CNO Financial Group, Inc.

Ladies and gentlemen, welcome to the CNO Financial Group fourth quarter 2022 earnings results call. My name is Glenn, and I'll be your moderator for today's call. If you would like to ask a question during the presentation, you may do so by pressing star 1 on a telephone keypad. I will now hand you over to your host, Adam Irving, to begin. Adam, please go ahead.

Good morning, and thank you for joining us on CNO Financial Group's fourth quarter 2022 earnings conference call. Today's presentation will include remarks from Gary Bajwani, 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 this 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 10K and post it on our website on or before February 24th. 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 presentations, we'll be making performance comparisons, and unless otherwise specified, any comparisons made will be referring to changes between fourth quarter 2022 and fourth quarter 2021. And with that, I'll turn the call over to Gary. Thanks, Adam.

Good morning, everyone, and thank you for joining us. We reported operating earnings per share of $2.33, which reflect ongoing market volatility, moderation in our alternative investment returns, and favorable one-time actuarial benefits from the prior year that did not repeat in 2022. Adjusting for these items, we delivered sustainable earnings with strong underlying margins across our product portfolio and rising new money rates supporting investment and income results. Paul will cover these items in greater detail. We remain pleased with how the full-year sales momentum and solid fundamentals have positioned us for 2023 and beyond. Turning to sales results. Recent strategic investments to accelerate growth resulted in strong production momentum across both divisions. We generated double-digit year-over-year sales growth in direct-to-consumer life, annuities, and our worksite insurance businesses. Notable investments in 2022 included enhancing our Medicare product offerings and capabilities with new Medicare supplement plans and more Medicare Advantage products offered on MyHealthPolicy.com. These investments contributed to a strong Medicare selling season during the fourth quarter. We also launched Optivise, a unified worksite brand, which was well-received by the market as a one-stop shop for a comprehensive set of worksite solutions to maximize employee benefit programs. In early 2022, AMBEST upgraded the financial strength rating of CNO's Life and Health subsidiaries from A- to A, continuing our strong track record of upgrades. We returned $245 million to shareholders in the year, including $180 million in share buybacks. Weighted average share count outstanding was reduced by 10%. Our key capital metrics ended the year strong and remain above target levels. We increased book value for diluted share, excluding AOCI, by 11% and are nearing $30 per diluted share. Returning to slide five and our growth scorecard. Our sales performance in the quarter continues to illustrate the strength and attractiveness of our distribution model and diverse product portfolio. I'll discuss each division in the next two slides. Beginning with the consumer division on slide six. The integration of our agent field force and direct-to-consumer distribution continues to open up more opportunities for us to serve our middle-income customers and drive growth in our consumer divisions. Sales momentum remained strong in the fourth quarter and capped off a solid production year. Full year and fourth quarter results were driven primarily by annuities, direct-to-consumer life sales, and a strong Medicare annual enrollment period. Life and health sales were up 3% for the quarter. As I shared last quarter, these results are against a tough comparable after record sales in the second half of 2021 in the state of Washington due to new legislation. Adjusting for these sales, life and health NAP was up 7%. Direct-to-consumer life sales were up 9% for the quarter and 10% for the year. This is the seventh consecutive quarter of sales growth for D2C Life. The full year reflects the third consecutive year of double-digit growth. Efficient advertising spend, enhanced distribution, and solid policy conversion rates are delivering sustainable growth in this channel. Supplemental health sales were up 26% for the quarter and 9% for the year. We were also very pleased with the performance of our Medicare business. Our approach to Medicare includes manufactured Medicare supplement plans and a broad offering of third-party Medicare Advantage and Part D prescription drug plans. During the year, we expanded the number of Medicare Advantage plans we offer through our digital health marketplace, MyHealthPolicy.com. Through this platform, consumers can compare plans and enroll online, over the phone, or through an agent. Medicare Advantage policies were down 1% for the quarter, but up 6% for the year. This contributed to third-party fee revenue growth of 34%. As a reminder, MA policies drive fee revenue and are not reflected in NAP. As I mentioned at the top of the call, we launched our new, more competitive Medicare supplement plans earlier this year and we were pleased to see the product gain traction with agents and policyholders. After the launch, we saw a sharp acceleration in sales growth. MedSupp was up 16% sequentially in the third quarter and picked up steam during the AEP in the fourth