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October 13, 2023

Michael Volley/Benjamin Phippen

Securities and Exchange Commission

Division of Corporate Finance

Washington, D.C. 20549

RE:     SEC letter dated September 20, 2023 regarding the Form 10-K for the Fiscal Year Ended December 31, 2022 filed February 24, 2023 and the Form 10-Q for the Quarterly Period Ended June 30, 2023 filed August 9, 2023 by CNO Financial Group, Inc. (File No. 001-31792)

The following information is provided in response to the comments in the letter from the staff of the Securities and Exchange Commission (the “Staff”) dated September 20, 2023.  For ease of reference, each of the Staff’s comments is reproduced below and is followed by CNO Financial Group, Inc.’s (“CNO” or the “Company”) response.

Form 10-Q for the Quarterly Period Ended June 30, 2023

Summary of Significant Accounting Policies, page 10

1.    Staff Comment:  Please tell us and revise future filings to more clearly describe how your annuities are accounted for during the accumulation and payout phase. Please describe the key attributes of each phase and describe the specific liabilities and revenue line items that are used to present the key recognition events. To supplement your disclosure, please provide us with an accounting analysis of the life cycle of a typical fixed index annuity, detailing the journal entries recorded with appropriate commentary at issuance and throughout the accumulation and payout phase. Please include the accounting for embedded derivatives, market risk benefits in an asset and liability position and include details regarding the periodic unlocking exercises. Please include appropriate reference to the applicable accounting guidance supporting your journal entries at each stage of the life cycle.

    Response:  The fixed indexed annuities (“FIA”) issued by the insurance subsidiaries of CNO are a deferred annuity contract with a guaranteed minimum interest rate plus a contingent return based on the price return of an external index, which is typically the S&P 500 (and is assumed to be the S&P 500 throughout this letter).  FIA contracts are designed so that the guaranteed contract value meets regulatory requirements such that the contract holder receives no less than 90 percent of the initial deposit, compounded annually at 3 percent, which establishes a floor value for the contract.

    Our FIA contracts do not have a specified maturity date; therefore, the contracts remain in the accumulation phase until the customer surrenders the contract.  Although the contracts permit the holder to elect to convert their annuity contract to a periodic paying contract under various payment options after a defined period of time, few elect these options.  Policyholders can surrender the contract at any time, at which point they receive their account value, as specified in the contract, less any applicable surrender charges.  The account value is generally defined as the greater of the policyholder’s initial investment plus the equity-indexed return or a guaranteed floor amount (calculated as the policyholder’s initial investment plus a specified annual percentage return).  One penalty-free withdrawal of up to 10 percent of either the premium paid or the account value is permitted annually after the first year of the annuity’s term and many policyholders elect that option at various times.

    Our FIAs are annual periodic ratchet designed contracts, where the policyholder receives the greater of: (i) the defined appreciation in the equity index during each one-year period ending on the policy’s anniversary date; or (ii) the guarantee minimum fixed return over that period.

    Consistent with the terms of the policy, the contract holder receives a portion of the appreciation in the S&P 500 index during the annual period, which is based on a participation rate that is reset on each policy anniversary date; subject to contractual guaranteed minimum participation rates.  This allows the Company to set the participation rate at a level consistent with the investment return earned on the net premiums received and the current option cost to fund the indexed benefit.

    In 2016, we began offering a guaranteed lifetime income rider to our FIA contracts, which allows policyholders the option to elect to receive a guaranteed income stream for life, without having to annuitize their policy.  In 2021, an optional benefit was added to the rider which enhances the guaranteed income stream payout amount for a two-year period if the policyholder meets certain conditions related to the ability to perform activities of daily living.  These benefits are often referred to as guaranteed living withdrawal benefits (“GLWB”).

    Commissions, underwriting, sales and contract issuance and processing costs are incurred when a FIA contract is issued.  When such costs are incremental costs directly related to the successful acquisition of a new insurance contract, they are capitalized and amortized on a constant level basis over the expected term to approximate straight-line amortization.

