CNO Financial (CNO) 26 Apr 182018 Q1 Earnings call transcript

Company Profile

Participants

Adam Auvil	VP, IR
Gary Bhojwani	CEO
Erik Helding	CFO
Eric Johnson	CIO and President, 40\|86 Advisors, Inc.
Randy Binner	B. Riley
Erik Bass	Autonomous Research
Ryan Krueger	KBW
Humphrey Lee	Dowling and Partners
Sean Dargan	Wells Fargo Securities
Alex Scott	Goldman Sachs
Tom Gallagher	Evercore
Dan Bergman	Citi

Call transcript

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Operator

Good morning. My name is Sara and I will be your conference operator today. At this time, I would like to welcome everyone to the CNO Financial Group First Quarter 2018 Earnings Results Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator turn over now Mr. the will to conference I Adam Auvil. Please ahead. go

Adam Auvil

will joining thank earnings CNO presentation Chief Gary Financial And Erik morning. Officer; us Chief conference remarks Executive Bhojwani, you Today’s Officer. XXXX Good Helding, quarter for on and from first Financial call. include Group’s

business Following the other presentation, the for also will available we question-and-answer several have leaders period.

will contained in release. During information this yesterday’s to conference be referring call, we press

morning’s the release website website by visiting is section the Media in our This in and a our obtain the at Form today. of Investors www.cnoinc.com. X-K could presentation filed of available also earlier You section was

We expect our Xrd. on before to it May file our and post on or XX-Q website Form

to to measures, a actual not Today’s of may as remind cause materially forward-looking by number which measures. be of number that non-GAAP which comparable directly Let statements me we subject you factors, results than forward-looking contains GAAP a statements. the substitutes most should any those different presentation for contemplated the considered make are be today

made changes reconciliation appendix. XXXX And of the the be first GAAP otherwise to Gary. corresponding the And be that, any measures with to quarter turn quarter performance non-GAAP in unless specified, comparisons a over I’ll we referring to comparisons. this measures making between presentation, Throughout call first find will XXXX. will and You’ll the

Gary Bhojwani

good morning. And Thanks, Adam.

another was XXXX quarter of progress quarter First CNO. for

are underlying advancing We implementation A to scale. from to continued phase fundamentals of strong. pilot to our key our and initiatives the metrics, number strategic are grow

these We our profitable The financial shortly earnings and are I’ll demonstrated per and for up full as share posted earnings go XX%. detail Operating consistent to solid these more franchise strength. As were efforts initiatives. expected, earnings about drive to potential. time we of it to encouraged growth. why diversity continued their will into take our demonstrate

excluding diluted Book impact in share from AOCI tax change X%. operating per earnings up up X% the value sequentially. was were share per Excluding $XX.XX, the rate,

strong. experienced quarter. provide million this during Although in remarks. some remains common his There Erik will key this capital position stock $XX no quarter. were we metrics repurchases details stock dividends paid in the noise in common quarter, our We

cash unchanged. to time deploying XXX% over flow remains of Our free commitment

to our Bankers down prescription down last increased values in supplement reflective in agents figures. are producing third-party Medicare is contributed result, continued sales advantage which this fewer due premiums modestly X%, segment issue the to Fewer this Moving strong underwriting our it impact X% NAP Because in we was account six sales. not a to reflect total of for in for Annuity drug generate lower quarter These to the review slide the collected Medicare results. new underwriting Health the producing driven collected margins, results Life NAP driven part on year quarter, short-term we to production with growth. persistency. to long-term our comfortable histories our strategic primarily XX% are headwind of action will late to sales a premiums. were down Life annuity was included NAP shift reported by implemented anticipate by the we due also plan simplified improvements but decline in agents. procedures business. XX% X% also

of designed continued force expanded advantage client productivity investment more to been revenue producing targeted growth strategy our Fee implement nationally. as offerings. and Medicare and to the Medicare counts. have process to agent X% a ongoing with registered the strong A up agent mentioned third-party advisor broker higher a XX%, retention recruiting was Our contributed market agent average decline initiatives in coupled our total Several improve recently policies sales. and inforce advantage of job result assets, dealer a increased previously in from XX%

of force. take While our to agent initiatives the commitment fundamentally reshaping decision a that for expand to performance overall agent our signal and improving our we ongoing these results force, is it time size anticipate will our of impact to these sales

we’ve for have financial help the agents providing new achieving incentives example, job positive veteran and production results training Based new an rates to in increased the piloted an their seen increase XXXX nationally late on productivity agents retention the expanded agents. on to increase As we pilot, in of from the and program milestones. already

in in was X% with the Washington down of to health, continued premiums collected driven by production a block. the by active again days. once health by sales Total year-ago growth total Medicare channel up the largely from Moving and increase NAP X% worksite supplemental offset quarter, partially The was modestly a weather double-digit impacted were National, up lower results posted supplemental run-off closed were reduced The of X% XX%. PMA the number sales X% the channel. supplement individual that

to X% agent Continued average this initiatives producing contributed recruiting an the overall to in count. increase PMA of channel

in are growth success seeing XX-state a National, initiatives. few a the we generated million geographic For In expand key during NAP over expansion. quarter early first to of efforts incremental part our $X particular, Washington presence in our as

doing We with great grew X% a the so. off progress full increase Life of offering seeing leveraging initiatives also XXXX breadth of CNO to product the are portfolio building insurance XX%. the diversify and year in sales

we the on in channel to gaining to PMA success. plan is pilot early care its traction. And Additionally, the short-term our expand pilot based individual

pull stable investment by up in remain as in down was sales. impacted quarter our than Lower first For the growth we in tele quarter, premiums to the were agent part due counts on X% also disciplined. Colonial XX% decision price total anticipated block the Penn, in and sales the collected persistency. marketing NAP driven to back deliberate

