Q2 2024 CNO Financial Group Inc Earnings Call

Good morning all. Welcome to the CNO Group Financial second quarter 2024 earnings call.

Operator: Call to 2024 earnings school. During the conference, if you have any questions, please press staff followed by one on your telephone keypad. If you'd like to remove yourself from that line of questioning, please press staff followed by two.

Kali: During the conference, if you have any questions, please press star followed by one on your telephone keypad. And if you'd like to remove yourself from that line of questioning, please press star followed by two. My name is Kali, and I'll be coordinating the call today. I'd now like to hand over to Adam Auvil.

Carly: During the conference, if you have any questions, please press star followed by one on your telephone keypad. And if you'd like to remove yourself from that line of questioning, please press star followed by two. My name is Carly and I'll be coordinating the call today.

Carly: My name is Carly, and I'll be coordinating the calls today.

Adam Auvil: I would like to hand over to Adam Auvil to begin.

Carly: I'd now like to hand over to Adam Auvil to begin.

Gary Bhojwani: Good morning, and thank you for joining us on CNO Financial Group's second quarter of 2024 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 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's section of our website and was filed in a Form 8-K yesterday.

Adam Auvil: Good morning, and thank you for joining us on CNO Financial Group's second quarter 2024 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 Auvil: Good morning, and thank you for joining us on CNO Financial Group's second quarter of 2024 earnings conference call.

Speaker Change: Today's presentation will include remarks from Gary Bhojwani, Chief Executive Officer, and Paul McDonough, Chief Financial Officer.

Speaker Change: Following the presentation, we will also have other business leaders available for the question and answer period.

Speaker Change: During this conference call, we will be referring to information contained in yesterday's press release. You can obtain the release by visiting the media section of our website at cnoinc.com.

Adam Auvil: This morning's presentation is also available in the Investors section of our website and was filed in a Form 8K yesterday. We expect to file our Form 10-Q and post it on our website on or before August 7th. 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 statement. 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 append Throughout the presentations, we'll be making performance comparisons, and unless otherwise specified, any comparisons made will refer to changes between second quarter 2024 and second quarter 2023. With that, I'll turn the call over to Gary.

Speaker Change: This morning's presentation is also available in the Investors section of our website and was filed in a Form 8K yesterday.

Gary Bhojwani: We expect to file our Form 10-Q and post it on our website on or before August 7th.

Speaker Change: We expect to file our Form 10-Q and post it on our website on or before August 7th.

Gary Bhojwani: 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-GAT measures which should not be considered a substitute for the most directly comparable GAT measures. You'll find a reconciliation of the non-GAT measures to the corresponding GAT measures in the appendix. Throughout the presentations, we'll be making performance comparisons, and then, less otherwise specified. Any comparisons made will refer to changes between 2nd quarter of 2024 and 2nd quarter of 2023.

Speaker Change: 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.

Speaker Change: Today's presentation contains a number of non- GAAP measures , which should not be considered as substitutes for the most directly comparable GAAP measures .

Speaker Change: You'll find a reconciliation of the non-GAAP measures to the corresponding GAAP measures in the appendix.

Speaker Change: Throughout the presentations, we'll be making performance comparisons, and unless otherwise specified, any comparisons made will refer to changes between second quarter of 2024 and second quarter of 2023. With that, I'll turn the call over to Gary.

Gary Bhojwani: With that, I'll turn the call over to Gary. Thanks, Adam. Good morning, everyone, and thank you for joining us. C&O delivered excellent financial and operating performance in the quarter. Operating earnings for deluded share were a dollar five, up 94%. Our strong results were broad-based across earnings, production, and capital. Our momentum over the past several quarters is establishing a baseline of consistent and repeatable results. We are seeing the green shoots of our strong sales growth beginning to translate into earnings growth. On a consolidated basis, we posted our eighth consecutive quarter of sales production growth and our sixth consecutive quarter of growth in producing agent counts.

Gary Chandru Bhojwani: Good morning, everyone, and thank you for joining us. CNO delivered excellent financial and operating performance in the quarter. Operating earnings per diluted share were $1.05, up 94%. Our strong results were broad-based across earnings, production, and capital. Our momentum over the past several quarters is establishing a baseline of consistent and repeatable results. We are seeing the green shoots of our strong sales growth beginning to translate into earnings. On a consolidated basis, we posted our eighth consecutive quarter of sales production growth and our sixth consecutive quarter of growth in producing agent counts.

Gary Chandru Bhojwani: Thanks, Adam.

Gary Chandru Bhojwani: Good morning, everyone, and thank you for joining us.

Gary Chandru Bhojwani: CNO delivered excellent financial and operating performance in the quarter.

Gary Chandru Bhojwani: Operating earnings for diluted share were $1.05, up 94%.

Gary Chandru Bhojwani: Our strong results were broad-based across earnings, production, and capital.

Gary Chandru Bhojwani: Our momentum over the past several quarters is establishing a baseline of consistent and repeatable results.

Gary Chandru Bhojwani: We are seeing the green shoots of our strong sales growth beginning to translate into earnings growth.

Gary Chandru Bhojwani: On a consolidated basis, we posted our 8th consecutive quarter of sales production growth and our 6th consecutive quarter of growth in producing agent counts.

Gary Bhojwani: Total new annualized premium was a 4% across the enterprise. Earnings benefited from favorable insurance product margin and strong investment results reflecting growth in the business and continued expansion of the portfolio book yield. Our new money rate exceeded 6% for a sixth consecutive quarter. Capital and liquidity remain well above target levels after returning $77 million share. Book value for deluded share excluding AOCI with $36, up 11%. Each component of our business is delivering top performance, as demonstrated by Dale momentum in both consumer and work site. A growing distribution force continued solid and sustainable earnings, our excellent capital position, and raising full-year guidance on earnings and cash flow.

Gary Chandru Bhojwani: Total new annualized premium was up 4% across the enterprise. Earnings benefited from favorable insurance product margins and strong investment results reflecting growth in the business and continued expansion of the portfolio book. Our new money rate exceeded 6% for a sixth consecutive quarter. Capital and liquidity remain well above target levels after returning $77 million to shareholders. Book value per diluted share, excluding AOCI, was $36, up 11%. Each component of our business is delivering top performance, as demonstrated by sales momentum in both consumer and worksite, a growing distribution force, continued solid and sustainable earnings, our excellent capital position, and raising four-year guidance on earnings and cash. Turning to slide 5.

Gary Chandru Bhojwani: Total new annualized premium was up 4% across the enterprise.

Gary Chandru Bhojwani: Earnings benefited from favorable insurance product margin and strong investment results reflecting growth in the business and continued expansion of the portfolio book yield.

Gary Chandru Bhojwani: Our new money rate exceeded 6% for a sixth consecutive quarter.

Gary Chandru Bhojwani: Capital and liquidity remain well above target levels after returning $77 million in shareholders.

Gary Chandru Bhojwani: Book value for diluted share excluding AOCI was $36 up 11%.

Gary Chandru Bhojwani: Each component of our business is delivering top performance as demonstrated by sales momentum in both consumer and worksite.

Gary Chandru Bhojwani: A Growing Distribution Force

Gary Chandru Bhojwani: continue solid and sustainable earnings.

Gary Chandru Bhojwani: Our excellent capital position.

Gary Bhojwani: Turning to slide five, as a reminder, last quarter we introduced an expanded growth scorecard to sharpen focus on the three key drivers of our performance: production, distribution, and investments in capital. We are pleased that all of our growth scorecard metrics are up in the quarter. I'll discuss each division in the next two slides.

Gary Chandru Bhojwani: and raising four-year guidance on earnings and cash flow.

Gary Chandru Bhojwani: As a reminder, last quarter we introduced an expanded growth scorecard to sharpen focus on the three key drivers of our performance: production, distribution, and Investments in Capital. We are pleased that all of our growth scorecard metrics were up in the quarter. I'll discuss each division in the next two slides.

Gary Chandru Bhojwani: Turning to slide 5.

Gary Chandru Bhojwani: As a reminder, last quarter we introduced an expanded growth scorecard to sharpen focus on the three key drivers of our performance.

Gary Chandru Bhojwani: Production.

Gary Chandru Bhojwani: Distribution and Investments in Capital

Gary Chandru Bhojwani: We are pleased that all of our growth scorecard metrics are up in the quarter.

Gary Bhojwani: Paul will cover investments in capital in more detail during his remarks. Beginning with the consumer division on slide six, sales momentum continued for a seventh consecutive quarter. Solid execution and sustainable sales growth continue to drive the division's strong financial performance. Our differentiated capabilities that marry a virtual connection with our established in-person agent force to complete the critical last mile of sales and delivery service continued to be well received by our target customer. Total NAF was up two percent. NAF from field sales was up eight percent. Health NAF was up 18 percent, driven by continual momentum with new and enhanced products.

Gary Chandru Bhojwani: Paul will cover investments in capital in more detail during his remarks, beginning with the consumer division on slide 4. Sales momentum continued for a seventh consecutive quarter. Solid execution and sustainable sales growth continue to drive the division's strong financial performance. Our differentiated capabilities that marry a virtual connection with our established in-person agent force to complete the critical last mile of sales and delivery service continue to be well received by our target customers. Total NAP was up 2%.

Gary Chandru Bhojwani: I'll discuss each division in the next two slides.

Gary Chandru Bhojwani: Paul will cover investments and capital in more detail during his remarks.

Paul Harrington McDonough: beginning with the Consumer Division on slide 6.

Speaker Change: Sales momentum continued for a seventh consecutive quarter.

Paul Harrington McDonough: Solid execution and sustainable sales growth continue to drive the division's strong financial performance.

Paul Harrington McDonough: Our differentiated capabilities that marry a virtual connection with our established in-person agent force to complete the critical last mile of sales and delivery service continue to be well received by our target customers.

Gary Chandru Bhojwani: NAF from field sales was up 8%, and HealthNAP was up 18%, driven by continued momentum with new and enhanced products. Our Medicare portfolio continues to deliver strong sales growth. Medicare Supplement NAF was up 16%, and Medicare Advantage sales were up 78%. As a reminder, Medicare Advantage fees and sales are not reflected in the. As we have often shared, by offering both Medicare Supplement and Medicare Advantage products, we provide more coverage options for customers.

Paul Harrington McDonough: Total NAF was up 2%. NAF from field sales was up 8%.

Paul Harrington McDonough: HealthNAP was up 18% driven by continued momentum with new and enhanced products.

Gary Bhojwani: Our Medicare portfolio continues to deliver strong sales growth. Medicare supplement NAF was up 16 percent, and Medicare Advantage sales were up 78 percent. As a reminder, Medicare Advantage fees and sales are not reflected in NAF. As we have often shared by offering both Medicare Supplement and Medicare Advantage products, we provide more coverage options for customers. The balance and diversification of our Medicare portfolio is an important part of how we serve the middle income market. With nearly 11,000 people turning 65 every day in the United States, Medicare distribution is a year-round business for us. As consumers age into Medicare, they value trust and seek guidance to help make an informed decision about how they receive their benefits.

