CNO Financial Group, Inc. Stock

All right. We're going to get started. Good afternoon, everyone. I'm Ryan Krueger from KBW. Excited to have CNO Financial with us today. Up on stage with me is Gary Bhojwani, CEO of the company. I also want to acknowledge Paul McDonough, the CFO; and Adam Auvil from Investor Relations in the audience.

So yes, just to kick it off, I think it's clear that CNO has made a lot of progress in recent years, improving growth metrics and also expanding your returns. So I was hoping you could just start by discussing how you feel about where the company is at, at this point and where it's headed over the next several years from here.

Okay. Ryan, thanks for having us, and thanks for the question. When I look at the performance of the stock and I look at the sales and I look at the employee retention and customer satisfaction scores and so on, we feel really good about where we're at. But I'm the CEO, and I'm biased, and I still think we're underpriced. And I still think we have tons of potential. And the lawyers get nervous when I say that, but it's the way I feel.

We've benefited from a number of things, not the least of which is the demographic that we serve. There's a handful of things that make CNO really unique. And one of them is that we focus exclusively on the middle market. And we define that as customers that have an average net worth of $100,000 or less. So we're focusing on Middle America. And the reality is that, that represents, depending on who you believe, somewhere around 60% or 70% of the population in the U.S. And there's nobody else out there that has a full suite of products and does all the things that we do that's focused on that segment. Most of the people in our business understandably are focused on the affluent that have $1 million or $2 million or $5 million to spend or invest, and that's just not where we're focused. So that demographic continues to have significant need.

People should remember that there's 11,000 Americans retiring every day. And oftentimes, that's when the relationships with our customers start. When they're getting ready for retirement or they have retired. They're turning 65 and they need to think about things like Medicare. We're also -- that's another thing that makes us unique is we're one of the few life insurers that also sells Medicare. So we start the relationship oftentimes with something like a Medicare supplement product, and then that goes on into other things.

Now I should also mention there are some really specific rules about starting relationships with health-related products and then moving into other things. We, of course, follow all those rules. But the reality is that we have a significant opportunity because of that demographic, because of how many of them are turning 65 every day and the fact that there are so few alternatives. And we have a great team of people that have really been able to turn those opportunities into results.

Great. So CNO has a Consumer division and a Worksite division. I'm going to start on the Consumer side, where you partly sell products to captive agents. So you've had a good success, I think, 14 straight quarters now of growth in the agent count within your consumer business. Can you talk about some of the things that's been driving that success and also how you're thinking about the ongoing momentum from here?

Yes. So just a couple of pieces of information to supplement what you said. So you're correct that we have Consumer and Worksite. Our Consumer business makes up about 80% of the company. And as the name implies, that's where we go out and talk to retail individuals. In our Worksite business, that's about 20% of the company, and that's where we talk to employers and get access to employees that way.

One of the biggest challenges in this business is the agents and how to manage them and grow them and so on. And as a side note, I really think this is one of the things that the industry has gotten wrong over the years. I think as an industry, we've lost sight of the fact that when you control distribution, you have a much greater ability to control your future. So we've stayed very committed to having an agent force that's captive, that sells only our products. And the majority of our agents, what they kill, which is to say they're not W-2 employees. They're independent contractors. and they make a living by selling products. And if they don't sell anything, they don't make a living. So it's a very tough model to make sure you get right.

We've shown consistent growth. And when you think about building an agent force, I think you have to break it down in a really simple way or at least we do. First, you have to think about what it takes to attract those agents, how you bring them in, and then you need to think about what it takes to keep them. In terms of attracting them, we've been extremely fortunate. We're different than many other companies in that our agents, when they join us, they join us as a full time. It's not that they're a part-time teacher and a part-time selling our stuff. They're full time with us. Half of our agents are millennials and half are women. Those 3 things right there make us very different than the usual model.

So in terms of making sure we bring in the right folks, we've done a lot of things over the last several years to ensure that we're appealing to the types of people that are most likely to succeed. And we found that one of our best sources are referrals. Now I know that sounds really obvious, but the agents that have been with us for 3 to 5 years and are really successful, the candidates that they suggest join us are the ones where we have the best retention. So we focused a lot on that. We focused a lot on creating training and compensation and support structures that appeal to those folks.

And then once you get them in, you've got to give them a career path that appeals to them. So a decade ago, we started our own broker-dealer. And we're really trying to position our agents. They come in by starting out and learning the business, selling basic protection products, whether that's Med Supp or life or what have you. And ultimately, the goal for the smarter ones, for the ones that want to stick around and make a career out of this is to be able to become financial advisers and create an annuity of income, if you will, a regular stream of income.

And so the combination of tweaking the types of folks we go after to join us, along with the enhancements we've made to make the career path compelling has really worked nicely and the stats you provided on both our Worksite and our Consumer side, we've had really good luck. And also having a captive distribution force gives us much more control over our destiny. So we feel very good about that. We're very pleased with the agents we brought on. We think they've done a wonderful job and really delivered some very nice results.

And then -- so there's obviously the number of agents and then there's the productivity of the agents. And I know growing productivity has also been a key priority. And it seems like you've had good success there as well. Can you talk a little bit more about the types of things you've been doing to increase productivity, how technology is playing a role in all of that and just the overall progress there?

Sure. First, a general comment. If you force me to pick between growing agent count and growing productivity, I'd pick productivity. If I can only pick one, I'd pick that. That's way more important. Our sales and net income results have grown better than our agent count has. So by definition, our productivity has consistently gone up. So that effort to focus on productivity has really yielded results, and I think we'll continue to do so. Now the magic happens, of course, when you do both, when you grow the absolute number of agents and the average productivity of each of those. If you can do both at the same time, that's really where you see the results kick in. And that's what we've been fortunate enough to do these last several quarters.

In terms of how you grow productivity, so first of all, you got to make sure you're retaining them, right? Back to my earlier comments, if your agents are a revolving door, it's almost impossible to grow productivity. So first, you got to make sure you keep them. Then you've got to give them more tools with technology. You've got to give them a product pipeline that's diversified. So if they start out a relationship with a customer talking about product A, they need to be able to also have product B, C and D that's viable, that's targeted for that consumer. So you've got to give them that portfolio. You've got to show them the career path where they can build an income.

And you've also got to do other things that sound really simplistic, but instant underwriting, being able to give the agent tools so that when they're sitting in front of the customer, they can actually respond on the spot and say, yes, we can buy this policy or do whatever it is and really have the customer follow through while they're in the mental place to do so. So it's been a variety of different things. Like many of the other things that have yielded results for CNO, I can't point to 1 or 2 things we've done. I can point to 100 little things we've done, each one of which has added on and helped us build this model. But those are the types of things we've worked on.

I understand that your model is a little bit different. You have a broader product mix, but there are some other life insurers that do focus on the middle income market more with protection-oriented products only. But some of them have cited some level of sales and persistency headwinds due to cost of living pressures on middle-income America. And it doesn't seem like you've really seen that much, but can you talk about what you have seen? And if not, if you haven't seen it, why you think that is?

Yes. So we're, of course, not immune to this. Almost all the products we sell are discretionary in nature, right? They don't have to buy them. There's no requirement. It's not like auto insurance. The closest thing we have to auto insurance in our business is Medicare Supplement or Medicare Advantage. Virtually every American that's turning 65 and/or getting ready to retire will at least look at Medicare Supplement and Medicare Advantage because they're getting off of their employer's health plan and they have to figure out how they're going to cover those exposures.

So one of the many things that makes us unique, a lot of life insurers, you're right, they say they focus on middle-income America, but they don't have the breadth of the portfolio. And in particular, they don't have that Medicare-related product. We see so many of our relationships start there. For roughly every 3 Med Supp policies we sell, at least one of those results in some type of a cross-sell where we're building that relationship. That really helps us.

And if you're a consumer that either has just retired or is thinking about retiring, chances are you're making that decision whether the inflation rate is at 4% or 10%, meaning you've made a decision to leave your employer or your employer has asked you to leave or whatever is going on. So you've got to do those things regardless of what's going on in the bigger economy. And so we've been fairly insulated from some of these pressures.

I don't want to say it's absolute because, of course, it's not. But you make that decision to leave and to retire regardless of what's going on with the economy and then you have to prepare for that, and that has benefited us and therefore, insulated us from some of these pressures. And I see no reason why that won't continue.

