Good morning, all, and thank you for joining us for the CNO Financial Group Fourth Quarter 2024 Earnings Call. My name is Carlin. I'll be coordinating you call today. [Operator Instructions]. And now I'd like to hand it over to your host, Adam Auvil, the floor is yours.

Good morning, and thank you for joining us on CNO Financial Group's Fourth Quarter 2024 Earnings Conference Call. Today's presentation will include remarks from Gary Bhojwani, Chief Executive Officer; and Paul McDonough, Chief Financial Officer. Following the presentation, we will also have other business leaders available for the question-and-answer period. During this conference call, we will be referring to information contained in yesterday's press release. You could obtain the release by visiting the media section of our website at cnoinc.com. This morning's presentation is also available in the Investors section of our website and was filed in a Form 8-K yesterday. Let me remind you that any forward-looking statements we make today are subject to a number of factors, which may cause actual results to be materially different than those contemplated by the forward-looking statements. Today's presentation contains a number of non-GAAP measures, which should not be considered as substitutes for the most directly comparable GAAP measures. You'll find a reconciliation of the GAAP -- non-GAAP measures to the corresponding GAAP measures in the appendix. Throughout the presentation, we'll be making performance comparisons, and unless otherwise specified, any comparisons made will be referring to changes between full year 2024 and full year 2023. And with that, I'll turn the call over to Gary.

Thanks, Adam. Good morning, everyone, and thank you for joining us. CNO delivered an exceptional quarter and full year financial performance showcasing our ability to grow the franchise while also growing earnings and improving profitability at the same time. 2024 was one of our best operating performances over the past several years, highlighted by sales records in both the Consumer and Worksite divisions. This year's performance demonstrated our proven commitment to leverage our business model to enable sustained profitable growth, execute on our strategic priorities and drive ROE expansion. Our strong results were broad-based across earnings, production, investment results and capital. We delivered our tenth consecutive quarter of sales growth, our eighth consecutive quarter in producing agent counts and our most productive year ever for the Bankers Life field force. For the full year, total new annualized premium was up 7% across the enterprise. Production records were set in both divisions and in multiple product lines which demonstrates the strength of our model to serve the varied needs of our middle-income consumers. I'll cover these results in more detail in each division's comments. Our sustained sales momentum continued to translate into earnings growth Operating earnings per diluted share was $3.97, an increase of 28%. Excluding significant items, the increase was 40%. Earnings results were further supported by strong underwriting margins, favorable net investment income and expense discipline. New money rates have exceeded 6% for 8 consecutive quarters now. Paul will go into greater detail on our financial performance. Capital and liquidity were well above target levels, while we returned $349 million to shareholders this year, a 50% increase over 2023. And for the 12th year in a row, we raised our quarterly common stock dividend. Book value per diluted share, excluding AOCI, was $37.19 up 10%. Additional highlights of our…

Thank you, Gary, and good morning, everyone. Turning to the financial highlights on Slide 8. We certainly finished the year strong with operating earnings per share, excluding significant items, up 41% in the quarter and 40% for the year. The operating return on equity ex significant items improved by 280 basis points. The results reflect growth in the business, higher interest rates and investment returns and strong insurance product margins, coupled with disciplined expense and capital management. Admittedly, the results also reflect a year of mostly puts and very few takes in our insurance product margin. On a run rate basis, we estimate the full year operating return on equity at about 10%. Our expenses were in line with expectations with the incentive comp accrual pushing the expense ratio to the high end of our guided range. We deployed $282 million of excess capital on share repurchases in the year, accelerating our capital return in the wake of the debt issuance back in May. This represents a 70% increase from the prior year and contributed to a 6% reduction in weighted average diluted shares outstanding. It also reflects the strong underlying free cash flow dynamics of the business. Turning to Slide 9. In general, sales growth together with higher interest rates are translating to growth in insurance product margin across all 3 of our product categories. Drilling down a bit our supplemental health and long-term care margins both continued to benefit from favorable morbidity in the quarter as they have for much of the year, reflecting claims trends that are within our expected range of outcomes, but favorable to what we would consider a sustainable run rate. In addition, for a third consecutive quarter, though to a lesser degree, other annuity margins benefited from reserve releases due to higher mortality…