Paul Harrington McDonough: Our Medicare portfolio continues to deliver strong sales growth.

Paul Harrington McDonough: Medicare Supplement NAP was up 16% and Medicare Advantage sales were up 78%.

Paul Harrington McDonough: As a reminder, Medicare Advantage fees and sales are not reflected in NAPCS.

Paul Harrington McDonough: As we have often shared, by offering both Medicare Supplements and Medicare Advantage products, we provide more coverage options for customers.

Gary Chandru Bhojwani: The balance and diversification of our Medicare portfolio is an important part of how we serve the middle-income market. With nearly 11,000 people turning 65 every day in the United States, Medicare distribution is a year-round business. As consumers age into Medicare, they value trust and seek guidance to help make an informed decision about how they will receive their benefits.

Paul Harrington McDonough: The balance and diversification of our Medicare portfolio is an important part of how we serve the middle-income market.

Paul Harrington McDonough: With nearly 11,000 people turning 65 every day in the United States, Medicare distribution is a year-round business for us.

Paul Harrington McDonough: As consumers age into Medicare, they value trust and seek guidance to help make an informed decision about how they receive their benefits.

Gary Bhojwani: Our thousands of dedicated field agents who can make an in-person visit in nearly every county in the United States are uniquely positioned to serve this market. Long-term care NAF was up 88 percent on the continued strength of our long-term care fundamental Plus product that we launched last year. The strong response for this product underscores the growing demand for our clients for practical long-term care solutions. Our LTC products are designed for the middle market consumer. 99 percent of the policies have benefit periods of two years or less, and more than 90 percent have benefit periods of one year or less.

Gary Chandru Bhojwani: Our thousands of dedicated field agents, who can make an in-person visit to nearly every county in the United States, are uniquely positioned to serve this market. Long-Term Care NAP was up 88% on the continued strength of our Long-Term Care Fundamental Plus product that we launched last year. The strong response for this product underscores the growing demand from our clients for practical, long-term care solutions. Our LTC products are designed for the middle market consumer.

Paul Harrington McDonough: Our thousands of dedicated field agents, who can make an in-person visit to nearly every county in the United States, are uniquely positioned to serve this market.

Paul Harrington McDonough: Long-term care NAP was up 88% on the continued strength of our long-term care fundamental plus product that we launched last year.

Paul Harrington McDonough: The strong response for this product underscored the growing demand from our clients for practical long-term care solutions.

Gary Chandru Bhojwani: 99% of the policies have benefit periods of two years or less, and more than 90% have benefit periods of one year or less. These plans cover essential costs for one to two years and offer a balanced, affordable approach to funding. Life production was down in the quarter, driven by lower spend on direct-to-consumer markets.

Paul Harrington McDonough: Our LTC products are designed for the middle market consumer.

Paul Harrington McDonough: 99% of the policies have benefit periods of two years or less.

Gary Bhojwani: These plans cover essential costs for one to two years and offer a balanced, affordable approach to funding.

Paul Harrington McDonough: And more than 90% have benefit periods of one year or less.

Paul Harrington McDonough: These plans cover essential costs for one to two years and offer a balanced affordable approach to funding care.

Gary Bhojwani: Live production was down in the quarter, driven by lower spend on direct-to-consumer marketing. As we shared last quarter, we managed our D2C business based on advertising efficiency. In the second quarter, we reduced our television marketing spend in response to higher lead costs. This stems from increased competition for television media space, which tends to spike during presidential election cycles. Meanwhile, we continue to grow our non-television direct response channels such as Web and Digital, which were up 4% in the quarter, and now accounts for approximately 1.4% of our D2C live sales. Anuity-collective premiums were up 9%, and account values were up 5%.

Paul Harrington McDonough: Life production was down in the quarter driven by lower spend on direct-to-consumer markets.

Gary Chandru Bhojwani: As we shared last quarter, we manage our D2C business based on advertising efficiency. In the second quarter, we reduced our television marketing spend in response to higher lead. This stems from increased competition for television media space, which tends to spike during presidential election cycles. Meanwhile, we continue to grow our non-television direct response channels, such as web and digital, which were up 4% in the quarter and now account for approximately one quarter of our D2C life sales.

Paul Harrington McDonough: As we shared last quarter, we manage our D2C business based on advertising efficiency.

Paul Harrington McDonough: In the second quarter, we reduced our television marketing spend in response to higher lead costs.

Paul Harrington McDonough: This stems from increased competition for television media space, which tends to spike during presidential election cycles.

Paul Harrington McDonough: Meanwhile, we continue to grow our non-television direct response channels, such as web and digital, which were up 4% in the quarter and now account for approximately one quarter of our D2C live sales.

Gary Chandru Bhojwani: Annuity Collective premiums were up 9%, and account values were up 5%. Our strong annuity performance was driven by a higher premium for our policies, which were up 9%. We continue to experience stability in our block, which benefits from our captive distribution and the long-term relationships that our agents build with customers. Client assets in brokerage and advisory were up 24% for the quarter to a record $3.6 billion, and new accounts were up 9%. This is now our fifth consecutive quarter of brokerage and advisory growth. When combined with their annuity account values, our clients now entrust us with more than $15 billion of their assets.

Gary Bhojwani: Our strong anuity performance was driven by higher premium for policy, which was up 9%. We continue to experience stability in our block, which benefits from our captive distribution and the long-term relationship that our agents build with customers. Client assets in brokerage and advisory were up 24% for the quarter to a record $3.6 billion. New accounts were up 9%. This is now our fifth consecutive quarter of brokerage and advisory growth. When combined with our annuity account values, our clients now entrust us with more than 15 billion of their assets. Recruiting continues to be favorable and reflects our eighth consecutive quarter of year-over-year gains.

Speaker Change: Annuity collected premiums were up 9% and account values were up 5%. Our strong annuity performance was driven by a higher premium per policy, which was up 9%.

Speaker Change: We continue to experience stability in our block, which benefits from our captive distribution and the long-term relationship that our agents build with customers.

Speaker Change: Client assets in brokerage and advisory were up 24% for the quarter to a record $3.6 billion.

Speaker Change: New accounts were up 9%.

Speaker Change: This is now our fifth consecutive quarter of brokerage and advisory growth.

Speaker Change: When combined with our annuity account values, our clients now entrust us with more than $15 billion of their assets.

Gary Chandru Bhojwani: Recruiting continues to be favorable and reflects our 8th consecutive quarter of year-over-year gains. The producing agent count was up 3%, our 6th consecutive quarter of growth. Next, slide seven in our worksite division.

Speaker Change: Recruiting continues to be favorable and reflects our 8th consecutive quarter of year-over-year gains, producing agent count was up 3%, our 6th consecutive quarter of growth.

Gary Bhojwani: Producing agent account was up 3%; our sixth consecutive quarter of growth.

Gary Bhojwani: Next, slide 7 and our worksite division performance. We posted our second highest quarter-ever for life and health, now with sales up 18%. For eight of the last nine quarters, worksite insurance sales have delivered at least 15% growth.

Gary Chandru Bhojwani: We posted our second-highest quarter ever for Life & HealthNAP, with sales up 18%. For 8 of the last 9 quarters, worksite insurance sales have delivered at least 15% growth. We are very pleased with how our worksite insurance offerings are delivering sustained growth for our business and value for our customers. As a reminder, this metric reflects the annual contract value of benefit services sold in the quarter and is a leading indicator of fee revenue. Our benefit services strategy remains a priority for 2024 and beyond.

Speaker Change: Next, slide 7 in our Worksite Division Performance.

Speaker Change: We posted our second highest quarter ever for life and health NAP with sales up 18%.

Speaker Change: For eight of the last nine quarters, worksite insurance sales have delivered at least 15% growth.

Gary Bhojwani: We are very pleased with how our worksite insurance offerings are delivering sustained growth for our business and value for our clients. Fee sales were up 24%. As a reminder, this metric reflects the annual contract value of benefit services sold in the quarter and is a leading indicator of the revenue growth.

Speaker Change: We are very pleased with how our worksite insurance offerings are delivering sustained growth for our business and value for our clients.

Speaker Change: Fee sales were up 24 percent.

Speaker Change: As a reminder, this metric reflects the annual contract value of benefit services sold in the quarter and is a leading indicator of fee revenue growth.

Gary Bhojwani: Our benefit services strategy remains a priority for 2024 and beyond. Producing agent count was up 25%. Our ninth consecutive quarter of growth. First year producing agent count was up 33%. We continue to see solid agent retention across all cohorts and healthy productivity levels.

Speaker Change: Our benefit services strategy remains a priority for 2024 and beyond.

Gary Chandru Bhojwani: The producing agent count was up 25%, our ninth consecutive quarter of growth; first year producing agent count was up 33%. We continue to see solid agent retention across all cohorts and healthy productivity. New products and strategic initiatives continue to deliver sales growth for WorkSite in the quarter. I'll briefly highlight three programs that are generating meaningful results. First, the new products that we introduced last year are driving sales. Accident insurance sales were up 27%, and critical illness sales were up 16%.

Speaker Change: Producing agent count was up 25%, our 9th consecutive quarter of growth.

Speaker Change: First year producing agent count was up 33%.

Speaker Change: We continue to see solid agent retention across all cohorts and healthy productivity levels.

Gary Bhojwani: New products and strategic initiatives continue to deliver sales growth for Worksite in the quarter. I'll briefly highlight three programs that are generating meaningful results. First, the new product that we introduced last year is driving sales growth. Accident insurance sales were up 27%, and critical illness sales were up 16%. Second, our geographic expansion initiative accounted for 32% of our total sales growth in the quarter. The third consecutive quarter of meaningful contribution from this program.

Speaker Change: New products and strategic initiatives continue to deliver sales growth for WorkSite in the quarter.

Gary Chandru Bhojwani: Second, our Geographic Expansion Initiative accounted for 32% of our total sales growth in the quarter, the third consecutive quarter of meaningful contribution from this program. This initiative targets areas where we've identified strategic opportunities to grow our market share and put. Finally, in 2023, we launched an initiative to help agents cultivate and acquire new employer groups for insurance. We're experiencing strong momentum from this program alongside continued growth from reserving existing clients. New employer groups were up 8% as compared to the same period last year, and NAB for new group clients was up 90%.

Speaker Change: I'll briefly highlight three programs that are generating meaningful results.

Speaker Change: First, the new products that we introduced last year are driving sales growth.

Speaker Change: Accident insurance sales were up 27% and critical illness sales were up 16%.

Speaker Change: Second, our Geographic Expansion Initiative accounted for 32% of our total sales growth in the quarter, the third consecutive quarter of meaningful contribution from this program.

Gary Bhojwani: This initiative targets areas where we've identified strategic opportunities to grow our market share and footprint. Finally, in 2023, we launched an initiative to help agents cultivate and acquire new employer groups for insurance sale. We're experiencing strong momentum from this program alongside continued growth from resurfacing existing clients.

