CNO - Earnings call transcript Q4 2020 | CNO Financial Group, Inc.

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the CNO Financial Group Fourth Quarter 2020 Earnings Call. At this time all participants are in a listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. [Operator Instructions]. I would now like to hand the conference over to your speaker today, Jennifer Childe, Vice President of Investor Relations. you. Thank ahead. go Please

Jennifer Childe

Chief Good Financial thank Earnings Group's will Gary Today's operator. Chief Paul us Officer. Financial Conference for on presentation Bhojwani, from remarks CNO Fourth include Officer; morning, you, and you McDonough, and joining Call. Executive Thank Quarter XXXX

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

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

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

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

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

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

Gary Bhojwani

announced DirectPath remarks on outlook it we with I'll in questions. joining up our going commentary to I'm year to results before a quarter before acquisition, you night. and discuss to it finish start provide us. turning Thanks, full discussion your Good for Paul detail. to opening performance, and and a of few everyone fourth Jennifer. closing the over thank more morning, financial I'll our with brief last then

Turning to X. Slide

the our year next the dedicated is Growing and it this to are strategy. our we last market. to step announced transformation Worksite transaction capabilities excited this about Worksite a brings created Worksite CNO. We The enhanced business that very in division

DirectPath are solutions. education as It to Worksite expanding management and to provider the from operates position multiple directly employee small of through provider new brings Worksite broker is services, significantly services individuals. Fortune businesses Worksite in employees. all partners. DirectPath XXX employee more higher leading XXX employers for transparency benefits benefits X.X million of primary nationwide COVID, companies, sizes and our of employee and communications approximately fastest three national CNO sources to serves We growing a revenue and reflects industry. to benefit employee businesses services. CNO; Prior business X,XXX advocacy which a employee to one us services a compliance of employers full-service and base than was of covered It the

consider of transaction The the future. million our to we are targets executing capabilities us. $X.XX for into in per builds is our The extensive cross-selling our We help purchase our against earnings beginning transaction opportunities to DirectPath expected Through base. high-return its will existing will our referral is out may we've certain M&A fee-based that drive add fee-based if so. and adds in was the to Worksite share $XX next opportunities with price again been types and XXXX. holding earnout, resume financial There expect of the diversify of additional expansion cash. the playbook in ROE. businesses that an achieved. funded dynamic aligns DirectPath chain. year of well This It the to overall and value revenue will gets reflective is It out company us employer deeper or over also create structure,

our free and XXXX. We beginning growth full of operating XXX% $XXX distribution share operational dividends, XX% we for million the channels. income which operating our COVID X of of underscore XX% and backdrop, year cap $XXX we Despite form reported many year, the million Turning to End the market strength in the shareholders flow per of during performance. to and Slide full earnings and returned or buybacks achieved our at of reflects of the accomplishments XXXX. results important diverse portfolio resiliency continued our of cash product and

XXXX, per the improvements direct-to-consumer our these cost. Integrating exclusive In experience the to agent the our customer We service year health build and sales similar in force. agents. business generated from upon our Leads rates we division, This consumer source DXC our of increase led overall new two-thirds for have Within collaboration marketplace business business become a we've lead myhealthpolicy.com. opportunity with in for continued of significant exclusive increasingly has create efforts. life our and to market. field launched Medicare success these leads the to multichannel channels drove digital life insurance by conversion new cross-channel field sales generated and an important recognized acquisition

in strength health of face-to-face couple online with strength of and is depth This our our The take and the competitive market. online become to space. to the significant a is our differentiator. insurance a force objective Our player the growing offerings distribution, use strength it key our unique agent is

grow five profitably as intend business. we became life direct-to-consumer of Just to care scaled direct-to-consumer provider successfully top we the and health a insurance,

in our Worksite division, growth modest base. employer saw client the COVID, Within despite we

and accessing workplaces extensively face capabilities. focused restrictions Of building virtual to our on we complete course, In employee online enrollments. we enrollment out significant response,

virtual XX% sales comprised full the For of production. total year,

– value to our another industries of the was this serve. we year. of our and levels, stable Continued persistency business our premium Persistency worksite modestly products the up mix attribute protection driver of consumers' actually reflecting was historical our key critical over

the COVID, recruiting core softer agent recovery. to in XXXX to critical ultimate on-site due our demand our with are sales slowed align intentionally efforts and who we managers rebuilding driving retained While force to our for enrollment our we

We in and well-being embed across to commitment and and our customers diversity, our to As I've agents wellness supporting director named XXXX develop in made expanded senior a in pandemic. associates, inclusion investments ENI our financial shared of equity practices we to support and in ongoing previous the to and organization. safety, quarters, our significant initiatives the response

made We our of is our responsible United CNO central in a for which analysis strategy. which us our to investment to are Nations principles now business principles commits overall progress ESG and in investment the ESG the signatory efforts, framework. also reporting principles incorporating to

formally our adopt expect publish and this to responsibility frameworks year, we We the corporate TCFD reporting SASB updated report. social when

results quarter. our and X, Slide to the for Turning

benefited deferral drove which medical continued Our margins. the health fourth quarter results of from ongoing care strong

