27.71% (13.52%)
Corporate securities (b)14.8
 Recovery method Percent of recovery expected 5% - 69% (55%)
Asset-backed securities (c)24.0
 Discounted cash flow analysis Discount margins 2.06% - 3.64% (2.76%)
Equity securities (d)25.2
 Market comparables EBITDA multiples 0.4X - 6.2X (5.9X)
Other assets categorized as Level 3 (e)172.9
 Unadjusted third-party price source Not applicable Not applicable
Total385.4
      
Liabilities:       
Future policy benefits (f)1,092.3
 Discounted projected embedded derivatives Projected portfolio yields 5.15% - 5.61% (5.59%)
     Discount rates 0.18% - 3.06% (2.07%)
     Surrender rates 0.94% - 46.48% (13.52%)

(a)Corporate securities - The significant unobservable input used in the fairFair value measurement of our corporate securities is discount margin added to a riskless market yield. Significant increases (decreases) in discount margin in isolation would result in a significantly lower (higher) fair value measurement.at December 31, 2022Valuation techniquesUnobservable inputsRange (weighted average) (a)
Assets:
(b)Corporate securities (b)$2.9 Discounted cash flow analysisDiscount margins2.23% - The significant unobservable input used in the fair value measurement of our corporate3.94% (2.25%)
Corporate securities is percentage of recovery expected.  Significant increases (decreases) in percentage(c)3.5 Recovery methodPercent of recovery expected in isolation would result in a significantly higher (lower) fair value measurement.0.00% - 35.00% (35.00%)
Corporate securities (d).5 Unadjusted purchase priceNot applicableNot applicable
Asset-backed securities (e)21.8 Discounted cash flow analysisDiscount margins2.50% - 3.86% (3.30%)
(c)Asset-backed securities - The significant unobservable input used in the fair value measurement of these asset-backed securities is discount margin added to a riskless market yield. Significant increases (decreases) in discount margin in isolation would result in a significantly lower (higher) fair value measurement.
(d)Equity securities - The significant unobservable input used in the fair value measurement of these equity securities is EBITDA multiples. Generally, increases (decreases) in the EBITDA multiples would result in higher (lower) fair value measurements.
(e)
Equity securities (f)63.9 Market comparablesEBITDA multiples8.5X
Equity securities (g).1 Recovery methodPercent of recovery expected0.00% - 100.00% (100.00%)
Equity securities (h)11.7 Unadjusted purchase priceNot applicableNot applicable
Other assets categorized as Level 3 (i)249.0 Unadjusted third-party price sourceNot applicableNot applicable
Market risk benefit asset (j)65.3 Discounted cash flow analysisSurrender rates1.28% - For these assets, there were no adjustments to quoted market prices obtained from third-party pricing sources.11.05% (3.45%)
Utilization rates6.78% - 63.16% (20.09%)
Total418.7 
(f)Liabilities:Future policy benefits
Market risk benefit liability (j)11.3 Discounted cash flow analysisSurrender rates1.28% - The significant unobservable inputs used in the fair value measurement of our11.05% (3.45%)
Utilization rates6.78% - 63.16% (20.09%)
Embedded derivatives related to fixed indexed annuity products (k)1,297.0 Discounted projected embedded derivatives associated with fixed index annuity products are projectedProjected portfolio yields discount4.30% - 4.63% (4.31%)
Discount rates and surrender rates. Increases (decreases) in projected portfolio yields in isolation would lead to a higher (lower) fair value measurement. The discount rate is based on the Treasury rate adjusted by a margin. Increases (decreases) in the discount3.77% - 5.48% (4.47%)
Surrender rates would lead to a lower (higher) fair value measurement. Assumed surrender 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.1.90% - 27.70% (9.20%)


(a)    The weighted average is based on the relative fair value of the related assets or liabilities.

(b)    Corporate securities - The significant unobservable input used in the fair value measurement of our corporate securities is discount margin added to a riskless market yield. Significant increases (decreases) in discount margin in isolation would have resulted in a significantly lower (higher) fair value measurement.
(c)    Corporate securities - The significant unobservable input used in the fair value measurement of these corporate 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)    Corporate securities - For these assets, there were no adjustments to the purchase price.
(e)    Asset-backed securities - The significant unobservable input used in the fair value measurement of these asset-backed securities is discount margin added to a riskless market yield. Significant increases (decreases) in discount margin in isolation would have resulted in a significantly lower (higher) fair value measurement.
(f)    Equity securities - The significant unobservable input used in the fair value measurement of these equity securities is multiples of earnings before EBITDA. Generally, increases (decreases) in the EBITDA multiples would result in higher (lower) fair value measurements.
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CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
___________________



(g)    Equity securities - The significant unobservable input used in the fair value measurement of these equity 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.
SUBSEQUENT EVENT(h)    Equity securities - For these assets, there were no adjustments to the purchase price.

(i)    Other assets categorized as Level 3 - For these assets, there were no adjustments to non-binding quoted market prices obtained from third-party pricing sources.
On October 13, 2017, the Company entered into an amendment and restatement agreement (the "Amendment Agreement") with respect to its Revolving Credit Agreement (as amended by the Amendment Agreement, the "Amended Credit Agreement").(j)    Market risk benefits – Many of our fixed indexed annuity products include a GLWB that is considered a MRB. The Amendment Agreement, among other things, increases the total commitments available under the revolving credit facility from $150.0 million to $250.0 million, increases the aggregate amount of additional incremental loans the Company may incur from $50.0 million to $100.0 million and extends the maturity datecalculation of the revolving credit facility from May 19, 2019value of MRBs are based on significant unobservable inputs including assumptions related to surrenders and utilization of policy benefits. These assumptions are based on actuarial estimates and past experience. Increases in assumed surrender rates would generally increase the value of a MRB asset or decrease the value of a MRB liability (with decreases in assumed surrender rates having the opposite impacts). Increases in utilization rates would generally decrease the value of a MRB asset or increase the value of a MRB liability (with decreases in utilization rates having the opposite impacts).
(k)    Embedded derivatives related to fixed indexed annuity products - The significant unobservable inputs used in the fair value measurement of our embedded derivatives associated with fixed indexed annuity products are projected portfolio yields, discount rates and surrender rates. Increases (decreases) in projected portfolio yields in isolation would have resulted in a higher (lower) fair value measurement. The discount rate is based on risk free rates (U.S. Treasury rates for similar durations) adjusted for our non-performance risk and risk margins for non-capital market inputs. Increases (decreases) in the discount rates would have resulted in a lower (higher) fair value measurement. Assumed surrender 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. The embedded derivatives related to fixed indexed annuity products are classified in policyholder account balances and future policy benefits as presented in the note to the earlier of October 13, 2022 and the date that is six months prior to the maturity date of the Company’s 4.50% senior notes due 2020, which is November 30, 2019. The amount drawn under the Amended Credit Agreement continues to be $100.0 million.consolidated financial statements entitled "Accounting for Derivatives".
The interest rate applicable to loans under the Amended Credit Agreement continues to be calculated as the eurodollar rate or the base rate, at the Company’s option, plus a margin based on the Company’s unsecured debt rating. The margins under the Amended Credit Agreement range from 1.375% to 2.125%, in the case of loans at the eurodollar rate, and 0.375% to 1.125%, in the case of loans at the base rate. The commitment fee under the Amended Credit Agreement continues to be based on the Company’s unsecured debt rating.
Additionally, the Amended Credit Agreement revises the debt to total capitalization ratio that the Company is required to maintain from not more than 30.0 percent to not more than 35.0 percent. The Amended Credit Agreement continues to contain certain other restrictive covenants with which the Company must comply.



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ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

In this section, we review the consolidated financial condition of CNO at September 30, 2017,2023, and its consolidated results of operations for the nine months ended September 30, 20172023 and 2016,2022, and, where appropriate, factors that may affect future financial performance. Please read this discussion in conjunction with the accompanying consolidated financial statements and notes. Results for interim periods are not necessarily indicative of the results that may be expected for a full year.


CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS


Our statements, trend analyses and other information contained in this report and elsewhere (such as in filings by CNO with the SEC, press releases, presentations by CNO or its management or oral statements) relative to markets for CNO's products and trends in CNO'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.  The "Risk Factors" section of our 20162022 Annual Report on Form 10-K and the changes set forth in the Risk Factors section of this Form 10-Q provideprovides examples of risks, uncertainties and events that could cause our actual results to differ materially from the expectations expressed in our forward-looking statements.  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:


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;

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;

•general economic, market and political conditions and uncertainties, 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;


•the impact of pandemics and major public health issues, including the novel coronavirus pandemic and the resulting financial market, economic and other impacts;

•exposure to interest rate risk, including interest rate volatility, may negatively impact our results of operations, financial position or cash flow;

•future investment results, including the impact of realized losses (including other-than-temporary impairment charges) may diminish the value of our invested assets and negatively impact our profitability, our financial condition and our liquidity;

•the ultimate outcome of lawsuits filed against us and other legal and regulatory proceedings to which we are subject;


•our ability to make anticipated changes to certain non-guaranteed elements of our life insurance products;


•our ability to obtain adequate and timely rate increases on our health products, including our long-term care business;


•the receipt of any required regulatory approvals for dividend and surplus debenture interest payments from our insurance subsidiaries;


•mortality, morbidity, the increased cost and usage of health care services, persistency, the adequacy of our previous reserve estimates, changes in the health care market and other factors which may affect the profitability of our insurance products;


•changes in our assumptions related to deferred acquisition costs or the present value of future profits;


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•the recoverability of our deferred tax assets and the effect of potential ownership changes and tax rate changes on their value;


•our assumption that the positions we take on our tax return filings will not be successfully challenged by the IRS;Internal Revenue Service;



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•changes in accounting principles and the interpretation thereof;


•our ability to continue to satisfy the financial ratio and balance requirements and other covenants of our debt agreements;


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;

•performance and valuation of our investments, including the impact of realized losses (including other-than-temporary impairment charges);investments;


•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;


•our ability to generate sufficient liquidity to meet our debt service obligations and other cash needs;


•changes in capital deployment opportunities;

•our ability to maintain effective controls over financial reporting;reporting and modeling;


•our ability to continue to recruit and retain productive agents and distribution partners;


•customer response to new products, distribution channels and marketing initiatives;


•inflation or other unfavorable economic or business conditions may impact the sales and persistency of insurance products, a portion of our insurance policy benefits affected by increased medical coverage costs and various selling, general and administrative expenses;

•our ability to achieve additional upgrades ofmaintain the financial strength ratings of CNO 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;


•regulatory changes or actions, including: those relating to regulation of the financial affairs of our insurance companies, such as the calculation of risk-based capital and minimum capital requirements, and 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 privacy laws and regulations;


•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;


•availability and effectiveness of reinsurance arrangements, as well as the impact of any defaults or failure of reinsurers to perform;


the amount we may need to pay to a reinsurer and the earnings charge we may incur in connection with a long-term care reinsurance transaction;

•the performance of third party service providers (both domestic and international) and potential difficulties arising from outsourcing arrangements;


•expectations for the growth rate of sales, collected premiums, annuity deposits and assets;


•interruption in telecommunication, information technology or other operational systems or failure to maintain the security, confidentiality or privacy of sensitive data on such systems;


•events of terrorism, cyber attacks, natural disasters or other catastrophic events, including lossespotential adverse impacts from a disease pandemic;climate change which may increase the frequency or severity of weather-related disasters;


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•cyber-security attacks, risk of data loss and other security breaches;

•ineffectiveness of risk management policies and procedures in identifying, monitoring and managing risks; and


•the risk factors or uncertainties listed from time to time in our filings with the SEC.


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.


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All written or oral forward-looking statements attributable to us are expressly qualified in their entirety by the foregoing cautionary statement.  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.


The reporting of risk-based capital ("RBC") measures is not intended for the purpose of ranking any insurance company or for use in connection with any marketing, advertising or promotional activities.


OVERVIEW


We are a holding company for a group of insurance companies operating throughout the United States that develop, market and administer health insurance, annuity, individual life insurance and other insurance and financial services products.  We focus on serving the seniormiddle-income pre-retiree and middle-income markets,retired Americans, which we believe are attractive, underserved, high growth markets.  We sell our products through three distribution channels: careerexclusive agents, independent producers (some of whom sell one or more of our product lines exclusively) and direct marketing. In

We view our operations as three insurance product lines (annuity, health and life) and the fourth quarterinvestment and fee income segments. Our segments are aligned based on their common characteristics, comparability of 2016, we began reportingprofit margins and the long-term care block recapturedway management 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. 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 BRe as an additionalinsurance products is the sum of the insurance margins of the annuity, health and life product lines, less expenses allocated to the insurance lines. It excludes the income from our fee income business, segment.investment income not allocated to product lines, net expenses not allocated to product lines (primarily holding company expenses) and income taxes. Management believes this information helps provide a better 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 Company’s insurance segments are described below:

Bankers Life,which markets and distributes Medicare supplement insurance, interest-sensitive life insurance, traditional life insurance, fixed annuities and long-term care insurance products toConsumer Division serves individual consumers, engaging with them on the middle-income senior marketphone, virtually, online, face-to-face with agents, or through a dedicated field forcecombination of career agents, financialsales channels. This structure unifies consumer capabilities into a single division and investment advisors, andintegrates the strength of our agent sales managers supported by a network of community-based sales offices.  The Bankers Life segment includes primarily the business of Bankers Life.  Bankers Life also has various distribution and marketing agreementsforces with other insurance companies to use Bankers Life's career agents to distribute Medicare Advantage and prescription drug plan products in exchange for a fee.

Washington National, which markets and distributes supplemental health (including specified disease, accident and hospital indemnity insurance products) and life insurance to middle-income consumers at home and at the worksite.  These products are marketed through Performance Matters Associates, Inc. ("PMA") and through independent marketing organizations and insurance agencies including worksite marketing.  The products being marketed are underwritten by Washington National. This segment's business also includes certain closed blocks of annuities and Medicare supplement policies which are no longer being actively marketed by this segment and were primarily issued or acquired by Washington National.

Colonial Penn, which markets primarily graded benefit and simplified issue life insurance directly to customers in the senior middle-income market through television advertising, direct mail, the internet and telemarketing.  The Colonial Penn segment includes primarily the business of Colonial Penn.

Long-term care in run-off consistsone of the long-term carelargest direct-to-consumer insurance businesses with proven experience in advertising, web/digital and call center support.

The Worksite Division focuses on worksite and group sales 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 that was recaptured due towhile further capitalizing on the terminationstrength of certain reinsurance agreements effective September 30, 2016. This business is not actively marketed and was issued or acquired by Washington National and BCLIC.
our wholly-owned subsidiary, Optavise, a national provider of year-round technology-driven employee benefits management services.






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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. Sales of group underwritten policies are currently not significant, but are expected to increase within the Worksite Division.

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 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.

Our fee income segment includes the earnings generated from sales of third-party insurance products, services provided by Optavise and the operations of our broker/dealer and registered investment advisor.

Expenses not allocated to product lines include the expenses of our corporate operations, excluding interest expense on debt.
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The following summarizes our earnings for the three and nine months ending September 30, 20172023 and 20162022 (dollars in millions, except per share data):
Three months endedNine months ended
September 30,September 30,
2023202220232022
Insurance product margin
Annuity margin$57.0 $60.1 $171.4 $176.1 
Health margin123.2 123.3 347.9 364.0 
Life margin59.8 55.7 165.1 161.9 
Total insurance product margin240.0 239.1 684.4 702.0 
Allocated expenses(153.2)(150.5)(460.2)(447.5)
Income from insurance products86.8 88.6 224.2 254.5 
Fee income(2.9)1.4 13.2 14.5 
Investment income not allocated to product lines38.4 27.1 81.9 118.7 
Expenses not allocated to product lines7.5 (16.1)(31.9)(28.0)
Operating earnings before taxes129.8 101.0 287.4 359.7 
Income tax expense on operating income(28.5)(23.1)(65.2)(82.2)
Net operating income (a)101.3 77.9 222.2 277.5 
Net realized investment losses from sales and change in allowance for credit losses(20.1)(.7)(64.1)(35.0)
Net change in market value of investments recognized in earnings(9.2)(17.0)(15.1)(64.2)
Fair value changes related to agent deferred compensation plan6.8 12.0 6.8 48.7 
Changes in fair value of embedded derivative liabilities and market risk benefits109.4 130.6 94.7 456.6 
Other(1.1)2.0 1.0 2.2 
Net non-operating income before taxes85.8 126.9 23.3 408.3 
Income tax expense on non-operating income(19.8)(28.9)(5.3)(93.2)
Net non-operating income66.0 98.0 18.0 315.1 
Net income$167.3 $175.9 $240.2 $592.6 
Per diluted share
Net operating income$.88 $.67 $1.92 $2.35 
Net non-operating income.58 .85 .16 2.67 
Net income$1.46 $1.52 $2.08 $5.02 
81
 Three months ended Nine months ended
 September 30, September 30,
 2017 2016 2017 2016
Adjusted EBIT (a non-GAAP measure) (a):       
Bankers Life$106.9
 $88.1
 $309.2
 $259.0
Washington National27.5
 25.2
 74.6
 73.0
Colonial Penn9.0
 .9
 16.7
 (2.9)
Long-term care in run-off(1.0) —
 1.1
 —
Adjusted EBIT from business segments142.4
 114.2
 401.6
 329.1
Corporate operations, excluding corporate interest expense(14.9) (4.4) (37.0) (19.5)
Adjusted EBIT127.5
 109.8
 364.6
 309.6
Corporate interest expense(11.7) (11.5) (34.8) (34.3)
Operating earnings before taxes115.8
 98.3
 329.8
 275.3
Tax expense on operating income39.1
 34.0
 114.7
 97.7
Net operating income (a)76.7
 64.3
 215.1
 177.6
Net realized investment gains (losses) (net of related amortization)28.5
 11.4
 51.3
 22.4
Fair value changes in embedded derivative liabilities (net of related amortization)2.3
 9.4
 (8.0) (36.6)
Fair value changes and amendment related to agent deferred compensation plan(13.4) 6.3
 (13.4) (12.0)
Loss on reinsurance transaction—
 (75.4) —
 (75.4)
Other(3.3) (.7) (4.6) (1.2)
Non-operating income (loss) before taxes14.1
 (49.0) 25.3
 (102.8)
Income tax expense (benefit):       
On non-operating income (loss)5.0
 (17.1) 8.9
 (36.0)
Valuation allowance for deferred tax assets and other tax items(15.0) 13.8
 (15.0) (13.2)
Net non-operating income (loss)24.1
 (45.7) 31.4
 (53.6)
Net income$100.8
 $18.6
 $246.5
 $124.0
Per diluted share:       
Net operating income$.45
 $.37
 $1.25
 $.99
Net realized investment gains (losses) (net of related amortization and taxes).11
 .04
 .19
 .08
Fair value changes in embedded derivative liabilities (net of related amortization and taxes).01
 .04
 (.03) (.13)
Fair value changes and amendment related to agent deferred compensation plan (net of taxes)(.05) .02
 (.05) (.05)
Loss on reinsurance transaction (net of taxes)—
 (.28) —
 (.27)
Valuation allowance for deferred tax assets and other tax items.09
 (.08) .09
 .07
Other(.02) —
 (.02) —
Net income$.59
 $.11
 $1.43
 $.69

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CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
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____________
____________(a)Management believes that an analysis of net income applicable to common stock before: (i) net realized investment gains or losses from sales, impairments and 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 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) loss related to reinsurance transaction, 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; and (viii) other non-operating items consisting primarily of earnings attributable to VIEs, 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 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 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. The table above reconciles the non-GAAP measure to the corresponding GAAP measure.
(a)
Management believes that an analysis of net operating income provides a clearer comparison of the operating results of the Company from period to period because it excludes:  (i) net realized investment gains or losses, net of related amortization; (ii) 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; (iii) fair value changes and an amendment to the agent deferred compensation plan; (iv) loss on reinsurance transaction; and (v) other non-operating items consisting primarily of earnings attributable to variable interest entities. 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.  Adjusted EBIT is presented as net operating income excluding corporate interest expense and income tax expense. The table above reconciles the non-GAAP measures 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, Adjusted EBIT and net operating income are not measurements of financial performance under GAAP and should not be considered as alternatives to cash flow from operating activities, as measures of liquidity, or as alternatives to net income as measures of our operating performance or any other measures of performance derived in accordance with GAAP. In addition, Adjusted EBIT and net operating income should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Adjusted EBIT and net operating income have limitations as analytical tools, and you should not consider such measures either in isolation or as substitutes for analyzing our results as reported under GAAP. Our definitions and calculation of Adjusted EBIT and net operating income are not necessarily comparable to other similarly titled measures used by other companies due to different methods of calculation.

CRITICAL ACCOUNTING POLICIES

Refer to "Critical Accounting Policies" in our 2016 Annual Report on Form 10-K for information on our other accounting policies that we consider critical in preparing our consolidated financial statements.


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RESULTS OF OPERATIONS

The following tables and narratives summarize the operating results of our segments (dollars in millions):

 Three months ended Nine months ended
 September 30, September 30,
 2017 2016 2017 2016
Pre-tax operating earnings (a non-GAAP measure) (a):       
Bankers Life$106.9
 $88.1
 $309.2
 $259.0
Washington National27.5
 25.2
 74.6
 73.0
Colonial Penn9.0
 .9
 16.7
 (2.9)
Long-term care in run-off(1.0) —
 1.1
 —
Corporate operations(26.6) (15.9) (71.8) (53.8)
 115.8
 98.3
 329.8
 275.3
Net realized investment gains (losses), net of related amortization:       
Bankers Life14.9
 .7
 30.1
 (1.3)
Washington National6.5
 .1
 12.6
 26.9
Colonial Penn1.0
 .3
 .8
 (.2)
Long-term care in run-off6.7
 —
 7.8
 —
Corporate operations(.6) 10.3
 —
 (3.0)
 28.5
 11.4
 51.3
 22.4
Fair value changes in embedded derivative liabilities, net of related amortization:       
Bankers Life2.3
 9.3
 (8.0) (36.2)
Washington National—
 .1
 —
 (.4)
 2.3
 9.4
 (8.0) (36.6)
Earnings attributable to VIEs:       
Corporate operations(3.3) (.7) (4.6) (1.2)
Fair value changes and amendment related to agent deferred compensation plan:       
Corporate operations(13.4) 6.3
 (13.4) (12.0)
Loss on reinsurance transaction:       
Corporate operations—
 (75.4) —
 (75.4)
Income (loss) before income taxes:       
Bankers Life124.1
 98.1
 331.3
 221.5
Washington National34.0
 25.4
 87.2
 99.5
Colonial Penn10.0
 1.2
 17.5
 (3.1)
Long-term care in run-off5.7
 —
 8.9
 —
Corporate operations(43.9) (75.4) (89.8) (145.4)
Income before income taxes$129.9
 $49.3
 $355.1
 $172.5

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CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
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(a)These non-GAAP measures as presented in the above table and in the following segment financial data and discussions of segment results exclude net realized investment gains (losses), fair value changes in embedded derivative liabilities, net of related amortization, fair value changes and an amendment to the agent deferred compensation plan, earnings attributable to VIEs and loss on reinsurance transaction and before income taxes.  These are considered non-GAAP financial measures.  A non-GAAP measure is a numerical measure of a company's performance, financial position, or cash flows that excludes or includes amounts that are normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP.