    Similar descriptions of our fixed indexed products are currently provided in Item I of our Form 10-K.  To the extent the above disclosures are not currently provided, they will be included in future filings.

    With respect to periodic unlocking exercises, a detailed review of assumptions is performed annually during the fourth quarter.  There were no assumption changes related to fixed indexed annuities in the three and six months ended June 30, 2023 and 2022.  In future filings, we will include disclosures related to our periodic unlocking exercises.

    In response to your request to provide detailed journal entries for the accounting for FIAs, please refer to the illustration included in Exhibit 1-1.

Liability for future policy benefits, page 11

2.    Staff Comment:  We note your disclosure that, “this liability also includes the amount of total reserves above (below) policyholder account balances for our fixed indexed annuity products due to the valuation of the related embedded derivative.” Please tell us and revise future filings to quantify this amount for each period presented and, if true, disclose that the change in this amount is recognized as “Insurance policy benefits” in the statement of operations. Additionally, please tell us and in future filings revise the Policyholder account balance policy disclosure to clearly describe the portion of the embedded derivative liability that is presented in this line item and revise the table on page 44 to more clearly describe in which balance sheet line items the fair value of the embedded derivative liability is presented.

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    Response:  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):

 June 30,
2023  December 31,
2022

Fixed indexed annuity insurance liabilities

Host contract liability $8,035.3  $7,856.4

Embedded derivatives at market 1,355.4  1,297.0

Total fixed indexed annuity insurance liabilities $9,390.7  $9,153.4

    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):

 June 30,
2023  December 31,
2022

Policyholder account balances $9,852.6  $9,644.8

Future policy benefits (461.9)   (491.4)

Total fixed indexed annuity insurance liabilities $ 9,390.7    $ 9,153.4

    The following definition of policyholder account balance is provided in ASC 944, which we follow in determining the amount to record in the policyholder account balances line item in our financial statements:

At any point in time, this is the amount held by the insurance entity on behalf of the policyholder.  This balance may be held in a general account, a separate account (a legally segregated account), or a combination of both on the insurance entity’s balance sheet.  This account includes premiums received from the policyholder, plus any credited income, less any relevant charges (acquisition costs, cost of insurance, and so forth).

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

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    In future filings, we will revise the table on page 44, as presented below, to more clearly describe which balance sheet items the fair value of the embedded derivative liability is included:

    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

  June 30,
2023  December 31, 2022

Assets:

Other invested assets:

Fixed indexed call options  $ 194.2    $ 56.7

Reinsurance receivables  (18.1)   (17.8)

Total assets  $ 176.1    $ 38.9

Liabilities:

Embedded derivatives related to fixed indexed annuities at fair value:

Policyholder account balances  $ 1,817.3    $ 1,788.4

Future policy benefits  (461.9)   (491.4)

Total liabilities  $ 1,355.4    $ 1,297.0

Liabilities for Insurance Products, page 28

3.    Staff Comment:  Please tell us and revise future filings to clarify the difference between “Issuances” and “Premiums Received” in the rollforward of the liability for policyholder account balances on page 34.

    Response:  “Issuances” represents funds collected from new business, and “Premiums received” represents premiums collected from policyholders during the period related to inforce business. In future filings, we will add parenthetical explanations to these line items to describe what is included in each line item, as summarized below.

4

    The following table summarizes balances and changes in the liability for policyholder account balances for the six months ended June 30, 2023 (dollars in millions):

  Six months ended

  June 30, 2023

  Fixed indexed annuities  Fixed interest annuities  Other annuities  Interest-sensitive life  Funding agreements  Other

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)  674.9    91.1    —    20.4    —    —

Premiums received (premiums collected from inforce business)  .2    1.6    15.4    101.6    —    134.3

Policy charges  (9.2)   (.4)   —    (93.3)   —    —

Surrenders and withdrawals  (360.8)   (85.4)   (20.7)   (16.3)   (14.3)   (144.2)

