CNO Financial Group Q4 2025 CNO Financial Group Inc Earnings Call | AllMind AI Earnings | AllMind AI
Q4 2025 CNO Financial Group Inc Earnings Call
Speaker #1: Financial Group, fourth quarter earnings call. After today's prepared remarks, we will host a question and answer session. If you'd like to ask a question, please press star one on your telephone keypad.
Adam Auvil: CNO Financial Group Q4 earnings call. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press star 1 on your telephone keypad. To withdraw your question, press star 1 again. We will now hand the call over to Adam Auvil, VP of Investor Relations. Please go ahead.
Operator: CNO Financial Group Q4 earnings call. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. To withdraw your question, press star one again. We will now hand the call over to Adam Auvil, VP of Investor Relations. Please go ahead.
Speaker #1: To withdraw your question, press star one again. We will now hand the call over to Adam Auvil, VP of Investor Ahead.
Speaker #1: Relations. Please go
Speaker #2: Good morning, and thank you for joining us on CNO Financial Group's fourth quarter 2025 earnings call.
Adam Auvil: Good morning, and thank you for joining us on CNO Financial Group's Q4 2025 Earnings Conference Call. Today's presentation will include remarks from Gary Bhojwani, Chief Executive Officer, and Paul McDonough, Chief Financial Officer. Following the presentation, we will also have other business leaders available for the question-and-answer period. During this conference call, we will be referring to information contained in yesterday's press release. You can obtain the release by visiting the media section of our website at cno.com. This morning's presentation is also available in the investors section of our website and was filed in a Form 8-K yesterday. Let me remind you that any forward-looking statements we make today are subject to a number of factors which may cause actual results to be materially different than those contemplated by the forward-looking statements.
Adam Auvil: Good morning, and thank you for joining us on CNO Financial Group's Q4 2025 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.
Speaker #2: 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 be available for the question and answer period.
Speaker #2: Earnings conference call. Today's presentation will include remarks from Gary Bhojwani, Chief Executive Officer, and Paul McDonough, Chief Financial Officer. Following the presentation, available for the question and answer, we'll also have other business leaders. During this conference call, we will be referring to information contained in yesterday's press release.
Adam Auvil: 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 cno.com. This morning's presentation is also available in the investors section of our website and was filed in a Form 8-K yesterday. Let me remind you that any forward-looking statements we make today are subject to a number of factors which may cause actual results to be materially different than those contemplated by the forward-looking statements.
Speaker #2: You can obtain the release by visiting the Media section of our website at cnoinc.com. This morning's presentation is also available in the Investor section of our website and was filed in a Form 8-K yesterday.
Speaker #2: Let me remind you that any forward-looking statements we make today are subject to a number of risks, and actual results may be materially different than those contemplated by the forward-looking statements.
Speaker #2: Today's presentation contains a number of factors which may cause actual results to differ and should not be considered a substitute for the most directly comparable GAAP measures. You'll find a reconciliation of the non-GAAP measures to the corresponding GAAP measures in the appendix.
Adam Auvil: Today's presentation contains a number of non-GAAP measures, which should not be considered as substitutes for the most directly comparable GAAP measures. You'll find a reconciliation of the non-GAAP measures to the corresponding GAAP measures in the appendix. Throughout the presentation, we'll be making performance comparisons, and unless otherwise specified, any comparisons made will refer to changes between full year 2025 and full year 2024. And with that, I'll turn the call over to Gary.
Adam Auvil: Today's presentation contains a number of non-GAAP measures, which should not be considered as substitutes for the most directly comparable GAAP measures. You'll find a reconciliation of the non-GAAP measures to the corresponding GAAP measures in the appendix. Throughout the presentation, we'll be making performance comparisons, and unless otherwise specified, any comparisons made will refer to changes between full year 2025 and full year 2024. And with that, I'll turn the call over to Gary.
Speaker #2: Throughout the presentation, we'll be making performance comparisons, and unless otherwise specified, any comparisons made will refer to changes between the full year of non-GAAP measures, which are '25 and full year 2024.
Speaker #2: And with that, I'll turn the call over to Gary.
Speaker #3: Thanks, Adam. Good morning, everyone, and thank you for joining us. CNO once again delivered an excellent quarter and full-year results. We are growing and investing in the franchise, growing operating earnings, and improving profitability.
Gary C. Bhojwani: Thanks, Adam. Good morning, everyone, and thank you for joining us. CNO once again delivered an excellent quarter and full year results. We are growing and investing in the franchise, growing operating earnings, and improving profitability all at the same time. Our performance remains consistent and repeatable, underpinned by strong execution and a focus on the underserved middle-income market. We achieved, and in most cases exceeded, all of our 2025 guidance, including improving our operating return on equity to 11.4%, excluding significant items. Building on our sustained momentum, 2025 represented one of our best operating performances to date. We delivered our 14th consecutive quarter of sales growth, our 12th consecutive quarter of growth in producing agent count, and our most productive year ever for both our Bankers Life and Optavise captive agencies. For the full year, we delivered record total new annualized premium up 15%.
Gary C. Bhojwani: Thanks, Adam. Good morning, everyone, and thank you for joining us. CNO once again delivered an excellent quarter and full year results. We are growing and investing in the franchise, growing operating earnings, and improving profitability all at the same time. Our performance remains consistent and repeatable, underpinned by strong execution and a focus on the underserved middle-income market. We achieved, and in most cases exceeded, all of our 2025 guidance, including improving our operating return on equity to 11.4%, excluding significant items.
Speaker #3: All at the same time. Our performance remains consistent and repeatable, underpinned by strong execution and a focus on the underserved middle-income market. We achieved and, in most cases, exceeded all of our 2025 guidance, including improving our operating return on equity to 11.4%, excluding significant items. Building on our sustained momentum, 2025 represented one of our best years.
Gary C. Bhojwani: Building on our sustained momentum, 2025 represented one of our best operating performances to date. We delivered our 14th consecutive quarter of sales growth, our 12th consecutive quarter of growth in producing agent count, and our most productive year ever for both our Bankers Life and Optavise captive agencies. For the full year, we delivered record total new annualized premium up 15%.
Speaker #3: Operating performances to date: we delivered our 14th consecutive quarter of sales growth, our 12th consecutive quarter of growth in producing agent counts, and our most productive year ever for both our Bankers Life and Optavise captive agencies.
Speaker #3: For the full year, we delivered record total new annualized premium, up 15%. We set production records across both lines—a clear sign that our model is meeting divisions and, in multiple products, the broad-based needs of our middle-income consumers.
Gary C. Bhojwani: We set production records across both divisions and in multiple product lines, a clear sign that our model is meeting the broad-based needs of our middle-income consumers. Our exclusive middle-market focus and our last-mile captive agent distribution model create our durable competitive moat. This difficult-to-replicate model is a clear competitive advantage and a catalyst for profitable growth. I'll cover these results in more detail in each division's comments. Our consistent sales momentum is driving earnings growth, operating earnings per diluted share with $4.40 and an increase of 11%. Earnings continue to benefit from strong insurance product margin and investment results reflecting growth in the business and expansion of the portfolio book yield. New money rates have exceeded 6% for 12 consecutive quarters while maintaining portfolio quality. Paul will go into greater detail on our financial performance.
Gary C. Bhojwani: We set production records across both divisions and in multiple product lines, a clear sign that our model is meeting the broad-based needs of our middle-income consumers. Our exclusive middle-market focus and our last-mile captive agent distribution model create our durable competitive moat. This difficult-to-replicate model is a clear competitive advantage and a catalyst for profitable growth. I'll cover these results in more detail in each division's comments.
Speaker #3: Our exclusive middle market focus and our last-mile captive agent distribution model create our durable competitive moat. This difficult-to-replicate model is a clear competitive advantage and a catalyst for profitable growth.
Speaker #3: I'll cover these results in more detail in each division's comments. Our consistent sales momentum is driving earnings growth. Operating earnings per diluted share were $4.40, an increase of 11%.
Gary C. Bhojwani: Our consistent sales momentum is driving earnings growth, operating earnings per diluted share with $4.40 and an increase of 11%. Earnings continue to benefit from strong insurance product margin and investment results reflecting growth in the business and expansion of the portfolio book yield. New money rates have exceeded 6% for 12 consecutive quarters while maintaining portfolio quality. Paul will go into greater detail on our financial performance.
Speaker #3: Earnings continue to benefit from strong insurance product margin and investment results, reflecting growth in the business and expansion of the portfolio book yield. New money rates have exceeded 6% for 12 consecutive quarters, while maintaining portfolio quality.
Speaker #3: Paul will go into greater detail on our financial performance. We ended the year with a robust total capital position after returning $386 million to shareholders and an 11% increase over 2024.
Gary C. Bhojwani: We ended the year with a robust total capital position after returning $386 million to shareholders, an 11% increase over 2024. For the 13th year in a row, we raised our quarterly common stock dividend. Book value per diluted share, excluding AOCI, was $38.81, representing a 7% compound annual growth rate over the past 3 years. Additional highlights from 2025 include a second reinsurance transaction with our Bermuda affiliate, continued strong capital position, and free cash flow generation, and an all-time high share price. Turning to slide 5 and our growth scorecard, 2025 was a record-setting year, and nearly all growth scorecard metrics were up for the quarter and for the full year. As a reminder, our growth scorecard focuses on the 3 key drivers of our performance: production, distribution, and investments in capital. I'll discuss each division in the next 2 slides.
Gary C. Bhojwani: We ended the year with a robust total capital position after returning $386 million to shareholders, an 11% increase over 2024. For the 13th year in a row, we raised our quarterly common stock dividend. Book value per diluted share, excluding AOCI, was $38.81, representing a 7% compound annual growth rate over the past 3 years. Additional highlights from 2025 include a second reinsurance transaction with our Bermuda affiliate, continued strong capital position, and free cash flow generation, and an all-time high share price.
Speaker #3: And for the 13th year in a row, we've raised our quarterly common stock dividend. Book value per diluted share, excluding AOCI, was $38.81, representing a 7% compound annual growth rate over the past three years.
Speaker #3: Additional highlights from 2025 include a second reinsurance transaction with our Bermuda affiliate, continued strong capital position and free cash flow generation, and an all-time high share price.
Gary C. Bhojwani: Turning to slide 5 and our growth scorecard, 2025 was a record-setting year, and nearly all growth scorecard metrics were up for the quarter and for the full year. As a reminder, our growth scorecard focuses on the 3 key drivers of our performance: production, distribution, and investments in capital. I'll discuss each division in the next 2 slides.
Speaker #3: Our growth scorecard. Turning to slide five, and 2025 was a record-setting year, and nearly all growth scorecard metrics were up for the quarter and for the full year.
Speaker #3: As a reminder, our growth scorecard focuses on the three key drivers of our performance: production, distribution, and investments in capital. I'll discuss each division in the next two slides.
Speaker #3: Paul will cover investments in capital during his remarks, beginning with the consumer division on slide six. Our consumer division delivered an exceptional year, capped off by our 13th consecutive quarter of sales growth.
