CNO Financial Group, Inc.CNO
CNO Financial Group, Inc. Income Taxes Disclosure
INCOME TAXES
The components of income tax expense were as follows (dollars in millions):
| 2025 | 2024 | 2023 | |||||||||||||||
Income from continuing operations | $ | 293.4 | $ | 539.9 | $ | 356.8 | |||||||||||
Current tax expense (benefit): | |||||||||||||||||
U.S. | 53.4 | 23.3 | 53.1 | ||||||||||||||
State and local | 10.3 | 3.1 | 15.2 | ||||||||||||||
Total current tax expense (benefit) | $ | 63.7 | $ | 26.4 | $ | 68.3 | |||||||||||
Deferred tax expense (benefit): | |||||||||||||||||
U.S. | 1.1 | 82.9 | 14.9 | ||||||||||||||
State and local | (0.7) | 9.8 | (2.9) | ||||||||||||||
Total deferred tax expense (benefit) | 0.4 | 92.7 | 12.0 | ||||||||||||||
| Total income tax expense | $ | 64.1 | $ | 119.1 | $ | 80.3 | |||||||||||
A reconciliation of the U.S. statutory corporate tax rate to the effective rate reflected in the consolidated statement of operations is as follows:
| December 31, 2025 | December 31, 2024 | December 31, 2023 | ||||||||||||||||||||||||
Amount | Percent | Amount | Percent | Amount | Percent | |||||||||||||||||||||
U.S. federal statutory tax rate | $ | 61.6 | 21.0 | % | $ | 113.4 | 21.0 | % | $ | 74.9 | 21.0 | % | ||||||||||||||
State and local income taxes, net of federal income tax effect (a) | 7.1 | 2.4 | 12.9 | 2.4 | 8.0 | 2.2 | ||||||||||||||||||||
Tax credits | (2.1) | (0.7) | (0.7) | (0.1) | (1.2) | (0.3) | ||||||||||||||||||||
Nontaxable or nondeductible items: | ||||||||||||||||||||||||||
Limitations on deduction for executive compensation (IRC §162 (m)) | 4.4 | 1.5 | 3.5 | 0.6 | 4.4 | 1.2 | ||||||||||||||||||||
Tax benefits related to share-based compensation ("windfall benefits") | (3.7) | (1.3) | (0.8) | (0.1) | (1.2) | (0.3) | ||||||||||||||||||||
| Tax-exempt interest and dividends received deduction | (5.7) | (1.9) | (5.8) | (1.1) | (3.2) | (0.9) | ||||||||||||||||||||
| Tax-exempt income from company-owned life insurance | (5.5) | (1.9) | (2.4) | (0.4) | (2.8) | (0.8) | ||||||||||||||||||||
Goodwill impairment | 6.4 | 2.2 | — | — | — | — | ||||||||||||||||||||
All other, net (under 5%) | 1.6 | 0.6 | (1.0) | (0.3) | 1.4 | 0.4 | ||||||||||||||||||||
| Effective tax rate | $ | 64.1 | 21.9 | % | $ | 119.1 | 22.0 | % | $ | 80.3 | 22.5 | % | ||||||||||||||
____________________
(a) In 2025, state taxes in Illinois and Florida made up the majority (greater than 50 percent) of the tax effect in this category. In 2024, state taxes in Illinois and Indiana made up the majority of the tax effect in this category. In 2023, state taxes in Illinois, Florida, New York, and Pennsylvania made up the majority of the tax effect in this category.
The components of income taxes paid, net of refunds, were as follows (dollars in millions):
Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
Income taxes paid, net of refunds: | |||||||||||||||||
U.S. | $ | 32.7 | $ | 44.3 | $ | 44.8 | |||||||||||
State and local | 5.0 | 10.8 | 14.3 | ||||||||||||||
Total income taxes paid, net of refunds | $ | 37.7 | $ | 55.1 | $ | 59.1 | |||||||||||
Income taxes paid (net of refunds) exceeded 5 percent of total income taxes paid (net of refunds) in the following jurisdictions (dollars in millions):
Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
Illinois | (a) | $ | 3.4 | (a) | |||||||||||||
Florida | (a) | 3.0 | 4.3 | ||||||||||||||
_____________
(a) Jurisdiction below the threshold for the period presented.