Speaker Change: This initiative targets areas where we've identified strategic opportunities to grow our market share and footprint.

Speaker Change: Finally, in 2023, we launched an initiative to help agents cultivate and acquire new employer groups for insurance sales.

Speaker Change: We're experiencing strong momentum from this program alongside continued growth from resurfacing existing clients.

Paul Mcdonough: New employer groups were up 8% as compared to the same period last year, and now for new group and new group clients with up 90%. And with that, I'll turn it over to Paul. Thanks, Gary, and good morning, everyone. Turning to the financial highlights on Slide 8. It was really an exceptional quarter across the board: net operating income of 84% and whole dollars 94% on a per share basis, driven by improved product margins and investment returns, coupled with better operating leverage and fewer shares outstanding. The expense ratio is 19.31% on a trailing 12-month basis, down 31 basis points versus the prior year period.

Speaker Change: New employer groups were up 8% as compared to the same period last year, and NAP for new group clients was up 90%.

Paul Harrington McDonough: And with that, I'll turn it over to Paul.

Paul Harrington McDonough: Thanks, Gary. Good morning, everyone.

Speaker Change: And with that, I'll turn it over to Paul.

Paul Harrington McDonough: Turning to the financial highlights on slide 8, it was really an exceptional quarter across the board. Net operating income of 84% in whole dollars, 94% on a per share basis, driven by improved product margins and investment returns, coupled with better operating leverage and fewer shares outstanding. The expense ratio is 19.31% on a trailing 12-month basis, down 31 basis points versus the prior year period.

Paul Harrington McDonough: Thanks Gary and good morning everyone. Turning to the financial highlights on slide 8.

Paul Harrington McDonough: It was really an exceptional quarter across the board. Net operating income up 84% in whole dollars, 94% on a per share basis, driven by improved product margins and investment returns.

Paul Harrington McDonough: coupled with better operating leverage and fewer shares outstanding.

Paul Harrington McDonough: The expense ratio is 19.31% on a trailing 12-month basis, down 31 basis points versus the prior year period.

Paul Mcdonough: Free cash flow generation was strong; hold code liquidity benefited from the $700 million debt offering in May. We deployed $60 million of excess capital on share repurchases in the quarter, contributing to a 6% reduction in weighted average diluted shares outstanding either over year. On a trailing 12 month basis through June 30, operating return on equity was 11.2% as reported and 10% ex significant items. Turning to slide 9, insurance product margin was very strong in the quarter, up 23%, reflecting sustained growth in the business and favorable experience resulting in margin growth across all three product categories.

Paul Harrington McDonough: Pre-cash flow generation was strong, and HoldCode Liquidity benefited from the $700 million debt offering in May. We deployed $60 million of excess capital on share repurchases in the quarter, contributing to a 6% reduction in weighted average diluted shares outstanding year-over-year.

Paul Harrington McDonough: Free cash flow generation was strong. Holdcode liquidity benefited from the $700 million debt offering in May.

Paul Harrington McDonough: We deployed $60 million of excess capital on share repurchases in the quarter, contributing to a 6% reduction in weighted average diluted shares outstanding year-over-year.

Paul Harrington McDonough: On a trailing 12-month basis through June 30, operating return on equity was 11.2% as reported and 10% ex-significant items. Turning to slide nine, insurance product margin was very strong in the quarter, up 23%, reflecting sustained growth in the business and favorable experience, resulting in margin growth across all three product categories. Fixed indexed annuity margins benefited from improved yield and growth in the block. The improved yield was driven by portfolio optimization trades in the quarter, where we selectively sold certain lower yielding securities and reinvested in higher yielding securities.

Paul Harrington McDonough: On a trailing 12-month basis through June 30, operating return on equity was 11.2% as reported and 10% at significant items.

Paul Harrington McDonough: Turning to slide 9.

Paul Harrington McDonough: Insurance product margin was very strong in the quarter, up 23%.

Paul Harrington McDonough: reflecting sustained growth in the business and favorable experience, resulting in margin growth across all three product categories.

Paul Mcdonough: Fixed indexed annuity margins benefited from improved yield and growth in the block. The improved yield was driven by portfolio optimization trades in the quarter where we selectively sold certain lower-yielding securities and reinvested in higher-yielding securities. Other annuity margins benefited from reserve releases due to higher mortality on larger close block policies. Long term care margins reflect favorable claims experience in the current period as compared to unfavorable claims experience in the prior period. Finally, traditional life margins benefited from growth in the block and lower advertising expense. Turning to slide 10, net investment income results were strong in the quarter. The new money rate was 6.41%.

Paul Harrington McDonough: Fixed indexed annuity margins benefited from improved yield and growth in the block.

Paul Harrington McDonough: The improved yield was driven by portfolio optimization trades in the quarter, where we selectively sold certain lower yielding securities and reinvested in higher yielding securities.

Paul Harrington McDonough: Other annuity margins benefited from reserve releases due to higher mortality on larger closed block policies.

Paul Harrington McDonough: Long-term care margins reflect favorable claims experience in the current period as compared to unfavorable claims experience in the prior period.

Paul Harrington McDonough: Turning to slide 10, other annuity margins benefited from reserve releases due to higher mortality on larger closed block policies. Long-term care margins reflect favorable claims experience in the current period as compared to unfavorable claims experience in the prior period. Finally, traditional life margins benefited from growth in the block and lower advertising expense.

Paul Harrington McDonough: Finally, traditional like margins benefited from growth in the block and lower advertising expense.

Paul Harrington McDonough: Net investment income results were strong in the quarter. The new money rate was 6.41 percent, the sixth consecutive quarter above 6%. The average yield on allocated investments was 4.81%, or 16 basis points year over year. The larger-than-trend increase was due to the portfolio optimization trades that I mentioned earlier. The increase in yield, along with growth in the business, drove a 6% increase in net investment income allocated to products for the quarter. Investment income not allocated to products was up 60%, with alternative investment results slightly below expectations but much improved from recent quarters.

Paul Harrington McDonough: Turning to slide 10.

Paul Harrington McDonough: Net investment income results were strong in the quarter. The new money rate was 6.41%, the sixth consecutive quarter about 6%.

Paul Mcdonough: The 6 consecutive quarters about 6%. The average yield on allocated investments was 4.81% of 16 basis points year over year. The larger-than-trend increase was due to the portfolio optimization trades that I mentioned earlier. The increase in yield along the growth in the business drove a 6% increase in that investment income allocated to products for the quarter. Investment income not allocated to products was at 60% with alternative investment results slightly below expectation. with much improved from recent quarters. We completed a $750 million three-year FABN offering in the quarter, increasing the spread income we earn on the program.

Paul Harrington McDonough: The average yield on allocated investments was 4.81% of 16 basis points year-over-year.

Paul Harrington McDonough: The larger-than-trend increase was due to the portfolio optimization trades that I mentioned earlier.

Paul Harrington McDonough: The increase in yield along with growth in the business drove a 6% increase in net investment income allocated to products for the quarter.

Paul Harrington McDonough: Investment income not allocated to products was up 60% with alternative investment results slightly below expectations but much improved from recent quarters.

Paul Harrington McDonough: We completed a $750 million three-year FABN offering in the quarter, increasing the spread income we earn on the program. Total investment income was up 12%. Our new investments in the quarter comprised approximately $840 million of assets, with an average rating of single A and an average duration of seven years. Our new investments are summarized in more detail on slides 20 and 21 of the presentation. Turning to slide 11.

Paul Harrington McDonough: We completed a $750 million three-year FABN offering in the quarter, increasing the spread income we earn on the program.

Paul Mcdonough: Total investment income was up 12%. Our new investments in the quarter comprised approximately $840 million of assets, with an average rating of single A and an average duration of seven years. Our new investments are summarized in more detail on 520 and 21 of the presentation. Turning to slide 11, the market value of invested assets grew 5% in the quarter. Approximately 97% of our fixed maturity portfolio at quarter end was investment grade rated, with an average rating of single A, reflecting our up-and-quality bias over the last several years. Our commercial real estate portfolio continues to perform within expectations, reflecting conservative underwriting and proactive management.

Paul Harrington McDonough: Total investment income was up 12%.

Paul Harrington McDonough: Our new investments in the quarter comprised approximately $840 million of assets with an average rating of single A and an average duration of seven years.

Paul Harrington McDonough: Our new investments are summarized in more detail on slides 20 and 21 of the presentation.

Paul Harrington McDonough: The market value of invested assets grew 5% in the quarter. Additionally, 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 bias over the last several years. Our commercial real estate portfolio continues to perform within expectations, reflecting conservative underwriting and proactive management. We've again included some summary metrics in slides 22 and 23 of the presentation. Turning to slide 12.

Paul Harrington McDonough: Turning to slide 11.

Paul Harrington McDonough: The market value of invested assets grew 5% in the quarter.

Paul Harrington McDonough: 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 bias over the last several years.

Paul Harrington McDonough: Our commercial real estate portfolio continues to perform within expectations.

Paul Mcdonough: We've again included some summary metrics in slides 22 and 23 of the presentation. Turning to slide 12, our capital position remained strong. At quarter end, our consolidated RBC ratio was 394%. Available hold code liquidity was $429 million at quarter end, benefiting from this quarter's debt issuance and net of $500 million that will be used to pay down the senior notes that mature in May of next year. Leverage at quarter end was 32% as reported, adjusting for the senior notes that will be paid off at maturity in May of next year. Leverage at quarter end was 25.5%, up from 22.9% at March 31 and just inside the low end of our target range.

Paul Harrington McDonough: reflecting conservative underwriting and proactive management.

Paul Harrington McDonough: We've again included some summary metrics in slides 22 and 23 of the presentation.

Paul Harrington McDonough: Our capital position remains strong. At quarter end, our consolidated RBC ratio is 394%. Available holdco liquidity was $429 million a quarter, benefiting from this quarter's debt issuance and net of $500 million that will be used to pay down the senior notes that mature in May of next year. Leverage at quarter end was 32% as reported.

Paul Harrington McDonough: Turning to slide 12.

Paul Harrington McDonough: Our capital position remains strong. At quarter-end, our consolidated RBC ratio is 394%.

Paul Harrington McDonough: Available hold co-liquidity was 429 million dollars a quarter at benefiting from this quarter's debt issuance and net of 500 million dollars that will be used to pay down the senior notes that mature in May of next year.

Paul Harrington McDonough: Adjusting for the senior notes that will be paid off at maturity in May of next year, leverage at quarter end was 25.5%, up from 22.9% at March 31 and just inside the low end of our target range. Turning to slide 13 in our 24 guide.

Paul Harrington McDonough: Leverage at quarter end was 32% as reported.

Paul Harrington McDonough: Adjusting for the senior notes that will be paid off at maturity in May of next year, leverage at quarter end was 25.5%, up from 22.9% at March 31, and just inside the low end of our target range.