I guess related, but a little separate, how do you view the actual economic sensitivity of recruiting and retaining agents?

So historically, because these are commission-only jobs, the traditional wisdom has been when unemployment goes up, more people are willing to try a commission-only job or lifestyle. So historically, higher unemployment has benefited us. We haven't seen as much fluctuation because we fundamentally changed the types of agents we're trying to recruit and how we go after them, to my earlier point about referrals and so on. So that has really put us in a different place.

And most people would be surprised to learn, I talk about how half of our agents are millennials and half are female, almost all of our agents that we bring into the company, they've never sold insurance. We really look for people that have a customer service orientation that think about customers in the way that we want. And frankly, we have better luck when they don't have insurance experience. We don't want people to unlearn another organization's habits. We want to teach them the way we want to teach them in terms of how to service our customer base and so on. So some of the macroeconomic conditions that have influenced agents elsewhere, we just -- we haven't been as impacted by that. And there, too, I don't see any reason why that won't continue.

So within consumer, the other area or way you sell business is through a direct-to-consumer operation. And you've been shifting significantly away from television advertisements to digital and other sources. I think at the same time, there's been a lot of changes to digital advertising lately with the use of AI and other things like that. So how are you -- like kind of give us an update on your direct-to-consumer business and how you're navigating all this change?

Sure. When I joined the company about a decade ago, almost all of our direct-to-consumer business emanated from our television advertising. Colonial Penn is one of our companies in our portfolio. And it used to be you couldn't turn on the TV without seeing a commercial with Alex Trebek talking about Colonial Penn. And he, by the way, did a wonderful job for us. He was just a wonderful human being and did great for us.

But things have changed. When I was growing up, when you watch TV, it was ABC, CBS, NBC or later on Fox. It was 1 of 4 channels. It was live television and you saw all sorts of advertisements. Today, when my wife and I watch TV, there's XYZ show on Hulu or Amazon Prime or HBO Max or whatever the streaming service, we don't watch ads anymore. The closest I come to advertising is when I have -- during the day, I have CNBC running in the background and Squawk Box is going on, but it's on mute and there's advertising. That's the closest I get exposed to ads anymore. And I don't think we're that different. I think the vast majority of people out there, they're regionally watching television in an on-demand way. So you can't rely on Alex Trebek anymore and that type of advertising.

So we've shifted to be much more focused with our direct-to-consumer business on other types of digital advertising, and we disclosed in our Q2 results that 70% of our D2C sales actually emanated from non-television advertising sources, some type of social media, online and so on. And I think that trend is only going to continue. Now 30% is still a big number. We can't walk away from the television stuff, and we're constantly refining this balance. We've got a pretty sophisticated model internally where we track the advertising cost and the yield, meaning how many people call in and how many people we ultimately sell from those incoming calls. And we know that if the advertising costs more than X dollars, it's not going to work. It's got to cost Y dollars or less. in order to make the model work. And so we're pretty disciplined about that. But I think that, that television advertising will continue to go down. And that will be, I think, ultimately to our benefit.

Now there's also an interesting thing here in terms of how the accounting works. Television advertising is very expensive and under accounting rules, you can't capitalize it. So it makes the numbers look screwy because you take 100% of that very expensive television advertising upfront, but you recognize the revenue over time. So it doesn't break my heart that we're also moving away from TV, but we're still learning how to do that, and it's going to take a little time to get it right, but we're pleased so far with the results.

You talked a little bit about Medicare and how it's a product that you often lead with. So CNO underwrites Medicare Supplement and you sell third-party Medicare Advantage products. In the last 2 or 3 years, there's been a major resurgence in Medicare Supplement sales at CNO. To what extent do you think that is being driven more by a shift back in consumer preference? And to what extent do you think that's somewhat company specific?

I think it's a combination. It would be hard for me to parse them out precisely. But in general, for the last decade, we saw more consumers preferring Medicare Advantage over Med Supp. Now we made a choice a long time ago not to manufacture Med Advantage and instead to keep focused on manufacturing Med Supp. The economics internally for us are such that we're frankly indifferent.

If a consumer needs Med Advantage more than they need Med Supp, sell them Med Advantage. It's a third-party company, UnitedHealth, Humana, whoever. We sell their products, we collect a commission. Economically, we're indifferent because remember, while the absolute revenue dollars may be lower, we don't have the risk and the capital we're tying up because we're not a manufacturer of that product. So the distribution income drops to the bottom line. So economically, we've set it up so that we're indifferent, so our agents know that they can sell whatever makes the most sense for the consumer.

Now in more recent years, the economics got out of whack for the companies that were manufacturing Medicare Advantage primarily because their benefit offerings and their inducements just got too rich. So as the government subsidies change, they've had to reel those in, which has pushed more consumers back to Med Supp. Now at the end of the day, we're indifferent to that from an economic standpoint. I like the idea that the consumers are coming back and buying things that we manufacture and distribute. Our cross-sell ratio tends to be a little bit better on the Med Supp than it is on the Med Advantage. But I think that will continue.

The reason I say it's difficult to parse is, on the one hand, the trend that I just talked about, everyone has benefited from. But if you look at our Medicare Supplement growth rates, they've been better than most of the other consumers. So I think that has something to do with the way we're going to market as well. It's a combination of the 2 things. We're happy to take the benefit regardless of whether it's us or the market, we're pleased with the result.

And then I guess just with the big increase in sales of Med Supp, how do you ensure that you maintain your target margins?

Yes. So we're -- so we've been doing this a long time. We've got a good track record of understanding it. And one of the things I always tell our investors, of all the products we write, Med Supp is the one you should worry the least about. We get to reprice that every year as compared to a life product or another product with a 20- or 30-year liability duration, I don't get to reprice those every year. The Med Supp, if we screw something up, we get to fix it within a year, and we've got a pretty good track record of doing that. You can look at what our underwriting results have been and our historic margin have been as proof to the point that we generally price this properly, and we're able to get the right return and the right results.

Yes. I guess one other thing it might be useful to discuss is just the differences between the Med Advantage and Med Supp product because sometimes we see a health insurer that has some issue with Medicare Advantage, people get concerned about how that's going to affect Med Supp. Usually, it doesn't actually have an impact because it's not the same product.

It's a very different product. There are a number of different -- there are a number of differences. And maybe if I keep this at a high level, think of Med Supp as your traditional health insurance, okay? No matter what doctor you go to, no matter where you are in the country, no matter what. Med Advantage, think of more like an HMO, certain geographies, certain health care providers and so on. So that's one big difference. The government created Medicare Advantage as a means of letting private industry participate in this. And so there are differences.

Now all of these policies, Med Supp and Med Advantage, they vary by county in the United States, the benefit levels, what network you can go to, all these sort of things. So you really have to understand and know what you're buying. And this, frankly, is what helps us because part of our philosophy is to have that controlled distribution that goes into the homes and really explains things. So the increased complexity actually makes our people that much more valuable and that much more necessary.

But there are 2 very different things. And you can see and give an insurer, if you have an insurer that manufactures both, as you pointed out, they can have different results between the 2 because they are different coverages and they appeal to different populations.

Moving to the retirement side of your business and annuities, in particular, the annuity market has grown a lot. It's gotten a lot more competitive, but you have your own captive distribution. So how much annuity competition do you actually run into? Or is the -- really the growth constraint more just your ability to find and grow the agents and people that want to buy the product?

So if you look at the annuity market as a whole, it's extremely competitive. There have been a slew of new entrants and very well-heeled new entrants, people with a lot of money. And they've come in primarily because it's a really cheap source of funds for asset managers. The thesis is go buy an annuity company, take those assets, invest them, increase the yield by 50 or 100 bps and it's a lot cheaper for an asset manager to do that than to try and source the funds through traditional asset management means. So that's been the reason you've seen so many new entrants and so many new offerings and how much more competitive the products have gotten. And I spent a little over a decade running the top FIA rider. So I understand that side of the business.

But most of those clients are substantially -- their net worth is higher than the customers we go after. Our average annuity sale is about $140,000 right now. Most of those annuities are well into the 7 figures. So it's a very different market set. And frankly, most of those distributors aren't calling on our customers. 9 out of 10 of the customers that we talk to about in annuity, the decision is not whether to buy brand X and brand Y. The decision is, should we buy your annuity or should we leave it in a CD? Should we buy your annuity or should we leave it in our money market.

