Life Insurance Initiation 092016

Please see page 23 for rating definitions, important disclosures
and required analyst certifications
All estimates/forecasts are as of 09/22/16 unless otherwise stated.
Wells Fargo Securities, LLC does and seeks to do business with companies
covered in its research reports. As a result, investors should be aware that
the firm may have a conflict of interest that could affect the objectivity of the
report and investors should consider this report as only a single factor in
making their investment decision.
INSUR081516-153338
September 22, 2016
Equity Research
In Need Of A Life Line
Resuming Coverage Of Life Insurers
Top Picks: CNO, PFG, MET
Source: © istockphoto.com
Insurance
Sean Dargan, Senior Analyst
(212) 214-1416
sean.dargan@wellsfargo.com
Kenneth Hung, CFA, ASA, Associate Analyst
(212) 214-8023
kenneth.hung@wellsfargo.com

WELLS FARGO SECURITIES, LLC
In Need Of A Life Line EQUITY RESEARCH DEPARTMENT
3
TABLE OF CONTENTS
Executive Summary ...................................................................................................................................................................................... 5
Coverage and Ratings Summary....................................................................................................................................................................7
Valuation ..................................................................................................................................................................................................... 10
Key Theme 1 – Macro Exposure: Interest Rates and Equity Markets .....................................................................................................12
Key Theme 2 – Demographics, the Protection Gap....................................................................................................................................15
Key Theme 3 – Curbing Expense Growth ...................................................................................................................................................19
Key Theme 4 – M&A ....................................................................................................................................................................................21
CNO Financial Group, Inc. ......................................................................................................................................................................... 23
Principal Financial Group, Inc. .................................................................................................................................................................. 33
MetLife, Inc. ................................................................................................................................................................................................ 43
Torchmark Corp. ......................................................................................................................................................................................... 53
AFLAC Inc. ...................................................................................................................................................................................................61
Genworth Financial, Inc. ............................................................................................................................................................................ 69
Lincoln National Corp................................................................................................................................................................................. 79
Primerica, Inc..............................................................................................................................................................................................89
Prudential Financial, Inc. ........................................................................................................................................................................... 97
Reinsurance Group of America, Inc. ........................................................................................................................................................ 109
Unum Group...............................................................................................................................................................................................119
Voya Financial, Inc.....................................................................................................................................................................................127

Insurance EQUITY RESEARCH DEPARTMENT
4
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5
Executive Summary
We have resumed coverage of eight life insurance stocks with a change in analyst and we have initiated
coverage of four other life insurance stocks. Our current group outlook for the life insurance sector is Market
Weight, owing chiefly to negative macro headwinds that we think are largely priced in at these levels. Absent a
steady rise in long-term interest rates, we will likely continue to see earnings compression until new money
rates reach equilibrium with portfolio yields.
• Our Outperform rated stocks include CNO, PFG, and MET.
• We are Underperform rated on TMK.
Having stated that, boards of directors in the industry are unlikely to sit idly as share prices stagnate. Over the
next 12-18 months, we have identified four themes we believe investors should focus on as the hidebound life
insurance industry tries to reinvent itself:
 Macro Exposure: Interest Rates and Equity Markets. Not all U.S. life insurers are fungible—
some are much more exposed to interest rate risk through the products they sell than others. While we do
not view low interest rates as a capital event in the near term, earnings growth will likely be impeded by
low reinvestment rates until new money yields and portfolio yields reach equilibrium.
 Demographics, the Protection Gap, and a Changing Business Model. The business model
embraced by some life insurers to achieve growth by selling macro-sensitive savings and retirement
products to Baby Boomers is broken, in our view. Baby Boomers are looking for guaranteed lifetime
income, and the new normal macroeconomic environment differs from that assumed when those products
were sold. At the same time, the “protection gap” has widened and a large swath of the American
population does not have basic death protection. We believe life insurers will simplify their product
offering, which should make reported financial results more easily understood and believable over time.
 Technological Change. Life insurers are famously slow-moving mass employers, which, perhaps in
part, is due to the mutual legacy of some players, has not translated into the aggressive cost cutting of
other sectors of corporate America. We believe there are efficiencies of scale to be realized by automation
that can improve expense ratios. In addition, on the medical front, we think cancer treatments have the
ability to meaningfully improve mortality versus assumptions for in-force books. On the underwriting
side, biometrics offer the ability to more accurately segment mortality pricing.
 M&A. As U.S. life insurers rationalize their business models, we believe there will be more spin-offs, asset
dispositions, and bolt-on acquisitions. After a lull in activity in 2016, we believe inbound acquisitions from
Asia will return to the SMID cap space, as Japanese acquirers have digested the last round of U.S. targets.
While some investors more bullish than us point out that sector valuations are inexpensive on an historical
basis when looking at the entirety of the post-demutualization era (from late 1990s to today), when viewed
through the lens of the “new normal” of the past ten years, multiples do not seem particularly cheap. Our
universe is trading a hair below the 10-year average of 1.05x book value ex-AOCI. On a price-to-forward
earnings basis, our universe’s current 10.4x median multiple is higher than the 10-year average of 9.2x, but
within one standard deviation.

6
Exhibit 1. Historical Median P/BV ex AOCI and Historical Median P/E Ratios
Our Universe’s Median P/BV is at the 10-Yr. Average Universe Median NTM P/E Ratio is Above 10-Yr. Avg.
1.6
0.5
10 Yr. Avg. =1.05x
0.2x
0.4x
0.6x
0.8x
1.0x
1.2x
1.4x
1.6x
1.8x
Sep-06
Feb-07
Jul-07
Dec-07
May-08
Oct-08
Mar-09
Aug-09
Jan-10
Jun-10
Nov-10
Apr-11
Sep-11
Feb-12
Jul-12
Dec-12
May-13
Oct-13
Mar-14
Aug-14
Jan-15
Jun-15
Nov-15
Apr-16
Sep-16
PricetoBook(ex.AOCI)
1.0
12.0x
3.7x
10.4x
10 -year avg 9.2x
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
14.0x
Sep-06
Mar-07
Sep-07
Mar-08
Sep-08
Mar-09
Sep-09
Mar-10
Sep-10
Mar-11
Sep-11
Mar-12
Sep-12
Mar-13
Sep-13
Mar-14
Sep-14
Mar-15
Sep-15
Mar-16
Sep-16
Source for both graphs: FactSet, company data and Wells Fargo Securities, LLC
House view: Underweight Financials, Overweight Insurance (relative to Sector). Wells Fargo
Securities Equity Strategist Gina Martin Adams is recommending investors underweight the Financials sector
relative to the S&P 500, but relative to other financials, overweight insurance. We note that as a broad
industry, “insurance” captures relatively defensive P&C underwriter and insurance broker stocks with lower
betas that should do better than the macro-affected life insurance stocks in a lower-for-longer environment.
The life insurance sector has always traded at a discount to the broader market on a price-to-earnings basis,
and we don’t expect that to change. Life insurance is a low-growth market that should be thought of as growing
with GDP. With the P/E ratio of the life sector at 53% of the S&P 500 P/E, it is sitting at one standard
deviation below the 10-year average, and we concede that should the Fed embark on a period of tightening, it is
likely that the life sector’s P/E ratio will migrate closer to the historical average as market multiples compress.
Exhibit 2. Relative S&P 500 LIFE Index price performance and P/E vs. S&P 500
Life Index Has Trailed Broader Index Over 10 Years Life Index Relative P/E One St. Dev. Below 10-Yr Avg.
-10.0%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
0%
25%
50%
75%
100%
125%
150%
175%
200%
225%
Sep-06
Feb-07
Jul-07
Dec-07
May-08
Oct-08
Mar-09
Aug-09
Jan-10
Jun-10
Nov-10
Apr-11
Sep-11
Feb-12
Jul-12
Dec-12
May-13
Oct-13
Mar-14
Aug-14
Jan-15
Jun-15
Nov-15
Apr-16
Real GDP Growth (right axis) S&P 500 (left axis) S&P 500 LIFE Index (left axis)
86%
33%
10 Yr. Avg. 63%
53%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
S&P 500 LIFE P/E AS % of S&P 500 P/E
Source for both graphs: FactSet, company data and Wells Fargo Securities, LLC

7
Coverage and Ratings Summary
Exhibit 3. Ratings and Valuation Ranges
Market 9/22/16 Valuation
Company Ticker Rating Cap Price Range
CNO Financial CNO 1 $2,666 $15.22 $18-$20
Principal Financial PFG 1 $14,408 $50.10 $56-$60
MetLife MET 1 $49,317 $44.88 $51-$53
Voya Financial VOYA 2 $5,845 $29.19 $30-$32
Prudential Financial PRU 2 $35,340 $80.87 $82-$86
UNUM UNM 2 $8,367 $35.66 $36-$38
Primerica PRI 2 $2,674 $57.53 $58-$60
Aflac AFL 2 $30,255 $73.87 $73-$77
Lincoln National LNC 2 $11,029 $47.37 $46-$50
Reinsurance Group Of America RGA 2 $6,974 $108.85 $105-$115
Genworth Financial GNW 2 $2,472 $4.96 $4-$6
Torchmark TMK 3 $7,857 $65.60 $56-$58
Note: Intraday share price and market cap as of September 22, 2016.
Source: FactSet, company data and Wells Fargo Securities, LLC estimates
Outperform-rated stocks:
CNO Financial (CNO, $15.22, Outperform), Top Pick. We think CNO is a well-run life insurer that has
made marked progress over the past decade, but whose stock price currently reflects an impact less favorable
than our modeled worst-case scenario in a reinsurance recapture situation. The results of an internal audit by
CNO into the reinsurance counterparty’s assets should act as a catalyst for the shares, in our opinion.
Principal Financial Group (PFG, $50.10, Outperform). PFG is a financial services hybrid life
insurer/asset manager/retirement company that has identified niches within those three businesses that we
believe are better positioned than the life insurance, asset management, and retirement businesses in general.
A lever toward upward estimate revisions will likely be PFG’s Latin American retirement business, where
recent headwinds are poised to turn into tailwinds.
MetLife (MET, $44.88, Outperform). MET has a catalyst ahead in the separation of the company, which
should result in the RemainCo MetLife having an earnings stream and ROE less volatile and less affected by
interest rates and equity market movements. We expect the separation of Brighthouse Financial from MetLife
to take part in at least two stages starting in Q1 2017, in the form of some combination of IPO, spinoff, and/or
exchange offer. We should have more information after MET’s board meets on September 27.
Least favorite pick:
Torchmark (TMK, 65.60, Underperform). Torchmark’s business model throws off steady midteen ROEs
with no equity market exposure and low investment leverage. However, we think the valuation is extremely
stretched at more than 2x book value, which we attribute to its takeout premium, a topic that was asked of and
acknowledged by management on the Q4 2015 earnings conference call.

