Q4 2023 CNO Financial Group Inc Earnings Call
Operator: 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.
Hello, and welcome to today's CNA Financial Group fourth quarter 2023 earnings Conference call. My name is Bailey and I'll be your moderator for today.
Operator: 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 Allwood, to begin. Adam, please begin.
All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end.
Speaker Change: If you would like to ask a question.
Speaker Change: Please press star followed by one on your telephone keypad.
Speaker Change: I would now like to pass the conference over to todays host Adam over to begin please begin.
Adam Allwood: Good afternoon, and thank you for joining us on CNO Financial Group's fourth quarter 2023 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. You can obtain the release by visiting the media section of our website at cnoinc.com.
Adam: Good afternoon, and thank you for joining us on <unk> financial group's fourth quarter 2023 earnings conference call.
Adam: Today's presentation will include remarks from Gary, but Ronnie Chief Executive Officer, and Paul Mcdonough, Chief Financial Officer.
Adam: Following the presentation. We will also have other business leaders available for the question and answer period.
Adam: During this conference call, we will be referring to information contained in Yesterdays press release, you can obtain the release by visiting the media section of our web site at C. N O I.
Adam: <unk> Dot com.
Adam: This mornings presentation is also available in the investors section of our website and was filed in a form 8-K yesterday, we expect to file our Form 10-K and posted on our website on or before February 23.
Adam Allwood: This morning's presentation is also available in the investor section of our website and was filed in as 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 from those contemplated by the forward-looking statement. Additionally, today's presentation contains a number of non-GAAP measures which should not be considered as substitutes for the most directly comparable GAAP measures.
Adam: 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.
Adam: 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.
Adam Allwood: 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 full year 2023 and full year 2022. And with that, I'll turn the call over to Gary.
Adam: Throughout the presentation, we will be making performance comparisons and 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.
Gary C. Bhojwani: Thanks, Adam. Good afternoon, everyone, and thank you for joining us. CNO 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%, and improvement in virtually all agent metrics across both divisions.
Gary: Thanks, Adam.
Gary: Good afternoon, everyone and thank you for joining us.
Gary: <unk> delivered strong earnings growth in the quarter and exceptional operating performance for the full year.
Gary: Our results underscore the health and strength of our business model and lay the foundation for sustained profitable growth.
Gary: Highlights of our full year performance include four quarters of sustained sales momentum.
Gary: Total new annualized premium up 9%.
Gary: Improvement in virtually all agent metrics across both divisions.
Gary C. Bhojwani: Strong Net Investment Income Results. Continued strong capital position in 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.
Gary: Strong net investment income results.
Gary: <unk> strong capital position and free cash flow generation.
Gary: And our share price reached an all time high.
Gary: We delivered a solid solid earnings performance for the full year with operating earnings per diluted share of $3 nine.
Gary C. Bhojwani: Stable underlying insurance product margins were bolstered by our diversified product; 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.
Gary: Stable underlying insurance product margins were bolstered by our diversified product suite.
Gary: New money rates exceeded 6% for all four quarters, which drove an inflection point in our investment portfolio yield and reverse several years of decline.
Gary: Fee income improved as we grew fee revenue and expanded margins.
Gary: Paul will go into greater detail on our financial performance for the quarter and full year.
Gary: Sales production and agent force results were strong in both divisions as we posted record sales levels in multiple product categories.
Gary C. Bhojwani: A robust calendar of successful product launches in 2023 accelerated our 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. Fee revenue was also up for the year and remains an important component in our diversification. Our portfolio includes both manufactured and distributed products, which enables us to offer customers a broad selection of solutions to meet their needs.
Gary: A robust calendar of successful product launches in 2023 accelerated our growth.
Gary: Producing agent counts were up sharply driven by recruiting and retention initiatives.
Gary: Total health Nap was up 11% and total life Nap was up 7% with nearly all of our product lines posting sales growth.
Gary: Fee revenue was also up for the year and remains an important component in our diversification approach.
Gary: Our portfolio includes both manufactured and distributed products, which enables us to offer customers a broad selection of solutions to meet their needs.
Gary C. Bhojwani: Our strong capital position remains a differentiator for CNO. Notable highlights of our year include that our capital and liquidity ended the year well above target. We established a Bermuda affiliate and executed its first reinsurance transaction. And Fitch upgraded our financial strength rating from A- 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%.
Gary: Our strong capital position remains a differentiator for <unk>.
Gary: Notable highlights of our year include our capital and liquidity ended the year well above target levels. We.
Gary: We established our Bermuda affiliate and executed its first reinsurance transaction.
Gary: And Fitch upgraded our financial strength rating from a minus today.
Gary: We returned more than $230 million to shareholders in the year, including $165 million in share buybacks.
Gary: We again raised our quarterly common stock dividend, marking our 11th straight years with an increase.
Gary: Book value per diluted share, excluding OCI was $33 94 up 6%.
Gary C. Bhojwani: 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 1.
Turning to slide five and our growth scorecard.
Gary: Our growth scorecard metrics for the quarter and in the full year reflect our continued focus on and investment in our strategic growth priorities.
Gary: We expect to build on this momentum in 2024.
Speaker Change: I'll discuss each division in the next two slides.
Speaker Change: 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.
Gary C. Bhojwani: 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 age. Total life sales were up 6%, with balanced production for our agent and direct-to-consumer distribution. Field sold life was up 9%, and direct-to-consumer life was up 3%, reflecting six consecutive years of growth and record results in 2020. HealthNAP was up 8% for the full year, and 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 products to the middle market that cover essential costs for one to two years. 99% of the policies we sell have benefit periods of two years or less.
Speaker Change: 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.
Speaker Change: Total nap was up 6% for the full year led by 16% sales growth in field agent now.
Speaker Change: Total life sales were up 6% with balanced production from our agents and direct to consumer distribution.
Speaker Change: He also life was up 9% direct to consumer life was up 3%, reflecting six consecutive years of growth and record results in 2023.
Speaker Change: Health Nap was up 8% for the full year.
Speaker Change: Long term care Nap was up 27% on the strength of our new long term care fundamental plus product.
