CNO Financial Group, Inc.

Hello and welcome to today's CNO Financial Group third quarter earnings results. My name is Bailey and I'll be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star followed by one on your telephone keypad. I would now like to pass the conference over to our host, Adam Orville. Please go ahead when you're ready.

Good morning, and thank you for joining us on CNO Financial Group's third quarter 2022 earnings conference call. Today's presentation will include remarks from Gary Bagiwani, Chief Executive Officer, and Paul McDonough, Chief Financial Officer. Following the presentation, we will also have 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 4th. 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'll be making performance comparisons, and unless otherwise specified, any comparisons made will be referring to changes between third quarter 2022 and third quarter 2021. And with that, I'll turn the call over to Gary.

Thanks, Adam. Good morning, everyone, and thank you for joining us. Turning to slide four and our third quarter performance, we reported operating earnings per share of 49 cents. Our underlining business results are stable, with insurance product margins performing as expected. Strong new money rates in the quarter led to sequential growth in our yield on assets allocated to products, reversing a long-term trend of declining portfolio yields. Gradually declining yields on historically low new money rates over the last several years have offset growth in assets, thereby constraining investment income results. We are cautiously optimistic this inflection point signals stabilized yield in the portfolio. Our focus remains squarely on accelerating sales growth and agent productivity. We delivered strong sales performance this quarter in life and health NAP, annuities, direct-to-consumer businesses, and worksite insurance sales. Strategic investments and product enhancements in our consumer and worksite divisions have positioned us well to capture year-end sales and enrollment opportunities. We returned $26 million to shareholders, including $10 million in share buybacks. We reduced the weighted average shares outstanding by 10% since the third quarter of 2021. Our key capital ratios are at or slightly above target levels, reflecting the robust capital generation capacity of the enterprise and disciplined capital management. Our balance sheet is strong and enables our ability to navigate the changing economic environment. We increased book value per diluted share, excluding AOCI by 15%. Turning to slide five in our growth scorecard. Continued strong production in the quarter demonstrated the depth and resiliency of our model. I'll touch on the specifics by division in the next two slides. Beginning with the consumer division on slide six, we are pleased with our production results. As in previous quarters, we continue to achieve strong growth in both our annuities and direct-to-consumer business. Life and health sales were flat to prior year against the tough comparable. Last year, we achieved record sales in the state of Washington as a result of legislation that requires workers to contribute to a state-sponsored long-term care fund unless they receive an approved exemption for owning private LTC insurance. Adjusting for these sales, life and health map was up 3% year over year. Direct-to-consumer life sales were up 4%, the sixth consecutive quarter of sales growth. This channel continues to benefit from efficiencies in advertising spend and policy conversion rates, as well as enhanced distribution. As we have mentioned, our approach to Medicare includes our manufactured Medicare supplement plan and a large slate of third-party Medicare Advantage and Part D prescription drug providers. During the quarter, we continue the rollout of our new Medicare supplement plans. This product is more competitive and is now available in nearly every state. As compared to the previous quarter, MedSupp NAP is up 16%. We continue to expand the number of Medicare Advantage carrier plans that are available through our My Health Policy platform. This platform enables customers to buy plans through direct enrollment online, through our telesales operations, or through our field agents via a newly operationalized pilot program. I will cover this program in greater detail shortly. For the quarter, Medicare Advantage sales, which drive fee revenue, are up 26%. No wonder our fee business is not reflected in NAP. We are capitalizing on a strong Medicare annual enrollment period, which began on October 15th and runs through December 7th. We recently operationalized a pilot that instantly connects consumers responding to one of our marketing campaigns to a Banker's Life agent in their area. These agents have local knowledge that is uniquely suited to help customers with their enrollment decisions. After this initial introduction, local agents can build relationships with their new clients and assist with additional insurance and retirement needs. Our broad product portfolio and omnichannel distribution model are competitive strengths in this important market. The pandemic accelerated the adoption of virtual tools, both at home and in the workplace. Our unique capabilities marry this virtual connection with our established in-person agent force who complete the critical last mile of sales and service delivery. Annuity collected premiums were up 11% compared to the prior year. This represents eight consecutive quarters of year-over-year growth. Seven of those eight quarters posted double-digit increases. As a reminder, fixed index annuity products tend to perform well in an environment of rising interest rates and uncertain equity markets. The need for reliable retirement income combined with the increased risk of pure equity investments continue to make these products attractive to our customers. These products represent an important component of our product suite, creating value for our customers and shareholders. We like the risk-adjusted return characteristics of the product. When comparing the present value of future profitability on a capital adjusted basis, our fixed index annuities are slightly more favorable, leaving us largely indifferent from a sales mix perspective. Our annuities are also less complex than most annuities in the market, thereby reducing the potential for a significant tail risk event. Client relationships tend to be stickier when customers own annuities because they're typically entrusting us with a considerable percentage of their net worth. That dynamic enhances the lifetime value of those customers as we offer them additional products over time to address their evolving needs. Client assets and brokerage and advisory were down 9% year over year to $2.5 billion in the third quarter as a result of declining equity values. However, we reported increases in net inflows and new accounts. Combined with our annuity account values, we manage more than $13 billion in assets for our clients. Our agent productivity is improving, and we continue to experience positive momentum in agent recruiting. Field producing agent count was down 6%, primarily due to the tight labor market over the last 12 months. As mentioned last quarter, the softening macro environment appears to be helping our recruiting efforts, Agent recruiting was up 9% for the quarter, representing our third consecutive quarter of recruiting gains. These results further signal that we are at an inflection point in agent recruiting. Please remember that it does take time for a new agent to meet the minimum level of production to be counted as a producing agent. Finally, veteran agent retention remained stable and agent productivity was up 5%. Our registered agent count increased 7% from prior year as more agents became securities professionals. Turning to slide seven and our worksite division performance. Insurance sales were up 33% this quarter. This is the second consecutive quarter of double-digit growth. We continue to experience an acceleration in sales as COVID disruption subsided and access to employees has improved. As I shared in our last call, we recently announced the launch of Optivise. Through this single worksite brand, we can now offer employers and employees a one-stop shop for expert guidance from our agents, benefit educators, and healthcare advocates, voluntary benefits, year-round communications and advocacy services, and benefits administration technology. We recently rolled out Optivise Now. our hybrid enrollment platform, to give our agents greater flexibility to connect with employees wherever they are. We saw positive customer experience with the platform and strong attendance from initial enrollment cases. This is another example, now within the worksite business, of how we are marrying the virtual connection with our in-person agent force to complete the last mile of sales and service delivery in a differentiated manner. In the fourth quarter, most employers conduct their employee benefits enrollments. As a result, October through December are critical months for our worksite business. We have seen meaningful increases in scheduled enrollments over the next several months and expect utilization of the OptiVise Now platform to increase in the quarter. Retention of our existing employer customers remains strong, and employee persistency within these employer groups is stable. Producing agent count was up 13% year over year and 10% sequentially. First-year agent counts were up substantially year over year. These results are due in large part to the field agent referral program that we introduced in late 2021 and modeled after an effective consumer division program. New agents who are referred by an existing agent stay with us longer and are more successful. We also saw improved conversion rates of new agents into producing agents. Recent improvements to our new agent onboarding and skills development programs are credited for these positive trends. We expect the momentum to persist as our agent force rebuilds and favorable agent productivity continues. The integration of our fee-based businesses continues to progress steadily. Fee revenue within the worksite division was up 2% in the quarter. And with that, I'll turn it over to Paul.