8
Market Perform-rated stocks:
Aflac (AFL, $73.87, Market Perform). Aflac produces roughly 75% of of its earnings in Japan, where it
produces stable P&C-like underwriting margins in its cancer and medical insurance businesses. Although we
are encouraged by efforts to limit sales of first-sector spread products, we believe negative interest rates will
present a problem to the in-force first-sector business in Japan. After a 20+% move upward in the AFL share
price year to date (YTD) vs the S&P 500, up 6%, we do not see the current share price as an attractive entry
point.
Genworth (GNW, $4.96, Market Perform). We think Genworth has an attractive U.S. Mortgage
Insurance Business. However, an answer to the existential threats of long-term care and debt service rely too
much on a regulatory favor, in our view, for which we have limited insight.
Lincoln National (LNC, $47.37, Market Perform). We view the company as a strong domestic franchise
characterized by consistent return of capital. In the near term, we think the risk/reward of the stock is
balanced with uncertainty related to the negative impacts of the DOL’s fiduciary proposal, as well as the
company’s earnings sensitivity to capital market risks.
Primerica (PRI, $57.53, Market Perform). We like the company’s business model, as well as its strong
earnings growth, high returns on equity, and investment leverage. Still, given the potential risks related to the
final fiduciary rules, we think the stock is fairly valued at around 12x forward earnings (which is also its
historical average).
Prudential Financial (PRU, $80.87, Market Perform). We see the company as a franchise name
among global life insurers, with key strengths highlighted by a high-return Japanese business and a dominant
market position in large case pension risk transfer. However, the company’s exposure to variable annuities and
the uncertainty regarding its SIFI status are keeping us on the sidelines.
Reinsurance Group of America (RGA, $108.85, Market Perform). We like RGA’s consistency in
results and potential upside related to improving mortality and business rationalization by other carriers.
However, we think the risk/reward is fairly balanced at these levels given a shrinking reinsurance market,
upcoming management change, and competition in the marketplace.
Unum (UNM, $35.66, Market Perform). We think UNM’s focus on mortality and morbidity underwriting
is a positive in an environment with continued low interest rates and volatile equities. However, we believe the
stock’s risk/reward is balanced in the near term, due to the company’s closed blocks of LTC policies and higher
exposure to below IG and energy investments.
Voya Financial (VOYA, $29.19, Market Perform). While we believe Voya’s ongoing retirement- and
investment-oriented business mix should command a higher valuation multiple, the company’s legacy business
should continue to suppress the company’s overall valuation given much lower interest rates.

WELLSFARGOSECURITIES,LLC
InNeedOfALifeLineEQUITYRESEARCHDEPARTMENT
9
Exhibit 4 Life insurer comp table
($ in millions, except per share) 9/22/16 Market
Rank Rating Price Cap 15A 16E 17E Current 16E 17E 15A 16E 17E Current 16E 17E 15A 16E 17E 15 16 YTD
Life Insurance
1 1 CNO Financial CNO $15.22 $2,665.6 $1.41 $1.36 $1.62 $20.87 $21.57 $22.96 10.8 11.2 9.4 0.73 0.71 0.66 7.3% 6.4% 7.3% 10.9% (20.3%)
2 1 Principal Financial PFG $50.10 $14,408.4 $4.26 $4.40 $4.80 $32.98 $33.90 $36.24 11.7 11.4 10.4 1.52 1.48 1.38 12.6% 13.2% 13.7% (13.4%) 11.4%
3 1 MetLife MET $44.88 $49,317.3 $4.86 $4.56 $5.75 $53.20 $54.39 $58.04 9.2 9.8 7.8 0.84 0.83 0.77 9.6% 8.5% 10.2% (10.9%) (6.9%)
4 2 Voya Financial VOYA $29.19 $5,844.7 $2.92 $3.07 $3.71 $59.44 $62.56 $69.43 10.0 9.5 7.9 0.49 0.47 0.42 5.2% 5.0% 5.6% (12.9%) (20.9%)
5 2 Prudential Financial PRU $80.87 $35,340.2 $10.04 $8.87 $10.29 $76.56 $78.49 $84.50 8.1 9.1 7.9 1.06 1.03 0.96 14.3% 11.4% 12.6% (10.0%) (0.7%)
6 2 UNUM UNM $35.66 $8,367.4 $3.64 $3.85 $4.05 $37.52 $38.91 $41.77 9.8 9.3 8.8 0.95 0.92 0.85 10.6% 10.1% 10.0% (4.6%) 7.1%
7 2 Primerica PRI $57.53 $2,673.6 $3.72 $4.38 $4.90 $23.06 $25.15 $27.48 15.5 13.1 11.7 2.49 2.29 2.09 16.0% 18.2% 18.6% (13.0%) 21.8%
8 2 Aflac AFL $73.87 $30,255.3 $6.16 $6.85 $6.74 $39.32 $41.35 $44.58 12.0 10.8 11.0 1.88 1.79 1.66 19.1% 17.0% 15.7% (1.9%) 23.3%
9 2 Lincoln National LNC $47.37 $11,029.1 $5.44 $6.10 $6.75 $54.66 $57.20 $63.90 8.7 7.8 7.0 0.87 0.83 0.74 10.8% 10.9% 11.1% (12.8%) (5.8%)
10 2 Reinsurance Group Of America RGA $108.85 $6,973.6 $8.43 $9.75 $10.00 $87.33 $91.60 $99.66 12.9 11.2 10.9 1.25 1.19 1.09 10.5% 10.9% 10.5% (2.4%) 27.2%
11 2 Genworth Financial GNW $4.96 $2,471.7 $0.51 $0.88 $0.93 $20.15 $20.58 $21.53 9.7 5.6 5.3 0.25 0.24 0.23 2.5% 4.3% 4.4% (56.1%) 33.0%
12 3 Torchmark TMK $65.60 $7,856.8 $4.21 $4.47 $4.71 $31.11 $33.17 $36.12 15.6 14.7 13.9 2.11 1.98 1.82 14.2% 13.9% 13.6% 5.5% 14.8%
Life Insurance Sector Mean 11.2 10.3 9.3 1.20 1.14 1.06 11.0% 10.8% 11.1% (10.1%) 7.0%
Life Insurance Sector Median 10.4 10.3 9.1 1.00 0.97 0.91 10.7% 10.9% 10.8% (10.4%) 9.3%
S&P 500 SPX 2,175.67 117.46 115.58 126.25 (0.7%) 6.4%
Earnings Per Share Book Value Per Share Price/Book ValuePrice / Earnings Operating ROE Price Performance
Note: Intraday share price and market cap as of September 22, 2016. Book value per share and operating return on equity is ex-AOCI.
Ratings: 1=Outperform; 2 = Market Perform; 3 = Underperform.
Source: FactSet and Wells Fargo Securities, LLC estimates

10
Valuation
With certain exceptions, our preferred valuation framework for life insurers is based on a price-to-book value
(P/BV) multiple. As referenced,, the life insurance industry as a whole is a low-growth sector that may never
demand a high price-to-earnings multiple. To the degree that individual company EPS growth is based on
macro-sensitive product sales or leverage, the market will likely discount such growth since the true cost of
goods sold likely won’t be known until it is too late. We like to think of capital as the raw material of an
insurance company, with efficient capital allocation to be rewarded with a premium valuation. As with other
capital-intensive financial services sectors, over time there is a correlation between P/BV and return on equity
(ROE). For purposes of our analysis, we back Accumulated Other Comprehensive Income (AOCI) from equity,
which largely consists of unrealized gains in the investment portfolio. Likewise, we use forecasted operating
earnings in calculating ROE, which excludes net realized gains from income.
In theory, a company should be trading at book value if it is earning exactly its cost of capital. According to the
regression below, that puts the average cost of capital slightly above the 10.0% area. The R-squared of 0.8641
means that 86% of a life insurer’s price-to-book multiple is attributed to expected operating ROE, with the
other 14% attributable to other factors.
Exhibit 5. Price-to-Book vs. Operating Return on Equity
AFL
AEL
CNO
FGL
GNW
LNCMET
PRI
PFG
PRU
RGA
TMK
VOYA
UNM
y = 0.1806e14.469x
R² = 0.8641
0.0x
0.5x
1.0x
1.5x
2.0x
2.5x
3.0x
0.0% 5.0% 10.0% 15.0% 20.0%
P/B(2016E)
2017E ROE
P/B (2016E) vs. 2017E ROE
Source: FactSet, company data, and Wells Fargo Securities, LLC estimates
In Exhibit 6 below we calculate cost of equity capital using the Capital Asset Pricing Model (CAPM) for our
coverage universe. Inputs include betas over the past year as calculated by FactSet, the 10-year U.S. Treasury
yield as the risk-free rate, and an equity risk premium as calculated by Professor Aswath Damodaran of New
York University. We note the average cost of equity capital of roughly 10.5% which is close to the implied cost
of ROE required to trade at 1x book value in the regression above in Exhibit 5. In recent years, P&C insurers
have traded at higher multiples despite lower expected ROEs. We attribute this to lifecos needing a certain
interest rate and equity market levels to hit consensus ROE projections in a way that P&C carriers do not.

11
Exhibit 6. Cost of Equity Has Come Down Along With Betas and Interest Rates
CAPM Components By Company Operating ROE And Cost of Equity
Beta
(LTM)
10 yr.
UST
Yield
Assumed
Equity
Risk
Premium
Cost of
Equity
Capital
AFL 0.94 1.69% 6.06% 7.4%
CNO 1.46 1.69% 6.06% 10.5%
GNW 2.44 1.69% 6.06% 16.5%
LNC 1.79 1.69% 6.06% 12.5%
MET 1.50 1.69% 6.06% 10.8%
PFG 1.61 1.69% 6.06% 11.5%
PRI 1.29 1.69% 6.06% 9.5%
PRU 1.62 1.69% 6.06% 11.5%
RGA 1.05 1.69% 6.06% 8.0%
TMK 1.04 1.69% 6.06% 8.0%
UNM 1.37 1.69% 6.06% 10.0%
VOYA 1.43 1.69% 6.06% 10.3%
AVERAGE 1.46 10.5%
6%
8%
10%
12%
14%
16%
18%
05 06 07 08 09 10 11 12 13 14 15 16E
ROE CofE
Source for table and graph: FactSet, NYU (http://pages.stern.nyu.edu/~adamodar/) and Wells Fargo Securities, LLC estimates

12
Key Theme 1 – Macro Exposure: Interest Rates and Equity Markets
Interest rates. Life insurers collect premiums associated with policies (liabilities), and invest those
premiums largely in fixed income instruments (assets). The goal of a life insurance company investment
portfolio is not total return, but rather, asset-liability matching (ALM). Insurers have an assumption-based
business model; that is to say, profitability is a measure of actual experience versus assumptions embedded in
product pricing. In addition to assumptions around mortality, morbidity, and policy lapse rates, insurers make
assumptions around investment returns. Needless to say, interest rates are now materially lower than assumed
when long-tail products like life insurance and long-term care were sold decades ago.
Exhibit 7. US Life Insurance Industry Portfolio Yields Continue to Compress

4.50
4.75
5.00
5.25
5.50
5.75
6.00
6.25
6.50
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
PortfolioYield,in%
Statutory Net Yield On Invested Assets
Source: SNL and Wells Fargo Securities, LLC
While in theory, if assets and liabilities were perfectly matched, there would be no problem, in reality, assets
and liabilities are never perfectly matched and the companies are exposed to reinvestment risk. Lower interest
rates have manifested themselves on the interest statement in the form of lower net investment income and
compression in spread income in products like fixed annuities. On the balance sheet, low interest rates have
led to write-downs of goodwill and deferred acquisition cost (DAC) balances, followed in some cases by
strengthening of GAAP and ultimately, statutory reserves. Essentially, while recent central bank policy has
benefited equities valuations in general, low interest rates have impaired the life insurance business model.
Exhibit 8. Life insurer multiples have been closely
correlated with 10-yr UST yields
Exhibit 9. Wells Fargo Economics Group Is Not
Forecasting a Snap Back in UST 10-Yr Yields
0.0x
0.5x
1.0x
1.5x
2.0x
2.5x
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
P/BVMultiple
Yield,in%
UST 10 Yr Yield (left axis) Fed Funds Rate (left axis) S&P LIFE Index P/BV (right axis)
1.94
2.35
2.06
2.27
1.78
1.49 1.53 1.56 1.59 1.62 1.68 1.73 1.78
1.88 1.92
2.10
0.00
0.50
1.00
1.50
2.00
2.50
Yield,in%
10-Yr. US Treasury Yield
Source: FactSet and Wells Fargo Securities, LLC Source: FactSet and Wells Fargo Securities, LLC
estimates

