CNO - Earnings call transcript Q4 2018 | CNO Financial Group, Inc.

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Operator

Good morning. My name is Emily, and I will be your conference operator today. At this time, I would like to welcome everyone to the CNO Financial Group fourth quarter 2018 earnings results. [Operator Instructions] Thank you. Jennifer Childe, Vice President of Investor Relations, please go ahead.

Jennifer Childe

Emily. you, Thank thank Group's and joining on us Good quarter you XXXX Financial fourth earnings CNO afternoon, for conference call. include Helding, Today's Officer; will remarks Bhojwani, Gary presentation Chief and Erik Chief Officer. Financial from Executive

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

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

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

file on to XXth. or expect our website February We Form XX-K posted before our and on

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

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

Gary Bhojwani

the the benefit was in benefit different sell strong demand this this The as shorter risk to insurance designed we considerable the which alone. financial CNO. a and Growth remain investment in very XXXX investment headwind, the Despite The you, S&P profile it in past blocks our By few that comfortable and the transaction Moody's duration provides fundamental executed design we comfort Re. fact profile quarter very needs billion in our drove negative share our a of across fundamentally We of the ceded of years operational care product. to first operating captured that shareholders in earnings of well especially the late. thank the reinsurance block, morning, quarter, Wilton we reserves repurchases, portion board. upgrading were XXXX the the other of in marketplace our of problematic past with remain LTC the share care strategy remainder an million to created year. CNO company pleased in volatility policies from form should long-term consumers affordable, company. to which the periods only strong second you change and share for delivered grade recognize the currently middle-income the quality including and implemented dividends as fourth initiatives LTC of provide than per path increased the successful of option which Fitch. over X% October. the Jennifer. I'm to strong million for half less $X.XX market the production with fourth years. product and ceding have year significant We mind. to in Good has XXXX was and $XX against reinsurance the Thank products three with are high that on for the of accelerated that block of we complete joining $XXX our a transaction by another we returned us. offer and risk We in both our performance, with We've $X.X headlines most this grade profile long-term changed per seen

included and products franchise, right and highest common transaction. to XXXX, best the our priorities, services, stock capital reinsurance deploying growing against the and LTC to this we year, new launching funding made excess the the dividends repurchases, and During strategic share use. its progress In expanding solid

Slide a of for Turning growth X scorecard. the review to

start part strong. first quarters. half a in are segments in In third to new accelerated grow the production was XXXX, for premiums quarter and the and of Annuity After faster than XXXX year. at growth operating Collected X% slow products XX% the pace of the we in by and the collected Our a quarter XX% year in enhancements XX% X% for for second before. the launched product the health and both year, premiums NAP increased fourth that ever and increased overall. full the XXXX, life

We expect this pace to XXXX. into continue

agent was web a technology scale improved at lead results to Life large the and to enhancements the Bankers experience at sales XXXX. We initiative end part and of Penn improve advertising increase to productivity productivity. and due also technology, customer introduced agent in in improve invested Colonial

as first-year Slide in results generate positive producing X. helped investments well significant to a ongoing Life, retention Bankers to Turning and recruiting a agent and retention. count initiatives Within in X% improvement increase as our continue in agent drive

Our fourth XX% we financial expand is than slightly Life one an for than is we reach younger is market XX% average face up the Annuity over XX% XX% XX% one or as for important metric financial this eight are advisors. the agents. annuity advisors time, this improve duly increased or consumers responsible of full licensed of past gaining agents The XX% within This amount middle in premiums to more strategy the Bankers as believe over can in were Over up sales to our right XX% our quarter five now year. wealthier quarter. annuity by prior the more the were three and traction. and to in years. increased collected the also year

than also Client remains and income to Our $X.X billion our dealer of continue fee grow. businesses growth assets advisor investment were robust. registered broker more

and This not applications primarily income X% quarter increase protection the and further needs of Importantly, by full in was when profitability our NAP recent remain consumer of of up a Life down sales XX% middle-income to which the the we driven our our stronger underwriting an positioned retirement for relationships well up XX% year. serve also business. much to overall, tend long be underwriting Advantage life improvements we provide solutions. but products, third-party was consumers. for We in just the insurance processes. result was the the made were to NAP products, quarter. enhance not are X% In denied Health changes of included but NAP run, these in as Medicare will decline

