(CNO) CNO Financial Group Reaches Settlement

Conseco Life Insurance Company (“Conseco Life”), a subsidiary of CNO Financial Group, Inc. (CNO), reached a settlement to pursue with the Nicholas putative class action lawsuit.

The litigation comes in the wake of certain changes made last year to certain non-guaranteed elements in some of the universal life policies sold by Conseco Life prior to its takeover.

In the hearing a couple of days back, the judge considered Conseco Life’s request for a countrywide status that would act as an approval for the settlement of the claim. The court also complied with Conseco Life’s request for a stay order on any other legal action pertaining to the cost of insurance increase on the Valulife and Valuterm policies in November 2011, that are a part of Nicholas proceedings.

Even though if the court approves a go ahead on the status of a class for the purpose of settling the claim, the final approval is subject to hearing after a notice to the in force and former policyholders under the settlement schemes.

As a consequence of this settlement, the company is expected to incur a pre-tax charge about $20 million in its Other CNO Business segment for the first quarter of 2012. Also, CNO Financial’s risk-based capital ratio will be trimmed down by 6%.

The company has scheduled the release of its first quarter results on May 1, 2012. The Zacks Consensus Estimate for the first quarter is 15 cents per share, down 15.9% from a year ago.

CNO Financial remains committed to its expense management initiatives that help the company improve its operational efficiency supported by a sound capital position. The company also fairs well with the rating agencies.

We retain our long term Neutral recommendation on CNO Financial. The quantitative Zacks #3 Rank (short-term Hold rating) for the company indicates no clear directional pressure on the stock over the near term. CNO Financial competes with AFLAC Inc. (AFL) and Torchmark Corp. (TMK).

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