These non-GAAP financial measures of "pre-tax operating earnings" differ from "income (loss) before income taxes" as presented in our consolidated statement of operations prepared in accordance with GAAP due to the exclusion of realized investment gains (losses), fair value changes in embedded derivative liabilities, net of related amortization, fair value changes and an amendment to the agent deferred compensation plan, earnings attributable to VIEs and loss on reinsurance transaction.  We measure segment performance excluding these items because we believe that this performance measure is a better indicator of the ongoing businesses 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 realized investment gains (losses), and a long-term focus is necessary to maintain profitability over the life of the business. Realized investment gains (losses), fair value changes in embedded derivative liabilities, fair value changes and an amendment to the agent deferred compensation plan, earnings attributable to VIEs and loss on reinsurance transaction depend on market conditions and do not necessarily relate to decisions regarding the underlying business of our segments.  However, "pre-tax operating earnings" does not replace "income (loss) before income taxes" as a measure of overall profitability.

We may experience realized investment gains (losses), which may affect future earnings levels since our underlying business is long-term in nature and we need to earn the assumed interest rates on the investments backing our liabilities for insurance products to maintain the profitability of our business.  In addition, management uses this non-GAAP financial measure 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. The table above reconcilesHowever, 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. Also, as we adopted the non-GAAP measurenew accounting standard related to targeted improvements to the correspondingaccounting for long-duration insurance contracts effective January 1, 2023, we updated our method of determining non-operating earnings for our fixed indexed annuities to better identify the volatile non-economic impacts of that line of business. This resulted in fixed indexed annuity margins that more closely reflect the economics of the business.

GOVERNMENTAL REGULATION

Risk-Based Capital

On August 13, 2023, the National Association of Insurance Commissioners (“NAIC”) adopted a short-term
solution related to the accounting treatment of an insurer’s negative interest maintenance reserve (“IMR”)
balance, which may occur when a rising interest rate environment causes an insurer’s IMR balance to become
negative as a result of bond sales executed at a capital loss. The new interim statutory accounting guidance,
which is effective until December 31, 2025, allows an insurer with an authorized control level RBC greater than
300% to admit negative IMR up to 10% of its general account capital and surplus, subject to certain restrictions
and reporting obligations. The NAIC intends to develop a long-term solution for the accounting treatment of
negative IMR even if interest rates shift.

The NAIC has undertaken a principles-based bond project, which includes consideration of factors to
determine whether an investment in an asset-backed security qualifies for reporting on an insurer’s statutory
financial statement as a bond on Schedule D-1 as opposed to Schedule BA (other long-term investment assets),
the latter of which has a higher risk charge. The NAIC is also reviewing the RBC treatment of collateralized loan
obligations (“CLOs”), as discussed below, and on August 16, 2023, the NAIC increased the RBC factor for
structured security residual tranches from 30% to 45%, which will be effective for year-end 2024 RBC filings.


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Regulation of Investments

The NAIC has been evaluating the risks associated with insurers’ investments in leveraged loans and
CLOs. Under the NAIC’s recent amendment to the Purposes and Procedures Manual, the NAIC’s Structured
Securities Group will assign risk weights to CLOs based on its own modeling and evaluate tranche level losses
across all debt and equity tranches under a series of calibrated and weighted collateral stress scenarios to
assign NAIC designations. The goal is to ensure that the aggregate RBC factor for owning all tranches of a CLO is
the same as that required for owning all of the underlying loan collateral, in order to avoid RBC arbitrage. The
amendment will become effective on January 1, 2024, with insurers first reporting the financially modeled
NAIC designations for CLOs with their year-end 2024 financial statement filings. It is possible that the NAIC may
propose new regulations or changes to statutory accounting principles regarding CLOs.

Privacy and Cybersecurity Regulation

In July 2023, the SEC adopted the Risk Management, Strategy, Governance, and Incident Disclosure Final Rule (the "Cybersecurity Final Rule") requiring enhanced disclosures of material cybersecurity incidents in a Form 8-K and periodic disclosures of, among other things, details on the processes to assess, identify, and manage those risks, cybersecurity governance, and management's role in overseeing such a compliance program, including the board of directors' oversight of cybersecurity risks. Certain reporting requirements under the Cybersecurity Final Rule become effective as early as December 2023.

The NAIC’s Privacy Protections (H) Working Group (“PPWG”) continues to develop a new Consumer Privacy Protections and Model Law (“Model 674”) to replace the existing privacy models #670 (Insurance Information and Privacy Protections Model Act) and #672 (Privacy of Consumer Financial and Health Information Regulation.) Following meetings in the spring of 2023, the PPWG rewrote model 674 to incorporate industry feedback and they exposed a new draft in July 2023. Due to the large number of comments received, the PPWG intends to ask for an extension of time to develop the new model law at the NAIC’s Fall National Meeting in December 2023.

CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements in accordance with GAAP measure.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 and revenues and expenses during the reporting period. Management has made estimates in the past that we believed to be appropriate but were subsequently revised to reflect actual experience. If our future experience differs materially from these estimates and assumptions, our results of operations and financial condition could be materially affected.


General:Effective January 1, 2023, we adopted ASU 2018-12. The adoption of ASU 2018-12 impacted the accounting and presentation related to long-duration insurance contracts and certain related balances for the years ended December 31, 2022 and 2021. Disclosures of the impacts of ASU 2018-12 as of the Transition Date are included within the tables in the note to the consolidated financial statements entitled "Recently Adopted Accounting Standards." For a discussion of our significant accounting policies impacted by the adoption of ASU 2018-12, see the note to the consolidated financial statements entitled "Summary of Significant Accounting Policies".

The critical accounting estimates that were not impacted as a result of the adoption of ASU 2018-12 are described in "Critical Accounting Estimates" in our 2022 Annual Report on Form 10-K. Below is a discussion of our updated critical accounting estimates.

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), mortality and lapse assumptions that are used in calculating the liability for future policy benefits, and these assumptions are reviewed and updated at least annually.

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CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
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As a result of the adoption of ASU 2018-12, the amortization methodology related to these account balances is no longer subject to the same degree of variability and does not require a high degree of judgment. However, these accounts remain sensitive to unexpected lapses, due to higher mortality 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 value of deferred acquisition costs is no longer subject to recovery testing after the adoption of ASU 2018-12.

Liabilities for Insurance Products

The adoption of ASU 2018-12 significantly changes how we account for the liabilities for insurance products for long-duration contracts and amends existing recognition, measurement, presentation and disclosure requirements. As part of this adoption, we measure all payments under an insurance contract including future expected claims and unpaid policy claims (with the exception of life insurance policy and contract claims, which are classified in the "liability for life insurance policy claims") and related expenses as an integrated reserve. This resulted in unpaid claims on long-duration health insurance contracts that were previously in the "liability for policy and contract claims" pre-adoption to be now presented as part of the liability for future policy benefits.

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.

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 during the fourth quarter. 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".

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 accumulated 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
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CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
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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.

RESULTS OF OPERATIONS

The following tables and narratives summarize the operating results of our segments (dollars in millions):

Three months endedNine months ended
September 30,September 30,
 2023202220232022
Insurance product margin
Annuity:
Insurance policy income$7.2 $6.3 $20.4 $17.1 
Net investment income131.0 121.1 384.1 356.4 
Insurance policy benefits(9.8)(6.5)(29.1)(22.8)
Interest credited(53.4)(44.8)(152.1)(128.7)
Amortization and non-deferred commissions (a)(18.0)(16.0)(51.9)(45.9)
Annuity margin57.0 60.1 171.4 176.1 
Health:
Insurance policy income397.8 403.5 1,196.3 1,213.7 
Net investment income74.2 73.3 222.5 219.6 
Insurance policy benefits(308.5)(310.8)(949.3)(943.8)
Amortization and non-deferred commissions (a)(40.3)(42.7)(121.6)(125.5)
Health margin123.2 123.3 347.9 364.0 
Life:
Insurance policy income221.0 213.4 663.1 643.0 
Net investment income36.3 35.4 108.7 106.1 
Insurance policy benefits(140.7)(138.7)(430.7)(419.5)
Interest credited(12.1)(12.6)(36.4)(36.3)
Amortization and non-deferred commissions (a)(22.1)(19.7)(62.8)(57.4)
Advertising expense(22.6)(22.1)(76.8)(74.0)
Life margin59.8 55.7 165.1 161.9 
Total insurance product margin240.0 239.1 684.4 702.0 
Allocated expenses:
Branch office expenses(16.3)(16.5)(52.0)(50.0)
Other allocated expenses(136.9)(134.0)(408.2)(397.5)
Income from insurance products86.8 88.6 224.2 254.5 
Fee income(2.9)1.4 13.2 14.5 
Investment income not allocated to product lines38.4 27.1 81.9 118.7 
Expenses not allocated to product lines7.5 (16.1)(31.9)(28.0)
Operating earnings before taxes129.8 101.0 287.4 359.7 
Income tax expense on operating income(28.5)(23.1)(65.2)(82.2)
Net operating income$101.3 $77.9 $222.2 $277.5 

____________
(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
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CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
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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.

CNO is the top tier holding company for a group of insurance companies operating throughout the United States that develop, market and administer health insurance, annuity, individual life insurance and other insurance and financial services products. We distribute theseview 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 worksite and group sales 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 margins of the annuity, health and life product lines, less expenses allocated to the insurance lines. It excludes the income from our Bankers Life segment,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 this information helps provide a better 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 utilizes a career agency force, throughis 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 balances for annuity 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 reinsurance 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 Washington National segment, which utilizes independent producersproduct lines; (iii) interest expense on notes payable, investment borrowings and throughfinancing 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 Colonial Penn segment, which utilizes direct response marketing. Inholding companies, the fourthspread 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.

Summary of Operating Results: Net operating income was $101.3 million in the third quarter of 2016, we began reporting2023, up from $77.9 million in the third quarter of 2022, and was $222.2 million in the first nine months of 2023, down from $277.5 million in the first nine months of 2022.

Insurance product margin was $240.0 million in the third quarter of 2023 compared to $239.1 million in the third quarter of 2022, and was $684.4 million in the first nine months of 2023 compared to $702.0 million in the first nine months of 2022. Insurance product margins in the first nine months of 2023 were impacted by: (i) both unfavorable claim experience in our Medicare supplement line of business as an additional business segment,well as a reduction in the size of the block; and (ii) unfavorable claim experience in our long-term care blockline of business. The claim experience in our Medicare supplement business returned to expected levels in the third quarter of 2023 as compared to the first six months of 2023. The claim experience in our long-term care business moderated in the third quarter of 2023, particularly as compared to the unfavorable experience in the second quarter of 2023. In addition, the traditional life margin was favorably impacted in the second quarter of 2022 due to a larger than typical reduction in claim liabilities due to the work down of a backlog of claims that was recapturedwere in-the-course-of-settlement. Such claim payments also had a positive impact (of approximately $10 million) on the change in September 2016.the liability for future policy benefits as calculated under the new LDTI standard.




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Bankers LifeTotal allocated and unallocated expenses are summarized in the table below. Expenses not allocated to product lines in the 2023 periods reflect significant items related to the net favorable impact of legal recoveries, net of expenses and increased legal accruals. Expenses not allocated to product lines in the first nine months of 2022 include the impact of a significant item related to an experience refund pursuant to the terms of a reinsurance agreement. Total allocated and unallocated expenses as adjusted for the significant item are summarized below (dollars in millions):

Three months endedNine months ended
September 30,September 30,
2023202220232022
Expenses allocated to product lines$153.2 $150.5 $460.2 $447.5 
Expenses not allocated to product lines(7.5)16.1 31.9 28.0 
Net favorable impact from legal matters21.7 — 21.7 — 
Experience refund related to a reinsurance agreement (a)
— — — 22.5 
Adjusted total$167.4 $166.6 $513.8 $498.0 

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(a)    Under the terms of the reinsurance agreement to cede a substantial portion of our legacy long-term care block, we were entitled to receive an experience refund of up to $22.5 million if certain rate increases were approved and implemented. As of June 30, 2022, all requirements to earn the maximum experience refund had been met and the refund was recognized. The refund was received in the second quarter of 2023.

Though expenses were elevated in the first nine months of 2023, we currently expect our projected expense ratio for the full year to be between 19.2 percent to 19.4 percent, narrowing the range of our previous guidance of between 19.0 percent to 19.4 percent. 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):

Three months endedNine months ended
September 30,September 30,
2023202220232022
Fee revenue$27.9 $30.6 $108.6 $102.0 
Operating costs and expenses(30.8)(29.2)(95.4)(87.5)
Net fee income$(2.9)$1.4 $13.2 $14.5 

The decrease in net fee income in the first nine months of 2023 is primarily due to lower net fee income related to services provided by Optavise, partially offset by growth in the sales of third party products in recent periods and changes to our revenue recognition assumptions reflecting favorable policy persistency. The decrease in net fee income in the third quarter of 2023, as compared to the same period in 2022, reflects less favorable changes to our revenue recognition assumptions on the sales of third party products and lower net fee income related to services provided by Optavise.

Investment income not allocated to product lines generally fluctuates from period to period based on the level of prepayment income (including call premiums) and trading account income; the performance of our alternative investments (which are typically reported a quarter in arrears); the earnings related to the investments underlying our COLI; and the spread we earn from our FHLB investment borrowing and FABN programs.

The effective tax rate for the first nine months of 2023 was 22.7 percent.
87
 Three months ended Nine months ended
 September 30, September 30,
 2017 2016 2017 2016
Premium collections:       
Annuities$236.5
 $245.1
 $758.3
 $685.1
Medicare supplement and other supplemental health291.5
 305.4
 906.4
 922.4
Life113.7
 115.4
 345.4
 347.3
Total collections$641.7
 $665.9
 $2,010.1
 $1,954.8
Average liabilities for insurance products:       
Fixed index annuities$5,222.5
 $4,597.1
 $5,048.2
 $4,461.9
Fixed interest annuities2,860.5
 3,149.7
 2,935.9
 3,222.7
SPIAs and supplemental contracts:       
Mortality based159.2
 172.7
 162.1
 177.1
Deposit based148.1
 152.9
 149.8
 154.0
Health:       
Long-term care5,038.4
 5,161.2
 4,950.4
 4,985.4
Medicare supplement329.8
 333.0
 336.7
 335.9
Other health56.5
 50.8
 55.3
 49.7
Life:       
Interest sensitive785.6
 722.7
 771.7
 706.2
Non-interest sensitive1,099.1
 1,027.9
 1,080.8
 1,009.1
Total average liabilities for insurance products, net of reinsurance ceded$15,699.7
 $15,368.0
 $15,490.9
 $15,102.0
Revenues:       
Insurance policy income$414.6
 $413.7
 $1,252.8
 $1,246.5
Net investment income:       
General account invested assets242.1
 229.1
 710.9
 676.2
Fixed index products28.5
 15.6
 89.5
 10.6
Fee revenue and other income11.3
 9.6
 32.5
 23.5
Total revenues696.5
 668.0
 2,085.7
 1,956.8
Expenses:       
Insurance policy benefits364.7
 368.4
 1,089.9
 1,098.7
Amounts added to policyholder account balances:       
Cost of interest credited to policyholders26.3
 27.7
 79.3
 83.3
Cost of options to fund index credits, net of forfeitures16.0
 15.7
 47.1
 49.2
Market value changes credited to policyholders30.2
 15.3
 91.4
 9.7
Amortization related to operations38.7
 43.8
 126.3
 135.3
Interest expense on investment borrowings5.3
 3.5
 14.3
 9.4
Other operating costs and expenses108.4
 105.5
 328.2
 312.2
Total benefits and expenses589.6
 579.9
 1,776.5
 1,697.8
Income before net realized investment gains (losses), net of related amortization, and fair value changes in embedded derivative liabilities, net of related amortization, and income taxes106.9
 88.1
 309.2
 259.0
Net realized investment gains (losses)15.6
 .9
 31.1
 (.7)
Amortization related to net realized investment gains (losses)(.7) (.2) (1.0) (.6)
Net realized investment gains (losses), net of related amortization14.9
 .7
 30.1
 (1.3)
Insurance policy benefits - fair value changes in embedded derivative liabilities2.8
 11.6
 (9.8) (45.7)
Amortization related to fair value changes in embedded derivative liabilities(.5) (2.3) 1.8
 9.5
Fair value changes in embedded derivative liabilities, net of related amortization2.3
 9.3
 (8.0) (36.2)
Income before income taxes$124.1
 $98.1
 $331.3
 $221.5

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Margin from Annuity Products (dollars in millions):
Three months endedNine months ended
September 30,September 30,
 2023202220232022
Annuity margin:
Fixed indexed annuities
Insurance policy income$5.1 $3.6 $14.2 $10.3 
Net investment income104.4 95.0 304.4 276.5 
Insurance policy benefits(4.3)(2.0)(12.6)(9.7)
Interest credited(41.5)(33.0)(116.8)(92.9)
Amortization and non-deferred commissions(16.5)(14.7)(47.9)(42.1)
Margin from fixed indexed annuities$47.2 $48.9 $141.3 $142.1 
Average net insurance liabilities$9,381.0 $8,902.9 $9,280.2 $8,700.1 
Margin/average net insurance liabilities2.01 %2.20 %2.03 %2.18 %
Fixed interest annuities
Insurance policy income$.3 $.2 $.8 $.6 
Net investment income21.0 20.3 62.8 62.4 
Insurance policy benefits(.1).1 (.2)(.9)
Interest credited(11.4)(11.2)(33.6)(34.0)
Amortization and non-deferred commissions(1.4)(1.2)(3.6)(3.5)
Margin from fixed interest annuities$8.4 $8.2 $26.2 $24.6 
Average net insurance liabilities$1,603.0 $1,675.9 $1,615.7 $1,716.5 
Margin/average net insurance liabilities2.10 %1.96 %2.16 %1.91 %
Other annuities
Insurance policy income$1.8 $2.5 $5.4 $6.2 
Net investment income5.6 5.8 16.9 17.5 
Insurance policy benefits(5.4)(4.6)(16.3)(12.2)
Interest credited(.5)(.6)(1.7)(1.8)
Amortization and non-deferred commissions(.1)(.1)(.4)(.3)
Margin from other annuities$1.4 $3.0 $3.9 $9.4 
Average net insurance liabilities$455.6 $478.8 $462.6 $484.4 
Margin/average net insurance liabilities1.23 %2.51 %1.12 %2.59 %
Total annuity margin$57.0 $60.1 $171.4 $176.1 
Average net insurance liabilities$11,439.6 $11,057.6 $11,358.5 $10,901.0 
Margin/average net insurance liabilities1.99 %2.17 %2.01 %2.15 %
 Three months ended Nine months ended
 September 30, September 30,
 2017 2016 2017 2016
Health benefit ratios:       
All health lines:       
Insurance policy benefits$291.3
 $301.2
 $863.0
 $896.2
Benefit ratio (a)94.8% 97.0% 93.1% 96.0%
Medicare supplement:       
Insurance policy benefits$140.0
 $140.5
 $414.1
 $418.7
Benefit ratio (a)72.0% 72.5% 70.8% 72.2%
Long-term care:       
Insurance policy benefits$151.3
 $160.7
 $448.9
 $477.5
Benefit ratio (a)134.2% 137.7% 131.2% 135.1%
Interest-adjusted benefit ratio (b)72.9% 77.7% 70.5% 76.9%

______________
(a)We calculate benefit ratios by dividing the related product's insurance policy benefits by insurance policy income.
(b)We calculate the interest-adjusted benefit ratio (a non-GAAP measure) for Bankers Life's long-term care products by dividing such product's insurance policy benefits less the imputed interest income on the accumulated assets backing the insurance liabilities by policy income. These are considered non-GAAP financial measures. A non-GAAP measure is a numerical measure of a company's performance, financial position, or cash flows that excludes or includes amounts that are normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP.

These non-GAAP financial measures of "interest-adjusted benefit ratios" differMargin from "benefit ratios" due to the deduction of imputed interest income on the accumulated assets backing the insurance liabilities from the product's insurance policy benefits used to determine the ratio. Interest income is an important factor in measuring the performance of health products that are expected to be inforce for a longer duration of time, are not subject to unilateral changes in provisions (such as non-cancelable or guaranteed renewable contracts) and require the performance of various functions and services (including insurance protection) for an extended period of time. The net cash flows from long-term care products generally cause an accumulation of amounts in the early years of a policy (accounted for as reserve increases) that 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 benefits 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 (which is equal to the tabular interest on the related insurance liabilities). Since interest income is an important factor in measuring the performance of this product, management believes a benefit ratio that includes the effect of interest income is useful in analyzing product performance. We utilize the interest-adjusted benefit ratio in measuring segment performance because we believe that this performance measure is a better indicator of the ongoing businesses and trends in the business. However, the "interest-adjusted benefit ratio" does not replace the "benefit ratio" as a measure of current period benefits to current period insurance policy income. Accordingly, management reviews both "benefit ratios" and "interest-adjusted benefit ratios" when analyzing the financial results attributable to these products. The imputed investment income earned on the accumulated assets backing Bankers Life's long-term care reserves fixed indexed annuities was $69.1 million and $70.1 million in the three months ended September 30, 2017 and 2016, respectively, and was $207.6 million and $205.6 million in the nine months ended September 30, 2017 and 2016, respectively.