Advantage in our to continue see policies Medicare a manufactured from We Medicare third-party shift to supplement policies. sales

that sales with require in customers capital We this suits their needs. are are we shift to NOLs. importantly, manner allow comfortable our Most us Medicare less and non-life and utilize serving our Advantage because best the

states, XX%, comprises our overall market remain for momentum to continued X, care pleased is penetration insurance mix. to significant up and up Sales all-time the still portion expansion successful up National. geographic XX sales diversify program. and in X% sequentially. to were initiatives and launched in Life sales We're XX% XX% year. the years. entered Since XX%. recently sales fourth we diversification in include the stage increase only and life quarter, opportunities the on Washington the quarter leaving the initiatives remains sales Short-term these cross-sell of very Slide new encouraging an with past were efforts two future growth. with of growth attributable significant our product Moving now for fourth portfolio A low also the quarterly record Examples mix. Strong

in territories. was expand were product, Washington Worksite relationships performance consumers new was by quarter records particularly distribution establish received new Worksite more for hospital and XX% household see sales our up in the to total now to noteworthy new existing represents quarter sales. tremendous launched the also consumers indemnity XX% force. health year. fourth for the National We of well year. efforts to XX% and setting full a which full and expansion our than very We and both potential cross-sell supplemental Worksite

a the on in included and up Turning Penn to full experience. Penn. generation the X% to year, initiatives and by user quarter X Growth largely had sources Slide innovations fourth improve growth enhance Sales expand strong diversify technology Colonial to initiatives. were the productivity online investments agent Colonial lead XX% for quarter. and and driven also

We drove while also investment marketing increased which sales price higher disciplined. still remaining our

and key quarter a web and expand for generated the see and XX% to in web We capabilities. success in sales continue of increase sales accounts digital now web We our digital in digital XX% initiatives XXXX to sales.

our We look will we're progress cost have furthers also invest XXXX. which marketing in in in pilot the ability products the seen and we I'm spend. new lead overall to conversion, Colonial meaningful improvements Penn forward to with effectively pleased making very at

Now on Slide to XX.

Before I'd words about few like I capital it Erik, to over strategy. say our a deployment turn to

are our its to to highest of deploying capital We XXX% excess and use. best committed

over capital to return run. unchanged maximize invested remains goal Our the long on

continue to our accordingly. weigh will options We

recognized book or investments to the growing business, significant toward expressed be are we that have at hard-pressed or will return. to adjusted internal could our we a similar we've a acquisition an discount trading While a better bias risk when generate shares value, that find

other of generate fourth risk mentioned, said, the changing to opportunistic conditions. I quarter. buybacks may well took That million to these returns. As and capital adjusted volatility with intend market market of as remain flexible we stock could responsive We into in higher the and depressed that uses advantage deploy $XX as we similar price decisions, consider to or

to in M&A free robust any repurchases, on investments mutually metrics. year. we common be stock middle-income believe grade like. also to color financial stray consumers that what need like dividends, business attractive generation, our might maintaining of share look not from provide a core our little and we cash To be Given remain committed serving exclusive organic I'd given flow will we acquisition an clear, investment not and

is size appetite of inversely related risk transaction. the Our any to

bias scale our can toward Penn digital enhance businesses. that capabilities our leverage technology channels, or National Washington diversified a have help We assets Colonial distribution our and manufacturing

to financials. Finally, With transaction within would be the XX ideally turn earnings months. to Erik to that, discuss it accretive any over I'll Erik?

Erik Helding

reported CNO of the XX% quarter, year. which prior the compares $X.XX, loss share $X.XX Gary. down share We earnings per net in the operating a to $X.XX year. of reported per in from diluted prior of Thanks, income

in had half $X.XX, million XXX%, reflect capital third price, primarily impact made equity, rates. decline was prior volatility quarter. up NAIC, capital in $XXX significant on the in Roughly million, compared from quarter significant were our market at $XX down and to excluding the lower changes noted estimated consolidated tax X.X% to was the items the the stock to worth return the and $XXX release, share we bought down earnings the from per RBC by Equity to third from opportunistically ratio calculation CNO's of the recent the required a related stock. the of significant ratio risk-based was back the in corporate company Operating million investments press Excluding of on year. year. cash items quarter. slightly end XX.X% Holding our operating prior were

other of our that The market largely significant volatility to reserves. capital decline impacted was half the annuity values the equity related index and fixed

strong is below XXX% stated seen of this recovery very and XXX%. this RBC year. While expect so is still This level have to increase we market capital based of upon our we the target far in the a

to which incurred lower advertising sales. resulted continue cost segment lower margins Life we Colonial Bankers to levels Turning higher of earnings claims. spend, health continued year, to the to claims. due prior in as the reflect earnings. earnings XX National's margins, reflect down higher in Penn's Medicare increased levels due earnings expected of supplemental were levels supplement of primarily in versus Washington Slide than period higher experience incurred affected

