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01/10 16:48
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call summary and Q&A reveal a positive outlook with strong revenue growth across multiple product lines, improved expense ratio guidance, and strategic capital deployment. Despite some unclear management responses, the strong D2C sales and partnerships, along with optimistic guidance, outweigh the concerns. The company's focus on shareholder returns through share repurchases and investments in growth is likely to drive a positive stock price movement. Given the market cap of $2.98 billion, a positive reaction of 2% to 8% is anticipated over the next two weeks.
Total new annualized premiums $125 million, up 26% year-over-year. Reasons for the increase include double-digit insurance sales growth in both divisions.
Operating earnings per diluted share $1.29, up 16% year-over-year. This growth was driven by favorable insurance product margin and solid investment results, reflecting growth in the business and expansion of the portfolio book yield.
Book value per diluted share (excluding AOCI) $38.10, up 6% year-over-year. No specific reasons for the change were mentioned.
Life and Health NAP Up 27% year-over-year. Reasons include steady execution and dedication to serving the middle-income market.
Total life insurance Up 33% year-over-year. Reasons include process and technology enhancements, diversification of direct marketing channels, and increased direct marketing spend by third-party partners.
Direct-to-consumer life insurance sales Up 56% year-over-year. Reasons include process and technology enhancements, diversification of direct marketing channels, and increased direct marketing spend by third-party partners.
Total Health NAP Up 21% year-over-year. Reasons include strong customer demand for solutions to protect against out-of-pocket gaps in medical coverage and the growing cost of healthcare.
Supplemental Health Up 23% year-over-year. No specific reasons for the change were mentioned.
Long-term care Up 7% year-over-year. No specific reasons for the change were mentioned.
Medicare Supplement Up 33% year-over-year. Reasons include a growing shift in consumer preferences from Medicare Advantage to Medicare Supplement.
Medicare Advantage policies sold Down 24% year-over-year. Reasons include a growing shift in consumer preferences from Medicare Advantage to Medicare Supplement.
Annuity collected premiums Up 2% year-over-year, totaling nearly $475 million. Reasons include sustained growth and long-term relationships established by agents.
In-force account values Up 8% year-over-year, exceeding $13 billion for the first time. No specific reasons for the change were mentioned.
Client assets in brokerage and advisory Up 28% year-over-year, surpassing $5 billion. Reasons include sustained growth and strategic initiatives.
Producing agent count Up 11% year-over-year. Reasons include investments in training and sales tools.
Worksite Life and Health NAP Up 20% year-over-year. Reasons include geographic expansion initiatives and investments in training and sales tools.
Life insurance sales (Worksite) Up 24% year-over-year. No specific reasons for the change were mentioned.
Hospital Indemnity insurance Up 53% year-over-year. No specific reasons for the change were mentioned.
Critical Illness insurance Up 17% year-over-year. No specific reasons for the change were mentioned.
Accident insurance Up 15% year-over-year. No specific reasons for the change were mentioned.
Net investment income allocated to products Up 7% year-over-year. Reasons include an increase in yield and growth in the business.
New Annualized Premiums: Record total new annualized premiums of $125 million, up 26%.
Direct-to-Consumer Life Insurance: Record sales up 56%, driven by process and technology enhancements, diversification of marketing channels, and increased marketing spend by third-party partners.
Medicare Supplement: Sales up 33%, reflecting a shift in consumer preferences from Medicare Advantage to Medicare Supplement.
Annuity Collected Premiums: Up 2%, totaling nearly $475 million, marking the ninth consecutive quarter of growth.
Geographic Expansion in Worksite Division: Contributed 42% of NAP growth in the quarter, marking the seventh consecutive quarter of growth from this program.
Operational Efficiency in Simplified Life Products: Accelerated underwriting delivered an 89% instant decision rate on submitted policies, up 11%.
Exit from Worksite Fee Services Business: Decision to exit fee services business to focus on core insurance business, expected to improve operating return on equity starting in Q4 2025.
Bermuda Reinsurance Treaty: Ceded approximately $1.8 billion of Supplemental Health U.S. statutory reserves to Bermuda affiliate, expected to improve operating ROE through 2027.
Shift in Medicare Product Strategy: Focus on Medicare Supplement due to consumer preference shift and reduced benefits in Medicare Advantage plans.
Streamlining Worksite Operations: Exiting fee services business to sharpen focus on core insurance products and align resources to growth areas.