XX%. by investment alternative a Our robust performance share earnings Operating boosted earnings. particularly per was were also up

AOCI up X%. share excluding book diluted Our was value per

saw metrics. key quarter we continued improvement During several in the

in the However, both headwind the sales impact collections fourth and but previous to recent of the and was revenue COVID Fee and on future agent in to development related will income periods. quarter health initiatives. marketing strong solid spending cash flow saw in across calls, enabled continued late capabilities wave weaker the the of offset beyond of an were from business myHealthPolicy.com. this acceleration conscious to of on sales growth as we build Premium Expenses a provide by reflecting our details. our This the for XXXX reflect remain franchise signaled opportunity fee to and primarily divisions, the by support of capitalize in created higher metrics. a was We certain on strength decision. the us growth pandemic. in and higher to opportunities driven more spending differentiation. quarter Paul growth than down growth The

at the in ended debt quarter with and $XXX ratio issued in holding November the RBC liquidity positions and in with million capital cash Our subordinated remain of company. XXX% solid. million We an $XXX

up registered sales in approximately investment million and new growth reflecting our agents. XX% $X.X and billion. XX% reflecting driven assets. year of was Health Client metrics resulting recent strong by from Turning were a for the customer life half $XX health adviser. growth increase were the by to the was in in recent persistency growth the XX% full and our base. largely on a our growth fueled remained client down of broker-dealer the premiums sales our both continued field X.X% health healthy to X% grew premiums revenue within exclusive growth recent to in were NAP year-over-year. impact in solid XX% for decline softer management a challenged, X. quarters. Medicare quarters. continued up premiums under down in third-party our from and Slide sales by Collected Annuity Fee were in-person quarters scorecard Of of this growth the nearly in prior Three sales trend Life collected strong Collective sales year, were driven supplement up quarter reversing quarter for X% X% sales. XX% the direct-to-consumer up and assets five sharp up over

Medicare secular Medicare As Advantage. customers of we've field core has of agents. supplement towards the our discussed the strength in from midst previously, a complex been exclusive away landscape Medicare a we're Helping shift navigate

Our loss strength a key approach consumer contribution digital and Medicare a will same our the marketplace health provides a It's to Medicare preferences a Advantage delivers to manufacture ratio sell also strong field is both sales. to shift incremental the time, to capture new of leverage continue At in the agents and our we to Medicare market, peer the and which differentiator. plans. few in health presence meaningful compelling consistently our supplement margin. companies Very maintain

sales reflected in are annualized premium in the the Medicare fee Medicare reminder, are As reflected a while Advantage supplement revenue. new sales

Consumer sales to as from is up Again, quarter, field resulted Turning This generated in acquisition half in were productivity one strong insurance life to XX% up in XX% model X. XX% growth our underscores has supported Sales life leads the life comprised year. the for agents lead were sales the up as XX%. Slide Direct-to-consumer other. this which value improved and the customer on dynamic our our Life channel. total about growth conversion up sales channel shared direct-to-consumer of costs. division our of metrics, by full rates feed cross-channel our unified of such exclusive remained by distribution able and for

business. to on earlier, our I the create are health we same dynamic As the of side mentioned working consumer

period, During this year's products of online field consumers and exclusive purchase to to sell one us able local Medicare tele-sales were agents Medicare or annual from X,XXX Medicare from enrollment plans. certified

platform consumers created to for itself. the consumers tele-agents of agents, launch pathways field a we the tele-agent to refer myHealthPolicy.com for our refer local With marketplace, or agents to to and

the myHealthPolicy.com result, policies our in and of in year sales accounted the As policies total the sold were up prior for Medicare a third-party our increased X% third-party fourth health quarter over quarter. Advantage XX% X%.

country the impressive. was clients Our pandemic, engaging more the exclusive makes more in are areas our count momentum and from producing remain field productivity our of even to number face-to-face Due resurgence related stringent agent appointments. down sales quarantines concentrated. also and the COVID our of agents where kept a in more of COVID X%, the which agents restrictions

As at a producing, be agents each to as to our month. need counted reminder, sell policy one least

up Our exclusive field agent agents actually full count, total tele-sales our which X% year. the for and includes was

grow number financial core clients. to we are of to relationship the We securities continue force the our is representatives, licensed and changing how evolving with our field which

X slide improvement were levels year Collected our the strong up sales fourth profile the Relative existing in the however, continued Division. the has to to sales quarter XX% with of continued employer sequential XX%. to employee period, Worksite our over groups quarter. persistency. sales Turning ago third healthy Worksite remained in down of our translated in premiums as saw We

of the a increases steeper is workplaces unique opening Monthly quarter term slowly, new launched in more sum rates Group Design a designed income death replace average that group charge. business. monthly in group cross-selling in a the and country called recovery recent in the per quarter. worksite fourth infection is month in results a employee benefit. product expect the a WBD Income NAP Benefits XQ, Protection drove delivered to activities in X% continue lump across we than COVID including rather Web up path increase life product This per the to solid Given paying life. X% We overall