I over resolve to enhancements. will saw experience results. to issue isolated increase web our half Erik? Erik the and sales in be digital to working efficiency the the turn expect discuss recent financial the actively now investments XX% Due call and sales are we to XXXX. of However, effects and platform a first from for the user efforts, to

Erik Helding

Gary. earnings $X.XX, were quarter solid share had were earnings. up net or XX%. significant $X.XX, income or $X.XX of up or per another per share of We reported XX%. per excluding share Thanks, Operating XX%. $X.XX, items earnings up $X.XX CNO $X.XX Operating

the quarter to insurance return on XX%, subsidiaries GAAP holding tax certain very and to discussed was made several rate as quarter fourth attractive because improvement in assets requirements. incremental expected Of highly unwind is million, having offered previously seasonality quarter between higher from its the as investments of due expense to. from yield an and decline and outsized effective company Holding of into lower from higher in to fourth payments well value reform. to tax was due which Estimated the we of noted corporate the primarily had approximately Operating on we stock earnings we capital yields of very a increase wish company X.X%, of consolidated call, the as are tax result points them subsidiaries. slightly the and cash relative from levels from time, tax rate. short should The an the benefiting These we our effective have income period we lower lower ability XX had equity XXXX As related but a XXX%. statutory as rate. down were other dividends are opportunistic liquid was fourth benefit and ETFs risk-based the increases and $XXX preferred above, capital high approximately investments and investments a income

the to we a As our it XXX% consolidated objective ratio RBC the past, the XXX% company have in stated at in is to run range.

As we within range, be not management continue plans. have we our to capital this changed

to change cash over generation XXX% future no is expected and ability cash flow to flow or willingness there Additionally, of free deploy free time.

supplement reflect of a Life $X of segment result million, primarily occurred earnings. in the crossover to the Medicare processing Turning and margins eight lower slide of our quarter. that implementation Bankers earnings as

processing claims crossover platform As provider payments. provides that of through a reminder, a straight industry-wide is an

National’s were have slightly expenses. offset in of supplemental moved as margins and claims. lower we and the the portions unfavorable small incurred claims slightly this Offsetting earnings our spend favorable significantly advertising in overall the platform income reflect volume we in as block period ahead as levels As occur past, of Washington see uptick did dollar over this expected. to typically quarter of this mortality. first in the expectations an we Colonial were investment results experienced lower health higher Penn’s of

results, reported in line expectations. breakeven run-off in segment LTC with Our

expense Lastly, corporate COLI due our segment prior year current s the in asset of lower were XXXX. lower results quarter outperformance significant the versus the quarter. in was primarily decline of first Partially offsetting the to

crossover claims a than the Turning to but benefit ratio supplement ratios. the benefit prior previously XX.X%, expectations, as slide with health quarter, key Bankers the line Life nine of prior year of and our implementation was mentioned Medicare result higher in our processing. and

to range supplement will adjusted of XX impact better excluding increase incurred in XX% the related for benefit continue of interest expectations, and claims XX.X%, be the ratio the than care persistency. the was that We Bankers reflecting rate Medicare XXXX. expect remainder releases ratio to reserve Life favorable long-term benefit

XX.X%, due interest Washington as XX% of interest significantly expectations expect reserve to released was XXXX. a than to the continue the adjusted was adjusted to ratio range well ratio that the period redundancy better the in for benefit We incurred as in to be claims quarter. benefit favorable XX health National remainder prior supplemental

range ratio XX interest to XX% remainder continue the benefit We to for expect adjusted the XXXX. the be of in to

provide results recent care in call are to I’ll And although and will businesses. this second we over ratios changing we that quarter recent supplemental back time, by our And and trends call. we’ll at guidance are long-term on Gary. We turn are optimistic benefit on encouraged our with health not now that, continue the update an cautiously

Gary Bhojwani

strategy following Number execution achieving the remain balance through and and We care addressing committed initiatives. the our two, further our legacy Erik. growth opportunities. derisking to sheet. strategic Number long-term and priorities one, implementation three insurance our on exposure Thanks

generation appropriate. interested and share market active funding will will update amount free have market flow over Number of repurchases, conditions. include risk based investments deploying and to timing accelerate dividends, transactions. growth, The potential continue three, deployment be on We of XXX% the and business Areas deployment common cash conversations reduction to stock when parties of with care profitable time. long-term and

aim for in CNO is Our Financial interest its Thanks your over to best to highest ongoing capital time. use and Group. deploy

for open We will now questions. Operator? it up

Operator

B. comes Riley. Thank go you. Randy from Please ahead. Binner of the [Operator Your question first Instructions] line from