13
While life insurance stocks as a group would react favorably to a rise in interest rates (assuming a parallel shift
in the yield curve), investors who have played life stocks as a way to benefit from rising rates have been
disappointed several times in the post-crisis era. Given our Wells Fargo Economics Group house view of the
U.S. Treasury 10-year yield rising only to 1.73% at the end of 2017E, after one Fed Funds hike in 2016
(December), followed by two more in 2017E, we believe investors have to take an interest-rate
agnostic view when looking at the sector. If one assumes a lower-for-longer interest rate environment,
which we increasingly think has become the census view, the sector should continue to underperform the
market. However, there are individual stories that should work for reasons apart from interest rates
Exhibit 10. Not All Life Insurers are Highly Leveraged To Investments
($ in millions, unless otherwise noted, as of June 30, 2016)
PRU LNC MET RGA VOYA PFG AFL Avg CNO GNW UNM TMK PRI
Investments 411,944 110,587 543,511 45,761 99,192 76,687 122,283 26,157 74,147 53,114 16,049 2,246
Total Equity, excl AOCI 33,991 12,725 64,741 5,595 12,926 10,587 17,118 3,678 11,921 8,817 3,889 1,144
Invested Assets/Equity Leverage 12.1x 8.7x 8.4x 8.2x 7.7x 7.2x 7.1x 7.1x 7.1x 6.2x 6.0x 4.1x 2.0x
Source: SNL and Wells Fargo Securities, LLC
Equity markets: The Wells Fargo Securities 12-Month Fair Value Estimate for the S&P 500 is 2,200,
implying only 0.9% potential upside. Our house forecast does not leave us bullish on asset management
businesses or variable annuities in the near term. For companies with equity asset management businesses
(PFG and to a lesser extent, PRU), lower equity markets translate into lower average assets under
management, in turn, leading to lower fee income and earnings headwinds. For variable annuity carriers (LNC,
PRU, and METs’ Brighthouse Financial unit), lower equity markets mean not only lower FAS 97 fees charged
against average assets under administration, but higher levels of in-the-money guaranteed benefits, which can
lead to reserve strengthening. Variable annuity hedge programs have proven to sometimes suffer from basis
risk, and volatile equity markets increase the cost of hedging (although, as seen below in Exhibit 11,
movements in swap interest rates have a greater impact on the cost of hedging). Generally speaking we do not
view insuring high water marks of equity mutual funds to be a business in which life insurers should be
engaged.
Exhibit 11. Hedge Costs Have Risen Even As Volatility Has Subsided, Due to Swap Interest Rates
10
12
14
16
18
20
22
24
26
28
80
90
100
110
120
130
140
150
160
170
180
VIX
ExpectedHedgeCost(bps)
Milliman Index (left hand side) VIX
Source: Bloomberg, FactSet and Wells Fargo Securities, LLC
The impact of the macro is not hypothetical. For the stocks within our universe, 2016 EPS estimates
have been cumulatively downwardly revised by 8% over the past 12 months, with the majority of the downward
movement occurring before companies reported Q1 2016 earnings. The spread of the revisions has not been
uniform: predictably, companies with business models less tied to macro drivers have fared better. But still,
only three companies (AFL +8.2%, PRI +5.2%, and RGA +1.6%) have seen consensus estimates upwardly
revised. The most negative revisions were experienced by MET (-27.2%), GNW (-20.7%), PRU (-16.1%) and
VOYA (-15.8%).

14
Exhibit 12. Macro Impact Has Led to Negative Estimate Revisions
-9.0%
-8.0%
-7.0%
-6.0%
-5.0%
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
Sep
'15
Oct
'15
Nov
'15
Dec
'15
Jan
'16
Feb
'16
Mar
'16
Apr
'16
May
'16
Jun
'16
Jul
'16
Aug
'16
Sep
'16
Cumulative WFS Life Insurance Universe 2016E EPS Revisions
Source: FactSet and Wells Fargo Securities, LLC

15
Key Theme 2 – Demographics and the protection gap
If we had written this report 20 years ago, we might have highlighted the growth potential of the industry
primed by Baby Boomers in their peak accumulation years buying variable annuities, which were not yet
wrapped by guaranteed living benefits. Fast forward to today, when the known drawbacks of the variable
annuity product (equity market sensitivity, capital strain, hedging costs, basis risk) are joined by the first
credible experience studies of policyholder behavior, and it is safe to say the market no longer rewards growth
in variable annuities. In the United States, the Baby Boomers are retiring and the business model of some
large-cap life insurers that was predicated on selling them macro-sensitive retirement products seems like an
exercise in value destruction (real or imagined).
The protection gap. The protection gap is the difference between the resources someone has (life insurance
and savings included) and the amount of insurance necessary for the dependent to maintain living standard
after the death of the primary provider. For purposes of this report, we consider only the working population
with dependents. Over the past 30 years, growth in the U.S. life insurance sector has been fueled by the Baby
Boomers and their desire to accumulate assets. Unlike the generations before them, many Baby Boomers are
concerned about the risk of outliving their savings, rather than dying too early. Variable annuities, defined
contribution retirement plans, and other accumulation products offered by life insurers provided Baby
Boomers with a means of protection against the risk of living too long and a stream of income for a few years or
a lifetime. These products are now reaching the maturity phase and are no longer growth engine products.
Exhibit 13. Protection gap is growing in the United States
INCOME NEEDED TO MORTALITY
MAINTAIN PROTECTION
LIVING STANDARD GAP
SAVINGS
LIFE INSURANCE
Source: Wells Fargo Securities, LLC
The age 65+ population is growing faster than the working-age population. In addition, life expectancy has
increased from 12.5 years after 65.0 to 20.6 years for women and 18.1 years for men in 2014, according to
Swiss Re. As the waves of the Baby Boomers enter retirement, the U.S. contends a financial challenge in
funding programs such as Social Security. Many Americans are unprepared for retirement and are relying on
Social Security and Medicare to aid health care costs.
How did we get here? Before the 1980s, life insurance agents commonly would go door to door to reach
middle class Americans and raise awareness on the affordability of basic life insurance products offered.
Ownership of life insurance policies have reached all-time lows in the United States since 1960. According to
LIMRA, in 1960, 59% of the adult population in the United States owned life insurance, and the number has
since fallen to 36%. Since the mid-1980s, the U.S. life industry has experienced a decline in life insurance
policies by roughly 45%. Since the Financial Crisis, new business and life policies sold have declined at an
annual rate of 5% with inflation adjustments, and American households without coverage of any kind
increased from 22% to 30% between 2004 and 2010, according to LIMRA, following a two-decade decline in
sales capacity. Americans are increasingly vulnerable to potentially heavy expenses as a result of
underinsurance.

16
Exhibit 14. An Aging Population Has Different Needs
0
50
100
150
200
250
300
350
400
450
2015 2020 2025 2030 2035 2040 2045 2050 2055 2060
Population(Millions)
65 years and
over
18 to 64 years
Under 18 years
Retirees fastest
growing segment
Source: U.S. Census Bureau and Wells Fargo Securities, LLC
Expense of carrying a career sales force. In the 1980s, Life insurance companies moved away from
investing in agents in an effort to cut the cost of carrying a career sales force. According to LIMRA, in 2004,
there were 161,955 U.S. agents, and over the course of just three years that number fell by more than 11,000. In
the face of high fixed costs, life insurers cut back on sales expenses to improve top line growth and shifted sales
to third parties, which include financial advisors and registered representatives. The two-decade decline in
sales force has weakened marketing campaigns of life insurance products to the mass market.
Emergence of term life. As inflation climbed in the 1970s and ate into the relative attractiveness of
participating whole life, and tax law changes in the early 1980s tightened up the criteria for tax-advantage
treatment of whole life, the workhorse participating whole life policy lost its luster. Term life, a basic and
affordable protection plan directed to appeal to the mass market, took off in popularity. Term life tended to
have thin margins, so life companies had to focus on selling as many policies as possible to drive growth. Life
agents struggled to make a career out of selling these pure protection products and saw an opportunity to
specialize in high face value whole life or universal life, which were aimed primarily at affluent families and
produced favorable commissions.
Shift to retirement and savings products. In the 1990s, asset accumulation products were considered to
be “growth” products, not without cause. In 1994, the year-over-year change in annuity sales was +300%. The
increase in annuity sales coincided with a shift in middle class financial habits. The mass market began
investing, and mutual funds and 401(k)s gained popularity. The demand for term-life insurance policies and
pure life products has since softened in the United States. Since 2014, more than half of the Statutory
operating income of U.S. life insurers has been derived from annuity-based products, and premiums and
deposits have overtaken life insurance as the top-line driver of earnings. The recent widening of the gap
reflects the industry’s adaption to the Baby Boomers’ financial needs and the steering away from traditional life
insurance products toward lifetime income strategies.
Demutualization and IPOs. In the mid-1990s to early 2000s, several large life insurers demutualized,
including John Hancock, MetLife, Prudential Financial, and Principal. The organizational structure changed
from mutuals where the policyholders were the owners, to a stock company. Shareholders seeking a return on
their investment put pressure on the insurers to increase the value of their stake. The strategy to drive growth
became more about selling volatile and riskier products, such as variable annuities with higher margins and
less about selling pure life products in bulk. In the 1990s, the growth of sales in retirement products and
annuities in the United States, coupled with strong equity markets, produced high short-term earnings, and
these products became primary drivers of top-line growth. Strong competition resulted in product features that
increased exposed carriers’ capital to equity market risk.

