CNO Financial Group, Inc.

Previous wording

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.

Current wording

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 the CODM makes operating decisions and assesses the performance of the business.

Previous wording

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 of deferred acquisition costs and present value of future profits, 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 insurance liabilities, net of insurance intangibles, 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 values for interest sensitive 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 reinsured business; (iv) deferred acquisition costs; (v) the present value of future profits; and (vi) the value of unexpired options credited to insurance liabilities.

Current wording

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; (ii) interest credited to policyholders; (iii) amortization of deferred acquisition costs and present value of future profits, (iv) non-deferred commissions; and (v) 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 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 values for interest sensitive 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 reinsured business; (iv) deferred acquisition costs; (v) the present value of future profits; and (vi) the value of unexpired options credited to insurance liabilities.

Previous wording

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 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 an additional understanding of the business and a more meaningful analysis of the results of our insurance product lines.

Current wording

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 product 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 provides an additional understanding of the business and a more meaningful analysis of the results of our insurance product lines.

Previous wording

The Worksite Division focuses on the sale of voluntary benefit life and health insurance products in the workplace for businesses, associations, and other membership groups, interacting with customers at their place of employment and virtually. The Worksite Division also offers employer benefits services that seek to increase benefits engagement and reduce costs for employers and their employees. These services include: benefit administration technology, year-round advocacy, enrollment, benefits compliance and communications services.

Current wording

The Worksite Division focuses on the sale of voluntary insurance benefits, including supplemental health and life insurance products in the workplace for businesses, associations, and other membership groups, interacting with customers at their place of employment and virtually.

Previous wording

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

Current wording

Our fee income segment includes the earnings generated from sales of third-party insurance products (primarily Medicare Advantage), services provided to employers through our Worksite division and the operations of our broker-dealer and registered investment advisor. In November 2025, we announced our intention to exit the fee services business within our Worksite Division to sharpen our focus on the core insurance business. As a result, beginning in fourth quarter of 2025, the net results of this business are no longer presented within the fee income segment, but are presented within net loss related to divested business within non-operating income. The resulting fee income metric is the fee income segment's measure of profitability.

Previous wording

(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 the 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 market risk benefits ("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) gains or losses related to material reinsurance transactions, 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 including earnings attributable to variable interest entities, 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 allocated to the items 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 believes this information helps provide a better understanding of the business and a more meaningful analysis of results of our insurance product lines. The table above reconciles the non-GAAP measure to the corresponding GAAP measure.

Current wording

(a)Management believes that an analysis of net income applicable to common stock before: (i) net realized investment gains or losses from disposals, impairments and the 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 market risk benefits ("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) gains or losses related to material reinsurance transactions, 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; (viii) costs related to our three-year project to modernize certain elements of our technology ("TechMod") that are incremental to normal spend and will not recur following implementation, net of taxes; (ix) goodwill and other asset impairment expenses, net of taxes; (x) gains or losses related to divested business, net of taxes; and (xi) other non-operating items including earnings attributable to variable interest entities, 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 allocated to the items 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 believes this information provides a better understanding of the business and a more meaningful analysis of results of our insurance product lines. The table above reconciles the non-GAAP measure to the corresponding GAAP measure.

Previous wording

Amortization of the present value of future profits and deferred acquisition costs is calculated using the same contract groupings (or cohorts), mortality, surrender and lapse assumptions that are used in calculating the liability for future policy benefits, and these assumptions are reviewed and updated at least annually.

Current wording

Amortization of the present value of future profits and deferred acquisition costs is calculated using the same contract groupings (or cohorts), partial withdrawal rate, mortality, surrender and lapse assumptions that are used in calculating the liability for future policy benefits, and these assumptions are reviewed and updated at least annually.

Previous wording

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 be considered to determine whether, based on the weight of 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.

Current wording

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 be considered to determine whether, based on the weight of 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, and tax planning strategies.