Randy Binner

Thank you. morning. Good

that a was willful trend. the these the allocation to question So, I flattens it it mean, preferred hearing But, your have I liquid just with RBC that change of a and this actually optically, investments. nature kind understand, right switch ETF off it’s RBC just of I the move. can the because you to on

is like little opportunity could? so, kind bit that what trade it And us size the with and a kind I’d of maybe if to for understand better of you

Eric Johnson

that. take I’ll and Johnson, Eric is this Randy, Sure.

some remember part fixed kind markets middle will the as was widened some fairly cash a in fairly we basically than some kind opportunity short well, credit reversion very that grade, tactically risk non-investment substantially a diverse to in income, some a strategy others. has that during took -- underlying Bish of time, ETFs, CLO shutter of corps. ETFs, places, that as in February, very number very spreads spaces a highly You that And equities to more predominantly in cash prior it also of some non-investment constituents, which deploy with and yield term, constituents earning, widened the been dip, basically XXX, strong investment that out obviously also XXX, B, very there which some a in think about of some double using and market high the XXX affected enhanced proportion well during preferred little as underlying of of paper and triple substantially grade them series are grade, into liquid, small

relative all high you and million the other adds being probably two grade yield of comprising economy a are and up up, A-ish I lags two-thirds constituent together, years put investment If of basis. have one a the that to has kind left already say up the in corporate played this investments IT, relative it another on And single $XXX the to rates cycle. third. probably of inflation The that trending fixed preferreds or strong, to kind trending Corporate with think value be to earnings investment. appears continue traditional out CLO

IT basis, example there’s of well. you of benefit a favorable that think, return can I kind tell and fair for has already been also pretty corps, ETFs the very the on a playing I to that’s company. versus capital amount of on on out spreads the tightening pronounced it

capital something fully am allocation after probably default traditional higher, I ROE, charge, numbers use While a after something -- produces which charge. this significant as illustrative, to believe fairly only for that adjusted something default basis is going if on and only like a are our basket basket adjustment that as well investment you produces XX% our XX% capital

prove We’ll as conditions have So, we capital this market it Company’s it’s change, well from and as think obviously capital investments. a the to revisit good reduce we high the tactical example required even the way it. I X%. the what boundaries think income corporate yield lot for we for some for It’s within the go return into rates to other here on will allocation. But, subscribe Company, now, is balance year; producing it to X% producing with, allocation earner so if a to it’s high change; the struggle -- good needs of -- for risk that and of yield include be rebalance the avoiding if going they associated I assets that good which when continue higher, Company, Company, did curve, to for allocation, we’re longer the capital you fits adding goods, the end on with we and a live

we different think about from I and returns implications, the and risks thought understand angles the a and the lot good So, about feel of it. it

Randy Binner

And something went think capital like forecast then, by housekeeping nominally required up RBC, I of in million. just $XX kind the on

of no in bleed kind first to And that’s term. all so, quarter. second the reflected through of There’s the

that was said February. it You mid

that’s we for correct? got all quarter-end, our that’s RBC, -- So, the denominator new number at

Eric Johnson

we this reallocation -- tactical think completed period. February What that is I the during -- you’re asking

and of wouldn’t you I see as rest the wouldn’t can’t And it But, so, certainly here not event. from the then promise expect you March to in similar a in see -- now, quarter. happens what through of

Randy Binner

capital? kind the Is of potential Okay. higher a And discussions, curve? transfer. many there’s then, movement how of guess, uses we specific one in think of tenure the risk should this mention free those movement Gary, of that affects kind just of the how I LTC on the the -- and it of meaning belly about

Gary Bhojwani

the short I see looking to, think, is, short elaborate think, affecting answer, answer we’re the wants at the different we how that if and I let opportunities. I’ll Erik he don’t but

Erik Helding

in sensitivity there. in obviously because overly I pretty think we’re rates. what There’s that’s right. tightly match, sensitive to because good And is, shape past. This up a the question has there. of in [ph] we’ve come not pretty the that of ALN said move again interest match we’re some But,

at much disclosed that’s assumptions. and susceptible bigger morbidity, obviously We’re testing are. our more discussed the to mortality, really the stress we’ve persistency the past, And when in where you look impacts that

think rates lower But, the as aren’t us. said necessarily barrier we past, for a to in I rates or higher help. rates higher So, transacting

Gary Bhojwani

maybe only that would the I thing think, to I Randy. add

increases lot but move appetite. their in feel like think So, a there’re terms rates that obviously, folks significant don’t think we of interest factor that other our we about options, it’s how this there in of do I out other

Randy Binner

the Yes. I was thinking counterparty. more like for

to it that? counterparty, with bear for would side you’re echoing seem seems the like would more on So, give this them and work it the

Gary Bhojwani

Yes. We’ve seen evidence of that.