17
Socioeconomic factors. Other socioeconomic factors have contributed to the decline in mortality
protection. The perceived high cost of life insurance products and lack of funds has deterred the middle class
from purchasing life insurance products. The recession and decline in household income has decreased
consumer spending. According to a Swiss Re report, households with a primary breadwinner younger than 55
saw a decline in real terms by 12% from 2001 to 2010 and this percentage dipped even further for the age
group as a whole, a consequence of the housing bubble bursting and the global financial crisis. Lower
investment returns, decreased financial assets, and rising debt levels have made reaching the same living
standard even more challenging for Americans.
Back to the future? In our view, the U.S insurance industry has been ineffective in relaying the message to
the mass market the need for pure life products the past three decades. Although we believe the industry has
done a sufficient job convincing employers to package their life products in employee benefits, generating a
distribution channel to serve the broader market, Americans now see buying insurance on their own to be
unnecessary. Americans tend to overlook the fact that employer-provided coverage lasts only so long as one
has a job and payouts remain relatively small in comparison to individual policies.
It is well documented that many Americans tend to overestimate the cost of insurance. The industry’s focus on
selling retirement plans to affluent Americans has only reinforced this misconception, and the smaller sales
force, together with the focus on investment and retirement products, have proven to further detach the
industry from educating the mass market. Interestingly, term-life cost in the United States has fallen
significantly and the product is cost effective. Yet we see fewer and fewer pure life protection policies being
bought each year. The lack of consumer education about pure life insurance products unveils a potential
opportunity for the U.S. life companies to close the gap and reach their unmet potential.
We think the detritus from the global financial crisis and the sustained low interest rate environment is forcing
a change in the business model for many life insurers, including a move away from variable annuities.
Exhibit 15. Fixed Annuity Sales > Variable Annuity Sales For First Time Since 1995

0
50
100
150
200
250
300
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 1H
2016
$inBillions
Fixed Variable
Source: LIMRA and Wells Fargo Securities, LLC
Variable Annuities: Need more reasons not to like them? Policyholder behavior and capital and
reserve requirements not trending favorably. While we acknowledge the benefits of variable annuities
from the standpoint of the consumer and we generally agree with carriers that a well-designed hedge program
mitigates risks to economic capital, we believe the product introduces too much volatility to the GAAP and
statutory financial results. The complexity of the product design and the opaqueness of the capital and
reserving requirements have clearly weighed on the valuation of carriers who sell variable annuities. We
identify several headwinds:
 Companies are only now gathering credible experience around policyholder behavior. Our
impression is that the industry benefitted for years from a policyholder base that did not always act in a
rational manner. Even when policyholders were sitting on in-the-money guarantees, at the end of a seven-

18
year surrender period they were churned into a new contract, which incidentally, created a commission
payment to their financial advisor or broker. During the VA arms race of the 1990s and 2000s, it could
perhaps be argued that newer, more generous benefits in the marketplace justified an exchange. As we
have seen in other long-tail products, elevated lapsation rates were assumed in product pricing.
Now that credible experience is emerging from variable annuities sold at the height of the pre-crisis arms
race, it appears that policyholders are increasingly acting in their economic best interest and not only
lapsing less frequently, but utilizing the living benefits at a higher rate than assumed in pricing. In our
view, the canary in the coal mine should have been Voya’s $1.5 billion charge in 2011 related to lower-
than-expected lapsation and higher utilization in the closed block of variable annuities (as part of ING). In
2Q16, MET took an after-tax charge to net income of $2 billion to a VA assumption review. While a large
portion of the charge was a non-cash charge related to a change in accounting from insurance to derivative
fair value accounting, the base cause was that policyholders were utilizing dollar-for-dollar withdrawals of
account value of the guaranteed minimum withdrawal benefit (GMIB) at a higher rate than assumed. On
the other hand, PRU released reserves after updating utilization assumptions in 2016. The problem from a
portfolio manager’s point of view is that it is impossible to know what a company’s original assumptions
were and how experience is trending. We suspect the s-1 filing of MET’s NewCo Brighthouse Financial
later in 2016 may spur other carriers to provide more detail on policyholder behavior assumptions.
 Capital and reserving requirements appear to be getting more onerous. On August 19, 2016,
consulting firm Oliver Wyman released a report commissioned by the National Association of Insurance
Commissioners (NAIC), which was looking to remove or mitigate motivation by carriers to use captive
reinsurance. In particular, the interplay between requirements of Actuarial Guideline 43 (“AG-43”) for VA
reserving and C3 Phase 2 stochastic modeling for computing market risk and interest rate risk associated
with variable annuities in risk-based capital (RBC) has introduced complexity in to statutory balance
sheets and driven carriers to employ the use of captives.
The five proposals are heavy on actuarial jargon, but one that is attracting attention is the call to use
Conditional Tail Expectation (CTE) 98 in the C3 capital calculation, which would require companies to
assume the average of the worst 2% of interest rate scenarios when establishing capital requirements. All
else being equal, those companies using CTE 95 (average of the worst 5%) or CTE 97 (average of the worst
3%) would need to hold more capital against VA because more conservative interest rates assumptions
would be used. But, as is often the case in life insurance, all things (assumptions) are not the same and a
company using CTE 95 could have more conservative assumptions around other inputs than a company
using CTE 98 interest rate assumptions.
 If U.S. life insurers ever fall under jurisdiction of Federal or International regulators,
variable annuities will likely be treated more punitively. On June 3, the Federal Reserve released
an advance notice of proposed rulemaking inviting comment for capital standards for insurance
Systemically Important Financial Institutions (SIFIs) and also proposed a rule to apply enhanced
prudential standards to insurance SIFIs. Of particular interest in the prudential standards as applied to
variable annuities is the Fed’s position on the short-term liquidity risk associated with derivatives hedging,
and a proposal that separate accounts are to be factored into cash flow testing.
Independently of the Fed’s move toward regulating large U.S. insurers is the movement of the
International Association of Insurance Supervisors (IAIS) to designate Global Systemically Important
Insurers (GSII). Under the IAIS proposed assessment methodology, variable annuities are classified as
non-traditional insurance products driving the systemic important of insurers, thus requiring more
capital.
 Proposed accounting changes may result in more reserve strengthening. The Financial
Accounting Standards Board (FASB) is working on an insurance project it is calling “Targeted
Improvements to the Accounting for Long-Duration Contracts.” Since the mid-2000s, guaranteed
minimum death benefits (GMDB) have been classified as a nontraditional long-duration contract for
which SOP 03-1 allows reserving on an accrual (insurance) basis. We believe that FASB will change course
and require GAAP reserves for GMDB to be accounted for under derivative fair value rules in the same
manner as Guaranteed Minimum Withdrawal Benefits (GMWB). A similar shift in GAAP accounting by
MetLife for its GMIB reserves in 2Q16 caused a meaningful non-cash reserve strengthening. We believe
investors should brace themselves for an industrywide hit if FASB does change the rule since a GMDB has
been standard on most contracts sold over the past 20 years, as well as the introduction of more volatility
to the balance sheet.

19
Key Theme 3 – Curbing expense growth: FinTech
Goodbye, Mother Met. In another era, insurance companies were known as maternalistic employers, with
company nicknames to match. While the industry has been more bottom-line focused since at least the late-
1990s demutualization era, expense saves have taken on new urgency in the post-crisis era as revenue growth
slows. As the period of extended low interest rates drags on, life insurers have adjusted by raising pricing on
new business to attain acceptable margin on new product. With limited ability to raise premium rates on in
force business (until claims-paying ability is compromised, as in the case of long-term care), life insurers have
been forced to cut expenses as a way mitigating margin degradation on in force business. We present
announced expense save programs in the space below in Exhibit 16.
Exhibit 16. Announced Expense-Save Initiatives
Ticker Expense-save Initiatives
CNO Decline in OCB policies requred careful management of expenses.
GNW Reduced US Life and HQ cash expenses by $150 million
LNC Budgets expense growth 1% to 2% less than revenue growth
MET $1 billion in run-rate expense savings by the end of 2019
UNM
"Focus on disciplined expense management" contributed to 100 bps expense
ratio decline in 2Q16
VOYA "Proactive" expense management program
Source: Company data and Wells Fargo Securities, LLC
Automation. We believe there is meaningful room to improve expense ratios in the industry.
Cutting head count alone will likely not be an end to itself in the quest to expand returns. Thus far, the
insurance industry has been a laggard in using fintech, in part due to dependence on clunky mainframes to
service decades’ worth of in force business. More immediate improvement will likely be realized in the
application of fintech to efficiently source new business, the process of which often includes mailing paper
applications and collecting bodily fluid samples. Data analytics making use of items like credit scores are
transforming mortality underwriting. Ultimately, we would not rule out a shift of retail life insurance and
annuity sales away from legacy carriers to technology companies, perhaps with some back-end underwriting
expertise provided by reinsurers. We believe RGA is positioned to leverage its expertise in mortality
underwriting to “white label” life insurance sold on the front end by a technology company.
Exhibit 17. The Proportion Of FinTech Funding Going To Insurance Is Rising
56% 48%
64% 67%
46%
3% 4%
4%
7%
12%
9% 14%
13%
8%
18%
14%
10%
3%
9%
11%
18% 14% 16%
9% 13%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016
FinTech Funding By Financial Industry Subsector
Transaction and
Payment Services
Investment Services
Insurance
Capital Markets
Banking Services
Source: PWC and Wells Fargo Securities, LLC

20
Immuno-oncology (IO) and mortality. Advancements in specific treatments of cancer are progressing at
a faster rate than many insurance-specific investors realize. Immuno-oncology has the potential to keep cancer
patients alive longer. By extending the lives of cancer patients, these drugs should have a favorable impact on
mortality over time.
The mortality assumptions used by life insurers are based off of actuarial tables that are by definition backward
looking. Generally, there has been a one-way trend in favorable mortality that has aided life insurers’ earnings
over the decades. The Commissioners Standard Ordinary (CSO) Mortality Table is a tool developed by the
Society of Actuaries (SOA) and American Academy of Actuaries (Academy). Currently, the SOA and the
Acedamy are finalizing a 2017 CSO at the request of the American Council of Life Insurers (ACLI) since
experience studies have shown “significant improvement in the mortality rates experienced by the industry
from that underlying the 2001 CSO table development.” Prior to the 2001 CSO that was adopted by the
National Association of Insurance Commissioners (NAIC) in 2006, the last CSO table was from 1980. At a
basic level, the CSO table assigns a life expectancy at each age for males and females. Tables have historically
been used in establishing premium rates, and calculating reserves. A new table also impacts buyer and agent
behavior since IRS rules around what qualifies as insurance vs. investment take into account statutory-defined
life expectancy.
A real benefit to life insurers would come if cures were developed for cancers that typically affect people in the
30s, 40s, and 50s. If a statistically significant number of policyholders in those age groups continued to pay
premiums above and beyond what was assumed in pricing and reserves, insurers would experience better-
than-expected mortality results on in-force business. According to statements made at a 2016 investor day,
RGA President (and future CEO) Anna Manning, death claims from cancer make up 30-40% of RGA’s total
claims in a typical year and represent the leading cause of insured death because underwriting has gotten
better at screening for cardiovascular disease.
If we assume that cancer deaths make up 30% of RGA’s book (the low end of the range given), and IO drugs
add an extra 5 years to cancer patients life expectancy, that adds an additional 1.5 years (30% x 5) of life
expectancy to RGA’s book. Current CEO Greig Woodring quantified the effect one additional year of
life expectancy would have on the earnings profile as being equal to approximately one year’s
annual premium, or about $7 billion, versus RGA’s market cap of $7.0 billion.

