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CNO makes LTCI reinsurance deal

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(Bloomberg) — CNO Financial Group Inc. is using a reinsurance deal to manage its exposure to a closed block of long-term care insurance (LTCI) business.

CNO (NYSE:CNO) recently reported $106 million in net income for the fourth quarter of 2013 on $1.1 billion in revenue, up from $101 million in net income on $943 million in revenue for the fourth quarter of 2012.

The company – which counts John Paulson’s hedge fund firm as one of its biggest investors – impressed investors by announcing the reinsurance deal.

Beechwood Re Ltd., a reinsurer domiciled in the Cayman Islands, agreed to take on obligations tied to the LTCI policies. Beechwood invests in the businesses of acute care and long-term care (LTC) providers as well as in the reinsurance market.

CNO ceded $590 million, mostly in reserves, the reinsurer said in a statement.

CNO has been struggling to overcome the effects of lower-than-expected policy lapse rates and lower-than-expected earnings on the assets supporting its LTCI business.

CNO’s Bankers Life continues to sell LTCI products. The unit reported $5.7 million in LTCI sales for the latest quarter on $134 million in premium revenue, compared with $6 million in sales on $135 million in premium revenue for the fourth quarter of 2012.

The BRe risk-transfer deal is a “key catalyst that we believe could propel the stock to another level,” Mark Palmer, an analyst at BTIG LLC, said in a note to clients. The deal “will put CNO in a better position to bolster its already robust share repurchase program.”

CNO announced in December it would buy back as much as $300 million in securities. Palmer has a buy rating on the stock.

–Allison Bell contributed tothis article. Editors: Dan Kraut, Steven Crabill

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