$XX loss and million television of earnings to We in million XXXX to in of Penn's to for in LTC we the expectations. seasonality with $XX range were in expect million spend, to expect $X first Colonial $X quarter. a million run-off EBIT line due advertising be the the

due versus year results prior segment down were investment Lastly, to Corporate the results. unfavorable

health part XX in to claims to Turning was Life benefit to costs treatments incurred a benefit in supplement expectations our as higher Part plans. of XX%, result related elevated than D Bankers Medicare physician Slide prescribed higher key ratio ratios. Medicare under due

second As already in. consecutive in locked of experiencing rates premium this is quarter XXXX are the higher claims,

will We XX% range Medicare be to in expect benefit XX% XXXX. the for ratio supplement the

should Looking remain elevated. levels ahead, claim

of ratio level higher experience. the due of for benefit be retained a rate for a level. We Life of the effective quarter in that XXXX care interest normalization will will for long-term XX.X%, Bankers allow third block claims from and improved a to business will increases benefit of favorable to file adjusted was XXXX lower ratio the

XXXX. interest Washington the for block to health expectations this benefit interest was expect claims XX.X%, continued for XX% XX% to be better due the in supplemental than We to ratio benefit experience. range adjusted ratio National favorable adjusted

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

key few moment me of a LTC to a Let retained take characteristics business. our reiterate Bankers Life

to the have reinforced than the legacy LTC by of in is industry of that As our different our business. materially our rest said ability we the and past, was business reinsure block

for comfortable are reasons. retained the several We of business with block

duration First, the benefit the our rest average than is significantly of shorter industry.

with has risk experience. X% of retained of of business than associated less reduces one-year, deviations This and of lifetime XX% years benefits XX% Our of than with durations four policies policies and tail with benefit policies less adverse the benefits. only potential with greatly

or with a significant product We sales to periods of Currently, our years have new care less. are years. up benefit of as comfortable benefit our two current durations short-term offers XX% sales our fundamental care either of offerings our or are product product two portion that long-term of approximately

reserve set assume of lowered limited rate mortality to significant have addition, assumptions benefit X.X% from business recognition loss of assumption XXXX reinsured year-end ultimate rate new incredible improvement, money increases. morbidity new upon And We experience. as future we based We X%. XXXX. we or a part testing, portion no In from historical our our since

Our profile. retain a economic business has favorable

As GAAP. margins than to in with most reduction but the importantly, lastly, rates a reserves be transaction. were rate. claims reinsurance $XX significantly the XX% million now of result been reduced And recent overall more are money ultimate associated has as of CNO LTC risk XXXX, perhaps potential liabilities, Statutory tail our XX% in testing just which recognition of stress GAAP GAAP of year-end conservative severe and reserves, net reserves. or Total approximately than despite higher tend million $XXX are loss new GAAP

to the Turning and alternatives a XX results about for the low, $XX.X in a be call up in income to negative just which quality income in prepayment Slide put continuing investment in in adjustment $XX our volatility but emphasize work in quarter. statement. Statutory to more our good higher points. to in at on performance GAAP a the order in We strong our impacted increase Impairments resulted continue We by of unrealized equity achieved from money quarter. in level, turn defensive the market income. million level quarter based in Important note impacted by XXXX. XX January million negatively RBC to investment were results the to mark-to-market that losses, be upon a with results X% benefiting cycle. this to while position performance Overall, credit continue be portfolio. in there a income take Should

recovery We these in a values. have seen amount of significant

cycle turning it companies regarding over is it classes. assets to that are Before asset turn back Gary, certain worth the exposures potential a mentioning we life insurance concerns credit aware to of in and and investor

have specifically risk presentation in I'll BBB the rated allocation and we back the that, are to with to for CNO's pages couple expectations to over of credit across BBB's, of appendix a turn and short, that with exposure comfortable In We discuss Gary. adjusted performance And it this returns cycle. added our bonds.

Gary Bhojwani

made business story. and the investments we for and was CNO us in significant XXXX of and focus closed chapter fix year the pivotal Erik. Thanks, a the

growing turned to We attention now our franchise. the have squarely

strategic As we to unchanged. XXXX, priorities our look remain

just to market through to address have serve strong solutions. entered continue continue unique initiatives, and growth. their of the our and momentum has XXXX needs both distribution diverse I spoke traction leaving will wealth performance. about product been and health for gain good the with We started offerings the laid continued our middle-income runway insurance and We for Many security earlier, significant of with groundwork to combination and

consumers their our open long-term With of success. dedication very our up Board team like our building and are would to to commitment and optimistic I'm questions. serving more for and competitive prospects. it thank to our leadership ongoing their Directors, that, stronger We Operator? steadfast let's associates for company a I about our

Operator

FBR. from [Operator of Instructions]. Randy Riley And comes our Binner the line first question from B

line Your is open.