Thanks, Paul. Turning to Slide 14. As you have heard us discuss over the last several earnings calls, expanding ROE is the next step in the strategic evolution of CNO. Before 2019, our fixed and focused strategy was aimed at strengthening and fortifying our balance sheet. That phase culminated in our successful long-term care reinsurance transaction and an upgrade to investment grade ratings. Around 2020, we turned our attention to restarting our sales engine. We completed the strategic transformation of our business units to realign our operating model with changing consumer behaviors. Our Consumer and Worksite divisions were the result of these efforts. With 10 consecutive quarters of growth, our sales momentum is strong. These building blocks create a strong financial foundation CNO enjoys today. From 2024 onwards, we have been positioning CNO for growth and optimizing the results. As Paul shared in our 2025 guidance, we expect to generate 150 basis points of operating ROE improvement over the next 3 years. It's critical to note that we expect to deliver this improvement while continuing our sales momentum and investing back into the business to enable long-term growth. We're using multiple levers from across the enterprise to deliver these results. This slide highlights a representative sample of initiatives already in flight. I won't address them all, but will share thoughts on a handful. Number one, brokerage and advisory. Generating retirement income is a critical need for our market. We expect the demand for these services to accelerate. Number two, new products. Consumers have embraced our new and refreshed product offerings. Significant additional opportunities remain to leverage our product portfolio. Number three, CNO Bermuda Re. We are pleased with our initial treaty and remain committed to working with regulators on future opportunities to do additional business in Bermuda. Number four, modernizing…

[Operator Instructions]. Our first question comes from John Barnidge of Piper Sandler.

How should we be thinking about buybacks assumed in guidance you offered excess free cash flow guidance as well. Some further color on that would be helpful.

John, it's Paul. So I think you should consider the free cash flow guidance together with the excess cash position relative to our minimum Holdco liquidity at the end of '24. I think that gives you a sense for share repurchase capacity in 2024, absent more compelling uses of that capital. I think I'd leave it there.

My follow-up question. Distribution has been good. Geographic expansion. It looks like it contributed 38% of NAP growth in 4Q, 35% in the full year. how much additional geographic expansion opportunity is there.

The short answer, John, is a lot. We think we're at the front end of this. We're very pleased with what our results have been so far, and we're always just trying to balance this against expense discipline. So we see tremendous potential, particularly in our worksite business. Our consumer division has a very well-developed national footprint our worksite division is considerably smaller. If you think about the dedicated agents we have, our worksite division literally has 1/10 the number of agents. So that gives you a sense. Now do I believe that the Worksite Division has the potential to have all of the same footprint, I think that's neither wise or necessary, but I think there's a lot more upside left. I'm very encouraged by what the geographic expansion has yielded and I think there's a lot more upside.

Our next question comes from Ryan Krueger of Keefe, Bruyette, & Woods.

First, just wanted to ask, Paul, I think you mentioned you're evaluating additional Bermuda opportunities. Can you give us any more sense of what you're considering there?

Sure. I don't want to get ahead of the process. So I won't provide any specifics. But yes, we are very closely evaluating what the opportunities are, prioritizing those opportunities. Our focus over the last year or so has been to just establish the team in Bermuda develop the relationships on Ireland, including with the Bermuda Monetary Authority. We're in a good place there. We've got an established team. They're hitting their stride. And so now our primary focus is to look for opportunities to leverage that platform beyond the initial treaty.

And in fixed annuities, particularly fixed indexed annuities, you saw surrender rates moderate in the fourth quarter back towards historical levels and also pretty strong sales activity. Can you give us some color around what you're seeing there and if you think this will kind of continue into 2025.