Gary C. Bhojwani: Paul will cover investments in capital during his remarks. Beginning with the consumer division on slide six, our consumer division delivered an exceptional year, capped off by our 13th consecutive quarter of sales growth. 2025 also marked the third consecutive year of record production by the Bankers Life agent force. For the full year, we delivered record total NAP up 15%, double-digit growth in Life, Supplemental Health, and Medicare supplements, and record growth in annuities and client assets in brokerage and advisory. Life NAP was up 10% for the full year, led by record direct-to-consumer life sales, up 20%. Our targeted measured approach to the D2C channel benefited from technology-driven productivity enhancements and diversifying our direct marketing away from television to include more web, digital, and third-party channels. These non-television lead sources generated over 70% of all D2C life sales for the year.
Gary C. Bhojwani: Paul will cover investments in capital during his remarks. Beginning with the consumer division on slide six, our consumer division delivered an exceptional year, capped off by our 13th consecutive quarter of sales growth. 2025 also marked the third consecutive year of record production by the Bankers Life agent force. For the full year, we delivered record total NAP up 15%, double-digit growth in Life, Supplemental Health, and Medicare supplements, and record growth in annuities and client assets in brokerage and advisory.
Speaker #3: 2025 also marked the third consecutive year of record production by the Bankers Life agent force. For the full year, we delivered record total NAP, up 15%, double-digit growth in life, supplemental health, and Medicare supplements, and record growth in annuities and client assets in brokerage, which was up 10% for the full year, led by record direct-to-consumer life sales, up 20%.
Speaker #3: Life NAP channels—these non-television lead sources generated over 70% of all D2C life sales for the year. Total health NAP was up 22%, which marks 14 consecutive quarters of growth.
Gary C. Bhojwani: Life NAP was up 10% for the full year, led by record direct-to-consumer life sales, up 20%. Our targeted measured approach to the D2C channel benefited from technology-driven productivity enhancements and diversifying our direct marketing away from television to include more web, digital, and third-party channels. These non-television lead sources generated over 70% of all D2C life sales for the year.
Speaker #3: Our targeted, measured approach to the D2C channel benefited from technology-driven productivity enhancements and diversifying our direct marketing away from television to include more advisory.
Gary C. Bhojwani: Total health NAP was up 22%, which marks 14 consecutive quarters of growth. Supplemental health was up 15%, and long-term care was up 4%. Our field force delivered another exceptional performance during the Medicare annual enrollment period. Medicare supplement NAP was up 49% for the full year and up 92% for the quarter, our best Medicare supplement quarter in 15 years. Medicare Advantage policies sold, which are not reflected in NAP, were down 3% for the year. Our results reflect a growing shift in consumer preferences from Medicare Advantage to Medicare supplement, as many of the leading MA carriers pare back plans and benefits, reversing a decade-long trend. Medicare remains a flagship door-opening product for us to meet and serve more customers. Total Medicare policies sold were up 5% for the year.
Gary C. Bhojwani: Total health NAP was up 22%, which marks 14 consecutive quarters of growth. Supplemental health was up 15%, and long-term care was up 4%. Our field force delivered another exceptional performance during the Medicare annual enrollment period. Medicare supplement NAP was up 49% for the full year and up 92% for the quarter, our best Medicare supplement quarter in 15 years. Medicare Advantage policies sold, which are not reflected in NAP, were down 3% for the year.
Speaker #3: Supplemental health was up 15%, and long-term care was up 4%. Our performance during the Medicare annual field force delivered another exceptional enrollment period. Medicare supplement NAP was up 49% for the full year and up 92% for the quarter.
Speaker #3: Our best Med-Sup quarter in 15 years. Medicare Advantage policies sold, which are not reflected in NAP, were down 3% for the year. Our results reflect a growing shift in consumer preferences from Medicare Advantage to Medicare Supplement, as many of the leading MA carriers pare back plans and benefits, reversing a decade-long trend.
Gary C. Bhojwani: Our results reflect a growing shift in consumer preferences from Medicare Advantage to Medicare supplement, as many of the leading MA carriers pare back plans and benefits, reversing a decade-long trend. Medicare remains a flagship door-opening product for us to meet and serve more customers. Total Medicare policies sold were up 5% for the year.
Speaker #3: Medicare remains a flagship, door-opening product for us to meet and serve more customers. Total Medicare policies sold were up 5% for the year. With approximately 11,000 Americans turning 65 each day, we expect overall demand for Medicare products to grow and to help us expand the total number of households we serve.
Gary C. Bhojwani: With approximately 11,000 Americans turning 65 each day, we expect overall demand for Medicare products to grow and to help us expand the total number of households we serve. Record annuity collected premiums were up 9% for the full year and up 3% for the quarter, our 10th consecutive quarter of growth. Collected premiums in the quarter totaled $508 million, and in-force account values were up 7%, exceeding $13 billion. Our captive distribution and the long-term relationships that our agents establish with their clients add stability to our annuity block. We delivered our 11th consecutive quarter of brokerage and advisory growth. Client assets in the channel were up 24% over the prior year, totaling more than $5 billion. For the full year, total accounts were up 12%.
Gary C. Bhojwani: With approximately 11,000 Americans turning 65 each day, we expect overall demand for Medicare products to grow and to help us expand the total number of households we serve. Record annuity collected premiums were up 9% for the full year and up 3% for the quarter, our 10th consecutive quarter of growth. Collected premiums in the quarter totaled $508 million, and in-force account values were up 7%, exceeding $13 billion.
Speaker #3: Record annuity collected premiums were up 9% for the full year and up 3% for the quarter—our 10th consecutive quarter of growth. Collected premiums in the quarter totaled $508 million, and in-force account values were up 7%, exceeding $13 billion.
Gary C. Bhojwani: Our captive distribution and the long-term relationships that our agents establish with their clients add stability to our annuity block. We delivered our 11th consecutive quarter of brokerage and advisory growth. Client assets in the channel were up 24% over the prior year, totaling more than $5 billion. For the full year, total accounts were up 12%.
Speaker #3: Our captive distribution and the long-term relationships that our agents established with their clients add stability to our annuity block. We delivered our 11th consecutive quarter of brokerage and advisory growth.
Speaker #3: Client assets in the channel were up 24% over the prior year, totaling more than $5 billion. For the full year, total accounts were up 12%.
Speaker #3: When combined with our annuity account values, our clients now entrust us with more than $18 billion of their assets, up 11% from 2024. Improving agent productivity fueled our sustained sales momentum in 2025.
Gary C. Bhojwani: When combined with our annuity account values, our clients now entrust us with more than $18 billion of their assets, up 11% from 2024. Improving agent productivity fueled our sustained sales momentum in 2025. Producing agent count grew for the 12th consecutive quarter, and registered agent count was up 8%. The consumer division delivered another outstanding year. We expect that same focus and momentum to carry into 2026. Next, slide 7 and our worksite division performance. Worksite insurance sales have never been stronger, with 2025 representing the best production year ever for our worksite business. We finished the year with record full-year insurance sales, up 15%, and record fourth-quarter insurance sales, up 13%. This represents our second consecutive year of record production and 15th consecutive quarter of NAP growth. Full-year highlights included record life insurance sales, up 36%, hospital indemnity insurance, up 41%, and accident insurance, up 11%.
Gary C. Bhojwani: When combined with our annuity account values, our clients now entrust us with more than $18 billion of their assets, up 11% from 2024. Improving agent productivity fueled our sustained sales momentum in 2025. Producing agent count grew for the 12th consecutive quarter, and registered agent count was up 8%. The consumer division delivered another outstanding year. We expect that same focus and momentum to carry into 2026.
Speaker #3: Producing agent count grew for the 12th consecutive quarter, and registered agent count was up 8%. The Consumer Division delivered another outstanding momentum to carry into the year.
Speaker #3: We expect that same focus in 2026. Next, slide seven in our Worksite Division performance. Worksite insurance sales have never been stronger. With 2025 representing the best business, we finished the year with record full-year insurance sales, up 15%, and record fourth-quarter insurance sales, up 13%.
Gary C. Bhojwani: Next, slide 7 and our worksite division performance. Worksite insurance sales have never been stronger, with 2025 representing the best production year ever for our worksite business. We finished the year with record full-year insurance sales, up 15%, and record fourth-quarter insurance sales, up 13%. This represents our second consecutive year of record production and 15th consecutive quarter of NAP growth. Full-year highlights included record life insurance sales, up 36%, hospital indemnity insurance, up 41%, and accident insurance, up 11%.
Speaker #3: This production year ever for our worksite represents our second consecutive year, 15th consecutive quarter of NAP growth. Full-year highlights included record 36%, hospital indemnity insurance up 41%, and accident insurance up 11%.
Speaker #3: Strategic growth initiatives contributed significantly to our worksite NAP performance in 2025. Our geographic expansion initiative delivered 11% of the NAP growth for the year.
Gary C. Bhojwani: Strategic growth initiatives contributed significantly to our worksite NAP performance in 2025. Our geographic expansion initiative delivered 11% of the NAP growth for the year, and NAP from new group clients was up 23%. Producing agent count was up 7%, driven by recruiting up 10%. This marks our 14th consecutive quarter of growth in the agent force. Our previously announced exit of the fee services business within worksite is progressing on schedule and should be largely complete in the first half of 2026. We are already seeing the benefits of streamlining our focus on core insurance business. As we enter 2026, we remain confident in our ability to execute and continue to grow the business. And with that, I'll turn it over to Paul.
Gary C. Bhojwani: Strategic growth initiatives contributed significantly to our worksite NAP performance in 2025. Our geographic expansion initiative delivered 11% of the NAP growth for the year, and NAP from new group clients was up 23%. Producing agent count was up 7%, driven by recruiting up 10%. This marks our 14th consecutive quarter of growth in the agent force.
Speaker #3: And NAP from new group clients was up 23%. Producing agent count was up 7%, driven by recruiting, up 10%. This marks our 14th consecutive quarter of growth in the agent force.
Speaker #3: Our previously announced exit of the fee services business within Worksite is progressing on schedule and should be largely complete in the first half of 2026.
Gary C. Bhojwani: Our previously announced exit of the fee services business within worksite is progressing on schedule and should be largely complete in the first half of 2026. We are already seeing the benefits of streamlining our focus on core insurance business. As we enter 2026, we remain confident in our ability to execute and continue to grow the business. And with that, I'll turn it over to Paul.
Speaker #3: We are already seeing the benefits of streamlining our focus on core insurance business. As we enter 2026, we remain confident in our ability to execute and continue to grow. With that, I'll turn it over to
Speaker #3: Paul: Thank you, Gary, and good business.
Paul McDonough: Thank you, Gary, and good afternoon or good morning, rather. Good morning, everyone. Turning to the financial highlights on slide 8, our results for the quarter and the year demonstrate our ability to deliver sustained, profitable growth. Operating return on equity, excluding significant items, was 11.4%, reflecting significant improvement from the 10% run rate return on equity in 2024 and good progress toward our 12% target ROE in 2027. Operating earnings per share, ex-significant items, grew 10% in the quarter and 6% for the year, reflecting continued strength in both insurance product margin and net investment income. Notably, at $4.02, our full-year operating earnings per share, excluding significant items, exceeded the high end of our original guidance. Similarly, our full-year expense ratio of 18.9%, excluding significant items, was better than the low end of our original guidance, reflecting improved operating leverage as we grow the business.
Paul McDonough: Thank you, Gary, and good afternoon or good morning, rather. Good morning, everyone. Turning to the financial highlights on slide 8, our results for the quarter and the year demonstrate our ability to deliver sustained, profitable growth. Operating return on equity, excluding significant items, was 11.4%, reflecting significant improvement from the 10% run rate return on equity in 2024 and good progress toward our 12% target ROE in 2027.