Benefit payments  (122.3)   (55.9)   (3.1)   (13.7)   —    —

Interest credited  23.3    22.5    1.2    18.5    14.4    1.3

Other  11.2    —    (.2)   (.2)   —    —

Balance, end of period excluding contracts 100% ceded  9,707.7    1,636.6    119.7    1,226.6    1,410.9    386.9

Balance, end of period for contracts 100% ceded  144.9    612.4    22.3    109.1    —    10.6

Balance, end of period  $ 9,852.6    $ 2,249.0    $ 142.0    $ 1,335.7    $ 1,410.9    $ 397.5

Form 10-K for the Fiscal Year Ended December 31, 2022

Annuities, page 9

4.    Staff Comment:  Please tell us and revise future filings to clarify how premiums are paid for your fixed index annuities (e.g., lump sum or installments) and the magnitude of each.

    Response:  In 2023, we will begin offering fixed indexed annuities which permit flexible premium payments.  However, we expect the vast majority of premium payments will continue to be paid in a lump sum.  In future filings, we will add the following disclosure assuming no significant changes in consumer behavior:

Substantially all of the deposits on our fixed indexed annuity products are paid in a lump sum.

5.    Staff Comment:  Please tell us and revise future filings to clarify the available payout options for your fixed index annuities (e.g., lump sum, fixed payments for a fixed amount of time, lifetime payments, etc.) and the magnitude of each payment option selected.

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    Response:  Although our fixed indexed annuities provide for various annuitization options which permit the policyholder to convert a policy to one which provides for periodic payments under various payment options (including the policyholder’s remaining life or for a term-certain period), the majority of policyholders take their benefit in a lump sum or may elect the option to take one penalty-free withdrawal of up to 10 percent each year of either the premium paid or the account value after the first year of the annuity’s term.  Similar disclosure will be added in future filings.

Overview, page 48

6.    Staff Comment:  We note your disclosure on page 65 that, “Net investment income and interest credited exclude the change in market values of the underlying options supporting the fixed indexed annuity products and corresponding offsetting amount credited to policyholder account balances. Such amounts were $(181.3) million, $195.5 million and $32.3 million in 2022, 2021 and 2020, respectively.” Please provide us with and revise future filings to include an analysis of the earnings impact, for each period presented, of the embedded derivative and related items if meaningful to the analysis (e.g., interest credited to policy holder account balances, amortization of DAC, etc.) and the derivative options used to hedge the embedded derivative. The analysis should detail the specific line items in which each earnings impact is recognized in your GAAP financial statements and in your non-GAAP financial measures net operating income and non-operating income.

    Response:  In response to your request, we have provided a reconciliation of the relevant fixed indexed annuity amounts in our consolidated statement of operations to our non-GAAP financial measures of margin from fixed indexed annuities and non-operating income.  Please refer to Exhibit 6-1 for a reconciliation for the six months ended June 30, 2023.

    Options are not purchased to hedge the embedded derivatives.  We buy call options (including call spreads) referenced to the applicable indices in an effort to hedge potential increases to policyholder benefits resulting from increases in the particular index to which the policy’s return is linked.  The value of the embedded derivatives is based on the estimated cost to fulfill our commitment to fixed indexed annuity policyholders to purchase a series of annual forward options over the duration of the policy (and is not based on the increase in the particular index to which the policy’s return is linked).

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7.    Staff Comment:  We note your disclosure on page 50 in note (a) that “fair value changes due to fluctuations in the interest rates used to discount embedded derivative liabilities related to our fixed indexed annuities” is excluded from your segment measure. Please tell us and revise future filings as needed to clarify, if all changes in fair value of embedded derivative liabilities are excluded, or if it is only the portion related to changes in the discount rate. Additionally, please explain why you exclude the change in fair value of the embedded derivative liabilities from your segment measure but include the change in fair value of the derivative call options which are used to hedge the embedded derivative liability.

    Response:  Prior to January 1, 2023, our non-operating earnings only included fair value changes due to fluctuations in interest rates that were used to value the embedded derivatives