CNO Financial Group, Inc. Q3 FY2025 earnings call

• CNO once again delivered a strong quarter, showing the ability to generate consistent and repeatable results and execute on the strategic plan. - Took two actions expected to accelerate operating ROE improvement through 2027 by an additional 50 basis points: execution of a second Bermuda treaty and changes to the Worksite Division's fee services business. - Sales results were excellent with record total new annualized premiums of $125 million, up 26%, and double - digit insurance sales growth in both divisions. - Operating earnings per diluted share were $1.29, up 16%, with earnings benefiting from favorable insurance product margin and solid investment results. - Capital and liquidity remained above target levels, and $76 million was returned to shareholders in the quarter. - In the Consumer Division: life and health NAP had double - digit growth, annuity collected premiums had ninth consecutive quarter of growth, brokerage and advisory had tenth consecutive quarter of growth, and investments in technology enabled customer experience enhancements and operational efficiency. - In the Worksite Division: insurance product sales had 14th consecutive quarter of growth, and the exit of the fee services business was a strategic move to focus on the core insurance business.

CNO delivered a strong quarter. In the Consumer Division, record total new annualized premiums reached $125 million, up 26%, with double - digit growth in life and health NAP. Annuity collected premiums saw a 2% increase for the ninth consecutive quarter, with collected premiums in the quarter totaling nearly $475 million, average account size up 5%, and in - force account values up 8% to exceed $13 billion for the first time. Brokerage and advisory growth was for the 10th consecutive quarter, with client assets in brokerage and advisory up 28% to a new record. In the Worksite Division, insurance product sales achieved another record performance and 14th consecutive quarter of growth. The fee services business, which represented less than 1% of total CNO revenue and contributed a pretax annual loss of approximately $20 million, was exited, with the exit process expected to be substantially complete in the first half of 2026.

• Over the next 5 quarters, the combined impact of exiting the fee services business and the new Bermuda treaty will lead to 50 basis points of incremental operating return on equity over the previous projections for the 2025 - 2027 period. - Revised the operating return on equity target for 2027 to an improvement of 200 basis points, up from the prior target of 150 basis points. - Narrowed the operating earnings per share range to $3.75 to $3.85. - Raised the guidance for excess cash flow to the holding company to a range of $365 million to $385 million, up from $200 million to $250 million.

• The Worksite Division's fee services business did not meet financial performance expectations. - There has been intensified competition with lower cost alternatives and new technologies disrupting the market position of the Worksite Division's fee services business.

Q: Ryan Krueger asked about the strong D2C sales and the $20 million annual earnings loss from the services business.

A: Gary Bhojwani talked about being selective in partnerships and how they are exploring opportunities in areas like the Hispanic market through partnerships, and Paul McDonough said the $20 million loss flows through the fee income line.

Q: John Barnidge asked about the opportunity related to actively exploring additional transactions with Bermuda and the impact of exiting the fee services business.

A: Paul McDonough said they are looking at opportunities to cede additional business to Bermuda, especially in life insurance, and Paul McDonough also said the exit of the fee services business will result in the elimination of pretax operating losses associated with the fee income segment.

Q: Joel Hurwitz asked about the assumption review and the fee service exit.

A: Paul McDonough and Jeremy Williams responded that on a GAAP basis, there was a $2 million quarterly benefit in Sup Health from the assumption review, and there would be minimal impact to the Worksite insurance sales from the exit of the fee services business.

Q: Wilma Jackson Burdis asked about the cash benefits from the two actions.

A: Paul McDonough and Jeremy Williams said that the expenses supporting the fee services business are real - time cash and there would be cash benefits from the actions such as reduced strain and additional cash flows.

Q: Jack Matten asked about the uses of additional cash flow from the Bermuda transaction and the cadence of the ROE target.

A: Paul McDonough said they would be measured in share repurchases while investing in sales growth and the tech modernization project, and Paul McDonough said the incremental 50 basis points of ROE uplift would mainly be in the 2026 - 2027 period.

Q: Suneet Kamath asked about the consumer producing agent count and inorganic growth.

A: Gary Bhojwani said they expected to continue growth despite tough comps and that the investment in the fee services business made them rethink inorganic growth and they were taking lessons learned very seriously.

Q: Jack Matten asked about Medicare Supplement business claims trends and assumption review impact.

A: Paul McDonough and Jeremy Williams said they had filed around a 10% average rate increase and the annual actuarial assumption update incorporated the seen trends.