Previous wording

We evaluate the need to establish a valuation allowance for our deferred income tax assets on an ongoing basis using a deferred tax valuation model. Our model is adjusted to reflect changes in our projections of future taxable income including changes resulting from the Tax Cuts and Job Act, investment strategies, the impact of the sale or reinsurance of business, the recapture of business previously ceded and tax planning strategies. Our estimates of future taxable income are based on evidence we consider to be objectively verifiable. At December 31, 2024, our projection of future taxable income for purposes of determining the valuation allowance is based on our estimates 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 more likely than not that all our net deferred tax assets of $791.4 million will be realized through future taxable earnings.

Current wording

We evaluate the need to establish a valuation allowance for our deferred income tax assets on an ongoing basis using a deferred tax valuation model. Our model is adjusted to reflect changes in our projections of future taxable income including changes resulting from the Tax Cuts and Job Act, investment strategies, the impact of the sale or reinsurance of business, the recapture of business previously ceded and tax planning strategies. Our estimates of future taxable income are based on evidence we consider to be objectively verifiable. At December 31, 2025, our projection of future taxable income for purposes of determining the valuation allowance is based on our estimates 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 more likely than not that our net deferred tax assets of $711.7 million will be realized through future taxable earnings.

Previous wording

We had $343.9 million of federal NOLs as of December 31, 2024, as summarized below (dollars in millions):

Current wording

We had $976.4 million of federal NOLs as of December 31, 2025, as summarized below (dollars in millions):

Previous wording

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. In addition, we expect to recognize approximately $800 million of non-life NOLs on our 2024 tax return as a result of changes related to the tax accounting method for allocating indirect costs (pursuant to the Code) to self-constructed real estate assets upon approval from the IRS. Such NOLs will not be subject to expiration.

Current wording

Our non-life NOLs with no expiration date of $832.4 million can be used to offset 35 percent of life insurance company taxable income and 80 percent of non-life company taxable income. Our non-life NOLs with expiration dates 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. Our life NOLs with no expiration date of $127.5 million can be used to offset 80% of life company taxable income, subject to certain limitations in the Code. In March 2025, the Company executed a consent agreement with the IRS that provided formal approval for the tax method change for allocating indirect costs (pursuant to the Code) to self-constructed real estate assets. As a result, the Company recharacterized the remaining $797.6 million of capitalized indirect costs under the prior accounting method to a NOL with no expiration date.

Previous wording

At December 31, 2024, the total balance of our liabilities for insurance products was $29.7 billion. These liabilities are generally payable over an extended period of time and the profitability of the related products is dependent on the pricing of the products and other factors. Liabilities for insurance products are calculated using management's best judgments, based on our past experience and standard actuarial tables, of mortality, morbidity, lapse rates, investment experience and expense levels. Differences between our expectations when we sold these products and our actual experience could positively or negatively impact future earnings.

Current wording

At December 31, 2025, the total balance of our liabilities for insurance products was $31.1 billion. These liabilities are generally payable over an extended period of time and the profitability of the related products is dependent on the pricing of the products and other factors. Liabilities for insurance products are calculated using management's best judgments, based on our past experience and standard actuarial tables, of mortality, morbidity, lapse rates, investment experience and expense levels. Differences between our expectations when we sold these products and our actual experience could positively or negatively impact future earnings.

Previous wording

The table presented below summarizes our estimates of the immediate impacts to pre-tax income resulting from hypothetical revisions to certain assumptions and is for illustrative purposes only as such hypothetical revisions are not currently required or anticipated. We have assumed that revisions to assumptions resulting in the adjustments summarized below would occur equally among policy types, ages and durations within each product classification. Any actual adjustment would be dependent on the specific policies affected and, therefore, may differ from the estimates summarized below. In addition, the impact of actual adjustments would reflect the net effect of all changes in assumptions during the period.

Current wording

The table presented below summarizes our estimates of the immediate impacts to pre-tax income resulting from hypothetical revisions to certain assumptions and is for illustrative purposes only as such hypothetical revisions are not currently required or anticipated. We have assumed that revisions to assumptions resulting in the adjustments summarized below would occur equally among policy types, ages and durations within each product classification. Any actual adjustment would be dependent on the specific policies affected and, therefore, may differ from the estimates summarized below. In addition, the impact of actual adjustments would reflect the net effect of all changes in assumptions during the period. The impacts also assume no management actions. For example, higher morbidity could result in higher expected rate increases, which would create some level of offset to the morbidity impacts.