Speaker Change: As mentioned last quarter. This product is part of our strategy to offer plants in the middle market that cover our central costs for one to two years of care.
Speaker Change: 99% of the policies, we sell have benefit periods of two years or less.
Gary C. Bhojwani: 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 years. The balance and diversification of our Medicare portfolio is central to how we serve our market. As a reminder, we offer two types of Medicare products, Medicare supplement products that we manufacture, and third-party Medicare Advantage and Part D prescription drug plans for which we collect fees and bear no underwriting.
Speaker Change: Our long term care product policies provide a balanced affordable approach to funding care.
Speaker Change: We are pleased to see consumers embrace these plans and the protection that they provide.
Speaker Change: We were also pleased with the performance of our Medicare business and how we're growing this portfolio.
Speaker Change: Medicare policy sold were up 5% over prior year.
Speaker Change: The balance and diversification of our Medicare portfolio is central to how we serve our market.
Speaker Change: As a reminder, we offer two types of Medicare products Medicare supplement products that we manufacture.
Speaker Change: And third party Medicare advantage and part D prescription drug plans for which we collect fees and bear no underwriting risk.
Speaker Change: Medicare supplement nap was up 16% and Medicare advantage fee revenue was up 14%.
Gary C. Bhojwani: Medicare Supplement NAF 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 costs.
Speaker Change: 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 increase the number of MA certified agents by 14%.
Speaker Change: Our agent spring local knowledge and experience to every customer they assist.
Speaker Change: The personal sales and service provided by agents reduces churn and build relationships with potential cross sale.
Gary C. Bhojwani: As I've mentioned before, our local agents represent the unique strength of our last mile distribution capability. 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.
Speaker Change: As I've mentioned before our local agents represent the unique strength of our last mile distribution capabilities.
Speaker Change: Annuity account values were up 4% and we reported record annuity collected premiums in the quarter.
Speaker Change: Consistent with previous quarters, our captive agent distribution model lend stability to this block and persistency remains within expected levels.
Speaker Change: Client assets and brokerage and advisory were up 20% to a record $3 2 billion.
Gary C. Bhojwani: Total accounts were up 7% for the full year. When combined with their 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 we're. The producing agent count was up 9% and continues to build on our four consecutive quarters of year-over-year growth.
Speaker Change: Total accounts were up 7% for the full year.
Speaker Change: When combined with our annuity account values, our in our clients now entrust us with nearly $15 billion of their assets.
Speaker Change: Our consumer division had a very strong recruiting year up 23%.
Speaker Change: We've consistently grown agent recruiting for six consecutive quarters, and we credit this growth to ongoing investments in agent referrals.
Speaker Change: Productivity.
Speaker Change: And retention.
Speaker Change: Producing agent count was up 9% and continues to build on our four consecutive quarters of year over year growth.
Speaker Change: These results contributed to the meaningful growth, we reported for the year and position us well for a strong 2024.
Gary C. Bhojwani: These results contributed to the meaningful growth we reported for the year and position us well for a strong 2020. Three notable investments in 2023 contributed to our sales momentum and illustrated how our approach to technology can improve operational efficiency. First, we enhanced our life, health, and annuity product lines, which bolstered sales. Second, we expanded the scale and capabilities of our Medicare health insurance technology plan. Nearly 9 out of 10 Medicare Advantage policies sold during the AEP were processed through our myhealthpolicy.com portal.
Speaker Change: Three notable investments in 2023 contributing contributed to our sales momentum and illustrate how our approach to technology can improve operational efficiency.
Speaker Change: First we enhanced our life health and annuity product lines, which bolstered sales growth.
Speaker Change: Second we expanded the scale and capabilities of our Medicare Health insurance technology platform nearer.
Speaker Change: Nearly nine out of 10 Medicare advantage policies sold during the AEP were processed through our my health policy Dot Com portal.
Gary C. Bhojwani: This represents a 14% increase from 2020. Additionally, 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. Our worksite division finished the year strong with continued insurance sales momentum and a successful fourth quarter benefits enrollment. 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.
Speaker Change: This represents a 14% increase from 2022.
Speaker Change: Lastly by introducing accelerated underwriting on a portion of our simplified life products approximately 75% of those applicants received an instant decision.
Speaker Change: Next slide seven and our Worksite Division performance.
Speaker Change: Our Worksite Division finished the year strong with continued insurance sales momentum and a successful fourth quarter benefits enrollment season.
Speaker Change: Life and health insurance sales were up 29% for the full year and up 20% for the quarter.
Speaker Change: And five of the past six quarters insurance sales have delivered 20% growth.
Gary C. Bhojwani: 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 2020. For the full year, recruiting was up 15%, and agent productivity was up 4%. Improving agent productivity while onboarding new agents is not easy.
Speaker Change: This level of sustained incremental growth is exceptional and underscores the significant value that our worksite insurance offerings bring to employers and their employees.
Speaker Change: Initiatives to grow our Worksite agent force generated significant gains in 2023.
For the full year recruiting was up 15% in agent productivity was up 4%.
Speaker Change: Improving agent productivity, while Onboarding, new agent is not easy.
Gary C. Bhojwani: 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 a 40, multiple investments in product development. Geographic Expansion.
Speaker Change: It takes time and training to grow these metrics simultaneously.
Speaker Change: Having both of these measures up is a testament to the strength of our field leadership to attract and develop career agent talent.
Speaker Change: 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%.
Speaker Change: Enhanced agent referral and on boarding programs also delivered double digit growth in first year agent count, which was up 43%.
Speaker Change: And first year agent productivity, which was up 40%.
Speaker Change: Multiple investments in product development.
Speaker Change: Geographic expansion.
Gary C. Bhojwani: 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.
Speaker Change: And sales enablement.
Speaker Change: Created a foundation for accelerated Worksite growth in 2023 and beyond.
Speaker Change: Our accident insurance product, which was refreshed and June was up 34% for the full year.
Speaker Change: And our updated critical illness product launched in the fourth quarter has already received positive early reception.
Speaker Change: Our geographic expansion initiatives generated approximately one fourth of work sites total sales growth for the year.
Speaker Change: We are pleased with this early result.