quarter. MedSupp NAP ended the fourth quarter up 30% sequentially and up 14% versus the comparable quarter. During AEP, we were able to instantly connect inbound callers responding to one of our marketing campaigns. Our agents have local knowledge and are uniquely suited to assist consumers with their enrollment decisions. They can also meet in person. This program accounted for roughly 10% of our Medicare Advantage enrollments. In aggregate, local agents achieved a higher conversion rate on these calls than our call center teleagents. And most importantly, We hope these burgeoning relationships represent the potential for future cross-sales. Our approach to Medicare products and distribution is just one illustration of how our diverse product portfolio and omnichannel distribution model are a competitive strength in the market. Our key differentiator is the unique ability to marry a 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 8% for the quarter and 15% over the prior year. This is our ninth consecutive quarter of comparable period growth. As a reminder, we primarily sell fixed index annuities, which provide consumers with protection of principle, a potential for upside based on the positive changes to a market index, and the ability to generate predictable income. Higher demand for these products generally coincides with periods of rising interest rates and uncertain equity markets. Client assets and brokerage and advisory were down 9% year-over-year to $2.6 billion due to ongoing market volatility and declining equity values. More importantly, net inflows and new accounts were up, continuing this positive trend from prior quarters. Combined with our annuity account values, we now manage more than $13 billion in assets for our clients. Our agent recruiting had positive momentum throughout the year. We attribute this performance to a combination of successful recruiting strategies that we've put in place over the past several years. The softening labor market also drove more candidates to our career opportunity. We were up 4% for the quarter, which represented our fourth consecutive quarter of recruiting gains. As a reminder, it does take time for a new agent to meet the minimum level of production to be counted as a producing agent. Field producing agent count was down 3%. This is a steady improvement over third quarter and indicates that we are at or near an inflection point. Veteran agent retention and productivity remained solid. Agent productivity was up 6% for the full year. Our registered agent count increased 6% from the prior year, expanding the number of securities professionals embedded in our branch offices to serve our customers. Turning to slide seven and our worksite division performance. The fourth quarter is an important selling season for our worksite business because most employers conduct their employee benefits enrollment from October to December. We are pleased to post our best worksite insurance sales quarter since the start of the pandemic. Insurance sales were up 8% for the quarter and up 20% for the full year. This is the seventh consecutive quarter of year-over-year growth and follows two previous quarters of double-digit growth. This growth can be attributed to strong retention of our existing employer customers, stable employee persistency within these employer groups, and growth in producing agent counts. Our new worksite brand, Optivise, launched in mid-2022, and we remain pleased with the positive reception from the market as well as our captive agents. As a reminder, the Optivise brand unified our worksite capabilities into a one-stop shop for employers and employees. With Optivise, clients can access expert guidance, voluntary benefits, year-round communications and advocacy services, and benefits administration technologies. We expect to capitalize on the capabilities of the OptiVise brand and expand its market reach in 2023 and beyond. During the fourth quarter, we were very pleased with the performance of our new hybrid enrollment platform, OptiVise Now. The platform gives our agents greater flexibility to connect with employees wherever they are, including by video or over the phone. We experienced higher attendance and engagement with customers who leveraged this technology and expect to expand its use with more clients in 2023. Optivise now illustrates our unique capability to deliver the last mile of sales and service. It blends a virtual experience with the benefits of personal guidance from an in-person agent. Producing agent counts were up 21% year-over-year and 7% sequentially. First year agent counts were up 60% year over year. We credit our worksite referral program for driving these results as agents who come to us by referral typically have higher retention and productivity. The Optivise brand has shown early signs of being a recruiting catalyst and we expect it to generate interest in our agent opportunity. We saw improved conversion rates of new to producing agents and increased productivity in the quarter. We credit recent improvements to our new agent onboarding and skills development programs for these positive trends. The integration of our fee-based businesses continues as expected. Fee revenue within the worksite division continues to benefit from cross-selling. We expect cross-sale activity to accelerate with all products and service offerings now under the Optivise brand. And with that, I'll turn it over to Paul.