21
Key Theme 4 – M&A
Logically, there should be consolidation. According the American Council of Life Insurers (ACLI), there
were 830 statutory life insurance companies at the end of 2014, owned by more than 200 groups, many of
them mutual or fraternal organizations. It stands to reason that in a fractured low-growth industry facing a
secular headwind, there should be consolidation. However, we have not seen a publicly traded U.S. life insurer
buy another U.S. publicly traded life insurer in 11 years. Post-crisis, whole-company M&A has been infrequent,
but when it has happened, transactions have been marked by SMID cap targets, foreign (i.e., Japanese) buyers,
and premium multiples. (Please see Exhibit 18 for more detail.)
Exhibit 18. Japanese Buyers Have Paid Largest Premiums Over the Past Five Years
Announcement Deal P/BV Rationale
Acquirer Target Date Size multiple
*
Anbang Insurance Group Co.,
Ltd.
Fidelity & Guaranty Life 11/9/2015**
$1.6B 1.1x Enhance the growth of Anbang's business, move capital out of China
Nassau Reinsurance Group
Holdings L.P.
The Phoenix Companies 9/29/2015 $217MM 0.5x
Nassau's first life insurance acquisition; to become the company's U.S. life and
annuity platform for future growth
Sun Life Financial Inc AIZ Employee Benefits Biz 9/9/2015 $940MM
The deal should create a domestic benefits business that will rank sixth in market
share as measured by revenue
Sumitomo Life Insurance Symetra Financial 8/11/2015 $3.8B 1.6x
Symetrais to become Sumitomo Life’s platform in the U.S., where Sumitomo Life
does not currently have a material operational presence
Meiji Yasuda Life Insurance Co StanCorp Financial Group 7/23/2015 $5.0B 2.2x
Expands the scope and quality of Meiji Yasuda’s offerings in the U.S. market, should
help to enhance/accelerate its diversification and international growth
J.C. Flowers & Co. LLC AmeriLife Group, L.L.C. 6/5/2015 $390MM Private equity firm dedicated to investing in the global financial services industry
Pan-American Life Mutual Holding
Company
Mutual Trust Holding Company 4/8/2015 NA
Strengthen combined company's position as a premier life, accident and health
insurance provider in the Americas
Manulife Financial
Standard Life Investments Inc. and
Standard Life Financials Inc
9/3/2014 $4.0B Increase presence in Quebec
Tiptree Financial Inc Fortegra Financial Corp 8/12/2014 $209MM 1.2x Tiptree is a diversified holding company that actively acquires new businesses
Dai-ichi Life Insurance Company, Protective Life 6/3/2014 $5.7B 1.7x
Protective Life to be the company's strategic growth platform in the North American
region
GreyCastle Holdings XL Life Reinsurance 5/1/2014 $570MM Expand reinsurance business
Canada Pension Plan Inv. Board
(CPPIB)
Wilton Re Holdings Ltd 3/21/2014 $1.80bn
CPPIB plans to use the asset as a platform for further U.S. expansion into closed-
block life insurance, (non-correlated risk)
TPG Capital Management LP The Warranty Group 3/21/2014 $1.50B
Private equity firm specializing in venture capital, growth capital, public equity and
debt investments
Wilton Reassurance Co Conseco Life Insurance Co 3/3/2014 $237mm Continued track record of acquiring seasoned blocks of business
Beechwood Re, Ltd. CNO Financial closed block LTC 2/12/2014 $590MM Expand reinsurance business
Wilton Re Holdings Limited Continental Assurance Company 2/10/2014 $615mm Expand payout annuity business
Global Atlantic Forethought Life 9/26/2013 NA Acquire annuity distribution and preneed business
Resolution Life Lincoln Benefit Life Company (Allstate) 7/17/2013 $600MM
Acquire life ins biz in the US; focus on needs of existing customers rather than seek
new sales
Berkshire Hathaway Hartford Life International 6/27/2013 $285MM Expand life insurance business
Global Atlantic Accordia Life 5/1/2013 NA Expand life insurance business via former Aviva U.S. life operation
Madison Dearborn Partners, LLC National Financial Partners 4/14/2013 $1.28B Expand growth in wealth management industry
Protective Life MONY Life Insurance Company 4/10/2013 $1.06B Capital efficiency
MetLife AFP Provida S.A. 2/1/2013 $2.0B 3.0x Capitalizing on pensiongrowth opportunities in emerging markets
Athene Holding Ltd. Aviva USA Corp 12/21/2012 $1.55bn
Growth of retail sales and reinsurance operations; Focused on becoming leading
U.S. fixed annuity company
Guggenheim Partners Sun Life Assurance Company of Canada 12/17/2012 $1.35B Growth in annuity biz (primarily variable annuities)
Principal Financial Group AFP Cuprum S.A. 10/8/2012 $1.51B Broaden presence in the voluntary Chilean pension markets
Prudential Financial Hartford Financial's Individual Life Ins 9/27/2012 $615MM Provide greater scale, enhanced product offerings and expanded distribution
Massachusetts Mutual Life Ins Hartford Financial Services Group 9/4/2012 $400MM Expand retirement services division
Torchmark Family Heritage Life Ins Co of America 7/31/2012 $218.5MM Grow in supplemental health insurance line of business
Athene Group Ltd. Presidential Life Corporation 7/12/2012 $414.3mm 0.7x Growth of retail sales and reinsurance operations
Prudential Plc SRLC America Holding Corp. 5/30/2012 $621MM Increase the scale of life business
Tokio Marine Delphi Financial Group 12/21/2011 $2.7B 1.5x Strengthen P&C presence; expand into life
Guggenheim Capital LLC EquiTrust Life Insurance Company 10/6/2011 $440MM Grow presence in the annuity and life insurance arena
Average
1.5x
*For publicly traded, whole-company targets only. Book value excludes AOCI.
Source: SNL, Wells Fargo Securities, LLC
SNL DISCLAIMER: SNL FINANCIAL LC. CONTAINS COPYRIGHTED AND TRADE SECRET MATERIAL DISTRIBUTED
UNDER LICENSE FROM SNL. FOR RECIPIENT’S INTERNAL USE ONLY.

22
We are not holding our breath waiting for M&A among large-cap life insurers. For one thing, depressed
multiples mean large U.S. life insurers do not have the currency to make accretive acquisitions. In addition,
companies are not eager to double down on variable annuities and universal life with secondary guarantees,
particularly when they didn’t underwrite the products. European companies who found the United States a
target-rich environment in the 1990s are beset by their own problems and Solvency II capital requirements
make doing business in the United States more difficult than in past eras. Given the difficulty Anbang has had
in closing its announced acquisition of Fidelity & Guaranty Life, we don’t see a wave of incoming M&A from
China anytime soon.
Japan M&A taking a breather. After a 16-month period in 2014-2015 in which three publicly traded U.S.
life insurers were sold at significant premiums to Japanese acquirers in deals amounting to $14.5 billion (see
Exhibit 18), the pipeline has slowed. The reasons behind outbound M&A from Japan have been well reported:
other developed markets, including the United States, offer higher growth and higher returns than no-growth
Japan, which is characterized by single-digit ROE in the insurance industry. Seen through the lens of Japanese
companies, acquisition multiples well in excess of trading multiples are easier to justify since lower returns in
their home markets can make the acquired businesses ROE accretive and a lower cost of capital translates into
a lower hurdle return rate.
Outbound M&A from Japan, Inc. has slowed sharply in 2016. Based on commentary we heard at the 2016
Association of Insurance and Financial Analysts (AIFA), it seems that the three buyers in the 2014-2015 time
frame are taking time to digest their purchases. We have seen slow steps to re-engage: in August, Dai-Ichi
used Protective as a platform to acquire non-life warranty provider United States Warranty Corporation. In our
opinion, the next large acquisition is likely to be made by mutually owned Nippon Life, which is the second-
largest Japanese life insurer behind Japan Post. In 2015, Nippon said it was looking to spend up to US$13.5
billion on outbound M&A. Nippon made a US$1.7 billion acquisition of an insurance unit of an Australian bank
in 2015, but indicated earlier this year that it is still hunting for targets.
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CNO Financial Group, Inc. EQUITY RESEARCH DEPARTMENT
23
CNO Financial Group, Inc.
CNO: Initiating Coverage With An Outperform Rating
Recapturing Lost Value
 Summary: We are initiating coverage of CNO Financial Group, Inc. (CNO)
with an Outperform rating and a valuation range of $18-20. Our EPS estimates
are $1.36 for 2016 and $1.62 for 2017. In our opinion, CNO’s trading multiple
should expand in the near term as the market reacts to incremental
information related to its long-term care reinsurance transaction with
Beechwood Re.
 Reaction overdone. CNO’s per share price has declined by roughly $5 since
May 31 (-25% vs. S&P 500+3.9%). In July, news reports surfaced of links
between Beechwood Re Ltd. (Beechwood), and hedge fund Platinum Partners,
which is under federal investigation. Beechwood reinsured CNO’s closed block
long-term care business in 2014. Our worst-case scenario in a Beechwood
reinsurance recapture scenario only implies a $2 per share hit to BVPS.
 The math. If we apply a price-to-book multiple of 0.85x (one standard
deviation below the three-year average) to a worst-case forward book value
estimate $2 per share lower than our current Q3 2017 estimate of $22.57, we
still get to an equity valuation of $17.48, implying the market has overreacted
to the Beechwood news.
 Our base case points to continued share repurchase. If Beechwood
cannot collateralize the reserve trust due to losses in Platinum Partners funds,
CNO would recapture the reserves and associated long-term care liabilities.
CNO is in the process of auditing $126 million of assets in the trust, which we
assume will be impaired and trigger a recapture. Including the mark-to-market
impact on liabilities to reflect low interest rates, we think the Q3 after-tax
charge would be around $100 million, or $0.64 per share. After factoring in
the reversal of capital relief and assuming higher capital charges for remaining
trust assets, we expect CNO’s excess capital would decline to about $275
million ($125 million deployable) from $375 million ($225 million deployable).
Still, CNO would be in a position to continue share repurchase.
 No equity raise is required even in our worst case. In our worst case we
assume all $302 million of Level 3 assets in the Beechwood trust will be
impaired, with a Q3 net charge of about $1.29 per share. We estimate the net
draw down on holdco excess capital would be around $250 million, which
would wipe out CNO’s deployable excess capital. As a result, in a worst case we
think CNO could suspend its share repurchase, or potentially access debt
markets to fill any capital holes, but we don’t see any need for equity.
 Q3 2016 preview. We believe there is a high probability of CNO valuing the
assets in the Beechwood trust at below 107% collateralization, which puts Q3
2016 consensus of $0.37 at risk, but the market has already priced in a
recapture.
Valuation Range: $18.00 to $20.00 from NE to NE
Our range is based on applying a 0.9x multiple to our Q3 2017E book value
estimate of around $23 per share ex. accumulated other comprehensive income
but including potential asset impairment charges related to Beechwood Re. Risks
to our range include adverse mortality, credit losses, and falling interest rates.
Investment Thesis:
We rate CNO shares Outperform. We like the company's fundamentals, potential
for ROE expansion, and cash tax benefits. We think its price multiple should
expand in the near term as the market has priced in an overly pessimistic
outcome related to its long-term care reinsurance transaction with Beechwood
Re.
Outperform
Sector: Life Insurance
Market Weight
Initiation of Coverage
2015A 2016E 2017E
EPS Curr. Prior Curr. Prior
Q1 (Mar.) $0.30 $0.27 A $0.34
Q2 (June) 0.31 0.35A 0.41
Q3 (Sep.) 0.30 0.35 0.42
Q4 (Dec.) 0.52 0.39 0.45
FY $1.41 $1.36 $1.62
CY $1.41 $1.36 $1.62
FY P/EPS 11.0x 11.4x 9.5x
Rev.(MM) $3,858 $3,922 $3,986
Source: Company Data, Wells Fargo Securities, LLC estimates, and Reuters
NA = Not Available, NC = No Change, NE = No Estimate, NM = Not Meaningful
V = Volatile, = Company is on the Priority Stock List
operating EPS
FY 2015 EPS impacted by timing of share repurchase
Ticker CNO
Price (09/22/2016) $15.46
52-Week Range: $14-21
Shares Outstanding: (MM) 175.1
Market Cap.: (MM) $2,700.0
S&P 500: 2,179.49
Avg. Daily Vol.: 1,564,850
Dividend/Yield: $0.32/2.1%
LT Debt: (MM) $912.0
LT Debt/Total Cap.: 19.9%
ROE: 7.0%
3-5 Yr. Est. Growth Rate: 10.0%
CY 2016 Est. P/E-to-Growth: 1.1x
Last Reporting Date: 07/26/2016
After Close
(212) 214-1416
(212) 214-8023