Previous wording

At December 31, 2024 the value of goodwill and other intangible assets was $69.5 million and $28.1 million, respectively. Intangible assets with definite lives are amortized over their estimated useful lives and are reviewed for impairment if indicators of impairment arise. Goodwill is tested annually for impairment and whenever indicators of impairment arise in accordance with Accounting Standards Codification 350, Intangibles and Other (“ASC 350”). The Company first performs a qualitative assessment to determine whether it is more likely than not a goodwill impairment exists, and if an indication of potential impairment results from the qualitative assessment, a quantitative assessment is performed. The Company prepares a quantitative assessment to determine the fair value of the reporting unit by using a combination of the present value of expected future cash flows and a market approach based on revenue multiple data from peer companies and relevant observable market transactions, if available. If an impairment is identified, an impairment is recorded by the amount that the carrying value exceeds the fair value of the reporting unit up to the carrying amount of goodwill.

Current wording

Intangible assets with definite lives are amortized over their estimated useful lives and are reviewed for impairment if indicators of impairment arise. When such indicators are present, intangible assets are first tested for recoverability in accordance with Accounting Standards Codification ("ASC") 360, Property, Plant, and Equipment. If the assets are not recoverable, an impairment loss is recorded, measured as the difference between the assets' fair value and their carrying value. Goodwill is tested annually for impairment and whenever indicators of impairment arise in accordance with ASC 350, Intangibles - Goodwill and Other. The Company first performs a qualitative assessment to determine whether it is more likely than not a goodwill impairment exists, and if an indication of potential impairment results from the qualitative assessment, a quantitative assessment is performed. The Company prepares a quantitative assessment to determine the fair value of the reporting unit by using a combination of the present value of expected future cash flows and a market approach based on revenue-multiple data from peer companies and relevant observable market transactions, if available. If an impairment is identified, an impairment is recorded by the amount that the carrying value exceeds the fair value of the reporting unit up to the carrying amount of goodwill.

Previous wording

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 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 an additional understanding of the business and a more meaningful analysis of the results of our insurance product lines.

Current wording

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 product margins of the annuity, health and life product lines, less expenses allocated to the insurance product 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 provides an additional understanding of the business and a more meaningful analysis of the results of our insurance product lines.

Previous wording

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 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 values for interest sensitive 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 reinsured 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 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.

Current wording

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 values for interest sensitive 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 reinsured 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 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.

Previous wording

Comprehensive Annual Actuarial Review: We perform an annual review of our experience and assumptions including, but not limited to, assumptions related to mortality rates, surrender rates, earned rates, credited rates and expenses. Previously, the review was completed in the fourth quarter of each year, however, we began performing this review in the third quarter starting with 2024 to better align with our annual planning process, and third quarter is also more consistent with industry practice. In addition, we also review and update our assumptions on a more frequent basis to the extent current conditions or circumstances warrant changes that could be significant to our operating results. The impacts of the review have had a significant impact on our earnings.

Current wording

Comprehensive Annual Actuarial Review: We perform an annual review of our experience and assumptions including, but not limited to, assumptions related to mortality rates, morbidity rates, surrender rates, earned rates, credited rates and expenses. In addition, we also review and update our assumptions on a more frequent basis to the extent current conditions or circumstances warrant changes that could be significant to our operating results. The impacts of the review have had a significant impact on our earnings.

Previous wording

We performed our 2024 comprehensive annual actuarial review, resulting in a net favorable impact to insurance product margins included in pre-tax operating income of $27.3 million. The impact to insurance product margins by product are summarized in the table below. The most significant impacts related to fixed indexed annuities and Medicare supplement products which were favorably (unfavorably) impacted by $36.2 million and $(9.4) million, respectively. The primary fixed indexed annuities changes related to higher mortality assumptions. The primary Medicare supplement changes related to higher morbidity and higher persistency assumptions. In addition, the comprehensive annual actuarial review unfavorably impacted pre-tax non-operating income by $42.8 million related to changes in the fair value of embedded derivative liabilities and market risk benefits on our fixed indexed annuities. The primary changes related to higher earned rate assumptions.