Paul H. McDonough: We are pleased with this early success. As a reminder, this program targets key markets where we've identified strategic opportunities to grow our market share and for... 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. 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. Thanks, Gary, and good afternoon, everyone.
Speaker Change: As a reminder, this program targets key markets, where we have identified strategic opportunities to grow our market share and footprint.
Speaker Change: We will also continue to be opportunistic and engaging third party technology partnerships that enhance the tech enabled services in our benefits enrollment offerings.
Speaker Change: 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 either.
Speaker Change: We're focused on continuing to deepen the integration across our sales channels to improve our client service capabilities and cross sell opportunities.
Speaker Change: As we enter 2024, we remain bullish on our Worksite business and confidence in our strategic path forward.
Speaker Change: And with that I'll turn it over to Paul.
Speaker Change: Yes.
Speaker Change: Yeah.
Thanks, Gary and good afternoon, everyone.
Paul H. McDonough: Turning to the financial highlights on slide eight.
Paul H. McDonough: We finished the year strong with operating earnings excluding significant items of 34% year over year.
Speaker Change: This reflects an improvement in every major component of operating income.
Speaker Change: Including insurance product margin net investment income fee income and expenses.
Paul H. McDonough: Turning to the financial highlights on slide eight, we finish the year strong with operating earnings excluding significant items of 34% year-over-year. This reflects an improvement in every major component of operating income, including insurance product margin, net investment income, fee income, and expense. The income in the quarter was up 31% with solid growth and met advantage sales, despite reduced advertising and lead spend. Expenses were down year over year, and we posted a full-year expense ratio, excluding significant items, of 19.4%, in line with our prior guidance. The significant items in the quarter relate to the impact of our annual actuarial review, which I'll summarize on the next slide. For the full year, operating earnings per share were $2.72, excluding significant items, as compared to $2.91 in the prior year period, with a variance driven by two things.
Speaker Change: Fee income in the quarter was up 31% with solid growth in med advantage sales, despite reduced advertising and lead spend.
Speaker Change: Expenses were down year over year, and we posted a full year expense ratio, excluding significant items of 19, 4%.
Speaker Change: In line with our prior guidance.
Speaker Change: The significant items in the quarter relate to the impact of our annual actuarial review, which I'll summarize on the next slide.
Speaker Change: For the full year operating earnings per share were $2 72.
Speaker Change: Excluding significant items as compared to $2 91 in the prior year period with.
Speaker Change: With the variance driven by two things.
Speaker Change: Number one lower alternative investment income.
Speaker Change: As volatile by definition and second elevated health claims during the second quarter, which moderated as expected during the second half of the year.
Speaker Change: The underlying trends evident in our strong third and fourth quarter results.
Paul H. McDonough: Number one, lower alternative investment income, which is volatile by definition, and second, elevated health claims during the second quarter, which moderated as expected during the second half of the year. The underlying trends evident in our strong third and fourth quarter results position us as well for solid earnings growth going forward. We're also well-positioned from a capital perspective, with the recent formation of CNO Bermuda Re and the initial treaty between our Illinois-based operating company and the new Bermuda company, which settled on November 30, with an October 1 effective date. This structure materially enhances capital efficiency, which is reflected in our year-end capital and holding company liquidity metrics. Turning to slide 9.
Speaker Change: Physician as well for solid earnings growth going forward.
Speaker Change: We're also well positioned from a capital perspective.
Speaker Change: With the recent formation of <unk> Bermuda re.
Speaker Change: Any initial treaty between our Illinois based operating company and the New Bermuda Company.
Speaker Change: Which settled on November 30, with an October one effective date.
Speaker Change: This structure materially enhances capital efficiency, which is reflected in our year end capital and holding company liquidity metrics.
Speaker Change: Turning to slide nine.
Speaker Change: Our annual actuarial review resulted in a $33 $9 million favorable impact driven.
Speaker Change: Driven by favorable morbidity and persistency assumption updates in our supplemental health business with smaller mostly offsetting impacts across the remaining product lines.
Paul H. McDonough: Our annual actuarial review resulted in a $33.9 million favorable impact, driven by favorable morbidity and persistency assumption updates in our supplemental health business, with smaller, mostly offsetting impacts across the remaining product line. As mentioned, we're calling this out as a significant item in the quarter and presenting the margin on this slide X as a significant item. On that basis, Total Insurance Product Margin posted another strong quarter with some puts and takes across products, highlighting the value of our diverse product mix. It's worth noting that the assumption unlocking related to the annual actuarial review creates new go-forward income patterns, beginning with the fourth quarter results, separate from and in addition to the $33.9 million impact reported in the quarter. In particular, SUPHEALTH was favorably impacted by $4 million, and FIAs and MedSup were unfavorably impacted by $2 million and $1 million, respectively. Turning to slide 10.
As mentioned, we are calling this out as a significant item in the quarter.
Speaker Change: And presenting the margin on this slide ex significant items.
Speaker Change: On that basis total insurance product margin posted another strong quarter with some puts and takes across products highlighting the value of our diverse product mix.
Speaker Change: It's worth noting that the assumption unlocking related to the annual actuarial review creates new go forward income patterns, beginning with the fourth quarter results separate from and in addition to the $33 $9 million impact reported in the quarter and.
Speaker Change: In particular sub health was favorably impacted by $4 million in F. <unk> and med sup were unfavorably impacted by $2 million and $1 million respectively.
Speaker Change: Turning to slide 10.
Speaker Change: The new money rate in the quarter was 692% up from 596% in the prior year period, and six 3% in the third quarter of this year.
Paul H. McDonough: The new money rate in the quarter was 6.92%, up from 5.96% in the prior year period and 6.03% in the third quarter of this year. This was the fourth consecutive quarter of new money rates above 6% and set the high water mark for the year. The average yield on allocated investments was 4.68% in the quarter, up eight basis points year over year. The increase in yield, along with strong production driving growth in net insurance liabilities and the assets supporting them, contributed to 4% growth in net investment income allocated to products for the quarter and up 5% for the year. Investment income not allocated to products increased 52% in the quarter, primarily driven by an improvement in income from alternative investments. Our new investments in the quarter comprised approximately $350 million of assets with an average rating of single A-minus and an average duration of seven and a half years. Our new investments are summarized in more detail on slides 22 and 23 of the presentation. Turning to slide 11.