Total premium collections were $641.7$47.2 million in the third quarter of 2017, down 3.6 percent from 2016,2023 compared to $48.9 million in the third quarter of 2022, and were $2,010.1was $141.3 million in the first nine months of 2017, up 2.8 percent from 2016. See "Premium Collections" for further analysis of Bankers Life's premium collections.

Average liabilities for insurance products, net of reinsurance ceded were $15.7 billion in the third quarter of 2017, up 2.2 percent from 2016, and were $15.5 billion2023 compared to $142.1 million in the first nine months of 2017, up 2.6 percent from 2016. Such average2022. The margins in 2023 are relatively flat, as compared to the same periods in the prior year, as growth in the block is primarily being offset by spread compression driven by increased surrenders of higher spread products. Average net insurance liabilities for long-term care products(policyholder account balances less: (i) amounts related to reinsured business; (ii) deferred acquisition costs; (iii) present value of future profits; and (iv) the value of unexpired options credited to insurance liabilities) were increased by $154.7$9,381.0 million and $337.8$8,902.9 million in the third quarters of 20172023 and 2022, respectively, and were $9,280.2 million and $8,700.1 million in the first nine months of 2023 and 2022, respectively, driven by deposits and reinvested returns in excess of withdrawals. The increase in net insurance liabilities results in higher net investment income allocated. The earned yield was 4.45 percent in the third quarter of 2023 up from 4.27 percent in the third quarter of 2022, and was 4.37 percent in the first nine months of 2023 up from 4.24 percent in the first nine months of 2022, reflecting higher portfolio yields.


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2016,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 $(49.8) million and $(30.9) million in the third quarters of 2023 and 2022, respectively, and $75.9were $22.8 million and $182.0$(175.3) million in the first nine months of 20172023 and 2016, respectively, to reflect the premium deficiencies that would exist if unrealized gains on the assets backing such products had been realized and the proceeds2022, respectively.

Margin from the sales of such assets were invested at then current yields. Such increase is reflected as a reduction of accumulated other comprehensive income. Excluding the impact of the aforementioned item, the increase in average liabilities for insurance products fixed interest annuities was primarily due to new sales and the amounts added to policyholder account balances on interest-sensitive products.

Insurance policy income is comprised of premiums earned on policies which provide mortality or morbidity coverage and fees and other charges assessed on other policies.

Net investment income on general account invested assets (which excludes income on policyholder portfolios) was $242.1$8.4 million in the third quarter of 2017, up 5.7 percent from 2016,2023 compared to $8.2 million in the third quarter of 2022, and was $710.9$26.2 million in the first nine months of 2017, up 5.1 percent from 2016. In the three and nine months ended September 30, 2017, net investment income reflects $3 million and $14 million, respectively, of higher investment income from alternative investments2023 compared to the 2016 periods. Such increases reflect higher returns from credit and equity related strategies and a larger average alternative investment portfolio in the 2017 periods. Prepayment income (including call premiums) was $14.1 million and $2.3 million in the third quarters of 2017 and 2016, respectively, and was $21.9 million and $8.8$24.6 million in the first nine months of 2017 and 2016, respectively.

Net investment income related to fixed index products represents the change2022, driven primarily by higher spreads, partially offset by a reduction in the estimated fair value of options which are purchased in an effort to offset or hedge certain potential benefits accruing to the policyholders of our fixed index products. Our fixed index products are designed so that investment income spread is expected to be more than adequate to cover the costsize of the options and other costs related to these policies.  Net investment income related to fixed index products was $28.5 million and $15.6block. Average net insurance liabilities were $1,603.0 million in the third quartersquarter of 20172023 compared to $1,675.9 million in the third quarter of 2022, and 2016, respectively, and was $89.5 million and $10.6were $1,615.7 million in the first nine months of 2017 and 2016, respectively. Such amounts were substantially offset by the corresponding charge (credit)2023 compared to amounts added to policyholder account balances - market value changes credited to policyholders.Such income and related charges fluctuate based on the value of options embedded in the segment's fixed index annuity policyholder account balances subject to this benefit and to the performance of the index to which the returns on such products are linked.

Fee revenue and other income was $11.3 million and $9.6 million in the third quarters of 2017 and 2016, respectively, and was $32.5 million and $23.5$1,716.5 million in the first nine months of 20172022, driven by withdrawals in excess of deposits and 2016, respectively.reinvested returns. The increasedecrease in net insurance liabilities results in lower net investment income allocated, however, the 2017 periods is attributableearned yield increased to fee income earned by our broker-dealer and registered investment advisor subsidiaries and revenues earned related to sales of Medicare Advantage products of other insurance companies.

Insurance policy benefits fluctuated as a result of the factors summarized below for benefit ratios.  Benefit ratios are calculated by dividing the related insurance product’s insurance policy benefits by insurance policy income.

The Medicare supplement business consists of both individual and group policies.  Government regulations generally require us to attain and maintain a ratio of total benefits incurred to total premiums earned (excluding changes in policy benefit reserves), after three years from the original issuance of the policy and over the lifetime of the policy, of not less than 65 percent on individual products and not less than 75 percent on group products, as determined in accordance with 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. Our benefit ratios were 72.0 percent and 72.55.24 percent in the third quartersquarter of 20172023 from 4.85 percent in the third quarter of 2022, and 2016, respectively, and were 70.8 percent and 72.2to 5.18 percent in the first nine months of 2017 and 2016, respectively. The benefit ratio in the 2017 periods reflected favorable claim experience compared to the 2016 periods. We currently expect the Medicare supplement benefit ratio to be in the range of 70 percent to 73 percent during the fourth quarter of 2017.

The net cash flows2023 from our long-term care products 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 typically increases, but the increase in reserves is partially offset by investment income earned on the accumulated assets.  The benefit ratio on our long-term care business in the Bankers Life segment was 134.2 percent and 137.7 percent in the third quarters of 2017 and 2016, respectively, and was 131.2 percent and 135.14.85 percent in the first nine months of 2017 and 2016, respectively.  The interest-adjusted benefit ratio on this business 2022, reflecting higher portfolio yields.

Margin from other annuities was 72.9 percent and 77.7 percent$1.4 million in the third quartersquarter of 2017 and 2016, respectively,2023 compared to $3.0 million in the third quarter of 2022, and was 70.5 percent and 76.9 percent$3.9 million in the first nine months of 2017 and 2016, respectively.  The interest-adjusted benefit ratio2023 compared to $9.4 million in the first nine months of 20172022. 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. Such mortality was

lower in the 2023 periods compared to the same periods in 2022.
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favorably impacted by $11.6Margin from Health Products (dollars in millions):
Three months endedNine months ended
September 30,September 30,
 2023202220232022
Health margin:
Supplemental health
Insurance policy income$177.9 $173.5 $533.1 $519.0 
Net investment income39.0 37.7 116.5 112.7 
Insurance policy benefits(128.0)(125.8)(385.1)(383.2)
Amortization and non-deferred commissions(26.1)(26.9)(78.5)(77.9)
Margin from supplemental health$62.8 $58.5 $186.0 $170.6 
Margin/insurance policy income35 %34 %35 %33 %
Medicare supplement
Insurance policy income$154.2 $163.6 $466.0 $495.5 
Net investment income1.1 1.4 3.6 4.1 
Insurance policy benefits(107.4)(113.9)(341.3)(348.5)
Amortization and non-deferred commissions(10.7)(12.4)(32.7)(38.0)
Margin from Medicare supplement$37.2 $38.7 $95.6 $113.1 
Margin/insurance policy income24 %24 %21 %23 %
Long-term care
Insurance policy income$65.7 $66.4 $197.2 $199.2 
Net investment income34.1 34.2 102.4 102.8 
Insurance policy benefits(73.1)(71.1)(222.9)(212.1)
Amortization and non-deferred commissions(3.5)(3.4)(10.4)(9.6)
Margin from long-term care$23.2 $26.1 $66.3 $80.3 
Margin/insurance policy income35 %39 %34 %40 %
Total health margin$123.2 $123.3 $347.9 $364.0 
Margin/insurance policy income31 %31 %29 %30 %

Margin from supplemental health business was $62.8 million of one-time reserve releases which was comprised of: (i) $6.5 million recognized in the second quarter of 2017 related to lower persistency (including the results of procedures performed to identify policies that had terminated prior to June 30, 2017 due to death); (ii) $1.7 million related to an out-of-period adjustment recognized in the second quarter of 2017 that reduced reserves; and (iii) $3.4 million related to the impact of policyholder decisions to surrender or reduce coverage following rate increases (such amount was not significant in the third quarter of 2017 and had no impact on the interest-adjusted benefit ratio). Such ratio2023 compared to $58.5 million in the third quarter of 20162022, and was favorably impacted by $6 million of reserve releases related to policyholder decisions to surrender or reduce coverage following rate increases. The interest-adjusted benefit ratio in the third quarter of 2016, excluding these favorable reserve releases was 82.6 percent. The interest-adjusted benefit ratio in the first nine months of 2017 and 2016, was favorably impacted by the aforementioned reserve releases of $12 million and $19 million, respectively. The interest-adjusted benefit ratio in the first nine months of 2017 and 2016, excluding these favorable reserve releases was 73.9 percent and 82.4 percent, respectively. The interest-adjusted benefit ratio in the three and nine months ended September 30, 2017 also reflected no increase to the future loss reserve, given the outcome of the year-end 2016 actuarial review, compared to an $8.4 million and $25.4 million increase in the three and nine months ended September 30, 2016, respectively. We currently expect the long-term care interest-adjusted benefit ratio to be in the range of 75 percent to 80 percent during the fourth quarter of 2017, excluding the reserve-related impacts of rate increase actions. We expect that the rate increases will have a minor impact on the interest-adjusted benefit ratio in the fourth quarter of 2017.

Amounts added to policyholder account balances - cost of interest credited to policyholders were $26.3 million and $27.7 million in the third quarters of 2017 and 2016, respectively, and were $79.3 million and $83.3$186.0 million in the first nine months of 2017 and 2016, respectively. The weighted average crediting rate for these products was 2.8 percent in both the third quarters of 2017 and 2016 and the first nine months of 2017 and 2016. The average liabilities of the fixed interest annuity block were $2.9 billion and $3.2 billion in the first nine months of 2017 and 2016, respectively. The decrease in the liabilities related2023 compared to these annuities reflects the lower sales of these products in the current low interest rate environment and consumer preference for fixed index products.

Amounts added to policyholder account balances for fixed index products represent 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 S&P 500 Index, over a specified period. Such amounts include our cost to fund the annual index credits, net of policies that are canceled prior to their anniversary date (classified as cost of options to fund index credits, net of forfeitures). Market value changes in the underlying indices during a specified period of time are classified as market value changes credited to policyholders. Such market value changes are generally offset by the net investment income related to fixed index products discussed above.

Amortization related to operations includes amortization of deferred acquisition costs and the present value of future profits. Deferred acquisition costs and the present value of future profits are collectively referred to as "insurance acquisition costs". Insurance acquisition costs are generally amortized either:  (i) in relation to the estimated gross profits for interest-sensitive life and annuity products; or (ii) in relation to actual and expected premium revenue for other products.  In addition, for interest-sensitive life and annuity products, we are required to adjust the total amortization recorded to date through the statement of operations if actual experience or other evidence suggests that earlier estimates of future gross profits should be revised. Accordingly, amortization for interest-sensitive life and annuity products is dependent on the profits realized during the period and on our expectation of future profits.  For other products, we amortize insurance acquisition costs in relation to actual and expected premium revenue, and amortization is only adjusted if expected premium revenue changes or if we determine the balance of these costs is not recoverable from future profits.  Bankers Life’s amortization expense was $38.7 million and $43.8 million in the third quarters of 2017 and 2016, respectively, and was $126.3 million and $135.3$170.6 million in the first nine months of 2017 and 2016, respectively. The lower amortization2022, reflecting growth in the 2017 periods generally reflects the favorable persistency experiencedblock. The margin as compared to the prior year.

Interest expense on investment borrowings represents interest expense on collateralized borrowings as further described in the note to the consolidated financial statements entitled "Investment Borrowings". The increase in interest expense in the 2017 periods is primarily due to higher interest rates on the variable rate investment borrowings.


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Other operating costs and expenses in our Bankers Life segment were $108.4 milliona percentage of insurance policy income was 35 percent in the third quarter of 2017, up 2.72023 compared to 34 percent from 2016,in the prior year period, and were $328.2 millionwas 35 percent in the first nine months of 2017, up 5.12023 compared to 33 percent from 2016. Such expenses in the first nine months of 2017 include $3.5 million for estimated future state guaranty association assessments, net of premium tax offsets, related to the liquidation of Penn Treaty Network America Insurance Company ("Penn Treaty"). Other operating costs and expenses include the following (dollars in millions):2022.


 Three months ended Nine months ended
 September 30, September 30,
 2017 2016 2017 2016
Commission expense and agent manager benefits$17.3
 $19.8
 $53.5
 $52.3
Other operating expenses91.1
 85.7
 274.7
 259.9
Total$108.4
 $105.5
 $328.2
 $312.2

Net realized investment gains (losses) fluctuate from period to period. During the first nine months of 2017, we recognized net realized investment gains of $31.1 million, which were comprised of: (i) $22.2 million of net gains from the sales of investments; and (ii) the increase in fair value of certain fixed maturity investments with embedded derivatives of $8.9 million. During the first nine months of 2016, we recognized net realized investment losses of $.7 million, which were comprised of: (i) $17.6 million of net gains from the sales of investments; (ii) the increase in fair value of certain fixed maturity investments with embedded derivatives of $.1 million; and (iii) $18.4 million of writedowns of investments for other than temporary declines in fair value recognized through net income.

Amortization related to net realized investment gains (losses) is the increase or decrease in the amortization of insurance acquisition costs which results from realized investment gains or losses. When we sell securities which back our interest-sensitive life and annuity products at a gain (loss) and reinvest the proceeds at a different yield, we increase (reduce) the amortization of insurance acquisition costs in order to reflect the change in estimated gross profits due to the gains (losses) realized and the resulting effect on estimated future yields. Sales of fixed maturity investments resulted in an increase in the amortization of insurance acquisition costs of $.7 million and $.2 million in the third quarters of 2017 and 2016, respectively, and $1.0 million and $.6 million in the first nine months of 2017 and 2016, respectively.

Insurance policy benefits - fair value changes in embedded derivative liabilities represents fair value changes due to fluctuations in the interest rates used to discount embedded derivative liabilities related to our fixed index annuities.

Amortization related to fair value changes in embedded derivative liabilities is the increase or decrease in the amortization of insurance acquisition costs which results from changes in interest rates used to discount embedded derivative liabilities related to our fixed index annuities.


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Washington National (dollars in millions)
 Three months ended Nine months ended
 September 30, September 30,
 2017 2016 2017 2016
Premium collections:       
Supplemental health and other health$145.2
 $141.5
 $443.2
 $425.3
Medicare supplement11.7
 14.6
 38.7
 46.1
Life7.1
 7.1
 22.3
 21.7
Annuity.2
 .2
 .6
 1.0
Total collections$164.2
 $163.4
 $504.8
 $494.1
Average liabilities for insurance products:       
Fixed index annuities$309.9
 $346.0
 $317.9
 $355.1
Fixed interest annuities96.6
 105.6
 98.9
 108.4
SPIAs and supplemental contracts:       
Mortality based231.8
 251.9
 232.5
 250.4
Deposit based267.8
 267.1
 269.7
 266.5
Separate Accounts4.8
 4.7
 4.7
 4.7
Health:       
Supplemental health2,749.9
 2,621.7
 2,715.3
 2,589.1
Medicare supplement23.9
 27.8
 25.4
 28.5
Other health13.4
 14.1
 13.7
 14.2
Life:       
Interest sensitive148.9
 150.3
 149.0
 150.5
Non-interest sensitive174.1
 178.9
 174.2
 180.6
Total average liabilities for insurance products, net of reinsurance ceded$4,021.1
 $3,968.1
 $4,001.3
 $3,948.0
Revenues:       
Insurance policy income$167.4
 $164.4
 $502.0
 $490.0
Net investment income:       
General account invested assets65.5
 66.0
 193.7
 190.3
Fixed index products2.0
 1.5
 5.8
 .3
Trading account income (loss) related to policyholder accounts.5
 (.4) 2.4
 .7
Fee revenue and other income.3
 .4
 .8
 1.0
Total revenues235.7
 231.9
 704.7
 682.3
Expenses:       
Insurance policy benefits138.0
 138.7
 415.7
 405.6
Amounts added to policyholder account balances:       
Cost of interest credited to policyholders3.2
 3.3
 9.7
 10.3
Cost of options to fund index credits, net of forfeitures1.2
 1.2
 3.2
 4.4
Market value changes credited to policyholders2.3
 1.3
 8.1
 1.7
Amortization related to operations14.3
 14.3
 43.9
 44.5
Interest expense on investment borrowings1.7
 .9
 4.5
 2.5
Other operating costs and expenses47.5
 47.0
 145.0
 140.3
Total benefits and expenses208.2
 206.7
 630.1
 609.3
Income before net realized investment gains and fair value changes in embedded derivative liabilities, net of related amortization, and income taxes27.5
 25.2
 74.6
 73.0
Net realized investment gains6.5
 .1
 12.6
 27.2
Amortization related to net realized investment gains—
 —
 —
 (.3)
Net realized investment gains, net of related amortization6.5
 .1
 12.6
 26.9
Insurance policy benefits - fair value changes in embedded derivative liabilities.1
 .5
 —
 (1.3)
Amortization related to fair value changes in embedded derivative liabilities(.1) (.4) —
 .9
Fair value changes in embedded derivative liabilities, net of related amortization—
 .1
 —
 (.4)
Income before income taxes$34.0
 $25.4
 $87.2
 $99.5


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 Three months ended Nine months ended
 September 30, September 30,
 2017 2016 2017 2016
Health benefit ratios:       
Medicare supplement:       
Insurance policy benefits$9.1
 $10.7
 $28.3
 $33.0
Benefit ratio (a)68.1% 69.5% 68.4% 69.5%
Supplemental health and other:       
Insurance policy benefits$122.4
 $118.8
 $369.2
 $352.6
Benefit ratio (a)83.2% 84.0% 84.1% 83.6%
Interest-adjusted benefit ratio (b)59.0% 59.8% 60.0% 59.7%

_________________
(a)We calculate benefit ratios by dividing the related product’s insurance policy benefits by insurance policy income.
(b)We calculate the interest-adjusted benefit ratio (a non-GAAP measure) for Washington National's supplemental health products by dividing such product’s insurance policy benefits less the imputed interest income on the accumulated assets backing the insurance liabilities by policy income.  These are considered non-GAAP financial measures.  A non-GAAP measure is a numerical measure of a company's performance, financial position, or cash flows that excludes or includes amounts that are normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP.

These non-GAAP financial measures of "interest-adjusted benefit ratios" differ from "benefit ratios" due to the deduction of imputed interest income on the accumulated assets backing the insurance liabilities from the product’s insurance policy benefits used to determine the ratio.  Interest income is an important factor in measuring the performance of health products that are expected to be inforce for a longer duration of time, are not subject to unilateral changes in provisions (such as non-cancelable or guaranteed renewable contracts) and require the performance of various functions and services (including insurance protection) for an extended period of time.  The net cash flows from supplemental health products generally cause an accumulation of amounts in the early years of a policy (accounted for as reserve increases) that 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 benefits 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 (which is equal to the tabular interest on the related insurance liabilities). Since interest income is an important factor in measuring the performance of these products, management believes a benefit ratio that includes the effect of interest income is useful in analyzing product performance.  We utilize the interest-adjusted benefit ratio in measuring segment performance because we believe that this performance measure is a better indicator of the ongoing businesses and trends in the business.  However, the "interest-adjusted benefit ratio" does not replace the "benefit ratio" as a measure of current period benefits to current period insurance policy income. Accordingly, management reviews both "benefit ratios" and "interest-adjusted benefit ratios" when analyzing the financial results attributable to these products.  The imputed investment income earned on the accumulated assets backing the supplemental health reserves was $35.6 million and $34.3 million in the three months ended September 30, 2017 and 2016, respectively, and was $105.7 million and $100.9 million in the nine months ended September 30, 2017 and 2016, respectively.

Total premium collections were $164.2 million in the third quarter of 2017, up .5 percent from 2016, and were $504.8 million in the first nine months of 2017, up 2.2 percent from 2016, driven by sales and persistency of the segment's supplemental health block; partially offset by lower Medicare supplement collected premiums due to the run-off of this block of business. This segment no longer markets Medicare supplement products and no longer actively pursues sales of annuity products. See "Premium Collections" for further analysis of fluctuations in premiums collected by product.

Average liabilities for insurance products, net of reinsurance ceded were $4.0 billion in the third quarter of 2017, up 1.3 percent from 2016, and were $4.0 billion in the first nine months of 2017, up 1.4 percent from 2016, reflecting an increase in the supplemental health block; partially offset by the run-off of the annuity blocks.


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Insurance policy income is comprised of premiums earned on traditional insurance policies which provide mortality or morbidity coverage and fees and other charges assessed on other policies. Such income increased in recent periods as supplemental health premiums have increased consistent with sales; partially offset by the decrease in Medicare supplement premiums.

Net investment income on general account invested assets (which excludes income on policyholder portfolios) was $65.5 million in the third quarter of 2017, down .8 percent from 2016, and was $193.7 million in the first nine months of 2017, up 1.8 percent from 2016. Prepayment income (including call premiums) was $2.6 million and $2.7 million in the third quarters of 2017 and 2016, respectively, and was $4.7 million and $4.3 million in the first nine months of 2017 and 2016, respectively.

Net investment income related to fixed index products represents the change in the estimated fair value of options which are purchased in an effort to offset or hedge certain potential benefits accruing to the policyholders of our fixed index products. Our fixed index products are designed so that investment income spread is expected to be more than adequate to cover the cost of the options and other costs related to these policies. Net investment income related to fixed index products was $2.0 million and $1.5 million in the third quarters of 2017 and 2016, respectively, and was $5.8 million and $.3 million in the first nine months of 2017 and 2016, respectively. Such amounts were substantially offset by the corresponding charge to amounts added to policyholder account balances - market value changes credited to policyholders.  Such income and related charges fluctuate based on the value of options embedded in the segment's fixed index annuity policyholder account balances subject to this benefit and to the performance of the index to which the returns on such products are linked.

