BTIG analyst Mark Palmer in a Sept. 30 note downgradedCNO Financial GroupInc. to "neutral" from "buy" after the companyannounced that two of its units are recapturing $550 million of closed-block long-term careliabilities reinsured by Beechwood Re.

The move came after the New York State Department ofFinancial Services and the Indiana Department of Insurance decided that many ofthe assets managed by Beechwood Re did not comply with applicable insuranceregulatory requirements.

The company expects the recapture to result in a $55 millionafter-tax charge, but the analyst said the company has included an additional$90 million in Level 3 assets in its audit of Beechwood Re's assets, whichcould result in additional hits to its book value beyond the expected $55million charge.

The company initially started an audit of $116 million ofLevel 3 assets, and has now reduced the carrying value of those assets by 43%,the analyst noted. The audit is expected to be completed during the fourthquarter.

Palmer said CNO Financial will transfer $200 million to thetwo subsidiaries, Bankers ConsecoLife Insurance Co. and Washington National Insurance Co., and suspend its sharebuyback program to account for the recapture.

The analyst's EPS estimates for CNO Financial are $1.38 for2016 and $1.48 for 2017.