Operator

comes from Autonomous from question go Please next Erik Your Research. Bass ahead.

Erik Bass

higher in But, else, excess unwind a capital back. yield you the the a come up just changes transaction was reflected to pick to just could and if capital. to this way seems RBC, excess mean, do that and is something you some wanted a in you’re like thinking portfolio see get if what would deploying I I I to of it needed or that you’re care and be capital easily at am about taking your doing long-term back kind either tactical it on that it correctly. that investment sense

that hold if enhancing that plan think excess right on capital it’s yield So, a it’s -- to period? it’s mechanism for really you I

Erik Helding

what So, you’re I fairly think, describing is accurate.

in I think, it a to think XXX% manage RBC XXX%. the of about the we way is, I range Company’s consolidated

meaning. I And say range range, so, get capital, above within necessarily anything loan that anything but I’d the that excess at your isn’t

the dividends remarks, insurance excess caused the said, that of somehow guess that’s to first strategy this. no I we think, In correct, the we the if company. or from subs felt like just at flow XXX%. disruption the specifically be I coming And capital, a generation. of that notion the free perceived rebuild I in immediately change cash off quarter that would using And that’s at we’re prepared management looking capital way holding not my had

Erik Bass

as Got you it. we as a deployment And of then, guess about I general the bucket. think account the capital, mentioned hadn’t excess potential

dealing for of the that your the correct? buybacks, Gary really et growth, of terms that’s kind cash that used laid you existing be account RBC, general buckets organic would dividends, flow out the generate Is M&A the So, with in cetera. free

Erik Helding

way of What cash the excess considered terms free is, is and statutory to is my anything Again, I not in is flow above $XXX in capital. sort I XXX% perspective excess above think consider at holding about $XXX which Yes. future million capital the that and from range beyond million. XXX it currently everything working company the of capital generated of

for yes, And Gary more things those his things remarks. so, geared that in would towards say, I the mentioned they’re

Erik Bass

the it. guess And but it’s the we’ve dividend than Got I first company lower in this to also something seen normal, past. the paid quarter was holding the in quarter

the is or declined So, didn’t cash really slightly quarter-over-quarter? why position that

Erik Helding

a be a of contributors. the one was that that and lower, tend That’s true Yes. as on bit GAAP the statutory case. our well as little It’s quarter first basis earnings to

up holding less to we so, company. the And design, did by dividend

necessarily one made. to quarter, the officers. payments first of incentive holding have company the expenses The it’s insurance compensation its the behalf The those and company an holding it’s that is other insurance we it the issue, -- subs. on directors pays that’s and the case wasn’t something -- actually between issue seasonality it’s paid that And of subs. in that’s the And big

so, in happened And quarter. the that first

you tends made could If some the were here a other historically, payments on that has see back case again the were amount and for this little happened That number us. time settlement to It there behalf be net look that because that was you was insurance quarter. negative a bit that larger this of subs.

Now, is that second basically that is some expecting -- company what the going quarter, is happen holding what happen get of we’re back. the to in to should

positive would expect range. second XX to so, quarter of in the net $XX I settlement And the number kind be in million that to

Erik Bass

could the Tennenbaum if accounts. Got it, BlackRock? specific but held Partners will of without implications you. for are capital sale I in general giving I of the -- Capital numbers, to one. thank And the And And What last stake ask just was you? free-up think you’re one will this this maybe

we lift should an expect So, there? RBC

Erik Helding

the I determined. So, is answer think to be

then, there to been So, are reinvested proceeds that is but obviously, process and closing, happen has we first, from there, disclosed which out, that think is the it quarter. in the actually play in. And a what on depends which I third has process all approval the expect to

lift; we then So, in be, wouldn’t could may a invest on there there similar, be again there lift. something if potential capital not capital be likely depending

proceeds change disclosed. when might terms capital actually paid fairly Now, see you expect well investment. are financial in been The where do is out, to that on we haven’t

and to beyond as played with sale. of we And that. can’t benefit how so, expect are very the out we pleased result comment But, a we do that’s

Operator

go Your ahead. KBW. comes next Ryan the from of Please Krueger question from line

Ryan Krueger

was Good RBC. the My just question about first thanks. Hi, morning.

kind past, an closer talked XXX of long-term as XXX, I think, were de-risking you like you as to and range, transaction. view to appropriate is. more about sounds if now XXX do targeting range the a you then to care XXX in It the

led change just curious there. to general I am the So, what in

Erik Helding

you think, point. make a I So, good

a the the while, think, to have range. and we XXX I past to XXX guided been in it’s

actually recent, been it’s several we running several the have in recent Now, true -- quarters, at XXX%. in that

asked about is think the when profile that that the So, given is risk said I the company. about appropriate level, what I’ve this level, of

run level be comfortable confirming that so, But, sort wouldn’t XXX%. that was we And that I XXX% we intended at. running to was the wasn’t I saying necessarily at of

manage the way I is think really about more capital to it So, XXX and statement XXX. general think, is, we the

your comment, be to we is that can second run we believe capital XXX%, in that a LTC potentially That lower post world XXX%? at remains absolutely, Now, that now. determined. to and yes, Is adding on of transaction level should a