Speaker #2: afternoon or good morning, rather. Good morning,
Speaker #2: Everyone, turning to the financial highlights on slide eight. Our results for the quarter and the year demonstrate our ability to deliver sustained, profitable growth.
Speaker #2: Operating return on equity, excluding significant items, was 10%, up from 11.4%, reflecting significant improvement from rate return on equity in 2024, and good progress toward our 12% target ROE in 2027.
Paul McDonough: Operating earnings per share, ex-significant items, grew 10% in the quarter and 6% for the year, reflecting continued strength in both insurance product margin and net investment income. Notably, at $4.02, our full-year operating earnings per share, excluding significant items, exceeded the high end of our original guidance. Similarly, our full-year expense ratio of 18.9%, excluding significant items, was better than the low end of our original guidance, reflecting improved operating leverage as we grow the business.
Speaker #2: Operating earnings per share, excluding significant items, grew 10% in the quarter and 6% for the year, reflecting continued strength in both insurance product margin and net investment income.
Speaker #2: Notably, at $4.02, our full-year operating earnings per share, excluding significant items, exceeded the high end of our original full-year guidance. Our expense ratio of 18.9%, excluding significant items, was better than the low end of our original guidance.
Speaker #2: The effective tax rate on operating income, reflecting improved operating leverage as we grow the business, was 20.6% for the year, coming in below our 22 to 22.5% guidance.
Paul McDonough: The effective tax rate on operating income was 20.6% for the year, coming in below our 22% to 22.5% guidance. This reflects the impact of tax strategies implemented in the fourth quarter related to certain tax credits, reduced impact of state taxes, and an increase in tax-exempt interest. We deployed $320 million of excess capital on share repurchases in the year, up 14%, including $60 million in the fourth quarter. This contributed to an 8% reduction in weighted average diluted shares outstanding and reflects the strong free cash flow generation of the business. Overall, the quarter and full year reflect a continuation of the operational momentum we have carried throughout the year. Turning to slide nine, total insurance product margin, excluding significant items, increased again this quarter, supported by outstanding sales performance over the last few years across both divisions and for most products.
Paul McDonough: The effective tax rate on operating income was 20.6% for the year, coming in below our 22% to 22.5% guidance. This reflects the impact of tax strategies implemented in the fourth quarter related to certain tax credits, reduced impact of state taxes, and an increase in tax-exempt interest. We deployed $320 million of excess capital on share repurchases in the year, up 14%, including $60 million in the fourth quarter.
Speaker #2: This reflects the impact of tax strategies implemented in the fourth quarter related to certain tax credits, reduced impact of state tax-exempt interest, and an increase in taxes. We deployed $320 million of excess capital on share repurchases in the year, up 14%, including $60 million in the fourth quarter.
Paul McDonough: This contributed to an 8% reduction in weighted average diluted shares outstanding and reflects the strong free cash flow generation of the business. Overall, the quarter and full year reflect a continuation of the operational momentum we have carried throughout the year. Turning to slide nine, total insurance product margin, excluding significant items, increased again this quarter, supported by outstanding sales performance over the last few years across both divisions and for most products.
Speaker #2: An 8% reduction in outstanding reflects the strong free cash flow generation of the business. This contributed to an improvement in the weighted average diluted shares. Overall, the quarter and full year reflect a continuation of the operational momentum we have carried throughout the year.
Speaker #2: Slide nine: total insurance product margin, excluding significant items, increased again this quarter. This was supported by outstanding sales performance over the last few years, across both divisions and for most products.
Speaker #2: This growth, coupled with stable underlying claims trends, continues to drive higher margins across the three product categories. 2025 again product portfolio, where ordinarily puts and takes across, demonstrates the value of our diversified product lines—consistently margin over net to stable and growing total. Net investment income remains solid, marking the ninth consecutive quarter of growth in total net investment income.
Paul McDonough: This growth, coupled with stable underlying claims trends, continues to drive higher margins across the three product categories. 2025 again demonstrates the value of our diversified product portfolio, where ordinarily puts and takes across product lines consistently net to stable and growing total margin over time. Turning to slide 10, net investment income remains solid, marking the ninth consecutive quarter of growth in total net investment income. Allocated net investment income increased with both growth and average net insurance liabilities, up 4.1%, and continued improvement in the average yield on allocated investments. For the year, NII allocated to products was up 6%. Net investment income not allocated to products reflects puts and takes across its various components. The net result in the quarter was strong, supported by alternative investment income, which met yield expectations, and a $12 million special dividend from a strategic investment.
Paul McDonough: This growth, coupled with stable underlying claims trends, continues to drive higher margins across the three product categories. 2025 again demonstrates the value of our diversified product portfolio, where ordinarily puts and takes across product lines consistently net to stable and growing total margin over time. Turning to slide 10, net investment income remains solid, marking the ninth consecutive quarter of growth in total net investment income.
Paul McDonough: Allocated net investment income increased with both growth and average net insurance liabilities, up 4.1%, and continued improvement in the average yield on allocated investments. For the year, NII allocated to products was up 6%. Net investment income not allocated to products reflects puts and takes across its various components. The net result in the quarter was strong, supported by alternative investment income, which met yield expectations, and a $12 million special dividend from a strategic investment.
Speaker #2: Allocated net investment income increased with both growth and average net insurance liabilities, up 4.1%, and continued improvement in the average yield on allocated investments.
Speaker #2: For the year, NII allocated to products was up 6%. Net investment income not allocated to products reflects puts and takes across its various components.
Speaker #2: The net result in the quarter was strong, supported by alternative investment income, which met yield expectations, and a $12 million special dividend from a strategic investment.
Paul McDonough: Total NII reflects disciplined portfolio management, steady asset growth, and durable yield performance, all of which continue to support strong earnings fundamentals. We issued $400 million of FABN in the quarter and $750 million for the full year. This program continues to deliver quality risk-adjusted returns, and we remain very pleased with its performance and expect to continue issuing under the program going forward, subject to market conditions. Our new investments in the quarter comprise approximately $1.6 billion of assets, an average rating of single A, and an average duration of six years. Our new investments are summarized in more detail on slide 22 of the presentation. The new money rate was 6.11%, the 12th consecutive quarter above 6%. Turning to slide 11, our investment portfolio remains high quality and liquid.
Paul McDonough: Total NII reflects disciplined portfolio management, steady asset growth, and durable yield performance, all of which continue to support strong earnings fundamentals. We issued $400 million of FABN in the quarter and $750 million for the full year. This program continues to deliver quality risk-adjusted returns, and we remain very pleased with its performance and expect to continue issuing under the program going forward, subject to market conditions.
Speaker #2: Disciplined portfolio management, total NII reflects steady asset growth, and durable yield performance, all of which continue to support strong earnings fundamentals. We issued $400 million of FABN in the quarter, and $750 million for the full year.
Speaker #2: This program continues to deliver quality, risk-adjusted returns, and we remain very pleased with its performance. We expect to continue issuing under the program going forward, subject to market conditions.
Paul McDonough: Our new investments in the quarter comprise approximately $1.6 billion of assets, an average rating of single A, and an average duration of six years. Our new investments are summarized in more detail on slide 22 of the presentation. The new money rate was 6.11%, the 12th consecutive quarter above 6%. Turning to slide 11, our investment portfolio remains high quality and liquid.
Speaker #2: Our new investments in the quarter comprise approximately $1.6 billion of assets, an average rating of single A, and an average duration of six years.
Speaker #2: Our new investments are summarized in more detail on slide 22. Of the 6.11%, this marks the 12th consecutive quarter above 6%. Turning to slide 11, our investment portfolio remains high-quality and liquid.
Speaker #2: As of year-end, we held a record $31 billion of invested assets, with 97% rated investment grade and an average rating of single A. The portfolio's strong performance reflects our consistent up-and-quality positioning, and remains diversified and well-balanced.
Paul McDonough: As of year-end, we held a record $31 billion of invested assets, with 97% rated investment grade and an average rating of single A. The portfolio's strong performance reflects our consistent up-in-quality positioning and remains diversified and well-balanced. Commercial real estate and private credit portfolios continue to perform as expected, supported by conservative underwriting and proactive risk management. Turning to slide 12, we ended the year with a robust total capital position. Our consolidated risk-based capital ratio was 380%. You may notice that we're referencing a target RBC range of 360 to 390, with the midpoint consistent with the previously stated 375%. Managing within this range allows for normal quarter-to-quarter variability in the RBC metric. The range is also consistent with how we describe to rating agencies and to regulators our risk appetite and our approach to risk management.
Paul McDonough: As of year-end, we held a record $31 billion of invested assets, with 97% rated investment grade and an average rating of single A. The portfolio's strong performance reflects our consistent up-in-quality positioning and remains diversified and well-balanced. Commercial real estate and private credit portfolios continue to perform as expected, supported by conservative underwriting and proactive risk management. Turning to slide 12, we ended the year with a robust total capital position. Our consolidated risk-based capital ratio was 380%. You may notice that we're referencing a target RBC range of 360 to 390, with the midpoint consistent with the previously stated 375%. Managing within this range allows for normal quarter-to-quarter variability in the RBC metric. The range is also consistent with how we describe to rating agencies and to regulators our risk appetite and our approach to risk management.
Speaker #2: Commercial real estate and private credit, as expected, supported portfolios continue to perform risk management. Turning to slide 12, we ended the year with a robust total capital position.
Speaker #2: Our consolidated risk-based capital ratio was 380%. You may notice that we're referencing a target RBC range of 360% to 390%, with the midpoint consistent with the previously stated 375%.
Speaker #2: Managing within this range allows for normal quarter-to-quarter variability in the RBC metric. The range is also consistent with how we described to rating agencies and to regulators our risk appetite and our approach to risk management.
Speaker #2: Holding company liquidity ended the year at $351 million, well above our minimum threshold of $150 million, supported by continued strong free cash flow generation, and reflecting our second-by-conservative underwriting and proactive affiliate announced back in November.
Paul McDonough: Holding Company liquidity ended the year at $351 million, well above our minimum threshold of $150 million, supported by continued strong free cash flow generation and reflecting our second reinsurance transaction with our Bermuda affiliate announced back in November. Debt to total capital remains within our target range of 25% to 28%. Overall, our capital position remains strong, providing flexibility to support growth, maintain financial resiliency, and continue deploying capital in a disciplined and sustainable manner. Turning to slide 13 and our initial 2026 guidance, we continue to target an improvement in run rate operating return on equity of 200 basis points through 2027, off a run rate 2024 ROE of approximately 10%. Importantly, our 2026 guidance is aligned with that trajectory as we remain focused on delivering improved profitability while maintaining our strong growth momentum and resilient capital position.
Paul McDonough: Holding Company liquidity ended the year at $351 million, well above our minimum threshold of $150 million, supported by continued strong free cash flow generation and reflecting our second reinsurance transaction with our Bermuda affiliate announced back in November. Debt to total capital remains within our target range of 25% to 28%. Overall, our capital position remains strong, providing flexibility to support growth, maintain financial resiliency, and continue deploying capital in a disciplined and sustainable manner. Turning to slide 13 and our initial 2026 guidance, we continue to target an improvement in run rate operating return on equity of 200 basis points through 2027, off a run rate 2024 ROE of approximately 10%. Importantly, our 2026 guidance is aligned with that trajectory as we remain focused on delivering improved profitability while maintaining our strong growth momentum and resilient capital position.