Exit from Worksite Fee Services Business: The company decided to exit the fee services business due to its underperformance, contributing a pretax annual loss of approximately $20 million. This decision was driven by intensified competition, lower-cost alternatives, and new technologies disrupting the market position. The exit process is expected to incur charges of $15 million to $20 million and will be completed by the first half of 2026.
Medicare Advantage to Medicare Supplement Shift: There is a growing shift in consumer preferences from Medicare Advantage to Medicare Supplement plans, reversing a decade-long trend. This shift is attributed to leading Medicare Advantage sponsors paring back plans and benefits, which could impact fee income from the distribution of Medicare Advantage products.
Impairment of Goodwill and Intangibles: The company recorded a $96.7 million impairment in nonoperating income related to the goodwill and intangibles of Web Benefit Design and DirectPath acquisitions. This reflects updated financial projections and an increasingly competitive market for the fee services business.
Higher Claims in Medicare Supplement: Unfavorable morbidity within Medicare Supplement products was noted, which could impact margins and profitability in this segment.
Underperformance in Worksite Fee Services Business: The Worksite fee services business underperformed expectations, contributing to modestly unfavorable income results in the quarter.
Operating ROE Improvement: CNO expects to accelerate operating ROE improvement through 2027 by an additional 50 basis points due to the execution of a second Bermuda treaty and changes to the Worksite Division's fee services business.
Direct-to-Consumer (D2C) Life Insurance Sales: D2C life insurance sales were up 56% in Q3 2025, benefiting from process and technology enhancements, diversification of marketing channels, and increased direct marketing spend by third-party partners. However, this level of spending is not expected to repeat in Q4 2025.
Medicare Product Trends: A shift in consumer preferences from Medicare Advantage to Medicare Supplement plans is expected to continue, driven by leading MA sponsors paring back plans and benefits. This trend presents an opportunity to expand the total number of households served.
Worksite Fee Services Business Exit: CNO plans to exit the Worksite fee services business by the first half of 2026, which is expected to improve operating return on equity starting in Q4 2025, with full effects emerging by year-end 2026.
2027 Operating ROE Target: CNO revised its operating ROE target for 2027 to an improvement of 200 basis points, up from the prior target of 150 basis points, versus a run rate of approximately 10% in 2024.
2025 Operating Earnings Per Share Guidance: CNO narrowed its operating EPS range to $3.75 to $3.85, reflecting adjustments in expense ratio, effective tax rate, and fee income projections.
Excess Cash Flow Guidance: CNO raised its guidance for excess cash flow to the holding company to a range of $365 million to $385 million, up from $200 million to $250 million, incorporating the impact of the new Bermuda reinsurance transaction.
Dividends returned to shareholders: $76 million in the quarter and $310 million year-to-date.
Share repurchases: $60 million of excess capital deployed on share repurchases in the quarter, contributing to an 8% reduction in weighted average diluted shares outstanding.
The earnings call summary and Q&A reveal a positive outlook with strong revenue growth across multiple product lines, improved expense ratio guidance, and strategic capital deployment. Despite some unclear management responses, the strong D2C sales and partnerships, along with optimistic guidance, outweigh the concerns. The company's focus on shareholder returns through share repurchases and investments in growth is likely to drive a positive stock price movement. Given the market cap of $2.98 billion, a positive reaction of 2% to 8% is anticipated over the next two weeks.
The earnings call summary and Q&A indicate strong financial performance, with growth across divisions, solid investment income, and a positive outlook on direct-to-consumer sales. While there were no specific new partnership announcements, the reaffirmation of 2025 guidance and stable financial health are positives. The Q&A addressed potential concerns, showing confidence in sustaining growth and managing competition. The market cap suggests moderate sensitivity, leading to a positive short-term stock price reaction.
The earnings call reflects a positive outlook, with strong sales growth, high Medicare Advantage policy growth, and improved insurance product margins. Net investment income and the market value of invested assets have increased significantly. The shareholder return plan includes elevated buybacks, indicating confidence in future performance. However, there are some concerns about unclear management responses and potential revenue recognition issues, which slightly temper the overall positive sentiment. Considering the company's moderate market cap, the stock is likely to experience a positive movement between 2% and 8% over the next two weeks.
The earnings call highlights consistent sales growth across multiple segments, strong demand for new products, and a robust capital position. Despite some uncertainties in fee income and market volatility, management remains optimistic about future growth, supported by strategic initiatives and ongoing share buybacks. The positive sentiment from analysts and management's confidence in navigating challenges suggest a likely positive stock price movement over the next two weeks, especially given the company's small-cap status.
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