Ryan Krueger

lack more potential guess your M&A that alternatives Okay. buyback Thanks. then, LTC how the as it and of And the of of of on your view I Was related well? as do with in or such in much quarter. de-risking your just has to to stock valuation valuation

Gary Bhojwani

Thanks at a for is not least Hey, that tell issue. for the There’s I driving would answer because there’s think really Ryan. the you way about you I not simple question. This short Gary. it, one

I talk this. at And so, as to look how high a I maybe level just can at

should is is walk that The say I first not case. That thinking our table. off away thing want to the of none buybacks absolutely the shareholders are

a to continue as capital. We regard viable potential use buybacks of that

And recall, presently. you’ll made results, doing explain we’ve and I past, the I are done the the bias way we to as XXXX that we after not that a business. providing However, and simplest main that you a have buybacks, right not now, of reason know, the grow want range as specific of is, to in doing can we’re it point not the

number with we want reduction the the or all also of it the factor we But, points. There comfortable really where one, two support there like stopping remain should into stock of from are to first short we where Everyone time meaning major Board range want or are do committing we quarter, have growth. all carefully a more Directors. growth I’m the of coming buybacks. when trading deploy business Number is look funds. of not at because potential course specific when out that. we at is to a in opportunities were grow And emphasize still be two, felt here. So, when whether those we the And in that bias clear look looked point has looking deploying of everything, opportunities us, to very at the to at consider about the we trading, period in year, on have those share we stock to where buybacks a to during the our we really option the maximize more and for investing a organic investing want strong was are inorganic opportunity I we viable funds risk us. that to

I think, we want. unique opportunities powder some strong and have think we think and before business. reasons to keep there that want we am our very we grow us some happy I here talk I about are why this really should dry. opportunity you an But, separately there’s to if

Ryan Krueger

Just follow-up. one

around of In or to types what terms most of inorganic you; businesses are potential are or more properties growth, full businesses? that kind are the they interesting of distribution

Gary Bhojwani

To things. we’ve at variety different be looked a of honest,

purely first, terms grow grow business be in than to pleased else of in distribution, want marketplace are I distributors, take some different the us more manufacturers opportunities. us. on really Second, somewhere on? going number What very specifically -- the in strengths. criteria, us frankly, with a the we’re I’ve can And that find meet to focused to we middle have two would we’re between, people pretty talking us are seen open to And I’ve existing that once market as with anything build in of described what those help basic going the is been things different some what’s some direction, Some help business? and a to some what’s

Operator

Please line Humphrey ahead. Dowling Lee Partners. from comes question and go of the next from Your

Humphrey Lee

about Gary, productivity that the example, for the in out of same you your in much we PMA, pilots about rolled force as that rolled in think about how should -- stage? on those how should talk a we out productivity national help terms short think of that And sales have bigger in been remarks the how well? you prepared to basis. care Can enhancement, like pilots, did term about talked some your pilot being on and how like, enhancements, thing

Gary Bhojwani

Sure.

Okay.

None as want. is are of state of working obvious. that let of So, fast pilots first the I all, these. as the the me And nature

But, and you so I one of try care two things for of I work think pilot. and saw try well out, it and experimentation. nature with don’t other to you A very great, you so. short-term that upon. the pleased of works faster. don’t would when and the was them really work things, of things in terms of kind all pilots move five I I two That’s love the the couple touched of what

PMA Our one focused business. historically business has line on pretty much of

of So, to talented little that as that’s product, that. otherwise distribution crossed really a and very threshold. excited learn takes of about to imagine, that them base. might about force you to off bit take to we’ve excited pushing get the new get folks a distribution very get get a It’s and small those But,

we of I the that example. more. I’m happen are more. they’re can So, of because that from push lot leaders think do And really me, a listening channel it. the we hoping don’t just capable such is they talk short-term much, this but distribution is one And that. I getting care to think constantly think that there with channel that have a lot about But, I’m pleased very much I

would historically to So, has business. insurance channel that. also pleased point That I’m I didn’t very very also with life well done the sell that life.

So, that the brands and case that to because diversified the you. now force. these am to those point number have more captive sell that’s yet. pilot refine sixth you things force think is to measure and we fifth Am term been to is continue short them the to of got biggest you Recall $X by our life, right our reshaping started of a give And one that’s that selling care. even going bring next it’s products very CNO you that of challenge Life, that keep. I either depending the an I we’ll us, Bankers not we’re specific result pleased sale way the on Life quarter? family, we’ve or And we something one Bankers our telling find been agent to we get committed opportunity the do they’ve country. the force taken there within manufacture channel now I’m or what we access that’s with sell have model. those In another’s I’ve excited they’ve We’ve million a about. in that products, in Colonial how captive supplemental willing or to is health, there’s to to Penn next now that started that. We things distribution No. I to historically the out able largest of folks they’ve reasons many been how to agent and willing it an would

have significant clock you forward number them. then, We when There kept a haven’t agents. But, brought three a we of is many two lot historically of the in years, churn. or of very wind

so, our XXX and X,XXX instead having what this have there, opportunity talked bring that’s goal about and our them then hopefully of left, we’re And And or three X,XXX X,XX to years bringing is trying and a later before, do. X,XXX XXX or I’ve of left. to in in

high that’s we’re give while, recognize reshape do. have agents We’re what you. to don’t know, like giving with that we force, and tell we’re that can got and you you I a trying to to what doing. do agent trying one referrals, to with level have target. incentives, doing productivity. that would that I it I all with veteran the different do That’s to a drive pilots have of to we’ve