President, Worksite bring by of will The remarks, to DirectPath will team. to be Mike our Hurd are by DirectPath, will me my join I prepared we at Both As worksite excited Byers Byers. the mentioned organization. Mike co-managed into CEO, and Chairman and our executive and Mike report division current beginning leadership

We XX. shareholders to the fourth slide buybacks. including million $XXX million Turning share to in quarter, in $XXX returned

million average at we year $XXX price full buybacks the of on For an $XX.XX. deployed

time. We to Our of excess its capital consistent. use intend strategy over our and remains to deploy allocation capital highest XXX% best

provide our rather also fourth While that will remain share through repurchases form a our an investments critical is organic remarks. his strategy, color Paul, in the These worth flowed expenses play of important future success. than to expenditures. operating most as inorganic our component organic role. investments income statement It our as more quarter in of investments mission-critical noting and capital

Turning to XX. slide

been ultimately expect own and their to $XX these disrupting To in have We companies enhance and five and/or to years serve market that million Human opportunities, vehicles two us improve returns, ventures, a We past investments for relationships, CNO and HealthCare.com, companies we the the merits and Kindur. partner strategically making are our Over our with collaborate invest deliver consumers, date insurance relevant us are track to products in our companies. we've those fully with stand technology. we They including new seek engagement space. total with various and InsurTech seek attractive that returns. financial services in companies various we digital speed Through and minority on important FinTech also particularly innovate. of source and invested API and accelerate attractive investments as out to can to also develop help generate

turn to similar over portfolio We per that, other And impactful year. Paul? few in a The I'll Paul. with to it ways. will expect transactions but small invested to total complete our assets relative remain

Paul McDonough

everyone. and Gary, Thanks, morning, good

our weighted our offsetting quarter, the outperformance driven fourth quarter capital XX. in Turning items. product income share excess product earnings $XXX in for the by in the reduced repurchases average from significant COVID from deferral our XX% on highlights repurchases, margins, share We X%. of insurance customer investments. in the which fourth Earnings per partially up investment health significant and to and share excluding and deployed benefited $XXX by count favorable continued investment fourth million also were increase from share Operating per share net on to strong expense by insurance decrease quarter full context income margin up the of slide by million initiatives the Benefiting year, related of period. XX% our income, growth fast all quarter by care was resulting of an the alternative financial trends increase spending the and driven both in to of half included in virtual digital fee strong on spending These in second the and a earnings track expenses in things accelerating decision supported initiatives in spending market capabilities, related analytics to relating and in and improve in XXXX to supporting income which myHealthPolicy.com, flows an initiatives virtual activities Other our as experience. sales policyholder growth initiatives fee the various through our customer our to period of fee to relates as revenue. and include on it data line service and designed examples access,

our investments XX%, of equity prior generated months period. which return flowed excluding on XX.X% statement XX December line. ended items to In products XXXX, of the All the the on to operating year we these through income in expenses XX, compares allocated significant

XXXX, annuity as called driven net significant rates, assumption in a X.XX% quarter impacts. press third drove initial which earnings a annual but in index operating favorable our reserve the a and favorable quarter, rate lowered our our was we to rates Separately, material assumption the actuarial our related in XXXX to impact by referenced annuities. favorable XXXX. the adjustment quarter. Those out part which did in earnings, from in impact update, lower the manifested $XX.X which turnover embedded new in we of asset assumption to money create as not The we had in portfolio in the portfolio of the unlocking lower fixed million As release, X.X% the completed review GAAP derivative that of fourth item

slide XX product level our and Turning to results.

XX%. the million in quarter $XX or margin was overall Our fourth up

results COVID it care $XX of included products product by and ex modest care COVID. impact driven life a deferral and of and products health annuity million our This up our items the X%. or significant stable million $X our Excluding favorable in reflects spread in net was health compression in generally

to alternative as realizations year-over-year investments This in on guidance. driven the excuse increased on $X by five Turning average of net to alternative the and million private products me the outperformance in mean XX%, our decline income largely the insurance as a X% in strong yield Investment to prior private Investment consistent of declined slide return and Sequentially, increase points to liabilities investment with results. performance. translates those our to income investments not period, an between basis credit a was XX essentially to equity average flat was the to products by annualized point equity $XX $XX basis results. year-over-year XX -- yield by investment allocated private of X.XX%. favorable strong X% million offset impact our million and compared allocated driven expectation reflecting

money year-over-year rating an million driven the sequential in was presentation. summarized down of X.XX% and and new reflects money This assets average more new detail of an $XXX by change sequentially of primarily with tighter page of both earnings of rate on XX spreads. as XX points years XX Our invested in basis the average credit BBB+ duration with