Trading account income related to policyholder accounts represents the income on investments backing the market strategies of certain annuity products which provide for different rates of cash value growth based on the experience of a particular market strategy. The income on our trading account securities is designed to substantially offset certain amounts included in insurance policy benefits related to the aforementioned annuity products.

Insurance policy benefits fluctuated as a result of the factors summarized below. Benefit ratios are calculated by dividing the related insurance product's insurance policy benefits by insurance policy income.

Washington National's 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 three-fourths 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)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, the benefit ratioinsurance policy benefits will typically increase, but the increase in benefits will be partially offset by investment income earned on the accumulated assets. The benefit ratio will fluctuate depending on the claim experience during the year.

90

Insurance margins (insurance policy income less insurance policy benefits) on supplemental health products were $24.8CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
___________________

Margin from Medicare supplement business was $37.2 million and $22.6$38.7 million in the third quarters of 20172023 and 2016,2022, respectively, and were $69.9$95.6 million and $68.9$113.1 million in the first nine months of 20172023 and 2016,2022, respectively. The higher marginsdecrease in margin on the Medicare supplement business is primarily due to a reduction in the 2017 periods primarily reflectssize of the growth in the block. The interest-adjusted benefit ratio on this supplemental health business was 59.0 percentblock and 59.8 percentunfavorable claims experience (although claim experience returned to expected levels in the third quartersquarter of 2017 and 2016, respectively,2023 as compared to the first six months of 2023). Claim experience will fluctuate from period to period. Insurance policy income was $154.2 million in the third quarter of 2023, down 5.7 percent from the third quarter of 2022, and was 60.0 percent and 59.7 percent in$466.0 million the first nine months of 2017 and 2016, respectively.2023 down 6.0 percent from the first nine months of 2022, reflecting lower sales in recent periods partially offset by premium rate increases. Over the last several years, we have experienced a shift in the sale of Medicare supplement policies to the sale of Medicare Advantage policies. We receive fee income when Medicare Advantage policies of other providers are sold, which is recorded in our Fee income segment. We continue to expect the supplemental health interest-adjusted benefit ratioinvest in both our Medicare supplement products and Medicare Advantage distribution to bemeet our customers' needs and preferences. For example, we launched a new competitive Medicare supplement product in the range of 58 percent to 61 percent during the fourth quarter of 2017.2022.


Washington National's Medicare supplement business primarily 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 statutory accounting principles. Since the insurance product liabilities we establish for our Medicare supplement business are subject to significant estimates, and the ultimate claim liability we incur for a particular period is likely to be different than our initial estimate. Governmental regulations generally require usChanges to our estimates are reflected in insurance policy benefits in the period the change is determined.


Margin from Long-term care products was $23.2 million and $26.1 million in the third quarters of 2023 and 2022, respectively, and $66.3 million and $80.3 million in the first nine months of 2023 and 2022, respectively. The margin as a percentage of insurance policy income was 35 percent in the third quarter of 2023 compared to 39 percent in the third quarter of 2022, and was 34 percent in the first nine months of 2023 compared to 40 percent in the first nine months of 2022. The decrease in margins in the 2023 periods is primarily due to unfavorable claims experience as compared to the prior year periods. However, the claims experience in this block moderated in the third quarter of 2023 as we expected, particularly as compared to the unfavorable experience in the second quarter of 2023. Claim experience will fluctuate from quarter to quarter.
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Margin from Life Products (dollars in millions):
to attain and maintain a ratio of total benefits incurred to total premiums earned (excluding changes in policy benefit reserves), after three years
Three months endedNine months ended
September 30,September 30,
 2023202220232022
Life margin:
Interest-sensitive life
Insurance policy income$45.1 $43.5 $134.9 $130.4 
Net investment income12.9 12.9 38.7 38.7 
Insurance policy benefits(18.1)(20.5)(53.4)(57.5)
Interest credited(11.9)(12.4)(35.9)(35.8)
Amortization and non-deferred commissions(5.1)(5.9)(14.5)(17.5)
Margin from interest-sensitive life$22.9 $17.6 $69.8 $58.3 
Average net insurance liabilities$1,039.6 $1,019.2 $1,035.7 $1,015.0 
Interest margin$1.0 $.5 $2.8 $2.9 
Interest margin/average net insurance liabilities.38 %.20 %.36 %.38 %
Underwriting margin$21.9 $17.1 $67.0 $55.4 
Underwriting margin/insurance policy income49 %39 %50 %42 %
Traditional life
Insurance policy income$175.9 $169.9 $528.2 $512.6 
Net investment income23.4 22.5 70.0 67.4 
Insurance policy benefits(122.6)(118.2)(377.3)(362.0)
Interest credited(.2)(.2)(.5)(.5)
Amortization and non-deferred commissions(17.0)(13.8)(48.3)(39.9)
Advertising expense(22.6)(22.1)(76.8)(74.0)
Margin from traditional life$36.9 $38.1 $95.3 $103.6 
Margin/insurance policy income21 %22 %18 %20 %
Margin excluding advertising expense/insurance policy income34 %35 %33 %35 %
Total life margin$59.8 $55.7 $165.1 $161.9 

Margin from the original issuance of the policy and over the lifetime of the policy, of not less than 65 percent on these products, as determined in accordance with statutory accounting principles. Insurance margins (insurance policy income less insurance policy benefits) on these products were $4.2 million and $4.7interest-sensitive life business was $22.9 million in the third quartersquarter of 20172023, up 30 percent from the third quarter of 2022, and 2016, respectively, and were $13.0 million and $14.5was $69.8 million in the first nine months of 20172023, up 20 percent from the first nine months of 2022, reflecting favorable mortality, as compared to the 2022 periods, and 2016, respectively. Such decrease reflectsgrowth in the run-off of this block of business.due to sales in recent periods.


Amounts added to policyholder account balances - cost ofThe interest credited to policyholders were $3.2margin was $1.0 million and $3.3$0.5 million in the third quarters of 20172023 and 2016,2022, respectively, and were $9.7was $2.8 million and $10.3$2.9 million in the first nine months of 20172023 and 2016,2022, respectively.

Amounts added Net investment income in the 2023 periods was comparable to policyholder account balances for fixed index products represent a guaranteed minimum rate of return and a higher potential return that is based on a percentage (the "participation rate") of the amount of2022 periods. The increase in the value of a particular index, such as the S&P 500 Index, over a specified period. Such amounts include our cost to fund the annual index credits,average net of policies that are canceled prior to their anniversary date (classified as cost of options to fund index credits, net of forfeitures). Market value changesinsurance liabilities results in the underlying indices during a specified period of time are classified as market value changes credited to policyholders. Such market value changes are generally offset by the higher net investment income related to fixed index products discussed above.

Amortization related to operations includes amortization of insurance acquisition costs. Insurance acquisition costs are generally amortizedallocated, which is offset by lower earned yields. The earned yield was 4.96 percent and 5.06 percent in relation to actual and expected premium revenue, and amortization is only adjusted if expected premium revenue changes or if we determine the balance of these costs is not recoverable from future profits. Such amounts were generally consistent with the related premium revenue. A revision to our current assumptions could result in increases or decreases to amortization expense in future periods. Washington National's amortization expense was $14.3 million in both the third quarters of 20172023 and 2016,2022, respectively, and was $43.94.98 percent and 5.08 percent in the first nine months of 2023 and 2022, respectively. The decrease in earned yields is due to the sale or maturity of higher yielding investments. 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 exclude 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 $(4.8) million and $44.5$(4.0) million in the third quarters of 2023 and 2022, respectively, and were $3.5 million and $(23.9) million in the first nine months of 20172023 and 2016,2022, respectively.


Interest expense on investment borrowings represents interest expense on collateralized borrowings as further described in the note to the consolidated financial statements entitled "Investment Borrowings". The increase in interest expense in the 2017 periods is due to higher interest rates on the variable rate investment borrowings.

Other operating costs and expenses were $47.5Margin from traditional life business was $36.9 million and $47.0$38.1 million in the third quarters of 20172023 and 2016,2022, respectively, and were $145.0was $95.3 million and $140.3$103.6 million in the first nine months of 20172023 and 2016,2022, respectively. Such expenses inIn the first nine months of 2017 include $1.3 million for estimated future state guaranty association assessments, net of premium tax offsets, related to the liquidation of Penn Treaty. Other operating costs and expenses also include commission expense of $17.8 million and $17.7 million in the third quarters of 2017 and 2016, respectively, and $51.9 million and $52.6 million in the first nine months of 2017 and 2016, respectively.

Net realized investment gains (losses) fluctuate each period. During the first nine months of 2017, we recognized net realized investment gains of $12.6 million, which were comprised of: (i) $7.7 million of net gains from the sales of investments; (ii) the increase in fair value of certain fixed maturity investments with embedded derivatives of $3.0 million; (iii) the increase in fair value of embedded derivatives related to a modified coinsurance agreement of $2.4 million; and (iv) $.5 million of writedowns of investments for other than temporary declines in fair value which were recorded in earnings. During the first nine months of 2016, we recognized net realized investment gains of $27.2 million, which were comprised of: (i) $24.3 million of net gains from the sales of investments; (ii) the increase in fair value of certain fixed maturity investments with embedded derivatives of $.6 million; (iii) the increase in fair value of embedded derivatives related to a modified coinsurance agreement of $6.7 million; and (iv) $4.4 million of writedowns of investments for other than temporary declines in fair value recognized through net income.

Amortization related to net realized investment gains (losses) is the increase or decrease in the amortization of insurance acquisition costs which results from realized investment gains or losses. When we sell securities which back our interest-sensitive life and annuity products at a gain (loss) and reinvest the proceeds at a different yield (or when we have the intent to sell the impaired investments before an anticipated recovery in value occurs), we increase (reduce) the amortization of insurance acquisition costs in order to reflect the change in estimated gross profits due to the gains (losses) realized and the

second
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resulting effectquarter of 2022, there was a larger than typical reduction in traditional life claim liabilities due to the work down of a backlog of claims that were in-the-course-of-settlement. The claim payments also had a favorable impact (of approximately $10 million) on estimated future yields. Sales of fixed maturity investments resulted in an increasethe change in the amortizationliability for future policy benefits, as calculated under the new LDTI standard, which is the primary driver of insurance acquisition coststhe decrease in the traditional life margin in the first nine months of $.32023 as compared to the same period in 2022.
Allocated net investment income was higher in the 2023 periods, as compared to the 2022 periods, primarily due to growth in the block and higher investment yields. The earned yield was 4.72 percent and 4.63 percent in the third quarters of 2023 and 2022, respectively, and was 4.72 percent and 4.61 percent in the first nine months of 2023 and 2022, respectively.

Advertising expense was $22.6 million in the third quarter of 2023, up 2.3 percent from the comparable period in 2022, and was $76.8 million in the first nine months of 2016.

Insurance policy benefits - fair value changes in embedded derivative liabilities represents fair value changes due to fluctuations in the interest rates used to discount embedded derivative liabilities related to our fixed index annuities.

Amortization related to fair value changes in embedded derivative liabilities is the increase or decrease in the amortization of insurance acquisition costs which results from changes in interest rates used to discount embedded derivative liabilities related to our fixed index annuities.


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Colonial Penn (dollars in millions)

 Three months ended Nine months ended
 September 30, September 30,
 2017 2016 2017 2016
Premium collections:       
Life$72.2
 $70.1
 $218.1
 $208.6
Supplemental health.4
 .6
 1.5
 1.8
Total collections$72.6
 $70.7
 $219.6
 $210.4
Average liabilities for insurance products:       
SPIAs - mortality based$73.6
 $76.1
 $73.0
 $73.8
Health:       
Medicare supplement5.6
 6.4
 5.8
 6.6
Other health4.1
 4.2
 4.1
 4.3
Life:       
Interest sensitive15.4
 16.3
 15.6
 16.2
Non-interest sensitive720.1
 691.9
 714.3
 685.8
Total average liabilities for insurance products, net of reinsurance ceded$818.8
 $794.9
 $812.8
 $786.7
Revenues:       
Insurance policy income$73.1
 $70.9
 $219.1
 $210.5
Net investment income on general account invested assets11.0
 11.1
 33.1
 33.0
Fee revenue and other income.3
 .2
 .9
 .8
Total revenues84.4
 82.2
 253.1
 244.3
Expenses:       
Insurance policy benefits47.5
 50.1
 150.3
 150.8
Amounts added to annuity and interest-sensitive life product account balances.2
 .2
 .5
 .5
Amortization related to operations3.9
 3.7
 11.9
 11.3
Interest expense on investment borrowings.3
 .1
 .7
 .4
Other operating costs and expenses23.5
 27.2
 73.0
 84.2
Total benefits and expenses75.4
 81.3
 236.4
 247.2
Income (loss) before net realized investment gains (losses) and income taxes9.0
 .9
 16.7
 (2.9)
Net realized investment gains (losses)1.0
 .3
 .8
 (.2)
Income (loss) before income taxes$10.0
 $1.2
 $17.5
 $(3.1)

This segment's results are significantly impacted by the accounting standard related to deferred acquisition costs. We are not able to defer most of Colonial Penn's direct response advertising costs although such costs generate predictable sales and future in-force profits. We plan to continue to invest in this segment's business, including the development of new products and markets. The amount of our investment in new business during a particular period will have a significant impact on this segment's results. We currently expect this segment to report earnings (before net realized investment gains (losses) and income taxes) in 2017 in the range of $18 million to $23 million (or $15 million to $20 million, excluding the favorable impact of $3.0 million related to an out-of-period adjustment and refinement to liabilities for insurance products recognized in the third quarter of 2017).


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Total premium collections were $72.6 million in the third quarter of 2017,2023, up 2.73.8 percent from 2016, and were $219.6 millionthe comparable period in the first nine months of 2017, up 4.4 percent from 2016. The increase was driven by recent sales activity and steady persistency. See "Premium Collections" for further analysis of Colonial Penn's premium collections.

Average liabilities for insurance products, net of reinsurance ceded have increased as a result of growth in the core graded benefit and simplified issue life insurance block in this segment.

Insurance policy income is comprised of premiums earned on policies which provide mortality or morbidity coverage and fees and other charges assessed on other policies. The increase in such income reflects the growth in the block of graded benefit and simplified issue life insurance business.

Net investment income on general account invested assets in the 2017 periods was comparable to the corresponding periods in 2016.

Insurance policy benefits in the 2017 periods reflect: (i) growth in this segment; (ii) the favorable changes to liabilities for insurance products including a $2.5 million out-of-period adjustment and a $.5 million refinement to the calculation; and (iii) favorable mortality as compared to the corresponding periods in 2016.

Amortization related to operations includes amortization of insurance acquisition costs. Insurance acquisition costs in the Colonial Penn segment are amortized in relation to actual and expected premium revenue, and amortization is only adjusted if expected premium revenue changes or if we determine the balance of these costs is not recoverable from future profits. Such amounts were generally consistent with the related premium revenue and gross profits for such periods and the assumptions we made when we established the present value of future profits. A revision to our current assumptions could result in increases or decreases to amortization expense in future periods.

Other operating costs and expenses in our Colonial Penn segment fluctuate primarily due to changes in the marketing expenses incurred to generate new business. Marketing expenses were lower in the 2017 periods as compared to the corresponding periods in 2016.2022. The demand and cost of television advertising appropriate for Colonial Penn's campaigns has fluctuated widely in certain periods. In the first nine months of 2017, higher advertising costs resulted in our decisioncan fluctuate from period to lower our planned spending.period. We are disciplined with our marketing expenditures and will increase or decrease our advertisingmarketing spend depending on prices.the current economics of the purchase or other factors.


Net realized investment gains (losses) fluctuated each period. During
Collected Premiums From Annuity and Interest-Sensitive Life Products (dollars in millions):

Three months endedNine months ended
September 30,September 30,
 2023202220232022
Collected premiums from annuity and interest-sensitive life products:
Annuities$372.2 $370.0 $1,144.9 $1,173.6 
Interest-sensitive life58.3 56.6 176.8 169.8 
Total collected premiums from annuity and interest-sensitive life products$430.5 $426.6 $1,321.7 $1,343.4 

Collected premiums from annuity and interest-sensitive products increased 0.9 percent in the third quarter of 2023 compared to the third quarter of 2022, and decreased 1.6 percent in the first nine months of 2017, we recognized net realized investment gains of $.8 million, which were comprised of: (i) $.9 million of net gains from the sales of investments; (ii) the increase in fair value of certain fixed maturity investments with embedded derivatives of $.4 million; and (iii) $.5 million of writedowns of investments for other than temporary declines in fair value which were recorded in earnings. During2023 compared to the first nine months of 2016, we recognized net realized investment losses2022. Premium collections from fixed indexed annuities decreased 7.0 percent to $321.8 million in the third quarter of $.22023 compared to the same period of 2022, and 10 percent to $996.7 million which were comprised of: (i) $.7 million of net gains from the sales of investments; (ii) the decrease in fair value of certain fixed maturity investments with embedded derivatives of $.1 million; and (iii) $.8 million of writedowns of investments for other than temporary declines in fair value recognized through net income.

Management believes that an analysis of Adjusted EBIT for Colonial Penn, separated between in-force and new business, provides increased clarity for this segment as the vast majority of the costs to generate new business in this segment are not deferrable and Adjusted EBIT will fluctuate based on management's decisions on how much marketing costs to incur in each period. Adjusted EBIT from new business includes pre-tax revenues and expenses associated with new sales of our insurance products during the first year afternine months of 2023 compared to the sale is completed. Adjusted EBITfirst nine months of 2022. Premium collections from in-force business includes all pre-tax revenuesfixed interest annuities increased 117 percent to $48.9 million in the third quarter of 2023 compared to the same period in 2022, and expenses associated with sales157 percent to $141.6 million in the first nine months of insurance2023 compared to the first nine months of 2022, resulting from increased consumer preference for these products that were completed more than one year beforein 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.

current interest rate environment.
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RecognizingInvestment Income Not Allocated to Product Lines (dollars in millions):
Three months endedNine months ended
September 30,September 30,
 2023202220232022
Net investment income$291.8 $268.1 $1,034.5 $700.2 
Allocated to product lines:
Annuity(131.0)(121.1)(384.1)(356.4)
Health(74.2)(73.3)(222.5)(219.6)
Life(36.3)(35.4)(108.7)(106.1)
Equity returns credited to policyholder account balances54.6 34.9 (26.3)199.2 
Amounts allocated to product lines and credited to policyholder account balances(186.9)(194.9)(741.6)(482.9)
Impact of annual option forfeitures related to fixed indexed annuity surrenders2.5 (1.1)3.9 — 
Amount related to variable interest entities and other non-operating items(18.7)(13.6)(58.6)(29.9)
Interest expense on debt(15.7)(15.6)(47.0)(46.9)
Interest expense on financing arrangements(1.1)— (1.1)— 
Interest expense on investment borrowings from FHLB(28.3)(10.3)(74.2)(17.4)
Expenses related to FABN program(7.6)(7.5)(22.8)(22.4)
Less amounts credited to deferred compensation plans (offsetting investment income)2.4 2.0 (11.2)18.0 
Total adjustments(66.5)(46.1)(211.0)(98.6)
Investment income not allocated to product lines$38.4 $27.1 $81.9 $118.7 

The above table reconciles net investment income to investment income not allocated to product lines. Such amount will generally fluctuate from period to period based on the accounting standard that requires us to expense certain direct response advertising costs (rather than deferring such costs as deferred acquisition costs),level of prepayment income (including call premiums) and trading account income; the amountperformance of our alternative investments (which are typically reported a quarter in arrears); the earnings related to the investments underlying our COLI; and the spread we earn from our FHLB investment in new business in the Colonial Penn segment during a particular period will have a significant impact on the segment results. borrowing and FABN programs.

Net Non-Operating Income:

The following summarizes our earnings, separated between in-forcenet non-operating income (loss) for the three and new business for Colonial Pennnine months ending September 30, 2023 and 2022 (dollars in millions):

Three months endedNine months ended
September 30,September 30,
 2023202220232022
Net realized investment losses from sales and change in allowance for credit losses$(20.1)$(.7)$(64.1)$(35.0)
Net change in market value of investments recognized in earnings(9.2)(17.0)(15.1)(64.2)
Fair value changes related to agent deferred compensation plan6.8 12.0 6.8 48.7 
Changes in fair value of embedded derivative liabilities and market risk benefits109.4 130.6 94.7 456.6 
Other(1.1)2.0 1.0 2.2 
Net non-operating income before taxes$85.8 $126.9 $23.3 $408.3 

94
 Three months ended Nine months ended
 September 30, September 30,
 2017 2016 2017 2016
Adjusted EBIT from In-Force Business       
Revenues:       
Insurance policy income$61.0
 $57.2
 $180.8
 $169.0
Net investment income and other11.3
 11.3
 34.0
 33.8
Total revenues72.3
 68.5
 214.8
 202.8
Benefits and expenses:       
Insurance policy benefits40.3
 41.9
 127.5
 126.0
Amortization3.7
 3.5
 11.3
 10.7
Other expenses8.5
 8.9
 24.7
 25.1
Total benefits and expenses52.5
 54.3
 163.5
 161.8
Adjusted EBIT from In-Force Business$19.8
 $14.2
 $51.3
 $41.0
        
Adjusted EBIT from New Business       
Revenues:       
Insurance policy income$12.1
 $13.7
 $38.3
 $41.5
Net investment income and other—
 —
 —
 —
Total revenues12.1
 13.7
 38.3
 41.5
Benefits and expenses:       
Insurance policy benefits7.4
 8.4
 23.3
 25.3
Amortization.2
 .2
 .6
 .6
Other expenses15.3
 18.4
 49.0
 59.5
Total benefits and expenses22.9
 27.0
 72.9
 85.4
Adjusted EBIT from New Business$(10.8) $(13.3) $(34.6) $(43.9)
        
Adjusted EBIT from In-Force and New Business       
Revenues:       
Insurance policy income$73.1
 $70.9
 $219.1
 $210.5
Net investment income and other11.3
 11.3
 34.0
 33.8
Total revenues84.4
 82.2
 253.1
 244.3
Benefits and expenses:       
Insurance policy benefits47.7
 50.3
 150.8
 151.3
Amortization3.9
 3.7
 11.9
 11.3
Other expenses23.8
 27.3
 73.7
 84.6
Total benefits and expenses75.4
 81.3
 236.4
 247.2
Adjusted EBIT from In-Force and New Business$9.0
 $.9
 $16.7
 $(2.9)

The Adjusted EBIT from in-force business in the Colonial Penn segment in the 2017 periods reflects growth in the block; the aforementioned $3.0 million favorable impact related to liabilities for insurance products; and favorable mortality as compared to the same periods in 2016. The Adjusted EBIT from new business in the Colonial Penn segment in the 2017 periods primarily reflects lower marketing costs. The vast majority of the costs to generate new business in this segment are

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not deferrable and Adjusted EBIT will fluctuate based on management's decisions on how much marketing costs to incur in each period.