So there's been tremendous annuity competition, but not in our space. And it's one of the many reasons that I absolutely love the business that we operate in. It's just really hard to get down here and compete in the middle market if you don't already have a developed foothold.

The other part of the retirement business at CNO has been the brokerage and advisory operation, which is I guess it's not completely new anymore, but it's newer than some of your other product categories. Can you give us an update on how that build-out has been going? And at what point do you think that could become a more noticeable earnings contributor to the company?

Well, it's definitely a very significant contributor already, not necessarily in terms of earnings, but in terms of strategy. And so what do I mean by that? We started our broker-dealer a decade ago. And as of the second quarter, the numbers we released, including the annuity business that runs through there, we have $19 billion of assets, again, started in 2016, and it grew 24% in the second quarter. So it's really important in terms of being able to change the relationship with the client and with distribution. So what does that mean?

I started out as an entry-level insurance agent. When you sell an insurance policy to a customer, be it life or long-term care or whatever it is, and they decide they don't want it anymore, they decide they're going to move from you to brand X, they can simply stop paying the premium and never talk to you again. If they entrust you with their assets, they buy an annuity with you or they invest money with you. It fundamentally changes the relationship. Even if they're going to move away from you, they're going to take that last meeting or that last call because you've got a chunk of their assets. It also philosophically changes the relationship. When you simply sell a life insurance policy or a health insurance policy, you are an expense. And what do we do with expenses? We minimize them.

If you have a relationship with a customer where they invest money with you or they have an annuity with you, now you are an investment. What do you do with investments? You try and maximize those. So it fundamentally changes the relationship. Even if you told me our broker-dealer wasn't going to yield any kind of income and just breakeven, I'd still say do it. Now it turns a profit for us. We're very pleased with it. We will continue to grow it.

The other reason I feel that it's very important, it gives our captive distribution that career path I talked about. It lets them go from selling commission products where they get a onetime income or a short trail to developing a relationship with clients where they are truly an adviser and they have a lifetime of income that they can make. So it does a lot of different things for us. The finances are, of course, important, but the bigger things are what it lets us do in terms of changing the customer relationship and giving our captive distribution a career path that they can't replicate elsewhere.

Moving to the Worksite division. You've had a really good run of growth there, both sales, premiums have been increasing. So give us -- can you unpack some of the key drivers that has led to the success and what needs to happen for it to continue?

Sure. Just like our Consumer business, we have a wonderful leadership team in the Worksite business. They've done a great job tapping into employers. And if you look at what's been happening with employers, in order to manage the health insurance costs because we all know health care costs have been going up roughly 6% to 8% a year. So in order to manage that, employers have been changing the profile of the insurance that they offer -- the health insurance that they offer to their employees. But the exposure hasn't gone away. So employers want to help their employees get supplemental health coverages and other coverages. So we've been able to capitalize on a broader demographic trend that's been happening with employers.

We focus on relatively small employers. We have some exceptions to that, but that's generally who we focus on. And we focus on employers that tend to employ middle-income Americans. So these are people -- unions, these are people that are working with their hands. And we've been able to give a product offering that really has made a difference and capitalized on this trend.

We've also benefited from geographic expansion. On the Consumer side, we have about 5,000 exclusive agents. On the Worksite side, we have about 800. So we have a lot more part of the country that we haven't yet tapped into. So that's helped. And then we've also been able to take our existing employer relationships and offer them multiple other products. And so all of that has come together to give us a really nice tailwind where we continue to grow that Worksite business.

You've done some M&A, some divestitures in the Worksite business over time. Do you feel like you have all the capabilities you need at this point? Or are there other things you'd still consider acquiring to further build out?

So that was a very charitable description. We did 2 acquisitions on the Worksite side, and they were both mistakes, and we undid them. We do have, I think, the key priorities that we need. And I would simply point to the growth of the agents and the growth in the sales as proof to the point. Clearly, something is working there with the numbers that we put up and continue to grow.

And you, as a company, announced a technology modernization initiative. I think was last year. Can you talk about what that is designed to do and what you expect the benefits from that to be for the company?

Yes. It's a 3-year program. We've publicly stated that we're going to spend about $170 million. And the way I would describe it is this is the biggest amount of money that I am the least excited about. The analogy I would give you is imagine if you had to put a new foundation under your house. Nobody sees it. It probably is not going to drive your resale value. But if you don't have a good foundation under your house, you can't add on other things. You can't make the house nicer. And what we found ourselves faced with is many of the foundational systems within CNO were frankly obsolete or approaching obsolescence.

And my fear, even if they continue to work fine, what happens when one of them breaks and the last COBOL programmer retired 25 years ago. What do you do? So we're having to spend all this money. And by the way, the vast majority of insurance companies out there have this problem. We have the luxury of being in a place where we're growing nicely, we have good cash flow, and it made sense to take this on now. So we made a decision, and we're on track right now.

Now it's still early. I want to emphasize we're still, I don't know, in the third inning. It won't be until the end of 2028, whether we know we really pull this off. But based on what we know today, we're going to spend $170 million. It's not one big system. It's about a dozen different smaller systems underneath that we're going to modernize, replace, get rid of, whatever.

And when it's all done, I'll get the joy of pointing to something and saying, see, and no one will -- there will be nothing tangible to show for it. But what the real benefit will be is that those new technologies, the new self-service things, all the other things that modern consumers expect, we will now be able to put on to these systems. So it won't be an immediate benefit, but it will set us up to continue the growth trajectory at the end of 2028 and really build on this.

Got it. And moving to ROE. So you had guided to 200 basis points of ROE expansion by 2027, which would get you a 12% ROE. You're already above the 12% ROE this year, and you've already communicated that you'll give us an update next year. So I'm not going to ask you for the update now, unless you want to tell us right now, I don't think.

I don't.

But it would be helpful to understand what has gone better than you expected that has led to you outperforming the guidance that you had given? And what are the potential building blocks to lead to further ROE expansion?

Yes. So what we did was in 2025, we took our 2024 run rate of approximately 10%. And we initially said in 3 years, we would improve it by 150 basis points. We were running ahead of schedule. So a year later, we said, no, no, we're going to improve it by 200 basis points. And then this year, it turns out we're running better than that as well. So we had committed to a revised improved target, if you will, of 200 basis points by 2027, and we've already exceeded that.

So we are going to come out in 2027 with a revised target. It won't be before then. We haven't yet made a decision if we'll give a 2-year target or a 3-year target. We've got some things that we need to work through, but it will be higher than that. And at a high level, what we've guided to is our ambition for ourselves is to perform at a top quartile level. And that would suggest that we would get to the mid-teens. Exactly what time frame and what commitments we want to make, we haven't sorted through all that yet.

I have this bias -- well, first of all, I hate providing guidance period. But once we do provide guidance, I really have a bias against revisiting it too much because to me, it seems to take away the whole point of long-term guidance if you revise it every quarter. That's not long-term guidance then. So we have some work to do, but we expect to get -- the ambition is to get into that top quartile.

In terms of the things that we benefited from, a lot like the other things I've talked about, there's not 1 or 2 things I can point to. There's 100 little things I would point to, everything from greater capital efficiency to better sales results, to managing expenses to using technology, all the things you would expect a good and growing business to do, we've been able to benefit from. And in many cases, we've benefited more than we thought we would.

Then I guess as you've grown, you've increased growth, your returns have increased and then this has all helped your stock perform quite well over the last few years. So I think the natural question is what's next? So I guess, in your opinion, from here, what are the key things that need to happen at CNO to continue to grow the valuation of the company?

Look, I have a bias right now that capital and ideas are commodities. In the world we live in, if you look at technology and all these things, there's not some great new idea in our mature business that we're going to come up with. I believe that the real differentiator is execution. I really think that long term, that's what separates the companies that will long term be successful versus not.

And the way I think about execution is a very simple thing. If you break your business down into what the key tasks are, each one of those -- you just got to find a way to do each one just 1% better every quarter, every month, every year, whatever is. Just take each little thing, it's got to get -- each thing has got to get a little bit better, a little bit more efficient, a little bit more customer-friendly. And that's the philosophy we brought to this. There hasn't been 1 or 2 big things. There's been hundreds of little things.