Speaker Change: This is the fourth consecutive quarter of new money rates above 6%.
Speaker Change: Set the high watermark for the year.
Speaker Change: The average yield on allocated investments was $4 six 8% in the quarter up eight basis points year over year.
Speaker Change: The increase in yield along with strong production driving growth in net insurance liabilities and the assets supporting them contributed to 4% growth in net investment income allocated to products for the quarter and up 5% for the year.
Speaker Change: Investment income not allocated to products increased 52% in the quarter, primarily driven by an improvement in income from alternative investments.
Speaker Change: Our new investments in the quarter comprised approximately $350 million of assets with an average rating of single a minus and an average duration of seven and a half years.
Speaker Change: Our new investments are summarized in more detail on slides 22, and 23 of the presentation.
Speaker Change: Turning to slide 11.
Speaker Change: Approximately 97% of our fixed maturity portfolio at quarter end was investment grade rated with an average rating of single a reflecting our up in quality actions over the past several years.
Speaker Change: In the last 12 months the allocation of that single a rated or higher securities is up 310 basis points.
Paul H. McDonough: Approximately 97% of our fixed maturity portfolio at quarter end was investment grade rated with an average rating of single A, reflecting our increase in quality actions over the past several years. In the last 12 months, the allocation to single A rated or higher securities has been up 310 basis points. The BBB allocation is down 290 basis points, and the high yield allocation is down 20 basis points. With respect to commercial real estate, our commercial mortgage loan and CMBS investments continue to perform well, reflecting conservative underwriting and proactive management. We've again included some summary metrics in slides 24 and 25 of the presentation. Turning to slide 12, we ended the quarter with a consolidated RBC ratio of 402%, up 18 points for the year and comfortably above our 375% target. Holdco's liquidity was $256 million, above our minimum threshold of $150 million.
Speaker Change: The Triple B allocation is down 290 basis points.
And the high yield allocation is down 20 basis points.
Speaker Change: With respect to commercial real estate or commercial mortgage loan and see MBS investments continued to perform well, reflecting conservative underwriting and proactive management.
We have again included some summary metrics on slides 24, and 25 of the presentation.
Speaker Change: Turning to slide 12, we ended the quarter with a consolidated RBC ratio of 402%.
Up 18 points for the year and comfortably above our 375% target.
Holdco liquidity was $256 million above our minimum threshold of $150 million.
Speaker Change: Again these metrics reflect the impact of the capital efficiency of our new Bermuda captive reinsurance structure.
Speaker Change: We generated $311 million in excess cash flow to the holding company for the year slightly below our guidance, but excess capital relative to our target RBC and Holdco liquidity levels was in line with our expectations.
Paul H. McDonough: Again, these metrics reflect the impact of the capital efficiency of our new Bermuda Captive Reinsurance Structure. We generated $311 million in excess cash flow to the holding company for the year, slightly below our guidance, but excess capital relative to our target RBC and hold code liquidity levels was in line with our expectations. Turning to slide 13 in our 2024 guidance. We expect operating earnings per share to be in the range of $3.10 and $3.30 for the year, which at the midpoint represents an 18% increase from full year 2023, excluding significant items. This reflects an expectation of modest improvement in insurance product margin, an expense ratio of between 18.8% and 19.2%, a slight improvement from the 19.4% in 2023, and following a quarterly trend similar to 2023, starting on the high end in the first quarter and then grading down through the year, significant improvement in net investment income not allocated to product, which assumes that alternative investments generate a return more in line with the long-term run rate assumption of between nine and 10%.
Speaker Change: Turning to slide 13, and our 2024 guidance.
Speaker Change: We expect operating earnings per share to be in the range of $303 10.
Speaker Change: And $3 30 for the year, which at the midpoint represents an 18% increase from full year 2023, excluding significant items.
Speaker Change: This reflects an expectation of modest improvement in insurance product margin.
Speaker Change: And expense ratio of between 18, 8% and 19, 2%.
Slight improvement from the 19, 4% in 2023.
Speaker Change: And following a quarterly trend similar to 2023, starting on the high end in the first quarter and then grading down through the year.
Speaker Change: Significant improvement in net investment income not allocated to product, which assumes that alternative investments generate a return more in line with the long term run rate assumption of between 9% and 10%.
Speaker Change: Fee income to be slightly down year over year with roughly a quarter of the full year earnings coming in the first quarter and.
Speaker Change: And the balance coming in the fourth quarter with the second and third quarters roughly breakeven.
Speaker Change: And no change to our expected effective tax rate of 23%.
Paul H. McDonough: Fee income is expected to be slightly down year over year, with roughly a quarter of the full-year earnings coming in the first quarter and the balance coming in the fourth quarter, with the second and third quarters roughly breakeven, and no change to our expected effective tax rate of 23 percent. We expect excess cash flow to the holding company in the range of $140 to $200 million.
Speaker Change: We expect excess cash flow to the holding company in the range of $140 million to $200 million.
Speaker Change: High end of the range assumes status quo in.
In particular that we maintain the current pace of organic growth.
Speaker Change: We maintain the current asset mix and our investment portfolio.
Speaker Change: And there is no change to economic conditions and the related pattern of credit migration in the investment portfolio.
Paul H. McDonough: The high end of the range assumes the status quo, in particular that we maintain the current pace of organic growth. We maintain the current asset mix in our investment portfolio, and there is no change to economic conditions and the related pattern of credit migration in the investment portfolio. The low end of the range assumes a departure from the status quo, in particular that we accelerate organic growth, where we take more risk in our investment portfolio and or economic conditions deteriorate, prompting adverse credit migration. Certainly, decisions to accelerate organic growth and or to take more risk with our assets would consume more capital in the near term, but those decisions would be based on an expectation of enhancing value creation and free cash flow in the long term. Finally, we will continue to manage to a consolidated RBC ratio of 375% in our U.S.-based insurance companies, minimum hold code liquidity of $150 million, and target leverage of between 25 and 28%. And with that, I'll turn it back over to Gary.
