• Operating Earnings Per Diluted Share: $3.97, an increase of 28% year-over-year.
• Total New Annualized Premium: Up 7% across the enterprise for the full year.
• Shareholder Returns: $349 million returned to shareholders, a 50% increase over 2023.
• Book Value Per Diluted Share (excluding AOCI): $37.19, up 10%.
• Consumer Division NAP: Up 5% for the full year.
• Medicare Supplement NAP: Up 26% for the year.
• Medicare Advantage Policies Sold: Up 14% for the year.
• Long Term Care NAP: Up 35% for the year.
• Annuity Collected Premiums: Up 13% for the year.
• Brokerage and Advisory Client Assets: Up 28% to $4.1 billion.
• Producing Agent Count: Up 8% for the year.
• Worksite Division Insurance Sales: Up 16% for the full year.
• Critical Illness Sales: Up 24% for the year.
• Accident Sales: Up 13% for the year.
• Hospital Indemnity Sales: Up 20% for the year.
• New Money Rate: 6.72%, marking the eighth consecutive quarter above 6%.
• Net Investment Income: Up 16% for the quarter and 9% for the year.
• Consolidated Risk-Based Capital Ratio: 383% at quarter end.
• Available Holdco Liquidity: $372 million at quarter end.
• Excess Cash Flow to Holding Company: $284 million for the year.
• Leverage (Adjusted): 25.6% at quarter end.

• Warning! GuruFocus has detected 6 Warning Sign with EGP.

Release Date: February 07, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• CNO Financial Group Inc (NYSE:CNO) delivered its 10th consecutive quarter of sales growth and its most productive year ever for the banker live field force.
• Operating earnings per diluted share increased by 28%, with a 40% increase when excluding significant items.
• Capital and liquidity were well above target levels, with $349 million returned to shareholders, a 50% increase over 2023.
• The consumer division saw a 5% increase in total new annualized premium, with significant growth in Medicare supplement and Medicare Advantage policies.
• The worksite division achieved record full-year insurance sales, up 16%, and record fourth-quarter insurance sales, up 23%.

Negative Points

• Live production was down for the year, driven by high lead costs in direct-to-consumer television advertising.
• The expense ratio was at the high end of the guided range due to incentive compensation accruals.
• The favorable impact on insurance product margins from reserve releases due to higher mortality is not expected to continue.
• The company is facing pressure on fee income due to a sales mix shift to smaller Medicare Advantage providers.
• The upcoming technology modernization initiative is expected to cost approximately $170 million over three years, which may put pressure on expenses.

Q & A Highlights

Q: How should we think about buybacks in relation to the free cash flow guidance? A: Paul McDonough, CFO: You should consider the free cash flow guidance together with the excess cash position relative to our minimum Holdco liquidity at the end of 2024. This gives a sense of share purchase capacity in 2024, absent more compelling uses of that capital.

Q: How much additional geographic expansion opportunity is there for CNO? A: Gary Bagiwani, CEO: There is significant potential, particularly in our worksite business. Our consumer division has a well-developed national footprint, but our worksite division is considerably smaller. We see a lot more upside in geographic expansion.

Q: Can you provide more details on the additional Bermuda opportunities being considered? A: Paul McDonough, CFO: We are closely evaluating opportunities and prioritizing them. Our focus has been on establishing the team in Bermuda and developing relationships, including with the Bermuda Monetary Authority. We are now looking to leverage that platform beyond the initial treaty.

Q: Could you give a breakdown of the tech investments and their use cases? A: Paul McDonough, CFO: The primary focus is converting legacy policy admin platforms to cloud-based SaaS solutions. This will allow us to evolve with the changing AI landscape and adopt new technologies more fully. Gary Bagiwani, CEO: This investment is about building a new foundation to offer consumers and agents the technology and flexibility they expect.

Q: What gives you confidence in achieving the three-year ROE improvement guidance? A: Gary Bagiwani, CEO: We are careful about the commitments we make publicly. We have a strong belief in our ability to execute against our guidance, supported by our track record. Paul McDonough, CFO: Sales growth and higher interest rates are compounding tailwinds. We have line of sight on initiatives that will drive ROE expansion over the next three years.

Q: Is there a concern about the regulatory environment in Bermuda affecting reinsurance treaties? A: Paul McDonough, CFO: We do not foresee this being an issue. Bermuda operates effectively with a regulatory regime that works well and has capacity for growth. Many companies have moved business there, and we expect that trend to continue.

Q: What are the drivers for the excess cash flow outlook of $200 million to $250 million? A: Paul McDonough, CFO: It reflects the dynamics of the business, including the pace of organic growth, the economic climate, and the degree of risk in our investment portfolio. These factors will determine whether we reach the higher or lower end of the range.

Q: How do you view the long-term benefits of the IT initiative? A: Paul McDonough, CFO: While not a cost-saving program, the IT initiative will create a stable platform for leveraging current technology, enabling long-term growth. We expect our expense ratio to come down over time as we develop more operating leverage.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.