CNO Financial Group(CNO) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Operating earnings per diluted share were $1.11, up 26% from the previous year, and$ 0.94, up 27% excluding significant items [6] - Book value per diluted share excluding AOCI was $35.84, up 6% [9] - The expense ratio was 18.8% for the quarter and 19.2% on a trailing 12-month basis [27] - Operating return on equity was 11.7% as reported and 10.5% excluding significant items [28] Business Line Data and Key Metrics Changes - Total new annualized premium (NAP) was up 1% across the enterprise, with a 7% increase excluding direct-to-consumer [7] - Consumer Division's NAP from field sales was up 9%, and Health NAP was up 11% [12] - Long-Term Care NAP was up 31%, marking the fifth consecutive quarter of double-digit growth [15] - Annuity collected premiums were up 25%, with account values up 6% [18] - Worksite Division's NAP was up 4%, representing the 10th consecutive quarter of growth [21] Market Data and Key Metrics Changes - Client assets in brokerage and advisory were up 35% to a record$ 3.9 billion [19] - The market value of invested assets grew 21% in the quarter [38] - Approximately 97% of the fixed maturity portfolio was investment-grade rated [39] Company Strategy and Development Direction - The company aims to optimize the balance between production, profitability, and capital management [9] - Focus on expanding the Medicare portfolio and enhancing distribution capabilities [13][14] - Continued emphasis on improving return on equity through various operational efficiencies [30][79] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the business's performance and the favorable economic environment for middle-income consumers [45][70] - The company anticipates strong sales growth translating into earnings growth, establishing a solid foundation for future results [45] - Management remains bullish on market opportunities driven by demographic trends and the lack of public solutions for retirement income [70] Other Important Information - The company returned $107 million to shareholders during the quarter [9] - The new money rate exceeded 6% for the seventh consecutive quarter [8] - The company raised and narrowed guidance for operating earnings per share to between$ 3.50 and $3.60 for the full year [42] Q&A Session Summary Question: Can you talk about the long-term care announcement regarding the reinsurance arrangement? - Management expressed a strong belief in the long-term care business and the decision to retain 100% of new business is a reflection of confidence in its performance [48][49] Question: How will the organizational changes impact the direct expense ratio? - Management indicated that the recent actions taken will improve run rate expenses and contribute to return on equity improvements [52] Question: What is the outlook for free cash flow sustainability? - Management emphasized that the business generates healthy levels of free cash flow, although future capital investments may affect this [56] Question: How sensitive is the company to short-term rate changes? - Management noted that floating rate assets are largely matched against floating rate liabilities, minimizing the impact of short-term rate changes [60] Question: What is the company's strategy for cutting fixed expenses? - Management highlighted a continuous focus on efficiency to free up resources for business growth [63] Question: What are the market opportunities for sales in the near term? - Management remains bullish on market opportunities driven by demographic trends and the lack of public solutions for retirement income [70]