Humphrey Lee

Got it.

maintain agents, steady maybe surprise. I third of kind a were even veteran was this kind Bankers over you of touch kind agents [ph] more force bit understand the in kind of the coming But, X% little as focus this at pruning grow plus Just year at more. a bit. that agents. I as aging of -- little down doing veteran of or decline a to kind But, group some in agent force quarter little the of to expected the well? thought a well you as a on least hoping you or Are as the on

Gary Bhojwani

Bankers growing, keep liked Humphrey, data from okay. There at And, down that went very from that on. have And if to some look, would you fair number plus three-year that X,XXX. make going we at is to We we always the of Life point. X,XXX, have you look a

headcount. is X,XXX what force distribution XX that? is strong. So, And the

the wanted down, to X,XXX. change that of up, too headcount go conclusions against not to I for hard of XX me denominator While a it’s over many to draw

but So, with do folks time. with some it has a has to other to just few did it of fluctuation. number has some This not But, doing and fairness we do go alarm of pruning, sounding to down, things, that’s some relatively want do the have we hoped, itself to also it in would not take of going given play out. what Humphrey, bells, small I’m quarters with the is to not that

Humphrey Lee

higher of that the wage. impact to above now many your just offering companies Yes. an have Does it’s guess, kind I of kind hourly retention? minimum the salary agent

Gary Bhojwani

basis. And strictly talking any a on and market you’ll are unemployment, are trends the the Look, XXXX career an They macro more like agents are you’re work and producers, employment unemployment our us. you’re X% change recall, when willing have try just commission employees, you folks they in reality. talking that impact commission-only. world as a when Because about not a to that’s than they’re you X% about

all What driven by of that, three of I bodies absolutely. that I’d or because of say certainly, say is I be folks be are driven to driven impacted of willing that that wouldn’t So, two willing that. able swing that. XX that those but because be to Maybe three-year XX are of of them that. to because we’re say wouldn’t

I when that we this. of employment of in agents we happening also market, the with reach threshold, these -- basis pilots certain we’re have out folks that’s the certain also some through a on been the a based working than provide done one of support on would recognizing more in historically criteria. I things we’ve terms think, point when And what’s and selected

of So, the things trying navigate to those through. are types we’re

Operator

ahead. question from next Your Sean comes Please of go Dargan the Securities. Wells from line Fargo

Sean Dargan

understand question, have step high if to company and an sure between transaction. LTC take I to I just do at a I resources, RBC, holding your make level, you. the a just Thank a I ability relationship back want

ETFs the insurance you done made, buying share was RBC So, sub through investments which down at the preferred incremental level. brought

contributed would to just LTC do be sub? it to an trying it company would that be would were cash or you I any figure to If out the am insurance capital holding transaction, relationship counterparty, what be is.

Erik Helding

this Helding. Erik is Sean, Yes,

general a just maybe So, comment.

done So, entity would is party. this counter and legal be any -- potential LTC and casualty, between about, the Bankers transaction we’re talking particularly the one Life statutory and

transfer happen of the those assets entities. so, And between will in liabilities two consideration and

and transact. the level starts first wherewithal of entity the capital legal to with it So,

basis, would to maintain Now, if on transaction. entity on doesn’t sufficient capital legal and risk-based adequate help to to holding fund up capital standalone a hand be it company then the have the the transact

So, works. that’s of kind how it

Sean Dargan

not is LTC stack under Okay. Bankers discrete And sub the a Life. block

has transaction, that transaction be correct? is any reinsurance a So, to

Erik Helding

Yes.

You in that casualty the correct. is the LTC business discussing actually subsidiary we company. Life legal It’s within The not are are and Bankers entity.

correct. is that So

Operator

Alex Sachs. Your next Scott question go Please from the ahead. from Goldman comes of line

Alex Scott

Thanks.

I care. question just First have long-term is the on

some mentioned of You the optimistic that cautiously trends continue. can

block you performance the the give there comments? or in way morbidity, Is the those that’s persistency Just that? claims, that confidence would something you anything mortality to seeing coming wondering, the like that what driving around are say in is of

Eric Johnson

This Hi, Alex. is Eric.

or I’d favorability general least for at say, row four quarters just we’ve five that it’s a seen here. in So,

probably the If remember you low the we’d we that if end, were the guidance of back you better roll to than that towards not low end XXXX, given.

we guidance actually think interest, during lowered the year, the of benefit I ratio. middle fact, the In on

slight yes, in what So, in persistency. we is claims favorability seeing general, credit favorability in are and

lower being people reserves you’re to lights But the there’s acute. a releasing little happens, when persistency sort that lower that and off, So, than [ph] contributes of when bit benefit expecting, were nothing we which ratio.

discussing us. for have hard been things certainly that things, do ways looking but improve we a quantify, at we we is practices to We it’s to that that benefiting; think continue And have and to been that’s think management while like benefiting we that.