Speaker Change: The low end of the range assumes a departure from the status quo in.
Speaker Change: In particular that we accelerate organic growth.
Speaker Change: We take more risk in our investment portfolio.
Speaker Change: <unk> economic conditions deteriorate, prompting adverse credit migration.
Speaker Change: Certainly decisions to accelerate organic growth <unk> to take more risk with our assets would consume more capital in the near term, but those decisions will be based on an expectation of enhancing value creation and free cash flow in the long term.
Speaker Change: Finally, we will continue to manage to a consolidated RBC ratio of 375%.
Speaker Change: US based insurance companies.
Speaker Change: Minimum holdco liquidity of $150 million and target leverage of between 25% and 28%.
Speaker Change: And with that I'll turn it back over to Gary.
Gary: Thanks, Paul.
Gary: Our business continued to perform well in the year and we are proud of how the C&I team executed against our strategic growth priorities.
Gary: Our sales engine has momentum and our agent force is growing.
Gary: We enter 2024, well positioned to build on our strong operating performance.
Gary: Our capital position, our liquidity and the cash flow generating power of the company remain robust.
Gary C. Bhojwani: Thanks, Paul. Our business continued to perform well in the year, and we are proud of how the CNO team executed against our strategic growth priority. Our sales engine has momentum, and our agent force has grown. We enter 2024 well positioned to build on our strong operating performance, of capital. Our liquidity and the cash flow generating power of the company remain robust.
We remain confident in our profitable growth and shareholder return opportunity.
Speaker Change: We thank you for your support of and interest in <unk> Financial group.
Speaker Change: We will now open it up for questions.
Speaker Change: Later.
Speaker Change: Thank you have you would like to ask a question. Please press star followed by one on your telephone keypad. If for any reason you would like to me. It's not a question. Please press star followed by tape again to ask a question. Please press star followed by one as a reminder, if you are using speaker phone. Please remember to pick up your handset before asking your question.
Operator: We remain confident in our profitable growth and shareholder return opportunities. We thank you for your support of and interest in CNO Financial. We will now open it up for questions. Operator.
Operator: Thank you. If you would like to ask a question, please press star followed by 1 on your telephone keypad. If, for any reason, you would like to remove that question, please press star followed by 2.
Speaker Change: Please do ensure that youre on mute locally.
Speaker Change: First question today comes from the line of Ryan Krueger from Stifel. Please go ahead. Your line is now open.
Ryan Krueger: Hey, Thanks, good morning.
Ryan Krueger: My first question was on the ROE.
Ryan Krueger: It's been trending kind of in the 90% range I think ex notables recently I'm curious, where you think that can go overtime and what what are some of the key opportunities to improve the Roe.
Ryan Krueger: Again, to ask a question, please press star followed by 1. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question and please do ensure that you are unmuted locally. Our first question today comes from the line of Ryan Krueger from Stiefel. Please go ahead; your line is now open. Hey, thanks. Good morning.
Ryan Krueger: Perhaps one of them maybe what you were just mentioning in terms of.
Ryan Krueger: Accelerating growth or repositioning some of the investment portfolio.
Paul H. McDonough: My first question was on the ROE. So, you know, it's been trending kind of in the 9% range, I think X notables recently. I'm curious, you know, where you think that can go over time, and what are some of the key opportunities to improve the ROE?
Ryan Krueger: Sure Good morning, Ryan It's Paul.
Paul H. McDonough: We didn't include ROE.
Paul H. McDonough: In our guidance.
Paul H. McDonough: And that's primarily because the nonoperating income.
Paul H. McDonough: Can create some some sort of unplanned noise in the ratio.
Gary C. Bhojwani: And I guess perhaps one of them may be what you were just mentioning in terms of, you know, accelerating growth or repositioning some of the investment portfolio. Sure. Good morning, Ryan. It's Paul.
Paul H. McDonough: But I would say assuming sort of no no impact from non operating for the year. The guidance that we provided translates to an ROE kind of around nine 5%.
Paul H. McDonough: So, we didn't include ROE in our guidance, and that's primarily because the non-operating income can create some sort of unplanned noise in the ratio. But I would say, assuming sort of no impact from non-operating income, for the year, the guidance that we provided translates to an ROE kind of around nine and a half percent. So, I would characterize that as the current run rate. I certainly think that we have opportunities to expand the ROE, and that's something that we're focused on as a management team over the next couple of years. Ryan, I would add one other thing. Ryan, can you hear me okay?
Paul H. McDonough: So I would characterize that as the current run rate I, certainly think that we have opportunities to expand the ROE and thats something that were focused on as a management team over the next couple of years.
Speaker Change: Ryan I would add Inc. And then Gary I would add one other thing.
Speaker Change: Brian can you hear me okay.
Hi, yes, thanks, Okay.
I just wanted to remind you and our shareholders the senior management team, notably myself and Paul but others, we have ROE expansion in our targets our incentive comp is based on hitting certain ROE targets and so on so we are very focused on this and as Paul indicated we believe theres an opportunity to drive this up.
Gary C. Bhojwani: I just wanted to remind you and our shareholders, the senior management team, notably myself and Paul, but others, we have ROE expansion in our targets. Our incentive comp is based on hitting certain ROE targets and so on. So we are very focused on this, and as Paul indicated, we believe there's an opportunity to drive growth. Thanks.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Then I.
Speaker Change: I guess a question on <unk>.
Speaker Change: The non variable components of our unallocated NII it trended up throughout 2023, there is a lot going on with with the yield curve and the forward curve.
Speaker Change: I'm, just hoping to get maybe a little more color on what how that May look as we go into 2024, given all the variables that play.
Paul H. McDonough: And then on, I guess a question on the non-variable components of unallocated NII, you know, it trended up kind of throughout 2023. There's a lot going on with the yield curve and the forward curve. And I'm just hoping to get a little more color on what that may look as we go into 2024, given all the variables at play. Yeah, I can give a very high-level comment. And then Eric, I'd invite you to provide some color.
Speaker Change: Yes, I can give a very high level comment and then Eric.