Ryan. I'll comment on the surrenders and then Gary can comment on -- more broadly on sales activity. So the surrenders are down a little bit from sort of the high watermark last year. I wouldn't say they gotten back to where they were a couple of years ago, but they've come down a little bit and seemed to have stabilized at the current level. And then Gary, I'll turn it over to you on the sales going forward front.

Yes. Thanks, Paul. And Ryan, thanks for the question. we feel very bullish about the opportunity we have with annuity sales. We think that the demographics are with us, meaning the number of people that are retiring or turning 65 every day continues to be growing. We're hitting near the peak of that. So we expect that to continue. There are fewer and fewer alternatives offered, meaning pensions and other things that offer lifetime income are virtually nonexistent anymore. So we think when you take those things together, particularly for middle income America, specifically in the population we service, we think that there's going to be a continued demand. Now we've had a really good run and in my experience, the real world doesn't move in a straight line. The comps are getting tougher for us. So those will certainly present headwinds. But I think if you look at a longer-term trend, let's call it 3 to 5 years, I think you're going to continue to see very robust growth. will a given quarter here, they're not match up to a pretty good year's quarter. I'm sure that's going to happen just because our comps are getting tougher. But in the aggregate, demand will be strong. Our clients need these products, our agents love using them because they're such a useful tool. So we see a really bright future for Annuities for middle-income America.

[Operator Instructions]. Our next question comes from Wilma Burdis of Raymond James.

Could you give us a bit of a breakdown on the tech investments? Is it kind of platforms, consultants, implementing systems, other items. And then just can you talk about a few of the use cases for the tech and AI investments?

Sure. I'll start off, and then I'm sure Gary want to provide some color. The primary focus of this investment, this initiative is converting various legacy policy Adnan platforms and select foundational systems from mainframe systems to cloud-based SaaS solutions. And with the new platform, we'll be able to evolve with the quickly changing Gen AI landscape. And in general, it will allow us to adopt and leverage new technologies more fully in the future.

Yes, maybe I can just supplement that. I think the way to really think about this is exactly what Paul touched on getting away from historical, and in some cases, these were things that have been built at help, so to speak, getting away from these mainframe platforms. We really need to position ourselves to where we can offer consumers and agents the new kinds of technology and flexibility that they expect, and we just can't keep building on these old systems. We have to have newer systems that are cloud based, that are Software-as-a-Service based and so on to give us that flexibility. So really, the way it's been explained to me is a non-tech guy. This is us building a new foundation that we can put other new features on top of. We can't put -- keep putting these new features, these new bells and whistles on top of an old foundation. It just doesn't work anymore. As a side note, I would just add that as a 30-year insurance executive, I think virtually all insurers have some version of this challenge that they have dealt with or need to deal with. This is not a unique thing to seasonal technology has changed so much in recent years, and it's just imperative that we get on that new foundation so that we can have these new features and benefits. Wilma, does that clarify what you were looking for?

Yes, that did. That definitely helps. And then it's great to see the 3-year guide with the ROE improvement, realizes a lot of pieces, small moving pieces and you've talked about many of them. But maybe just help us think for what gives you the confidence? Are there some of those small pieces that you can identify? And it certainly sounds like this platform investment will probably help streamline things as well. So maybe if you could talk about all that.

Yes. Wilma, maybe I will start with kind of...

So Wilma...

I'm sorry, go ahead, Paul, do you want to start?

No, please go ahead.