Alex Scott

I And Okay. was transaction. had around LTC question just potential other the

potentially about the there if Would think you it, ability guys You to is [ph] there capacity? enough side to risk, an fund of enough On out. is debt there? that out event OpCo transaction, not take LTC how mentioned other unloaded you’ve in the a do HoldCo you leverage would -- help

Erik Helding

to maybe I transaction. wasn’t think Yes. capital fund clarify. I at to don’t recall there Alex, the the potential enough same, LTC so, holding company as

clarify to that. want just I So,

Alex Scott

I -- Then, mean sorry…

Erik Helding

was its entity Yes, fine. going That’s transaction, on are to casualty I on the okay. the is, or whether That’s next -- Life a on of where number own enough holding enough or it from blocks has needs whether transacted not capital legal Bankers capital the and is factors. company has and depend the size going holding different capital company, which the capital of

So, get there. I just out wanted to that

that does sense? -- that So, make

Alex Scott

Yes.

Okay.

Erik Helding

-- And I am that? have a did have did question follow-up you sorry, on you

Alex Scott

it. Thanks. That’s No.

Operator

Evercore. line of next ahead. Gallagher Your Please from question from the Tom comes go

Tom Gallagher

First trends for long follow-up term care just on the risk a theme.

about ones when insurance counterparties, the or risk I main the for highly guys counterparties mainly highly you’re a thinking Is seen know that is consortium’s think, alternatives on investment you’ve now the involved companies, we’ve thinking variable change in in you you But, rated getting consideration? alternative rated guys had side. really it’s focusing on insurance table had still of transfer. risk under market. about here managers it companies are talked the about transfer. I But, when definitely on annuity terms

Gary Bhojwani

my the can shareholders our to and Look, on make of different willing to of look for the look deal And highly, are at I’m our hedging so to is. we’re how opportunities, number we of want I you on. that the counterparty, point we to it understand will of a what the tell, the answer but and is, will this short me is, quality on counterparty sensitive the response the sure be shareholders question the credibility structure because very to bit little highly sensitive

hedging surprised market number of reason there are been particular by I’ve you as that. out We is, are opportunities consortiums about and that the I’m very now. right put though other The

way. a ask said, same seen people variable would taking going to at things happen you year seeing If the be some I would a I me am no annuity of are right business? that you’ve have now. ago, run And

rule are want I don’t with, strength surprised by I that quite that deal to and would be I of of looking So, But any be we the of type to financial and quality the number the out very And that counterparty something things. of paramount will compelling. do nature that a haven’t out am do that today thought there, parties consideration.

Tom Gallagher

clear, pretty Gary. That’s you. Got

that which some nature if regulators mean. these and same types changes out think question businesses to is, entities way of change which the would approving related counterparties, entities, legal The dealing those are within state I you transactions, in seen that potentially some what addition the in the the other housed to legal carve of transactions I with of could are you’ve know also

you. sale that. reinsurance on possibility more the I’m economics in I a difference regulators here curious a So, also there you But terms to that’s thoughts curious instead carve-out if think approve of of the transaction deal, a of if reinsurance very your for get opportunity limiting. to done, in a vacuum anyway that that think, possibility is big if that’s -- or be is it’s a it’s could a because only But,

Gary Bhojwani

Yes.

of question the nature I with to happy want you the keep speculative, our tell make is obviously, sure I attorneys purely first So, me. to

to I And have said, buying never are that there and happening today, are would seen are like movement carve-outs the be a variable And would is capital amount people the that asked this, all annuity a here growing think by in what lot I come said flexibility regulators, back that stuff. allowing we’ve just in me we and the they the the marketplace, of in if you the for number sorts growing of I transactions company would and of interested like not, good think potentially have growing that before, I’ll marketplace, to happen. regulators of going I ago, parties blocks CNO. absolutely all of months things XX

not So, we we that’s like understand to think nature for the would of point the that for specific. do, can us, ours. I issue gives optionality important thing that’s quality, thing good it organization react emphasize a the an But predict where how is. I I character, at credit the I a a I’m good so deal strength, it’s we how the because the again, want think

Tom Gallagher

topic, on just then, And Gary. Okay. another

If sales around the and sounds happening you what’s big distill on momentum here, because I a know and front really were like priority. try turning to organic growth sales strategic

really you Is sort it makes and harder. for or why we’re terms you explain happening, the maybe think could believe today drill the jobs of can down were You improving you that of picture if in results why biggest highlighting improve why you you the of challenge it’s how sort seeing it.

