CNO Financial Group, Inc.

Ladies and gentlemen, thank you for standing by and welcome to today's C&O Financial Group third quarter 2020 earnings call. After the speaker's remarks, there will be a question and answer session. To ask a question during this time, simply press star and the number one on your telephone keypad. If you require any further assistance throughout the call, please press star zero. I would now like to turn the call over to your speaker today, Jennifer Child, VP of Investor Relations. Please go ahead.

Thank you, Operator. Good morning, and thank you for joining us on C&O Financial Group's third quarter 2020 earnings conference call. Today's presentation will include remarks from Gary Bhojwani, Chief Executive Officer, and Paul McDonough, Chief Financial Officer. Following the presentation, we will also have several other business leaders available for the question and answer period. During this conference call, we will be referring to information contained in yesterday's press release. You can obtain the release by visiting the media section of our website at cnoinc.com. This morning's presentation is also available in the investors section of our website and was filed in a form 8K yesterday. We expect to file our form 10Q and post it on our website on or before November 6th. Let me remind you that any forward-looking statements we make today are subject to a number of factors which may cause actual results to be materially different than those contemplated by the forward-looking statements. Today's presentations contain a number of non-GAAP measures which should not be considered as substitutes for the most directly comparable GAAP measures. You'll find a reconciliation of the non-GAAP measures to the corresponding GAAP measures in the appendix. Throughout the presentation, We will be making performance comparisons, and unless otherwise specified, any comparisons made will be referring to changes between third quarter 2019 and third quarter 2020. And with that, I'll turn the call over to Gary.