Speaker #2: That's a range of $25 to total capital remains within our target 28%. Overall, our capital position remains strong, providing flexibility to support growth, maintain financial resiliency, and continue deploying capital in a disciplined and sustainable manner, including through the reinsurance transaction with our Bermuda entity.
Speaker #2: Turning to slide 13 and our initial 2026 guidance, we continue to target an improvement in run-rate operating return on equity of 200 basis points through 2027, off a run-rate 2024 ROE of approximately 10%.
Speaker #2: Our 2026 guidance is aligned, importantly, with that trajectory, as we remain focused on delivering improved profitability while maintaining our strong growth momentum and resilient capital position.
Speaker #2: We expect operating earnings per share between $4.45, which represents an 8% increase at the midpoint from our 2025 result and reflects continued earnings growth across the business.
Paul McDonough: We expect operating earnings per share between $4.25 and 4.45, which represents an 8% increase at the midpoint from our 2025 result and reflects continued earnings growth across the business. This outlook assumes a stable macro environment and investment returns consistent with our long-term expectations. Our expense ratio is expected to be in the range of 18.8% to 19.2%. At the midpoint, this reflects stable operating leverage as we continue to grow the business, partially offset by ongoing investments to support growth. As in prior years, we would expect some seasonality within the year, with the expense ratio starting higher in Q1 and trending lower as the year progresses. We expect fee income of approximately $30 million for the year, with roughly 1/3 in Q1, minimal contribution in Q2 and Q3, and the balance in Q4.
Paul McDonough: We expect operating earnings per share between $4.25 and 4.45, which represents an 8% increase at the midpoint from our 2025 result and reflects continued earnings growth across the business. This outlook assumes a stable macro environment and investment returns consistent with our long-term expectations. Our expense ratio is expected to be in the range of 18.8% to 19.2%. At the midpoint, this reflects stable operating leverage as we continue to grow the business, partially offset by ongoing investments to support growth. As in prior years, we would expect some seasonality within the year, with the expense ratio starting higher in Q1 and trending lower as the year progresses. We expect fee income of approximately $30 million for the year, with roughly 1/3 in Q1, minimal contribution in Q2 and Q3, and the balance in Q4.
Speaker #2: This outlook assumes a stable macro environment and investment returns consistent with $425 and with our long-term expectations. Our expense ratio is expected to be in the range of 18.8% to 19.2%.
Speaker #2: At the midpoint, this reflects stable operating leverage as we continue to grow the business, partially offset by ongoing investments to support growth. As in prior years, we would expect some seasonality within the year.
Speaker #2: With the expense ratio starting higher in the first quarter and trending lower as the year progresses, we expect fee income of approximately $30 million for the year.
Speaker #2: With roughly a third in the first quarter, minimal contribution in the second and third quarters, and the balance in the fourth quarter. The effective tax rate is expected to be approximately 22.5%.
Paul McDonough: The effective tax rate is expected to be approximately 22.5%. We expect free cash flow of $200 to 250 million, which supports continued progress on capital deployment while maintaining a strong balance sheet and investing in the business to support growth and execution of our strategic initiatives. You'll recall that in 2025, we began a three-year initiative to invest in tech modernization with an expected investment over that period of approximately $170 million. This initiative is on track and on budget. In 2025, we deployed roughly $20 million on the initiative, and in 2026, we expect to deploy an additional $75 million. It's worth noting that our free cash flow guidance is net of this investment. As mentioned, we expect to operate with a risk-based capital ratio in the range of 360 to 390.
Paul McDonough: The effective tax rate is expected to be approximately 22.5%. We expect free cash flow of $200 to 250 million, which supports continued progress on capital deployment while maintaining a strong balance sheet and investing in the business to support growth and execution of our strategic initiatives. You'll recall that in 2025, we began a three-year initiative to invest in tech modernization with an expected investment over that period of approximately $170 million. This initiative is on track and on budget. In 2025, we deployed roughly $20 million on the initiative, and in 2026, we expect to deploy an additional $75 million. It's worth noting that our free cash flow guidance is net of this investment. As mentioned, we expect to operate with a risk-based capital ratio in the range of 360 to 390.
Speaker #2: We expect free cash flow of $200 to $250 million, which supports continued progress on capital deployment while maintaining a strong balance sheet and investing in the business to support growth and execution of our strategic initiatives.
Speaker #2: You'll recall that in 2025, we began a three-year initiative to invest in tech modernization, with an expected investment over that period of approximately $170 million.
Speaker #2: This initiative is on track and on budget. Roughly $20 million on the initiative was deployed in 2025, and in 2026, we expect to deploy an additional $75 million.
Speaker #2: It's worth noting that our free cash flow guidance is net of this investment. As mentioned, we expect to operate with a risk-based capital ratio in the range of 360 to 390.
Speaker #2: Finally, we expect minimum hold co-liquidity of $150 million and a debt-to-total capital ratio of 25% to 28%. And with that, I'll turn it back to Gary.
Paul McDonough: Finally, we expect minimum holdco liquidity of $150 million and a debt to total capital ratio of 25% to 28%. And with that, I'll turn it back to Gary.
Paul McDonough: Finally, we expect minimum holdco liquidity of $150 million and a debt to total capital ratio of 25% to 28%. And with that, I'll turn it back to Gary.
Speaker #2: Thanks, Paul. Turning to slide 14. CNO once again had exceptional full-year results. We achieved, and in most cases exceeded, all 2025 guidance metrics and delivered one of the best operating performances on record.
Gary C. Bhojwani: Thanks, Paul. Turning to slide 14, CNO once again had exceptional full-year results. We achieved and in most cases exceeded all 2025 guidance metrics and delivered one of our best operating performances on record. Consistent, repeatable results continue to drive our momentum. We're growing and investing in the franchise while also growing earnings and improving profitability. We enter 2026 with a strong capital position and a path to achieving our 2027 ROE target. Thank you for your support of and interest in CNO Financial Group. We will now open it up for questions. Operator?
Gary C. Bhojwani: Thanks, Paul. Turning to slide 14, CNO once again had exceptional full-year results. We achieved and in most cases exceeded all 2025 guidance metrics and delivered one of our best operating performances on record. Consistent, repeatable results continue to drive our momentum. We're growing and investing in the franchise while also growing earnings and improving profitability. We enter 2026 with a strong capital position and a path to achieving our 2027 ROE target. Thank you for your support of and interest in CNO Financial Group. We will now open it up for questions. Operator?
Speaker #2: Consistent, repeatable results continue to drive our momentum. We're growing and investing in the franchise while also growing earnings and improving profitability. We enter 2026 with a strong capital position and a path to our ROE target.
Speaker #2: Achieving our 2027 goals—thank you for your support of, and interest in, CNO Financial Group. We will now open it up for questions. Operator?
Speaker #3: We will now begin the question and answer session. If you would like to ask a question, please press star one on your telephone keypad.
Operator: We will now begin the question and answer session. If you would like to ask a question, please press star one on your telephone keypad. To withdraw your question, press star one again. Please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from Suneet Kamath from Jefferies. Please go ahead.
Operator: We will now begin the question and answer session. If you would like to ask a question, please press star one on your telephone keypad. To withdraw your question, press star one again. Please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from Suneet Kamath from Jefferies. Please go ahead.
Speaker #3: To withdraw your question, press star one again. Please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device.
Speaker #3: Please stand by while we compile the Q&A roster. Your first question comes from Sunit.
Speaker #3: Kamath from Jefferies. Please go
Speaker #4: Great, thanks. I wanted to start with earnings emergence, and maybe this one's for Paul. As we think about the strong sales that you guys have generated over the past couple of years, I'm assuming there's some sort of lag between when you write the business and when it sort of fully earns in.
[Analyst] (Jefferies): Great, thanks. I wanted to start with earnings emergence, and maybe this one's for Paul. As we think about the strong sales that you guys have generated over the past couple of years, I'm assuming there's some sort of lag between kind of when you write the business and when it sort of fully earns in. So I was just wondering if you can maybe give us a rule of thumb in terms of sort of how long does it take to kind of hit the target returns that you're pricing for?
[Analyst] (Jefferies): Great, thanks. I wanted to start with earnings emergence, and maybe this one's for Paul. As we think about the strong sales that you guys have generated over the past couple of years, I'm assuming there's some sort of lag between kind of when you write the business and when it sort of fully earns in. So I was just wondering if you can maybe give us a rule of thumb in terms of sort of how long does it take to kind of hit the target returns that you're pricing for?
Speaker #4: So, I was just wondering if you could maybe give us a rule of thumb in terms of, sort of, how long does it take to kind of hit—
Speaker #4: The target returns that you're pricing for?
Speaker #5: Sure. Hi, Sunit. Appreciate the question. So, it depends by product and the duration of the product. I guess what I'd emphasize is that we are hitting our target portfolio.
Paul McDonough: Sure. Hi, Suneet. Appreciate the question. So it depends by product and the duration of the product. I guess what it emphasizes is that we are hitting our target returns across our product portfolio, and the guidance that we've provided is capturing how earnings are emerging based on the sales trends over the last few years. And given our continued sales momentum and how that translates to earnings, that gives us confidence in our ability to meet the ROE target in 2027. And as Gary has emphasized on a number of occasions, that's not the endpoint, right? The expectation is that beyond 2027, we would continue to see ROE improvement.
Paul McDonough: Sure. Hi, Suneet. Appreciate the question. So it depends by product and the duration of the product. I guess what it emphasizes is that we are hitting our target returns across our product portfolio, and the guidance that we've provided is capturing how earnings are emerging based on the sales trends over the last few years. And given our continued sales momentum and how that translates to earnings, that gives us confidence in our ability to meet the ROE target in 2027. And as Gary has emphasized on a number of occasions, that's not the endpoint, right? The expectation is that beyond 2027, we would continue to see ROE improvement.
Speaker #5: And the guidance that we've provided is capturing how earnings are emerging based on the sales trends over the last few.
Speaker #5: Years, and given ahead. Momentum, and how that translates to earnings—that gives us confidence in our ability to meet the ROE target in 2027.
Speaker #5: Emphasized on a number of, and as Gary has said on occasions, that's not the end point, right? The expectation is that beyond 2027, we would continue to see ROE improvement.
Speaker #4: Got it. And then, I guess maybe for Gary, just wanted to get a sense of how you're thinking about the environment. We're seeing layoffs.
[Analyst] (Jefferies): Got it. Then I guess maybe for Gary, just wanted to get a sense of how you're thinking about the environment. We're seeing layoffs. We're seeing bad job numbers. On the one hand, it creates an opportunity for you from a recruiting perspective. On the other hand, it could create challenges for your target market. So I was just hoping you could walk us through your thoughts on that. Then do you have an expectation for producing agent count growth in 2026?
[Analyst] (Jefferies): Got it. Then I guess maybe for Gary, just wanted to get a sense of how you're thinking about the environment. We're seeing layoffs. We're seeing bad job numbers. On the one hand, it creates an opportunity for you from a recruiting perspective. On the other hand, it could create challenges for your target market. So I was just hoping you could walk us through your thoughts on that. Then do you have an expectation for producing agent count growth in 2026?
