CNO Financial Group(CNO) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - CNO Financial Group reported operating earnings per diluted share of $3.97, an increase of 28% year-over-year, with a 40% increase when excluding significant items [10][32] - Total new annualized premium was up 7% across the enterprise, marking the tenth consecutive quarter of sales growth [9][10] - Book value per diluted share, excluding AOCI, was$ 37.19, up 10% [12] - Capital and liquidity were well above target levels, with $349 million returned to shareholders, a 50% increase over 2023 [12][32] Business Line Data and Key Metrics Changes Consumer Division - Total NAP in the Consumer Division was up 5% for the full year, with health NAP up 18% and Medicare Supplement NAP up 26% [15][16] - Long-term Care NAP increased by 35% for the year, reflecting growing demand [18] - Annuity collected premiums were up 13% for the year, with record sales in the last two quarters [20][21] Worksite Division - Worksite Division insurance sales were up 16% for the full year and 23% for the fourth quarter, marking the 11th consecutive quarter of insurance growth [25] - New insurance products in the Worksite Division saw double-digit sales growth, with critical illness up 24% and accident insurance up 13% [25][26] - Producing agent count in the Worksite Division was up 8% for the year, continuing a trend of growth [29] Market Data and Key Metrics Changes - Client assets in brokerage and advisory were up 28% to a record$ 4.1 billion, with new accounts up 13% [21] - The market value of invested assets grew 12% from the prior year, with 96% of the fixed maturity portfolio rated investment-grade [41] Company Strategy and Development Direction - CNO is focused on expanding return on equity (ROE) and has set a target to improve ROE by 150 basis points over the next three years [55] - The company is investing in technology modernization to enhance operational efficiency and support long-term growth [49][58] - CNO aims to leverage its strong sales momentum and agent distribution to drive future growth [24][30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in continued demand for annuities due to demographic trends and a lack of alternatives for lifetime income [75] - The company anticipates challenges in matching previous quarters' performance due to tougher comparisons but remains optimistic about long-term growth [76] - Management highlighted the importance of maintaining expense discipline while pursuing growth opportunities [66][108] Other Important Information - The new money rate was reported at 6.72%, marking the eighth consecutive quarter above 6% [38] - CNO's consolidated risk-based capital ratio was 383%, indicating a strong capital position [42] Q&A Session Summary Question: Thoughts on buybacks and excess free cash flow guidance - Management indicated that free cash flow guidance should be considered alongside excess cash position relative to minimum liquidity [63] Question: Geographic expansion opportunities - Management believes there is significant potential for geographic expansion, particularly in the Worksite Division [66] Question: Additional Bermuda opportunities - Management is evaluating opportunities in Bermuda but did not provide specifics, focusing on establishing relationships and team capabilities [70] Question: Surrender rates and sales activity in fixed indexed annuities - Surrender rates have moderated, and management is optimistic about continued strong sales activity in annuities [72][74] Question: Breakdown of tech investments - The technology investment focuses on converting legacy systems to cloud-based solutions to enhance flexibility and efficiency [80][81] Question: Confidence in ROE improvement - Management emphasized a cautious approach to guidance, highlighting a strong track record and various initiatives to support ROE growth [90][94] Question: Drivers of excess cash flow outlook - The outlook for excess cash flow is influenced by organic growth pace, economic conditions, and investment portfolio risk [108] Question: Long-term expense ratio expectations - Management expects the expense ratio to improve over time as the company grows and develops operating leverage [112]