Now we've also benefited from the fact that we've got a consumer demographic that's just a huge tailwind. There's a lot of customers that need what we do, and we're really well positioned for that. But I think that our ROE can continue to grow. I think our efficiency will continue to grow. I think our top line will continue to grow. And it's simply by taking every little thing and just making it a little bit better.

Are there any questions from the audience? All right. Well, we're almost out of time. So maybe just before we wrap up, I guess, are there any final kind of comments or messages you'd like to leave the audience with about the company?

Yes. I think -- so first of all, thank you for the time. Thank you for the questions. I think there's a handful of key things, and we try and cover this in our own internal meetings and as well as our earnings calls. There's a handful of things that make CNO very, very different. And lots of companies can say any 1 or 2 of these things. Virtually none can say all of these things.

First, that focus on middle-income America. That's all we do. That has a benefit in terms of it's not as competitive down here. There's not as many people calling on our clients. It also doesn't cause us to have this crazy pressure that some people in this industry have where there's so many people that are competing with, they have to take investment risk and do other crazy things to offer the richest possible product. We offer a fair product to a consumer that understands and appreciates it, middle of the road, a lot less competitive pressure.

Second, we use a lot of technology, but we use the technology to enhance the distribution that we have. We think a key differentiator is what we refer to as that last mile of distribution, where our controlled captive distribution goes into the consumer's household, builds a relationship, talks to them, helps them understand these complex things. I do this stuff for a living, and I couldn't explain Medicare Supplement to my dad, okay? So I had to have somebody else come in. This is complex stuff. It varies by county. It's not easy. You need somebody to explain it to you and part of our differentiation is that last mile.

Third, product mix. The best way to point to why this was an advantage, in COVID, when everybody's mortality results, including ours, were challenged, our morbidity results were much better. We were able to offset where life insurance was getting beat up, our health insurance was doing better. We've got a very nice mix of long tail, short tail of morbidity and mortality. That combination, especially for a company of our size, is quite unique.

Finally, I talk about how we get access to the consumer. If you look at our direct-to-consumer results, if you look at how we use Medicare to open the relationship for these other products, if you look at the fact that we formed a broker-dealer, there's a lot of different things we're doing to surround that customer. And it's not just about product, it's also about the services and all of the things that means to keeping those agents that we get.

I think when you look at that combination, it's a very unique company. I'm thrilled to death that investors are seeing over the last several years. We've had a very nice return. I hope that continues. And again, I think the future is really bright. And if anything, I continue to believe we're undervalued.

Excellent. We're going to wrap it up there. Thanks to CNO and Gary and the team.

Thanks, Ryan.

Good morning, and welcome to CNO Financial Group's investor briefing on our Worksite division and Medicare business. I'm Adam Auvil, Vice President of Investor Relations & Sustainability. Thank you for joining us today. These briefings are designed to provide a deeper understanding of CNO and the drivers that support our growth. If you have not watched our prior investor briefings on Investments and the Consumer division, both are available in the Investor Relations section of our website. Today's discussion is grounded in our purpose to secure the future of middle-income America. Both our Worksite & Medicare businesses bring that purpose to life by helping customers navigate important coverage needs with the support of our trusted in-person agents.

Before we begin, I need to cover a few housekeeping items. This morning's presentation is available in the Investors section of our website and was filed today in a Form 8-K. 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. Finally, today's presentation contains a number of operating metrics. Certain operating metrics do not have a corresponding GAAP measure, but are presented because management believes they provide useful insight into our business and performance. These metrics should not be considered a substitute for results reported in accordance with GAAP.

I'd now like to introduce Karen DeToro, President of the Worksite division. Karen, over to you.

All right. Thank you, Adam. And thank you to all of you for making time today to learn more about our Worksite division. I'm Karen DeToro, President of CNO's Worksite division. I've been with CNO for 7 years. I spent 4 years as CNO's Chief Actuary, and I was named President of the Worksite division in January 2024. CNO has been selling insurance in the worksite for decades, and I'm here today to shed a little more light on how we go to market and what's been driving our success in this market.

Joining me today is Richard Shaffer, Senior Vice President of Worksite Sales. Richard has been with CNO in this role for 4 years, and he has done a tremendous job of working with our field agents to deliver strong growth every quarter since he joined. Richard will share some insights about our agents and the investments we're making to support them a little later in the presentation.

As you listen today, I'd like you to keep 3 main points in mind. First, our focus in the Worksite division is well aligned with CNO's mission of securing the future of middle-income America. Our agents focus on helping employers with middle-income employees such as teachers, first responders and union members. These individuals need the coverage that we offer, and it's easy for them to buy this coverage at their workplace. Many employees in this demographic don't know where to start when purchasing insurance on their own, and they appreciate the trust and convenience that comes with evaluating coverage offered through their employer.

Second, our products are specifically designed to fill the gaps in employer paid coverage, gaps that have widened greatly over the last 2 decades as employers have sought to manage benefit costs through reduced benefit offerings and the increasing use of high deductible health plans. We offer life and health products that we can manufacture and service with confidence. We specifically don't offer products like major medical, dental or vision that require provider networks. And this is similar to our strategy in the Consumer division on Medicare, where we choose to manufacture Medicare Supplement, but not Medicare Advantage.

Third, as with CNO's Consumer division, we pride ourselves on the strength and quality of our own distribution. Many worksite carriers go to market through employee benefits brokers and consultants, which puts a distance between the carrier and the employers that they're serving. This can also result in broker-initiated churn. We go to market primarily through our captive agents. As you'll hear from Richard, these agents provide the last mile of delivery. They show up anytime, anywhere employers need them to help employees understand their benefits, purchase coverage and use that coverage when they need it. And they maintain long-term relationships with the employers and employees we serve.

We're very proud of the success we've had over the last several years. 2020 was a difficult year for the U.S. voluntary benefits market in general, and we were no exception. But since 2020, we've delivered consistent sales growth with an 18% compound annual growth rate from 2020 to 2025. Over that same period, the U.S. market for the products that we offer had a compound annual growth rate of only 5%. So far in 2026, our year-over-year growth rates were 22% in Q1 and 29% in Q2. With respect to producing agent count, after a slight dip in 2021, which was driven by the ongoing effects of the pandemic, we've also delivered consistent growth in this metric. I'll note that our sales have grown faster than our producing agent count, meaning that we're growing NAP both by adding agents and through improved productivity. Driving greater productivity has been a strategic priority since Gary Bhojwani became CEO in 2018, and the benefits are showing up in stronger production, higher agent effectiveness and sustained sales growth.

We have delivered this growth by focusing on industries that need in-person education and enrollment for their employees. These are industries where people aren't sitting in front of a computer all day. So virtual enrollments are not an effective option. These employees may have limited break periods or shift changes late at night or early in the morning. They may be spread out across multiple geographic locations. These are the conditions for which our agency model is perfectly suited. These industries also tend to be ones that employ middle-income Americans. Our agents do extremely well in industries like transit and utilities, education and public sector. We've historically done well with unions, and we're growing our union presence even more with focused attention and investment in that space. These middle-income Americans need the coverage we offer.

There's a large addressable market in the industries we serve, which means continued opportunity for growth. Our top 4 industries represent roughly 1/3 of the total employment market in the United States. Health services and Construction are expected to grow faster than the national average over the next 8 years based on projections from the Bureau of Labor Statistics. And Transit is expected to grow at about the same rate as the national average. And while Education and Public Sector are expected to stay flat in terms of the total number of jobs, both industries are expected to experience high turnover driven by rising retirements, which will bring more new employees into these industries. Finally, due to the nature of the work in these industries, they're less likely to be disintermediated by AI.

Our product portfolio positions us well to capitalize on the evolution that's happening in the U.S. employee benefit space. The supplemental products we offer in the workplace are designed to address the growing gap in employer paid coverage. Here are some sobering statistics about employee benefits. In just the last 4 years, the percentage of employers offering major medical coverage to their employees has dropped from 78% to 61%. And this drop is occurring primarily among employers with fewer than 100 employees. Less than half of employers provide dental or vision coverage to their employees. In 2025, 88% of employees with major medical were enrolled in a plan with a deductible, and that average annual deductible was over $1,800. And consider this against the backdrop of recent surveys that indicate that almost half of Americans don't have the liquidity to cover a $1,000 emergency expense. And we all know that the premiums for major medical insurance for both the employer and the employee continue to rise each year.