Speaker #4: We're seeing bad job numbers on the one hand. It creates an opportunity for you from a recruiting perspective. On the other hand, it could create challenges for your target market.
Speaker #4: So just hoping you could walk us through your thoughts on that. And then do you have an expectation for producing agent count growth in 2026?
Gary C. Bhojwani: Yes. This is a question. I'll start with the last question first. Do we expect to grow producing agent count? Yes, we will continue to grow it. That's our expectation. I would just emphasize, I think producing agent count growth is important, but I think it's a distant second to agent productivity. Ideally, we try and do both. We try and grow the number of agents we have, and we want them all to be more productive. But if you force me to pick, I will always emphasize productivity. That's a very long-winded way of saying we expect the agent count to grow in 2026, but it's not my primary focus. Primary focus is definitely productivity. In terms of the overall outlook, let me first issue a disclaimer. I have a terrible track record of predicting everything from interest rates to the weather.
Gary C. Bhojwani: Yes. This is a question. I'll start with the last question first. Do we expect to grow producing agent count? Yes, we will continue to grow it. That's our expectation. I would just emphasize, I think producing agent count growth is important, but I think it's a distant second to agent productivity. Ideally, we try and do both. We try and grow the number of agents we have, and we want them all to be more productive. But if you force me to pick, I will always emphasize productivity. That's a very long-winded way of saying we expect the agent count to grow in 2026, but it's not my primary focus. Primary focus is definitely productivity. In terms of the overall outlook, let me first issue a disclaimer. I have a terrible track record of predicting everything from interest rates to the weather.
Speaker #6: This is a
Speaker #6: Question: I'll start with the last question—yes. First, do we expect to grow producing agent count? Yes, we will continue to grow it. That's our expectation.
Speaker #6: I would just emphasize, I think producing agent count growth is important, but I think it's a distant second to agent productivity. Ideally, we try and do both.
Speaker #6: We try to grow the number of agents we have, and we want them all to be more productive. But if you force me to pick, I will always emphasize productivity.
Speaker #6: long-winded way of saying That's a very we expect the agent count to grow in 2026, but it's not my primary focus. Primary focus is definitely productivity.
Speaker #6: In terms of the overall outlook, let me first issue a disclaimer: I have a terrible track record of predicting everything from interest rates to the weather.
Speaker #6: If you want to know exactly what's not going to happen, you should ask me for a prediction. All of that said, I feel like 2025 was a year of significant lack of visibility, and I have to tell you, I still feel that way.
Gary C. Bhojwani: If you want to know exactly what's not going to happen, you should ask me for a prediction. All of that said, I feel like 2025 was a year of significant lack of visibility. And I have to tell you, I still feel that way. I feel like there are so many variables in terms of what could happen with interest rates and geopolitics and so on. I think that it's very difficult. It's always difficult to predict, but I really feel like 2025 and now 2026, during my tenure as running different businesses, these are some of the most lack of visibility I've had as a CEO. Now, all of that said, yes, we have seen the job numbers. We have seen the reports of more layoffs.
Gary C. Bhojwani: If you want to know exactly what's not going to happen, you should ask me for a prediction. All of that said, I feel like 2025 was a year of significant lack of visibility. And I have to tell you, I still feel that way. I feel like there are so many variables in terms of what could happen with interest rates and geopolitics and so on. I think that it's very difficult. It's always difficult to predict, but I really feel like 2025 and now 2026, during my tenure as running different businesses, these are some of the most lack of visibility I've had as a CEO. Now, all of that said, yes, we have seen the job numbers. We have seen the reports of more layoffs.
Speaker #6: I feel like there are so many variables in terms of what could happen with interest rates and geopolitics and so on. I think that it's very difficult.
Speaker #6: To predict, but I really feel like, in my 25-year tenure running different businesses, these are some of the most significant lack of visibility I've had as a CEO.
Speaker #6: Now, it's always difficult. To all of that said, yes, we have seen the job numbers. We have seen the reports of more layoffs. That typically helps us on the recruiting side, but that, of course, makes consumers more afraid and more reticent to engage in discretionary purchases.
Gary C. Bhojwani: That typically helps us on the recruiting side, but that, of course, makes consumers more afraid and more reticent to engage in discretionary purchases. So what does that mean? It means our agent counts may go up. It means that things like Medicare supplements, which are typically a little bit more immune to economic cycles, those sales should still be reasonable. But other discretionary sales, such as annuities, life, and long-term care, I think get more difficult when the macro environment gets tougher. All that said, we've continued to work through it. And I think it's really important to remember that no matter what's happening in the economy, there's still 11,000 folks turning 65 every day, and those folks still have an absence of alternatives in terms of long-term planning and so on. So that represents the opportunity for us, but the pressure is definitely growing.
Gary C. Bhojwani: That typically helps us on the recruiting side, but that, of course, makes consumers more afraid and more reticent to engage in discretionary purchases. So what does that mean? It means our agent counts may go up. It means that things like Medicare supplements, which are typically a little bit more immune to economic cycles, those sales should still be reasonable. But other discretionary sales, such as annuities, life, and long-term care, I think get more difficult when the macro environment gets tougher. All that said, we've continued to work through it. And I think it's really important to remember that no matter what's happening in the economy, there's still 11,000 folks turning 65 every day, and those folks still have an absence of alternatives in terms of long-term planning and so on. So that represents the opportunity for us, but the pressure is definitely growing.
Speaker #6: So what does that mean? It means our agent counts may go up. It means that things like Medicare supplements, which are typically a little bit more immune to economic cycles, those sales should still be—long-term care, I think, gets more difficult when the macro environment gets tougher.
Speaker #6: All that said, we've continued to work through it. And I think it's really important to remember that no matter what's happening in the economy, there's still 11,000 folks turning 65 every day.
Speaker #6: They have an absence of alternatives in terms of long-term planning and so on. So, that represents the opportunity for us, but the pressure is definitely growing.
Speaker #6: The headwinds are—and those folks are still definitely growing. Was that the type of detail you were looking for, or...
Gary C. Bhojwani: The headwinds are definitely growing. Was that the type of detail you were looking for, or is there something I missed?
Gary C. Bhojwani: The headwinds are definitely growing. Was that the type of detail you were looking for, or is there something I missed?
Speaker #6: Is there something I missed? No, no.
[Analyst] (Jefferies): No, no, no. That's great. And if I could just sneak one more in, Paul, I think you mentioned on the last call it was sort of reasonable to assume sort of a one Bermuda transaction a year. I just want to make sure that's right and that there's no change in that kind of thinking high level.
[Analyst] (Jefferies): No, no, no. That's great. And if I could just sneak one more in, Paul, I think you mentioned on the last call it was sort of reasonable to assume sort of a one Bermuda transaction a year. I just want to make sure that's right and that there's no change in that kind of thinking high level.
Speaker #4: There's—that's right, and there's no change in that kind.
Speaker #4: of thinking, high
Paul McDonough: Yeah. So, Suneet, I guess I'd say that we're very pleased to have completed our second treaty in Q4 of last year. We continue to work to further grow our Bermuda operation, but we won't share any specific plans so as not to get ahead of the regulatory review process. Our guidance does not contemplate any additional treaties beyond the two already in place, for 2026. But I think, as I said last time, the cadence we've been on should be a decent indication of the cadence going forward.
Paul McDonough: Yeah. So, Suneet, I guess I'd say that we're very pleased to have completed our second treaty in Q4 of last year. We continue to work to further grow our Bermuda operation, but we won't share any specific plans so as not to get ahead of the regulatory review process. Our guidance does not contemplate any additional treaties beyond the two already in place, for 2026. But I think, as I said last time, the cadence we've been on should be a decent indication of the cadence going forward.
Speaker #3: Pleased to have completed our second treaty in Q4 of last year. We continue to work to further grow our Bermuda.
Speaker #3: Operation. But we won't share any specific plans so as not to get ahead of the regulatory review process. Our guidance does not contemplate any additional treaties beyond the two already in place for 2026.
Speaker #3: But I think, as I said last time, the cadence we've been on should be a decent indication of the cadence going forward.
Speaker #4: Okay, thanks. Sunit, I agree with you.
[Analyst] (Jefferies): Okay. Thanks.
[Analyst] (Jefferies): Okay. Thanks.
Gary C. Bhojwani: Suneet, I agree with Paul's comments. I would just like to emphasize one point. We enjoy really good relationships with the regulators there, and frankly, in the US as well. And I think part of the reason we have those good relationships is because we're very respectful of their process. We never want to make any predictions that would seem like we're getting ahead of them or their processes. And that's why we don't build those types of things into our projections. We will be working to do what makes sense and what's smart and so on, but we also want to be respectful of the regulatory process.
Gary C. Bhojwani: Suneet, I agree with Paul's comments. I would just like to emphasize one point. We enjoy really good relationships with the regulators there, and frankly, in the US as well. And I think part of the reason we have those good relationships is because we're very respectful of their process. We never want to make any predictions that would seem like we're getting ahead of them or their processes. And that's why we don't build those types of things into our projections. We will be working to do what makes sense and what's smart and so on, but we also want to be respectful of the regulatory process.
Speaker #6: Paul's comments: I would just like to emphasize one point. We enjoy really good relationships with the regulators there, and frankly, in the US as well.
Speaker #6: I think part of the reason we have those good relationships is because we're very respectful of their process. We never want to make any predictions that would seem like we're getting ahead of them or their processes.
Speaker #6: And that’s why we don’t build those types of things into our projections. We will be working to do what makes sense and what’s smart and so on, but we also want to be respectful of the regulatory—
Speaker #6: process. Okay.
[Analyst] (Jefferies): Okay. Makes sense. Thanks.
[Analyst] (Jefferies): Okay. Makes sense. Thanks.
Speaker #4: Makes sense.
Speaker #4: Thanks. Your next question comes from Adam Auvil.
Operator: Your next question comes from Wilma Burdis at Raymond James. Please go ahead.
Operator: Your next question comes from Wilma Burdis at Raymond James. Please go ahead.
Speaker #1: Wilma Burdus at Raymond James. Please go ahead.
[Analyst] (Raymond James): Growth in 2025 was strong at kind of high single digits or maybe, I guess, low double digits, but realize this has been a result of multiple years, Gary, that you've been focused on positioning the business for growth. But is this a sustainable level? Anything unusual in 2025? Or I suppose there could even be some upside, right, with Medicare Advantage issues, tech investments, that kind of thing. So maybe just give us some color. Thanks.
[Analyst] (Raymond James): Growth in 2025 was strong at kind of high single digits or maybe, I guess, low double digits, but realize this has been a result of multiple years, Gary, that you've been focused on positioning the business for growth. But is this a sustainable level? Anything unusual in 2025? Or I suppose there could even be some upside, right, with Medicare Advantage issues, tech investments, that kind of thing. So maybe just give us some color. Thanks.
Speaker #7: '25 was strong at kind of high single-digit Of course, in or maybe even I guess low double digits, but realize this has been a result of multiple years Gary that you've been focused on positioning the business for growth.
Speaker #7: But is this a sustainable level? Anything unusual in 2025—or, I suppose there could even be some upside, right? With Medicare Advantage issues? Tech investments?
Speaker #7: That kind of thing. So maybe just give us some color. Thanks.
