Q1 2025 Travelzoo Earnings Call

Good morning, and thank you for joining us for the <unk> Financial group first quarter 2025 earnings call. My name is call. It I will be coordinating the call today, if that starts to your question. During the call you can do so by pressing star filled up by one player inside the phone keypad and Cemig, because that's a lot of questioning the stuff with let's see I'm not.

Adam: Over to our host Adam over the floor is yours.

Adam: Good morning, and thank you for joining us on CNR financial group's first quarter 2025 earnings conference call.

Gary: Today's presentation will include remarks from Gary <unk>, Chief Executive Officer, 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 Yesterdays press release, you can obtain the release by visiting the media section of our website.

Speaker Change: I N C dot com.

Speaker Change: Morning presentation is also available in the investors section of our website and was filed in a form 8-K yesterday.

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 you can find a reconciliation of the non-GAAP measures to the corresponding GAAP measures in the appendix.

Speaker Change: The rest presentations, we will be making performance comparisons and unless otherwise specified any comparisons made will refer to changes between first quarter of 2025 in the first quarter of 2024 and with that I'll turn the call over to Gary.

Speaker Change: Okay.

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

Gary: <unk> is off to a solid start in the quarter building on a strong 2020 for performance.

Gary: Our first quarter results enable us to reaffirm our full year 2025, and three year Roe guidance.

Gary: Operating earnings per diluted share were <unk> 79.

Gary: 52% and.

Gary: 74 cents up 42%.

Gary: Excluding significant items.

Gary: Our first quarter performance reinforces our commitment to grow earnings while improving profitability.

<unk> also delivered our 11th consecutive quarter of strong sales momentum.

Gary: And our ninth consecutive quarter of growth in producing agent count.

Gary: I'll cover these results in more detail in each division's comments.

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

Gary: New money rates have exceeded 6% for nine consecutive quarters now.

Gary: Capital and liquidity remained well above target levels after returning $117 million to shareholders.

Gary: Book value per diluted share, excluding OCI was $37 three.

Gary: 6%.

Gary: Paul will go into greater detail on our financial performance.

Gary: Most importantly, the core areas of our business continue to perform well including production.

Gary: And for some metrics.

Gary: Policyholder persistency underwriting margin capital management.

Gary: And overall investment management.

Gary: Visibility into macroeconomic drivers such as interest rates is deteriorating however.

Gary: Our track record demonstrates our ability to not navigate volatility.

Gary: As we look to the balance of the year, we remain squarely focused on leveraging our business model to enable sustained profitable growth.

Gary: Executing on our strategic priorities and driving ROE expansion.

Gary: Yes.

Gary: Turning to slide five all but one of our growth scorecard metrics were up for the quarter. As a reminder, our growth scorecard focuses on three key drivers of our performance production.

Gary: Distribution and investments and capital.

Gary: I will discuss each division in the next two slides Paul will cover investments in capital in more detail during his remarks.

Gary: Beginning with the consumer division on slide six.

Gary: The consumer division posted another solid start to the year.

Gary: Capabilities to reach the underserved middle income market remain a key differentiator for our consumer business we.

Gary: We marry a virtual connection with local agents, who deliver the last mile of sales and service to both lasting relationships with our customers.

Gary: This personal interaction is especially valuable to customers during times of uncertainty and market.

Gary: Get volatility.

Gary: Our agents maintained positive sales momentum in the quarter with financial and health products, continuing the consistent strong performance.

Gary: Annuity collected premiums were up 12%, our seventh consecutive quarter of growth.

Gary: Account values were up 7% and premium per policy was up 19%.

Gary: Our strong annuity performance comes on the heels of a record 2024.

Gary: Our captive distribution and our long term relationships that our agents build.

Gary: With their clients enable stability in our block of business.

Gary: We delivered our eighth consecutive quarter of brokerage and advisory group.

Gary: Client assets and brokerage and advisory were up 16% for the quarter.

Gary: New accounts were up 13% and average account size was up 3%.

Gary: Persistency remained strong with our investment clients.

Gary: When combined with our annuity account values, our clients now entrust us with more than $16 billion of their assets up 9%.

Gary: Sustained growth in brokerage and advisory and annuities reflects a critical but largely unmet need within our market for retirement income solutions.

Gary: It has long been our position that middle income customers need and deserve access to professional guidance and retirement products as do more affluent customers.