Paul Mcdonough: Turning to slide 13 and our 24 guidance. We are raising guidance on operating earnings per share to 330 to 350 for the whole year, excluding significant items. This increase reflects the strong second quarter results, along with the modest improvement and outlook for the second half of the year. This also includes an expectation that alternative investments generated return in line with the long term run rate assumption of 9 to 10% for the remainder of the year, consistent with our initial guidance assumptions. As a component of this change, we're narrowing the expense ratio range to 19.0% to 19.2%.

Paul Harrington McDonough: We are raising guidance on operating earnings per share to $3.30 to $3.50 for the full year, excluding significant items. This increase reflects the strong second quarter results, along with a modest improvement in the outlook for the second half of the year. This also includes an expectation that alternative investments generate a return in line with a long-term run rate assumption of 9 to 10 percent for the remainder of the year, consistent with our initial guidance assumption.

Paul Harrington McDonough: Turning to slide 13 in our 24 guidance.

Paul Harrington McDonough: We are raising guidance on operating earnings per share to $3.30 to $3.50 for the full year, excluding significant items.

Paul Harrington McDonough: This increase reflects the strong second quarter results, along with a modest improvement in outlook for the second half of the year.

Paul Harrington McDonough: This also includes an expectation that alternative investments generate a return in line with a long-term run rate assumption of 9 to 10 percent for the remainder of the year, consistent with our initial guidance assumptions.

Paul Harrington McDonough: As a component of this change, we're narrowing the expense ratio range to 19.0 to 19.2 percent. In addition, we are raising guidance on excess cash flow to the holding company to $200 to $250 million. This favorable adjustment is primarily driven by higher statutory earnings in the first half of the year and a refinement of expectations regarding capital consumption within the operating company. Recall that the high end of the prior range assumed the status quo in terms of the health of the economy and the risk profile of our investment portfolio.

Paul Harrington McDonough: As a component of this change, we're narrowing the expense ratio range to 19.0 to 19.2 percent.

Paul Mcdonough: In addition, we are raising guidance on excess cash flow to the holding company to $200 to $250 million. This favorable adjustment is primarily driven by higher statutory earnings in the first half of the year and a refinement of expectations on capital consumption within the operating companies. Recall that the high end of the prior range assumes status quo in terms of the health of the economy and the risk profile of our investment portfolio. Both of those variables have remained fairly constant year to date, and we expect will remain so through year end. We will continue to manage to a consolidated RBC ratio of 375% in our US-based insurance companies and minimum hold co liquidity of 150 million dollars over the long term, although we expect to end 2024 well above those target levels.

Paul Harrington McDonough: In addition, we are raising guidance on excess cash flow to the holding company to 200 to 250 million dollars.

Paul Harrington McDonough: This favorable adjustment is primarily driven by higher statutory earnings in the first half of the year and a refinement of expectations on capital consumption within the operating companies.

Paul Harrington McDonough: Recall that the high end of the prior range assumed status quo in terms of the health of the economy and the risk profile of our investment portfolio.

Paul Harrington McDonough: Both of those variables have remained fairly constant year-to-date, and we expect them to remain so through year-end. We will continue to manage to a consolidated RBC ratio of 375 percent in our U.S.-based insurance companies and minimum holdcold liquidity of $150 million over the long term, although we expect to end 2024 well above those target levels. No change to our target leverage of between 25 and 28 percent. Lastly, we have decided to change the timing of our annual actuarial review to the third quarter from the fourth quarter. This timing aligns better with our annual planning process and is more in line with industry standards. And with that, I'll turn it back over to Gary.

Paul Harrington McDonough: Both of those variables have remained fairly constant year-to-date, and we expect will remain so through year-end.

Paul Harrington McDonough: We will continue to manage to a consolidated RBC ratio of 375 percent.

Paul Harrington McDonough: in our U.S.-based insurance companies and minimum holdcold liquidity of $150 million over the long term, although we expect to end 2024 well above those target levels.

Paul Mcdonough: No change to our target leverage of between 25 and 28 percent.

Paul Harrington McDonough: No change to our target leverage of between 25 and 28 percent.

Paul Mcdonough: Lastly, we have decided to change the timing of our annual actual review to the third quarter from the fourth quarter. This timing aligns better with our annual planning process and is more in line with the industry standard.

Paul Harrington McDonough: Lastly, we have decided to change the timing of our annual actuarial review to the third quarter from the fourth quarter.

Paul Harrington McDonough: This timing aligns better with our annual planning process and is more in line with the industry standard.

Gary Bhojwani: And with that, I'll turn it back over to Gary. Next, Paul, we delivered excellent financial performance in the quarter across the board, and the green suits of eight consecutive quarters of strong sales momentum are beginning to translate into earnings growth. CNO remains well positioned with the right products and unique distribution capabilities to serve the middle income market. Our capital position, our liquidity, and our cash flow generating power, the company remain robust. We are establishing a baseline of consistent and repeatable results, and we expect to build on this foundation as we look to the second half of the year.

Paul Harrington McDonough: And with that, I'll turn it back over to Gary.

Gary Chandru Bhojwani: We delivered excellent financial performance across the board, and the green shoots of eight consecutive quarters of strong sales momentum are beginning to translate into earnings. CNO remains well-positioned with the right products and unique distribution capabilities to serve the middle-income market. Our capital position, our liquidity, and our cash flow-generating power to the company remain robust. We are establishing a baseline of consistent and repeatable results, and we expect to build on this foundation as we look to the second half of the year. We thank you for your support of and interest in CNO Financial Group. We will now open it up to questions. Operator?

Gary Chandru Bhojwani: Thanks, Paul. We delivered excellent financial performance in the quarter across the board.

Gary Chandru Bhojwani: And the green shoots of eight consecutive quarters of strong sales momentum are beginning to translate into earnings growth.

C&O: CNO remains well-positioned with the right products and unique distribution capabilities to serve the middle-income market.

Gary Chandru Bhojwani: Our capital position, our liquidity.

Gary Chandru Bhojwani: and our cash flow generating power to company remain robust.

Gary Chandru Bhojwani: We are establishing a baseline of consistent and repeatable results and we expect to build on this foundation as we look to the second half of the year.

Gary Bhojwani: We thank you for your support of and interest in CNO Financial Group.

Operator: We'll now open it up to questions, operator. Thank you. If you'd like to ask a question, please press staff will up by one on your telephone keypad. And if you'd like to remove yourself from that line of questioning, please press staff will up by two.

Gary Chandru Bhojwani: We thank you for your support of and interest in CNO Financial Group. We will now open it up to questions. Operator?

Operator: Thank you. If you'd like to ask a question, please press star followed by one on your telephone keypad. And if you'd like to remove yourself from that line of questions, please press star followed by two.

Speaker Change: Thank you. If you'd like to ask a question please press star followed by one on your telephone keypad and if you'd like to remove yourself from that line of questioning please press star followed by two.

John Barnidge: Our first question comes from John Barnish of Python. John, your line is now open. Good morning. Thank you for the opportunity. It sounds like the increase in the EPS guide and cash flow is mainly coming from better-than-expected earnings performance in the first half of the year. So there's certain items that maybe flatter Q2 earnings were above expectations that you think could continue into the second half of the year.

Operator: Our first question comes from John Barnidge of Piper Sandlin. Joan, your line is now open. Good morning. Thank you for the opportunity.

Speaker Change: Our first question comes from John Barnidge of Piper Fannin.

John Bakewell Barnidge: Thank you.

John Bakewell Barnidge: Good morning. Thank you for the opportunity. It sounds like the increase in the EPS Guide and Cash Flow is mainly coming from better-than-expected earnings performance in the first half of the year, but there are certain items that maybe flattered Q2's earnings or were above expectations that you think could continue into the second half of the year.

Speaker Change: Joan, your line is now open.

John Bakewell Barnidge: Good morning. Thank you for the opportunity. It sounds like the...

John Bakewell Barnidge: Increase in the EPS guide and cash flow is mainly coming from better than expected earnings performance in the first half of the year. So there's certain items that maybe flattered Q2's earnings or above expectations that you think could continue into the second half of the year. Thank you.

Paul Mcdonough: Thank you. Paul, you might still be on mute. Sorry about that. Hey, John, it's Paul. Yeah, there are two things that help drive the really strong second quarter results that could certainly continue into the second half. And they include number one of the portfolio yield, which is benefiting from the higher new money rates, you know, about 6% now for six consecutive quarters and enhanced a bit in the second quarter by the portfolio optimization trade that we that we talked about. So I don't expect that that will change in the second half. I think rates generally will remain high; that certainly may be one, maybe two Fed cuts, but still, as compared to the current portfolio yield, still a bit of a tailwind.

Paul Harrington McDonough: Paul, you might still be on mute.

Speaker Change: Paul, you might still be on mute.

Paul Harrington McDonough: Hey, John, it's Paul. Yeah, there are two things that, you know, help drive the really strong second quarter results that could certainly continue into the second half. And they include, number one, the portfolio yield, which is benefiting from the higher new money rates, you know, above six percent now for six consecutive quarters, enhanced a bit in the second quarter by the portfolio optimization trade that we talked about. So I don't expect that that will change in the second half.

Paul Harrington McDonough: Hi, John . It's Paul. Yeah, there are two things that

Paul Harrington McDonough: help drive the really strong second quarter results that could certainly continue.

Paul Harrington McDonough: into the second half and

Paul Harrington McDonough: And they include number one of the portfolio yield, which is benefiting from the higher new money rates, you know, about 6% now for six consecutive quarters.

Paul Harrington McDonough: enhanced a bit in the second quarter by the portfolio optimization trade that we talked about. So I don't expect that that will change in the second half. I think rates generally will remain high. They certainly may be.

Paul Harrington McDonough: I think rates generally will remain high, though there may be one, maybe two Fed cuts. But still, as compared to the current portfolio yield, still a bit of a tailwind. We may do a bit more of the portfolio optimization trade. So I think that that should benefit the second half to some degree. The second thing is claims experience, and obviously that can go either way, plus or minus. And that's You know, one of the reasons for the range around a point estimate of EPS. So I'd leave it at that, John.

Paul Harrington McDonough: One, maybe two Fed cuts, but still, as compared to the current portfolio yield,

Paul Mcdonough: And we may do a bit more of the portfolio optimization trade. So I think that that should benefit the second half to some degree. The second thing is claims experience, and obviously that can go either way, plus or minus. You know, one of the reasons for the range around a point estimate of EPS, so I'd leave it at that, John. Thank you very much.

Paul Harrington McDonough: Still a bit of a tailwind.

Paul Harrington McDonough: We may do a bit more of the portfolio.

Paul Harrington McDonough: optimization trade. So I think that that should benefit the second half to some degree. The second thing is claims experience. And obviously that can go either way, plus or minus.

Paul Harrington McDonough: You know, one of the reasons for the range around a point estimate of EPS

Paul Harrington McDonough: So I'd leave it at that, John .