Okay. I think I'm just going to start maybe with some general comments about how we think about guidance, kind of a little bit maybe more philosophical, and then I'll let Paul fill in some specifics. I think that one of the things that we're particularly mindful of within CNO is we're really careful about the commitments we make, particularly when we make them in a public setting. And that sounds obvious, but if you look over the last 5 years, I think what you'll see is we've been very cautious about when we provided guidance and the types of things we provided guidance about. So we've been very disciplined about making sure that we were committing to things that we really had a strong belief in. And I think if you take a look at our track record, I think we've got a pretty good track record of when we say we will do it actually delivering it. But we're really careful about that. I think on the ROE in particular because that's the biggest thing that we've gotten feedback from our shareholders about was providing more visibility into that. This is something we've been working on for quite some time. As you know, ROE is one of our incentive comp metrics. So we've always had attention on it. but really being able to get to a point where we've got good line of sight, and we feel like we've got the ability to execute against it. We feel like this is the natural point in our evolution. In other words, I'm saying all that, to make the point that it was very intentional that we didn't provide guidance prior. We feel like we're in a place now where we've got good line of sight, good credibility, the right people and so on. So we feel good about our ability to do those things. There are a number of things. If you take a look at that slide that I spoke to in terms of levers we're pulling there, whether it's reexploring our reinsurance, whether it's thinking about how we'll handle our capital, whether it's the expense discipline. There are a number of different things we're looking at to make sure that we can perform against that commitment or that guidance. Paul, do you want to add any more specifics to that?

I guess I had a couple of comments. So Wilma, we're not going to give specific guidance beyond '25 in terms of what drives that additional improvement. But I would emphasize that the sales growth over the last couple of years and the sales growth that we expect will continue over the next foreseeable future, together with sort of higher for longer interest rates. Let's imagine the 10-year settles in here at about 4.5% and stays there, maybe it goes higher who knows, I don't imagine goes much lower, that's a compounding tailwind. So that's part of it. There are things that we're doing in '25 that don't really begin to show up until '26 in terms of driving ROE expansion there are additional things that we have line of sight that we'll do in '26 that will help a little bit in '26 and more in '27. So it's all the things that are referenced or alluded to in the last slide of our deck, all the things that Gary just talked about, in aggregate, give us a lot of confidence in getting this 3-year ROE metric that we've put out.

Our next question comes from Suneet Kamath of Jefferies.

So first on the tech investments. We got the $170 million over 3 years, but I don't recall -- I don't know if you quantified what savings element associated with that would be and sort of over what time frame? And then Paul, it sounds like a lot of this will be excluded from operating results. But then I thought you had said it's all embedded in the ROE. So I just wanted to understand what's going on there?

Yes. Suneet. So first of all, this isn't really a cost play. We don't expect this to translate to significant cost savings, but it's also not the run rate of our technology will be no better or worse for this investment. But it creates a more stable platform that allows us to leverage current technology, as Gary was talking about. So that's really the play. It's not a coseplay. It's an investment that enables long-term growth of the business, right? We're at a point in our evolution as a company where we need to make these kinds of investments, and as Gary said, by the way, many of our peers will also. As an industry, we've got some sort of aging systems that are mainframe based and don't really allow you to leverage some of the newer technology. We're making this investment to enable long-term growth. So that's really ahead. And then in terms of how it will flow through, yes, the majority of it, we will characterize as nonoperating. We'll give it a lot of visibility as a component of nonoperating and all of the guidance in '25 is inclusive of the impact on operating income, the impact on equity, the impact on free cash flow Holdco, so that $25 million at the midpoint, free cash for the flow to the Holdco is after investing $60 million in Tech Mod in 2025.

Got it. Okay. And then just on Bermuda, just at a high level, it does seem like a lot of life insurance companies are using this opportunity. And I guess I worry when I see so many companies doing it at some point does Bermuda kind of raise a hand and say, kind of enough is enough? Or just getting these treaties approved just takes longer. Just curious if that's a concern that you have or how we should think about it.

I don't foresee that being an issue in Bermuda. I mean it's a market that operates, I think, very effectively, very efficiently and a regulatory regime that works well also that I think has lots of capacity for growth. So I don't see that as an issue. I think that's why so many companies have moved business there. And I think I expect that trend will continue.

[Operator Instructions]. Our next question comes from Jack Matten of BMO.