Current wording

We performed our 2024 comprehensive annual actuarial review, resulting in a net unfavorable impact of $12.1 million to net income, including a net favorable impact to insurance product margins included in pre-tax operating income of $27.3 million. The most significant impacts related to fixed indexed annuities and Medicare supplement products which were favorably (unfavorably) impacted by $36.2 million and $(9.4) million, respectively. The primary fixed indexed annuities changes related to higher mortality assumptions. The primary Medicare supplement changes related to higher morbidity and higher persistency assumptions. In addition, the comprehensive annual actuarial review unfavorably impacted pre-tax non-operating income by $42.8 million related to changes in the fair value of embedded derivative liabilities and market risk benefits on our fixed indexed annuities. The primary changes related to higher earned rate assumptions.

Previous wording

We performed our 2023 comprehensive annual actuarial review, resulting in a net favorable impact to insurance product margins included in pre-tax operating income of $33.9 million. The impact to insurance product margins by product are summarized in the table below. The most significant impacts related to supplemental health and Medicare supplement products which were favorably (unfavorably) impacted by $41.9 million and $(10.6) million, respectively. The primary supplemental health changes related to lower morbidity and higher surrender assumptions. The primary Medicare supplement changes related to higher near-term morbidity and higher persistency assumptions. In addition, the comprehensive annual actuarial review unfavorably impacted pre-tax non-operating income by $12.4 million related to changes in the fair value of embedded derivative liabilities and market risk benefits on our fixed indexed annuities.

Current wording

We performed our 2023 comprehensive annual actuarial review, resulting in a net favorable impact of $16.7 million to net income, including a net favorable impact to insurance product margins included in pre-tax operating income of $33.9 million. The most significant impacts related to supplemental health and Medicare supplement products which were favorably (unfavorably) impacted by $41.9 million and $(10.6) million, respectively. The primary supplemental health changes related to lower morbidity and higher surrender assumptions. The primary Medicare supplement changes related to higher near-term morbidity and higher persistency assumptions. In addition, the comprehensive annual actuarial review unfavorably impacted pre-tax non-operating income by $12.4 million related to changes in the fair value of embedded derivative liabilities and market risk benefits on our fixed indexed annuities.

Previous wording

The following tables summarize the impacts of our comprehensive annual actuarial reviews on our operating income for the years ended December 31, 2024, 2023 and 2022 (dollars in millions):

Current wording

The following tables summarize the favorable (unfavorable) impacts of our comprehensive annual actuarial reviews on pre-tax operating income for the years ended December 31, 2025, 2024 and 2023 (dollars in millions):

Previous wording

Summary of Operating Results: Net operating income was $429.3 million in 2024, compared to $356.1 million in 2023 and $360.4 million in 2022.

Current wording

Summary of Operating Results: Net operating income was $439.2 million in 2025, compared to $429.3 million in 2024 and $356.1 million in 2023.

Previous wording

Insurance product margin was $1,040.0 million, $959.0 million and $936.5 million in 2024, 2023 and 2022, respectively. Insurance product margin, excluding the impacts summarized in the table above, were $1,012.7 million, $925.1 million and $935.8 million in 2024, 2023 and 2022, respectively. Fluctuations by product line are discussed in greater detail in the narratives that follow.Total allocated and unallocated expenses are summarized in the table below. Expenses not allocated to product lines include certain significant items listed in the table below. Total allocated and unallocated expenses as adjusted for the significant items are summarized below (dollars in millions):

Current wording

Insurance product margin was $1,067.6 million, $1,040.0 million and $959.0 million in 2025, 2024 and 2023, respectively. Excluding significant items primarily related to our comprehensive annual actuarial review, the insurance product margin was $1,019.5 million, $1,012.7 million and $925.1 million in 2025, 2024 and 2023, respectively. Fluctuations by product line are discussed in greater detail in the narratives that follow.

