(Updates shares in second paragraph.)
Feb. 12 (Bloomberg) -- CNO Financial Group Inc., the insurer that counts John Paulson’s hedge fund firm among its biggest investors, gained in New York trading after announcing a deal to limit risk of losses on long-term care policies.
The insurer rose 3.2 percent to $17.84 at 4:10 p.m. Carmel, Indiana-based CNO has rallied 63 percent in the past year, compared with the 23 percent advance of the Russell 2000 Index.
Beechwood Re Ltd. agreed to take on obligations tied to the policies with CNO ceding $590 million, mostly in reserves, the reinsurer said in a statement today. CNO is among insurers burned by higher-than-expected costs on the coverage, which helps pay for home-health aides or residence in nursing homes. Low interest rates also pressured returns.
The risk transfer is a “key catalyst that we believe could propel the stock to another level,” Mark Palmer, an analyst at BTIG LLC, said in a note to clients. The deal “will put CNO in a better position to bolster its already robust share repurchase program.”
CNO announced in December it would buy back as much as $300 million in securities. Palmer has a buy rating on the stock.
Fourth-quarter net income rose 4.7 percent to $106 million, CNO said in a separate statement late yesterday. Operating profit, which excludes some investment results, was 33 cents a share, beating by four cents the average estimate of seven analysts surveyed by Bloomberg. Full-year net income in 2013 more than doubled to a record $478 million.
CNO earnings and estimates: CNO <Equity> EE <GO> CNO risk profile: CNO <Equity> RSKC <GO> CNO shareholders: CNO <Equity> PHDC1 <GO> Top insurance news: TINS <GO>
--Editors: Dan Kraut, Steven Crabill