To sum up, employers are providing less coverage and shifting more of the financial burden to employees with middle-income workers often feeling the strain the most. Our supplemental health products, critical illness, accident insurance and hospital indemnity, help protect employees and their families from unexpected out-of-pocket health care-related costs that may not be covered by their major medical, dental or vision coverage. These are primarily indemnity products, which means policyholders can use their benefits as they see fit, whether to cover a medical bill or to pay for other nonmedical expenses that can arise from an adverse health event.

We also offer life insurance in the workplace. The workplace is where many Americans first obtain life insurance coverage. Group coverage is the typical starting point, but the amount of coverage offered on these group products is typically limited and often insufficient to meet people's coverage needs. Our supplemental life products offer both term and permanent coverage in amounts up to $250,000 to help employees address this gap and obtain coverage in a convenient way. We're particularly proud of the return of premium feature offered on our supplemental health and life products subject to state regulations. When this rider is added to the product, it pays the policyholder the cumulative premiums paid into the policy, less any benefits received generally after 20 to 25 years. Through this product design, we've paid out almost $5 billion to policyholders since inception.

Our products are typically written as individual, not group coverage. Even though the policies are individual, we can still take payment through payroll deduction or through direct bill, whatever the employer prefers. The individual chassis means that coverage is portable and employees can keep their coverage even if they leave the employer. This feature, combined with the return of premium feature, tends to make our policies stickier than some other workplace coverage. And as I noted, we are less exposed to broker-driven churn because of the fact that our long-tenured captive agents maintain stable relationships with the employers that they work with for years or even decades.

We feel we have a strong story to tell about our go-to-market approach and our product portfolio, but I think the most distinctive quality of our Worksite division is the strong synergy between our captive distribution, the Optavise Career Agency and our manufacturing arm, Washington National Insurance Company.

I'm going to turn it over to Richard now to talk about how this relationship and in particular, our Optavise agency force is a source of competitive advantage for us. Richard?

Thank you, Karen. Good morning, everyone. My name is Richard Shaffer, Head of Sales in CNO's Worksite division. I've worked in the employee benefits industry for 28 years. One thing that makes our business different is that we own both manufacturing of insurance through Washington National and distribution of our products through our wholly owned career agency, Optavise. That's increasingly rare. Most supplemental benefits carriers rely heavily on brokers and external enrollment firms. We don't. We have a dedicated career sales force working for Optavise selling Washington National Insurance. That gives us direct relationships with employers and employees before, during and after enrollment.

Our distribution force is comprised of independent contractors. Agents are paid through product commissions, allowing for a variable cost structure. As sales grow, the economics scale. An independent contractor workforce creates tremendous energy and alignment. Their entrepreneurial mindset, the mind of an owner growing a business and a team inside of our business, is a powerful engine when paired with Optavise recruiting, sales enablement, and field development support. Ownership of distribution also gives us greater visibility into how our products are presented and sold, allowing us to establish consistent training, supervision and compliance standards across the agency.

Our Optavise Career Agency has become a long-term career destination that scales with opportunity and attracts self-motivated producers with the sky's the limit mentality. They provide benefits advice and education in live, tailored one-on-one sessions anytime, anywhere workers need us. I'd like you to hear directly from 2 Optavise top performers working inside of our model every day. Here's an excerpt from a conversation I recorded with them recently in Florida.

[Presentation]

One of the things we are proud of ourselves is being with workers, policyholders wherever they are, whenever they want. Liana and Todd, thank you for spending a few minutes with me today. I know you all are very busy helping to lead Optavise Career Agency. Thank you for what you do every day. So something people may not realize is we're in a B2B2C business, right? We're a business. We're calling on business owners, Presidents of unions, Vice Presidents of benefits at large employers. What's the value for them in what we do at Optavise, if you're an employer and an owner?

Yes. I think that it's different depending upon the employer group that you're referring to. So we have employer groups as small as 3 lives and in some cases, hundreds of thousands of lives. When I'm talking to a smaller employer group, the value add is very simple for this individual, which is, in most cases, their benefit programs are pretty minimal. They can't afford it. So how can we help make, allow them to have a more robust benefit offering to their employees? That ultimately can help them attract and retain employees to stay inside of their organization. So that's what I'll speak to. When you move to something like a more of a union-driven or member benefits driven, there's huge opportunity to get their messaging out, to actually have a true partner, to be able to have the opportunity to visit with their members and educate their members on whatever it is that they need to be educated on, not just on our program. And ultimately, more times than not, the thought process of a decision-maker when I'm in front of them is exponentially different from the moment I walk in after the moment I walk out.

Till the end of the meeting.

Because what all they're thinking about is how much is going to cost, how much extra labor is this going to be on this department or on that department. And ultimately, they realize very quickly that it's a very, very light lift for them with a huge reward on the backside of that. And when you're able to look someone in the eye and they can feel whether you're being honest with them, you're guiding them down the right path, that you're able to answer their questions directly, I don't think that will ever be replaced.

Todd, we tend to work with underserved workers, right? Police, firefighters, first responders, teachers, unionized workers, what is it about the way Optavise works that resonates with those kind of workers in America?

For me, I think it's all about understanding and putting ourselves on the other side of the table. When we're sitting with a firefighter, a police officer, an educator, we have an understanding of what their world actually is like. It's truly educating them on what's available to them to be able to protect themselves and their families. One of the things that in my organization specifically, but OCA all the way around, we believe in white-glove service. And for us, that's what's really been able to separate us from the pack and really resonate deeply with those folks.

And what's -- one of the things we pride ourselves on is being with workers, policyholders wherever they are, whenever they are, you really exemplify that. What's your schedule like? How do you sit with people?

So the scheduling usually happens quite a few weeks in advance. We want to make sure nothing comes up on the calendar, SWAT training or different type of training that they already have planned. And it's all shift work. So we want to make sure we catch somebody a few different times. So finding, hey, let's find a meeting place here, and we'll do a little lunch and get everybody together. So as much as so many police, firemen and service officers are the same, they're all so very different. So it's definitely not a plug-and-play simple type of process.

Can you think of a story where it really landed for you like the value of what we're providing? And you get to know these people year after year. So I'm sure you get close to some of our policyholders. Can you think of a specific time that?

I'm going through a situation with a dear friend of ours that's a policyholder out in Las Vegas, and he's in Stage 4 cancer right now. And what we've been able to do for his family from a policy that he bought from me many years ago. And actually had called me a few years prior to his diagnosis and said, "Hey, Todd, do I actually need to keep this?"

Oh, my goodness.

And I said, you bet you, you know what, that you need to keep this. Absolutely. And because he kept it, he was able to go and get some additional treatments, some things that were outside of the box, pay his mortgage, et cetera.

That he couldn't have afforded. Wow, I love the story.

And it doesn't even have to be that serious. I mean some actually at his department as well. Her little son slipped at the water park earlier, summer started and a few stitches, few ER visits, and she got the exact same service. And no matter what the severity, we just want to be able to be there.

They say insurance is a kind of promise, but it's intangible until, God forbid, somebody dies, somebody gets hurt or it's time to return a premium check to them.

One of the things that I love about our organization is is that when this type of tragedy occurs, we jump to it. And we understand that this is what they actually paid for.

Right. Thank you both for an outstanding conversation today. 2 of the very best of Optavise Career Agency. Thank you, guys. Thanks for being here. Appreciate you both.

What you just heard from Todd and Liana is a snapshot of the work hundreds of Optavise agents and leaders are doing all across the United States. What you see here is our current agent footprint. We have deep agency infrastructure in many established markets, but the bigger takeaway is the amount of white space that remains, especially across the middle and northern parts of the country. Now for us, this is not simply about planting more flags on a map. Our agents are the engine of our business. Where we develop productive agents and capable field leaders, we create the capacity to serve more employers and unions, enroll more of their workers and build durable relationships in those markets. As we expand our footprint, we take a disciplined and strategic approach, carefully matching the pace of expansion to our ability to recruit, develop and support agents successfully.

We know the characteristics of the employers and communities where our model works. We identify attractive markets, establish and seed new leadership there, recruit to real sales opportunities, find new clients in the vicinity around existing clients and build infrastructure over time, then repeat. So when I look at this map, I see lots of room to grow. The growth opportunity comes from taking a proven model already delivering an 18% compound annual growth rate over the last 5 years and extending it into markets where we are underrepresented.