Previous wording

The effective tax rate for 2024, 2023 and 2022 was 22.0 percent, 22.5 percent and 22.8 percent, respectively.

Current wording

The effective tax rate for 2025, 2024 and 2023 was 21.9 percent, 22.0 percent and 22.5 percent, respectively.

Previous wording

Our expense ratio was 19.2 percent, 19.4 percent, and 19.3 percent for the years ended December 31, 2024, 2023 and 2022, respectively. 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.

Current wording

Our expense ratio was 18.9 percent, 19.2 percent, and 19.4 percent for the years ended December 31, 2025, 2024 and 2023, respectively. 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.

Previous wording

The favorable (unfavorable) impacts of our comprehensive annual actuarial review (reflected in insurance policy benefits) on annuity product margins are summarized below (dollars in millions):

Current wording

The favorable impacts of our comprehensive annual actuarial review (reflected in insurance policy benefits) on annuity product margins are summarized below (dollars in millions):

Previous wording

Margin from fixed indexed annuitieswas $215.8 million in 2024 compared to $192.2 million in 2023 and $183.4 million in 2022. The margin adjusted to exclude the favorable (unfavorable) impacts of the annual actuarial review previously discussed was $179.6 million, $182.8 million and $186.6 million in 2024, 2023 and 2022, respectively. The decreasing adjusted margins are primarily due to additional amortization resulting from higher surrenders and assumption changes partially offset by increased surrender charge income. Growth in the block is primarily being offset by spread compression driven by increased surrenders of higher spread products. Net insurance liabilities (equal to (i) policyholder account values for interest sensitive 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 reinsured business; (iv) deferred acquisition costs; (v) the present value of future profits; and (vi) the value of unexpired options credited to insurance liabilities) were $9,848.9 million, $9,337.3 million and $8,788.6 million in 2024, 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 4.66 percent in 2024, up from 4.39 percent in 2023 and 4.25 percent in 2022, reflecting higher portfolio yields.

Current wording

Margin from fixed indexed annuitieswas $196.0 million in 2025 compared to $215.8 million in 2024 and $192.2 million in 2023. The margin adjusted to exclude the favorable impacts of the comprehensive annual actuarial review previously discussed was $182.2 million, $179.6 million and $182.8 million in 2025, 2024 and 2023, respectively. The adjusted margin increased in the current period primarily due to growth in the block, partially offset by higher amortization. Growth in the block is being partially offset by spread compression driven by increased surrenders of higher spread products. The adjusted margin decreased from 2023 to 2024 primarily due to additional amortization resulting from higher surrenders partially offset by increased surrender charge income. Net insurance liabilities (equal to (i) policyholder account values for interest sensitive 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 reinsured business; (iv) deferred acquisition costs; (v) the present value of future profits; and (vi) the value of unexpired options credited to insurance liabilities) were $10,582.5 million, $9,848.9 million and $9,337.3 million in 2025, 2024 and 2023, respectively. The growth in net insurance liabilities was driven by deposits and reinvested returns in excess of withdrawals, which results in higher net investment income allocated. The earned yield was 4.84 percent in 2025, up from 4.66 percent in 2024 and 4.39 percent in 2023, reflecting higher portfolio yields.

Previous wording

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 $231.8 million, $118.3 million and $(181.3) million in 2024, 2023 and 2022, respectively.

Current wording

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 $106.5 million, $231.8 million and $118.3 million in 2025, 2024 and 2023, respectively.

Previous wording

Margin from fixed interest annuitieswas $31.6 million in 2024 compared to $33.9 million in 2023 and $32.4 million in 2022. The margin decreased in 2024 primarily due to additional amortization from higher policy surrenders. The reduction in the size of the block is largely offset by increased yields. Average net insurance liabilities were $1,578.3 million, $1,612.0 million and $1,700.5 million in 2024, 2023 and 2022, respectively, driven by withdrawals in excess of deposits and reinvested returns. The earned yield increased to 5.33 percent in 2024, reflecting higher portfolio yields compared to 5.19 percent in 2023 and 4.88 percent in 2022.

