CNO Financial Group, Inc.

Good morning and a warm welcome to the CNO Financial Group second quarter 2023 earnings call. My name is Candy and I will be your moderator for today's call. All lines have been placed on mute during a presentation portion of the call with an opportunity for question and answer at the end. If you would like to ask a question, please press start followed by one on your telephone keypad. I would now like to hand this conference call over to our host, Adam Orville. Please go ahead.

Good morning and thank you for joining us on CNO Financial Group's second quarter 2023 earnings conference call. Today's presentation will include remarks from Gary Boggiani, 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 August 9th. 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 GAAP measures, which should not be considered as substitutes for the most directly comparable GAAP measures. You'll find a reconciliation of non-GAAP measures to the corresponding GAAP measures in the appendix. Throughout the presentation, we'll be making performance comparisons, and thus otherwise specified, any comparisons made will be referring to changes between second quarter 2023 and second quarter 2022. And with that, I'll turn the call over to Gary.

Thanks, Adam. Good morning, everyone, and thank you for joining us. We delivered a solid performance in the second quarter. Operating earnings were 54 cents per share. The fundamentals of our business remain sound, including double-digit sales production across multiple product categories, a strengthened capital position, and strong free cash flow generation. Another quarter of strong new money rates drove continued improvement on the earned yield on investments allocated to insurance products Variable investment income improved sequentially. Elevated health claims impacted results in the quarter. We expect this to moderate in the second half of the year. Paul will touch on this during his remarks. Both our consumer and worksite divisions once again delivered strong sales production and agent results in the quarter. Total new annualized premium was up 11%. We reported double-digit sales growth in field life sales, Medicare supplements, supplemental health, and worksite insurance sales. Capital and liquidity improved and remained above target levels, even after returning $47 million to shareholders. This demonstrates the strong cash flow generation of the enterprise. Our high-quality investment portfolio continued to produce stable core investment income. Book value, excluding AOCI, was up to $32.34 per share. Turning to slide five in our growth scorecard. Life and health production was strong in the quarter, and client assets in our broker-dealer and advisory services were up nicely. Our broad product portfolio and balanced business model continue to provide strength, stability, and resilience to our overall results. I'll discuss each division in the next two slides. Beginning with the consumer division on slide six, sales production was strong, continuing the growth momentum from the first quarter. Life and health NAP was up 9%. Life production was up 7%. Field life sales were up 20%, demonstrating the strength of our captive agent distribution and broad product portfolio to quickly respond to evolving customer needs. Our D2C life channel was down 1% on a strong comparable, but contributed to overall life sales growth through shared lead generation. One-third of field life sales in this quarter originated from a D2C customer leak. This illustrates the value of our integrated distribution model. During the second quarter, we also implemented accelerated underwriting on our simplified life products to address a growing market demand. This real-time underwriting solution gives customers an instant decision on their application as they sit across the kitchen table from their agent. We expect roughly 60% of our underwritten life business to be eligible for this new process. HealthNAP was up 12% in the quarter, driven by strong sales growth in Medicare Supplement and Supplemental Health. Medicare Supplement was up 29% as consumers gravitated towards these plans, continuing this positive trend from the last several quarters. Our new, more competitive Medicare Supplement plans continue to perform well with customers, and we have experienced a balancing of our Medicare product sales as a result. As a reminder, we offer two types of Medicare products in our portfolios. Medicare supplement products that we manufacture, and a broad offering of third-party Medicare Advantage and Part D prescription drug plans for which we collect fees. By offering both Medicare supplement and Medicare Advantage products, we can provide more coverage options for customers to choose from and respond immediately to shifts in the healthcare preferences of our middle market consumers. Supplemental health plans were up 12% the fourth consecutive quarter of double-digit growth. This product continues to benefit from growth in our producing agent count. Annuity account values were up 4% year over year. Annuity collected premiums for the quarter were the third highest ever posted for this product line, which is significant given the tough comparable. Persistency remains within expected ranges. Additionally, we have experienced a modest shift towards fixed interest plans due to the higher interest rate environment. As noted previously, our captive distribution model and the long-term relationships our agents build with customers provide stability to this block. Client assets in brokerage and advisory were up 14% year-over-year to a new high of $2.9 billion. We increased net inflows in new accounts, which strengthened the strong returns that our customers captured from improved market conditions in the quarter. When combined with our annuity account values, our clients entrust us with more than $14 billion of their assets. Our diverse and integrated distribution model remains a differentiator for C&O. We marry a virtual connection with our established in-person agent force who serve more than 230 communities nationwide. We market nationally and complete the last mile of the sale locally. The strength of our agent force remains a key enabler of sales growth in the consumer divisions. Agent recruiting is a leading indicator of future sales growth, and we were very pleased with our performance in the quarter. Recruiting was up 27%, which represents our best overall recruiting quarter since late 2020. This recruiting momentum has led to growth in our producing agent count, which was up 8%. Based on this trend, we expect the agent force to continue to grow in the second half of the year. Veteran agent retention and productivity remain strong. Our registered agent count increased 3% from prior year. As economic uncertainty persists, demand for securities professionals remains high. This is especially critical for middle income consumers. Expanding our bench of registered agents is key to how we serve our middle market with both insurance and financial protection products. Turning to slide seven in our worksite division performance. Life and health insurance sales were up 31% this quarter, exceeding pre-pandemic sales levels for the first time. This is the ninth consecutive quarter of worksite insurance sales growth. As a reminder, immediately prior to the onset of the pandemic, our worksite business posted record sales production with eight consecutive quarters of growth prior to the first quarter of 2020. Achieving this result marks a significant milestone in the return to growth trajectory for our worksite divisions. Importantly, sales from new broker relationships positively contributed to sales performance in the quarter. Expanding our broker sales pipeline remains a strategic initiative for both our national and regional worksite markets. We recently launched several pilots designed to increase broker engagement. We are very pleased with the early results. Key indicators of the health of our worksite business continue to trend positively in the quarter. Retention of our existing employer customers was strong. Employee persistency within these employer groups was stable, and collected premiums within these employer groups was also stable. Total producing agent counts were up 32%, and agent productivity remained strong. Among our first-year agents, producing agent counts were up 94%, and productivity in that cohort was up 64%. As a reminder, agents must reach a certain level of production to be considered a producing agent. Our successful worksite agent referral program and enhancements to our new agent onboarding program are credited for driving these meaningful agent productivity gains. Product refreshment remains an important component to accelerating worksite growth. In early June, we introduced a new accident insurance product available for both individual and worksite sales. Sales in the first month are off to a solid start, representing nearly 10% of the total NAP in the quarter. As I shared last quarter, we are squarely focused on three strategic worksite growth priorities as we look to the second half of 2023 and beyond. Continuing the integration of our worksite capabilities under a single Optivise brand. Expanding distribution capabilities in our national and regional employer markets through new broker relationships and strategic alliances. and accelerating momentum in agent recruiting to grow producing agent counts. And with that, I'll turn it over to Paul.