Randy Binner

morning. Thank Good you.

have I question line. a supplement about Medicare So the

matter the take it. there's I risk pieces here drugs to confirm there's more. to are administered the subject that prescribed So that easier is the are kind just physician two think I that One, third being quarter to of of wanted continuation where the

product continues is, be then can case? how if explain a and roll the then you refiling we detail roll losses higher if know So rate I to somewhat the would to cetera? as kind would market to ratio? repricing, in how and of effort -- through you a benefit Or rates, kind repricing new there's et the work assuming on any would how want that implement be to And that the this the development able When elevated? follow-up XXXX, stayed of that file like the out

Erik Helding

the is This for Thanks question. Randy. Yes, Erik.

question. the the continuation largely in answer a of in the first saw your to part quarter. what saw of Yes, what was we quarter So fourth we third

quarter, if recall, to of we somewhat see if be needed experts you trend going if third it level a another a quarters that to new a just the worth flip. that and So in of was experience was of or determine was to

trend that increasing to And answer of second the ratio the two To benefit part XXXX. and quarters, that it's for the for so this is going be on unlikely the question. was your a reason with guidance

idea So to the states then quarter the early the which go experience will first that quarter be would in timeframe, effective of process various May's X-X-XXXX. the in or is, prepare the we rate part here June and those the of filings second monitor with would XXXX, the on

of ratio would points would year extent saw it's experience where that now. up we behind, a catch factored that the That benefit we're to couple the get and is for half to elevated extend in repricing expectations our second right this we in of to into claim level which sort the of that So continues. the of XXXX

Randy Binner

kind are there or -- it's do guess follow-up year ratably throughout the the if these more? these products is times effective X-X-XX, sell are But the sold I you of year where of Okay. there

Erik Helding

The once for sold year. but the given set products are year, any ratably is pricing throughout a year

Gary Bhojwani

throughout latter available in are comes new volume the which annual year. the enrollment the period sales, terms in the the bulk but year, of your they the Yes, of of during portion come will

Randy Binner

Yes.

of kind November-December. make these in everyone still people makes kind when So of else decisions, decisions their

So being those enrollment new that do open affect -- but for need you prices that if period? prices, next will

Gary Bhojwani

Yes.

Randy Binner

Yes.

Okay, thank you.

Operator

comes Krueger next the Ryan from line of Our from question KBW.

line Your open. is

Ryan Krueger

mentioned a as you Good reform? thanks. RBC from then and give then right ratio has also, moves are you And morning. the Could how of much following you market thinking about the Hi, how target RBC sense in January? rebounded tax

Erik Helding

Yes, Ryan. This Thank question. Erik. is the for

recovery about point roughly is two. So give XX or take a points or

So I equal ratio we would that would that the we that everything as be the expect low roll benefit would first in through report XXXs. quarter else

from In terms perspective, the that's which going think we've with so at want some that go recently to longer-term the reform to target excuse tax a And XXX%. XXX% through. for to all talked be we're we're operate a changes going of say, lower RBC forward, speaking as Practically -- times, we, is I me, an XXX%, though that target the giving going buffer I'd no after rolled were about effect to against just target, than

expect would I between somewhere So XXX% to the and over longer managing term. to be us XXX%

Ryan Krueger

detail types as just the thanks. of portfolio well ABS Could And and then portfolio. collateral on the portfolio, the Got within that bit it, provide ratings the profile? investment you more on a as

Eric Johnson

quite Johnson. Eric portfolio is diversified. is This morning. good Hi, Yes. ABS

we business whole or fairly would esoteric. significant cellphone what like we a don't and the lot have ABS, do other we tested ABS. securitization, do of more other products of like securitizations esoteric whole less solar of premiums types be example, of don't types things amount call We around a For which

small limited portfolio. amount a it's have of lease also airline fairly ABS, We a

the tend there's seasoned And certain portfolio quite and We invested to you securities new is of, with highly characterize then lastly, as allocation have legacy market. portfolio there and that a overall also might amount well. diverse well could subprime of of you no percent there's , a some rated a a that assets. which entrants consumer very loan Within -- ABS, SFR not something substantial a into it's securities as single on are be

roughly probably So within the invested it's assets, a got diversified quite overall XX% allocation of that's it's footprint.

Ryan Krueger

Thank great. you. Okay,

Eric Johnson

You're welcome.

Operator

comes Our from Dowling from of question line next Humphrey the Lee Partners. &

Your line is open.