Current wording

Margin from fixed interest annuitieswas $32.8 million in 2025 compared to $31.6 million in 2024 and $33.9 million in 2023. The margin increased in 2025 primarily due to growth in the block and decreased in 2024 primarily due to additional amortization from higher policy surrenders. The reduction in the size of the block in 2024 was largely offset by increased yields. Average net insurance liabilities were $1,591.4 million, $1,578.3 million and $1,612.0 million in 2025, 2024 and 2023, respectively, driven by withdrawals in excess of deposits and reinvested returns. The earned yield increased to 5.46% percent in 2025, reflecting higher portfolio yields compared to 5.33 percent in 2024 and 5.19 percent in 2023.

Previous wording

Margin from other annuities was $26.8 million in 2024 compared to $8.9 million in 2023 and $11.1 million in 2022. The margin adjusted to exclude the favorable impacts of the annual actuarial review previously discussed was $5.4 million in 2023. 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. We experienced elevated annuitant mortality on a small number of closed block payout annuity policies in 2024. Mortality was lower in 2023 compared to 2022.

Current wording

Margin from other annuities was $9.8 million in 2025 compared to $26.8 million in 2024 and $8.9 million in 2023. The margin adjusted to exclude the favorable impacts of the comprehensive annual actuarial review previously discussed was $7.0 million in 2025, $26.8 million in 2024, and $5.4 million in 2023. 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. The adjusted margin decreased in the current period due to higher mortality in 2024.

Previous wording

Margin from supplemental health business was $269.8 million in 2024 compared to $294.4 million in 2023 and $230.9 million in 2022. The margin adjusted to exclude the favorable impacts of the annual actuarial review previously discussed was $269.5 million, $252.5 million and $229.0 million in 2024, 2023 and 2022, respectively. The adjusted margin as a percentage of insurance policy income was 37 percent in 2024 compared to 36 percent in 2023 and 33 percent in 2022. The increase in the supplemental health adjusted margin in 2024, compared to 2023 and 2022, reflects growth in the block and favorable morbidity.

Current wording

Margin from supplemental health business was $305.4 million in 2025 compared to $269.8 million in 2024 and $294.4 million in 2023. The margin adjusted to exclude the favorable impacts of the comprehensive annual actuarial review previously discussed was $280.6 million, $269.5 million and $252.5 million in 2025, 2024 and 2023, respectively. The adjusted margin as a percentage of insurance policy income was 38 percent in 2025 compared to 37 percent in 2024 and 36 percent in 2023. The increase in the supplemental health adjusted margin in 2025, compared to 2024 and 2023, reflects growth in the block and lower morbidity.

Previous wording

Margin from Medicare supplement business was $113.9 million in 2024 compared to $116.9 million in 2023 and $151.0 million in 2022. The Medicare supplement margin adjusted to exclude the impacts of the annual actuarial review previously discussed was $123.3 million, $127.5 million and $151.0 million in 2024, 2023 and 2022, respectively. The adjusted margin as a percentage of insurance policy income was 20 percent, 21 percent and 23 percent in 2024, 2023 and 2022, respectively. The slight decrease in the adjusted margin in 2024, as compared to 2023, is primarily due to higher morbidity. The decrease in the adjusted margin in 2023 compared to 2022, was primarily due to a reduction in the size of the block and higher morbidity. Claim experience will fluctuate from period to period. Insurance policy income was $620.5 million in 2024 compared to $619.9 million in 2023 and $657.8 million in 2022. 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 invest in both our Medicare supplement products and Medicare Advantage distribution to meet our customers' needs and preferences. We launched a new competitive Medicare supplement product in 2022 resulting in sales growth over the past two years.