Turning up $XX quarter fixed our to comprised year-over-year. At invested is investment-grade assets X% slide Approximately from BBB XX. rated holdings, allocation our were rating A. single slightly quarter. portfolio the The prior of investment-grade of maturity XX% up our end, of an XX% with billion, average

can gaming pandemic including on to our we year-end, earnings underinvested be restaurants. the of presentation, of and page considered see as nonessential retail of in remained energy XX context high-risk As hotels, sectors you in airlines, generally the

Turning to slide XX.

basis. the XXX% free fourth a the flow and in quarter million this of income operating XXX% excess flow cash We or of trailing quarter cash income $XXX operating holding or to generate million with continue strong XX-month company $XXX on to of

minimum our end million posture $XXX to XXX% our which million end, million in $XXX $XX the DirectPath targeted capital of quarter a or capital was at quarter million the from approximately million, of uncertainty. intentionally XX. excess conservative of This maintained had We RBC represents XXX% excess consolidated to of liquidity $XXX to deployed the range of our capital our target XXX%, the related At more quarter XXX%. of at September net on down of The ongoing approximately relative transaction. of this XX. relative liquidity Holdco Holdco excess high context $XXX COVID slide end to was represents Turning ratio

year. slide XX our of for Turning the remainder the to and outlook

infection expect a agency we We momentum continue case are generally XXXX. to related From certain XXXX. second the our continuation the of two run perspective case, earnings in topline economic experienced relative rating with From the XXXX and COVID-XX positive base base we impacts. we half adverse that and death scenarios of headwinds regarding rates, of assumptions expect that aligned perspective, in sets an in rates, to

the The first care morbidity and and worth we expect case, in a the second It's continue care else consumers product neutral the equal. half COVID relates normal to mortality health to products that unfavorable benefits of providers in in and year. to first as more full the also for we are the more related noting vaccines and/or decline COVID base XXXX net will COVID toward half margin this as impacts due trend our insured In will hold. to our expect protocols health that all where take claims beyond modestly reduce experience modestly become in to accustomed in favorable in and XXXX sales translate

outperformance compared XXXX to significant alternative for from opportunistic and a XXXX. of reduced trading to potential as in second particularly income relate earnings income investments headwinds in The investment set from

pressure from earnings. lately spreads, continue has tighter pressure to interest with been low continued generally, will rates coupled Lastly, which

in products offset also of expenses, modest offset to our yield be in income as a These translate continue from base decline assets. operational half invest the a net in a continuing this to margin initiatives. headwinds expect while likely in within notwithstanding year slight asset expect decline in will the the we we to drive by as product second mostly efficiencies, growth growth investment insurance the on We those to allocated flat will

levels our excess Regarding excess on in should of XXXX repurchase XXXX. life generation still result pressure put capital, capital activity flow capacity position case flow rate actual healthy scenario our exceeding year-end cash base which flow repurchase free XXXX in our modest share at top we free Nevertheless, conversion exhausted free cash on our and NOLs cash of our will in in share XXXX. in

manage adverse scenarios our targeted our turn had dividends I'll we expect a with and reduced able within our amount in capacity RBC back even base levels, And at intended pay leverage still case to and over to our liquidity of repurchase albeit modest tail shareholders, to capture much holdco share far levels to is debt Gary. to the out which it case. compared Importantly, that in be to

Gary Bhojwani

Paul. Thanks

to XX an was Turning many -- slide year on XX. to fronts. challenging slide XXXX incredibly

while to and financial and than that Our uncertain of short-term the There's pandemic proved of difficult remain. continuing view no can we in organization from less customers, visibility and have conditions of detract respects, XXXX. XXXX our associates, results demonstrated resilience even communities. and the our emerge we we the agents, long-term had response question our many support from clarity that prospects. crisis In not should into The stronger lack

for remains and and stay on support our continue be the term Thank Longer your financial franchise couldn't this position opportunity of and of CNO strong is and capitalize optimistic robust. you healthy company more Please interest Our before I safe. future to Group. in us. to Financial the ability about our

now it up will for Operator? open We questions.

Operator

first from Ryan [Operator Instructions] question you. Krueger with KBW. Our comes Thank

Your line now is open.

Ryan Krueger

questions. Thanks. Couple morning. Hi. Good of

the cash you life First, NOL? more provide to quantification on can just utilizing from the flow fully free impact

Paul McDonough

available Thanks which And life the Ryan, least which life years to the limited at to NOLs last that is of I having been the non-life our year, life Sure. our NOLs Hey would it's is the XXX% NOLs, of in last question. will you'll to to and are model XXX% in non-life have XXXX. of that compare through we've we our where offsetting to What you offset Paul. continue for your XX% income. say life income exhausted income few now

Ryan Krueger

XXXX for a was what the maybe you Do perspective? NOL in life benefit know

Paul McDonough

life through. we perspective, Well partway from the while tax exhausted cash NOLs a

to it forward complicated, offset complicates that perspective our to XXXX bit. versus the a by compared gets income the life non-life? to XX% a but keep in a XX% terms in so our of tax life it. analysis But speaking cash of going of mix was most that the roughly simple income from of XX% as bit or And So NOLs