Speaker Change: To provide some color.
Eric: So I guess I'd make.
Speaker Change: Two points right number one.
Eric: Well by definition.
Eric: So it's going to be volatile.
Eric: And then the second point I'd make is.
Eric: As I indicated in my earlier comments.
Eric: Our plan for the year and the related guidance that we've provided.
Paul H. McDonough: So I guess I'd make two points, Ryan. Number one, it's variable by definition. And then the second point I'd make is, as I indicated in my earlier comments, our plan for the year and the related guidance that we've provided assumes that all generate a return that's consistent with our long-term sort of on average run rate expectation, which is around nine, you know, nine and a half percent, call it. Is that what we expect in the next three to six months? Probably not.
Eric: Assuming that all to generate a return that's consistent with our long term sort of an average run rate expectation.
Eric: Which is around 995% call it.
Eric: Is that we expect in the next three to six months, probably not there's probably more downside risks there than upside.
Eric: But over the course of the next 12 months, but I think it's not an unrealistic expectation. So I'll leave it there Eric would you.
Paul H. McDonough: You know, there's probably more downside risk there than upside. But over the course of the next 12 months, I think it's not an unrealistic expectation. So I leave it there, Erik. What would you add? If I could, if I could just add, I was actually thinking more about the non-variable components of the unallocated NII. Yeah, Ryan, let me jump in on you here. A couple ingredients there.
Eric: What would you add.
Eric: If I could if I could just add.
More about the not the non variable component of the unallocated NII.
Eric: Yes, Ryan.
Eric: Yes, let me jump, let me jump in on you here a couple of ingredient there for one higher higher floating rates short term rates in the market.
Ryan Krueger: Flow through there is a benefit so to the extent that that rates stay short rates stayed higher for longer that that work well there second.
Eric R. Johnson: One, higher floating rates; short-term rates in the market flow through there as a benefit. So to the extent that short rates stay higher for longer, that works well there. Second, we've extracted higher margins in our Federal Home Loan Bank and funding agreement programs just through Asset Reallocation on an ongoing basis without really taking on any much greater credit risk and well within the asset liability management boundaries that we targeted when we started doing those. And then there are just more dollars there as well, like Gary mentioned earlier about the growth of the company and a little more capital in the company. So there's more, so you have, you know, there's a compounding effect of more dollars there and then higher, marginally higher returns on the dollars. So you know, I agree with the statement that this is not, it's not going to be a steady state. There are going to be puts and takes over time, but those are some of the things that paid off in 2023.
Ryan Krueger: We extracted higher margins in our.
Ryan Krueger: Uh huh.
Ryan Krueger: Federal home loan bank and and funding agreement programs.
Speaker Change: Just through.
Speaker Change:
Speaker Change: Asset reallocation.
Speaker Change: On an ongoing basis without really.
Speaker Change: They're taking on any much greater credit risk.
Speaker Change: Well within.
Speaker Change: The asset liability management boundaries that we.
Speaker Change: We targeted when we when we started doing those things.
And then Theres just more dollars there as well as Gary mentioned earlier about the growth of the company in a little more capital in the company. So theres more so you have got the compounding effect of more dollars.
Speaker Change: There and then higher.
Speaker Change: Generally higher returns on the dollars so.
Speaker Change: Yeah.
Speaker Change: I agree with.
Speaker Change: Sure.
Speaker Change: That.
Speaker Change: This is <unk>.
Speaker Change: It's not going to be a steady state there are going to be puts and takes over time, but those are some of the things that paid some benefits in 2023.
Eric R. Johnson: Thank you. You're welcome. The next question today comes from the line of Sunit Kamath from Jefferies. Please go ahead; your line is now open.
Speaker Change: Thank you.
Speaker Change: Youre welcome.
Yes.
Speaker Change: The next question today comes from the line of <unk> Kamath from Jefferies. Please go ahead. Your line is now open.
Ankur Kamath: Great. Thanks, I just wanted to start with the RBC of 402, I guess for the end of the year and you're guiding to $3 75 for I guess the plan for 2024 is the idea that youll kind of see that RBC decline driven largely by sales strain or is there an expectation that you may start to take some cash out of the.
Sunit Kamath: Great, thanks. I just wanted to start with RBC 402, I guess, for the end of the year, and you're guiding to 375 for, I guess, the plan for 2024. Is the idea that you'll kind of see that RBC decline driven largely by sales strain? Or is there an expectation that, you know, you may start to take some cash out of the operating subsidiary? Good morning, Sinead. It's Paul.
Ankur Kamath: Operating subsidiary.
Ankur Kamath: Yes.
Good morning, it's Paul So I wouldn't say, we're guiding to a $3 75.
Paul H. McDonough: So I wouldn't say we're guiding to a 375 or that we continue to manage; 375 is sort of a threshold level. You know, our practice for the last couple of years has been to manage sort of comfortably to the plus side of that 375, and I expect we'll continue to do that. We do actually have a minimum in our risk appetite that we share with rating agencies and regulators of 350.
Paul H. McDonough: We continue to manage to a $3 75 as sort of a threshold level.
Paul Mcdonough:
Paul H. McDonough: Our practice for the last couple of years has been to manage sort of comfortably to the plus side of that $3 75, and I expect we'll continue to do that.
Paul H. McDonough: We do actually have a minimum and our risk appetite that we share with rating agencies and regulators of $3 50.
Paul H. McDonough: But, you know, as a practical matter, we have been and will continue to manage to the plus side of that 375. So you should expect that 402 to come down, but not necessarily come down all the way to 375. And you should expect that we'll continue to pay dividends out of the OPCOs as we manage the RBC. That makes sense.
Paul H. McDonough: But.
Paul H. McDonough: As a practical matter we we.
Paul H. McDonough: That and we will continue to to manage to the plus side of that $3 75. So you should expect.
Paul H. McDonough: Spect that 402 to come down, but not necessarily come down all the way to $3 75.
Paul H. McDonough: And you should expect that we will continue to pay dividends out of the op codes as.
As we manage the RBC.
Speaker Change: Okay that makes sense and then I guess.