Speaker #5: Yeah. I think the easiest way to answer your question, Wilma, is probably to give you a little bit of a field product-by-product. I think that we would expect down because of what's happening in our Medicare Advantage sales to go marketplace.
Paul McDonough: Yeah. I think the easiest way to answer your question, Wilma, is probably to give you a little bit of a feel product by product. I think that we would expect our Medicare Advantage sales to go down because of what's happening in the marketplace. That really has nothing to do with CNO. It's just what's going on in the marketplace. Similarly, I would expect our Medicare supplement sales to continue to go up. That volume, those 11,000 seniors that are turning 65 every day, more of them are going to be buying Medicare supplements than historically have. In terms of some of the other products, it starts to get harder to predict. If you think about some of the comments I made with Suneet, depending on what's happening with the macroeconomic conditions, that's really going to impact the discretionary purchases that the consumers make.
Paul McDonough: Yeah. I think the easiest way to answer your question, Wilma, is probably to give you a little bit of a feel product by product. I think that we would expect our Medicare Advantage sales to go down because of what's happening in the marketplace. That really has nothing to do with CNO. It's just what's going on in the marketplace. Similarly, I would expect our Medicare supplement sales to continue to go up. That volume, those 11,000 seniors that are turning 65 every day, more of them are going to be buying Medicare supplements than historically have. In terms of some of the other products, it starts to get harder to predict. If you think about some of the comments I made with Suneet, depending on what's happening with the macroeconomic conditions, that's really going to impact the discretionary purchases that the consumers make.
Speaker #5: That really has nothing to do with C&O. It's just what's going on in the marketplace. Similarly, I would expect our Medicare supplement sales to continue to go up.
Speaker #5: That volume, those 11,000 seniors that are turning 65 every day, historically have. In terms of some, more of them are going to be buying Medicare Supplement than of the other products, it starts to get harder to predict.
Speaker #5: If you think about some of the comments I made with Sunit, depending on what's happening with the macroeconomic conditions, that's really going to impact the discretionary purchases that the consumers make.
Speaker #5: Now, we've been able to continue to work right through all of those. Again, we've really had the demographic tailwinds that have helped us. But if we see increased headwinds, if there are really a lot more layoffs like we've seen early signs of, that's going to slow down discretionary purchases.
Paul McDonough: Now, we've been able to continue to work right through all of those. Again, we've really had the demographic tailwinds that have helped us. But if we see increased headwinds, if there are really a lot more layoffs like we've seen early signs of, that's going to slow down discretionary purchases, and we will inevitably be impacted by that. All in all, we remain pretty comfortable with the guidance that we've provided in terms of ROE and earnings and so on. It might be that we get more in one product and less in another, but we feel pretty good about the guidance we've provided. We do acknowledge that there's some macroeconomic headwinds coming.
Paul McDonough: Now, we've been able to continue to work right through all of those. Again, we've really had the demographic tailwinds that have helped us. But if we see increased headwinds, if there are really a lot more layoffs like we've seen early signs of, that's going to slow down discretionary purchases, and we will inevitably be impacted by that. All in all, we remain pretty comfortable with the guidance that we've provided in terms of ROE and earnings and so on. It might be that we get more in one product and less in another, but we feel pretty good about the guidance we've provided. We do acknowledge that there's some macroeconomic headwinds coming.
Speaker #5: And we will inevitably be impacted by that. All in all, we remain pretty comfortable with the guidance that we've provided. In terms of ROE and earnings and so on, it might be that we get more in one product and less in another, but we feel pretty good about the guidance we've provided.
Speaker #5: We do acknowledge that there's some macroeconomic headwinds coming.
Speaker #7: You. And on Medicare Advantage distribution fees? I think that there's some actuarial component there that's based on the churn. Could you help us think through any impact? We've all heard about Medicare Advantage, some of the issues there.
[Analyst] (Raymond James): Thank you. And then could you help us think through any impacts on Medicare Advantage distribution fees? I think that there's some actuarial component there that's based on the churn. And we've all heard about Medicare Advantage and some of the issues there. Realize that those underwriting issues don't apply to you guys, but could impact the churn. Is that reflected in the 2026 outlook? And maybe if you can give us any additional color. Thanks.
[Analyst] (Raymond James): Thank you. And then could you help us think through any impacts on Medicare Advantage distribution fees? I think that there's some actuarial component there that's based on the churn. And we've all heard about Medicare Advantage and some of the issues there. Realize that those underwriting issues don't apply to you guys, but could impact the churn. Is that reflected in the 2026 outlook? And maybe if you can give us any additional color. Thanks.
Speaker #7: I realize that those underwriting issues don't apply to you guys, but they could impact the churn. Is that reflected in the '26 outlook? And maybe, if you can, give us any additional color.
Speaker #7: Thanks.
Paul McDonough: Yeah. We have reflected. I'm sorry. This is Gary. We have reflected what we're expecting to see in terms of the volume on Medicare Advantage in our projections. I would expect there will continue to be pressure there. It's hard to know whether the carriers are going to focus on compensation or they're going to focus on paring back benefits or what other things they're going to do as they go through the process. All of that said, I think the bottom line is Medicare Advantage is going to have some very significant headwinds. And that's another reason we feel good about our model, where those consumers that want it, they can get it from us, but we are definitely more focused on Medicare supplement, and we like the Medicare supplement better.
Paul McDonough: Yeah. We have reflected. I'm sorry. This is Gary. We have reflected what we're expecting to see in terms of the volume on Medicare Advantage in our projections. I would expect there will continue to be pressure there. It's hard to know whether the carriers are going to focus on compensation or they're going to focus on paring back benefits or what other things they're going to do as they go through the process. All of that said, I think the bottom line is Medicare Advantage is going to have some very significant headwinds. And that's another reason we feel good about our model, where those consumers that want it, they can get it from us, but we are definitely more focused on Medicare supplement, and we like the Medicare supplement better.
Speaker #5: Enjoy reflected—I'm sorry. This is Gary. We have reflected what we're expecting to see in terms of the volume on Medicare Advantage in our projections.
Speaker #5: I would expect there will continue to be pressure. Yeah. We—there—it's hard to know whether the carriers are going to focus on compensation, or they're going to focus on paring back benefits, or what other things they're going to do as they go through the process.
Speaker #5: All of that said, I think the bottom line is Medicare Advantage is going to have some very significant headwinds, and that's another reason we feel good about our model. Where those consumers that want it, they can get it from us, but we are definitely more focused on Medicare supplement, and we like the Medicare supplement better.
Speaker #7: Okay. Thank you.
[Analyst] (Raymond James): Okay. Thank you.
[Analyst] (Raymond James): Okay. Thank you.
Speaker #1: Your next question comes from Jack Mattan of BMO Capital Markets. Please go ahead.
Operator: Your next question comes from Jack McMullen of BMO Capital Markets. Please go ahead.
Operator: Your next question comes from Jack McMullen of BMO Capital Markets. Please go ahead.
Speaker #1: ahead. Hi.
Speaker #8: Good morning. Let me just ask one on capital deployment. I guess, given you ended the year with about $200 million above your holding company target, are you thinking you'll bring that down closer to your target level by the end of this year?
[Analyst] (BMO Capital Markets): Hi. Good morning. Maybe just one on capital deployment, I guess, given the end of the year with about $200 million above your holding company target. I guess, are you thinking you'll bring that down closer to your target level by the end of this year? And any perspective or thoughts on potential uses of cash would be helpful.
[Analyst] (BMO Capital Markets): Hi. Good morning. Maybe just one on capital deployment, I guess, given the end of the year with about $200 million above your holding company target. I guess, are you thinking you'll bring that down closer to your target level by the end of this year? And any perspective or thoughts on potential uses of cash would be helpful.
Speaker #8: And any perspective or thoughts on potential uses of cash would be helpful.
Speaker #5: Hey, Jack. It's Paul. I would just emphasize that there's really been no change in how we think about deploying capital. On the margin, we return it to shareholders through share repurchases.
Paul McDonough: Hey, Jack. It's Paul. I would just emphasize that there's really been no change in how we think about deploying capital. On the margin, we return it to shareholders through share repurchases, absent more compelling alternatives. We also think there's some wisdom to being somewhat measured in how quickly we take down the excess. So without providing specific guidance, I think past practice here should be a good indication of our future behavior.
Paul McDonough: Hey, Jack. It's Paul. I would just emphasize that there's really been no change in how we think about deploying capital. On the margin, we return it to shareholders through share repurchases, absent more compelling alternatives. We also think there's some wisdom to being somewhat measured in how quickly we take down the excess. So without providing specific guidance, I think past practice here should be a good indication of our future behavior.
Speaker #5: Absent more compelling alternatives, we also think there's some wisdom to being somewhat measured in how quickly we take down the excess. So, without providing specific guidance, I think past practice here should be a good indication of our future.
Speaker #5: behavior. Got it.
[Analyst] (BMO Capital Markets): Got it. Thanks. Maybe just on the unallocated NII, I know there's a lot of things that go into that bucket, but wondering if there's any kind of directional outlook you can provide for that line? I mean, I know you called out a $12 million special dividend. If we back that out, is that something close to a normal run rate that you'd expect?
[Analyst] (BMO Capital Markets): Got it. Thanks. Maybe just on the unallocated NII, I know there's a lot of things that go into that bucket, but wondering if there's any kind of directional outlook you can provide for that line? I mean, I know you called out a $12 million special dividend. If we back that out, is that something close to a normal run rate that you'd expect?
Speaker #8: Thanks. And maybe just on the unallocated and II, I know there's a lot of things that go into that bucket, but wondering if there's any kind of directional outlook you can provide for that line.
Speaker #8: I guess, I mean, I know you cut out a $12 million special dividend. If we back that out, is that something close to a normal run rate that you'd—
Speaker #8: expect? Yeah.
Paul McDonough: Yeah. I would point you, Jack, to the detail in the supplement that breaks down what flows through NII not allocated. Certainly, the dividend in the fourth quarter of this year and the fourth quarter of last year is sort of off-trend and not something that we expect to be repeated. We may see more of that, but it's not kind of run rate. The one thing that's fairly volatile has been, at least the last few years, is the income from ALTS. And certainly, the sequential trend has been good there over the last few quarters, particularly in the fourth quarter of this year where the yield was actually slightly better than our long-term run rate of sort of 8 to 9, something in that range.
Paul McDonough: Yeah. I would point you, Jack, to the detail in the supplement that breaks down what flows through NII not allocated. Certainly, the dividend in the fourth quarter of this year and the fourth quarter of last year is sort of off-trend and not something that we expect to be repeated. We may see more of that, but it's not kind of run rate. The one thing that's fairly volatile has been, at least the last few years, is the income from ALTS. And certainly, the sequential trend has been good there over the last few quarters, particularly in the fourth quarter of this year where the yield was actually slightly better than our long-term run rate of sort of 8 to 9, something in that range.
Speaker #5: I would point to Jack to the detail in the supplement that breaks down what flows through NII not allocated. Certainly, the dividend in the fourth quarter of this year and the fourth quarter of last year is sort of off-trend and not something that we expect to be repeated.
Speaker #5: We may see more of that, but it's not kind of run rate. The one thing volatile has been, at least that's fairly consistent the last few years, is the income from alts.