Humphrey Lee

Good thank morning, for taking you questions. my and

Randy's on the related Just to to supplement. Medicare follow question

you for assume XXXX the XXXX driving XX% at higher ratio the just benefit the looking there, in had that's XXXX. Just you from level some ratio benefit to looks it of I deterioration and activities are think XXXX, crossover being XX% because expecting repriced like I

that's you was the some expectation? like So would of be it I looks your just case terms provide if additional why wondering are like that expecting color deterioration. If maybe in can you further

Erik Helding

Yes, for think Thanks -- is Humphrey, I question. the Erik. this

supp So reflect and increased XX% of XXXX, XX% you may higher results, to the recall, fourth from quarter was XX% crossover. at claims slightly to actually that for the the Med we low the announced have to would end that guidance expectation we dollar ratio to we benefit XX% the related

we expecting. And little see we were that than we did so a come more would through. probably say I bit saw

for And the ratio XXXX. so material performance -- factor benefit wasn't a but that of sort in

I what specifically of year, think in real was in of physician half drug uptick some claims to treatments. came which administered we the the the impact really saw related the these from second

so think And came the divergence real that's from. I where

that XXXX XX.X% so dialed look we're the pretty it XX% at you range and year in. for comfortable should XX% was results, If pretty well to full about be

Humphrey Lee

can has how the if understanding fixed my in you funds. looking the income wondering this should COLI invested equity source some Shifting Okay. in just a assets gears, about and versus the at return provide we that for are volatility was think going I is segment of split corporate that of forward? detail mutual earnings been terms and between sensitivity But funds COLI

Erik Helding

This again. Humphrey, Erik Yes, is

and is XX% domestic is rest I of over equities XX% the XX% equities. to income and the allocation international about asset XX% fixed believe the equities, currently So is the split -- equities, that

we big more it. certainly our markets the good of us. so quarter balance a in comfortable XXXX. with We're some over a ways, a manifest that's volatility, pretty the fourth So in there's of had itself it's just mirror pretty What right, is you're and in XXXX like was so. we we and allocation image some earnings what for movement when Yes, saw in there saw in

So it's equities were be we and that XXXX. otherwise and it attractive to But alternatives we in by able also well. wouldn't to a about way in were because same that the result this without of like tax-advantaged gives very it's they exposure almost capital-friendly the XXXX positive amount negative asset, as in sort us

Humphrey Lee

Can you kind million. million I provide the 'XX, size ballpark, obviously, terms Is of an but right that is of in the should $XXX COLI portfolio? the size in about how end -- update at we kind assets? believe the of that still think $XXX of roughly the the decline XXXX, it of in of there was the market to

Erik Helding

Yes, million. $XXX so the decline, about of market it's net

Operator

the of from question comes from Our Bass Research. line Erik next Autonomous

open. Your line is

Erik Bass

and broad-based I the you. of hoping terms retention where dual more And a And you driven seen agents? bit recruiting? agent could thank granular in Hi, it the was in improvement the licensed is by or provide productivity at the detail Bankers? we've being at improvement, count primarily

Gary Bhojwani

Hi, is for Erik, us. Gary. this joining Thanks

up a the by higher XX%. agents going premiums X%, terms in significantly gone think total we've productivity, new number first-year has seen count just all, of specifically first a So it, about of producing but way to Bankers sales the up of of a simple

for feel way So give just I'll the think you about a productivity, that. two, rough difference just in you to to give those a

we've lift, of population, that with strongly only sales dually the definitely you the are for sales saw they they have Recall it's greatest the I annuity XX% It's and sales. licensed to the say by In where agents. the accounted XX% up. for terms would annuity themselves annuity of of but XX% how our agent of seen accounted

highest. is their the So clearly productivity

Beyond productivity. we would in six a quarters wanting model folks or will maybe I higher yield, terms, to lead that recruiting ultimately tell a to which you and higher count a maybe to absolute fewer we've higher were move meaning, agent even talked having more four where about that, about or

various that pilots quarters good last So we we place feel four the put those in to very the are results. over yielding six

Erik Bass

and higher? believe you the time. licensed go number reach dual can right potentially XX% over Why And Thank you. mentioned you that is it this agents could

Gary Bhojwani

potentially mean for it before, to this crossed bridge could I it we new us. go is We've Yes, we've built this XXXX building remember, and one years this ago, broker-dealer higher. -- are out. never has two just

XX% in -- and go an I a is that to could bring licensure, good guide in also point would to. term dual to range ideal it So people we agents everybody. that think the they We a remember, as bring setting the conceivably higher? out want agents Yes. case not the long that's in, we get but for they new see that long-term career this that

to we're absolutely conservative somewhat in it we're trying to, So higher. I be yes, but of what could think, go terms guiding

Operator

comes Our next question Gallagher from Tom the line of from Evercore.