The components of the Company's income tax assets and liabilities are summarized below (dollars in millions):
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Net federal operating loss carryforwards | $ | 205.0 | $ | 72.2 | |||||||
| Net state operating loss carryforwards | 38.0 | 4.4 | |||||||||
| Capital loss carryforwards | 11.3 | 1.2 | |||||||||
| Insurance liabilities | 362.3 | 325.5 | |||||||||
| Indirect costs allocable to self-constructed real estate assets | 0.9 | 205.1 | |||||||||
| Accumulated other comprehensive loss | 310.3 | 385.1 | |||||||||
| Other | 19.2 | 18.2 | |||||||||
| Gross deferred tax assets | 947.0 | 1,011.7 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Investments | (47.9) | (40.8) | |||||||||
| Present value of future profits and deferred acquisition costs | (187.4) | (184.3) | |||||||||
| Gross deferred tax liabilities | (235.3) | (225.1) | |||||||||
| Net deferred tax assets | 711.7 | 786.6 | |||||||||
| Current income taxes prepaid (accrued) | 1.6 | 27.5 | |||||||||
| Income tax assets, net | $ | 713.3 | $ | 814.1 | |||||||
Effective January 1, 2024, the Company elected to change its tax method of accounting for indirect costs allocable to
self-constructed real estate assets. The change in accounting method results in a tax deduction of certain indirect costs
previously capitalized under the Company's prior method of accounting. In the second quarter of 2024, the Internal Revenue Service (the "IRS") revised the list of tax method accounting changes that require approval from the IRS to include tax method accounting changes related to indirect costs allocable to self-constructed real estate assets. Previously, only a taxpayer-initiated election was necessary and formal IRS approval was not required. The Company requested approval for its tax method change in June 2024. At December 31, 2024, the Company had not yet received approval from the IRS and was therefore required to account for the existing tax assets under the prior tax method of accounting. In March 2025, the Company executed a consent agreement with the IRS that provides formal approval for the tax method
change. As a result, the Company recharacterized the remaining $797.6 million of capitalized indirect costs under the prior accounting method to a NOL with no expiration date.
We evaluate the need to establish a valuation allowance for our deferred income tax assets on an ongoing basis using a deferred tax valuation model. Our model is adjusted to reflect changes in our projections of future taxable income. Our estimates of future taxable income are based on evidence we consider to be objectively verifiable. At December 31, 2025, our projection of future taxable income for purposes of determining the valuation allowance is based on our estimates of such future taxable income through the date our NOLs expire. Such estimates are subject to numerous risks and uncertainties and the extent to which actual impacts differ from the assumptions used in our deferred tax valuation model. Based on our assessment, we have concluded that it is more likely than not that our net deferred tax assets of $711.7 million will be realized through future taxable earnings.
Recovery of our deferred tax asset is dependent on achieving the level of future taxable income projected in our deferred tax valuation model and failure to do so could result in the recognition of a valuation allowance in a future period. The recognition of a valuation allowance would increase income tax expense and reduce shareholders' equity.
Section 382 of the Code imposes limitations on a corporation's ability to use its NOLs when the company undergoes a 50 percent ownership change over a three-year period. Future transactions and the timing of such transactions could cause an ownership change for Section 382 income tax purposes. Such transactions may include, but are not limited to, additional repurchases under our securities repurchase program, issuances of common stock and acquisitions or sales of shares of CNO stock by certain holders of our shares, including persons who have held, currently hold or may accumulate in the future five percent or more of our outstanding common stock for their own account. Many of these transactions are beyond our control. If an ownership change were to occur for purposes of Section 382, we would be required to calculate an annual restriction on the use of our NOLs to offset future taxable income. The annual restriction would be calculated based upon the value of CNO's equity at the time of such ownership change, multiplied by a federal long-term tax-exempt rate (3.58 percent at December 31, 2025), and the annual restriction could limit our ability to use a substantial portion of our NOLs to offset future taxable income or may defer the utilization of such NOLs. We regularly monitor ownership change (as calculated for purposes of Section 382) and, as of December 31, 2025, we were below the 50 percent ownership change level that could limit our ability to utilize our NOLs.
In 2009, the Company's Board of Directors adopted a Section 382 Rights Agreement designed to protect shareholder value by preserving the value of our tax assets primarily associated with tax NOLs under Section 382. The Section 382 Rights Agreement was adopted to reduce the likelihood of an ownership change occurring by deterring the acquisition of stock that would create "5 percent shareholders" as defined in Section 382. The Section 382 Rights Agreement has been amended five times, most recently effective November 13, 2023 (the "Fifth Amended and Restated Section 382 Rights Agreement"). The Fifth Amended and Restated Section 382 Rights Agreement extended the expiration date of the Section 382 Rights Agreement to November 13, 2026, updated the purchase price of the rights described below and provided for a new series of preferred stock relating to the rights that is substantially identical to the prior series of preferred stock. The Company's shareholders approved the Fifth Amended and Restated Section 382 Rights Agreement at the Company's 2024 annual meeting.