24
Investment Thesis
We think CNO’s intrinsic value in the long run is well supported by the company’s potential for ROE
expansion, its strong distribution network, and incremental cash tax benefits associated with the company’s
non-life net operating losses. In our opinion, CNO’s trading multiple should expand in the near term as the
market reacts to incremental information related to its long-term care reinsurance transaction with
Beechwood Re.
Valuation
CNO shares have declined roughly $5 per share since the beginning of June. Our worst-case scenario in a
recapture scenario only implies a $2 per share hit to book value per share (see Exhibit 3 on the following page
for more detail). If we apply a price-to-book multiple of 0.85x (one standard deviation below the three-year
average) to a forward book value estimate $2 per share lower than our current Q3 2017 estimate of $22.57, we
still get to an equity valuation of $17.48, implying the market has overreacted to the Beechwood news. If we
roll forward the current P/BV multiple of 0.73x that same lower estimate of Q3 2017 book, we would get to an
equity valuation of about $15 per share. Likewise, if we apply the current 10x forward P/E multiple to our
worst-case 2017E of $1.52, that would point to an equity value of around $15.20.
Exhibit 1. CNO Price To Book (ex AOCI) Multiple Exhibit 2. CNO Price To Earnings Multiple
0.73x
Average, 0.91x
0.6x
0.7x
0.8x
0.9x
1.0x
1.1x
Sep-13
Dec-13
Mar-14
Jun-14
Sep-14
Dec-14
Mar-15
Jun-15
Sep-15
Dec-15
Mar-16
Jun-16
Sep-16
PricetoBook(exAOCI)
CNO
CNO Average
9.80x
Average, 12.42x
8.0x
9.0x
10.0x
11.0x
12.0x
13.0x
14.0x
15.0x
16.0x
Sep-13
Dec-13
Mar-14
Jun-14
Sep-14
Dec-14
Mar-15
Jun-15
Sep-15
Dec-15
Mar-16
Jun-16
PricetoNTMEarnings
CNO
CNO Average
Source: FactSet and company data
Our valuation range of $18-20 brackets a 0.85x multiple against our current Q3 2017 book value per share (ex
AOCI) estimate of $22.57. We recognize applying a multiple one-standard deviation lower than the three-year
average may be warranted as a takeout premium has likely evaporated. Still, we can’t come to a scenario in
which CNO will have to raise equity capital to address the implications of a Beechwood recapture, and we
believe shares will melt up to our valuation range after the results of CNO’s audit are made public.
Investment Opportunities
We believe market has mis-priced impact of reinsurance recapture. CNO’s long path to recovery
toward investment grade status appeared to have hit a bump in July when news reports surfaced of links
between Beechwood Re Ltd. (Beechwood), and hedge fund Platinum Partners. Beechwood reinsured CNO’s
closed block long-term care business in 2014, which was a key component in the company’s quest to free up
capital. Platinum Partners is under investigation by Federal authorities. Last month, Fitch placed CNO ratings
on Rating Watch Negative.
 Our base case points to a $0.64 charge in Q3 and lower excess capital. If Beechwood cannot
collateralize the reserve trust to 107% due to Platinum losses, CNO would recapture its long-term care
policies. The company is in the process of auditing $126 million of Level 3 assets in the trust, which we
assume will be impaired. The results of the audit should be made public by CNO soon after September 30.
If we assume the audit results in an impairment of all $126 million of assets in question, plus a mark-to-
market impact on liabilities to reflect the low interest rates, we think the Q3 after-tax charge would be
around $100 million, or $0.64 per share. After factoring in the reversal of the $40 million capital relief
CNO experienced at the time of the reinsurance agreement and the higher capital charge for the remaining
$176 million lower rated Level 3 assets, we expect CNO’s excess capital would decline to about $275
million ($125 million deployable) from $375 million ($225 million deployable).

25
 No equity raise is required even in our worst case. In our worst case we assume all $302 million of
Level 3 assets in the trust will be impaired. Adding in the $50 million mark-to-market impact on
liabilities, the net charge in Q3 would be around $229 million after-tax, or $1.29 per share. Also factoring
in the reversal of the capital relief and higher capital charge on assets, we estimate the net draw down on
holdco excess capital would be around$250 million, which would wipe out the company’s $225 million
deployable (but not total) excess capital. As a result, we think CNO could suspend its share repurchase for
several quarters and/or potentially raise capital through debt issuance. In the “Worst Case” scenario
below, we suspend share repurchase for three quarters. Based on CNO’s recently giving up market
capitalization of around $500 million, we think the market has already priced in the worst case scenario
plus an equity raise (which we think is unlikely given the company’s debt capacity).
Exhibit 3. Base And Worst Case Scenarios For Recapture
After-tax charge
per share
2016E
EPS
2017E
EPS
2018E
EPS
2016
BVPS
2017
BVPS
2018
BVPS
Current Estimate NA $1.36 $1.62 $1.82 $21.57 $22.96 $24.45
Base Case Recapture $0.64 $0.71 $1.62 $1.82 $20.88 $22.23 $23.67
Worst Case Recapture $1.29 $0.06 $1.52 $1.70 $20.09 $21.25 $22.50
Note: BVPS ex. AOCI
Source: Company data and Wells Fargo Securities, LLC estimates
More about CNO’s long-term care reinsurance transaction. The announcement of CNO’s closed-block
LTC reinsurance agreement in 2014 whereby CNO ceded over $500 million of statutory reserves to Cayman-
domiciled Beechwood Re via 100% coinsurance was seen at the time as being significant for both CNO and
potentially the long-term care industry. For CNO, the deal was important because the in-force reserves and
liabilities associated with the LTC closed blocks were transferred and associated capital could be freed up. For
the industry, the potential read-through was that private capital was emerging to take on older long-term care
liabilities (something that hasn’t gained steam in the following 2+ years). We examine what we know of the
transaction and parties involved below:
 Beechwood. Beechwood Bermuda is a reinsurance and wealth management company. The company’s
Beechwood Re, Ltd. is a reinsurer licensed by the Cayman Islands Monetary Authority and the entity
which is CNO’s counterparty on the LTC transaction. According to the Wall Street Journal, Beechwood Re
is part-owned by family member trusts of the principals of a hedge fund called Platinum Partners
(Platinum). The paper also reported that Beechwood agreed to several deals in which the reinsurer bought
part of Platinum’s investment portfolio. The deals were later restructured.
 Platinum. Platinum Partners is a hedge fund firm that managed $1.25 billion at its peak and specialized
in esoteric assets such as distressed debt and life settlement contracts. The firm is now in liquidation after
one of the principals was arrested in relation to a union bribery investigation and the Wall Street Journal
reported the firm is the subject of a separate fraud investigation.
 Fitch. On August 3, Fitch placed CNO Financial Group on Ratings Watch Negative. The thrust of the
ratings agency’s reasoning is that the coinsurance agreements between CNO operating subsidiaries and
Beechwood require the LTC reserves to be over-collateralized to the tune of 7%. Given that CNO said it
could not independently verify the asset values of Level 3 assets in the Beechwood trust associated with
the LTC reserves, Fitch is concerned Beechwood would not be able to true up collateral in case of a
shortfall, in which case CNO subsidiaries Washington National Insurance Company (WNIC) and Bankers
Conseco Life Insurance Company (BCLIC) would be recaptured. We share Fitch’s concerns that recapture
of almost $600 million of LTC reserves would have negative implications for the capital adequacy of
WNIC and BCLIC.
 What the parties have said so far:
o CNO: On the Q2 2016 conference call, CNO Erik Helding said “where we stand today as of 6/30,
Beechwood appears to be in compliance with the agreements.” CNO framed the potential downside in
terms of $550 million of LTC reserves potentially coming back to the CNO operating companies if the
Beechwood trust was not adequately collateralized. The consolidated risk-based capital ratio is 450%,
which is higher than the businesses need. Of $376 million of holding company cash and investments.
$225 is viewed as being excess capital. The implication being that even if all $550 million of reserves
were recaptured, a combination of excess capital at the opco level plus holdco excess capital would be
enough to prevent a capital event.

26
o Beechwood. On August 15, Beechwood put out a release regarding loans to Platinum in which it
said: “there has been no apparent negative impact to these loans that represent a small portion of our
portfolio; and we continue to be confident in the strong security, strict covenants and over-
collateralization we have in place to protect against future potential downside risk.” On the same day,
Reuters reported that Beechwood had a $40 million collateralized loan to one of Platinum’s hedge
funds, and 3%-5% of its $2.4 billion investment portfolio is linked to Platinum.
Recapitalization. The story at CNO for several years has been that it is nearing investment grade status,
which would allow the company to recapitalize to assume a capital structure more typical of life insurance
holding companies. Currently, CNO has a debt-to-total capital leverage ratio of 19.9% (versus rule-of-thumb
25% for ‘AA’ rating), a consolidated risk-based capital (RBC) ratio of 448% with no variable annuity or
universal life with secondary guaranty exposure, and holdco cash and investments of $376 million. With more
leverage, CNO should be able to expand operating ROE beyond the 9% range reported in Q2 2016.
Distribution Network. CNO is able to sell new business in spite of its ratings largely through its own
distribution. Bankers Life has a dedicated field force of more than 4,600 producing career agents. The career
agents sell primarily supplemental health and long-term care insurance policies, life insurance, and annuities.
These agents typically visit the prospective policyholder’s home to conduct personalized “kitchen-table” sales
presentations. After the sale of an insurance policy, the agent serves as a contact person for policyholder
questions, claims assistance, and additional insurance needs.
Recently-launched distribution arms should help CNO utilize non-life NOLs. Since the former
Conseco emerged from bankruptcy, the company has utilized net operating loss (NOL) carryforwards
associated with life insurance businesses to pay no cash taxes, even though GAAP results show the statutory
effective tax rate. Now that CNO has utilized the life NOLs, it is turning its attention to the $838 million of
non-life loss carryforwards. The majority of these non-life NOLs expire in 2023. Using a 10% discount rate,
CNO estimates the economic value to be $450 million. The catch is that CNO cannot use these NOLs to offset
life insurance earnings. To better utilize the non-life NOLs, the company launched Bankers Life Securities, Inc.
and Bankers Life Advisory Services, Inc. After toying with the idea of running a holding-company-level
investment portfolio to make use of the NOLs, CNO hopes to generate distributions-sourced earnings instead.
Investment Risks
CNO to become a taxpayer in Q3 2016. Part of the bull thesis for CNO over the last decade was that the
company was not a cash taxpayer due to life net operating loss (NOL) carryforwards. The life NOLs were
substantially utilized in Q2 2016 and cash flows would be reduced by an estimated $17 million per quarter.
CNO still has $838 million in non-life carryforwards, against which a $177 million valuation allowance sits.
Long-term care claims experience. For both the Bankers Life long-term care business currently on
CNO’s books and the closed-block LTC we assume CNO will have to recapture from Beechwood, adverse claims
experience versus company assumptions will require higher levels of reserves. The Bankers Life book is
relatively younger in age with fewer guarantees versus the LTC industry as a whole. CNO can address reserve
deficiencies through retroactive premium rate increases on in force business.
Continuation of a low interest rate environment for an extended period may negatively impact
operating results and financial position. Although CNO is not among the group of most interest-rate
sensitive names in our universe, the company does have exposure to narrowing spreads in its whole life,
universal life, fixed rate and fixed indexed annuity contract. The weighted average fixed rate and fixed indexed
annuity guaranteed rate was 2.03% at year-end 2015. The weighted average universal life guaranteed crediting
rate was 3.06%.