Current wording

Margin from Medicare supplement business was $106.1 million in 2025 compared to $113.9 million in 2024 and $116.9 million in 2023. The Medicare supplement margin adjusted to exclude the impacts of the comprehensive annual actuarial review previously discussed was $115.3 million, $123.3 million and $127.5 million in 2025, 2024 and 2023, respectively. The adjusted margin as a percentage of insurance policy income was 18 percent, 20 percent and 21 percent in 2025, 2024 and 2023, respectively. Insurance policy income was $627.0 million in 2025 compared to $620.5 million in 2024 and $619.9 million in 2023. The decrease in the adjusted margin in 2025, as compared to 2024, is primarily due to modestly higher claims in 2025 compared to 2024, partially offset by growth in the block. The decrease in the adjusted margin in 2024 compared to 2023, was primarily due to higher claims in 2024 compared to 2023. Claim experience will fluctuate from period to period. We are able to re-rate our Medicare Supplement business annually. Each year we review experience and regulatory requirements to arrive at appropriate rate actions. We file rate increase requests with individual states and historically have received approvals generally aligned with our requests.

Previous wording

Margin from Long-term care products was $133.1 million in 2024 compared to $83.0 million in 2023 and $122.5 million in 2022. The margin adjusted to exclude the impacts of the annual actuarial review previously discussed was $132.2 million, $92.0 million and $106.1 million in 2024, 2023 and 2022, respectively. The adjusted margin as a percentage of insurance policy income and excluding the impacts of the annual actuarial review was 48 percent, 35 percent and 40 percent in 2024, 2023 and 2022, respectively. The fluctuations resulted from claim experience which was favorable in 2024 as compared to 2023 and unfavorable in 2023 as compared to 2022. Claim experience will fluctuate from period to period. Effective October 1, 2024, we discontinued ceding 25 percent of long-term care new business under a reinsurance agreement. We now retain 100 percent of our long-term care new business. This does not impact the inforce business that we previously ceded. As a result, we expect margins to increase modestly in 2025 and grow more in future years as earnings emerge from the sales.

Current wording

Margin from Long-term care products was $145.1 million in 2025 compared to $133.1 million in 2024 and $83.0 million in 2023. The margin adjusted to exclude the impacts of the comprehensive annual actuarial review previously discussed was $139.6 million, $132.2 million and $92.0 million in 2025, 2024 and 2023, respectively. The adjusted margin as a percentage of insurance policy income and excluding the impacts of the annual actuarial review was 48 percent, 48 percent and 35 percent in 2025, 2024 and 2023, respectively. The increase in margin in 2025 is primarily due to growth in the business from sales of our short duration Long-Term Care Fundamental product and continued favorable claims experience. The increase in margin from 2023 to 2024 was due to higher claim experience in 2023. Claim experience will fluctuate from period to period. The average benefit period for policies sold in 2025 is 13 months and 99 percent are policies with two years or less in benefits. In addition, effective October 1, 2024, we retain 100 percent of our long-term care new business as we discontinued ceding 25 percent of long-term care new business under a reinsurance agreement (this did not impact the inforce business that we previously ceded). As a result, margins increased modestly in 2025 and we expect to grow more in future years as earnings emerge from the sales.

Previous wording

Margin from interest-sensitive life business was $97.9 million in 2024 compared to $98.7 million in 2023 and $79.5 million in 2022. The interest-sensitive life margins adjusted to exclude the impacts of the annual actuarial review previously discussed were $94.1 million, $94.8 million and $80.9 million in 2024, 2023 and 2022, respectively. The increase in the adjusted margin in 2024 and 2023 compared to 2022 reflects more favorable mortality and growth in the block due to sales in recent periods.

Current wording

Margin from interest-sensitive life business was $94.3 million in 2025 compared to $97.9 million in 2024 and $98.7 million in 2023. The interest-sensitive life margins adjusted to exclude the impacts of the comprehensive annual actuarial review previously discussed were $91.5 million, $94.1 million and $94.8 million in 2025, 2024 and 2023, respectively. The decrease in the adjusted margin in 2025 and 2024 compared to 2023 reflects higher insurance policy benefits.

Previous wording

The interest margin was $2.3 million in 2024 compared to $2.8 million in 2023 and $3.3 million in 2022. The decline in the interest margin over the three year period is due to spread compression, partially offset by growth in the block. 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.