Paul H. McDonough: And then, I guess, in terms of the Medicare supplement business. You know, we get the question all the time when the managed healthcare companies report, and they've been reporting Medicare Advantage claims that have gone up, and I know the supplement is different, but are you seeing anything that would cause you to think that claims kind of could increase here if what we're seeing at the managed care companies kind of persists, or is it just a completely different exposure, and you're not expecting to see any increase? Well, they are very different, as you've pointed out.
Speaker Change: In terms of the Medicare supplement business.
Speaker Change: We get the question all the time when the managed health care companies report and they have been reporting.
Speaker Change: Medicare advantage claims that have gone up and I know supplement is different but are you seeing anything that would cause you to think that claims kind of could increase here if.
Speaker Change: And what we're seeing at the managed care companies kind of persists or is it just a completely different exposure and youre not expecting to see any increase in claims.
Speaker Change: Well they are very different as you've pointed out but we are seeing some pressure some pressure on claims I think you've seen that in our own results not anywhere near the same extent as you've seen from us.
Paul H. McDonough: But, you know, we are seeing some pressure, some pressure on claims. I think you've seen that in our own results, not anywhere near to the same extent as you've seen from, you know, some writers of NetAdvantage. But I would emphasize that with MedSupp, we have the opportunity to reprice the business annually. And so, to the extent that there's pressure on loss costs, you know, we're able to adjust by adjusting the price, subject to regulatory approval. But, you know, typically, we get something close to what we're asking for because it's based on real experience.
Speaker Change: Some writers of med advantage.
Speaker Change: But I would emphasize that with med sup you have the opportunity to.
Speaker Change: Reprice the business annually.
Speaker Change: So to the extent that there's pressure on loss cost, we're able to to adjust by adjusting the price.
Subject to regulatory approval, but typically.
Speaker Change: We got something close to what we're asking for because it's based on real experience.
Paul H. McDonough: And the other thing I'd say is that, notwithstanding the pressure, we continue to generate returns from that business that are consistent with our target returns. And then the last thing I'd say, and again, you've seen this in the results, you know, the new MedSupp product that we introduced, I think it's been a little over a year now, is not as profitable as the old NetSup product that's now running
Speaker Change: And the other thing I'd say is that notwithstanding the crusher.
Speaker Change: We continue to generate returns from that business.
Speaker Change: And that are consistent with our target returns.
Speaker Change: The last thing I'd say and again <unk> seen this.
Speaker Change: And the results.
Speaker Change: The new med sub product that we introduced.
Speaker Change: I think it's been a little over a year now is not as profitable as the net sub product, it's not running off so that creates a little bit of a headwind for us in terms of year over year.
Paul H. McDonough: So that creates a little bit of a headwind for us in terms of year-over-year margin comparisons for that product. Okay, that's helpful, thanks. The next question today comes from the line of John Barnidge from Piper Sandler. Please go ahead, your line is now open.
Speaker Change: Margin comparisons in that product.
Speaker Change: Yeah.
Speaker Change: Okay. That's helpful. Thanks.
Speaker Change: The next question today comes from the line of John Barnidge from Piper Sandler. Please go ahead. Your line is now open.
John Bakewell Barnidge: Great. Thank you very much. Appreciate the opportunity. With the completion of the first transaction for the Bermuda platform, can you talk about leveraging that for possibly other actions for your liability profile? Thank you. Sure. Good morning, John. It's Paul.
John Bakewell Barnidge: Great. Thank you very much appreciate the opportunity with the completion of the first transaction for the Bermuda platform.
John Bakewell Barnidge: Can you talk about leveraging that for possibly other actions for your liability profile. Thank you.
John Bakewell Barnidge: Sure Good morning, John It's Paul.
Paul H. McDonough: That is something we're currently in the process of exploring. And now that we've created this platform, there is, you know, certainly, there is an incentive to explore ways to leverage it further. We suspect that, you know, we'll ultimately identify, you know, specific opportunities to do that. But we don't have anything specific to share at this time.
Paul H. McDonough: That is something we are currently in the process of exploring.
Paul H. McDonough: We created this platform it's certainly.
Paul H. McDonough: There is an incentive to explore ways to leverage it further.
Paul H. McDonough: We suspect that will ultimately identify specific opportunities to do that.
Speaker Change: But nothing specific to share at this time.
Speaker Change: Great. Thank you and then to the extent we get rate cuts can you talk about sensitivity of NII to floaters.
Paul H. McDonough: Great, thank you. And then, to the extent we get rate cuts, can you talk about the sensitivity of NII to floaters? You know, we don't have a ton of floating rate assets, but Erik, I'll ask you to comment. You know, as I described earlier, there is a marginal amount of sensitivity that passes through unallocated NII. But to Paul's comment, the great amount of floating rate securities that we own on the asset side are matched against floating rate liabilities on the liability side, such that what we're taking out is a margin and not a variable income. So it'll probably have a marginal impact, you know, I'd say. Ninety percent, if not more, of the floating rate assets we hold are paired against liabilities of similar duration and index basis.
Speaker Change: We don't have a ton of floating rate, but Eric I'll ask you to comment.
Speaker Change: Yeah.
No.
Speaker Change: As I described earlier.
Eric: Marginal amount of sensitivity that passes through unallocated NII, but to Paul's comment that.
Eric: Great amount of floating rate securities that we own on the asset side are matched against floating rate liabilities on the liability side, such that what we're taking out as a margin and not and not.
Speaker Change: Got it.
Speaker Change: Not a variable income so it will be.
Speaker Change: Probably a marginal.
Speaker Change: Impact but.
Speaker Change: I would say.
Speaker Change: And 90% if not more of the floating rate assets, we hold are paired against.
Speaker Change: Liabilities of similar.
Speaker Change: Duration and an index basis.
Eric R. Johnson: Thank you very much. I appreciate it. You're welcome.
Speaker Change: Yes.
Speaker Change: Thank you very much I appreciate it youre.
Speaker Change: Youre welcome.
Speaker Change: Yeah.