Your line is open.

Tom Gallagher

make want cash this the flow about thinking the to and sure I'm Good for right go and RBC, just I Erik. morning. way. through Question

of that million RBC is starting or that? so a about to year that which dividends $XXX and million any your fair XXX%, if to XXXX build RBC Or would you highlighted, share repo. flow year Is So would free it? it probably have you be a this free of the would to flow to your cash a thinking that leave $XXX adjustments and to say guys $XXX make for a common that cash given right -- is million want target retain for where you that is your way is

Erik Helding

Yes, Tom. Thanks Erik. the questions. is for This

the absolute terms, in think correct I math. So that's

markets here on about the in going we're first to that I it I that equity manage think way back XXX% get lift the to quarter in which, the think just is minimum again, think by of I we're you to we've the seen. going

feel don't I XXX%. up need an so back to And to build immediate

to generation. flow So -- going immediate of cash free cash have we out of I million terms I think an it in call come that's of, wouldn't $XXX don't of

we capital the think that build an over slowly implication down or to of from have deployment excess makes and perspective. can is up sort anything time Does I that capital sense? stop of we slow don't that

Tom Gallagher

on I of evaluation following deployment. now? of earlier heavily opportunities it right as it moment. just each itself? repurchase in with at you looking comments presents Gary, share over What's the does your That about just view really on -- and favor at capital hear be the take a The opportunity it is Or Would alternatives? your given other priorities

Gary Bhojwani

that question. case and basis opportunity compelling right regularly Tom, risk to a that. at We're got we've opportunity give color thanks I'm I we considering think here. have the opportunities, also sorry, adjusted on think Look, we more a and looking I just by represents an that external now, stock our you can't one for than we're assess case. and each

Tom Gallagher

is risk comments on up, thoughts want to understand No, guess will that. be the I based that level you all, any just you the you bit on a put or of repricing retention you side at ask, or going lapse in of I there on I you a bit is have supplement competition? will question, you what reason I revenue competitive can just level you rate the whether there? whether think you're a risk a of repricing, you for? Medicare Does disadvantage OK talk maybe some think think about and there's final And if hear of about on the getting whether rate, -- remain

Erik Helding

Yes. is Erik. Tom, this

for going rate that's I we're and to what ratio not going sort you benefit that one. reasons So going we're to what is obvious fair to make think. point for or to specifically to answer obvious The a of file question, I'm competitive target your speak

but inforce translate one that we file as mind new for what be So as keep is, rates will we into we charged business, increases have will to in of rates a well. contemplate the couple things, for, rate those

And to to is the is so be persistency. inforce dynamic what implication the there going

increases in all company what so on bring experience at persistency. and historical then sort the those to look terms back And we on that at at potential of we've various based together taken factors external then outcome we the what's rate best that factors. look assess, that of all levels and had And impact for

year. goes rate our So factors sort but for that analysis, of all of into the upcoming multivariate increases into determining

Gary Bhojwani

here. I dimension in on preferred because I like listening supp closer I've course, this it is where morning different there initial missing have I chance to seen to expectations? I've had offer key of from our want Would our had to that had, skim a questioning in is Hey, the a and Tom Gary. write-ups jump line different and I perspective, that issue. to I we some -- wasn't have have focus the of is to, OK. ratio had analysts want feel come benefit slightly even here Of to to this a a this Med guess, prefer want the to a not

shift. benefit but preferences So at material to away shift interested, There's the Med we capitalize on would reasons that, time have to a very from something a if and been has consumer in has that consumers the other you're else the can in like Advantage. supp in a Med least been in my opinion we There lot have happened that for position talk been but a at that, of about same we've shifted that has direction.

extremely You our growth Advantage. saw in the Medicare strong

attention of reason the the your that's agents important how time reason the I the want are first Bankers' Medicare often, household. that remember Advantage and Now a supplement draw that, into the get very on frankly of majority the to that's Medicare

trust that but of pick then we're the Med up the on fact Med supp care, I on sales supp to getting relationship up importance household, product. that pricing, the opening right, we or the into the long-term and very focus want And Med the of sight in So Med we positioning for life our of this all to is sell us, us annuities, the of or of fix get focus sure Advantage strongly. need lost of to the were make in that, this we haven't which on will all top Advantage

in future households very significantly very up new of are positions other We well for in all us the which products. up the opening

but to shy into I these bigger make of and products. the So Med with sight benefit households sure ratio, to again, getting away picture happening I make Tom, from we makes what's I want that want sure, Medicare-related with sense? want don't lose does don't supp to the