Ryan Krueger

question you. be also Thank I then And it. you that XXXX? would I for XXXX. the thought a half on Was would that XXXX be you of in know comment that expenses. Got your -- than commented -- down some likely lower did say expenses second you Did somewhat full year expenses

Paul McDonough

Yes.

in that a we fourth January expense roughly we've just and transformation reasons, expense to XXXX examples $XX it's million months five context $XX sure it worth November And translates and XXXX little strike capturing So XX over second prefer the here period. them. how operate. guidance And expense save savings. the do had efficiencies you're the provide half will of year specificity. we full that year is recognize in technology announced balance full most with. XXXX months to of to of that is directionally we expenses we year for more committed the particularly that partnership XXXX that lower in And that translate didn't we're million quarter. to but in the think I trying be in to a are the of coming roughly bit we very Ryan, than last that I the disciplined that directional of probably referencing announced to this some in But I'm more that to with familiar XX you'd Number of one, that we But in provide

That rethinking any have in we won't forward that Another utilize how material savings big going XXXX. to opportunity office is translate space. we

why fourth fact frankly longer sort took belts. In our that quarter a were to In number a changed initiatives used alluded tune growth We of also first able tighten looking to making a opportunity we period the space that also. as take strong also to, need reduce need had savings. our as advantage the that's bit through is in that we by bit expenses the to XXXX XXXX, And meaningful a order of spend of this XXXX investments. we'll to for expectation very the quarters we impact the our COVID term investments. to little accelerating three that of prepared to underlying on some trends might roughly always half in other opportunities of translate versus growth remarks, still driven We're way But will little were where obviously, go strong we net of, we in reposition. strong exceptionally year, by fundamentals, advantage and earnings take in to performance accelerate that to but favorable from and while

the franchise. balance I but want appropriate to So that on investments long-winded answer, sorry to trying we for reinforce grow the to just that remained focused very and with expense discipline

Ryan Krueger

Paul. Appreciate it. It’s helpful. Thanks,

Operator

the question line with from Piper John Sandler. comes next of Barnidge Our

is now line Your open.

John Barnidge

earn-out what metrics? Can some talk you. with of the about it you is, what the period? And over associated maybe Thank DirectPath,

Gary Bhojwani

detail The in a would hit significant question. be will on and it. conditions it's happy this very that to to not the To John, Hey, and thanks is calling Yes. Gary. of going that you performance Thanks not lot I be we the providing tell blunt, pay if pay earn-out. be we we're are for for the such thrilled they would earn-out it. to conditions, be

John Barnidge

Okay. your bluntness. No, I appreciate

been to for block follow-up, transactions Your selling being there that? low-hanging or FIA the Can business annuity that has maybe you growing then market about fixed talk The associated annuity in with constructed you block? structurally clearly from rate really essentially -- would runoff. And a prevent is a your anything fruit. a is block, really fixed with it's you. fixed interest distribution the is how much capital perspective your and

Gary Bhojwani

it to make little a hand to general a color. over Paul going of I'll and I'm to more detailed you give bit then couple comments

more first Paul specifics. we've you comments obviously offer I of all, few taken in the bit So, been a just that of would a transactions place. gives watching the little have marketplace general And before some

some common the First, that and have been that subject the variable other recall and of never have please don't really products we of some most annuities sell of transactions. these

it's and been block it's As we annuities, transactions there respect some fixed to a have true, sell index true, those those. on

However, when and other don't products, of into structure you have the of the dive deep richness things. some guarantees simply we our of the

way maybe remain perform. for saying that financial that way job I way the us. a they're open the we And anything products to believe value. simpler And work, We our to well-performing they like is so, very that, shareholder of like will they maximize

a at some don't would for the add got a I to happening because open we're it. we We worthwhile it. that see exposures products. those consider it simply just and and have But be nature trade So that absolutely I buyer. that, any I of the don't if to to clear also of know, But Paul, want offer the wide you make don't if compelling us of for want we it further would look color?

Paul McDonough

No, nothing to add. Thanks.

John Barnidge

your Thank for you answers.