Gary Bhojwani

the Sure, have and definitely quick I we as let me as it’s -- because want. want challenges not challenges about turning talk I to

insurance pleased of be as also about well. to securities yet true of and things progress are consumers they And I been the by market of tell I’m and we’re you, thinks really short-term committing so that, into in under really, and have a outside don’t before number pleased I that dealer. enough to, want way insurance sold about really able the going on. just our career so where to. that making hay middle how with things one really, [indiscernible]. at want and I life National belt to can thank on our But step to pleased some mean, products the that are taking with this hadn’t I’m the way really our helping with to they’ve So, care Washington world products demonstrating know, extremely really and we grabbed no clear a I folks I that have have I been to we’ve business stepping but been agents of never and are broker quarters our results that new

biggest pockets sales The Life. challenge really very the on sales for Bankers is encouragement at are on there of the us front front. though some So, strong clearly

and is of no that. for that this us. There impacted impacts commission Some picture about a employment that. work is significant challenge that the agents by question into on basis bringing career a That’s

is all a from if for need goes management there the for, of life, if of know We and products are into the that -- whatever have I in right go their you’ve seen the boomers up. it other standpoint, for we I that how many wealth people paid houses down preference life kids is Some and financial -- think going insurance now. college where is the stats consumer need terms mean, retirement retirement. it their for or income sheer are goes but on provide planning is, into things

I We’re seeing some of think alone. And we’re don’t that.

our are there other have think seen come folks I that business in sales life under pressure. insurance

seeing we’re things. those So, of some

would the no in [Ph] answer commission say nature. agents into think question I There’s short bringing facing I what is headwinds relative -- terms So, of I’m about some we’re that. to

We fundamental products are facing some life the headwinds in like terms demand for picture of the insurance. consumer and

that However, tailwinds consumer. the agents we our of of really there million We’ve a market some middle not offers. terms competing in becoming facing, our aren’t opportunity got for significant licensed we embracing are have terms securities facing people tailwinds here are insurance professional -- in a some other down

of sell and are cross grow our within We products franchises in ability to operations like tailwinds our terms Washington National. the some seeing

thing a you’re do of at factors we run some here. driving change take hardest going lot work that And anybody as And through all. to that’s thing to momentum. there’s a the So, business, pushing knows There’s different ever one is no are and right, it’s that. that’s us time

Operator

Bergman of from comes the line Please go Dan question Citi. from next Your ahead.

Dan Bergman

the little charge purposes to bit liquidity a the I would assets of ETF? that guess allocation otherwise to does investments asset higher for talk much Could make through than and the start, to underlying a change. mainly start? the capital following use decision the up of ETFs Is draw about on you more

Eric Johnson

for be offer. us on Eric lot shares a looking is in happens it to want bid would difficult else anybody an you. for will are of that don’t Invesco those, But, to power BlackRock say a XXX, pay or And something task. money of underlying has constituents, you advertisement like to do and ETF. or here that or get out to efficiently who Happy a a I Johnson. This very would if very answer it XXX I But, do for at be that difficult

price wrapper one you is essence XX% the basis defined liquidity in components. in for mentioned before underlying So, and investments the what in getting your paying a are a broad a I This on the is had sum there. has rated, case getting you sum is are diversified particular this underlying of the than rating. roughly grade, NAIC R that that exposure greater it are of wrapper components as reverse just are you The

paying are a for administrative liquidity. convenience the So, and price you

the high which the a on the getting described what At On you to the on day, return of just very very north rate X% you of like capital. are end other I the something distribution on invested is is high. hand, dollar,

and run trade-offs the we the in words. end we order curve it of is curve that headed unfortunately to very by it be which rates probably are to or there is easy we headed simple not not simply going way -- there the single model to be a periodic to other going way with terminal where are are need. are bonds we earnings achieve long being And flat that need So, no -- they’re A rates so long-term seems in the value to buckets. There the needs, higher, was the able get the a has going Company’s

boundaries be smart risk. capital for opportunistic going appropriate are to So, that are to have and we within and

this you context. think So, at that I should in look

had But a to think thought to Particularly example there you passive portfolio. don’t quick a that I is ETF. on relative reasons allocation not this. quarter in exposure like gives capturing basis a cases lot sharp, like spreads. where portfolio And out had it out of we a good are that that the first broad be fairly a -- have to going something obviously a capture way something discontinuous a in the to have of even There a not add blow have are can and We carefully we that limited you are [Ph] that’s value going case where the change and in value in case. is

it over time. you relative and in So, you value change very modify then quickly can can grab that

Dan Bergman

follow-up one quickly kind quick the And care results? from elevated benefit that potentially saw there in business. season on you any Bankers mortality notable favorable long -- elevated adverse maybe the term of quarter Was -- of just flu the

Erik Helding

saw not of very I mean, was bit in and investment in the our Life benign an uptick and but little we and quarter. in little business was Life, No, traditional quarter sort of Colonial really Bankers the really. a mortality Penn benign fairly bit it a marginal and generally

Operator

hand Q&A the now to I’ll session. over ends closing it back comments. the This presenters for

Gary Bhojwani

Thank today’s us you operator, and thanks for joining on call.

Operator

ends today’s This call.

You may now disconnect.

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