This slide shows how growth activities reinforce one another and create a compounding effect. Our existing clients give us established enrollment locations. Those locations create opportunities for new agents to learn, produce and build repeatable business. Over time, as we earn the right to do more through consistently showing up and doing a good job, we deepen penetration within those clients. New client prospecting does several things for us. First, it typically generates higher sales in the first year of the relationship than re-enrollments in existing clients. Second, it provides opportunities for re-enrollments in future years. And finally, it gives us additional places to recruit, train and develop new agents. In targeted geographies, we move proven leaders and agents with entrepreneurial spirit into attractive white space and wrap financial and other support around them. We launch with experienced leadership and a clear path to early productivity.

This is our geographic expansion strategy. These 3 pieces provide a self-reinforcing effect. Existing clients give us a base to recruit and develop new agents, experienced agents open new clients to grow opportunities for enrollment and proven agents move into geographic white space to expand our footprint. All of these give us the ability to keep growing our owned distribution. Our job now is to make the system more efficient to scale.

Scaling owned distribution requires 2 things: more strong leaders and better tools, and that's what we're all about now. While our career agents at Optavise are independent contractors, we like to say that with the support and tools we wrap around them, they are independent but never alone as they build a career and a team inside of our business. First, leadership development. In an agency model, the local leader matters enormously. That person recruits, sets expectations, develops agents, builds the culture of that market and provides agency inspection and oversight, similar to how a franchise system maintains quality and consistency across locations as it grows. We've created clear career paths, practical development at every level. We've embedded field coaching from industry leaders, transparent performance and promotion standards and simpler incentives tied to the behaviors that we know drive the business. The goal is straightforward: develop more capable leaders more quickly, give them a repeatable way to build productive teams.

The second area is tools. We continually seek ways to improve the systems our agents and leaders use to develop themselves, manage client relationships, plan enrollments and sell at the worksite. We're making investments to reduce friction at the point of sale with our enrollment platform. Think of the enrollment platform like the cash register in our business. A streamlined purchasing experience reduces enrollment time, increasing agent capacity and allowing them to reach more customers. We've also standardized our enrollment planning, the pairing of agents with opportunities and work locations across a shared technology platform.

Finally, we've introduced modern lightweight CRM and learning platforms and put better data and insights into the hands of the field, empowering our leaders to track performance and respond to areas that need attention more quickly. Every improvement should help us do 1 of 3 things: get an agent productive faster, help leaders manage a larger, healthier organization or improve enrollment attendance, penetration and customer experience. When we do that well, we improve productivity while also increasing the capacity of our distribution system. So our growth plan is very practical. We have significant geographic white space. We know how to deploy new leaders and teams. Today, in fact, 24% of our annual sales and climbing come from geographic expansion locations.

We have a model where finding new clients, recruiting and re-enrollment reinforce one another, and we are investing in the career pathing, talent management and sales tools required to scale with consistency. We have significant opportunity with the model we have today. We have an owned distribution force, direct relationships with employers and employees, a focus on serving underserved sectors of the American workforce and a field force highly capable of running the logistics to deliver benefits, education and enrollment where and when America's workers actually work.

Back to you, Karen.

All right. Thank you, Richard. We feel our Worksite division is well positioned with the right go-to-market approach, products and distribution to capitalize on trends in the U.S. employee benefits market. The industries that we serve are aligned with CNO's middle-income focus. These employers and their employees continue to need the products and personalized high-touch service that our agents provide. Our products address a growing gap in employer-provided coverage, enabling employees to protect themselves and their families from unexpected out-of-pocket costs. And our owned distribution is a critical differentiated asset for us, one that is performing well today and has opportunities for growth. We're excited about the future of this business, and I appreciate you taking the time today to hear our story.

With that, I'll turn it back to Adam.

Thanks, Karen. We'll now move to the Q&A with the Worksite team. If you're interested in asking a question, please type it in the dialogue box on your screen. Thanks both for being here.

Let's begin with our first question. So Worksite has grown at an 18% CAGR since 2020. How sustainable is that growth?

So we're not going to provide a long-term growth target for Worksite today. And as our CEO likes to say, growth doesn't always go in a straight line, but we do feel like there's significant opportunities for growth. I think you heard Richard talk about our excitement around geographic expansion and new group development. But I think, as I think about that, what gives me the most confidence looking ahead is what we've done over the last several years. And the fact that the consistent growth we've put up every quarter has been driven by a number of different factors. We're not reliant on one sole driver of growth, but we've got diversity of growth levers that have all been contributing to our success. And so I'm most excited because I feel like that's a sustainable way to continue to grow in the future.

Excellent. Thank you very much for that one. Let's go to the second question. So some group benefit companies have argued dental is a must-have product. Hold on the question just moved. Does not having dental offering limit your ability to grow? Do you have any plans to add dental?

So I think that's a very interesting question. One of the things about having our owned distribution is the relationship that we have with the field. And we hear directly from our field agents and leaders about what they want, the kinds of products they want us to introduce. I have not heard from our field that they're looking for dental or that they feel like that's an essential component in the product portfolio. If we did, there's multiple ways that we can think about providing our agents with more products.

So one is to manufacture them ourselves. That's the core of our portfolio today. If we determine that there's another product in the future that our agent force wants to sell, and it's something that we don't think we've got the capabilities to manufacture, we can always move forward with a partnership. So there's other options available to us. But I would just say I haven't heard from the field that they're looking for dental. I don't know if you have.

The only thing I would add, Karen, is that in the last few years, we've refreshed all of our products. So all of our products have been refreshed in the last few years. And as we think about product design, we're really thinking about how do we tailor the products we have to those target audiences we talked about. So for instance, later this year, we'll be introducing into the market a life insurance product tailored for police and firefighters. So I think as we think about product design, we're really focused on those audiences, listening to them and get them what they need.

Excellent. Thank you for that. Next question. Can you provide more detail on what is supporting better Worksite agent productivity, use of tech, training practices, et cetera?

All of the above. Do you want to take that one?

Yes, I'll just start. I mean a couple of things. One of the things we did a few years ago, historically, the agency was relying upon a handful of senior leaders to open up new clients. And we knew that to scale in the way we wanted to, we needed to really have a culture of new group opening. And so we introduced a brand-new curriculum, teaching agents how to open up new groups, how to get through gatekeepers and manage objections and things like that, all the things that got to get set up to make a new group happen. And in that period of time, we shifted from about 10% of our new premium being from new clients to several times that. So that culture of new group opening, and as I said earlier, new clients tend to generate more premium at the worksite in their initial enrollment.

The other thing that we've done is we've introduced a CRM platform that's allowing agents and their managers to have a lot more visibility into the clients we do have, the penetration rates we do have, so we can unlock all of those assets. So those are the 2 things that come to mind, Karen, that are right out of -- that have improved agent productivity significantly.

Excellent. Thank you for that. So geographic expansion has come up a couple of times. I'll pick one of them. Could you talk about the geographical expansion that has taken place in your Worksite business over the past few years? And what are expectations moving forward? Are there reasons why you don't have a presence in a large part of Central U.S.? Do you view M&A as a possibility to fill some of the gaps you currently have?

That was a lot of questions. So I'll try to tackle all of them, so let us know if we missed any. So yes, we've done a lot around geographic expansion. I'll turn it over to you, Richard, in a minute to talk about some specific examples. Obviously, as you look at the map, it probably becomes apparent that we've sort of moved into adjacent states. It's easier to take somebody from Florida and ask them to move to Georgia than to ask them to maybe fly halfway across the country and relocate there.

The white space tells us that we absolutely do still have opportunity to continue to do that. And as I think Richard indicated, we just keep getting better at it. The more times that we've done this, and we've been doing this over the past few years, each time it becomes that much easier to repeat it. But we're committed to continuing to make investments in this space just because we have seen it work so well. And so I think that's something that we'll continue to do. I can't give you specific states. We haven't figured out exactly where we want to expand over the next few years yet. But we're definitely going to keep running this play because it's been very successful for us. Do you want to give an example?

Yes, I'll give an example. And like you said, we're intentionally choosy around where we expand and matching the pace of that growth to our ability to execute on it. Georgia is a great example. I mean Florida is sort of our founding state, and we had 4 or 5 years ago, very little sales activity in the state of Georgia. And we helped the team, a leader and his team physically move into the state of Georgia. And now we've gone from almost nothing in that state to $4 million, $5 million. And so that's probably, that's a great example of how you get very choosy at the right time, the right leader, wrap a lot of support around them. We're deciding now what our 2027 expansion states will be, and we'll have more to report as we make those decisions.