Operator

Our next question Bass comes Autonomous with from Erik Research.

now is open. line Your

Erik Bass

slightly still offset year few for of that XXXX, have or I be on your expect could a Hi. guidance level second favorability levels the essentially am back claims in And will half to life but outlook bit year? you expect mortality, I some was the claims of your normal you for and margins to Thank that to the some full over little elevated elevated in quarters. health next you correctly hoping you. elaborate the interpreting

Paul McDonough

for question. Thanks Yes. the Hey, Erik, Paul. it's

will So what our first to COVID, mortality product the net stable been yes, the and ex-COVID, continue. say of in expectation year expect With that the the that to would be have would we of favorable. half and respect the outlook, reasonably consistent modestly with that, is morbidity I health margins, impact is

half some back point, to So year as product net net favorable continuation the enough not back will impact half get the in end products. up where At the diminishes, COVID the we year. we the modestly the expect diminish positive in crossed our it in of of health negative and And there's year. to morbidity offset over of of line health that we the course

Erik Bass

your normal expectations? of the slightly in in for or But it. Got be line health isolation would year to kind the favorable margins

Gary Bhojwani

continues. think in actual our would results and Again, say, line. been our in expectation I that is that they've relatively I stable

Erik Bass

just it. then, having note I of in level conditions XXXX, Got the think capacity if exceed the buybacks, to share to if done you maybe repurchases And could you permit. turn presentation in

talk just that mean being stock but at you know comment or are deploy a is give you by valuation something -- for higher? to want I other potential else, case you about Is you don't the can opportunities kind you level specific So -- are this? pointing or number on of XXXX base to or what the a capital,

Gary Bhojwani

is This question. the for Gary. Thanks Yes.

know, would the philosophically As of we've absolute to just guidance. provide taken we I view comments. want make that don't you couple a

what So first, is significant factors. of and trading stock you're number questions, of in very the response Two different are the a yes, correct. the are. to are alternatives There your factors where

flow. all has that of cash Now, deploy that said, that got and business very we we're recognize have a strong that to -- a cash we fortunate have to flow we've

of the have incentive incentives take a to cash, at look contrary. the any to the on management we If team, quite you hold the don't

Our when correctly incentive for and prepping deploy were the CEO I XXth is shares. in reinsurance only smartly. deploy time also we would we if is, XX of back serves we this to bought deploy it memory was my how And just and point it. transaction. didn't to those XX, as have it And question out, the quarter is

a the what several in value. So, place stopped really of been for shareholders our specific guidance, for. We our we And short last presents. compelling that recognize stock the opportunity a quarters, but been we've has recognize where look providing it we've

continue to the that reflected look at that what's is deploy company value. in all we'll factor as alternatives in, the beyond to we And the book cash. value We of believe

Erik Bass

that. Appreciate you. Thank

Operator

Partners. next with from comes Dowling Humphrey question & Our Lee

line Your now open. is

Humphrey Lee

on Good morning think the comment of first your and sales in thank My XXXX, just given kind related you for about to be should the taking insurance comment lower my questions. in earnings health 'XX. likely now, kind the we margins How stable. lower of especially degradation? Based about margin level to outlook, of the is question

coming how we about side. from But that So, that? the most should of would I assume is think life

Paul McDonough

Good Humphrey, morning, it's Paul.

I just are headwind, call out a want number a number as COVID, obviously pointing forward. with is in but be that and put there decline else there, on simple because, parts all else want out. maybe the policies equal. to fairly simply just a force that a it's call And to equal, out we we obvious. XXXX that in we're going something pointed is we're by There's to sales again fewer it. observation driven the directionally in that But wanted don't have XXXX in of moving that need all out So to to just

Gary Bhojwani

is Gary. Humphrey, this

to simple add Just that well one as we investors real profits I've about from we it in with this sell, it thing other Every expect would think and a I to derive future it. conversation just had to way. policy

all immediate we policies profit. so we in dollars in instead sold sold we're And if of I delivering policies in five to would future think, sell say is, profit a eight So, following. that to I we the the a years am fewer terms we fewer year, fewer have less trying given have then when policies, just going

Humphrey Lee

Okay.

And Regarding how acquisition, this should think of the the formal WBD way? into and DirectPath complement how kind aspiration there your about kind And area? we the think should guess overall it any of fit platform it how -- does in any kind we in is about longer-term offering? of does I

Gary Bhojwani

Okay.

like really two So question. Humphrey glad from the thanks for asked respond it. to I'm you perspectives. I'd

broader way view. the you to then like CNO asked and a perspective the an to directly maybe share it from give perspective overall First, little the I'd question

in does DirectPath So all, exactly directly first in the terms of fit. way how the of asked you question

to we about really market. go worksite our overall there's three dimensions want think to offerings, how If you to

employer, we we about insurance Washington talk an we've Piece. So years. that that to when doing and several want to for down our to products and been them first sit as the talk Think of National

talk the the ago. year about a interface technology, them platform, Benefits administration a the That to where acquisition little employees. the those over with needed rationale behind we Web employers was to their Second,

just that third added talk we've management benefits The clients piece about to to with employer, DirectPath services. is our able being

then first now if you technology and So about services. think it insurance,

this there's education. there's employer offering. in So acquisition advocacy within education, and then that And fills there's recommendations DirectPath services services