Current wording

The interest margin was $2.7 million in 2025 compared to $2.3 million in 2024 and $2.8 million in 2023. Allocated net investment income reflects earned yields of 5.02 percent, 4.99 percent and 4.96 percent in 2025, 2024 and 2023, respectively. The fluctuating interest margin reflects growth in the block and compressed spreads in 2024, which lessened in 2025. 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.

Previous wording

Net investment income and interest credited excludes 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 $21.9 million, $13.2 million and $(24.0) million in 2024, 2023 and 2022, respectively.

Current wording

Net investment income and interest credited excludes 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 $12.5 million, $21.9 million and $13.2 million in 2025, 2024 and 2023, respectively.

Previous wording

Margin from traditional life business was $151.1 million in 2024 compared to $131.0 million in 2023 and $125.7 million in 2022. The traditional life margins adjusted to exclude the impacts of the annual actuarial review previously discussed were $155.6 million, $136.2 million and $138.7 million in 2024, 2023 and 2022, respectively. The increase in the adjusted margin in 2024 compared to 2023 and 2022 primarily reflects lower advertising expense and growth in the block.

Current wording

Margin from traditional life business was $178.1 million in 2025 compared to $151.1 million in 2024 and $131.0 million in 2023. The traditional life margins adjusted to exclude the impacts of the comprehensive annual actuarial review and a model refinement related to traditional life reserves previously discussed were $170.5 million, $155.6 million and $136.2 million in 2025, 2024 and 2023, respectively. The increase in the adjusted margin in 2025 compared to 2024 and 2023 primarily reflects lower advertising expense and growth in the business.

Previous wording

Allocated net investment income reflects earned yields of 4.68 percent, 4.71 percent and 4.63 percent in 2024, 2023 and 2022, respectively.

Current wording

Allocated net investment income reflects earned yields of 4.74 percent, 4.68 percent and 4.71 percent in 2025, 2024 and 2023, respectively.

Previous wording

Advertising expense was $77.3 million in 2024 compared to $92.5 million in 2023 and $94.3 million in 2022. The demand and cost of television advertising can fluctuate from period to period and tends to spike during presidential election cycles. We are disciplined with our marketing expenditures and will increase or decrease our marketing spend depending on the current economics of the purchase or other factors.

Current wording

Advertising expense was $67.7 million in 2025 compared to $77.3 million in 2024 and $92.5 million in 2023. We are disciplined with our marketing expenditures and will increase or decrease our marketing spend depending on the current economics of the purchase or other factors, including the effectiveness of advertising spend. Lower advertising expenses reflect a shift to lower cost and more effective advertising alternatives, which include web, digital, and third-party distribution channels.

Previous wording

The above table reconciles net investment income to investment income not allocated to product lines. Such amounts will generally fluctuate from period to period based on a number of factors. A dividend of $28.1 million was received in the fourth quarter of 2024 related to a single equity investment. Other factors driving fluctuations include the performance of our alternative investments (which are typically reported a quarter in arrears); the earnings related to the investments underlying our COLI; the spread we earn from our FHLB investment borrowing and FABN programs; and the level of prepayment income (including call premiums) and trading account income.

Current wording

The above table reconciles investment income not allocated to product lines to net investment income. Such amounts will generally fluctuate from period to period based on the performance of our alternative investments (which are typically reported one quarter in arrears); the earnings related to the investments underlying our COLI; the spread we earn from our FHLB investment borrowing and FABN programs; the level of prepayment income (including call premiums) and trading account income; and the impact of annual option forfeitures related to fixed indexed annuity surrenders. Dividends of $12.3 million and $28.1 million were received in the fourth quarter of 2025 and 2024, respectively, related to a single equity investment. Alternative investment income improved significantly in 2025 compared to 2024 and 2024 compared to 2023. Interest expense increased in 2025 on higher average debt outstanding. Other fluctuations between periods are primarily related to fluctuations in other variable components including the level of prepayment income and the impact of annual option forfeitures resulting from surrenders of in-the-money options.

Previous wording

The following summarizes our net non-operating income (loss) for each of the three years ended December 31, 2024 (dollars in millions):

Current wording

The following summarizes our net non-operating loss for each of the three years ended December 31, 2025 (dollars in millions):