John Bakewell Barnidge: Thank you very much. A quarter ago, you loosely talked about getting your ROEs to peer levels and talked about it being around 11 to 14% per peer level. How do you define the time frame to get there?

Paul Mcdonough: A quarter ago, you loosely talked about getting your ROE to peer levels and talked about it being around 11 to 14% for peer level. How do you define the timeframe to get there? Thank you very much. Hey John, so we're not putting a, you know, a precise time range on that, but I would say that it's not something that we're planning to do in the future and haven't already, you know, sort of begun. You know, we are very focused on it, as we've mentioned over the last couple of quarters. There are a number of initiatives that are already underway that, you know, will enhance our ROE over the long term.

John Bakewell Barnidge: Thank you very much. A quarter ago, you loosely talked about getting your ROEs to peer levels and talked about it being around 11 to 14 percent for peer levels. How do you define that timeframe to get there? Thank you very much.

Paul Harrington McDonough: Hey, John. So we're not putting a precise time range on that, but I would say that it's not something that we're planning to do in the future and haven't already, you know, sort of begun. You know, we, we are very focused on it, and as we've mentioned over the last couple of quarters, there are a number of initiatives that are already underway that, you know, will enhance ROE over the long term.

John Bakewell Barnidge: Hey, John .

Speaker Change: So we're

John Bakewell Barnidge: We're not putting a

John Bakewell Barnidge: a precise time range on that. But I would say that it's not something that we're planning to do in the future and haven't already sort of begun.

John Bakewell Barnidge: We are very focused on it, as we've mentioned, over the last couple of quarters.

John Bakewell Barnidge: There are a number of initiatives that are already underway that

John Bakewell Barnidge: Yeah, we'll, we'll

Paul Mcdonough: I'd say if you look at the ROE on a trailing 12 month basis through June 30 at 10%, that significant items. Which, you know, reflects a strong second half of last year and a strong first half of this year. You know, so arguably perhaps at the high end of a range of what you might estimate is current run rate. But clearly reflects an improvement of favorable trend in run rate ROE over the last couple of years. And, and that's something that we remain committed to. And in the long run, without putting a specific time frame on it, with a goal of, you know, getting more in line with the industry peer group.

Paul Harrington McDonough: I'd say if you look at the ROE on a trailing 12 month basis through June 30, at 10% significant items, which, you know, reflects a strong second half of last year and a strong first half of this year. You know, so arguably, perhaps at the high end of a range of what you might estimate as current run rate, but clearly reflects an

John Bakewell Barnidge: enhance ROE over the long term. I'd say if you look at the ROE on a trailing 12-month basis through June 30 at 10% X significant items.

John Bakewell Barnidge: which, you know, reflects a strong...

John Bakewell Barnidge: second half of last year and a strong first half of this year.

John Bakewell Barnidge: You know, so arguably, perhaps at the high end of a range of what you might estimate as current run rate.

John Bakewell Barnidge: that clearly reflects an improvement, a favorable trend.

John Bakewell Barnidge: and run RAID ROE over the last couple of years and that's something that we remain committed to and in the long run without putting a specific time frame on it with a goal of getting more in line with the industry peer group.

Gary Bhojwani: Yeah, John, I'd like to just supplement comments. And I want you to, I'd like you to take away two things from my comments. Number one. And Paul touched on this. I want you to know that we remain very focused on it. You're correct that we've been talking about it for a few quarters. And, and I want to just remind all of you a little bit of historical context there. We had some work to do several years ago to kind of turn the organization on clean up the balance sheet. The mandate then was to begin growing the business, which we did.

Gary Chandru Bhojwani: Yeah, John, I'd like to just supplement Paul's comments, and I want you to take away two things from my comments. Number one, and Paul touched on this, I want you to know that we remain very focused on it. You're correct that we've been talking about it for a few quarters. And I want to just remind all of you.

John Bakewell Barnidge: Yeah, John , I'd like to just supplement Paul's comments, and I'd like you to take away two things from my comments. Number one,

John Bakewell Barnidge: and Paul touched on this. I want you to know that we remain very focused on it. You're correct that we've been talking about it for a few quarters.

John Bakewell Barnidge: And I want to just remind all of you a little bit of historical context there. We had some work to do several years ago to kind of turn the organization around, clean up the balance sheet. The mandate then was to begin growing the business, which we did. Unfortunately, COVID intervened for us and everybody else.

Gary Bhojwani: Unfortunately, COVID intervened for us and everybody else. Now that the growth engine has fired back up again and we're past COVID, now we need to optimize the results. And so we're very committed to that. This is something that we're focused on. And the second thing that I would want you to know is that we're pleased with the progress, but nowhere near satisfied with the result. We believe we can continue to drive this. Are we upwards? We've got line of sight on it. We've got a number of action plans that we're working on. We're not yet in a place where we want to make specific commitments to those numbers.

John Bakewell Barnidge: Now that the growth engine has fired back up again and we're past COVID, now we need to optimize the results.

Gary Chandru Bhojwani: And so we're very committed to that. This is something that we're focused on. And the second thing that I would want you to know is that we're pleased with the progress, but nowhere near satisfied with it. We believe we can continue to drive this ROE upwards. We've got a line of sight on it. We've got a number of action plans that we're working on. We're not yet in a place where we want to make specific commitments to those numbers, but I can assure you we are nowhere near satisfied, and we've got a clear line of sight on how to continue.

John Bakewell Barnidge: and so we're very committed to that. This is something that we're focused on and the second thing that I would want you to know is that we're pleased with the progress but nowhere near satisfied with the results.

John Bakewell Barnidge: We believe we can continue to drive this ROE upwards. We've got line of sight on it, we've got a number of action plans that we're working on. We're not yet in a place where we want to make specific commitments to those numbers, but I can assure you we are nowhere near satisfied and we've got line of sight on how to continue to drive this.

Gary Bhojwani: But I can assure you we are nowhere near satisfied. And we've got line of sight how to continue to drive.

John Barnidge: Thanks for the answers.

Speaker Change: Thanks for the answers.

Ryan Krueger: Our next question comes from Ryan Krueger of Stysel. Ryan, your line is not open. Take a morning. Thanks, good morning. First question was on, I guess, just on the free cash flow guidance. To what extent was that increase driven by your first half, resulting better than expected versus, you know, on other refinement of your cash flow expectations on an ongoing basis.

Operator: Our next question comes from Ryan Kruger of Stuyvesant. Ryan, your line is now open. Hey, good morning.

Speaker Change: Our next question comes from Ryan Krueger of Stifel.

Ryan Krueger: Thanks. Good morning. My first question was on, I guess, just the free cash flow guidance. What, to what extent was that increase driven by your first half results being better than expected versus, you know, another refinement of your, your cash flow expectations on an ongoing basis?

Ryan Krueger: Ryan, your line is now open. Hey, good morning.

Ryan Krueger: Thanks. Good morning. First question was on

Ryan Krueger: I guess just on the free cash flow guidance, to what extent was that, was the increase driven by your first half results being better than expected versus, you know, other refinement of your cash flow expectations on an ongoing basis?

Paul Harrington McDonough: Hey Ryan, it's Paul. So the way that I'm thinking about it is sort of two major sorts of dynamics. Number one, you'll recall that when we initially provided the guidance of 140 to 200, we indicated that the high end of that range was assuming the status quo on the economy, meaning that we didn't expect that, you know, if the economy stayed healthy, that we wouldn't be consuming capital as a result of, you know, if the economy were to erode, that would have consumed capital through, you know, adverse credit migration, That hasn't happened yet.

Paul Mcdonough: Hey Ryan, it's Paul. So the way that I'm thinking about it is sort of two major sort of dynamics. Number one, you recall that when we initially provided the guidance of 140 to 200, we indicated that the high end of that range was assuming status quo in the economy, meaning that we didn't expect that, you know, if the economy stayed healthy, that we wouldn't be consuming capital as a result of a, you know, if the economy were to erode, that would have consumed capital through, you know, adverse credit migration, higher capital charges. That hasn't happened.

Ryan Krueger: Hey Ryan, it's Paul. So the way that I'm thinking about it is sort of two major sort of dynamics. Number one, you'll recall that when we initially provided the guidance of

Ryan: 140 to 200. We indicated that the high end of that range was assuming status quo in the economy, meaning that we didn't expect

Ryan: that, you know, if the economy stayed healthy, that we wouldn't be consuming capital.

Ryan: As a result of, you know, if the economy were to erode, that would have consumed capital through, you know, adverse credit migration, higher capital charges.

Paul Mcdonough: So that kind of moves us to the high end of the range. And then the other component that sort of associated with the high end of the range was that we would be status quo in terms of the risk profile, the portfolio, meaning, you know, that we wouldn't pivot to higher risk in the portfolio, which would consume capital and drag it to the lower end of the range. So both of those things have been fairly constant, which means that, you know, through June, we're sort of gathered to the high end of the range in the context of those two things.

Paul Harrington McDonough: So that kind of moves us to the high end of the range. And then there is the other component, that sort of. Associated with the high end of the range was that we would be status quo in terms of the risk profile of the portfolio, meaning you know that we wouldn't pivot to higher risk in the portfolio, which would consume capital and drive you to the lower end of the range. So both of those things have been fairly constant, which means that, you know, through June, we're sort of tethered to the high end of the range in the context of those

Ryan: That hasn't happened. So that kind of moves us to the high end of the range. And then the other component

Ryan: that sort of...

Ryan: Associated with the high end of the range was

Ryan: that we would be status quo in terms of the risk profile of the portfolio, meaning that we wouldn't pivot to higher risk in the portfolio, which would consume capital and drive it to the lower end of the range.

Ryan: So both of those things have been fairly constant.

Ryan: which means that, you know, through June we're sort of tethered to the high end of the range.

Paul Harrington McDonough: We expect that to remain so, so that kind of drives the new low end of the range at 200. And then the high end of the range is primarily driven by the very strong first half results, primarily in the second quarter, with some expectation of some modest continuation of favorable trends in the second half.

Paul Mcdonough: Let me expect that will remain so. So that kind of drives the new low end of the range at 200. And then the high end of the range is primarily driven by the very strong first half results, primarily in the second quarter, with, you know, some expectation of some modest continuation of favorable trends in the second half.

Ryan: in the context of those two things.

Ryan: We expect that will remain so.

Ryan: So that kind of drives the new low end of the range at 200.

Ryan: And then the high end of the range is...

Ryan: primarily driven by the very strong first half results, primarily in the second quarter, with some expectation of some modest continuation of favorable trends in the second half.

Paul Mcdonough: Great, thank you. And then can you give any more color on just what you're seeing on claim trends within long-term care? You've had pretty favorable results for a few quarters now.

Paul Harrington McDonough: Great, thank you. And then, can you give any more color on just what you're seeing on claim trends within long-term care? It's been, you've had pretty favorable results for a few quarters now. We have, and I'd say that, you know,

Speaker Change: Great, thank you. And then, can you give any more color on just what you're seeing on claim trends within long-term care? You've had pretty favorable results for a few quarters now.