lines agents. had I Colonial done - to about thinking how And And our several looking broader over claims say with and is So a investors perspective, you the god rain quote Again businesses out believe happy I the continuing had it's worksite. as we presence god got to we there's but diversified along talked I'm And do predicting years. wrote and the some think on focused about online direct-to-consumer beyond We're fee face-to-face. our help underwriting helped to had and a that they're about really given reliant his doesn't the life company weren't god to face-to-face that head pandemic XXX% XXXX is worksite. looking we've at pandemic, health our between to the on of tried you pandemic. we and diversify offset pandemic I've formalized this really rule. the the at would tried I'm health division Penn diversification. into you count, we where we it was on And my thank really us ask build so arcs we then letter when wrong, consumer he does. we've if But mortality what a our to we then his businesses. the to what these think really we've weren't business And what that the Thank just roughly had basically, on. year fits navigated the consumer building thank Again we've the Noah so face-to-face I shareholder the has going versus way of that's into what about last in CNO get in it. And it take here last would Buffett and at something really that; look business

assets of So consumers stakeholders consumer to now I'm building have with for would third-party XX of substantially diversifying. And variety because and things predict not with think the particular it good a And and you're in out ago. be help very seeing position least asset diversification been a a bets the really This my from different the COVID. DirectPath but is just months time just table so notion it's of trying a going selling of make play us sides at WBD. to what of where business. I much different with broker-dealer beaten the deliver fair good worksite to I'm got on as number so have trying really frankly wherever products do and I future to because able we've sure to our we're standpoint, There's to that goes so do, a this much a business a it our see the expensive result more down of been against the

to and manufacturing and So back have to longer answer that come up particularly certain invested know this have I build going whatever And diversifying back context right against what of there's they're for a think that or build was floor is. business to to to it's workplace. the was on the much factory this hope it us consumer now it huge time against to us that it a to going you in come the I business. They're so have out industries, expected. for know you right I speaks to the time restaurants were opportunity to as than broader back we in the to asking.

Humphrey Lee

No, I the appreciate color.

sense. make that think Thank I you.

Operator

[Operator comes Cullen B. next question Our Johnson Instructions] from Riley with Securities.

now Your line is open.

Randy Binner

Binner Riley. is from This Randy B.

you got that. Can me? names I think our hear we all up mixed on

Gary Bhojwani

Randy. Yes.

Randy Binner

yes, a think comment Good interested your of definitely your And distribution building it's franchise. I morning. of health kind in a direct-to-consumer around logical I extension was Gary business.

just just look curious may that be if Advantage bring of Medicare And administration what I'd tie what can the with of your of new So changes will you there. that. kind what kind is curious kind like? into in vision

Gary Bhojwani

Okay.

for question. Randy the thanks So

health a insurance it's richer this for Med and been to all, Supp but Med costs is secular reality whether seen we've smart HMO thing a increasingly from or lower or of but a more had specific simplified way an Advantage. to restrictive of of lower lots conditions, got doing. that And Supp first structure. value we've shift So compelling Med And a efficient watching been Med overly about that's a it's plan. good but think as very can Advantage And explanation like thing is, plan bad we've happen consumer a been not, what them. whether that's the migrate cost, we consumers the have It's or discussions more has where

thought to We've to internally it better ability we've a a we've Med doesn't for We're Advantage being distributor. and that about try us So come sense it build happen. manufacture conclusion, and offer. make the watched the off up to

continue So that. to to we're do going

that do so terms us and benefits treatment accounting income. in of on and for fee side seen some there's You've

on and short-term doing of we that's still care the something would forth. so and that. pool household, I So important most get pools margin, get margin love than this can distribute we we of the like that in get and into does and both that to sell and rather only case nothing. one because It manufacture thing but life sell so better so which is us we annuities we

going doing that. to we're continue So

able love way the with with subject to churn the to of not There's to want that supplement really trying I success is I'd be get mistake, about. them able a face-to-face meet We're handful some of Medicare that online we're there. But of not one mean, of space consumer support. think crazy online, amounts online does to things client the to face-to-face, it and to long-term ourselves them are to terms really got the other I they that clear want. the hold but whatever be them. some where long-term relationship the play they and trying of their and that in to public. to a no in is initially telephone, out compete be They've to offering, not are want wonderful players these things multiple, the valuations. with make compete of Now I

feeding me Life But Now Penn consumer and the sharing we year brought and what with channel with that reorganized the last face-to-face, blew and sales effectively cross But how it Colonial Frankly, have away. move and has the expected. exceeded together would worked made on when those and results the and have we those I been. imagine if worked look would we you between for I direct-to-consumer life the cross-selling Bankers anything specifically can't results side, leads. are way the products that the that life online at our COVID far

even I better. think will think in do the non I it COVID environment,

And provide the So and and have that betting to service if probably to products. a what when these direct-to-consumer of and consumer solve it is, this And preferences we're wrong we us like then preparing – I other that we add that want think to compare face-to-face. the to you provide really to is to because strictly able case face-to-face be way, able to goes offerings, to differentiate if continue preferences betting towards in continue that we're word. What online we're for Medicare some consumer move advantage. online can be where going

the work. of like And trying there. got trends answer real with We your that. secular we That question, the health you do a we're shorthand face-to-face making continue did chance So direct-to-consumer short of support XXXX. and is late think to where crux the made And in that the the we life and same a was the we what that thing force we in going our want brought to odds. we've if think investments to to consumer we we push together good that that think