Gary: We continue to consider it a great privilege to serve this market.

Gary: Total nap was flat for the quarter.

Gary: Health Nap was up 9% the 11th consecutive quarter of growth.

Gary: Supplemental health Nap was up 8%.

Gary: Sustained growth in our health results demonstrate strong consumer demand for ways to cover out of pocket gaps in medical coverage and safeguard against the growing cost of health care.

Gary: Our Medicare portfolio continues to deliver strong sales growth.

Gary: Medicare supplement nap was up 24% and Medicare advantage policies were up 42%.

Gary: Recall that Medicare advantage sales are not reflected in that.

Gary: As a reminder, we manufacturer med sup products and distribute MA policies from third party carriers.

Gary: The strategic choice to optimize our Medicare portfolio add balance and diversification and enables us to offer more coverage options for our customers health care needs.

Gary: With more than 11000 people in the U S. Turning 65 every day Medicare as a year round business, we're seeing persistency in both med sup and med advantage continues to benefit from the client relationships are agents established.

Gary: Long term care nap was down in the quarter on a strong comparable as the current product first launched in late 2023.

Gary: Long term care remains a strong product in our portfolio and fills a critical retirement Karen.

Gary: We continue to see a growing need for practical long term care solutions within our target market.

Gary: Life production was down in the quarter, primarily driven by lower lead volumes in our direct to consumer business lower D to C leads were due in part to elevated television advertising costs and an intentional pullback in marketing spend to optimize production with expense.

Gary: This seasonal fluctuation is consistent with previous first quarter results following the presidential election.

Gary: Our second quarter results will confirm if the prior trend per se.

Gary: Over the last several years, we are proactively diversified our non TV direct marketing to include more web and digital channels web and digital now accounts for over 36% of sales generated by D to C leads up 28% year over year.

Gary: Looking ahead, we remain confident in our ability to generate direct to consumer sales at an attractive rate of return.

Gary: We continue to see long term value in our diversified and integrated approach to reach middle income consumers.

Gary: Finally, producing agent count was up 2%, marking our ninth consecutive quarter of growth.

Gary: Our customers look for technology to supplement not replace human interaction investments in technology continue to enable customer experience and drive operational efficiency.

Gary: Accelerated underwriting on a portion of our simplified life products remains a prime example.

Gary: It delivered an 87% instant decision rate on submitted policies in the quarter up 11% over fourth quarter 2024.

Gary: Next slide seven and our Worksite Division performance.

Gary: Our Worksite Division is also.

People in the U S to travel international is there less demand for that as well.

We see the first but not the second so we yes, we see a bit hesitation.

In particularly Canadians Canadians.

Canadian interest in coming to the U S has decreased a lot, but we are not seeing the other we are we are not seeing it the other way round, So American still love to travel.

To Europe.

Great well thanks for answering my question is I noticed you guys. Good luck.

Thanks, Ed.

Our last question comes from Steve Silver from Argus Research. Please go ahead. Your line is open.

Thanks, operator, and thanks for taking the question.

So it looks like you guys became very aggressive over the course of the quarter in repurchasing shares it looks like as the stock price corrected along with the broader market I'm curious as to your thoughts on the balance sheet and the company's capacity and appetite to continue buying shares if the markets remain volatile over the near term.

Steve D opportunity was very attractive last quarter or so since we are confident in our business and we hit a lot of cash we.

<unk> increased our share repurchases going forward, we expect the cash balance to increase again.

First because we collect membership fees at the beginning of subscription peer yet.

And second the business is profitable and cash flow positive with relatively fixed operating expenses and.

As you heard we are quite confident right now in our member acquisition activities.

So we now have a better opportunity to invest in member growth than we had maybe a year ago.

And that's where we would like to allocate the positive cash that the business is generating.

Great. Okay. Thanks for the color.

Okay. This concludes the Q&A portion of today's call I would like to turn the call back over to Mr. Hold that back to Hal for closing remarks.

Well the investors. Thank you very much for your time and support today, we look forward to speaking with you again next quarter.

Great day.

This concludes today's travel group first quarter 2025 earnings call and webcast. You may now disconnect. Your lines at this time and have a wonderful day.

And we're now in private have a great day everyone.

Okay. Thank you.

Youre welcome bite on.

Yes.