Thanks, Jennifer. Good morning, everyone, and thank you for joining us. I'm very pleased with our record third quarter financial performance. These results underscore the continued strength of our model and the resiliency of our business during these unprecedented times. When I look back at what we've accomplished over the past 10 months, I am extremely proud of our associates, agents, and leadership team. In January, we announced our enterprise transformation and began the process of realigning our three segments into two divisions. Even before COVID, changing consumer behaviors and expectations drove this decision. As part of our long-term plan, we knew we needed to adjust our model to enable us to better reach consumers how and where they want to do business. C&O has a unique set of capabilities and our 5,000-agent-strong exclusive distribution force and our top five direct-to-consumer business. It's the combination of these businesses that allows us to pursue our current strategy. COVID-19 accelerated a shift in consumer buying behaviors that was already underway and sparked other changes that we could not have predicted. Many of these changes may prove to be permanent. The pandemic also accelerated our transformation. In March, we deployed enhanced technology tools and training to enable our agents to continue to serve customers through virtual consultations and digital insurance applications. In response to new customer and worksite employer needs, we began advancing our own strategic plans and technology investments. By fast-tracking various digital direct-to-consumer and cross-channel collaboration programs, we accomplished in about six weeks what was originally expected to take more than six months. Throughout this unprecedented year, our teams have pulled together to support our agent force, rebuild sales, and drive productivity and efficiency gains all while serving our customers with minimal disruption. I'd like to take a moment to thank the customers that put their trust in us every day and our agents and associates that work so tirelessly to deliver on our promises. This quarter, CNO was certified as a great place to work in our first year of participating in the survey. We are very proud of this recognition. Our people truly make CNO a great place to work. Turning to slide four, we continue to operate from a position of strength. Operating earnings were up 63% and operating earnings per share were up 76%. We're seeing continued sequential improvement in nearly all of our key metrics and premium collections continue unbated across both divisions. The overall product margin in the quarter was robust due primarily to fewer health claims as consumers deferred medical care. Even excluding these and other factors, which we believe are largely temporary, Our insurance product margin remains strong, up $3 million, or 1%. Discretionary spending was strictly controlled, and our capital and liquidity positions remained solid. We ended the quarter with an RBC ratio of 428% and $236 million in cash at the holding company. These levels are after returning $67 million to shareholders, including $50 million in stock buybacks. Turning to our growth scorecard on slide five. Three of our five metrics were up year over year. Life sales were up a solid 19%, fueled by both continued strong direct consumer growth and exclusive field agent sales. Health sales showed significant sequential improvement but remained down 16% over the prior year. Overall life and health sales were essentially flat this quarter relative to the prior year period. which reflects a marked improvement over last quarter's sales. Insurance collected premium growth accelerated to 3.3% driven by continued strong persistency and cumulative sales growth over the past year in life and health. Turning to our consumer division on slide six. The COVID-19 crisis continues to draw attention to the critical need for insurance products among our consumer base. Sales of life insurance remained strong in the third quarter while supplemental health and long-term care rebounded nicely. Our Medicare supplement sales remain challenged. Life insurance sales were up 25% for the quarter and up 19% year-to-date. Direct-to-consumer life sales were up 23%, which comprised just over half of our total life sales. Life sales generated by our exclusive field agents were up 29%, the highest growth rate we've experienced in several years. As you know, our consumer channels have been managed as a single division since February. Our third quarter results demonstrate the strength of this unified distribution model and the synergies that are being unlocked. Direct-to-consumer leads are being shared with field agents earlier in the sales cycles. Customers are now choosing whether to transact with us online, over the phone, in person with a local agent for more personalized service, or some combination of the three. This integrated blend of digital and local agent service allows us to build deeper, more meaningful relationships with our clients and establish a level of trust that is difficult to replicate. As a result, a growing portion of our field sales are coming from consumers who contacted us for a direct purchase, did not buy a policy upon initial contact, but later opted to purchase a plan from one of our exclusive agents in their community. This ability to flex our resources has translated to higher lead conversion rates and lower marketing costs The same dynamic applies to our health business. We are implementing various initiatives on the health side to provide consumers with a similar unified multi-channel sales and service experience. One example is our recently launched online health insurance marketplace, MyHealthPolicy.com, focused on helping Medicare beneficiaries enroll in Medicare Advantage and prescription drug plans. For the past few years, senior preferences have been shifting from Medicare Supplement to Medicare Advantage products. While we have been selling third-party MA products for some time, our new program leapfrogs our previous efforts. Our new platform leverages our direct-to-consumer experience with the strength of our local exclusive agent force. During this year's Medicare Annual Enrollment Period, consumers can purchase Medicare products from us online or from one of our 2,800 telesales and local exclusive field agents who are certified to sell Medicare plans. Our agents now have the ability to sell our own Medicare supplement plans and third-party Medicare Advantage and prescription drug plans. We believe we have the largest exclusive agent force certified for MA sales. We've seen steady sequential improvement in our producing agent count since the start of the pandemic. During the second quarter, at the height of the pandemic, our producing agent count was down as much as 26%. It has since rebounded nicely, up 9% sequentially, driven by higher retention and an uptick in new agent recruiting. Turning to slide seven in our worksite division. Collected premiums remain strong as the profile of our existing employer groups has translated to continued healthy levels of employee persistency. We saw significant sequential improvement in our worksite sales in the third quarter, with sales up 48% over the second quarter. Relative to the year-ago period, however, sales were down 56%. Given recent increases in COVID infection rates across the country, we continue to expect a steeper path to recovery in the worksite business. As workplace dynamics have changed, We've been focused on helping our existing clients navigate through COVID. We have made significant progress enhancing our digital capabilities to offer enrollment by telephone, video conference, or online. These virtual programs drove almost 30% of our sales in the quarter. Web benefits design continues to play a key role in accelerating these initiatives. We recently launched several pilots to deliver more holistic employer solutions including leveraging third-party products and targeted marketing to specific sectors. We are also accelerating the training of our veteran worksite agents on WBD technology to enable them to sell benefits technology and enrollment services. This cross-selling activity provides a more complete solution to our employer clients and provides additional scale to WBD. While still early, we are encouraged by the initial reception to the pilots. Similar to our consumer business, as various initiatives move from pilot to scale, we will provide additional updates. Turning to slide 8, we returned $67 million to shareholders in the third quarter, including $50 million in share buybacks. Year-to-date, we have deployed $100 million on buybacks. With our higher cash balance and RBC ratio, we had the capacity to repurchase significantly more shares during the quarter. We made a conscious and well-considered decision to take a measured approach. We expect to have the continued capacity to repurchase shares in the fourth quarter and will remain prudent as we carefully monitor the evolving circumstances. And with that, I'll turn it over to Paul.