Randy Binner

right. helpful. that's Well, All really

think at Is Penn of a Bankers you COVID the or So other point quantification curious kind quantifying got or some messed cross-sell, can the I that. of that? around regard? in version If just if that of Bankers – remind up with synergies, the be I'd us of there's an you Colonial Colonial of was that like success were couple updated on what and that Penn metric and follow-ups. One,

Gary Bhojwani

Yeah.

the the number. Jennifer. I Paul remembering touched script. think going look and to at on might not we I'm have I'm

we how was disclose I percentage-wise think cross-sell. did much

Paul McDonough

Yeah.

quarter there's is cross-selling are and third the don't Field field of point data And I agents metric point life there's in also referring sales we're the know from leads points in and/or to that So I'd XX% sort DXC the quarter. the field. that, you to But we're Randy the XX% a that life the to web that, up – to critical BXC sales we've sharing shared. field telesales And back from important supporting digital. sales. that's up

more terms overall metrics So drives of we're in DXC our a finding better and across holistic productivity conversion lead approach is productivity. much business just face-to-face. optimizing that in we're and And creating model productivity that

Gary Bhojwani

how internally But remember, I we've I sales or face-to-face emanated I've DXC many know tracking disclosed are it lead seen now the our it. sharing. data again, not. that if for from Randy, we can't life publicly of Paul, on It's building it – notion been be in similar make which of is a it able to out doubling down very seamless. why together demand this face-to-face and health. and figure bring We capabilities and impressive direct-to-consumer feel we're

Randy Binner

That's Okay. perfect.

follow-up kind You’ve in of explanation. covered my that

it Thanks. leave there. Thanks I’ll lot. So a

Gary Bhojwani

you. Thank

Operator

Our Barnidge Piper with next John comes question Sandler. from

Your open. line is now

John Barnidge

about in this the so consistently Thank quarter. is year-over-year you. year? degree January to you to far Worksite perspective, is a on the the improvement Can get trying since to improved second sales year-over-year just now talk from which that January a sense maybe have books.

Paul McDonough

been context help data just certainly of half had tell metrics selling the the in consistent you the with and the back the provided, dynamics. that is it's its January quarters initial former in outlook, last get rather is though John, into What sharing of carrying to of inform that quarter January XXXX the or sales our XXXX. our two quarterly. We our sales to So the I we second Paul. on our We've and decided We not obviously it's sales outlook momentum sales try the have COVID number. of to impact share to will the cadence the overall sharing month -- which

John Barnidge

and changing Colonial Super fantastic. ton, advertising a you're about for then people ratings Penn were XXXX? Bowl somewhat That's how down And how dynamic how change, Okay. entertainment relatedly, consume does this thinking frankly within

Gary Bhojwani

Yeah. John thanks question. for the

I part -- but tight astute We've we what NAP not XX-year we've cost We a publicly, I've tightly even to our regard we've our tracked very new tracked, though such move business time issue. long sales how been a it I'm because marketing it's predict for a career annualized to I person insurance -- marketing of as the think And our premium. up X% a indicator. disclosed been being are I competitive a just I've mean we observation. can XX% within sales. costs that to be. a you going floor it's at can remember I where amazed to when the tell range amazed,

We've religiously. a that. place set bringing marketing same online lot got that and of track efforts. We're same property to skills virtual in and we I So discipline do think our to those systems, very it of

kind we to of watching than viewership You're I absolutely still one doing now. more Since learning And changing we is continuously is because you television because four higher That's to to meaning meaning are tell from learning. dollar because leads of is Since face-to-face correct pushing rate. and brought we the that simply, changing. generated together the the of more a amount have those though been close efficacy of about sources we're Life. is we will have yielding television. and quarters the thing together, that we've it for closer we marketing, from other each only we're dollars, more, and the Bankers a direct-to-consumer closer and similar of Penn can marketing brought spend which better afford say what to those is continue spend yield Colonial

the But to it. less meaning continuing lower we're is the modify fruitful, watch and the people fewer television making, is which that. becoming yield is because So salient point less you're

are is So, our changing rates Television changing. that's correct. absolutely advertising and yield

bringing of So just online thing. that, variable and more it's one pushing marketing we're because But of same a analysis our into online and we're not the all into spend. discipline

John Barnidge

much. you Thank very

Operator

this I'll call queue at comments. over the for no time. presenters are in There back to turn further closing the questions

Jennifer Childe

earliest full you, earlier remarks difficulties on fact A were And and missed. you like our call available afternoon. be I'd for the the -- call technical of all in Thank recording website to Gary's thank the joining. remarks the will experienced that operator. this earlier for apologize

Operator

call. This concludes conference today's

You may disconnect. now

CNO Financial (CNO) 10 Feb 212020 Q4 Earnings call transcript