Speaker #5: And certainly, the sequential trend has been good there over the last few quarters, particularly in the fourth quarter of this year, where the yield was actually slightly better than our long-term run rate, sort of in that range.
Speaker #5: So I wouldn't necessarily predict how that's going to play out over the next four quarters, but our guidance does presume that it's generating that long-term return.
Paul McDonough: So I wouldn't necessarily predict how that's going to play out over the next four quarters, but our guidance does presume that it's generating that long-term return.
Paul McDonough: So I wouldn't necessarily predict how that's going to play out over the next four quarters, but our guidance does presume that it's generating that long-term return.
Speaker #8: Got it. And I guess one more kind of follow-up on the Medicare dynamics. I know for Medicare Supplement, you capture both distribution and the writing economics.
[Analyst] (BMO Capital Markets): Got it. And if I could just take one more and kind of a follow-up on the Medicare dynamics. I know for Medicare supplement, you capture both distribution and maybe underwriting economics. I guess, is that then more or less or the same on an ROE basis versus Medicare Advantage where you really are only capturing the distribution economics of that? Just wondering how you think about how that plays into your financials and ROE profile.
[Analyst] (BMO Capital Markets): Got it. And if I could just take one more and kind of a follow-up on the Medicare dynamics. I know for Medicare supplement, you capture both distribution and maybe underwriting economics. I guess, is that then more or less or the same on an ROE basis versus Medicare Advantage where you really are only capturing the distribution economics of that? Just wondering how you think about how that plays into your financials and ROE profile.
Speaker #8: I guess, is that then more, or less, or the same on an ROE basis versus Medicare Advantage, where you really are only capturing the distribution economics of that?
Speaker #8: Just wondering how you think about how that plays into your financials and ROE profile.
Speaker #5: Yeah, economically, frankly, we're indifferent. There are pros and cons to each. As an example, with the Medicare Advantage, you get to recognize the income sooner, as an example.
Gary C. Bhojwani: Yeah. Economically, frankly, we're indifferent. There are pros and cons to each. As an example, with the Medicare Advantage, you get to recognize the income sooner, as an example. But the high-level thing you should take away is economically, we're really indifferent, and we've designed it that way intentionally. All that said, operationally, I have a strong preference for the Medicare supplement, number one, because we manufacture it and distribute it, so we control the entire chain, if you will. So that isn't an economic commentary. That's just about the business. Second, typically, not always, but typically, Medicare supplement consumers tend to be of higher net worth, and they tend to have a greater ability to buy other products. Now, I want to emphasize with that, there are some really strict rules about how you can market to consumers when you have a Medicare relationship and so on.
Gary C. Bhojwani: Yeah. Economically, frankly, we're indifferent. There are pros and cons to each. As an example, with the Medicare Advantage, you get to recognize the income sooner, as an example. But the high-level thing you should take away is economically, we're really indifferent, and we've designed it that way intentionally. All that said, operationally, I have a strong preference for the Medicare supplement, number one, because we manufacture it and distribute it, so we control the entire chain, if you will. So that isn't an economic commentary. That's just about the business. Second, typically, not always, but typically, Medicare supplement consumers tend to be of higher net worth, and they tend to have a greater ability to buy other products. Now, I want to emphasize with that, there are some really strict rules about how you can market to consumers when you have a Medicare relationship and so on.
Speaker #5: But the high-level thing you should take away is, economically, we're really indifferent. And we've designed it that way intentionally. All that said, operationally, I have a strong preference for the Medicare supplement, number one, because we manufacture it and distribute it, so we control the entire chain, if you will.
Speaker #5: So, that isn't an economic commentary. That's just about the business. Second, typically—not always, but typically—Medicare Supplement consumers tend to be of higher net worth, and they tend to have a greater ability to buy other products.
Speaker #5: Now, I want to emphasize that there are some really strict rules about how you can market to consumers when you have a Medicare relationship, and so on.
Speaker #5: We, of course, follow all of those rules, so I don't want that to get misinterpreted. But the bottom line is, in the context of those consumers that have a Medicare Supplement—because they typically have a greater net worth and typically have a greater interest in talking to us about other products as well.
Gary C. Bhojwani: We, of course, follow all of those rules, so I don't want that to get misinterpreted. But the bottom line is, in the context of those rules, we do better with consumers that have a Medicare supplement because they typically have a greater net worth and typically have a greater interest in talking to us about other products as well. So that's the reason for the preference.
Gary C. Bhojwani: We, of course, follow all of those rules, so I don't want that to get misinterpreted. But the bottom line is, in the context of those rules, we do better with consumers that have a Medicare supplement because they typically have a greater net worth and typically have a greater interest in talking to us about other products as well. So that's the reason for the preference.
Speaker #5: So that's the reason for the
Speaker #5: preference. That's helpful.
[Analyst] (BMO Capital Markets): That's helpful. Thank you.
[Analyst] (BMO Capital Markets): That's helpful. Thank you.
Speaker #8: Thank you.
Speaker #1: A reminder: If you would like to ask a question, please press star one on your telephone keypad. Your next question comes from Will Maburdus at Raymond James.
Operator: A reminder, if you would like to ask a question, please press star 1 on your telephone keypad. Your next question comes from Wilma Burdis at Raymond James. Please go ahead.
Operator: A reminder, if you would like to ask a question, please press star 1 on your telephone keypad. Your next question comes from Wilma Burdis at Raymond James. Please go ahead.
Speaker #1: Please go
Speaker #1: ahead.
Speaker #7: Hey, thanks for
[Analyst] (Raymond James): Hey. Thanks for letting me back in. Just a couple for you. Are you seeing any dynamics in the investment universe that might influence a shift in allocations to higher yielding assets in order to just continue to give a good yield given proper risk management with interest rate decreases and ongoing tight spreads?
[Analyst] (Raymond James): Hey. Thanks for letting me back in. Just a couple for you. Are you seeing any dynamics in the investment universe that might influence a shift in allocations to higher yielding assets in order to just continue to give a good yield given proper risk management with interest rate decreases and ongoing tight spreads?
Speaker #7: Letting me back in. Just a couple for you. Are you seeing any dynamics in the investment universe that might influence the shift in allocations to higher-yielding assets in order to just continue to give a good yield, given proper risk management with interest rate decreases and ongoing tight spreads?
Paul McDonough: Wilma, thanks for the question. Eric, I'd invite you to offer your perspective on that. We may have lost Eric.
Paul McDonough: Wilma, thanks for the question. Eric, I'd invite you to offer your perspective on that. We may have lost Eric.
Speaker #8: Question, Eric. I'd invite you—well, thanks for the— to offer your perspective on that.
Speaker #2: I think Eric said 'technical difficulties.'
[Analyst] (Jefferies): I think Eric's having some technical difficulties. Yeah.
[Analyst] (Jefferies): I think Eric's having some technical difficulties. Yeah.
Speaker #2: Yeah.
Speaker #8: Yeah. Just one
Paul McDonough: Yeah.
Paul McDonough: Yeah.
Operator: Just one moment while we add Eric.
Operator: Just one moment while we add Eric.
Speaker #1: Moment while we add Eric. One moment, please.
Operator: One moment while we add Eric.
Operator: One moment while we add Eric.
Speaker #8: All right. Oh, you—we add Eric. Got me now? There we go. All right. Thank you. Thank you, Wilma. Sorry for the back and forth.
[Company Representative] (CNO Financial Group): All right.
[Company Representative] (CNO Financial Group): All right.
Paul McDonough: Oh, you got me now? There we go.
Paul McDonough: Oh, you got me now? There we go.
[Company Representative] (CNO Financial Group): There we go.
[Company Representative] (CNO Financial Group): There we go.
Paul McDonough: All right. Thank you.
Paul McDonough: All right. Thank you.
[Company Representative] (CNO Financial Group): All right. Thank you.
[Company Representative] (CNO Financial Group): All right. Thank you.
Paul McDonough: Thank you, Wilma. Sorry for the back and forth. I think right now, we're largely running back what we did for the second half of last year, which was pretty successful, which was largely around sustaining good portfolio quality, supplemented with some small tactical add-ins around the edges that really produce some yield in the portfolio. I would not expect us to be changing necessarily our risk parameters currently. I don't think your spreads continue to be very tight. I don't think there's a particular space right now where you're being rewarded for that. That would include the software space. That would include the BDC space as well. Very closely monitoring those areas for opportunities should it arise, but currently, don't think the valuations have cheapened enough to attract our money.
Paul McDonough: Thank you, Wilma. Sorry for the back and forth. I think right now, we're largely running back what we did for the second half of last year, which was pretty successful, which was largely around sustaining good portfolio quality, supplemented with some small tactical add-ins around the edges that really produce some yield in the portfolio. I would not expect us to be changing necessarily our risk parameters currently. I don't think your spreads continue to be very tight. I don't think there's a particular space right now where you're being rewarded for that. That would include the software space. That would include the BDC space as well. Very closely monitoring those areas for opportunities should it arise, but currently, don't think the valuations have cheapened enough to attract our money.
Speaker #8: I think right now we're largely running back what we did for the second half of last year, which was pretty successful. Which was largely around sustaining good portfolio quality, supplemented with some small tactical add-ins around the edges that really produce some yield in the portfolio.
Speaker #8: I would not expect us to be changing necessarily our risk parameters currently. I don't think we're—spreads continue to be very tight. I don't know where you're being rewarded for—I think there's a particular space, right, that—
Speaker #8: That would include the software space. That would include the BDC space as well. Very closely monitoring those areas for the opportunity should it arise.
Speaker #8: But currently, I don't think the valuations have cheapened enough to attract our money. So, running it back, I feel good about how things are trending right now.
Paul McDonough: So, running it back, feel good about how things are trending right now, and it'll take a little bit more juice in the orange for us to change that.
Paul McDonough: So, running it back, feel good about how things are trending right now, and it'll take a little bit more juice in the orange for us to change that.
Speaker #8: And it'll take a little bit more juice in the orange for us to change.
Speaker #8: that.
Speaker #7: Thank
Speaker #7: You. And thanks, Eric. Jumping back on. And then just one last one. Is there any elevated sales benefit that you're seeing from annuities products as a result of the increased health sales?
[Analyst] (Raymond James): Thank you. And thanks, Eric. Jumping back on. And then just one last one. Is there any elevated sales benefit that you're seeing from annuities products as a result of the increased health sales, specifically in Medicare supplement, or is it just kind of normal course growth? Thanks.
[Analyst] (Raymond James): Thank you. And thanks, Eric. Jumping back on. And then just one last one. Is there any elevated sales benefit that you're seeing from annuities products as a result of the increased health sales, specifically in Medicare supplement, or is it just kind of normal course growth? Thanks.
Speaker #7: Specifically in Medicare supplement, or is it just kind of normal course growth?
Speaker #7: Thanks. I think
Gary C. Bhojwani: I think it's mainly normal course growth. Now, that said, we had really strong Medicare supplement sales, and that, of course, helped us. Consistent with my earlier comments, the Medicare supplement consumers typically have a better cross-sell ratio for us, again, within the context of following all the rules that are out there. So we benefit from that. But in terms of that ratio growing where there was a greater level of cross-sale, I wouldn't say so. No.