Tom Gallagher

issues a if you're you quick the out -- Gary. the Or can if on one-year is look That that out just contribution? to you them a follow-up my seeing Would you're it when a enough it you're the from from based growth pressure margin kind would could over versus the and Advantage that Med balance say, that, -- on question? transition seeing you on is you just is does. -- Advantage an earnings Med offset you Thanks, offset the way some next supp And of near-term years. is guess repricing dimension on momentum that, I couple there in having, the of Med of the earnings margin standpoint

Gary Bhojwani

give Med margin performing a couple is on our perspective We Med number Med the as me better, because you, But an as it benefits alternative remember, make sell the of we let to we has other for the best which margin. underwriting on don't the of have it that. to distribution well just expected, supp course, as a you but like specific is a Advantage, second it. Advantage When

First household. the bit talked us about in it We that. little a gets

it use to our us because allows non-life NOLs it's Second, income.

it's tied distribution very this no E product. in is is there ROE helpful this, a Third, because frankly strictly our to up

middle-income to it's to to point, back to probably us into the service Med with think where the those entree to consumers that and is albeit the as because term, math continue to how be products we've are, the Now other the misses the equivalent doing to long be to point broader Med money is, to roughly But all got the these supp. household supp. where we we Med as much Med Advantage relationship and we're the still important for I sell the where opposed is, get as that's greatest could that Advantage is can place

Operator

Our from next the Bergman line Citi. from question comes Dan of

open. Your line is

DanBergman

despite in new Thanks. rates. To sounded morning. margin largely money it was reserve the long-term reduction start, the assumed a care unchanged, like Good

the pieces in you of? and moving what on main So overall, could color any some we just should changes care there if see more aware provide be some just assumptions wanted to assumption of review the for were long-term

Erik Helding

is Yes. Erik. Dan, this

loss in businesses results in Just of came pretty testing our strong. year-end recognition across aggregate all

Our of last from about percent liability was are net a net still GAAP GAAP -- unchanged XX% and margins as year. that

So pleased with the results there.

basis LTC million margin block that the did did $XXX based the XX LTC, reinsurance pro something of For is transaction part done expecting periodically five, net specifically that and the ago that come in. of a is. in This we rates we yield where we X% good or amount We are estimate X.X% sort lower on liabilities is retained were and XX% expecting new of that money as by we ultimate where of roughly and the GAAP the feel were rate points. have years and was LTC forma about that six past the of announcing the curve was now the

that $XX but all million So to decline assumptions. the contributed probably in $XX the or of other about margin, experience our across million

those. basically morbidity, there among sort that mortality, big that one really netted was So persistency and expenses and out bucket not stood out of

DanBergman

like can in quarterly there shifting look is then the is what highest Got the gears, to just maybe in pretty the And quarter big it. level I remember. jump thanks. fourth collected -- it the premiums annuity a

going the whether color we and line to about should in you around could current So strength just the any just drove some what more in thoughts how were think forward? quarter provide see had that and sales you wanted if the on that item sustainable

Gary Bhojwani

is Gary. Yes, thanks for the question. This

a things on. going I number think of there's

insurance The existing to licensed. is, to and an emphasis continue our take appropriately remember interested qualified have folks and that the of first become we agents have dually

financial And to they able they're so about like needs, talk talking naturally about products annuities. start their when overall to folks

about professionals, drive and products, going that's financial so a multitude to they're to some of as So more become we get licensed demand. more agents able talk to

tailwind You do conventional as a for better economic when that looking annuities index stock far there's because a fixed safety. go, market as of says volatility lot macro annuities wisdom are have consumers

that clearly can large, overall see means. So been least some annuity also with that have of good competitors annuities what hearing the the acquaintances our over from at means macro been also a look may last what for there us. be read. And and results. the at by fixed I friends or have mixed consumers you. the sales offering results about We what or factors, have Besides Many the or tailwind been, and quarter, have index their that that's industry are posting reports that

a a we good We number really of tailwinds this us a out So this us. significant for in and job doing future different are with that the there's opportunity helping here. is believe think we're

Operator

Scott Our from the Sachs. next Alex question from line of comes Goldman

Your line open. is

Alex Scott

morning. good Hi,

follow-up I spread sort IRRs. to about interested on the guess, annuities. levels first of targeted just index achieving The was had question I fixed there hear the you're be just I'd the

disclosure the kind of of on as things kind supplement, don't this to achieving of you're Some that quite just the understand we with in have much pricing the growth?

