CNO Financial Group(US:CNO)2026-02-06 17:02Financial Data and Key Metrics Changes - CNO Financial Group achieved an operating return on equity of 11.4%, an improvement from 10% in 2024, and is on track to reach a target of 12% by 2027 [13][19] - Operating earnings per diluted share increased to $4.40, reflecting an 11% growth, with full-year operating earnings per share exceeding guidance at $4.02 [5][13] - The company returned $386 million to shareholders, marking an 11% increase over 2024, and raised its quarterly common stock dividend for the 13th consecutive year [7][23] Business Line Data and Key Metrics Changes - The consumer division reported a record total new annualized premium (NAP) growth of 15%, with life NAP up 10% and Medicare Supplement NAP up 49% for the year [8][9] - The worksite division also saw record insurance sales, up 15% for the full year, with life insurance sales increasing by 36% [11][12] - Overall, the company experienced its 14th consecutive quarter of sales growth across both divisions [4][11] Market Data and Key Metrics Changes - Total health NAP increased by 22%, marking 14 consecutive quarters of growth, while Medicare Advantage policies sold decreased by 3% for the year [9][10] - The company holds over $18 billion in client assets, reflecting an 11% increase from 2024, with brokerage and advisory client assets up 24% [10][11] Company Strategy and Development Direction - CNO Financial Group focuses on the underserved middle-income market, leveraging a last-mile captive agent distribution model as a competitive advantage [5][8] - The company is investing in technology modernization with a planned investment of approximately $170 million over three years, with $20 million deployed in 2025 and $75 million expected in 2026 [21][22] - The strategic exit from the fee services business within the worksite division is progressing on schedule, expected to be completed in the first half of 2026 [12] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns about the lack of visibility in the economic environment, citing potential challenges from layoffs and job market conditions affecting consumer behavior [30][31] - Despite economic pressures, the company remains optimistic about the demand for Medicare products, with 11,000 Americans turning 65 daily, presenting ongoing opportunities [10][32] - The company anticipates continued growth in producing agent count and productivity, emphasizing the importance of agent productivity over mere count [28][29] Other Important Information - The effective tax rate on operating income was 20.6%, below the guidance range, due to tax strategies implemented in the fourth quarter [14] - The company ended the year with a consolidated risk-based capital ratio of 380%, within the target range of 360%-390% [17][18] Q&A Session Summary Question: Earnings emergence and target returns - Management indicated that the time to hit target returns varies by product, but confidence remains high due to strong sales trends [25][26] Question: Environment outlook and agent count growth - Management expects to grow producing agent count in 2026, emphasizing productivity as the primary focus [28][29] Question: Sustainability of growth levels - Management acknowledged potential headwinds but remains comfortable with guidance, expecting continued growth in Medicare Supplement sales [40][42] Question: Impact of Medicare Advantage distribution fees - Management reflected expectations of pressure on Medicare Advantage, focusing more on Medicare Supplement [44] Question: Capital deployment strategy - Management plans to return excess capital to shareholders through share repurchases while being measured in capital deployment [47][48] Question: Investment portfolio exposure to software - Management reported a small exposure to software in the investment portfolio, with a focus on mission-critical software [72][73] Question: Dynamics of turning 65 and product positioning - Management expects the number of individuals turning 65 to remain stable until around 2030, presenting ongoing opportunities for the company [79][81]