Long-term care in run-off (dollars in millions)

In September 2016, we terminated certain reinsurance agreements and recaptured the ceded business. The long-term care in run-off segment is comprised of the long-term care business that was recaptured.
 Three months ended Nine months ended
 September 30, 2017 September 30, 2017
Premium collections:   
Long-term care (all renewal)$3.9
 $12.9
    
Average liabilities for insurance products:   
Average liabilities for long-term care products$579.6
 $571.2
    
Revenues:   
Insurance policy income$4.2
 $13.3
Net investment income on general account invested assets6.8
 26.5
Total revenues11.0
 39.8
Expenses:   
Insurance policy benefits11.4
 36.6
Other operating costs and expenses.6
 2.1
Total benefits and expenses12.0
 38.7
Income (loss) before net realized investment gains and income taxes(1.0) 1.1
Net realized investment gains6.7
 7.8
Income before income taxes$5.7
 $8.9

 Three months ended Nine months ended
 September 30, 2017 September 30, 2017
Health benefit ratios:   
Long-term care:   
Insurance policy benefits$11.4
 $36.6
Benefit ratio (a)274.3% 276.5%
Interest-adjusted benefit ratio (b)99.4% 111.2%
_______________
(a)We calculate benefit ratios by dividing the related product's insurance policy benefits by insurance policy income.
(b)We calculate the interest-adjusted benefit ratio (a non-GAAP measure) for long-term care products in this segment by dividing such product's insurance policy benefits less the imputed interest income on the accumulated assets backing the insurance liabilities by policy income. These are considered non-GAAP financial measures. A non-GAAP measure is a numerical measure of a company's performance, financial position, or cash flows that excludes or includes amounts that are normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP.

These non-GAAP financial measures of "interest-adjusted benefit ratios" differ from "benefit ratios" due to the deduction of imputed interest income on the accumulated assets backing the insurance liabilities from the product's insurance policy benefits used to determine the ratio. Interest income is an important factor in measuring the performance of health products that are expected to be inforce for a longer duration of time, are not subject to unilateral changes in provisions (such as non-cancelable or guaranteed renewable contracts) and require the performance of various functions and services (including insurance protection) for an extended period of time. The net cash flows from long-term care

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products generally cause an accumulation of amounts in the early years of a policy (accounted for as reserve increases) that 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 benefits 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 (which is equal to the tabular interest on the related insurance liabilities). Since interest income is an important factor in measuring the performance of these products, management believes a benefit ratio that includes the effect of interest income is useful in analyzing product performance. We utilize the interest-adjusted benefit ratio in measuring segment performance because we believe that this performance measure is a better indicator of the ongoing businesses and trends in the business. However, the "interest-adjusted benefit ratio" does not replace the "benefit ratio" as a measure of current period benefits to current period insurance policy income. Accordingly, management reviews both "benefit ratios" and "interest-adjusted benefit ratios" when analyzing the financial results attributable to these products. The imputedNet realized investment income earned on the accumulated assets backing the long-term care reserves was $7.3 million and $21.9 millionlosses in the three and nine months ended September 30, 2017, respectively.

Average liabilities for long-term care products 2023, were increased by $32$20.1 million and $20$64.1 million, respectively, including the unfavorable change in the allowance for credit losses of $2.3 million and $13.7 million, respectively, which was recorded in earnings. Net realized investment losses in the three and nine months ended September 30, 2017, respectively, to reflect the premium deficiencies that would exist if unrealized gains on the assets backing such products had been realized and the proceeds from the sales of such assets2022, were invested at then current yields. Such increase is reflected as a reduction of accumulated other comprehensive income.

Insurance policy benefits were $11.4$0.7 million and $36.6$35.0 million, respectively, including the favorable (unfavorable) change in the allowance for credit losses of $7.5 million and $(46.9) million, respectively, which was recorded in earnings.

The change in market value of investments recognized in earnings was a decrease of $9.2 million and $17.0 million in the threethird quarters of 2023 and nine months ended 2017, respectively. The interest-adjusted benefit ratio for this long-term care block was 99.4 percent in the third quarter of 20172022, respectively, and 111.2 percent in the first nine months of 2017. Since this block of long-term care business is in loss recognition status, our valuation assumptions reflect no profits or losses on the block over its remaining life. Accordingly, changes in assumptions which adversely impact future earnings will result in an immediate charge to current earnings. This block of business is particularly sensitive to changes in assumptions related to expected future investment yields. For example, we estimate that a 50 basis point reduction in the ultimate new money rate assumption would result in a $10 million pre-tax charge.

Net realized investment gains fluctuated each period. During the first nine months of 2017, we recognized net realized investment gains of $7.8 million, which were comprised of: (i) $24.6 million of net gains from the sales of investments; and (ii) $16.8 million of writedowns of investments for other than temporary declines in fair value recognized through net income.

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Corporate Operations (dollars in millions)

 Three months ended Nine months ended
 September 30, September 30,
 2017 2016 2017 2016
Corporate operations:       
Interest expense on corporate debt$(11.7) $(11.5) $(34.8) $(34.3)
Net investment income (loss):       
General investment portfolio1.4
 1.5
 3.7
 4.4
Other special-purpose portfolios:       
COLI2.3
 2.3
 11.6
 2.0
Investments held in a rabbi trust.9
 .6
 2.4
 1.0
Other trading account activities2.4
 2.3
 7.1
 9.2
Fee revenue and other income1.8
 2.5
 6.5
 7.6
Other operating costs and expenses(23.7) (13.6) (68.3) (43.7)
Loss before net realized investment gains (losses), earnings attributable to VIEs, fair value changes and amendment related to agent deferred compensation plan, loss on reinsurance transaction and income taxes(26.6) (15.9) (71.8) (53.8)
Net realized investment gains (losses)(.6) 10.3
 —
 (3.0)
Earnings attributable to VIEs(3.3) (.7) (4.6) (1.2)
Fair value changes and amendment related to agent deferred compensation plan(13.4) 6.3
 (13.4) (12.0)
Loss on reinsurance transaction—
 (75.4) —
 (75.4)
Loss before income taxes$(43.9) $(75.4) $(89.8) $(145.4)

Interest expense on corporate debt was $34.8$15.1 million and $34.3$64.2 million in the first nine months of 20172023 and 2016,2022, respectively. Our average corporate debt outstanding was $925.0 million in both the first nine months of 2017 and 2016. The average interest rate on our debt was 4.7 percent in both the first nine months of 2017 and 2016.

Net investment income on general investment portfolio fluctuates based on the amount and type of invested assets in the corporate operations segment.

Net investment income on other special-purpose portfolios includes the income (loss) from:  (i) investments related to deferred compensation plans held in a rabbi trust (which is offset by amounts included in other operating costs and expenses as the investment results are allocated to participants' account balances); (ii) trading account activities; and (iii) income (loss) from Company-owned life insurance ("COLI") equal to the difference between the return on these investments (representing the change in value of the underlying investments) and our overall portfolio yield.  COLI is utilized as an investment vehiclewill fluctuate from period to fund Bankers Life's agent deferred compensation plan.  For segment reporting, the Bankers Life segment is allocated a returnperiod based on these investments equivalent to the yield on the Company’s overall portfolio, with any difference in the actual COLI return allocated to the Corporate operations segment. In the first quarter of 2017, we recognized a death benefit, net of cash surrender value, of $2.0 million related to the COLI.market conditions.


Fee revenue and other income includes the fees our wholly-owned investment advisor earns for managing portfolios of commercial bank loans for investment trusts. These trusts are consolidated as VIEs in our consolidated financial statements, but the fees are reflected as revenues and the fee expense is reflected in the earnings attributable to VIEs. This fee revenue fluctuates consistent with the size of the loan portfolios.


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Other operating costs and expenses include general corporate expenses, net of amounts charged to subsidiaries for services provided by the corporate operations. These amounts fluctuate as a result of expenses such as legal and consulting costs and performance-based compensation expense which were higher in the 2017 periods as compared to the 2016 periods.

Net realized investment gains (losses) often fluctuate each period. During the first nine months of 2017, net realized investment gains2023 and 2022, we recognized an increase in earnings of $6.8 million and $48.7 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 segment were nilliability through earnings as assumptions change.

We recognized an increase in earnings of $94.7 million and were comprised of: (i) $4.7$456.6 million of net gains from the sales of investments (including $2.2 million of net gains recognized by the VIEs and $2.5 million of net gains on other investment sales); (ii) $4.3 million of losses on the dissolution of VIEs; and (iii) $.4 million of writedowns of investments held by VIEs due to other-than-temporary declines in value. During the first nine months of 2016, net realized investment losses2023 and 2022, respectively, resulting from changes in this segment were $3.0 millionthe fair value of embedded derivative liabilities and were comprised of: (i) $5.5 million of net gains from the sales of investments (including $12.1 million of losses recognized by the VIEs and $17.6 million of net gains on other investment sales); (ii) $7.3 million of losses on the dissolution of a VIE; and (iii) $1.2 million of writedowns of investments held by VIEs dueMRBs related to other-than-temporary declines in value.

Earnings attributable to VIEs our fixed indexed annuities. 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.

Other non-operating items primarily include earnings in certainattributable 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.


Fair value changes and amendment related to agent deferred compensation plan related to: (i) changes in the underlying actuarial assumptions used to value liabilities for our agent deferred compensation plan; and (ii) an amendment made to the plan in the third quarter of 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. During the third quarter of 2016, we made lump sum settlement distributions to plan participants with account balances that were below a certain threshold consistent with the provision of the amended plan. We recognized a pre-tax gain of $6.3 million related to the settlement distributions in the third quarter of 2016.

Loss on reinsurance transaction of $75.4 million resulted from the termination of the reinsurance agreements with BRe and recapture of the ceded business as further described in "Liquidity and Capital Resources - Termination of Long-Term Care Reinsurance Agreements and Recapture of Related Long-Term Care Business in Run-off".

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.

Our insurance segments sell products through three primary distribution channels - career agents (our Bankers Life segment), direct marketing (our Colonial Penn segment) and independent producers (our Washington National segment).  Our career agency force in the Bankers Life segment sells primarily Medicare supplement and long-term care insurance policies, life insurance and annuities.  These agents visit the customer's home, which permits one-on-one contact with potential policyholders and promotes strong personal relationships with existing policyholders.  Our direct marketing distribution channel in the Colonial Penn segment is engaged primarily in the sale of graded benefit life and simplified issue life insurance policies which are sold directly to the policyholder.  Our Washington National segment sells primarily supplemental health and life insurance.  These products are marketed through PMA, a wholly-owned subsidiary that specializes in marketing and distributing health products, and through independent marketing organizations and insurance agencies, including worksite marketing.

Agents, insurance brokers and marketing companies 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 sales of supplemental health and life products to consumers at the worksite.  The current financial strength ratings of our primary insurance subsidiaries from Fitch Ratings ("Fitch"), S&P, A.M. Best Company ("A.M. Best") and Moody's Investor Services, Inc. ("Moody's") are "BBB+", "BBB+", "A-" and "Baa1", respectively.  For a description of these ratings and additional information on our ratings, see "Financial Strength Ratings of our Insurance Subsidiaries".



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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 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 $882.4 million in the third quarter of 2017, down 2.0 percent from 2016, and were $2,747.4 million in the first nine months of 2017, up 3.3 percent from 2016. First year collected premiums were $319.2 million in the third quarter of 2017, down 5.5 percent from 2016, and were $1,016.8 million in the first nine months of 2017, up 4.8 percent from 2016. The recent natural disasters affected our premium collections from our policyholders in Florida, Texas and Puerto Rico. We estimate that total first year premium collections were down approximately 2 percent in the three months ended September 30, 2017 due to the hurricanes. Total premiums collected are summarized as follows (dollars in millions):

 Three months ended Nine months ended
 September 30, September 30,
 2017 2016 2017 2016
First year:       
Bankers Life$288.2
 $304.8
 $919.2
 $869.7
Washington National18.9
 19.0
 59.1
 58.9
Colonial Penn12.1
 13.8
 38.5
 41.6
Total first year319.2
 337.6
 1,016.8
 970.2
        
Renewal:       
Bankers Life353.5
 361.1
 1,090.9
 1,085.1
Washington National145.3
 144.4
 445.7
 435.2
Colonial Penn60.5
 56.9
 181.1
 168.8
Long-term care in run-off3.9
 —
 12.9
 —
Total renewal563.2
 562.4
 1,730.6
 1,689.1
Total premiums collected$882.4
 $900.0
 $2,747.4
 $2,659.3


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Total premium collections by segment were as follows:

Bankers Life (dollars in millions)

 Three months ended Nine months ended
 September 30, September 30,
 2017 2016 2017 2016
Premiums collected by product:       
Annuities:       
Fixed index (first-year)$222.6
 $218.1
 $705.1
 $597.6
Other fixed interest (first-year)12.9
 25.4
 48.6
 82.8
Other fixed interest (renewal)1.0
 1.6
 4.6
 4.7
Subtotal - other fixed interest annuities13.9
 27.0
 53.2
 87.5
Total annuities236.5
 245.1
 758.3
 685.1
Health:       
Medicare supplement (first-year)16.8
 18.8
 51.9
 56.3
Medicare supplement (renewal)160.4
 163.4
 496.7
 491.8
Subtotal - Medicare supplement177.2
 182.2
 548.6
 548.1
Long-term care (first-year)3.8
 4.4
 12.1
 13.2
Long-term care (renewal)103.5
 111.9
 324.3
 340.7
Subtotal - long-term care107.3
 116.3
 336.4
 353.9
Supplemental health (first-year)1.1
 1.4
 3.8
 4.1
Supplemental health (renewal)4.4
 4.0
 13.0
 11.6
Subtotal – supplemental health5.5
 5.4
 16.8
 15.7
Other health (first-year).2
 —
 .6
 —
Other health (renewal)1.3
 1.5
 4.0
 4.7
Subtotal - other health1.5
 1.5
 4.6
 4.7
Total health291.5
 305.4
 906.4
 922.4
Life insurance:       
Traditional (first-year)19.8
 18.8
 62.1
 61.8
Traditional (renewal)53.9
 52.3
 162.3
 154.5
Subtotal - traditional73.7
 71.1
 224.4
 216.3
Interest-sensitive (first-year)11.0
 17.9
 35.0
 53.9
Interest-sensitive (renewal)29.0
 26.4
 86.0
 77.1
Subtotal - interest-sensitive40.0
 44.3
 121.0
 131.0
Total life insurance113.7
 115.4
 345.4
 347.3
Collections on insurance products: 
  
  
  
Total first-year premium collections on insurance products288.2
 304.8
 919.2
 869.7
Total renewal premium collections on insurance products353.5
 361.1
 1,090.9
 1,085.1
Total collections on insurance products$641.7
 $665.9
 $2,010.1
 $1,954.8

Annuities in this segment include fixed index and other fixed interest annuities sold to the senior market. Annuity collections in this segment decreased 3.5 percent, to $236.5 million, in the third quarter of 2017, and increased 11 percent, to $758.3 million, in the first nine months of 2017, as compared to the same periods in 2016. The increase in premium collections from our fixed index products in the 2017 periods is due primarily to sales of annuity contracts with living benefits following

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the introduction of that product in the third quarter of 2016. Premium collections from our other fixed interest products decreased due to lower sales of these products in the current low interest rate environment and consumer preference for fixed index products.

Health products include Medicare supplement, long-term care and other insurance products. Our profits on health policies depend on the overall level of sales, the length of time the business remains inforce, investment yields, claims experience and expense management.

Collected premiums on Medicare supplement policies in the Bankers Life segment decreased 2.7 percent, to $177.2 million, in the third quarter of 2017, and increased .1 percent, to $548.6 million, in the first nine months of 2017, as compared to the same periods in 2016.
Premiums collected on Bankers Life's long-term care policies decreased 7.7 percent, to $107.3 million, in the third quarter of 2017, and 4.9 percent, to $336.4 million, in the first nine months of 2017, as compared to the same periods in 2016. Such decreases reflect the run-off of this business and a continuing shift in the mix of new business to shorter duration long-term care sales, which have lower premiums per policy.

Life products in this segment include traditional and interest-sensitive life products. Life premiums collected in this segment in the 2017 periods were slightly lower than the comparable periods in 2016 reflecting lower premiums from interest-sensitive products.


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Washington National (dollars in millions)

 Three months ended Nine months ended
 September 30, September 30,
 2017 2016 2017 2016
Premiums collected by product:       
Health:       
Medicare supplement (renewal)$11.7
 $14.6
 $38.7
 $46.1
Supplemental health (first-year)17.8
 17.7
 55.2
 54.5
Supplemental health (renewal)127.0
 123.3
 386.7
 369.4
Subtotal – supplemental health144.8
 141.0
 441.9
 423.9
Other health (first-year).1
 .1
 .2
 .2
Other health (renewal).3
 .4
 1.1
 1.2
Subtotal - other health.4
 .5
 1.3
 1.4
Total health156.9
 156.1
 481.9
 471.4
Life insurance:       
Traditional (first-year).1
 .2
 .5
 .6
Traditional (renewal)2.5
 2.6
 7.7
 8.0
Subtotal - traditional2.6
 2.8
 8.2
 8.6
Interest-sensitive (first-year).9
 1.0
 3.2
 3.6
Interest-sensitive (renewal)3.6
 3.3
 10.9
 9.5
Subtotal - interest-sensitive4.5
 4.3
 14.1
 13.1
    Total life insurance7.1
 7.1
 22.3
 21.7
Annuities:       
Fixed index (renewal).1
 .2
 .4
 .8
Other fixed interest (renewal).1
 —
 .2
 .2
Total annuities.2
 .2
 .6
 1.0
Collections on insurance products:       
Total first-year premium collections on insurance products18.9
 19.0
 59.1
 58.9
Total renewal premium collections on insurance products145.3
 144.4
 445.7
 435.2
Total collections on insurance products$164.2
 $163.4
 $504.8
 $494.1

Health products in the Washington National segment include Medicare supplement, supplemental health and other insurance products. Our profits on health policies depend on the overall level of sales, the length of time the business remains inforce, investment yields, claim experience and expense management.

Collected premiums on Medicare supplement policies in the Washington National segment decreased in the 2017 periods due to the run-off of this block of business.

Premiums collected on supplemental health products (including specified disease, accident and hospital indemnity insurance products) increased 2.7 percent, to $144.8 million, in the third quarter of 2017, and 4.2 percent, to $441.9 million, in the first nine months of 2017, as compared to the same periods in 2016. Such increase is due to new sales in recent periods and persistency.

Overall, excluding premiums from the Washington National Medicare supplement and annuity blocks which are in run-off, collected premiums were up 2.5 percent, to $152.3 million, in the third quarter of 2017, and 4.1 percent, to $465.5 million, in the first nine months of 2017, as compared to the same periods in 2016, driven by sales in recent periods and persistency.

Life premiums collected in the Washington National segment in the 2017 periods were comparable to the same periods in 2016.

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Annuities in this segment include fixed index and other fixed interest annuities. We are no longer actively pursuing sales of annuity products in this segment.

Colonial Penn (dollars in millions)

 Three months ended Nine months ended
 September 30, September 30,
 2017 2016 2017 2016
Premiums collected by product:       
Life insurance:       
Traditional (first-year)$12.1
 $13.8
 $38.5
 $41.6
Traditional (renewal)60.0
 56.2
 179.4
 166.7
Subtotal - traditional72.1
 70.0
 217.9
 208.3
Interest-sensitive (all renewal).1
 .1
 .2
 .3
Total life insurance72.2
 70.1
 218.1
 208.6
Health (all renewal):       
Medicare supplement.4
 .6
 1.4
 1.7
Other health—
 —
 .1
 .1
Total health.4
 .6
 1.5
 1.8
Collections on insurance products:       
Total first-year premium collections on insurance products12.1
 13.8
 38.5
 41.6
Total renewal premium collections on insurance products60.5
 56.9
 181.1
 168.8
Total collections on insurance products$72.6
 $70.7
 $219.6
 $210.4

Life products in this segment are sold primarily to the senior market. Life premiums collected in this segment increased 3.0 percent, to $72.2 million, in the third quarter of 2017, and 4.6 percent, to $218.1 million, in the first nine months of 2017, as compared to the same periods in 2016. The increase in premiums collected reflects both recent sales activity and steady persistency.

Health products include Medicare supplement and other insurance products. Our profits on health policies depend on the overall level of sales, the length of time the business remains in-force, investment yields, claims experience and expense management. Premiums collected on these products have decreased as we do not currently market these products through this segment.

Long-term care in run-off (dollars in millions)

 Three months ended Nine months ended
 September 30, 2017 September 30, 2017
Premiums collected by product:   
Health:   
Long-term care (renewal)$3.9
 $12.9

The Long-term care in run-off segment only includes the premiums collected from the long-term care block that was recaptured in September 2016.


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LIQUIDITY AND CAPITAL RESOURCES


2023 Outlook

Prior to the sharp rise in interest rates in the United States in 2022, interest rates had been at or near historically low levels. We expect that a continued level of higher interest rates will benefit our operating results over time. We continuously monitor current market conditions and the impact to our business from potential changes in overall economic growth. We are also subject to financial impacts associated with changes in the equity markets and the credit cycle.