27
Company Overview
CNO Financial Group was incorporated in 1979 by Stephen Hilbert as Security National of Indiana Corp.,
which bought Consolidated National Life Insurance Co. in 1983. The company attempted to diversify into
consumer financial service in 1998, but eventually entered Chapter 11 reorganization in 2002. Conseco
emerged from Chapter 11 nine months later in 2003 and thereafter focused solely on insurance. CNO is now a
holding company for a group of insurance companies operating throughout the United States that develop,
market, and administer health insurance, annuity, individual life insurance and other insurance products.
CNO manages its business through the following operating segments: Bankers Life, Washington National and
Colonial Penn, which are defined on the basis of product distribution; and corporate operations, comprised of
holding company activities and certain noninsurance company businesses.
Exhibit 4. Earnings Before Interest and Tax (Ex. Corporate) By Segment, 2015
Bankers Life ,
75.9%
Washington
National ,
22.9%
Colonial Penn ,
1.2%
Summary Business Unit Discussion
Bankers Life. The Bankers Life segment markets and distributes Medicare supplement insurance, interest-
sensitive life insurance, traditional life insurance, fixed annuities and long-term care insurance products to the
middle-income senior market through a dedicated field force of career agents, financial and investment
advisors, and sales managers supported by a network of community-based sales offices. The Bankers Life
segment includes primarily the business of Bankers Life and Casualty Company. Bankers Life also has various
distribution and marketing agreements with other insurance companies to use Bankers Life's career agents to
distribute Medicare Advantage and prescription drug plans products in exchange for a fee.
Exhibit 5. Bankers Life EBIT And Pre-Tax Operating
Margin ($ in millions)
Exhibit 6. Washington National EBIT And Pre-Tax
Operating Margin ($ in millions)
$291 $301 $311 $387 $370 171
12.1% 12.1% 12.3%
15.0%
14.2%
13.20%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
2011 2012 2013 2014 2015 H1 2016
$776 $899 $919 $903 $899 $450
12.4%
16.6%
15.3%
12.4% 12.4%
10.6%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
$1,000
2011 2012 2013 2014 2015 H1 2016
Source for both Exhibits: Company data and Wells Fargo Securities, LLC

28
Washington National. The Washington National segment markets and distributes supplemental health
(including specified disease, accident and hospital indemnity insurance products) and life insurance to middle-
income consumers at home and at the worksite. These products are marketed through Performance Matters
Associates of Texas, Inc. (a wholly owned subsidiary) and through independent marketing organizations and
insurance agencies including worksite marketing. The products being marketed are underwritten by
Washington National Insurance Company. This segment's business also includes certain closed blocks of
annuities and Medicare supplement policies which are no longer being actively marketed by this segment and
were primarily issued or acquired by Washington National.
Exhibit 7. Colonial Penn EBIT And Pre-Tax Operating Margin ($ in millions)
-$5
-$9
-$13
$1
$6
$16
-1.9%
-3.3%
-4.6%
0.3%
1.8%
-2.3%
-5.0%
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
-$15
-$10
-$5
$0
$5
$10
$15
$20
2011 2012 2013 2014 2015 H1 2016
Source for both Exhibits: Company data and Wells Fargo Securities, LLC
Colonial Penn. The Colonial Penn segment markets primarily graded benefit and simplified issue life
insurance directly to customers in the senior middle-income market through television advertising, direct mail,
the internet and telemarketing. The Colonial Penn segment includes primarily the business of Colonial Penn
Life Insurance Company.

29
Investment Portfolio
40|86 Advisors, Inc., a registered investment advisor and wholly owned subsidiary of CNO, manages the
investment portfolios of the company’s insurance subsidiaries. 40|86 Advisors had roughly $24.4 billion of
assets (at fair value) under management at December 31, 2015, of which $24.1 billion were CNO’s assets and
$.3 billion were assets managed for third parties. The company’s general account investment strategies are to:
(1) provide largely stable investment income from a diversified high quality fixed income portfolio; (2)
maximize and maintain a stable spread between CNO’s investment income and the yields the company pays on
insurance products; (3) sustain adequate liquidity levels to meet operating cash requirements, including a
margin for potential adverse development; (4) continually monitor and manage the relationship between
CNO’s investment portfolio and the financial characteristics of the company’s insurance reserves such as
durations and cash flows; and (6) maximize total return through active investment management. CNO’s
invested assets are predominately fixed rate in nature and their value fluctuates with changes in market rates,
among other factors (such as changes in the credit quality of the issuer).
Exhibit 8. Investment Portfolio By Asset Class, 6/30/2016
90.08%
8.67%
1.28%
1.25%
0.72%
Other Securities (Mostly Fixed
Rate)
Cash and Cash Equivalents
Securities Owned: Common
Corporate Equity
Policy Loans
Securities Owned: Preferred
Corporate Equity

30
Capital Profile
We summarize the financial strength ratios of CNO’s primary companies below.
Exhibit 9. Financial Strength Ratings of Primary Companies
Moody's S&P Fitch AM Best
Bankers Conseco Life Insurance Co. -
BBB+ (WN)
Affirm
8/1/2016
BBB+ (WN)
Affirm
8/3/2016
A-
Upgrade
8/26/2015
Bankers Life & Casualty Co.
Baa1 (OS)
Upgrade
5/11/2015
BBB+ (WN)
Affirm
8/1/2016
BBB+ (WN)
Affirm
8/3/2016
A-
Upgrade
8/26/2015
Colonial Penn Life Insurance Co.
Baa1 (OS)
Upgrade
5/11/2015
BBB+ (WN)
Affirm
8/1/2016
BBB+ (WN)
Affirm
8/3/2016
A-
Upgrade
8/26/2015
Washington National Insurance Co.
Baa1 (OS)
Upgrade
5/11/2015
BBB+ (WN)
Affirm
8/1/2016
BBB+ (WN)
Affirm
8/3/2016
A-
Upgrade
8/26/2015
Source: Moody’s, S&P, Fitch, AM Best, and Wells Fargo Securities, LLC
Management
Below we provide a background of each key member of management, along with current stock ownership.
Exhibit 10. Key Management
Name Position Approximate Age Background Ownership (% of O/S)
Edward John Bonach
Chief Executive
Officer
62
Former CNO CFO; also
National Life, Allianz
0.28
Erik Magnus Helding Executive VP & CFO 43 Joined in 2004; ran IR 0.00
Gary Chandru Bhojwani President 48
Joined in 2016; was
management at Allianz
0.00
Summary Financial Model
Our EPS estimates for 2016, 2017 and 2018 are based on the following key assumptions:
 Share repurchases of $276 million, $200 million and $200 million for full year 2016E, 2017E, and 2018E
respectively.
 Consolidated operating EPS annual growth of 18.9% in 2017E and 12.5% in 2018E.
 Bankers Life EBIT growth of 5.1% in 2017E and 2.7% in 2018E
 Washington National EBIT growth of 16.8% in 2017E and 10.0% in 2018E
 Corporate operating losses of $75 million for full year 2017E and $71 million for 2018E
 Tax rate of 34.0% for both full year 2017E and 2018E.

31
Exhibit 11. CNO Financial (CNO) Summary Earnings Model
$ Millions Except Per Share Data
Fiscal Year Ends December 31 2013 2014 2015 Q1 2016 Q2 2016 Q3 2016E Q4 2016E 2016E 2017E 2018E
EBIT BY SEGMENT
Bankers Life 311 387 370 78 93 86 90 346 364 374
Washington National 140 111 112 26 22 28 29 105 122 134
Colonial Penn (13) 1 6 (7) 3 2 4 2 4 2
Other CNO Business (28) - - 0 0 0 0 - - -
EBIT from Business Segments 411 499 487 97 118 115 122 453 490 510
Corporate, excluding interest expense 19 (28) (19) (8) (7) (8) (8) (31) (32) (32)
EBIT 430 471 468 89 111 107 114 421 458 478
Corporate Interest Expense 51 44 45 11 11 12 12 46 43 39
Income before realized gains, derivative & taxes 378 427 423 78 99 95 103 375 415 440
Tax Expense on Operating Income (130) (151) (148) (28) (36) (32) (35) (131) (141) (150)
Net operating earnings 248 277 275 50 64 63 68 244 274 290
Earnings of CLIC being sold 26 15 - - - - - - - -
Net realized investment gains 17 21 (31) (1) (4) (3) (3) (9) (10) (10)
Fair value changes in embedded derivative liabilities 23.0 (23.4) 7.7 (19.2) (16.5) - - (35.7) - -
Loss on extinguishment of debt, net of income taxes (137) (7) (2) (0) 0 0 0 (0) - -
Net income before valuation allowance for deferred ta 177 268 249 29 43 61 65 199 264 280
Decrease in the valuation allow ance for deferred tax assets 302 55 33 20 7 - - 27 - -
Misc (0) (8) (11) (4) 10 0 0 6 - -
Net income 478 317 271 46 60 61 65 231 264 280
Operating EPS, fully converted $1.18 $1.28 $1.41 $0.27 $0.35 $0.35 $0.39 $1.36 $1.62 $1.82
% Change 72% 9% 10% -8% 14% 20% -26% -4% 19% 12%
SHARE COUNTS
Average Diluted Shares Outstanding 233 216 195 182 182 178 176 180 169 160
Average Diluted Shares Outstanding, Treasury Method 230 216 195 182 182 178 176 180 169 160
Diluted Shares Outstanding, EOP 227 206 186 181 178 177 175 175 164 155
Shares repurchased 9 22 21 5 3 4 3 15 11 10
Average stock price used for repurchase 13 17 18 18.25 18.70 17.68 17.95 18 19 21
Dollar amount of share repurchases 119 377 365 90 61 75 50 276 200 200
KEY RATIOS
Investment Yield (market) 5.07% 5.10% 4.85% 4.71% 4.65% 4.74% 4.76% 4.73% 4.69% 4.69%
Investment Yield (book) 5.23% 5.33% 4.98% 4.80% 4.77% 4.89% 4.91% 4.84% 4.83% 4.82%
Average Yield on Notes Payable 10.9% 10.3% -1.0% -1.3% -1.4% 10.8% 10.8% -0.9% -0.5% -0.5%
Pre-tax operating margin 9.7% 11.1% 11.0% 8.2% 10.3% 9.8% 10.6% 9.7% 10.5% 10.9%
Operating expenses to revenues 18.1% 19.3% 1.9% 1.8% 2.0% 1.6% 1.1% 1.6% 1.5% 1.5%
Benefit ratio (benefits to premium) 87.6% 83.7% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Medicare supplement loss ratio (consolidated) 66.8% 67.8% 69.2% 70.6% 73.1% 71.5% 71.6% 71.7% 71.6% 71.9%
Supplemental Health loss ratio 79.4% 80.0% 84.0% 81.2% 85.7% 80.9% 80.9% 82.2% 80.0% 78.5%
Operating expenses to revenues 18.1% 19.3% 1.9% 1.8% 2.0% 1.6% 1.1% 1.6% 1.5% 1.5%
BVPS & ROE
BVPS, ex AOCI 19.17 19.00 20.30 20.58 20.87 21.21 21.57 21.57 22.96 24.45
BVPS, ex AOCI, ex NOL 14.79 14.98 16.36 16.61 17.08 17.52 18.02 18.02 20.07 22.37
ROE ex AOCI 6.9% 7.4% 7.3% 5.3% 6.9% 6.9% 7.4% 6.6% 7.5% 8.0%
ROE ex AOCI and NOL 8.8% 9.6% 9.2% 6.6% 8.5% 8.4% 8.9% 8.1% 8.8% 8.9%
BALANCE SHEET
Total Investments 27,152 24,908 24,487 24,936 25,997 26,038 26,162 26,162 26,837 27,540
% Total Assets 78.1% 79.9% 78.7% 79.3% 81.2% 81.2% 81.2% 81.2% 81.2% 81.2%
Total Assets 34,781 31,184 31,125 31,458 32,023 32,073 32,226 32,226 33,057 33,923
Total Liabilities 29,825 26,496 26,987 27,231 27,566 27,645 27,796 27,796 28,630 29,489
Shareholders equity, ex AOCI and preferred 4,223 3,863 3,736 3,686 3,678 3,650 3,652 3,652 3,650 3,656
Net NOL carrying value (965) (818) (724) (711) (668) (636) (601) (601) (460) (310)
Shareholders equity, ex AOCI, preferred and NOL 3,258 3,045 3,012 2,975 3,010 3,014 3,051 3,051 3,190 3,346
AOCI 732 825 403 541 778 778 778 778 778 778
Shareholders' equity, reported, ex preferred 4,955 4,688 4,139 4,227 4,456 4,428 4,429 4,429 4,427 4,434
Total liabilities and shareholders' equity 34,781 31,184 31,125 31,458 32,022 32,073 32,226 32,226 33,057 33,923
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Fargo Securities. Wells Fargo Securities does not provide the products and services on these websites and the
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32
Company Description:
CNO Financial Group is a holding company headquartered in Carmel, Indiana. Formerly known as Conseco,
Inc., operating subsidiaries include Bankers Life, Colonial Penn and Washington National. Through its
subsidiaries, CNO engages in the development, marketing, and administration of supplemental health
insurance, annuity, individual life insurance, and other insurance products for senior and middle-income
markets in the United States.