Gary C. Bhojwani: I think it's mainly normal course growth. Now, that said, we had really strong Medicare supplement sales, and that, of course, helped us. Consistent with my earlier comments, the Medicare supplement consumers typically have a better cross-sell ratio for us, again, within the context of following all the rules that are out there. So we benefit from that. But in terms of that ratio growing where there was a greater level of cross-sale, I wouldn't say so. No.
Speaker #5: It's mainly normal course growth. Now, that said, we had really strong Medicare supplement sales, and that, of course, helped us, consistent with my earlier comments.
Speaker #5: The Medicare supplement consumers typically have a better cross-sell ratio for us. Again, within the context of following all the rules that are out there.
Speaker #5: So we benefit from that. But in terms of that ratio growing—where there was a greater level of cross-sell—I wouldn't say so, no.
Speaker #7: Thank
Speaker #7: you. Your next
[Analyst] (Raymond James): Thank you.
[Analyst] (Raymond James): Thank you.
Operator: Your next question comes from John Barnidge from Piper Sandler. Please go ahead.
Operator: Your next question comes from John Barnidge from Piper Sandler. Please go ahead.
Speaker #1: The question comes from John Barnage from Piper Sandler. Please go ahead.
Speaker #1: ahead. Good
Speaker #10: Morning. Thanks for the opportunity. My first question is sticking with the investment portfolio. What's the exposure to software in the investment portfolio, how do you broadly define that?
[Analyst] (Piper Sandler): Good morning. Thanks for the opportunity. My first question is sticking with investment portfolio. What's the exposure to software in the investment portfolio as you broadly define it? As you broadly define it?
[Analyst] (Piper Sandler): Good morning. Thanks for the opportunity. My first question is sticking with investment portfolio. What's the exposure to software in the investment portfolio as you broadly define it? As you broadly define it?
Speaker #8: Good morning, John. This is Eric. Hopefully, you can hear me. My first go-around. This, for us, I think, will be an opportunity if it arises—certainly not a problem.
Paul McDonough: Good morning, John. This is Eric. Hopefully, you can hear me on my first go-around. This for us, I think, will be an opportunity. If it arises, certainly not a problem. I'm old enough to remember Polaroid and Kodak. And so software has always been a business that's been susceptible to disruption. That's not something I'm learning this year. I've known it for a really long time. That's informed how we've allocated to the space. Currently, we have roughly $250 million of software exposure. That's about 60, 70 basis points. It's a pretty small number. Strong tilt towards software that serves enterprises rather than small businesses or consumers. Within that, rather, strong preference for mission-critical software, systems of record, proprietary data, repositories, and cybersecurity. So I think we are positioned from strength. And if the market rewards some risk-taking in this area, I think we'll be prepared for it.
Paul McDonough: Good morning, John. This is Eric. Hopefully, you can hear me on my first go-around. This for us, I think, will be an opportunity. If it arises, certainly not a problem. I'm old enough to remember Polaroid and Kodak. And so software has always been a business that's been susceptible to disruption. That's not something I'm learning this year. I've known it for a really long time. That's informed how we've allocated to the space. Currently, we have roughly $250 million of software exposure. That's about 60, 70 basis points. It's a pretty small number. Strong tilt towards software that serves enterprises rather than small businesses or consumers. Within that, rather, strong preference for mission-critical software, systems of record, proprietary data, repositories, and cybersecurity. So I think we are positioned from strength. And if the market rewards some risk-taking in this area, I think we'll be prepared for it.
Speaker #8: I'm old enough to remember Polaroid and Kodak. And so, software has always been a business that's been susceptible—not something I'm learning this year.
Speaker #8: I've known it for a really long time. That's informed how we've allocated to the space. Currently, we have roughly $250 million of software exposure to disruption.
Speaker #8: That's about 60 or 70 basis points—a pretty small number. There's a strong tilt toward software that serves enterprises, rather than small businesses or consumers. Within that, there's a strong preference for mission-critical software: systems of record, proprietary data repositories, and cybersecurity.
Speaker #8: So, I think we are positioned from strength, and if the market rewards some risk-taking in this area, I think we'll be prepared for it.
Speaker #8: Broadening out my answer for you, John, if you looked into our alternatives portfolio, somewhat similar answer in private credit, which is about a $1.4 billion allocation.
Paul McDonough: Broadening out my answer for you, John, if you looked into our alternatives portfolio, somewhat similar answer in private credit, which is about $1.4 billion allocation. It's less than 10% of that would be exposed to software. And within that, it's very little of its direct lending. The great bulk of it is in structured form, which means it has good credit support and is margined and all that stuff. So we've got strong cushions there. In PE, it's about 15% of our PE holdings, which is $400+ million. So 15% of that, you can do the math, about $70 million. And so I think that if you got a big drawdown or bigger than where we've currently experienced, at least in PE or even in private credit, you could, I think, dampen alternatives' returns, but I don't think you would destroy alternatives' returns.
Paul McDonough: Broadening out my answer for you, John, if you looked into our alternatives portfolio, somewhat similar answer in private credit, which is about $1.4 billion allocation. It's less than 10% of that would be exposed to software. And within that, it's very little of its direct lending. The great bulk of it is in structured form, which means it has good credit support and is margined and all that stuff. So we've got strong cushions there. In PE, it's about 15% of our PE holdings, which is $400+ million. So 15% of that, you can do the math, about $70 million. And so I think that if you got a big drawdown or bigger than where we've currently experienced, at least in PE or even in private credit, you could, I think, dampen alternatives' returns, but I don't think you would destroy alternatives' returns.
Speaker #8: We probably have—it's less than 10% of that—that would be exposed to software. And within that, very little of it is direct lending. The great bulk of it is in structured form, which means it has good credit support and is margined and all that stuff.
Speaker #8: So we've got strong cushions there. In PE, it's about 15% of our PE holdings, which is $400-plus million. So 15% of that—you can do the math.
Speaker #8: About $70 million. And so, I think that if you've got a big drawdown—or bigger than what we've currently experienced, at least—in PE or even in private credit, you could, I think, dampen alternatives returns, but I don't think you would destroy alternatives returns.
Speaker #8: So, I think on balance, we're in a good spot. And I think we have the ability and the partners to take advantage of opportunities that emerge, and I think I'll leave it there, but happy to amplify on anything you would.
Paul McDonough: So I think on balance, we're in a good spot, and I think we have the ability and the partners to take advantage of opportunities as they emerge. And I think I'll leave it there, but happy to amplify on anything you would like. Thanks for that, Eric. It was very helpful. My next question for Gary: if we talk about, I think it was, 11,000 people turn 65 a day now. You've certainly positioned yourself to take advantage of this secular dynamic for quite some time with recruitment and productivity. But I'm trying to better understand how we see this 11,000 moving to 12,000 and when it goes back down to 10,000. How long did it take us to get here from 10 to 11? And can you talk about your product positioning and the lifecycle of these individuals turning 65?
Paul McDonough: So I think on balance, we're in a good spot, and I think we have the ability and the partners to take advantage of opportunities as they emerge. And I think I'll leave it there, but happy to amplify on anything you would like. Thanks for that, Eric. It was very helpful. My next question for Gary: if we talk about, I think it was, 11,000 people turn 65 a day now. You've certainly positioned yourself to take advantage of this secular dynamic for quite some time with recruitment and productivity. But I'm trying to better understand how we see this 11,000 moving to 12,000 and when it goes back down to 10,000. How long did it take us to get here from 10 to 11? And can you talk about your product positioning and the lifecycle of these individuals turning 65?
Speaker #8: like. Thanks for that, Eric.
Speaker #10: It was very helpful. My next question for Gary. If we talk about—I think it was 11,000 people turning 65 a day now—you've certainly positioned yourself to take advantage of this secular dynamic for quite some time with recruitment and productivity.
Speaker #10: But I'm trying to better understand how we see this 11,000 moving to 12,000 and when it goes back down to 10,000. How long did it take us to get here from 10,000 to 11,000?
Speaker #10: And can you talk about your product positioning in the life cycle of these individuals turning 65 to turning 75? Thank you.
[Company Representative] (CNO Financial Group): Thank you. Yeah. Thanks, John. John, sorry, I'm getting it. A lot of echo. I'm getting it. A couple of comments. I believe we hit the peak. It's either 2030 or 2035 when the number of folks turning 65 starts to go down again. So we're within 5 to 10 years of that peak number, if memory serves correctly, but we expect it to grow or hold stable until then. And even when it starts to come down, it's not like it's going to go from 11,000 down to 2,000. It's going to gradually reduce again, so still represent a very significant opportunity for us. A very significant opportunity for us.
[Company Representative] (CNO Financial Group): Thank you. Yeah. Thanks, John. John, sorry, I'm getting it. A lot of echo. I'm getting it. A couple of comments. I believe we hit the peak. It's either 2030 or 2035 when the number of folks turning 65 starts to go down again. So we're within 5 to 10 years of that peak number, if memory serves correctly, but we expect it to grow or hold stable until then. And even when it starts to come down, it's not like it's going to go from 11,000 down to 2,000. It's going to gradually reduce again, so still represent a very significant opportunity for us. A very significant opportunity for us.
Speaker #5: Yeah. Thanks, John. Sorry, I'm getting a lot of echo. I'm getting a lot of echo. A couple of comments. I believe we hit the peak.
Speaker #5: It's either 2030 or 2035 when the number of folks turning 65 starts to go down again. So we're within five to ten years of that peak number, if memory serves correctly.
Speaker #5: But we expect it to grow or hold stable until then. And even when it starts, even when down, it's not like it's going to go from 11,000 down to 2,000.
Speaker #5: It's going to gradually reduce again, so it still represents a very significant opportunity for us. So we view this as something that will be there for quite some time.
Paul McDonough: So we view this as something that will be there for quite some time. And regardless of what's happening with Medicare Advantage versus Medicare supplement, the reality is that anyone that turns 65 is going to at least look at these products. So we expect this opportunity to continue for quite some time. Thank you.
Paul McDonough: So we view this as something that will be there for quite some time. And regardless of what's happening with Medicare Advantage versus Medicare supplement, the reality is that anyone that turns 65 is going to at least look at these products. So we expect this opportunity to continue for quite some time. Thank you.
Speaker #5: And regardless of what's happening with Medicare Advantage versus Medicare Supplement, the reality is that anyone that turns 65 is going to at least look at these products.
Speaker #5: So, we expect this opportunity to continue for quite some time.
Speaker #10: Thank you. Eric, I wonder if it might help with that echo if you put yourself on mute.
Paul McDonough: Eric, I wonder if it might help with that echo if you put yourself on mute.
Paul McDonough: Eric, I wonder if it might help with that echo if you put yourself on mute.
Speaker #10: mute. At this
Operator: At this time, there are no further questions. I will now turn the call back to Adam Auvil for closing remarks.
Operator: At this time, there are no further questions. I will now turn the call back to Adam Auvil for closing remarks.
Speaker #1: There are no further questions at this time. I will now turn the call back to Adam Auvil for closing remarks.
Speaker #11: 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.
Adam Auvil: 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.
Adam Auvil: Thank you, operator, and thank you all for participating in today's call. Please reach out to the investor relations team if you have any further questions. Have a great rest of your day.
Speaker #11: Have a great rest of your day.
Speaker #11: Have a great rest of your day. This concludes today's call.
Operator: This concludes today's call. Thank you for attending. You may now disconnect.
Operator: This concludes today's call. Thank you for attending. You may now disconnect.