Subsequent to September 30, 2023, we received all necessary approvals for: (i) the formation of a wholly-owned Bermuda captive reinsurance company; and (ii) a reinsurance agreement to cede approximately $6.2 billion of our inforce fixed indexed annuity statutory reserves, in addition to new fixed indexed annuity business. Implementation of the initial intercompany reinsurance agreement is in process, with an effective date of October 1, 2023. In the event that the Bermuda Monetary Authority changes its capital adequacy model of the Bermuda captive reinsurance company, we may be required to contribute additional capital to the captive, which would reduce the capital efficiency of the structure and may adversely impact the free cash flow available to the holding company.

For 2023, we currently expect operating earnings per diluted share to be in the range of $2.70 to $2.80, excluding any significant items in the year (narrowing the range from our previous guidance of $2.65 to $2.85 per diluted share, with no change to the midpoint of the range).

With respect to excess cash flow in 2023, we currently expect cash flow to the holding company to be in the range of $330 million to $350 million (including the impact of the intercompany reinsurance agreement with our Bermuda subsidiary), as compared to our previous guidance of $180 million to $200 million.

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Our capital structure as of September 30, 20172023 and December 31, 20162022 was as follows (dollars in millions):

September 30,
2023		December 31, 2022
Total capital:  
Corporate notes payable$1,140.1 $1,138.8 
Shareholders’ equity: 
Common stock1.1 1.1 
Additional paid-in capital1,965.3 2,033.8 
Accumulated other comprehensive loss(1,956.7)(1,957.3)
Retained earnings1,880.4 1,691.2 
Total shareholders’ equity1,890.1 1,768.8 
Total capital$3,030.2 $2,907.6 

 September 30,
2017		 December 31, 2016
Total capital:   
Corporate notes payable$914.4
 $912.9
Shareholders’ equity:   
Common stock1.7
 1.7
Additional paid-in capital3,094.5
 3,212.1
Accumulated other comprehensive income933.6
 622.4
Retained earnings851.9
 650.7
Total shareholders’ equity4,881.7
 4,486.9
Total capital$5,796.1
 $5,399.8

The following table summarizes certain financial ratios as of and for the nine months ended September 30, 20172023 and as of and for the year ended December 31, 2016:2022:

September 30,
2017		 December 31, 2016September 30,
2023		December 31, 2022
Book value per common share$29.10
 $25.82
Book value per common share$16.85 $15.47 
Book value per common share, excluding accumulated other comprehensive income (a)23.53
 22.24
Ratio of earnings to fixed charges2.92X
 2.43X
Book value per common share, excluding accumulated other comprehensive income (loss) (a)Book value per common share, excluding accumulated other comprehensive income (loss) (a)34.30 32.59 
Debt to total capital ratios:   Debt to total capital ratios:
Corporate debt to total capital15.8% 16.9%Corporate debt to total capital37.6 %39.2 %
Corporate debt to total capital, excluding accumulated other comprehensive income (a)18.8% 19.1%
Corporate debt to total capital, excluding accumulated other comprehensive income (loss) (a) (b)Corporate debt to total capital, excluding accumulated other comprehensive income (loss) (a) (b)22.9 %23.4 %
_____________________
(a)This non-GAAP measure differs from the corresponding GAAP measure presented immediately above, because accumulated other comprehensive income 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 income.
(a)This non-GAAP measure differs from the corresponding GAAP measure presented immediately above, 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 accumulated other comprehensive income (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.

Termination of Long-Term Care Reinsurance Agreements and Recapture of Related Long-Term Care Business in Run-off

In December 2013, two of our insurance subsidiaries with long-term care business (Washington National and BCLIC) entered into 100% coinsurance agreements ceding $495 million of long-term care reserves to BRe. BRe was a reinsurer that was not licensed or accredited by the states of domicile (Indiana and New York, respectively) of the insurance subsidiaries ceding the long-term care business and BRe was not rated by A.M. Best. As a result of its non-accredited status, BRe was required to provide collateral which met the regulatory requirements of the states of domicile in order for our insurance subsidiaries to obtain full credit in their statutory financial statements for the reinsurance receivables due from BRe. Such collateral was required to be held in market value trusts subject to 7% over collateralization, investment guidelines and periodic true-up provisions. In September 2016, we terminated the reinsurance agreements with BRe and recaptured the ceded business.

Prior to the recapture, certain irregularities had come to our attention regarding BRe (including its relationship with Platinum Partners, LP ("Platinum") and the valuation and appropriateness of the collateral deposited in trusts by BRe for Washington National and BCLIC). As a result, CNO commenced an independent third-party audit by a forensic accounting

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firm in late June 2016 of certain investments deposited in the trusts by BRe. Such investments included assets valued at that time using unobservable inputs that contained assumptions determined by BRe. The initial scope of CNO’s audit was a subset of investments which had an estimated fair value of approximately $62 million as of September 30, 2016. In September 2016, Washington National and BCLIC expandedour investment portfolio resulting from changes in general market interest rates rather than the scope ofbusiness decisions made by management.  However, this measure does not replace the independent audit to include additional investments for which we estimated the fair value to be approximately $63 million as of September 30, 2016.corresponding GAAP measure.

The aforementioned independent audit of these investments was completed(b)Our targeted ratio is in the fourth quarterrange of 2016. The audit confirmed that the assets in the initial scope of the audit bore some connection25.0 percent to Platinum or to parties that have had past or present associations with Platinum. Based on information obtained through the audit, the investments included in the additional scope of the audit did not appear to have clear connections to Platinum or to parties that have had past or present associations with Platinum. However, CNO and the auditor retained by CNO also concluded that many of the values that had been assigned to these investments by BRe, and summarized in reports prepared by its valuation firm, were inaccurate due to the use of flawed methodologies.28.0 percent.

In addition to the investments subject to the independent audits, Washington National and BCLIC received approximately $380 million in other investments and cash balances in the recapture. A substantial portion of these investments have been sold or redeemed since the recapture. The activity since the date of the recapture with respect to the assets received in the recapture is summarized below (dollars in millions):

      Investments not included in scope of audit  
  Investments included in initial scope of audit Investments included in additional scope of audit Cash, fixed maturities and other invested assets Total investments
September 30, 2016 values $62.2
 $62.6
 $379.8
 $504.6
Net cash flows (1) (13.5) (11.6) (359.5) (384.6)
Realized gains (losses) and impairments (2) .4
 (1.7) (4.0) (5.3)
Other activity (6) 3.9
 1.9
 .6
 6.4
December 31, 2016 values 53.0
 51.2
 16.9
 121.1
Net cash flows (1) (16.7) (5.5) (8.7) (30.9)
Realized gains (losses) and impairments (3) 3.2
 (4.5) 1.0
 (.3)
Other activity (6) (1.8) 1.3
 (1.4) (1.9)
March 31, 2017 values 37.7
 42.5
 7.8
 88.0
Net cash flows (1) .5
 (14.4) —
 (13.9)
Realized gains (losses) and impairments (4) (3.1) 4.5
 —
 1.4
Other activity (6) (.6) (.4) .3
 (.7)
June 30, 2017 values 34.5
 32.2
 8.1
 74.8
Net cash flows (1) (33.5) (9.1) (1.3) (43.9)
Realized gains (losses) and impairments (5) 7.0
 (.6) .3
 6.7
Other activity (6) (.9) (.3) (3.0) (4.2)
September 30, 2017 values $7.1
 $22.2
 $4.1
 $33.4


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A summary of the values as of September 30, 2017, for the remaining investments that were included in the aforementioned independent audits is summarized below (dollars in millions):

  Investments included in initial scope of audit Investments included in additional scope of audit Total investments included in the scope of audit
Lease related investments$—
 $11.1
 $11.1
Mortgage loans secured by real estate—
 10.6
 10.6
Senior secured loans to companies in the energy sector (7)2.1
 —
 2.1
Senior secured loans to other companies—
 .5
 .5
Secured term loan issued by Platinum Partners Credit Opportunity Master Fund L.P.5.0
 —
 5.0
Total investments$7.1
 $22.2
 $29.3

________________
(1)Net cash inflows from sales and redemptions of investments during the period.
(2)Includes $4.6 million of impairment charges and $.7 million of net realized losses recognized on the sale of transferred investments.
(3)Includes $8.4 million of impairment charges and $8.1 million of net realized gains recognized on the sale of transferred investments.
(4)Includes $3.7 million of impairment charges and $5.1 million of net realized gains recognized on the sale of transferred investments.
(5)Includes $4.7 million of impairment charges and $11.4 million of net realized gains on the sale of transferred investments.
(6)Includes amortization of discount and premium and changes in estimated fair values of investments during the period.
(7)Includes $1.2 million of loans issued by Golden Gate Oil, LLC with a par value of $11.7 million. The issuer of this debt has been referred to in articles regarding Platinum.


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 (Washington(Bankers Life, Washington National Bankers Life 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 September 30, 2017,2023, the carrying value of the FHLB common stock was $71.2 million.$90.1 million.  As of September 30, 2017,2023, collateralized borrowings from the FHLB totaled $1.6$2.1 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 $2.0$2.5 billion at September 30, 2017,2023, which are maintained in custodial accounts for the benefit of the FHLB.  


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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 September 30, 2017
$50.0
 February 2018 Variable rate – 1.404%
50.0
 August 2018 Variable rate – 1.435%
50.0
 January 2019 Variable rate – 1.724%
50.0
 February 2019 Variable rate – 1.404%
100.0
 March 2019 Variable rate – 1.714%
21.8
 July 2019 Variable rate – 1.727%
15.0
 October 2019 Variable rate – 1.830%
50.0
 May 2020 Variable rate – 1.754%
21.8
 June 2020 Fixed rate – 1.960%
25.0
 September 2020 Variable rate – 1.953%
100.0
 September 2020 Variable rate – 1.897%
50.0
 September 2020 Variable rate – 1.894%
75.0
 September 2020 Variable rate – 1.453%
100.0
 October 2020 Variable rate – 1.409%
50.0
 December 2020 Variable rate – 1.932%
100.0
 July 2021 Variable rate – 1.854%
100.0
 July 2021 Variable rate – 1.824%
28.2
 August 2021 Fixed rate – 2.550%
57.7
 August 2021 Variable rate - 1.842%
125.0
 August 2021 Variable rate – 1.717%
50.0
 September 2021 Variable rate – 1.857%
22.0
 May 2022 Variable rate – 1.668%
100.0
 May 2022 Variable rate – 1.666%
10.0
 June 2022 Variable rate – 1.931%
50.0
 July 2022 Variable rate – 1.675%
50.0
 July 2022 Variable rate – 1.693%
50.0
 July 2022 Variable rate – 1.694%
50.0
 August 2022 Variable rate – 1.702%
24.9
 March 2023 Fixed rate – 2.160%
20.5
 June 2025 Fixed rate – 2.940%
$1,646.9
    

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 450was 392 percent at September 30, 2017, reflects2023, compared to 384 percent at December 31, 2022. In the first nine months of 2023, the RBC ratio reflected: (i) our estimated consolidated statutory operating earnings of $257$113 million; (ii) insurance company dividends (net of capital contributions) of $58.7 million and dividendsthat were paid to the holding companycompany; and (iii) the impact of $286.8a sale-leaseback program as further discussed below. Our RBC ratio at September 30, 2023, exceeded our targeted RBC ratio of 375 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 375 percent RBC ratio target continues to adequately support our financial strength and credit ratings.

In June 2023, we began a sale-leaseback program resulting in an $80 million during the first nine months of 2017. Statutory earnings will often fluctuate onreduction in non-admitted assets and a quarterly basis duecorresponding increase in total adjusted capital which favorably impacted our consolidated RBC ratio. Such sale-leaseback transactions are accounted for as operating leases pursuant to the application of statutory accounting principles. Pursuant to GAAP, the sale-leaseback transactions do not meet the criteria for a sale. Accordingly, we account for these transactions as financing arrangements which are classified as other liabilities in our consolidated balance sheet.

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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 AM Best Company ("AM Best"), Fitch Ratings ("Fitch"), Moody's Investor Services, Inc. ("Moody's") and S&P A.M. Best and Moody's are the rating agency's opinions of the ability of our insurance subsidiaries to pay policyholder claims and obligations when due.


On August 15, 2017, Fitch affirmedS&P most recently reviewed its "BBB+"A-" financial strength ratings of our primary insurance subsidiaries.subsidiaries on June 23, 2023. The outlook for these ratings is stable. A "BBB" rating, in Fitch's opinion, indicates that there is currently a low expectation of ceased or interrupted payments. The capacity to meet policyholder and contract obligations on a timely basis is considered adequate, but adverse changes in circumstances and economic conditions are more likely to impact this capacity. Fitch ratings for the industry range from "AAA Exceptionally Strong" to "C Distressed" and some companies are not rated. Pluses and minuses show the relative standing within a category. Fitch has nineteen possible ratings. There are seven ratings above the "BBB+" rating of our primary insurance subsidiaries and eleven ratings that are below that rating.

On June 23, 2017, S&P affirmed the financial strength ratings of "BBB+" of our primary insurance subsidiaries and revised the outlook for these ratings to stable from negative. S&P financial strength ratings range from "AAA" to "R" and some companies are not rated.  An insurer rated "BBB" or higher is regarded as having financial security characteristics that outweigh any vulnerabilities, and is highly likely to have the ability to meet financial commitments. An insurer rated "BBB""A", in S&P's opinion, has goodstrong financial security characteristics, but is somewhat more likely to be affected by adverse business conditions than are higher-rated insurers.insurers with higher ratings.  Pluses and minuses show the relative standing within a category.  S&P has twenty-one possible ratings.  There are seven ratings above the "BBB+" rating of our primary insurance subsidiaries and thirteen ratings that are below that rating.

On February 8, 2017, A.M. Best affirmed the financial strength ratings of "A-" 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 A.M. Best's opinion, to meet their ongoing obligations to policyholders.  A.M. Best ratings for the industry currently range from "A++ (Superior)" to "F (In Liquidation)" and some companies are not rated.  An "A++" rating indicates a superior ability to meet ongoing obligations to policyholders.  A.M. Best has sixteen possible ratings.  There are threesix ratings above the "A-" rating of our primary insurance subsidiaries and twelvefourteen ratings that are below that rating.


On May 9, 2016, Moody's affirmed themost recently reviewed its "A3" financial strength ratings of "Baa1" of our primary insurance subsidiaries and theon May 12, 2023. The outlook for these ratings isremains 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 "Baa""A" offers adequategood financial security, however, certain protective elements may be lacking or may be characteristically unreliable over any great length of time.present which suggest a susceptibility to impairment sometime in the future. Moody's has twenty-one possible ratings.  There are sevensix ratings above the "Baa1""A3" rating of our primary insurance subsidiaries and fourteen ratings that are below that rating.

On February 1, 2023, 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 "F (In Liquidation)" and some companies are not rated.  AM Best has sixteen possible ratings.  There are two ratings above the "A" rating of our primary insurance subsidiaries and thirteen ratings that are below that rating.


On November 21, 2022, Fitch affirmed its "A-" financial strength ratings of our primary insurance subsidiaries and revised the outlook for these ratings to positive from 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 "C Distressed" and some companies are not
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rated. Pluses and minuses show the relative standing within a category. Fitch has nineteen possible ratings. There are six ratings above the "A-" rating of our primary insurance subsidiaries and twelve 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 thetheir rating agency 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.


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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


At September 30, 2017,2023, CNO, CDOC, Inc. ("CDOC", our wholly owned subsidiary and the immediate parent of Washington National and Conseco Life Insurance Company of Texas ("CLTX")) and our other non-insurance subsidiaries held: (i)held $171 million of unrestricted cash and cash equivalents which was above our minimum target level of $180.5 million; (ii) fixed income investments of $96.1 million; and (iii) equity securities of $103.2$150 million.

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, Inc. ("40|86 Advisors"), which receives fees from the insurance subsidiaries for investment services, and CNO Services, LLC which receives fees from the insurance subsidiaries for providing administrative services.  The agreements between our insurance subsidiaries and CNO Services, LLC and 40|86 Advisors, Inc., respectively, were previously approved by the domestic insurance regulator for each insurance company, and any payments thereunder do not require further regulatory approval.


The following summarizes the current ownership structure of CNO’s primary subsidiaries:

orgchartclic.jpg

The ability of our 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 each of the immediate insurance subsidiaries of CDOC has 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.  In the first nine months of 2017,2023, our insurance subsidiaries paid dividends to CDOC totaling $286.8$82.2 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.


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 state insurance department)Department of Insurance).  The estimated RBC ratio of CLTX was 390336 percent at September 30, 2017.2023.  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 state insurance department.Insurance Department. Dividends and other payments from our non-insurance subsidiaries, including 40|86 Advisors, Inc. and CNO Services, LLC, to CNO or CDOC do not require approval by any regulatory authority or other third party.  However, insurance regulators may prohibit payments

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by our insurance subsidiaries to parent companies if they determine that such payments could be adverse to our policyholders or contractholders.

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The insurance subsidiaries of CDOC 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.  At September 30, 2017,2023, the subsidiaries of CLTX had earned surplus (deficit) as summarized below (dollars in millions):

Subsidiaries of CLTX Earned surplus (deficit) Additional information
Bankers Life $567.4
 (a)
Colonial Penn (306.8) (b)
____________________
(a)Subsidiaries of CLTX
Earned surplus (deficit)Additional information
Bankers Life paid dividends of $139.0 million to CLTX in the first nine months of 2017.
$375.9 (a)
(b)Colonial PennThe deficit is primarily due to transactions which occurred several years ago, including a tax planning transaction and the fee paid to recapture a block of business previously ceded to an unaffiliated insurer.(507.5)(b)

____________________
(a)Bankers Life paid dividends of $55.0 million to CLTX in the first nine months of 2023. Bankers Life may pay dividends from earned surplus without regulatory approval or prior notice for any 12-month period if such dividends are less than the greater of: (i) statutory net income for the prior year; or (ii) 10 percent of statutory capital and surplus as of the end of the preceding year. Dividends in excess of these levels require 30 days prior notice. Immediately after the implementation of the reinsurance transaction with our wholly owned Bermuda reinsurance subsidiary (see " – 2023 Outlook" above), the earned surplus of Bankers Life will be zero. Accordingly, Bankers Life will not be able to pay dividends until future earnings result in an earned surplus balance. However, even if the earned surplus balance is zero or in a deficit position, Bankers Life could request approval from the Illinois Department of Insurance for return-of-capital distributions, the payment of which would be subject to prior approval.
(b)The deficit is primarily due to transactions which occurred several years ago, including a tax planning transaction and the fee paid to recapture a block of business previously ceded to an unaffiliated insurer.

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.

On October 13, 2017, the Company entered into the Amendment Agreement with respect to its Revolving Credit Agreement. The Amendment Agreement, among other things, increases the total commitments available under the revolving credit facility from $150.0 million to $250.0 million, increases the aggregate amount of additional incremental loans the Company may incur from $50.0 million to $100.0 million and extends the maturity date of the revolving credit facility from May 19, 2019 to the earlier of October 13, 2022 and the date that is six months prior to the maturity date of the Company’s 4.50% senior notes due 2020, which is November 30, 2019. The amount drawn under the Amended Credit Agreement continues to be $100.0 million.
The interest rate applicable to loans under the Amended Credit Agreement continues to be calculated as the eurodollar rate or the base rate, at the Company’s option, plus a margin based on the Company’s unsecured debt rating. The margins under the Amended Credit Agreement range from 1.375% to 2.125%, in the case of loans at the eurodollar rate, and 0.375% to 1.125%, in the case of loans at the base rate. The commitment fee under the Amended Credit Agreement continues to be based on the Company’s unsecured debt rating.
Additionally, the Amended Credit Agreement revises the debt to total capitalization ratio that the Company is required to maintain from not more than 30.0 percent to not more than 35.0 percent. The Amended Credit Agreement continues to contain certain other restrictive covenants with which the Company must comply.
In the first nine months of 2017,2023, CDOC made capital contributions of $23.5 million to CLTX.

At September 30, 2023, there are no amounts outstanding under our $250 million Revolving Credit Agreement and there are no scheduled repayments of our direct corporate obligations until May 2025.

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 the first nine months of 2023, we repurchased 6.7generated $139 million shares of such free cash flow. The Company expects to deploy its free cash flow into investments to accelerate profitable growth, common stock for $140.1 million under our securities repurchase program. In May 2017, the Company announced that its Board of Directors approved an additional $300.0 million to repurchase the Company's outstanding common stock. The Company has remaining repurchase authority of $412.6 million as of September 30, 2017. We currently anticipate repurchasing a total of approximately $175 million to $225 million of our common stock during 2017.dividends and share repurchases. The amount and timing of the securitiesfuture 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 opportunitiesand investment opportunities. In the first nine months of 2023, we repurchased 3.6 million shares of common stock for $85.1 million under our securities repurchase program (including $0.8 million of repurchases settled in the fourth quarter of 2023). In May 2023, the Company's Board of Directors approved an additional $500.0 million to invest in our business, acquisition transactions or ceding commissions related to reinsurance transactions.repurchase the Company's outstanding shares of common stock. The Company had remaining repurchase authority of $601.8 million as of September 30, 2023.


In the first nine months of 2017,2023, dividends declared on common stock totaled $44.7$51.0 million ($0.260.44 per common share). In May 2017,2023, the Company increased its quarterly common stock dividend to $0.09$0.15 per share from $0.08$0.14 per share.



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We have previously disclosed that our strategic priorities include a reduction of our relative long-term care exposure. To achieve this goal, it is likely that we will need to transfer the risks of a portion of this business through one or more reinsurance transactions. The comprehensive, nursing home and home health care long-term care business written before 2003 has negative margins. In order to meaningfully reduce the risk associated with our long-term care block, a substantial ceding commission would be paid by the Company to transfer long-term care risk through reinsurance. Such a reduction of our long-term care exposure would result in the recognition of a loss. Due to our current tax position, it is likely that a portion of the tax benefit recognized on the loss would not be realized and we may be required to increase our valuation allowance for deferred tax assets. Although we believe reducing our exposure to the risk of long-term care business would benefit the Company in the long term, such reduction could initially adversely impact certain aspects of our financial position, results of operations and/or cash flow, including the cash available to repurchase shares of our common stock.