Erik Helding

Erik. Yes. the this is Hi, Thanks Alex, question. for

better. the both fixed in or fixed annuities pricing with indexed achieving slightly general line interest So going in that I'm we're in to our terms are speak and spreads just

with where satisfied very we're stand So we there.

Alex Scott

And that sort new I of showing you're overall? is mean yields assumed consistent mean money pricing, the I with new money the in your yields

Erik Helding

is. that number overall than typically sort pricing corporate new yield the money of We assume lower product CNO what slightly of goes a into the the

Alex Scott

was of on to life. Okay. And just continues That place sales of Would the a of then growth bit. drag a sort direction more sales. interested one maybe be life in view kind on for your

If if -- annuities you insurance help going bigger think and is Advantage turn over going the life overtime? shift that Medicare some of this toward a mix to around just to fixed see we're or index

Gary Bhojwani

couple that answer this. So, Alex, I'd of ways there's a

the life that continue to We insurance and what elaborate underwriting mixed more that we will bit have or impact at looking all, of I term. first book effect the let believe life but more a implemented believe little net insurance our We me near guess of a a on in enhancements bankers, will a bag the So future. profitable, that. happened material in was it's corrections of get number in of at declinations

in our up. year, the Now a the look of went they it's applications number bag, say, second came reason I at that particularly when mixed field, specifically of actually in you the half the from

know we if about are the because of just but actually consumers to up, talking our our there an went case change is they well. thing we the out was already of that Life from at very be term will declinations life quite results, this underwriting And felt still is you satisfy, Bankers of the as need we applications an in important that more field think had do. long our to book least, good. performing But So

growth we've captive distribution I that's over if has distribution you insurance pivot there, Washington And very look we've to seen National, life if at that Now Penn, where substantial growth. obviously, we strictly to controlled historically seeing are shared Colonial been able then selling had growth numbers of some with supplemental recall that on you and been finally and have on more the life life through cross sales working break start We focused health. I you. that

to opportunity an see grow life. we So

morbidity. that of middle-income that longevity all more my personal term as belief is the and that opposed income, said, there and have -- to Now needs mortality consumer of all they accumulation said, longer for

their they products or that. plan like what think retirement to needs products or combo things and constant how because I similar push this there's for So need care simply of annuities, short-term are like toward

about terms that's come good they're But are. our with and in what they're what distribution and out I how reacting going force to think seeing I'm in. there is of a there I about, very what So those to talking force numbers consumer feel consumers

Alex Scott

right, thanks very much. All

Operator

Jeff comes from of William Schmitt Our last line from question the Blair.

is open. Your line

Jeff Schmitt

good morning, Hi, everyone.

revenue the X% Bankers XX%. What's which Life, Medicare up think that difference is is distribution where in of think income Advantage that were fee down Medicare issuing there? I at Why policies I Looking product. the drives Advantage that

Erik Helding

beginning rules Erik. we recognition has the actually difference this -- implemented new revenue related the is that at with this of year, Jeff, income. of question. Hey, believe do bulk Thanks fee the for to to I

going that'll all prior get and the a recognized year, in this of now on recognizing sale. so of equal installments. at sort were in basically year basis of XXXX revenue forward we point And sort the quarterly And

first the we lot of enrollment lot that commission the collect that that where that's where open a gets in fee tends activity obviously so of the pay is to that's the related we so And and quarter, to a be and recognized.

Jeff Schmitt

Got it, OK.

So more a issue. timing of

Erik Helding

Yes.

Jeff Schmitt

X% looking average. you then quarterly Washington the levels about there? amount agent in efforts talk at National And up a the Can I think your maybe fair

Erik Helding

the I In break it different few National, buckets. up case Yes. a would into Washington of

work So very, quite and sites up were our within PMA significantly, up performed well. very we channel first was force strongly. distribution very our of all, had They very,

consumer well. area PMA focused Our within did as perform not

for out of in then netted So a aggregate. we And the our increase an each a slight there. bit the two with positive other saw independent agents, finally,

it. of composition the that's So

going forward, I'm We've of very well I categories, as three enhancements the given terms agent as at changes of have some independent there in recently Washington, delivering hopeful agents terms we've and so made In of believe PMA. some opportunity be the we we an put all meeting in in for on, and counts. place leadership will what

Operator

remarks. will call closing Childe for further no Jennifer over questions I back time. are there the to this at And turn

Jennifer Childe

again for in we interest to soon. everyone forward Thanks CNO speaking your you with and look

Operator

concludes conference This call. today's

now disconnect. may You

CNO Financial (CNO) 13 Feb 192018 Q4 Earnings call transcript