Operator: As a reminder, if you would like to ask a question, please press star followed by 1 on your telephone keypad. Our next question today comes from the line of Wilma Burdiss from Raymond James. Please go ahead; your line is now open. Hey, good morning. How does CNO handle past medication or other healthcare events like Laquimbe, which is the new Alzheimer's drug? I guess I'm talking about within your med sub line.
Speaker Change: As a reminder, if you would like to ask a question. Please press star followed by one on your telephone keypad.
Speaker Change: Our next question today comes from the line of XOMA Budd <unk> from Raymond James. Please go ahead. Your line is now open.
Speaker Change: Yeah.
XOMA Budd: Hey, good morning.
XOMA Budd: Hi.
XOMA Budd: And on cost and medication or other health care events, like <unk>, which is a new Alzheimer's drug.
XOMA Budd: I guess I'm talking about senior mens top line.
Paul H. McDonough: Could you see pressure on pricing for the first few quarters post-approval but prior to repricing, or do you have the ability to kind of reprice first when you see an event like that coming? So, good morning or afternoon, Wilma, I guess depending on what time zone you're in. So we've been sort of tracking what can be for a while now. It feels like, and we have anticipated, an impact from Oquimbe on claims in 24s that was contemplated in the rate increase that we filed. So I think it's an example of something that can put pressure on loss costs that we respond to with rate increases. So I think, you know, it's evolving in terms of how much pressure it will put on us, but we've anticipated some, and I think we'll be able to manage it as it evolves over the next few years. Thank you. And then, could you just give a little bit of color on the recruiting environment this coming year? I mean, recruiting numbers were pretty good this year.
XOMA Budd: Would you see pressure on pricing for the first few quarters post approval, but prior to repricing or do you have the ability to kind of reprice first we've seen an event like that company.
So good good morning, or afternoon, I guess, depending on what times on your end.
XOMA Budd: Hi.
XOMA Budd: So we've been sort of tracking and what can be for for a while now it feels like and we have anticipated.
Speaker Change: On impact from Colombia on claims in.
Speaker Change: 24, so that was contemplated in the.
Speaker Change: The rate increase that.
Speaker Change: That we filed.
Speaker Change: So I think it's an example of something that can put pressure on loss costs.
Speaker Change: We respond to with with with rate increases.
Speaker Change: <unk>.
Speaker Change: It's evolving in terms of how much pressure it will put but we've anticipated some and I think we'll be able to manage it as it evolves over the next few years.
Speaker Change: Thank you.
Speaker Change: Could you just give a little bit of color on the recruiting environment.
Speaker Change: This coming year, I mean recruiting numbers were pretty good this year.
Gary C. Bhojwani: How are you guys seeing that shift in 2024? Thank you. Wilma, this is Gary.
Speaker Change: How are you guys seeing that shift in 'twenty 'twenty four thank you.
Speaker Change: Yes.
Speaker Change: This is Gary thanks for the question.
Gary C. Bhojwani: Thanks for the questions. So we were obviously very pleased with the recruiting environment, and let me start with the short answer. Based on everything we're seeing, we expect that. And so there are a few points I'd make. First of all, historically, conventional wisdom says that when unemployment starts to rise.
Gary: So we were obviously very pleased with the recruiting environment and let me start with the short answer.
Gary: Based on everything we're seeing we expect that continue.
Gary: And so there's a few points I'd make first of all.
Gary: Historically conventional wisdom says that when unemployment starts to rise you see more people willing to try a career change and specifically try out commission only based position like this.
Gary C. Bhojwani: You see more people willing to try a career change and specifically try out a commission-only based position like this. So as the labor market tightens a little bit, we're going to see that. But I think what's really happened and why we've had such a performance is a little bit like Jim Collins' analogy of the flywheel. I can't point to one or even two things. I could point to half a dozen or a dozen different things that we've done to make this a more attractive career path and simultaneously increase both recruiting and productivity. For us, that's the real trick.
Gary: So as the labor market tightens, a little bit we're going to see that but I think what's really happened and why we've had such performance, it's a little bit like Jim Collins' analogy of the flywheel I can't point to one or even two things I can point to a half a dozen or a dozen different things that we've done to make this a more attractive career path and to simultaneous.
Gary: As we increase both recruiting and productivity for us that's the real trick.
Gary C. Bhojwani: And if you asked me to pick, I would actually emphasize productivity, but the trick is doing both, and that's what we're very focused on. As we've built out new products, as we've bettered our sales enablement, as we've made clear the career path for these agents to become financial advisors, as we've done a number of different things, literally dozens of small, small things, I think we've made And everything we're seeing in 2024 leads us to believe that we should be able to continue to see good results. Now, you know, as the agent population gets bigger, of course, it gets harder to match this type of percentage growth rate, but we feel very good about our opportunity to continue to drive both recruiting and productivity.
Gary: And if you ask me to pick I would actually emphasize productivity, but.
Gary: But the trick is doing both and that's what we're very focused on.
Gary: As we built out new products as we bettered our sales enablement as we've made clear the career path for these agents to become financial advisors as we've done a number of different things literally dozens of small small things I think we've made this an increasingly attractive opportunity and everything we're seeing in <unk>.
24 leads us to believe that we should be able to continue to.
To see good results now.
Gary: Agent population gets bigger of course, it gets harder to match this type of percentage growth rates, but we feel very good about our opportunity to continue to drive forward.
Gary: Both recruiting and productivity in both divisions.
Gary: Yeah.
Speaker Change: Thank you.
Operator: Thank you. There are no additional questions waiting at this time, so I'd like to pass the call back over to Adam Orville for any closing remarks. Thank you, operator, and thank you all for participating in today's call. Please reach out to the Investor Relations team if you have any further questions. Have a great rest of your day. This concludes today's conference call. Thank you all for your participation. You may now disconnect. Thank you.
Speaker Change: Thank you.
Speaker Change: There are no additional questions waiting at this time, so I'd like to pass the call back over to Adam <unk> for any closing remarks.
Adam: Thank you operator, and thank you all for participating in today's call. Please reach out to the Investor Relations team. If you have any further questions have a great rest of your day.
Speaker Change: This concludes today's conference call. Thank you all for your participation you may now disconnect.
Speaker Change: [music].