Principal Financial Group, Inc. EQUITY RESEARCH DEPARTMENT
33
Principal Financial Group, Inc.
PFG: Resuming Coverage With An Outperform Rating; Ring The Bell
 Summary: We are resuming coverage on Principal Financial with a change in
analyst, an Outperform rating on the shares and a valuation range of $56-60
per share. Our EPS estimates are $4.40 for 2016 and $4.80 for 2017. We like
the niches Principal has carved out in its business lines, which allow the
company to continue growing its operating earnings and expanding its ROE
even if rates stay lower for longer. We expect PFG’s price multiple will continue
to expand as the company shifts its earnings mix toward less capital-intensive,
fee-based earnings.
 The pushback: why would I want to buy a life insurer/asset
management/retirement company? The initial reaction to some investors
might be summed up as: “life insurers are tied to low interest rates, active asset
managers are going to the way of the dodo bird, and the 401(k) industry is in
net outflows as baby boomers retire and millennials are not saving…why should
I own Principal?” While there are elements of truth to all three statements, we
think PFG is a unique animal whose positioning has set itself up well relative to
larger peers who are standalone insurers or active asset managers.
 PFG is less tied to interest rates. PFG operates two lines of insurance:
group benefits and individual life. Together, these businesses contribute only
about 20% of PFG earnings.
 PGI was never a large third-party active manager of active core
equity strategies. While it is true established active managers have struggled
with the secular shift to passive from active management, PFG’s “pure” asset
management business Principal Global Investors (PGI, about 20% of total
earnings) has a differentiated boutique strategy, with most of the core equity
strategy money coming from Principal’s retirement business. PGI experienced
net inflows of $4 billion in 2Q 2016. We are forecasting positive net flows
through 2018.
 Int’l Retirement headwinds turning into tailwinds. We think future
retirement growth will come from PFG’s international pension business --
Principal International (PI). In 2015 and early 2016, the Brazilian recession
and a strengthening US dollar have acted as headwinds to US GAAP results in
the segment. With tailwinds including the Brazilian BOVESPA index 34%
higher year-to-date, we think PI earnings could grow at a double-digit CAGR
going forward.
 Q3 preview. We are forecasting EPS of $1.12 versus consensus of $1.10. Our
Q3 EPS estimate reflects stronger-than-expected equity market performance,
lower interest rates, and stronger emerging market currencies in general in the
quarter.
Valuation Range: $56.00 to $60.00 from NE to NE
Our range is based on a SOTP analysis, which ascribes specific values to PFG's
2017E fee-based earnings ($48), spread-based earnings ($7), risk-based earnings
($8), and corporate losses (-$6). Risks to our valuation range include spread
compression, credit losses, weak equity markets, and volatile FX.
Investment Thesis:
We rate PFG shares Outperform. We like the niches Principal has carved out in
its businesses, which do not leave the company dependent on risky insurance
products like variable annuities. As the percentage of earnings from fee-based
earnings increases from 70% to 75%, PFG's multiple should continue to expand.
Outperform
Sector: Life Insurance
Market Weight
Resumption of Coverage
2015A 2016E 2017E
EPS Curr. Prior Curr. Prior
Q1 (Mar.) $1.09 $0.97 A NC $1.16 NE
Q2 (June) 1.09 1.15 A NE 1.17 NE
Q3 (Sep.) 1.06 1.12 NE 1.20 NE
Q4 (Dec.) 1.02 1.16 NE 1.27 NE
FY $4.26 $4.40 NE $4.80 NE
CY $4.26 $4.40 $4.80
FY P/EPS 11.7x 11.3x 10.4x
Rev.(MM) $12,121 $12,350 $13,413
NA = Not Available, NC = No Change, NE = No Estimate, NM = Not Meaningful
V = Volatile, = Company is on the Priority Stock List
Operating EPS
Ticker PFG
Price (09/22/2016) $49.87
52-Week Range: $33-53
Shares Outstanding: (MM) 287.6
Market Cap.: (MM) $14,367.1
S&P 500: 2,179.49
Avg. Daily Vol.: 1,244,810
Dividend/Yield: $1.64/3.3%
LT Debt: (MM) $3,270.2
LT Debt/Total Cap.: 25.7%
ROE: 13.0%
3-5 Yr. Est. Growth Rate: 10.0%
CY 2016 Est. P/E-to-Growth: 1.1x
Last Reporting Date: 08/28/2016
After Close
(212) 214-1416
(212) 214-8023

34
Investment Thesis
Unlike pure life insurers, Principal has a path to operating earnings growth and ROE expansion even if long-
term interest rates stay at current low levels for an extended period of time. With a little help from global
equity markets, PFG can accelerate revenue growth and expand margins in its asset management and
retirement businesses without putting capital at risk. We like the niches Principal has carved out in its
businesses, which do not leave the company dependent on risky insurance products like variable annuities. As
the percentage of earnings from fee-based earnings increases from 70% to 75%, PFG’s multiple should
continue to expand.
Valuation
We prefer to use a sum-of-the parts valuation for Principal due to its disparate lines of business. For
comparison purposes, we break out the business segments by source of earnings: 1) Fee (asset management
and non-spread retirement businesses), 2) Spread and 3) Risk. For the fee businesses, we comp PFG against a
basket of asset managers including Blackrock (16.6x FactSet consensus 2017E), Franklin Resources (13.2x
2017E), and T Rowe Price (13.8x 2017E). For the spread and risk businesses, we look to life insurers without
both: 1) variable annuities with living benefits and 2) long-term care as comps.
Exhibit 1. Sum-Of-The-Parts Valuation
($ in millions, unless per share)
2017 E
Pre tax Earnings
($ millions)
P/E
Multiple
Implied Valuation
($ millions)
Per
Share
RIS - Fee 526.1
Principal Global Investors 471.5
Principal International 311.2
Total Fee 1,308.8
Assumed taxes @18% 237.0
Fee after tax earnings 1,071.8 13.0x 13,933 $48
RIS - Spread 306.4
Assumed taxes@33% 101.1
Spread after tax earnings 205.3 10.0x 2,053 $7
Individual Life Insurance 165.1
Specialty Benefits Insurance 206.4
Total risk 371.5
Assumed taxes@33% 122.6
Risk after tax earnings 248.9 9.5x 2,365 $8
Corporate and Other (235.5)
Assumed taxes@40% (94.2)
Corporate after tax earnings (141.3) 12.0x (1,696) ($6)
Total after tax Income 1,384.7 12.0x 16,655
Diluted Shares Outstanding (millions) 288
Valuation Range $56-$60

Principal Financial Group, Inc. EQUITY RESEARCH DEPARTMENT
35
Exhibit 2. PFG Price-To-Book (ex AOCI) Multiples Exhibit 3. PFG Price-To-Earnings Multiples
1.51xAverage, 1.57x
0.6x
0.8x
1.0x
1.2x
1.4x
1.6x
1.8x
2.0x Sep-13
Dec-13
Mar-14
Jun-14
Sep-14
Dec-14
Mar-15
Jun-15
Sep-15
Dec-15
Mar-16
Jun-16
Sep-16
PricetoBook(exAOCI)
PFG
PFG Average
10.66xAverage, 11.10x
7.0x
8.0x
9.0x
10.0x
11.0x
12.0x
13.0x
14.0x
Sep-13
Dec-13
Mar-14
Jun-14
Sep-14
Dec-14
Mar-15
Jun-15
Sep-15
Dec-15
Mar-16
Jun-16
PricetoNTMEarnings
PFG
PFG Average
Source: FactSet, company reports, and Wells Fargo Securities, LLC
Investment Opportunities
Tailwinds in Principal International. We think future retirement growth will come from PFG’s
international pension business -- Principal International (PI). In 2015 and early 2016, the Brazilian recession
and a strengthening US dollar have acted as headwinds to US GAAP results in the segment. On a currency-
neutral basis, PI earnings have seen mid-teens growth. Principal has pointed to potentially expanding in
Mexico where the company is #6 in the mandatory pension market. With tailwinds including the Brazilian
BOVESPA index 35% higher year-to-date and f/x comps getting easier, we think PI earnings could grow at a
double-digit CAGR going forward.
Exhibit 4. Brazilian BOVESPA is up 35% YTD Exhibit 5. Chilean Peso F/X Comps Getting Easier YoY
35,000
40,000
45,000
50,000
55,000
60,000
65,000
Sep-14
Oct-14
Nov-14
Dec-14
Jan-15
Feb-15
Mar-15
Apr-15
May-15
Jun-15
Jul-15
Aug-15
Sep-15
Oct-15
Nov-15
Dec-15
Jan-16
Feb-16
Mar-16
Apr-16
May-16
Jun-16
Jul-16
Aug-16
Sep-16
Series1
550
570
590
610
630
650
670
690
710
730
750
Sep-14
Oct-14
Nov-14
Dec-14
Jan-15
Feb-15
Mar-15
Apr-15
May-15
Jun-15
Jul-15
Aug-15
Sep-15
Oct-15
Nov-15
Dec-15
Jan-16
Feb-16
Mar-16
Apr-16
May-16
Jun-16
Jul-16
Aug-16
Sep-16
Chilean Peso Per USD
Source for both Exhibits: FactSet and Wells Fargo Securities, LLC
Principal Global Investors’ flows are trending better than the industry as a whole. While active
asset managers might be going to the way of the dodo bird, PGI was never a large third-party active manager of
active core equity strategies. While it is true established active managers have struggled with the secular shift
to passive from active management, PFG’s “pure” asset management business Principal Global Investors (PGI,
about 20% of total earnings) has a differentiated boutique strategy, with most of the core equity strategy
money coming from Principal’s retirement business. PGI experienced net inflows of $4 billion in 2Q 2016. We
are forecasting positive net flows through 2018, in part driven by the company’s strong investment
performance. As of the end of Q2 2016, 95% and 93% of Principal mutual funds, separate accounts and
Collective Investment Trust (CITs) were in the top two quartiles of Morningstar rankings. See Exhibit 6. In
addition to organic growth, the company has also pointed to potential M&A targets for PGI including
infrastructure and global real estate.

Life Insurance Initiation 092016

Life Insurance Initiation 092016

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