On August 15, 2017, Fitch affirmedS&P most recently reviewed its “BB+”"BBB-" rating on our issuer credit and senior unsecured debt.debt on June 23, 2023. The outlook for these ratings is stable. In Fitch's view, an obligation rated "BB" indicates an elevated vulnerability to default risk, particularly in the event of adverse changes in business or economic conditions over time; however, business or financial flexibility exists which supports the servicing of financial commitments. Pluses and minuses show the relative standing within a category. Fitch has a total of 21 possible ratings ranging from "AAA" to "D". There are ten ratings above CNO's "BB+" rating and ten ratings that are below its rating.

On June 23, 2017, S&P affirmed our issuer credit and unsecured debt ratings of "BB+" and revised the outlook for these ratings to stable from negative. In S&P's view, an obligation rated "BB" is less vulnerable to nonpayment than other speculative issues; however, it faces major ongoing uncertainties or exposure to"BBB" exhibits adequate protection parameters. However, adverse business, financial or economic conditions which couldor changing circumstances are more likely to lead to a weakened capacity of the obligor's inadequate capacityobligor to meet its financial commitment on the obligation. Pluses and minuses show the relative standing within a category. S&P has a total of 22twenty-two possible ratings ranging from "AAA (Extremely Strong)" to "D (Payment Default)". There are tennine ratings above CNO's "BB+"BBB-" rating and twelve ratings that are below its rating.
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Moody's most recently reviewed its "Baa3" rating on our senior unsecured debt on May 12, 2023. 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 twenty-one possible ratings ranging from "Aaa" to "C". There are nine ratings above CNO's "Baa3" rating and eleven ratings that are below its rating.


On February 8, 2017, A.M.1, 2023, AM Best affirmed its "bbb" rating on our issuer credit and senior unsecured debt ratings of "bbb-" and the outlook for these ratings is stable. In A.M.AM Best's view, a company rated "bbb-""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. A.M.AM Best has a total of 22twenty-two possible ratings ranging from "aaa (Exceptional)" to "d (In default)". There are nineeight ratings above CNO's "bbb-""bbb" rating and twelvethirteen ratings that are below its rating.


On May 9, 2016, Moody'sNovember 21, 2022, Fitch affirmed its "BBB-" rating on our issuer credit and senior unsecured debt ratingsdebt. Fitch also affirmed CNO's long term issue default rating of "Ba1""BBB" and revised the outlook for these ratings isthis rating to positive from stable. In Moody'sFitch's view, obligationsan obligation rated "Ba""BBB" indicates that expectations of default risk are judgedcurrently low. The capacity for payment of financial commitments is considered adequate but adverse business or economic conditions are more likely to have speculative elementsimpair this capacity. Pluses and are subject to substantial credit risk. A rating is supplemented with numerical modifiers "1", "2" or "3" tominuses show the relative standing within a category. Moody'sFitch has a total of 21twenty-one possible ratings ranging from "Aaa""AAA" to "C""D". There are tennine ratings above CNO's "Ba1""BBB-" rating and teneleven ratings that are below its rating.


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.



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INVESTMENTS


At September 30, 2017,2023, the amortized cost, gross unrealized gains, andgross 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
 
Estimated
fair
value
Amortized
cost		Gross
unrealized
gains		Gross
unrealized
losses		Allowance for credit lossesEstimated
fair
value
Investment grade (a):       Investment grade (a):    
Corporate securities$12,356.1
 $1,509.8
 $(20.3) $13,845.6
Corporate securities$12,751.9 $10.3 $(2,248.1)$(38.4)$10,475.7 
United States Treasury securities and obligations of United States government corporations and agencies145.4
 26.9
 —
 172.3
United States Treasury securities and obligations of United States government corporations and agencies194.2 — (28.8)— 165.4 
States and political subdivisions1,854.2
 220.7
 (.6) 2,074.3
States and political subdivisions2,837.9 7.0 (547.0)(1.5)2,296.4 
Debt securities issued by foreign governments58.1
 3.1
 (.1) 61.1
Foreign governmentsForeign governments93.3 — (16.6)(.7)76.0 
Asset-backed securities1,203.2
 43.8
 (1.9) 1,245.1
Asset-backed securities1,388.3 .2 (124.1)(.2)1,264.2 
Collateralized debt obligations236.5
 1.4
 —
 237.9
Agency residential mortgage-backed securitiesAgency residential mortgage-backed securities627.9 .6 (12.6)— 615.9 
Non-agency residential mortgage-backed securitiesNon-agency residential mortgage-backed securities1,171.3 4.6 (183.2)— 992.7 
Collateralized loan obligationsCollateralized loan obligations1,077.7 1.9 (20.1)— 1,059.5 
Commercial mortgage-backed securities1,261.0
 36.6
 (9.2) 1,288.4
Commercial mortgage-backed securities2,462.5 .6 (285.4)— 2,177.7 
Mortgage pass-through securities2.0
 .2
 —
 2.2
Collateralized mortgage obligations310.6
 17.6
 (.5) 327.7
Total investment grade fixed maturities, available for sale17,427.1
 1,860.1
 (32.6) 19,254.6
Total investment grade fixed maturities, available for sale22,605.0 25.2 (3,465.9)(40.8)19,123.5 
Below-investment grade (a) (b): 
  
  
  
Below-investment grade (a) (b):    
Corporate securities789.3
 27.8
 (12.7) 804.4
Corporate securities560.2 .4 (49.0)(28.4)483.2 
States and political subdivisions3.0
 —
 (.3) 2.7
States and political subdivisions10.6 — (.8)(.2)9.6 
Asset-backed securities1,405.4
 136.8
 (1.2) 1,541.0
Asset-backed securities111.9 — (16.9)— 95.0 
Non-agency residential mortgage-backed securitiesNon-agency residential mortgage-backed securities524.5 29.1 (21.1)— 532.5 
Commercial mortgage-backed securities50.6
 .8
 (.9) 50.5
Commercial mortgage-backed securities87.3 — (25.9)— 61.4 
Collateralized mortgage obligations417.1
 59.7
 (.1) 476.7
Total below-investment grade fixed maturities, available for sale2,665.4
 225.1
 (15.2) 2,875.3
Total below-investment grade fixed maturities, available for sale1,294.5 29.5 (113.7)(28.6)1,181.7 
Total fixed maturities, available for sale$20,092.5
 $2,085.2
 $(47.8) $22,129.9
Total fixed maturities, available for sale$23,899.5 $54.7 $(3,579.6)$(69.4)$20,305.2 
_______________
(a)Investment ratings – Investment ratings are assigned the second lowest rating by Nationally Recognized Statistical Rating Organizations ("NRSROs") (Moody's, S&P or 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 on the page which follows
(a)Investment ratings are assigned the second lowest rating by Nationally Recognized Statistical Rating Organizations ("NRSROs") (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.
(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.

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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 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 DesignationNRSRO Equivalent Rating
1AAA/AA/A
2BBB
3BB
4B
5CCC and lower
6In 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 September 30, 20172023 is as follows (dollars in millions):

NAIC designationAmortized costEstimated fair valuePercentage of total estimated fair value
1$15,213.8 $13,011.4 64.1 %
27,974.8 6,692.0 32.9 
Total NAIC 1 and 2 (investment grade)23,188.6 19,703.4 97.0 
3544.3 469.5 2.3 
4139.5 122.4 .6 
58.1 7.4 .1 
619.0 2.5 — 
Total NAIC 3, 4, 5 and 6 (below-investment grade)710.9 601.8 3.0 
Total$23,899.5 $20,305.2 100.0 %

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NAIC designation Amortized cost Estimated fair value Percentage of total estimated fair value
1 $9,395.4
 $10,440.6
 47.2%
2 9,779.5
 10,751.6
 48.6
Total NAIC 1 and 2 (investment grade) 19,174.9
 21,192.2
 95.8
3 606.5
 625.2
 2.8
4 249.3
 252.1
 1.1
5 41.4
 40.4
 .2
6 20.4
 20.0
 .1
Total NAIC 3, 4, 5 and 6 (below-investment grade) 917.6
 937.7
 4.2
  $20,092.5
 $22,129.9
 100.0%


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Concentration of Fixed Maturity Securities, 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 September 30, 20172023 (dollars in millions):

Carrying valuePercent of fixed maturitiesGross unrealized lossesPercent of gross unrealized losses
States and political subdivisions$2,306.0 11.4 %$547.8 15.3 %
Commercial mortgage-backed securities2,239.1 11.0 311.3 8.7 
Banks1,705.8 8.4 299.3 8.4 
Non-agency residential mortgage-backed securities1,525.2 7.5 204.3 5.7 
Asset-backed securities1,359.2 6.7 141.0 3.9 
Collateralized loan obligations1,059.5 5.2 20.1 .6 
Utilities1,024.7 5.0 219.8 6.1 
Insurance1,024.6 5.0 256.8 7.2 
Healthcare/pharmaceuticals958.0 4.7 268.1 7.5 
Brokerage899.3 4.4 169.4 4.7 
Technology719.0 3.5 187.9 5.3 
Agency residential mortgage-backed securities615.9 3.0 12.6 .4 
Food/beverage612.0 3.0 115.7 3.2 
Energy478.6 2.4 67.5 1.9 
Cable/media426.5 2.1 101.8 2.8 
Real estate/REITs335.6 1.7 62.4 1.7 
Transportation320.4 1.6 55.4 1.6 
Telecom295.5 1.5 53.1 1.5 
Capital goods254.6 1.3 50.3 1.4 
Chemicals243.1 1.2 55.0 1.5 
Other1,902.6 9.4 380.0 10.6 
Total fixed maturities, available for sale$20,305.2 100.0 %$3,579.6 100.0 %
 Carrying value Percent of fixed maturities Gross unrealized losses Percent of gross unrealized losses
Asset-backed securities$2,786.1
 12.6% $3.1
 6.2%
States and political subdivisions2,077.0
 9.4
 .9
 1.9
Utilities1,649.2
 7.5
 .3
 .5
Healthcare/pharmaceuticals1,636.9
 7.4
 1.7
 3.5
Insurance1,494.4
 6.8
 1.1
 2.3
Energy1,445.6
 6.5
 7.8
 16.3
Commercial mortgage-backed securities1,338.9
 6.0
 10.1
 21.5
Banks1,179.9
 5.3
 .2
 .4
Food/beverage982.4
 4.4
 .2
 .4
Cable/media811.0
 3.7
 5.6
 11.8
Collateralized mortgage obligations804.4
 3.6
 .6
 1.2
Real estate/REITs550.1
 2.5
 —
 —
Capital goods550.0
 2.5
 .3
 .5
Chemicals520.4
 2.4
 2.9
 6.0
Transportation475.9
 2.2
 .3
 .7
Brokerage441.6
 2.0
 1.2
 2.6
Telecom342.7
 1.5
 .4
 .8
Technology320.1
 1.4
 1.0
 2.1
Aerospace/defense295.9
 1.3
 .2
 .3
Autos287.2
 1.3
 .5
 1.1
Business services267.1
 1.2
 2.0
 4.2
Paper261.3
 1.2
 .1
 .2
Collateralized debt obligations237.9
 1.1
 —
 —
Retail227.9
 1.0
 .5
 1.1
Other1,146.0
 5.2
 6.8
 14.4
Total fixed maturities, available for sale$22,129.9
 100.0% $47.8
 100.0%


Below-Investment Grade Securities


At September 30, 2017,2023, the amortized cost of the Company's below-investment grade fixed maturity securities, available for sale, was $2,665.4$1,294.5 million,, or 135.4 percent of the Company's fixed maturity portfolio.portfolio (or $710.9 million, or 3.0 percent, of the Company's fixed maturity portfolio measured on credit quality ratings assigned by the NAIC). The estimated fair value of the below-investment grade portfolio was $2,875.3$1,181.7 million,, or 10891 percent of the amortized cost (refer to the table on page 96 for composition of the below-investment grade portfolio).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

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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.


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Net Realized and Unrealized Investment Gains (Losses)Losses

The following table sets forth the net realized investment gains (losses) for the periods indicated (dollars in millions):

 Three months ended Nine months ended
 September 30, September 30,
 2017 2016 2017 2016
Fixed maturity securities, available for sale:       
Gross realized gains on sale$32.3
 $7.3
 $60.4
 $127.1
Gross realized losses on sale(8.5) (2.8) (16.4) (84.4)
Impairments:       
Total other-than-temporary impairment losses(3.2) —
 (10.0) (6.3)
Other-than-temporary impairment losses recognized in accumulated other comprehensive income—
 —
 (.9) —
Net impairment losses recognized(3.2) —
 (10.9) (6.3)
Net realized investment gains from fixed maturities20.6
 4.5
 33.1
 36.4
Equity securities7.7
 17.2
 9.6
 21.3
Commercial mortgage loans—
 —
 1.0
 —
Impairments of other investments(1.5) (1.2) (7.3) (18.5)
Loss on dissolution of variable interest entities(.6) —
 (4.3) (7.3)
Other (a)3.0
 (8.9) 20.2
 (8.6)
Net realized investment gains$29.2
 $11.6
 $52.3
 $23.3
_________________
(a)Changes in the estimated fair value of trading securities that we have elected the fair value option (and are still held as of the end of the respective periods) were $13.0 million and $.8 million for the nine months ended September 30, 2017 and 2016, respectively.


During the first nine months of 2017,2023, we recognized net realized investment gains of $52.3 million, which were comprised of: (i) $60.1$45.8 million of net gains from the sales of investments; (ii) $4.3 million of losses on the dissolution of VIEs; (iii) the increase in fair value of certain fixed maturity investments with embedded derivatives of $12.3 million; (iv) the increase in fair value of embedded derivatives related to a modified coinsurance agreement of $2.4 million; and (v) $18.2 million of writedowns of investments for other than temporary declines in fair value recognized through net income.

During the first nine months of 2016, we recognized net realized investment gains of $23.3 million, which were comprised of: (i) $48.1 million of net gains from the sales of investments; (ii) a $7.3 million loss on the dissolution of a VIE; (iii) the increase in fair value of certain fixed maturity investments with embedded derivatives of $.6 million; (iv) the increase in fair value of embedded derivatives related to a modified coinsurance agreement of $6.7 million; and (v) $24.8 million of writedowns of investments for other than temporary declines in fair value recognized through net income.

At September 30, 2017, there were three fixed maturity investments in default with both an amortized cost and carrying value of $2.1 million. At September 30, 2017, there was one mortgage loan in process of foreclosure with a carrying value of $10.6 million.

During the first nine months of 2017, the $16.4 million of gross realized losses on sales of $290.8$527.0 million of fixed maturity securities, available for sale, included:including: (i) $9.7$37.8 million related to various corporate securities; (ii) $3.1$6.0 million related to commercial mortgage-backed securities; and (iii) $3.6$2.0 million related to various other investments. Securities are generally sold at a loss following unforeseen issue-specificissuer-specific events or conditions or shifts in perceived relative values.  These reasons

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include but are not limited to: (i) changes in the investment environment; (ii) expectation that the market value could deteriorate; (iii) our desire to reduce our exposure to an asset class, an issuer or an industry; (iv) prospective or actual changes in credit quality; (v) better match certain characteristics of our investment portfolio with the corresponding characteristics of our insurance liabilities; or (v)(vi) changes in expected portfolio cash flows.


During the first nine months of 2016, the $84.42022, we recognized $81.3 million of gross realized losses on sales of $477.2$1,321.7 million of fixed maturity securities, available for sale, included:including: (i) $77.8$54.3 million related to various corporate securities (including $62.7securities; (ii) $14.0 million related to sales of investments in the energy sector); (ii) $5.3non-agency residential mortgage-backed securities; (iii) $7.3 million related to commercial mortgage-backed securities;states and (iii) $1.3political subdivisions; and (iv) $5.7 million related to 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.

During the first nine months of 2017, we recognized $18.2 million of impairment losses recorded in earnings which included: (i) $5.7 million of writedowns on fixed maturities in the energy sector; (ii) $5.2 million of writedowns related to a mortgage loan; and (iii) $7.3 million of writedowns on other investments. Factors considered in determining the writedowns of investments in the first nine months of 2017 included changes in the estimated recoverable value of the assets related to each investment and the timing of and complexities related to the recovery process.


The following summarizes the investments sold at a loss during the first nine months of 20172023 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 costFair value
Less than 6 months prior to sale3$45.6 $24.0 
Greater than or equal to 6 months and less than 12 months prior to sale12.6 .1 
Greater than 12 months prior to sale1.9 .2 
 $49.1 $24.3 
   At date of sale
 Number
of issuers		 Amortized cost Fair value
Less than 6 months prior to sale4 $17.8
 $13.0
Greater than or equal to 6 months and less than 12 months prior to sale1 2.7
 1.9
Greater than 12 months prior to sale1 .7
 .5
 6 $21.2
 $15.4

We regularly evaluate all of our investments with unrealized losses for possible impairment.  Our assessment of whether unrealized losses are "other than temporary" requires significant judgment.  Factors considered include:  (i) the extent to which fair value is less than the cost basis; (ii) the length of time that the fair value has been less than cost; (iii) whether the unrealized loss is event driven, credit-driven or a result of changes in market interest rates or risk premium; (iv) the near-term prospects for specific events, developments or circumstances likely to affect the value of the investment; (v) the investment's rating and whether the investment is investment-grade and/or has been downgraded since its purchase; (vi) whether the issuer is current on all payments in accordance with the contractual terms of the investment and is expected to meet all of its obligations under the terms of the investment; (vii) whether we intend to sell the investment or it is more likely than not that circumstances will require us to sell the investment before recovery occurs; (viii) the underlying current and prospective asset and enterprise values of the issuer and the extent to which the recoverability of the carrying value of our investment may be affected by changes in such values; (ix) projections of, and unfavorable changes in, cash flows on structured securities including mortgage-backed and asset-backed securities; (x) our best estimate of the value of any collateral; and (xi) other objective and subjective factors.


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.



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The following table sets forth the amortized cost and estimated fair value of those fixed maturities, available for sale, with unrealized losses at September 30, 2017,2023, 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$144.5 $134.3 
Due after one year through five years2,063.0 1,913.0 
Due after five years through ten years1,533.3 1,351.5 
Due after ten years11,962.2 9,344.7 
Subtotal15,703.0 12,743.5 
Structured securities6,663.5 5,974.0 
Total$22,366.5 $18,717.5 


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Amortized
cost
 
Estimated
fair
value
 (Dollars in millions)
Due in one year or less$37.1
 $37.1
Due after one year through five years136.5
 135.4
Due after five years through ten years135.1
 132.0
Due after ten years878.4
 848.6
Subtotal1,187.1
 1,153.1
Structured securities926.6
 912.8
Total$2,113.7
 $2,065.9

At September 30, 2017 there were noThe 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.basis for the period indicated as of September 30, 2023 (dollars in millions):



Number
of issuers		Cost
basis		Unrealized
loss		Estimated
fair value
Less than 6 months10$43.8 $(10.8)$33.0 
Greater than or equal to 6 months and less than 12 months333.7 (12.2)21.5 
Greater than 12 months540.5 (14.7)25.8 
Total$118.0 $(37.7)$80.3 


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The following table summarizes the gross unrealized losses of our fixed maturity securities, available for sale, by category and ratings category as of September 30, 20172023 (dollars in millions):


 Investment gradeBelow-investment grade
AAA/AA/ABBBBBB+ and
below		Total gross
unrealized
losses
States and political subdivisions$534.8 $12.2 $— $.8 $547.8 
Commercial mortgage-backed securities235.4 50.0 23.5 2.4 311.3 
Banks167.9 128.1 3.3 — 299.3 
Healthcare/pharmaceuticals177.6 86.6 2.9 1.0 268.1 
Insurance127.9 125.0 3.5 .4 256.8 
Utilities126.3 91.3 2.1 .1 219.8 
Non-agency residential mortgage-backed securities121.9 61.3 1.1 20.0 204.3 
Technology110.1 72.0 5.6 .2 187.9 
Brokerage91.2 76.1 1.6 .5 169.4 
Asset-backed securities53.9 70.2 16.2 .7 141.0 
Food/beverage36.8 77.2 1.3 .4 115.7 
Cable/media15.5 79.4 4.1 2.8 101.8 
Energy13.8 53.5 .2 — 67.5 
Real estate/REITs35.1 26.6 .7 — 62.4 
Transportation21.4 33.7 — .3 55.4 
Chemicals4.8 48.9 .8 .5 55.0 
Telecom.5 52.6 — — 53.1 
Capital goods23.1 24.0 3.2 — 50.3 
Consumer products25.3 14.8 3.6 1.0 44.7 
Retail23.8 17.3 1.7 1.7 44.5 
Autos5.9 23.7 1.5 — 31.1 
Aerospace/defense8.6 21.5 — .1 30.2 
Building materials5.9 23.1 .4 .2 29.6 
United States Treasury securities and obligations of United States government corporations and agencies28.8 — — — 28.8 
Metals and mining8.7 13.5 .7 — 22.9 
Collateralized loan obligations18.4 1.7 — — 20.1 
Paper.8 17.1 .1 .3 18.3 
Foreign governments7.3 9.3 — — 16.6 
Entertainment/hotels8.2 4.5 .6 — 13.3 
Agency residential mortgage-backed securities12.3 .3 — — 12.6 
Business services— 2.6 .7 .2 3.5 
Other86.8 9.0 .6 .1 96.5 
Total fixed maturities, available for sale$2,138.8 $1,327.1 $80.0 $33.7 $3,579.6 
 Investment grade Below-investment grade  
 AAA/AA/A BBB BB 
B+ and
below
 
Total gross
unrealized
losses
Commercial mortgage-backed securities$8.7
 $.5
 $.9
 $—
 $10.1
Energy.1
 4.1
 1.9
 1.7
 7.8
Cable/media—
 5.4
 .1
 .1
 5.6
Asset-backed securities1.2
 .7
 .2
 1.0
 3.1
Chemicals—
 .7
 2.2
 —
 2.9
Building materials—
 1.4
 .9
 —
 2.3
Business services—
 —
 2.0
 —
 2.0
Healthcare/pharmaceuticals.1
 .8
 —
 .8
 1.7
Brokerage.1
 .5
 —
 .6
 1.2
Insurance—
 1.1
 —
 —
 1.1
Technology—
 1.0
 —
 —
 1.0
States and political subdivisions.3
 .3
 —
 .3
 .9
Entertainment/hotels—
 .6
 —
 .1
 .7
Collateralized mortgage obligations.5
 —
 —
 .1
 .6
Autos—
 .2
 .3
 —
 .5
Metals and mining—
 —
 .5
 —
 .5
Retail—
 .2
 —
 .3
 .5
Telecom—
 .4
 —
 —
 .4
Transportation—
 .3
 —
 —
 .3
Capital goods—
 .2
 .1
 —
 .3
Utilities.2
 —
 —
 .1
 .3
Food/beverage—
 .1
 —
 .1
 .2
Banks.1
 .1
 —
 —
 .2
Aerospace/defense.2
 —
 —
 —
 .2
Paper—
 .1
 —
 —
 .1
Consumer products—
 —
 —
 .1
 .1
Debt securities issued by foreign governments—
 .1
 —
 —
 .1
Other2.2
 .1
 .7
 .1
 3.1
Total fixed maturities, available for sale$13.7
 $18.9
 $9.8
 $5.4
 $47.8


Our investment strategy is to maximize, over a sustained period and within acceptable parameters of quality and risk, investment income and total investment return 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
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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.