Under the Section 382 Rights Agreement, one right was distributed for each share of our common stock outstanding as of the close of business on January 30, 2009 and for each share issued after that date. Pursuant to the Fifth Amended and Restated Section 382 Rights Agreement, if any person or group (subject to certain exemptions) becomes an owner of more than 4.99 percent of the Company's outstanding common stock (or any other interest in the Company that would be treated as "stock" under applicable Section 382 regulations) without the approval of the Board of Directors, there would be a triggering event causing significant dilution in the voting power and economic ownership of that person or group. Shareholders who held more than 4.99 percent of the Company's outstanding common stock as of November 13, 2023 will trigger a dilutive event only if they acquire additional shares exceeding one percent of our outstanding shares without prior approval from the Board of Directors.
In 2010, our shareholders approved an amendment to CNO's certificate of incorporation designed to prevent certain transfers of common stock which could otherwise adversely affect our ability to use our NOLs (the "Original Section 382 Charter Amendment"). Subject to the provisions set forth in the Original Section 382 Charter Amendment, the transfer
restrictions generally will restrict any direct or indirect transfer (such as transfers of our common stock that results from the transfer of interests in other entities that own our stock) if: (i) the transferor is a person or public group (as defined in the regulations under Section 382) who directly or indirectly owns or is deemed to own 4.99% or more of our common stock; (ii) the effect of the transfer would be to increase the direct or indirect ownership of our common stock by any person or public group from less than 4.99% to 4.99% or more of our common stock; or (iii) the effect of the transfer would be to increase the percentage of our common stock owned directly or indirectly by a person or public group owning or deemed to own 4.99% or more of our common stock. The Original Section 382 Charter Amendment was amended and extended in 2013, 2016, 2019, 2022, and 2025 (the "2025 Section 382 Charter Amendment"). The expiration date for the 2025 Section 382 Charter Amendment is July 31, 2028.
We have $976.4 million of federal NOLs as of December 31, 2025, as summarized below (dollars in millions):
| Net operating loss | ||||||||
| Year of expiration | carryforwards | |||||||
2032 through 2035 | $ | 16.5 | ||||||
| No expiration date | 959.9 | |||||||
Total federal NOLs | $ | 976.4 | ||||||
Our non-life NOLs with expiration dates can be used to offset 35 percent of life insurance company taxable income and 100 percent of non-life company taxable income until all non-life NOLs are utilized or expire. Our non-life NOLs with no expiration date of $832.4 million can be used to offset 35 percent of life insurance company taxable income and 80 percent of non-life company taxable income. Our life NOLs with no expiration date of $127.5 million can be used to offset 80% of life company taxable income, subject to certain limitations in the Code.
We also had deferred tax assets related to NOLs for state income taxes of $38.0 million at December 31, 2025, primarily resulting from the tax method change discussed previously, and $4.4 million at December 31, 2024. The related state NOLs are available to offset future state taxable income in certain states and are expected to be fully utilized prior to expiration.
The Company had a capital loss carryforward of $53.7 million and $5.6 million as of December 31, 2025 and 2024, respectively. Capital loss carryforwards can be carried forward for up to five years to offset future capital gains. We expect this carryforward to be fully utilized prior to the expiration date in 2030.
The IRS is conducting an examination of our 2016 through 2018 tax returns. The federal statute of limitations remains open with respect to tax years 2016 through 2025. The Company's various state income tax returns are generally open for tax years based on individual state statutes of limitation. Generally, for tax years which generate NOLs, capital losses or tax credit carryforwards, the statute remains open until the expiration of the statute of limitations for the tax year in which such carryforwards are utilized. The outcome of tax audits cannot be predicted with certainty. If the Company's tax audits are not resolved in a manner consistent with management's expectations, the Company may be required to adjust its provision for income taxes.
On July 4, 2025, the One Big Beautiful Bill Act of 2025 was enacted in the United States, which among other things, provides permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. These changes primarily impacted the timing of our tax deductions and did not have a material impact on our financial position or results of operations.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 24, 2026 | Showing above |
| 2024 | Feb 26, 2025 | |
| 2023 | Feb 23, 2024 | |
| 2022 | Feb 24, 2023 | |
| 2021 | Feb 24, 2022 | |
| 2020 | Feb 24, 2021 | |
| 2019 | Feb 25, 2020 | |
| 2018 | Feb 26, 2019 | |
| 2017 | Feb 23, 2018 | |
| 2016 | Feb 21, 2017 | |
| 2015 | Feb 19, 2016 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.