CNO Financial Group, Inc.

Hello and welcome to today's CNO Financial Group fourth quarter 2023 earnings conference call. My name is Bailey and I'll be your moderator for today. 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 today's host, Adam Orwood to begin. Please begin.

Good afternoon, and thank you for joining us on C&O Financial Group's fourth quarter 2023 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 could obtain the release by visiting the media section of our website at cnoinc.com. This morning's presentation is also available in the investor section of our website and was filed in at Form 8K yesterday. We expect to file our Form 10K and post it on our website on or before February 23rd. 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 presentation contains 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 unless otherwise specified Any comparisons made will be referring to changes between full year 2023 and full year 2022. And with that, I'll turn the call over to Gary.

Thanks, Adam. Good afternoon, everyone, and thank you for joining us. C&O delivered strong earnings growth in the quarter and exceptional operating performance for the full year. Our results underscore the health and strength of our business model and lay the foundation for sustained profitable growth. Highlights of our full-year performance include four quarters of sustained sales momentum, total new annualized premium up 9%, improvement in virtually all agent metrics across both divisions, strong net investment income results, continued strong capital position and free cash flow generation, and our share price reached an all-time high. We delivered a solid earnings performance for the full year with operating earnings per diluted share of $3.09. Stable underlying insurance product margins were bolstered by our diversified product suite. New money rates exceeded 6% for all four quarters, which drove an inflection point in our investment portfolio yield and reversed several years of decline. Fee income improved as we grew fee revenue and expanded margins. Paul will go into greater detail on our financial performance for the quarter and full year. Sales production and agent force results were strong in both divisions as we posted record sales levels in multiple product categories. A robust calendar of successful product launches in 2023 accelerated our growth. Producing agent counts were up sharply, driven by recruiting and retention initiatives. Total health NAP was up 11% and total life NAP was up 7% with nearly all of our product lines posting sales growth. Fee revenue was also up for the year and remains an important component in our diversification approach. Our portfolio includes both manufactured and distributed products, which enables us to offer customers a broad selection of solutions to meet their needs. Our strong capital position remains a differentiator for CNO. Notable highlights of our year include our capital and liquidity ended the year well above target levels. We established a Bermuda affiliate and executed its first reinsurance transaction. And Fitch upgraded our financial strength rating from A minus to A. We returned more than $230 million to shareholders in the year, including $165 million in share buybacks. We again raised our quarterly common stock dividend, marking 11 straight years with an increase. Book value per diluted share, excluding AOCI, was $33.94, up 6%. Turning to slide five and our growth scorecard. Our growth scorecard metrics for the quarter and the full year reflect our continued focus on and investment in our strategic growth priorities. We expect to build on this momentum in 2024. I'll discuss each division in the next two slides. Beginning with the consumer division on slide six. We delivered a strong production year, illustrating the value and attractiveness of our business model and approach to serving our market. Our unique capability to marry a virtual connection with our established in-person agent force, who complete the critical last mile of sales and service delivery, remains a key differentiator. Total NAP was up 6% for the full year, led by 16% sales growth in field agent NAP. Total life sales were up 6% with balanced production for our agent and direct-to-consumer distributions. Field sold life was up 9%. Direct-to-consumer life was up 3%, reflecting six consecutive years of growth and record results in 2023. Health NAP was up 8% for the full year. Long-term care NAP was up 27% on the strength of our new long-term care fundamental plus product. As mentioned last quarter, this product is part of our strategy to offer plans to the middle market that cover essential costs for one to two years of care. 99% of the policies we sell have benefit periods of two years or less. Our long-term care product policies provide a balanced, affordable approach to funding care. We are pleased to see consumers embrace these plans and the protection that they provide. We were also pleased with the performance of our Medicare business and how we're growing this portfolio. Total Medicare policies sold were up 5% over prior year. The balance and diversification of our Medicare portfolio is central to how we serve our markets. As a reminder, we offer two types of Medicare products, Medicare supplement products that we manufacture, and third-party Medicare Advantage and Part B prescription drug plans for which we collect fees and bear no underwriting risk. Medicare supplement NAP was up 16%, and Medicare Advantage fee revenue was up 14%. In the fourth quarter, we completed another successful Medicare annual enrollment period with a strong go-to-market approach. We expanded our MA carriers to 14 and increased the number of MA certified agents by 14%. Our agents bring local knowledge and experience to every customer they assist. The personal sales and service provided by agents reduces churn and builds relationships for potential cross sales. As I've mentioned before, our local agents represent the unique strength of our last mile distribution capabilities. Annuity account values were up 4% and we reported record annuity collected premium in the quarter. Consistent with previous quarters, our captive agent distribution model lends stability to this block and persistency remains within expected levels. Client assets and brokerage and advisory were up 20% to a record $3.2 billion. Total accounts were up 7% for the full year. When combined with our annuity account values, our clients now entrust us with nearly $15 billion of their assets. Our consumer division had a very strong recruiting year, up 23%. We've consistently grown agent recruiting for six consecutive quarters, and we credit this growth to ongoing investments in agent referrals, productivity, and retention. Producing agent count was up 9% and continues to build on our four consecutive quarters of year-over-year growth. These results contributed to the meaningful growth we reported for the year and position as well for a strong 2024. Three notable investments in 2023 contributed to our sales momentum and illustrate how our approach to technology can improve operational efficiency. First, we enhanced our life, health, and annuity product lines which bolstered sales growth. Second, we expanded the scale and capabilities of our Medicare health insurance technology platform. Nearly nine out of 10 Medicare Advantage policies sold during the AEP were processed through our myhealthpolicy.com portal. This represents a 14% increase from 2022. Lastly, by introducing accelerated underwriting on a portion of our simplified life products, approximately 75% of those applicants received an instant decision. Next, slide seven in our worksite division performance. Our worksite division finished the year strong with continued insurance sales momentum and a successful fourth quarter benefits enrollment season. Life and health insurance sales were up 29% for the full year and up 20% for the quarter. In five of the past six quarters, insurance sales have delivered 20% growth. This level of sustained incremental growth is exceptional and underscores the significant value that our worksite insurance offerings bring to employers and their employees. Initiatives to grow our worksite agent force generated significant gains in 2023. For the full year, recruiting was up 15% and agent productivity was up 4%. Improving agent productivity while onboarding new agents is not easy. It takes time and training to grow these metrics simultaneously. Having both of these measures up is a testament to the strength of our field leadership to attract and develop career agent talent. Producing agent count was up 27%, our seventh consecutive quarter of year-over-year growth, and partially driven by agent retention, which was up 20%. Enhanced agent referral and onboarding programs also delivered double-digit growth in first-year agent count, which was up 43%. and first-year agent productivity, which was up 40%. Multiple investments in product development, geographic expansion, and sales enablement created a foundation for accelerated worksite growth in 2023 and beyond. Our accident insurance product, which was refreshed in June, was up 34% for the full year. And our updated critical illness product launched in the fourth quarter has already received positive early reception. Our geographic expansion initiative generated approximately one-fourth of Worksite's total sales growth for the year. We are pleased with this early result. As a reminder, this program targets key markets where we've identified strategic opportunities to grow our market share and footprint. We will also continue to be opportunistic in engaging third-party technology partnerships that enhance the tech-enabled services in our benefits enrollment offerings. I am pleased with our worksite insurance sales momentum and recognize that there is still a sizable opportunity for us to get more value out of our worksite fee barriers. We're focused on continuing to deepen the integration across our sales channels to improve our client service capabilities and cross-sale opportunities. As we enter 2024, we remain bullish on our worksite business and confident in our strategic path forward. And with that, I'll turn it over to Paul.