Paul Mcdonough: We have, and I'd say that, you know, the margin in long-term care reflects growth of the business, number one. And then also favorable claims experience, including in our older cohort that has a net-to-grows premium ratio, capped at 100. So on-capped greater than 100, which causes favorable experience to flow directly through margin in the period, as opposed to being, you know, somewhat muted in the context of LDTI.

Paul Harrington McDonough: We have, and I'd say that, you know, the margin in long-term care reflects growth of the business, number one, and then also favorable claims experience, including in our older cohort that has a net-to-gross premium ratio capped at 100, so uncapped greater than 100, which causes favorable experience to flow directly through margin in the period, as opposed to being, you know, somewhat muted in the context of LDTI. So, the question is, will that continue?

Speaker Change: We have, and I'd say that, you know, the margin in long-term care reflects growth of the business, number one, and then also favorable claims experience.

Speaker Change: including in our older cohort that has a net to gross premium ratio capped at 100.

Speaker Change: So, uncapped greater than 100, which causes favorable experience to flow directly through margin in the period, as opposed to being, you know, somewhat muted in the context of, of, uh,

Paul Mcdonough: If the question is, does that continue? And, you know, as I, as I said earlier in response to John's question, it certainly could. You know, we're not seeing anything in the current quarter that would suggest otherwise. But it's, you know, it's claims experience, and that's going to bump, bump around, you know, plus or minus. And so there's certainly the potential that we experience less favorable claims experience in some future quarters.

Paul Harrington McDonough: And, you know, as I said earlier in response to John's question, it certainly could. We're not seeing anything in the current quarter that would suggest otherwise, but it's claims experience, and that's going to bump around, you know, plus or minus, and so there's certainly the potential that we experience less favorable claims experience in some future quarter.

Speaker Change: of LDTI.

Speaker Change: Just the question is, does that continue and, you know, as I

Speaker Change: as I said earlier in response to John's question.

Speaker Change: It certainly could, you know, we're not seeing anything in the current quarter that would suggest otherwise.

Speaker Change: But it's, you know, it's claims experience, and that's going to bump around, you know, plus or minus. And so there's certainly the potential that we experience less favorable claims experience in some future quarter.

Paul Mcdonough: Great.

Paul Mcdonough: Thank you. Thank you very much.

Operator: Thank you very much. Our next question comes from Wes Carmichael of Autonomous. Where is your line? It's now open.

Wes Carmichael: Our next question comes from Wes Carmichael of Autonomous. Where's your line? It's now open.

Speaker Change: Thank you very much. Our next question comes from Wes Carmichael of Autonomous.

Paul Mcdonough: Hey, good morning. I'm on your raise guidance around the excess cash flows to the old code. Should we think about higher level of cash flows going towards buybacks in 2024 and maybe how should we think about you managing down the old code cash balance, first or minimum, 150 million dollar target over time?

Wes Carmichael: Hey, good morning. On your raised guidance around the excess cash flows to the holdco, should we think about a higher level of cash flows going towards buybacks in 2024? And maybe, how should we think about you managing down the holdco cash balance versus your minimum $150 million target?

Speaker Change: Where is your line? It's now open.

Wes Carmichael: Hey, good morning. I'm going to raise guidance around the excess cash flows to the Holdco. Should we think about higher level of cash flows going towards buybacks in 2024 and maybe how should we think about you managing down the Holdco cash balance versus your minimum $150 million target over time?

Paul Mcdonough: Hey Wes, it's Paul. So I say at a very high level there's no change to how we think about deploying excess capital. We will continue to be disciplined and fairly measured in terms of what we do in any individual quarter. Having subbed that in the wake of the debt offering in May where we issued 200 million more than the 500 million that's maturing and generating sort of a slug of excess capital.

Paul Harrington McDonough: Hey Wes, it's Paul. So I, you know, I'd say at a very high level there's no change to how we think about deploying excess capital. We'll continue to be disciplined and fairly measured in terms of what we do in any individual quarter. Having said that, in the wake of the debt offering in May, where we issued $200 million more than the $500 million that's maturing and generated, you know, sort of a slug of excess capital, there's certainly the opportunity to accelerate the pace a bit over the next few quarters of share repurchases, and that funded a portion of the share repurchase in 2Q.

Paul Harrington McDonough: Hey Wes, it's Paul.

Wes Carmichael: So, you know, I'd say at a very high level, there's no change to how we think about deploying excess capital. We'll continue to be disciplined and, you know, fairly measured in terms of what we do in any individual quarter.

Speaker Change: Having said that, in the wake of the debt offering in May where we issued

Speaker Change: $200 million more than the $500 million that's maturing and generating, you know, sort of a slug of excess capital.

Paul Mcdonough: There's certainly the opportunity to accelerate the pace a bit over the next few quarters of sharey purchases and that funded portion of the sharey purchase into Q. That's helpful, Paul.

Speaker Change: There's certainly the opportunity to accelerate the pace a bit.

Speaker Change: over the next few quarters of share repurchases and that funded a portion of the share repurchase in 2Q.

Paul Harrington McDonough: That's helpful, Paul. And maybe just on the surrender activity and annuities, I think overall surrenders ticked down a little bit versus the first quarter, driven by the fixed interest annuities. But can you maybe talk about the trends you saw in the quarter and if you kind of expect surrenders to moderate going forward or not? Yeah, I'm just focusing on fixed index annuities.

Paul Mcdonough: It made it from the surrender activity and annuities.

Paul Mcdonough: I think overall surrenders take down a little bit versus the first quarter driven by the fixed interest annuities, but can you maybe talk about the trends you saw in the quarter and if you can expect surrender some moderate going forward or not. Yes, surrenders just focusing on fixed indexed annuities. Surrenders are certainly higher now than they were a year ago. They do seem to have stabilized at current levels, and the current level is within our range of expectation in the current rate environment. In that environment, we continue to grow the book. The current interest rate environment has also driven higher yields on the portfolio, which has contributed to slightly better spreads.

Speaker Change: That's helpful, Paul. And maybe just on the surrender activity and annuities, I think overall surrenders ticked down a little bit versus the first quarter, driven by the fixed interest annuities. But can you maybe talk about the trends you saw in the quarter and if you kind of expect surrenders to moderate going forward or not?

Paul Harrington McDonough: Yeah, surrenders, just focusing on fixed index annuities, are certainly higher now than they were a year ago, but they do seem to have stabilized at current levels. And the current level is within our range of expectation in the current rate environment. And in that environment, we continue to grow the book. And, you know, the current interest rate environment has also driven higher yields on the portfolio, which has contributed to a slightly, slightly better spread. So I'd say that the book remains very healthy and profitable and attractive from a risk-return perspective.

Paul Harrington McDonough: Yeah, surrenders, just focusing on fixed index annuities, surrenders are certainly higher now than they were a year ago. They do seem to have stabilized at current levels.

Speaker Change: And the current level is within our range of expectation in the current.

Speaker Change: Great environment, and in that environment we continue to grow the book.

Speaker Change: The current interest rate environment has also driven higher yields on the portfolio, which has contributed to slightly better spreads.

Paul Mcdonough: So I'd say that the book remains very healthy and profitable and attractive from a risk-return perspective.

Speaker Change: So I'd say that, you know, that the book remains very healthy and profitable and attractive from a risk-return perspective.

Paul Mcdonough: Thank you very much.

Adam Auvil: and Adam Auvil. Thanks.

Scott G. Hernek: I next question comes from Scott G. Her neck of RPC. Scott, your line is now with. Yeah, good morning. Thanks. I'm bored a lot of new agents over the past couple of years. I think you said six or eight quarters in a row of agency camp growth. You expect that to continue in the back after the year in the 2025. There's quite a lot of interest. The recruiting is up nicely.

Operator: Our next question comes from Scott G. Heleniak of RBC. Scott, your line is now open.

Speaker Change: Thank you very much. Our next question comes from Scott G. Heleniak of RBC.

Scott Gregory Heleniak: Yeah, good morning. Thanks. You've onboarded a lot of new agents over the past couple years. I think you said, you know, six or eight quarters in a row of agency camp growth. Do you expect that to continue in the, you know, the back half of the year into 2025? There's clearly a lot of interest. The recruiting is going nicely. Any thoughts there? As well as, can you comment on just the productivity of some of the new agents that you have hired in the past two years as you've kind of ramped up?

Speaker Change: Scott, your line is now open.

Speaker Change: Yeah, good morning. Thanks. You've onboarded a lot of new agents over the past couple years. I think you said, you know, six or eight quarters in a row of agency count growth.

Speaker Change: Do you expect that to continue in the, you know, the back half of the year into 2025? There's clearly a lot of interest. The recruiting is up nicely. Any thoughts there as well as...

Gary Bhojwani: Any thoughts there as well as can you comment on just the productivity of some of the new agents that you have hired in the past two years as you've kind of ramped that up. Yeah, Scott, thanks for the question. This is Gary. So first of all, just to save the obvious. We've had several quarters of very strong growth in both consumer and work site, and of course the comparable will get tougher. There's no question about that, and that population grow as it'll be harder to be maintaining that percentage growth. All that said, yes, I believe we can continue to grow our Asian crowns, but more importantly, we will continue to grow in a productivity level of Asian.

Speaker Change: Can you comment on just the productivity of some of the new agents that you have hired in the past two years as you've kind of ramped that up?

Gary Chandru Bhojwani: Yeah, Scott, thanks for the question. This is Gary.

Speaker Change: Yeah, Scott, thanks for the question. This is Gary. So, first of all, just to state the obvious...

Gary Chandru Bhojwani: So first of all, just to state the obvious. We've had several quarters of very strong growth in both consumer and workplace, and of course, the comparables will get tougher. There's no question about that. As that population grows, it'll be harder to keep maintaining that percentage of growth. All that said, yes, I believe we can continue to grow.

Speaker Change: We've had several quarters of very strong growth in both consumer and worksite, and of course the comparables will get tougher. There's no question about that. As that population grows, it'll be harder to keep maintaining that percentage of growth.

Speaker Change: All that said, yes, I believe we can continue to grow our agent crowns, but more importantly, we will continue to grow the productivity of those agents.

Gary Bhojwani: We've talked about this for several quarters where we're much more focused on the productivity than the raw count, and that's really what I keep an eye on the most. I think we can continue to grow; that happens because of a combination of products, services, and tying in different parts of the business. As an example, we've talked frequently about how we have our direct to consumer business really support our field agent side of the business. So we feel very good about that on the consumer side. At one example, and then on the work side, if you think about the geographic expansion and the new products we've launched there, those should also continue to help drive productivity.

Gary Chandru Bhojwani: We've talked about this for several quarters, where we're much more focused on productivity than the raw count, and that's really what I keep an eye on the most, and I think we can continue to grow. That happened because of a combination of products, services, and tying in different parts of the business. As an example, we've talked frequently about how we have our direct-to-consumer business really support our field agents.

