Release Date: July 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- CNO Financial Group Inc (CNO, Financial) reported a 94% increase in operating earnings per diluted share, reaching $1.05.
- The company achieved its eighth consecutive quarter of sales production growth and sixth consecutive quarter of growth in producing agent counts.
- Total new annualized premium increased by 4% across the enterprise, with Medicare Advantage sales up 78%.
- Book value per diluted share, excluding AOCI, rose by 11% to $36.
- CNO Financial Group Inc (CNO) raised its full-year guidance on operating earnings per share to $3.30 to $3.50, reflecting strong second-quarter results.
Negative Points
- Life production declined due to reduced spending on direct-to-consumer marketing, impacted by higher lead costs and increased competition for television media space.
- The company experienced higher surrender rates in fixed indexed annuities compared to the previous year.
- There is uncertainty regarding claims experience, which could potentially lead to less favorable results in future quarters.
- The company faces tougher comparables for agent count growth as the population of agents increases.
- CNO Financial Group Inc (CNO) has not provided a precise timeframe for achieving its target return on equity levels, which are currently below industry peers.
Q & A Highlights
Q: It sounds like the increase in the EPS guide and cash flow is mainly coming from better-than-expected earnings performance in the first half of the year. Are there certain items that may have flattered Q2's earnings that you think could continue into the second half of the year?
A: Two factors helped drive strong Q2 results that could continue: the portfolio yield benefiting from higher new money rates and favorable claims experience. The portfolio yield is expected to remain high, and we may continue portfolio optimization trades. Claims experience can vary, which is why we provide a range for EPS.
Q: A quarter ago, you talked about getting your ROE to peer levels. How do you define the time frame to get there?
A: We are focused on improving ROE but are not putting a precise time frame on it. Initiatives are underway to enhance ROE over the long term. The trailing 12-month ROE is 10% ex-significant items, reflecting an improvement trend. We aim to align with industry peers over time.
Q: On your raised guidance around excess cash flows to the HoldCo, should we expect higher cash flows going towards buybacks in 2024?
A: There is no change in how we deploy excess capital. However, following the debt offering in May, there is an opportunity to accelerate share repurchases over the next few quarters.
Q: Can you give more color on what you're seeing on claim trends within long-term care?
A: Long-term care margins reflect business growth and favorable claims experience. While current trends are positive, claims experience can vary, and future quarters may not be as favorable.
Q: You've onboarded many new agents over the past couple of years. Do you expect that to continue, and can you comment on the productivity of new agents?
A: We expect to continue growing agent counts, though comparables will get tougher. More importantly, we focus on growing agent productivity through products, services, and business integration. We believe productivity will drive long-term success.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
