CNO Financial Group ((CNO)) has held its Q1 earnings call. Read on for the main highlights of the call.
CNO Financial Group’s recent earnings call painted a picture of cautious optimism, underscored by strong growth in operating earnings and sustained sales momentum across various divisions. While the company celebrated robust investment performance, challenges in revenue recognition for Medicare Advantage and declines in life production tempered the overall sentiment. Nonetheless, the reaffirmed guidance and strategic focus on leveraging business strengths amidst market uncertainties provided a positive outlook.
Strong Operating Earnings Growth
CNO Financial Group reported a significant increase in operating earnings per diluted share, which rose by 52% year-over-year to $0.79. Even when excluding significant items, the earnings per share still showed a robust growth of 42%, reaching $0.74. This impressive performance highlights the company’s ability to enhance profitability amidst a challenging economic environment.
Sustained Sales Momentum
The company marked its 11th consecutive quarter of strong sales momentum, alongside its ninth consecutive quarter of growth in producing agent count. This consistent performance underscores CNO’s effective sales strategies and its ability to maintain a competitive edge in the market.
Annuity and Brokerage Growth
CNO saw a notable increase in annuity collected premiums, which were up by 12%. Account values and premium per policy also experienced growth, rising by 7% and 19% respectively. Additionally, brokerage and advisory client assets increased by 16%, reflecting the company’s strong position in the financial services sector.
Medicare Portfolio Success
The Medicare segment of CNO’s business showed significant growth, with Medicare Supplement New Annualized Premiums (NAP) increasing by 24% and Medicare Advantage policies growing by 42%. This success highlights the company’s effective strategies in capturing market share in the Medicare space.
Worksite Division Growth
CNO’s worksite insurance sales rose by 11%, driven by a 37% increase in critical illness insurance and a 17% rise in life insurance sales. These figures demonstrate the company’s successful expansion in the worksite insurance market.
Investment Performance
Net investment income for CNO grew, supported by a new money rate exceeding 6% for nine consecutive quarters. This resulted in a 16% increase in investment income for the quarter, showcasing the company’s strong investment strategies.
Capital Management
CNO returned $117 million to shareholders and repurchased $100 million of shares, contributing to a 7% reduction in weighted average diluted shares outstanding. This capital management strategy underscores the company’s commitment to delivering value to its shareholders.
Medicare Advantage Revenue Recognition
Despite a 42% increase in Medicare Advantage policies sold, fee income was negatively impacted due to ASC 606 revenue recognition accounting. This challenge highlights the complexities involved in revenue recognition for third-party Medicare Advantage policies.
Life Production Decline
The company experienced a decline in life production, attributed to lower direct-to-consumer leads. This was affected by elevated TV advertising costs and a strategic pullback in marketing spend, which impacted the overall sales in this segment.
Persistency in Long-Term Care
Long-term Care New Annualized Premiums (NAP) were down for the quarter, primarily due to strong comparables from the previous year. This indicates the challenges faced in maintaining growth in this segment.
Equity Market Impact on RBC
The RBC ratio was adversely affected by a $25 million drag due to equity market weakness impacting the statutory accounting for Fixed Indexed Annuities (FIAs). This reflects the sensitivity of the company’s financial metrics to market fluctuations.
Forward-Looking Guidance
CNO Financial Group reaffirmed its guidance for the full year 2025 and its three-year Return on Equity (ROE) targets. The company highlighted its continued strong sales momentum and growth in producing agent compensation. With annuity collected premiums and account values on the rise, and a significant increase in Medicare Advantage and Supplement sales, CNO is poised for continued growth. The company’s investment strategies and capital management efforts further bolster its positive outlook.
In summary, CNO Financial Group’s earnings call conveyed a cautiously optimistic sentiment, driven by strong operating earnings growth and sustained sales momentum. While challenges in revenue recognition and life production were noted, the company’s strategic focus and reaffirmed guidance suggest a promising future. Investors and stakeholders can look forward to CNO’s continued efforts to leverage its strengths and navigate market uncertainties effectively.