Speaker Change: We've talked about this for several quarters, where we're much more focused on the productivity than the raw account, and that's really what I keep an eye on the most, and I think we can continue to grow that.

Speaker Change: that happens because of a combination of products, services, and tying in different parts of the business. As an example, we've talked frequently about how we have our direct-to-consumer business really support our field agent side of the business.

Gary Chandru Bhojwani: So we feel very good about that on the consumer side, as one example, and then on the workplace side, if you think about the geographic expansion and the new products we've launched there, those should also continue to help drive growth. So just to summarize, the costs will get tougher. It will be harder for us to grow the agents out in the same percentages, but we believe we will continue to grow them. And, more importantly, we will continue to drive productivity. That's where the real magic will come in over the long term, and that's what we're focused on.

Speaker Change: So we feel very good about that on the consumer side, as one example, and then on the worksite side, if you think about the geographic expansion and the new products we've launched there, those should also continue to help drive productivity.

Gary Bhojwani: So just to summarize, the cops will get tougher; it will be harder for us to grow the Asian crowns in the same percentages, but we believe we will continue to grow them. More importantly, we will continue to drive productivity.

Speaker Change: So, just to summarize, the costs will get tougher, it will be harder for us to grow the agent counts in the same percentages, but we believe we will continue to grow them. More importantly, we will continue to drive productivity. That's where the real magic will come in over the long term in my view, and that's what we're focused on.

Scott G. Hernek: That's where the okay, great.

Scott Gregory Heleniak: Okay, great.

Paul Mcdonough: Just any update on the Bermuda-Captain now that you have it up and running? Is that kind of running in line with the expectations? Anything to comment on there? Hey, Scott, it's Paul. Definitely running in line with the expectations. We've made a lot of progress building out the infrastructure on the island to support that treaty that we executed back in November of last year, both the enforce and the new business, effective 10-1. So, going as expected, we certainly have a commitment to that business and expect to grow it over time.

Scott Gregory Heleniak: Just any update on the Bermuda captive now that you have it up and running? Is that running in line with the expectations? Anything to comment on there?

Speaker Change: Okay, great. And just any update on the Bermuda captive now that you have it up and running? Is that kind of running in line with the expectations? Anything to comment on there?

Paul Harrington McDonough: Hey, Scott, it's Paul. Definitely running in line with expectations. You know, we've made a lot of progress building out the infrastructure on island to support that treaty that we executed back in November of last year, both the Enforce and the new business, effective 10-1. Yeah, so going as expected. We certainly have a commitment to that business and expect to grow it over time.

Speaker Change: Hey Scott, it's Paul. I'm definitely running in line with expectations, you know, we're

Paul Harrington McDonough: We made a lot of progress building out the infrastructure on island to support that treaty that we executed back in November of last year, both the Enforce and the new business.

Speaker Change: Effective 10-1. Yeah, so going as expected, you know, we certainly have a commitment to that business and expect to grow it over time.

Paul Mcdonough: Okay.

Scott Gregory Heleniak: My final question is, I know we've talked a lot about buybacks, but is there any thought to increasing the quarterly dividend by a greater amount at some point in the future, or is buyback still going to be the top priority consistent with what you've done over the past few years?

Scott G. Hernek: My final question is, I know we've talked a lot about buybacks. Is there any thought to increasing the quarterly dividend by a greater amount at some point in the future, or is buybacks still going to kind of be the top priority, consistent with what you've done over the past few years? So Scott, you know, the dividend level is something we look at every quarter, certainly, but something we look at, you know, more in earnest once a year in terms of any change to the level. And as you know, our practice has been to raise it by a penny per share in the second quarter.

Speaker Change: My final question is, I know we've talked a lot about buybacks. Is there any thought to increasing the quarterly dividend by a greater amount at some point in the future, or is buyback still going to be the top priority consistent with what you've done over the past few years?

Paul Harrington McDonough: So Scott, the dividend level is something we look at every quarter, certainly, but something we look at, you know, sort of, more in earnest once a year in terms of any change to the level. And as you know, our practice has been to raise it by a penny per share in the second quarter. I don't want to front run that, but you know, the current yield is pretty much in line with the peer group from, or the current dividend is in line from a yield perspective.

Speaker Change: So, Scott, you know, the dividend level is something we look at every quarter, certainly, but something we look at, you know, sort of...

Scott: more in earnest once a year in terms of any change to the level. And as you know, our practice has been to raise it by a penny per share in the second quarter. I don't want to front run that, but

Paul Mcdonough: I don't want to front run that, but the current yield is pretty much in line with the peer group from the current dividend in line from a yield perspective. Makes sense from a payout perspective. So I wouldn't anticipate deviation from what our practice has been. You know, sherry purchases are assuming your dividend policy makes sense, which I think our current policy does. I think sherry purchases are more efficient on the margin as a form of deploying access capital.

Speaker Change: You know, the current yield is pretty much in line with the peer group from a...

Paul Harrington McDonough: Makes sense from a payout perspective, so I wouldn't anticipate any deviation from what our practice has been. If share repurchases assume your dividend policy makes sense, which I think our current policy does, I think share repurchases are more efficient on the margin as a form of deploying excess capital.

Speaker Change: or the current dividend in line from a yield perspective.

Speaker Change: make sense from a payout perspective.

Speaker Change: So I wouldn't anticipate.

Speaker Change: deviation from what our practice has been if share repurchases are assuming your dividend policy makes sense which I think our current policy does

Speaker Change: I think shared purchases are more efficient on the margin.

Wilma Burdis: Great, thanks for all the answers. As a reminder, if you'd like to ask a question, please press start, followed by one in the telephone keypad, and to remove yourself from the line of questioning, please press start, followed by two. Our next question comes from Wilma Burdis of Raymond James.

Operator: Great. Thanks for all the answers. As a reminder, if you'd like to ask a question, please press the star followed by 1.

Speaker Change: Great. Thanks for all the answers.

Operator: As a reminder, if you'd like to ask a question, please press star followed by 1 on your telephone keypad. And to remove yourself from the line of questioning, please press star followed by 2. Our next question comes from Wilma Burdis of Raymond James. Wilma, your line is now open.

Speaker Change: As a reminder, if you'd like to ask a question, please press star followed by 1 on your telephone keypad, and to remove yourself from the line of questioning, please press star followed by 2.

Eric Johnson: Wilma, your line is not open. Good morning. Could you talk about what drove all returns closer to the run rate in 2-3-24, and should we expect that to continue? Thanks.

Speaker Change: Our next question comes from Wilma Burdis of Raymond James.

Uma: Wilma, your line is now open.

Wilma Carter Jackson Burdis: Hey, good morning. Could you talk about what drove alt returns closer to the run rate in 2Q24, and should we expect that trend to continue? Thanks.

Eric Johnson: Yeah, this is Eric Johnson. I'd be happy to fall if you don't mind. I'll be happy to jump in here. I think there are three basic factors there. One, real estate valuations were a little more stable during the period, perhaps with some relationship to anticipated changes in interest rates. Second, I think the value of the private credit carry emerged during the period and reflected the underlying earnings stream from that allocation, and then thirdly, some re-ventaging. We've been doing over the last several quarters, which is beginning to pay off in terms of earnings streams from more current ventages.

Operator: Yeah, this is Erik Johnson. I'd be happy to, Paul. If you don't mind, I'll be happy to jump in here. Okay. I think there are three basic factors involved there. One, real estate valuations were a little more stable during the period, perhaps with some relationship to anticipated changes in interest rates. Second, I think the value of the private credit carry emerged during the period and reflected the underlying earnings stream from that from that allocation.

Wilma Carter Jackson Burdis: Yeah, this is Erik Johnson. I'd be happy to, uh, Paul, if you don't mind, I'll be happy to jump in here. Okay. Um, I, you know, I, I think, uh, there were, uh, three basic, uh,

Wilma Carter Jackson Burdis: One, real estate valuations were a little more stable during the period, perhaps with some relationship to anticipated changes in interest rates. Second.

Wilma Carter Jackson Burdis: I think the value of the private credit carry emerged during the period and reflected the underlying earnings.

Operator: And then thirdly, some re-vintaging we've been doing over the last several quarters, which is beginning to pay off in terms of earnings streams from more current vintages. And so I think this is an area where you can use Gary's term of "green shoots," seeing some green shoots from some of the things we've been doing, and I hope they will continue to grow and meet expectations that Paul described earlier. I believe that will be the case as we get into later this year and early next year.

Wilma Carter Jackson Burdis: you know, stream from that from that allocation. And then thirdly,

Wilma Carter Jackson Burdis: Some re-vintaging we've been doing.

Wilma Carter Jackson Burdis: over the last several quarters, which is beginning to pay off in terms of

Eric Johnson: I think this is an area where you use Gary's term of green shoots, seeing some green shoots from some of the things we've been doing, and I hope they will continue to grow and meet expectations that Paul described earlier. I believe that will be the case as we get into later this year and early next year.

Wilma Carter Jackson Burdis: are earning streams from more current vintages. And so, I think this is an area where you use Gary's term of green shoots.

Gary Chandru Bhojwani: seeing some green shoots from some of the things we've been doing and I hope they will continue to grow and meet expectations that Paul described earlier. I believe that will be the case.

Paul Harrington McDonough: as we get into later this year and early next year.

Paul Mcdonough: Thank you. Could you talk a little bit about what drove the reserve release and other newties, and is that something that we could see? Any more activity there or not?

Speaker Change: Thank you. And could you talk a little bit about what drove the reserve release and other annuities and, you know, is that something that we could see any more activity there or not? Thanks.

Paul Mcdonough: Thanks.

Paul Mcdonough: Hey, well, nice Paul. Other newties is a relatively small block of pay out of newties that's in run-off, and as we've described occasionally in the past, when we see some volatility from this block, and it's almost always all to the plus side, and it's driven by what are typically a handful of deaths, the newties, which causes the reserve release. In this quarter, we had literally five kind of on one hand deaths that drove the very significant increase in margin in the quarter.

Paul Harrington McDonough: Hey Wilma, it's Paul. So other annuities is a relatively small block of payout annuities that's in runoff. And as we've described occasionally in the past, when we see some volatility from this block, and it's almost always all on the plus side, and it's driven by what are typically a handful of deaths of annuitants, which causes the reserve release. And in this quarter, we had five, literally five, count them on one hand, deaths that drove a very significant increase in margin in the quarter. We'll continue to have some volatility from this block for these reasons. I think it's very unlikely that we'll have another quarter that's this favorable, but that's the dynamic that's driving it.

Speaker Change: Hey Wilma, it's Paul.

Paul Harrington McDonough: So other annuities is a relatively small block of payout annuities.

Paul Harrington McDonough: that's in runoff and as we've described occasionally in the past when we see

Paul Harrington McDonough: some volatility in this in this from this block. And it's almost all always all to the plus side. And it's driven by, you know, what are typically a handful of

Paul Harrington McDonough: of deaths of annuitants.