Just a question on the excess cash flow outlook. And I understand that you're coming off a very strong 2024 baseline. If I think about the $200 million to $250 million range, can you just discuss some of the drivers there? I know you mentioned that some of the IT investments are flowing through. Any other moving pieces that might cause you to reach the higher end versus the lower end of that range.

Sure. it's just a reflection of the dynamics of the business. There are obviously lots of moving pieces that determine our estimate of free cash flow I think it reflects a balance of commitment to organic growth at healthy reasonable pace investments that we're making in the business like Tech Mod. And you put all that together in this $200 million to $250 million is what you get. In terms of what causes you to be at the low end or the high end, it's primarily the pace of organic growth, the economic climate, if you tip into a recession, that causes some credit moderation down, which results in higher capital charges. And then the third sort of primary element is the degree to which we take more or less risk inside of our investment portfolio.

Got it. That makes sense. And just a follow-up on the IT initiative. And I heard the commentary about not being a pure kind of expense taking program. There's just more to it. But I guess, given kind of the operating leverage you might expect to get over time, is there like a longer-term like expense ratio that we should think about relative to the 19% to 19.4% for this year? And should we expect that ratio to keep coming down over time? Just any other color on the benefits of the program that you might expect.

So in the long run, expenses broadly, not just this IT initiative, I would expect our expense ratio to come down as we grow as we develop more operating leverage you would expect that that's a lever that would help, and you'd see that move down. It's not moving down 24% to midpoint of our guided 25% largely because of on the margin, some pressure on operating income and the operating expense ratio from Tech Mod, some pressure on the margin from expenses related to exploring additional sessions to the Bermuda company. right, that takes some time and money before you can actually get to something that you're proposing to the Bermuda Monetary Authority. So in my mind, it reflects the balance that we're trying to get to between growing the business, investing in the business, but also growing earnings and improving profitability. So I think probably maybe flat for a while in the context of that balance, but at some point, certainly moving down.

Our next question comes from Wes Carmichael of Autonomous.

On long-term care, Paul, I think in your commentary on getting to the run rate ROE the 10% here. LTC has been pretty favorable relative to run rate levels. You had margin of $133 million in 2024. Any help with how you're thinking about what core earnings power would be not really looking for a guide, but maybe in terms of how much uplift that had on ROE versus the 10% would be helpful.

Right. So the 3 adjustments that we're making are 2 annuities which -- or sorry, other annuities, which we really expect kind of $1 million or $2 million per quarter and we got a lot more than that in 2024. So that's the one adjustment. And then the other is to margin in LTC and sub-health. So you can kind of do the math and the adjustments we're making there to something around 10% in 2024. And what's happening there is our experience has been quite favorable really at the sort of the high end of the range of expectations. And that -- we don't expect that to always happen or continue forever. We expect some reversion to the mean. And that's what -- that's where -- what we're assuming will happen in 2025. That's part of the basis for the '25 guidance.

Got it. And Gary, I think you mentioned in your prepared remarks a new and refreshed product offerings. What are you seeing in the near term? Where do you see consumer demand and maybe attractive margins for CNO in your perspective?

Yes. Thanks for the question. We've had really good fortune in the products we have refreshed. We've seen good demand. On the annuity side, we launched some new features on the Worksite side. We lost -- launched a number of new products, and we've seen good reception to all those. As we move forward here with our Tech Mod, we'll continue to look at products but to be honest, for the next 2 or 3 years, I don't envision us doing major product launches because we need to keep the organization focused effectively executing against this technology modernization initiative. So I would expect for the next 2 to 3 years, any product enhancements we make to be more tweaks than full on new launches. I think there's opportunity to do that. I think there's bandwidth within the organization to handle those types of modifications, but I don't see us doing major launches while we're in the tik of this technology modernization initiative.

We currently have no further questions. I'd like to hand back to Adam Auvil for any closing remarks.

Thank you, operator, and thank you all for participating in today's call. Please reach out to the Investor Relations team if you have any further questions. Have a great rest of your day.

We conclude today's call. We'd like to thank everyone for joining. You may now disconnect your lines.