CNO Financial Group, Inc. - Form 8-K Summary
Business Context and Reporting Period
This Form 8-K, dated January 31, 2013, reports a material correction to previously issued financial statements for CNO Financial Group, Inc. The filing addresses an inadvertent error in the calculation of accumulated other comprehensive income found in the original Form 10-Q for the quarterly period ended September 30, 2012.
Key Financial Metrics and Adjustments
The correction involves "shadow adjustments" related to unrealized gains and losses on available-for-sale securities for certain long-term care products. The filing explicitly states that the correction had no impact on net income, earnings per share, cash flows, or statutory accounting measures.
| Item (in millions) | As Reported (10-Q) | Correction | As Corrected (10-Q/A) |
|---|---|---|---|
| Deferred acquisition costs | $580.7 | $42.7 | $623.4 |
| Income tax assets | $594.5 | $105.0 | $699.5 |
| Change in total assets | $147.7 | ||
| Liabilities for insurance products | $24,593.5 | $334.4 | $24,927.9 |
| Accumulated other comprehensive income | $1,421.1 | $(186.7) | $1,234.4 |
| Change to total liabilities and equity | $147.7 | ||
| Comprehensive income (3 months ended Sept 30, 2012) | $425.3 | $(186.7) | $238.6 |
| Comprehensive income (9 months ended Sept 30, 2012) | $759.3 | $(186.7) | $572.6 |
Material Changes and Prior Period Comparison
The primary material change is the restatement of balance sheet items and comprehensive income for the periods ended September 30, 2012. Total assets and total liabilities increased by $147.7 million due to the correction. Accumulated other comprehensive income decreased by $186.7 million. The filing notes that shadow adjustments vary by period based on unrealized gains/losses and estimated gross profits.
Management Commentary and Risks
Management and the Audit and Enterprise Risk Committee concluded that the original Form 10-Q should no longer be relied upon. An amendment (Form 10-Q/A) has been filed to reflect the corrections. The company confirmed that the error correction will not impact the timing of the previously announced earnings release for the fourth quarter of 2012. The matter has been discussed with the independent registered public accounting firm.
Investor Verification Checklist
- Verify the filed Form 10-Q/A for the quarter ended September 30, 2012, to review the corrected financial statements.
- Confirm that the correction does not affect net income or cash flow metrics used in valuation models.
- Review the impact of the $186.7 million reduction in accumulated other comprehensive income on equity ratios.
- Monitor future filings for volatility in shadow adjustments related to available-for-sale securities.