Excellent. Thank you. First part of this question has come in a couple of times, the second part, not so much, but can you provide more color on average client size of your Worksite clients? How much of the business is employer paid versus employee paid? And on the employee paid side, what is the penetration rate?

So I don't have a specific statistic on the average client size. But I would also say that it's not that meaningful, and it's really because of what you heard Todd say in the video. We have clients as little as 3 employees all the way up to unions that have thousands of members, tens of thousands of members. And so the average client size is not as meaningful, I think, as the identity and the markets of the clients that we serve, the industries that I talked about. Sorry, what was the other question? It was about oh, employer.

Employee paid versus employer paid, correct?

Yes. So none of our business effectively is paid by the employer. So these are all employee funded, which again helps a lot with persistency because obviously, if the employee is accustomed to paying that, then when they leave their employer, there's no change in that. And then the third question was on persistency -- or sorry, penetration. Yes, I don't have a specific statistic on that.

I think we'll get it, Adam.

We can follow up with that one. All right. Let's go to the next one. So could digital enrollment or AI disintermediate your in-person model?

So I would say we haven't seen it yet. I think that as you saw in my comments, Richard's comments in the video, that in-person, very personalized touch that our agents bring is really the key to our identity. And it's really, I think, the greatest asset that we have. And so I think because of that, because we're targeting these industries, as I said, they're not in front of their computer all day. They're on the move. They're doing shift changes. I think that they will continue to need that in-person touch that we bring. They are also the industries that themselves are always working in person, police, fire, teachers. They're living in environments that bring them in contact with people all day every day. And so I think they appreciate that in-person touch that we bring. Richard, what are your thoughts?

One thing I would add is I've been in the industry for 28 years, and I've been hearing about the demise of live benefit assistance and advice for 28 years. There'll be parts of our business where we'll experiment with AI with partners perhaps. But we'll let other people replace their people with chatbots and robots. We're trying to -- we're leading a 700-person business, insurance entrepreneurs, and they're serving underserved workers who are not at their computers, right? They're -- as you said, they're police and firefighters and teachers and unionized workers. And they, by the way, value live assistance. I think people underestimate how much people want to talk to a person and get social confirmation around the benefit decisions they're making.

Excellent. Well, thank you very much. I think in the interest of time, we are going to have to cut it off there. So that includes the Worksite Q&A. If we did not get to your question, please contact the Investor Relations team following the event. Thank you, Karen and Richard, for a great presentation and Q&A session.

I'd now like to introduce a familiar face to the stage, Scott Goldberg, President of the Consumer division, to speak about our Medicare business. Scott, over to you.

Thank you, Adam, and thank you all for joining. Thank you to Karen and Richard for a terrific presentation. It's great to see the success that we're having with our Worksite sales. I'm Scott Goldberg. I lead our Consumer division. We typically engage individuals as they're transitioning away from workplace benefits, seeking individual retirement advice and guidance with navigating Medicare. As of today, we're just 45 days away from the beginning of the Medicare Annual Election Period. So it's an opportune time for us to talk about the Medicare market, the role we play in it and the value it creates for CNO.

As background, I've been with CNO for the last 22 years. I've had the pleasure of serving as the President of Bankers Life for the past 13 years and Head of our Consumer division since we formed it in 2020. I'll be joined today by our Chief Actuary, Jeremy Williams. Jeremy is also a long-time CNO veteran. He joined the enterprise about 11 months before I did. So we both had the privilege of being part of this journey for more than 2 decades, and it's been rewarding to share so much of that time together.

Our presentation today is not intended to be a deep dive into the nuances of Medicare. Rather, the goal is simply to convey 3 simple messages. First, the Medicare market is massive and growing. It's tied to the age demographics of the U.S. So the market is destined to expand. There's built-in demand. Second, CNO is well positioned to gain share because our model aligns with what consumers want, local experts and a choice of plans. And third, just look at our results, higher sales, higher enrollment and growing premium. Not to mention that the value we generate by participating in the market goes beyond Medicare. We open up new households, we uncover unmet needs, and we create opportunities across our products and services.

Medicare is a growing market. Let's start with a few basics. What is it? Well, it's a federal insurance program primarily for Americans aged 65 and older. It serves roughly 70 (sic) [70 million] people. And with the aging of the baby boom generation and increases in longevity, it's projected to continue to grow for decades. Medicare-related expenditures now exceed $1 trillion annually, which is an extraordinary figure. And it underscores the need for private insurance solutions, particularly as individuals are asked to assume a greater responsibility for their health care costs. And it's a dynamic program. Consumers need to revisit their coverage at least annually to make sure it continues to meet their needs.

So you might ask, if Medicare is a federal program, where do private insurers fit in? Private insurers provide plans that augment original Medicare, such as Medicare Supplement and Prescription Drug plans or serve as an alternative to it, such as Medicare Advantage plans. Each year, consumers are empowered to make choices around how they want to receive their benefits for the coming year. The top 2 boxes show the number of enrollees who choose to receive their benefits through original Medicare. Roughly speaking, about 29 million enrollees elect to receive their benefits through Part A and Part B. And about half of those enrollees, roughly 14 million, purchase a supplement policy from a private insurer, such as CNO to cover gaps in coverage.

Moving down the page, slightly more people, about 31 million receive their benefits through a Medicare Advantage plan, which replaces original Medicare and generally cannot be paired with a Medicare Supplement policy. And regardless of how consumers receive their medical benefits, most Medicare beneficiaries also have some type of prescription drug coverage. So if you're new to this, I know it sounds like a lot.

But the reality is, by its nature, health insurance can be complicated. And so far, we've only reviewed the types of coverage that exist for consumers who enroll in original Medicare, there's a number of different Medicare Supplement plans from which to choose. And for consumers who wish to explore Medicare Advantage options, on average, there's over 40 different plan options from which to choose depending on the area in which they live.

So not surprisingly, it's easy for consumers to become overwhelmed. As I said health insurance can be complicated. Well, it can also be scary. By the time people reach age 65, they understand how expensive health care can be and how important it is to choose coverage that fits their needs. For nearly 3/4 of consumers, that means consulting with an expert, an agent or a broker who can develop a personal relationship with them, understand their needs and bring confidence to their decision process.

And this brings us to one of CNO's key advantages and a real differentiator in the Medicare market. We have more than 5,000 licensed health insurance professionals who exclusively distribute our products and approved partner plans. Our Bankers Life agents are highly trained across Medicare, Medicare Supplement, Medicare Advantage and Prescription Drug plans. They also bring something that's difficult to replicate, deep local knowledge of providers and a genuine passion for serving this market. You'll see that passion later in a short video. Now by comparison, a traditional financial adviser is unlikely to have the time, the expertise or the incentive to engage in Medicare with the same level of focus and commitment that you'll find with our professionals. And even if they did, few can match the breadth of solutions that we're able to offer.

Our strategy is to offer consumers a broad selection of plans and to remain agnostic as to which type of coverage they choose. We provide our own Medicare Supplement plans, which we underwrite and retain the insurance risk on. And by regulation, these plans are standardized. We offer all the relevant options. We've been manufacturing these plans for more than half a century. We know our customers. We understand the risks, and our team has a strong track record of pricing and managing the block. Now we also distribute other carriers' plans, Medicare Advantage and Prescription Drug plans. In these instances, we do not take any insurance risk. We act as an agency and earn commissions. We earn an enrollment fee when a policy is placed and an ongoing renewal fee as long as the member remains enrolled. Currently, we have distribution arrangements with more than 2 dozen carriers that collectively represent more than 90% of all U.S. enrollments. So we offer quite a selection of plan options, and we operate our own health insurance marketplace called myHealthPolicy that allows agents and consumers to compare and enroll in plans online.

To take a closer look at our performance as it relates to our Medicare Supplement business, I'm now going to turn this over to Jeremy Williams, our Chief Actuary. Jeremy?

Thank you, Scott. Normally, they don't let the actuaries out of the back room. So it's great being here with you today. I'm going to take a few minutes to discuss Medicare Supplement performance. Med Supp is an important growth opportunity for CNO from both a top and bottom line perspective.

