CNO Financial Group, Inc.

Ladies and gentlemen, thank you for standing by. My name is Krista and I will be your conference operator today. At this time, I would like to welcome you to CNO Financial Group second quarter 2026 earnings results. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question at that time, simply press star and the number one on your telephone keypad. and if you would like to withdraw your question, again press star one. Thank you. I would now like to turn the conference over to Adam Auvil. Please go ahead.

Good morning and thank you for joining us on CNO Financial Group's second quarter 2026 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 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 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. 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 presentation, we'll be making performance comparisons, and unless otherwise specified, any comparisons made will refer to changes between the second quarter of 2026 and the second quarter of 2025. And with that, I'll turn the call over to Gary. Thanks, Adam.

Good morning, everyone, and thank you for joining us. CNO delivered a very strong quarter and first half of the year. Operating earnings per diluted share were up 45% in the second quarter and up 43% year-to-date, excluding significant items. We delivered our 16th consecutive quarter of sales growth and our 14th consecutive quarter of producing agent count growth. As a result, we are raising our full-year operating earnings per share guidance and either improving or reaffirming all other 2026 guidance. We remain pleased with the consistent results we're generating and we remain focused on growing earnings, improving profitability, and reinvesting in the business. Our business model continues to perform well as we navigate a dynamic macroeconomic environment. Sales results in the quarter were strong across both divisions. Total new annualized premiums were up 7% and we set multiple sales records. Our exclusive middle market focus and our last mile captive agent distribution model are the foundation of our durable competitive moat. This difficult to replicate model remains a key competitive advantage that drives consistent sales performance and profitable growth. Earnings benefited from strong insurance product margin and investment results reflecting growth in the business and expansion of the portfolio book yield. We maintained a robust capital position while returning $77 million to shareholders. Book value per diluted share excluding AOCI was $39.92, up 5%. Turning to slide five and our growth scorecard. Nearly all of our growth scorecard metrics were up for the quarter with strong performance across production, distribution, and investments in capital. Turning to slide six in our consumer division, we delivered our 15th consecutive quarter of sustained sales growth, including records in annuities and brokerage and advisory. Total health map was up 17% Marking 16 consecutive quarters of growth. Supplemental health was up 5%. Long-term care was up 4%. Our Medicare business continued to perform well. Medicare supplement NAF was up 52%, marking the third consecutive quarter of growth over 50%. Our results benefit from the shift in consumer preferences away from Medicare Advantage and towards Medicare supplements. This trend underscores the value of offering both Medicare Supplement and Medicare Advantage through our local agent distribution model. Medicare remains a flagship door-opening product for C&O, supporting our ability to expand the total number of households we serve. Total Medicare policies sold were up 12%. The baby boomer generation is moving through its peak retirement years, with more than 11,000 Americans turning 65 each day. Rising retirement health care costs also continue to pressure household finances. In 2026, the amount that a typical retired couple needs to save for health care increased nearly 8 percent, compared with annual increases of 2 to 3 percent in recent years. For these reasons, we expect durable demand for all our health care products. LifeNap was down 9% for the quarter against the strong comparable. Results were primarily driven by lower direct-to-consumer sales. We take a measured approach to managing our D2C channel. We invest where we see productive opportunities and optimize performance over time. This quarter, non-television marketing channels, including web, digital, and third-party partners, generated nearly 72% of all D2C live sales. As consumer media habits evolve, we continue to reduce our reliance on television advertising and shift more towards efficient marketing channels. While this transition may create some quarterly variability, we remain comfortable with the business and its long-term prospects. In general, demand for life insurance remains healthy. However, we do not expect sales to go at a straight line. Our broad product portfolio allows us to meet shifting customer needs across protection, health, and retirement income solutions. We set multiple records in our asset accumulation business during the quarter, reflecting the demand for retirement income solutions among middle-income consumers. Annuity collected premiums reached a new record of $536 million, up 3%. Account values were up 7%. We also delivered our 13th consecutive quarter of brokerage and advisory growth. Client assets were up 24% to a new record, and total accounts were up 13%. When combined with our annuity account values, our clients entrust us with more than $19 billion of their assets, up 11%. Strong agent productivity and retention fueled our sales momentum. Producing agent count was up 3%, Our 14th consecutive quarter of growth. Registered agents count grew 4%. Next, slide 7 in our worksite division performance. We delivered our 17th consecutive quarter of sustained sales growth. Record life and health map was up 29% for the quarter. This represents our 7th consecutive quarter of double-digit insurance sales growth. Highlights from the quarter include life up 44%, hospital indemnity up 33%, accident up 31%, and critical illness up 7%. Our focus on small to mid-sized businesses and associations drives meaningful sales growth. Employers invest heavily in employee benefits, but the mix is shifting. to control costs, many are reducing traditional Medicare coverage while increasing the availability of employee paid voluntary benefits. Our products are designed to address these protection needs and our career agents and partners are well positioned to help employees understand and address potential gaps in coverage.