Paul Harrington McDonough: which causes the reserve release and in this quarter we had

Paul Harrington McDonough: You know, five, you know, literally five, count them on one hand.

Paul Mcdonough: We'll continue to have some volatility from this block for these reasons. I think it's very unlikely that we have another quarter that's this favorable, but that's the dynamic that's driving it.

Paul Harrington McDonough: But that's the dynamic that's driving it.

Suneet Kamath: Thank you. Our next question today comes from the line of Suneet Kamath from Jeffries. Please go ahead. Your line is now open. Yeah, thanks.

Speaker Change: Thank you.

Speaker Change: Thank you. Our next question today comes from the line of Suneet Kamath from Jeffreys. Please go ahead, your line is now open.

Paul Harrington McDonough: Yeah, thanks. So I think we covered most of the margin improvement across the lines, but I think, too, that maybe we haven't hit on that are a little smaller but still improved or med sup and traditional life. So can you just unpack some of the drivers of the margin benefits there?

Paul Mcdonough: So I think we hit on most of the margin improvement across the lines, but I think two that maybe we haven't hit on that are a little smaller but still improved are metzup and traditional life. So can you just unpack some of the drivers of the margin benefits there? Sure. Hey, Suneet, it's all. So, you know, at a very high level, it's just growth from the block and generally favorable experience in track in track life. It's also the lower advertising expense that flows through margin. So that's really it at a high level.

Suneet Laxman L. Kamath: Yeah thanks, so I think we hit on most of the margin improvement across the lines but I think too that maybe we haven't hit on that are a little smaller but still improved or MEDSUP and traditional life so can you just unpack some of the drivers of the margin benefits there?

Paul Harrington McDonough: Sure. Hey, Suneet, it's Paul.

Suneet Laxman L. Kamath: Sure. Hey, Suneet. It's Paul. So, you know, at a very high level, it's just growth in the block and generally favorable experience. In trad life, it's also the lower advertising expense that flows through margin.

Paul Harrington McDonough: So, you know, at a very high level, just growth, growth in the block, and, and, and generally favorable experience. In trad, in trad life, it's also the lower advertising expense that flows through margin. So that's really it at a high level.

Gary Bhojwani: Got it. And then I guess for Gary, I think on past calls, you've sort of talked about your annuity business as being different from others in the sense that you don't have a lot of churn in your book, but you actually put up some pretty good growth. So I'm just curious if you had any color on where that growth is coming from. In other words, what's funding it? Is it is it retirement accounts like rollovers from 401k or movement from money market funds, just curious where it's coming from and kind of how you think the outlook.

Suneet Laxman L. Kamath: Got it. And then I guess, for Gary, I think on past calls, you've sort of talked about your annuity businesses being different from others, in the sense that you don't have a lot of churn in your book. But you actually put up some pretty good growth, so I was just curious if you had any color on where that growth is coming from. In other words, what's funding it? Is it retirement accounts like rollovers from 401ks or movement from money market funds? Just curious where it's coming from and kind of how you think the outlook is? What do you think the outlook is?

Suneet Laxman L. Kamath: So that's really it at a high level.

Gary Chandru Bhojwani: Got it. And then I guess for Gary, I think on past calls, you've you've sort of talked about your annuity businesses being different from others, in the sense that you don't have a lot of churn in your book. But you actually put up some pretty good growth. So I was just curious if you had any color on where that...

Speaker Change: growth is coming from? In other words, what's funding it? Is it is it retirement accounts, like rollovers from 401k or movement from money market funds? Just curious where it's coming from and kind of how you think the outlook? What do you think the outlook looks like going forward? Thanks.

Gary Bhojwani: What do you think the outlook looks like going forward? Thanks.

Gary Bhojwani: I'll start with the last half of that question. We believe the outlook is very strong. There's 11,000 people retiring every day in the United States. As you know, the vast majority of people don't have a pension anymore. They need some kind of a floor that's going to provide guaranteed income. And in particular with our middle income clients, there are very few alternatives for them that can give them a guaranteed source of income. So we believe that the future is incredibly bright.

Gary Chandru Bhojwani: I'll start with the last half of that question. We believe the outlook is very strong. There are 11,000 people retiring every day in the United States. As you know, the vast majority of people don't have a pension anymore. They need some kind of a floor that's going to provide guaranteed income. And, in particular, with our middle-income clients, there are very few alternatives for them that can give them a guaranteed source of income.

Speaker Change: I'll start with the last half of that question. We believe the outlook is very strong.

Speaker Change: There's 11,000 people retiring every day in the United States. As you know, the vast majority of people don't have a pension anymore.

Speaker Change: They need some kind of a floor that's going to provide guaranteed income and in particular with our middle income clients.

Gary Chandru Bhojwani: So we believe that the future is incredibly bright. I don't have the data in front of me to tell you how much of it came from rollovers or what have you. I do know that, generally speaking, we're less likely to get money from rollovers and so on than some of the other annuity riders out there, primarily because we serve a different party. However, we did see an increase. I believe we saw an increase of roughly 9% in premium per annuity this past quarter.

Speaker Change: There are very few alternatives for them that can give them a guaranteed source of income. So we believe that the future is incredibly bright.

Gary Bhojwani: I don't have the data in front of me to tell you how much of it came from rollovers or what have you. I do know that, generally speaking, we're less likely to get money from rollovers and so on than some of the other annuity writers out there, primarily because we serve a different market. We did see an increase; I believe we saw an increase of roughly 9% in premium per annuity this past quarter. So, some of it was driven just by selling larger annuities, but still, relative to the average annuity writer out there, our annuities are quite a bit smaller and generally come from folks that are in or approaching retirement.

Speaker Change: I don't have the data in front of me to tell you how much of it came from rollovers or what have you. I do know that, generally speaking, we're less likely to get money from rollovers and so on than some of the other annuity writers out there, primarily because we serve a different market.

Speaker Change: We did see an increase, I believe we saw an increase of roughly nine percent in premium per annuity this past quarter. So some of it was driven just by selling larger annuities, but still relative to the average annuity rider out there our annuities are quite a bit smaller.

Gary Chandru Bhojwani: So some of it was driven just by selling larger annuities, but still, relative to the average annuity rider out there, our annuities are quite a bit smaller and generally come from folks that are in or approaching retirement. And so the funds usually, not always, but usually come from 401Ks or other savings such as that. And we expect that to continue, and we

Gary Bhojwani: And so therefore the funds usually not only usually come from 401(k)s or other savings, such as that. And we expect that to continue, and we think, you know, we're going to have up quarter, down quarter, so on or so forth. But generally, if you look at the long-term trajectory of the business, we're very bullish on it. We think this is something our client base needs, and we believe we provide a really good value.

Speaker Change: and generally come from folks that are in or approaching retirement. And so therefore, the funds usually, not only usually, come from 401ks or other savings such as that.

Gary Chandru Bhojwani: And we think, you know, we're going to have up quarters, down quarters, so on and so forth. But in general, if you look at the long-term trajectory of this business, we're...

Gary Chandru Bhojwani: General, if you look at the long-term trajectory of this business, we're very fortunate. We think this is something our client base needs.

Speaker Change: And we expect that to continue, and we think, you know, we're going to have up quarters, down quarters, so on and so forth, but in general, if you look at the long-term trajectory of this business, we're very bullish on it.

Speaker Change: We think this is something our client base needs, and we believe we provide a really good value.

Gary Bhojwani: If I could just sneak in one quick follow-up on that, so obviously higher rates helped this business. I'm just curious what point, where would a rate have to go before all of a sudden this growth opportunity or growth outlook that you're seeing, you know, starts to fall off a bit. The business is, of course, impacted by interest rates in terms of what else is out there, right? So a consumer, when they're making a decision, they'll look at where else they can put their money. But even if they could get a comparable rate, say, in a CD or something of this sort, it doesn't change the fact that those other products don't provide guaranteed income for life and really protect them against the risk of outliving their assets.

Suneet Laxman L. Kamath: If I could just sneak in one quick follow-up on that. So obviously, higher rates help this business. But I'm just curious, like, at what point would rates have to go? Before all of a sudden, this growth opportunity or growth outlook that you're seeing,

Speaker Change: If I could just sneak in one quick follow-up on that. So, obviously, higher rates helps this business. I'm just curious, at what point, where would rates have to go before all of a sudden this growth opportunity or growth outlook that you're seeing starts to fall off a bit?

Gary Chandru Bhojwani: The business is, of course, impacted by interest rates in terms of what else is out there, right? So a consumer, when they're making a decision, they'll look at where else they can put their money. But even if they could get a comparable rate, say in a CD or something of this sort, it doesn't change the fact that those other products don't provide guaranteed income for life and really protect them against the risk of outliving their assets.

Speaker Change: The business is, of course, impacted by interest rates in terms of what else is out there, right? So a consumer, when they're making a decision, they'll look at where else they can put their money, but even if they could get a comparable rate, say, in a CD or something of this sort,

Speaker Change: It doesn't change the fact that those other products don't provide guaranteed income for life and really protect them against the risk of outliving their assets.

Gary Bhojwani: So, for that reason, I think that even if interest rates continue to go up, this growth would remain solid. And remember, we adjust our products and the participation rates and so on, depending on what's going on in the market. So we don't follow a step for staff, but we do adjust the benefit level of participation rates and so on in the annuities. So I don't know that I would say that there's a tipping point, per se, or there's a step number beyond which we couldn't go and continue to grow. I just don't see it working that way because of the need of the client.

Gary Chandru Bhojwani: So for that reason, I think that even if interest rates continue to go up, this growth would remain solid. And remember, we adjust our products and the participation rate, and so on, depending on what's going on in the market. We don't follow it step for step, but we do adjust the benefit levels and participation rates and so on in the annuities. So I don't know that I would say that there's a tipping point per se, or there's a set number beyond which we couldn't go and continue to grow. I just don't see it working that way because of the need of the time. It makes sense. Thanks, Gary.

Suneet Laxman L. Kamath: makes sense. Thanks, Gary.

Speaker Change: So for that reason, I think that even if interest rates continue to go up, this growth would remain solid. And remember, we adjust our products and the participation rate and so on depending on what's going on in the market.

Speaker Change: We don't follow it step for step, but we do adjust the benefit levels and participation rates and so on in the annuities. So I don't know that I would say that there's a tipping point per se, or there's a set number beyond which we couldn't go and continue to grow. I just don't see it working that way because of the need of the client base.

Gary Bhojwani: Makes sense.

Gary Bhojwani: Thanks, Gary.

Gary Chandru Bhojwani: Makes sense. Thanks, Gary.

Adam Auvil: There are no further questions waiting at this time, so I'd like to ask the call back over to add a more bill. Thank you, operator, and thank you all for participating in today's call.

Operator: 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.

Carly: Please reach out to the Investor Relations team if you have any further questions. Have a great rest of your day. Thank you all for your participation.

Speaker Change: 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.

Operator: You may now disconnect your lines.

Speaker Change: This concludes today's conference call. Thank you all for your participation. You may now disconnect your lines.