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The following table summarizes the gross unrealized losses and fair values of our investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that such securities have been in a continuous unrealized loss position, at September 30, 2017 (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
United States Treasury securities and obligations of United States government corporations and agencies $20.3
 $—
 $.6
 $—
 $20.9
 $—
States and political subdivisions 35.1
 (.6) 19.3
 (.3) 54.4
 (.9)
Debt securities issued by foreign governments 10.5
 (.1) —
 —
 10.5
 (.1)
Corporate securities 666.9
 (7.8) 400.4
 (25.2) 1,067.3
 (33.0)
Asset-backed securities 276.7
 (1.3) 79.6
 (1.8) 356.3
 (3.1)
Collateralized debt obligations 24.0
 —
 —
 —
 24.0
 —
Commercial mortgage-backed securities 226.2
 (1.3) 221.9
 (8.8) 448.1
 (10.1)
Collateralized mortgage obligations 72.8
 (.5) 11.6
 (.1) 84.4
 (.6)
Total fixed maturities, available for sale $1,332.5
 $(11.6) $733.4
 $(36.2) $2,065.9
 $(47.8)
Equity securities $37.4
 $(.8) $89.7
 $(1.8) $127.1
 $(2.6)

Based on management's current assessment of investments with unrealized losses at September 30, 2017, the Company believes the issuers of the securities will continue to meet their obligations (or with respect to equity-type securities, the investment value will recover to its cost basis).  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, our intent on an individual security may change, 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.

Structured Securities


At September 30, 2017,2023, fixed maturity investments included structured securities with an estimated fair value of $5.2$6.8 billion (or 2333.5 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.



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The following table sets forth the par value, amortized cost and estimated fair value of structured securities, summarized by interest rates on the underlying collateral, at September 30, 2017 (dollars in millions):

 
Par
value
 
Amortized
cost
 
Estimated
fair value
Below 4 percent$1,755.8
 $1,591.9
 $1,669.1
4 percent – 5 percent1,697.1
 1,552.6
 1,634.7
5 percent – 6 percent1,419.5
 1,278.4
 1,372.6
6 percent – 7 percent261.5
 233.9
 251.4
7 percent – 8 percent58.9
 59.7
 69.3
8 percent and above170.2
 169.9
 172.4
Total structured securities$5,363.0
 $4,886.4
 $5,169.5

The amortized cost and estimated fair value of structured securities at September 30, 2017,2023, summarized by type of security, were as follows (dollars in millions):

  Estimated fair value
TypeAmortized
cost		AmountPercent
of fixed
maturities
Asset-backed securities$1,500.2 $1,359.2 6.7 %
Agency residential mortgage-backed securities627.9 615.9 3.1 
Non-agency residential mortgage-backed securities1,695.8 1,525.2 7.5 
Collateralized loan obligations1,077.7 1,059.5 5.2 
Commercial mortgage-backed securities2,549.8 2,239.1 11.0 
Total structured securities$7,451.4 $6,798.9 33.5 %

   Estimated fair value
Type
Amortized
cost
 Amount 
Percent
of fixed
maturities
Pass-throughs, sequential and equivalent securities$585.9
 $647.1
 2.9%
Planned amortization classes, target amortization classes and accretion-directed bonds100.5
 114.8
 .5
Commercial mortgage-backed securities1,311.6
 1,338.9
 6.1
Asset-backed securities2,608.6
 2,786.1
 12.6
Collateralized debt obligations236.5
 237.9
 1.1
Other43.3
 44.7
 .2
Total structured securities$4,886.4
 $5,169.5
 23.4%

Pass-throughs, sequentialsResidential mortgage-backed securities ("RMBS") include transactions collateralized by agency-guaranteed and equivalent securities have unique prepayment variability characteristics.  Pass-through securities typically return principal to the holders based on cash payments from the underlyingnon-agency mortgage obligations.  Sequential securities return principalNon-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 tranche holdersborrower 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 detailed hierarchy.  Planned amortization classes, targeted amortization classessustainable payback arrangement.  CRT securities are collateralized by Government-Sponsored Enterprise ("GSE") conforming mortgages and accretion-directed bonds adhere to fixed schedules of principal payments as long as the underlying mortgage loans experience prepayments within certain estimated ranges.  In most circumstances, changes in prepayment rates are first absorbed by support or companion classes insulating the timing of receipt of cash flows from the consequences of both faster prepayments (average life shortening) and slower prepayments (average life extension).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, multi-family dwellings including apartments, retail centers, hotels, restaurants, hospitals, nursing homes, warehouses, and office buildings. While most commercial mortgage-backed securitiesCMBS 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.




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Commercial Mortgage Loans

The following table provides the carrying value and estimated fair value of our outstanding mortgage loans and the underlying collateral as of September 30, 2017 (dollars in millions):

   
Estimated fair
value
Loan-to-value ratio (a)Carrying value Mortgage loans Collateral
Less than 60%$983.5
 $1,007.0
 $2,463.3
60% to 70%406.8
 409.5
 621.4
Greater than 70% to 80%186.1
 195.8
 254.4
Greater than 80% to 90%37.4
 38.5
 43.3
Greater than 90%54.0
 55.0
 57.4
Total$1,667.8
 $1,705.8
 $3,439.8
________________
(a)Loan-to-value ratios are calculated as the ratio of:  (i) the carrying value of the commercial mortgage loans; to (ii) the estimated fair value of the underlying collateral.


INVESTMENTS IN VARIABLE INTEREST ENTITIES


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):


Three months endedNine months ended
September 30,September 30,
2023202220232022
Revenues:
Net investment income – policyholder and other special-purpose portfolios$21.3 $16.0 $65.7 $39.6 
Fee revenue and other income1.0 1.4 3.5 3.9 
Total revenues22.3 17.4 69.2 43.5 
Expenses:
Interest expense17.5 11.7 52.6 24.9 
Other operating expenses.3 .2 1.4 1.3 
Total expenses17.8 11.9 54.0 26.2 
Income before net investment gains (losses) and income taxes4.5 5.5 15.2 17.3 
Net investment gains (losses)(.2)3.5 (4.2)(6.7)
Income before income taxes$4.3 $9.0 $11.0 $10.6 


109
 Three months ended Nine months ended
 September 30, September 30,
 2017 2016 2017 2016
Revenues:       
Net investment income – policyholder and other special-purpose portfolios$16.1
 $21.2
 $53.0
 $58.9
Fee revenue and other income1.2
 1.8
 4.0
 4.8
Total revenues17.3
 23.0
 57.0
 63.7
Expenses:       
Interest expense11.1
 13.4
 38.0
 39.4
Other operating expenses.4
 .3
 1.3
 1.1
Total expenses11.5
 13.7
 39.3
 40.5
Income before net realized investment losses, loss on extinguishment of borrowings and income taxes5.8
 9.3
 17.7
 23.2
Net realized investment losses(.7) (6.9) (2.5) (20.6)
Loss on extinguishment of borrowings(5.5) —
 (5.5) —
Income before income taxes$(.4) $2.4
 $9.7
 $2.6

During the first nine months of 2017, the VIEs recognized net realized investment losses of $2.5 million which were comprised of: (i) $2.2 million of net gains from the sales of fixed maturities; (ii) $4.3 million of losses on the dissolution of VIEs; and (iii) $.4 million of writedowns of investments for other than temporary declines in fair value recognized through net income. During the first nine months of 2016, the VIEs recognized net realized investment losses of $20.6 million, which were comprised of: (i) $12.1 million of net losses from the sales of fixed maturities; (ii) a $7.3 million loss on the dissolution of a

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VIE; and (iii) $1.2 million of writedowns of investments for other than temporary declines in fair value recognized through net income.

Supplemental Information on Investments Held by VIEs


The following table summarizes the carrying values and gross unrealized losses of the investments held by the VIEs by category as of September 30, 20172023 (dollars in millions):
Carrying valuePercent
of fixed
maturities		Gross
unrealized
losses		Percent of
gross
unrealized
losses
Cable/media$111.3 13.0 %$4.2 19.7 %
Healthcare/pharmaceuticals105.1 12.2 3.7 17.3 
Technology104.5 12.2 5.2 24.4 
Food/beverage57.8 6.7 1.7 7.7 
Brokerage51.3 6.0 .4 1.6 
Chemicals45.1 5.3 .3 1.5 
Building materials44.8 5.2 .5 2.2 
Transportation41.2 4.8 .3 1.3 
Paper37.7 4.4 .3 1.4 
Utilities36.4 4.2 .3 1.4 
Capital goods34.8 4.1 .6 2.9 
Consumer products29.1 3.4 .9 4.0 
Autos28.1 3.3 .1 .3 
Insurance26.4 3.1 .1 .5 
Business services26.1 3.0 .3 1.3 
Banks16.6 1.9 .1 .3 
Aerospace/defense11.9 1.4 .1 .6 
Other49.9 5.8 2.4 11.6 
Total$858.1 100.0 %$21.5 100.0 %
 Carrying value 
Percent
of fixed
maturities
 
Gross
unrealized
losses
 
Percent of
gross
unrealized
losses
Healthcare/pharmaceuticals$169.0
 12.2% $.1
 1.8%
Cable/media155.0
 11.2
 1.7
 21.6
Technology147.3
 10.6
 .6
 8.3
Food/beverage96.2
 6.9
 .8
 10.8
Capital goods83.3
 6.0
 .3
 3.3
Consumer products67.4
 4.9
 .5
 6.8
Paper64.7
 4.7
 .1
 1.3
Aerospace/defense62.1
 4.5
 .3
 4.0
Brokerage61.0
 4.4
 .1
 .7
Building materials56.5
 4.1
 .1
 .9
Retail53.3
 3.9
 2.4
 31.6
Chemicals46.5
 3.4
 .1
 .9
Utilities39.5
 2.9
 —
 .3
Autos31.1
 2.3
 —
 .1
Gaming29.5
 2.1
 —
 .5
Entertainment/hotels27.9
 2.0
 .1
 .6
Transportation27.6
 2.0
 .1
 1.8
Insurance21.1
 1.5
 —
 —
Banks17.1
 1.2
 —
 .3
Real estate/REITs15.9
 1.2
 —
 .1
Metals and mining12.2
 .9
 —
 —
Business services8.5
 .6
 —
 .3
Telecom7.6
 .5
 —
 .2
Energy2.9
 .2
 —
 —
Textiles.8
 .1
 —
 —
Other78.5
 5.7
 .3
 3.8
Total$1,382.5
 100.0% $7.6
 100.0%



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The following table sets forth the amortized cost and estimated fair value of those investments held by the VIEs with unrealized losses at September 30, 2017,2023, 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$4.2 $3.4 
Due after one year through five years583.7 562.3 
Due after five years through ten years79.3 77.1 
Total$667.2 $642.8 



110
 
Amortized
cost
 
Estimated
fair
value
 (Dollars in millions)
Due in one year or less$1.7
 $1.7
Due after one year through five years154.7
 151.6
Due after five years through ten years244.7
 240.2
Total$401.1
 $393.5


CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES
___________________
The following summarizes the investments held by the VIEs sold at a loss during the first nine months of 20172023 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 costFair value
Less than 6 months prior to sale3$3.7 $2.6 
Greater than or equal to 6 months and less than 12 months prior to sale24.9 1.8 
Greater than 12 months prior to sale13.5 1.0 
 $12.1 $5.4 
   At date of sale
 Number
of issuers		 Amortized cost Fair value
Less than 6 months prior to sale2 $2.8
 $1.8


The following summarizes the investments in our portfolioheld by the VIEs 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 September 30, 20172023 (dollars in millions):


Number
of issuers		Cost
basis		Unrealized
loss		Estimated
fair value
Less than 6 months1$4.3 $(1.3)$3.0 
Greater than or equal to 6 months and less than 12 months12.7 (1.1)1.6 
Greater than 12 months11.9 (.4)1.5 
Total$8.9 $(2.8)$6.1 






111
 Number
of issuers		 Cost
basis		 Unrealized
loss		 Estimated
fair value
Less than 6 months1 $5.4
 $(1.2) $4.2


CNO FINANCIAL GROUP, INC. AND SUBSIDIARIES

___________________


NEW ACCOUNTING STANDARDS


See "Recently IssuedAdopted Accounting Standards" in the notes to consolidated financial statements for a discussion of recently issuedadopted accounting standards.





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ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.


Our market risks, and the ways we manage them, are summarized in "Management's Discussion and Analysis of Financial Condition and Results of Operations", included in our Annual Report on Form 10-K for the year ended December 31, 2016.2022.  There have been no material changes in the first nine months of 20172023 to such risks or our management of such risks.


ITEM 4. CONTROLS AND PROCEDURES.


Evaluation of Disclosure Controls and Procedures.  CNO's management, under the supervision and with the participation of the Chief Executive Officer and the Chief Financial Officer, evaluated the effectiveness of CNO's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended)amended, (the "Exchange Act")).  Based on its evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2017,2023, CNO's disclosure controls and procedures were effective to ensure that information required to be disclosed by CNO in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms.  Disclosure controls and procedures are also designed to reasonably assure that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.


Changes to Internal Control Over Financial Reporting.  There were no changes in the Company's internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934)Act) during the three months ended September 30, 2017,2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS.


Information required for Part II, Item 1 is incorporated by reference to the discussion under the heading "Litigation and Other Legal Proceedings" in the footnotes to our consolidated financial statements included in Part I, Item 1 of this Form 10-Q.




ITEM 1A.  RISK FACTORS.


CNO and its businesses are subject to a number of risks including general business and financial risk factors.risk.  Any or all of such factorsrisks could have a material adverse effect on the business, financial condition or results of operations of CNO.  Refer to "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2016,2022, for further discussion of such risk factors.  On September 27, 2017, President Trump announced a framework for tax reform including a reduction in the Federal corporate income tax rate from 35% to 20%. The following risk factor has been updated to summarize the impact the proposed rate reduction would have to CNO. If tax reform is enacted, there are likely to be other changes to the Code that would impact CNO. There have been no other material changes from such previously disclosed risk factors.


The value of our deferred tax assets may be reduced to the extent our future profits are less than we have projected or the current corporate income tax rate is reduced, and such reductions in value may have a material adverse effect on our results of operations and our financial condition.

As of September 30, 2017, we had net deferred tax assets of $573.9 million. Our income tax expense includes deferred income taxes arising from temporary differences between the financial reporting and tax basis of assets and liabilities, capital loss carryforwards and NOLs. We evaluate the realizability of our deferred tax assets and assess the need for a valuation allowance on an ongoing basis. In evaluating our deferred tax assets, we consider whether it is more likely than not that the deferred tax assets will be realized. The ultimate realization of our deferred tax assets depends upon generating sufficient future taxable income during the periods in which our temporary differences become deductible and before our capital loss carry-forwards and NOLs expire. Our assessment of the realizability of our deferred tax assets requires significant judgment. Failure to achieve our projections may result in an increase in the valuation allowance in a future period. Any future increase in the valuation allowance would result in additional income tax expense which could have a material adverse effect upon our earnings in the future, and reduce shareholders' equity.

The value of our net deferred tax assets as of September 30, 2017 reflects the current prescribed Federal corporate income tax rate of 35 percent. A reduction in the corporate income tax rate would cause a writedown of our net deferred tax assets, which may have a material adverse effect on our results of operations and financial condition. President Trump announced key proposals for tax reform on September 27, 2017, including a proposed reduction in the corporate income tax rate from the current 35 percent to 20 percent. A decrease in the corporate income tax rate to 20 percent would result in an immediate writedown of our deferred income tax assets of approximately $250 million based on the September 30, 2017 balances (or approximately $83 million reduction in the balance for each 5 percentage point decrease in the tax rate). The entire impact of the rate change would be recorded through net income (including the impact of a rate change on the taxes on accumulated other comprehensive income which has the impact of reducing the charge by approximately $220 million based on September 30, 2017 balances). A decrease in the corporate income tax rate to 20 percent would also result in a decrease to the statutory capital and surplus of our insurance subsidiaries of approximately $80 million due to a decrease in admissible deferred taxes based on September 30, 2017 balances. In addition, the risk charges that comprise RBC are tax effected, and an effective tax rate change to 20 percent could initially reduce our consolidated RBC ratio by approximately 85 percentage points (subject to changes being made to the formulas used to determine RBC by the NAIC). The decreases in statutory capital and the consolidated RBC ratio resulting from a corporate income tax rate change could result in the need to contribute additional capital to our insurance subsidiaries. A reduction in the corporate income tax rate would have no impact on the tax we pay on non-life income during the time our non-life net operating loss carryforwards remain available. However, a reduction in the corporate income tax rate will have a positive impact on the future cash flows of our insurance subsidiaries. During the period our non-life net operating loss carryforwards remain available and assuming a decrease in the corporate income tax rate to 20 percent, our insurance subsidiaries would pay tax at a rate of 13 percent compared to the current rate of 22.75 percent.



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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.


Issuer Purchases of Equity Securities

Period Total number of shares (or units) Average price paid per share (or unit) Total number of shares (or units) purchased as part of publicly announced plans or programs Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs (a)
Period (in 2023)Period (in 2023)Total number of shares (or units) purchasedAverage price paid per share (or unit)Total number of shares (or units) purchased as part of publicly announced plans or programsMaximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs (a)
       (dollars in millions)(dollars in millions)
July 1 through July 31 1,137
 $22.69
 —
 $440.8
July 1 through July 31845,817 $24.61 845,256 $621.0 
August 1 through August 31 391,512
 22.36
 391,400
 432.0
August 1 through August 31478,037 24.12 475,563 609.5 
September 1 through September 30 880,895
 22.12
 880,589
 412.6
September 1 through September 30324,918 23.67 324,854 601.8 
Total 1,273,544
 22.19
 1,271,989
 412.6
Total1,648,772 24.28 1,645,673 601.8 
_________________
(a)
In May 2011, the Company announced a securities repurchase program of up to $100.0
(a)    The Company's Board of Directors has authorized additional repurchases from time to time, most recently in May 2023 when it authorized the repurchase of an additional $500.0 million. In February 2012, June 2012, December 2012, December 2013, November 2014, November 2015 and May 2017, the Company's Board of Directors approved, in aggregate, an additional $1,900.0 million to repurchase the Company's outstanding securities.

ITEM 5. OTHER INFORMATION.

Effective October 31, 2017, the employment agreement with Christopher Nickele, the Company’s Executive Vice President and Chief Actuary, was amended to extend the term of the agreement until October 31, 2018. The amendment to Mr. Nickele’s employment agreement is attached hereto as Exhibit 10.7 and incorporated herein by reference.Company's outstanding shares of common stock.



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ITEM 5.  OTHER INFORMATION.

During the third quarter of 2023, certain officers (as defined in Rule 16a-1(f) of the Exchange Act) (the "Section 16 officers") of the Company adopted separate Rule 10b5-1 trading arrangements (as defined in Item 408(a) of Regulation S-K) for the sale of the Company’s common stock. The following summarizes the material terms of such Rule 10b5-1 trading arrangements:

Name and title of officerDate of trading arrangementDuration of trading arrangement (a)Aggregate shares of common stock to be sold pursuant to the trading arrangement
John R. KlineAugust 17, 2023March 29, 202421,642 
–Senior Vice President and Chief Accounting Officer
Jeanne L. LinnenbringerAugust 29, 2023May 28, 20244,000 
–Chief Operations Officer

_________
(a)    Or such earlier date that the aggregate amount of shares has been sold.

During the third quarter of 2023, no other of the Company's directors or Section 16 officers has adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement (as defined in Item 408(a) of Regulation S-K).
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ITEM 6. EXHIBITS.


3.1
10.13.2
10.2
Amendment dated asRestated Bylaws of August 14, 2017 to Employment Agreement between CNO Financial Group, Inc. and Edward Bonach., incorporated by reference to Exhibit 3.1 of our Current Report on Form 8-K filed December 14, 2022.
10.310.1
10.4
Amendment dated as of August 10, 2017 to Employment Agreement between 40|86 Advisors, Inc. and Eric Johnson.
10.5
Amendment dated as of August 17, 2017 to Employment Agreement between CNO Services, LLC Executive Severance Pay Plan, amended and Christopher Nickele.restated effective September 1, 2023.
10.631.1
10.7
Amendment dated as of October 31, 2017 to Employment Agreement between CNO Services, LLC and Christopher Nickele.
12.1
Computation of Ratio of Earnings to Fixed Charges.
31.1
Certification Pursuant to the Securities Exchange Act Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
32.1
32.2
101.INSXBRL Instance Document.Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCHXBRL Taxonomy Extension Schema Document.
101.CALXBRL Taxonomy Extension Calculation Linkbase Document.
101.DEFXBRL Taxonomy Extension Definition Linkbase Document.
101.LABXBRL Taxonomy Extension Label Linkbase Document.
101.PREXBRL Taxonomy Extension Presentation Linkbase Document.
104Cover Page Interactive Data File (embedded within the Inline XBRL document).

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SIGNATURE


Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.








CNO FINANCIAL GROUP, INC.




Dated:  November 1, 2017
8, 2023
By:/s/ John R. Kline
John R. Kline
Senior Vice President and Chief Accounting Officer
(authorized officer and principal accounting officer)



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