Scott talked a lot about the sales opportunity, and we've seen very strong sales growth the last few years. You'd see that here with new policies sold increasing more than 18% a year since 2023. And that strong sales growth is starting to equate into In-force and Earned Premium growth. In-force had hovered around 200,000 policies for several years, but has recently grown to 212,000 in 2026, and Earned Premiums have shown a similar pattern with more recent growth as well. And while higher recent claim trends across the industry have pushed down margin, we see those ratios returning back toward more historical levels of 18% in 2026 as recent rate increase actions have taken hold. And so overall, we're achieving higher sales that is driving growth in the block at solid margin levels.

If we move to the next slide, let's briefly hit on industry pricing dynamics as this is a critical part of how Med Supp is managed. Across the industry, higher health care utilization and medical cost trends have driven up claims experience over the last several years. And while it's created pressure on loss ratios and earnings, Med Supp has a well-established annual rate increase mechanism that allows the industry to reprice quickly in response to the emerging claims experience. And you can see that here in action. Industry rates have increased by roughly 35% since 2020 through annual rate actions in response to those higher claim trends. And so while there is exposure to health care cost volatility in the short term, we can react quickly and seek rate increases when experience supports it to meet longer-term pricing actions. And we have a strong track record of doing just that as the next slide demonstrates.

Here, you see our average historical rate increase approval percentages on the left. With the higher recent claim trends, our experience supported the need for higher rate increases, and we were able to file with the states and receive approval for 11.3% increase on average in 2026. That's similar to what we saw on the last slide from the industry. It's about 95% of what we requested, demonstrating the effectiveness of our rate action process. While those higher claim trends have pushed up our benefit ratios recently, we've seen the impacts of the rate increases start to pull down the ratios in 2026. And note that we also still have a material portion of our 2026 rate increase that will be effective in the third quarter, which also provides a tailwind for benefit ratios going forward.

And maybe the most important part on here is those higher rate increases haven't materially impacted persistency. We've seen very stable rates through time. And we've actually seen higher persistency this year compared to 2025 despite those higher rate increases. So the simple reason for the solid persistency is that Med Supp is a product that customers need and want. So they tend to hold on to their coverage. On top of that, our career agents build strong long-term relationships with our customers, and that leads to higher sticky persistency, further demonstrating the strength of our sales model.

And so to bring it all together, disciplined rate actions are improving our benefit ratios, while persistency remains strong. We're able to effectively manage the results through annual rate actions when justified and grow the block via strong sales and high persistency leading to good returns for the company.

With that, I'll turn it back to Scott.

Yes. Thank you, Jeremy. So as Jeremy indicated, our Med Supp sales have been strong over the last few years, and our overall enrollment is trending up. And this is partly due to good execution on our part, but we're also benefiting from a resurgence of demand for this particular type of coverage. Taken together, our overall outlook is quite bullish. Our exclusive distribution gives us an advantage in a relatively fragmented market. As you see in the middle of the chart, we represent less than 2% of total industry premium, which reinforces our belief that we have meaningful room to grow share, particularly as we continue to grow our field force. It's also worth noting that even if we were to simply maintain our current share, there's still substantial upside. Total industry Earned Premium is expected to become 50% larger over the next 8 to 10 years.

So now let me take you through some key metrics related to our Medicare Advantage business. Last year's annual election period was more disruptive than usual as several carriers retooled their plans or pulled out of areas completely. Our sales of Medicare Advantage plans, while relatively in line with recent years, were slightly down from the previous period. But if you look at our total enrollment numbers, they're still trending upwards, which speaks to the stickiness of our client relationships. Fee revenue is down slightly due to lower sales as well as adjustments we made to more conservatively reflect lifetime values. But again, our overall commissions receivable, which estimates our expectation of future renewals, continues to grow.

When we look at our Medicare business in total, combining Medicare Supplement and Medicare Advantage, the trend is clear. Total policies sold are growing at a compound annual growth rate of more than 9%, and we're really proud of that. At the same time, total Medicare enrollment continues to grow, which means new sales are more than offsetting attrition, and we are developing a stable growing block of business.

Now I said Medicare helps us acquire new households, and it does. For our professionals, it's a door opener that leads to broader conversations about retirement and the opportunity to understand consumers in a way that creates value. More than 1/3 of the time, we sell a second product into the household. And as trust builds and the relationship deepens, we can introduce additional offerings, including retirement planning, annuities with guaranteed income and investment management services.

When you look at the new life and health premium across CNO, you can see solid growth that we've achieved over the last several years. And more than most traditional life insurers, we lean towards health products. And that not only makes us unique, but it gives us the opportunity to talk differently with consumers. We help individuals protect themselves while they're living and health insurance gives us a reason to check in with our clients at least once a year as plans change and needs evolve. As you can see, Medicare Supplement has been a growing part of our overall production mix, rising from 9% of our total new premium from just a few years ago to now 15% of our total sales.

Now earlier, I said that you would hear from our agency managers who work directly with clients to help them make good decisions about their Medicare coverage. So before I wrap up, let's take a look.

[Presentation]

My thanks to everyone who participated in that presentation. I think the dedication and pride that our professionals take in helping our clients navigate these important decisions came through loud and clear. So I'll conclude with this.

The Medicare market is substantial, and it's going to continue to grow. CNO has the right model to succeed in serving this market, as demonstrated by our results. And as we look ahead, there's multiple ways to create additional value, whether that's through growing our field force, increasing our cross-sales, taking appropriate rate actions or as we've seen more recently, benefiting from lower claims as health outcomes improve.

Now I'm going to turn it back to Adam, and he'll lead us through Q&A.

Thanks, Scott. We'll now move to the Medicare Q&A portion of today's event with Scott and Jeremy. As a reminder on the dialogue box on your screen. Welcome to both of you.

Let's begin with our first question. So what are you seeing from a competitive standpoint in the Medicare market? And why do you believe CNO's growth will continue?

Yes, it's a good question. Look, it's a competitive product. There are standardized plans. A lot of the success that we have in this market is because we show up and we sit down with an individual over the kitchen table, and we take the time to explain how the programs work, how our products work and so forth. We've seen over this past year, a number of carriers and including ourselves, have significant rate increases as last year, there was a swelling of claims.

But we saw that across the board. So our relative competitive position hasn't changed. In fact, as our rate increases came to fruition throughout the year, we didn't see any change in our sales activity because the whole market has had to increase rates to cover higher claims costs. We think our competitive position is quite good. We think it's going to remain that way, at least for the next foreseeable business cycle. And we think that our distribution model is really what makes all the difference.

All right. Thank you for that one. All right. Next question. You highlighted that Medicare is an entry point to build deeper relationships. Could you talk about the overlap in policyholders who buy a Medicare product from you that also utilize CNO for other insurance and retirement products? How has that trended over time? And does cross-sell differ between Med Supp buyers and Med Advantage buyers?

Yes. So I'll take the last part first. We do see Medicare Supplement buyers tend to be a little bit more well-heeled. They tend to have more risks to cover and they tend to more often buy a second plan as compared to Medicare Advantage. In rough terms, 1 out of 3 of our Medicare Supplement policyholders will buy a second plan, and we'll see a little less than half of that come from the Medicare Advantage population.

Excellent. This is another question on trends within the space. So do you expect the trend toward Medicare Advantage will reverse in favor of Medicare Supplement regaining share? Or is this a temporary blip challenge with the challenges on MA? Could you walk us through CNO's economics between Med Supp and Med Advantage?

Yes, I'll take the first part. I'll refer to Jeremy for some of this as well to chime in. Look, we went through a decade or more where Medicare Advantage took a lot of share away from Medicare Supplement and some of this was from the way the government had set reimbursement rates and had supported the program with the idea of creating a larger private market for Medicare. More recently, we've seen some of the reverse happen as costs have become a little bit out of line for some of the plan sponsors of Medicare Advantage, some abuses have been reported in the press. And carriers have largely done what happens in any mature business cycle.

First, you're working towards growth and then there becomes a point where you're working towards profitability. We're seeing the latter part begin to happen, and that means narrower networks. That means pulling plans out of areas that aren't profitable. That means a greater degree of prior authorizations required and a variety of things that have made Medicare Advantage plans less attractive than they had been. Some of the ancillary benefits that were often found in Medicare Advantage plans have gone away or become less attractive. And all of that is feeding some of the demand into Medicare Supplement. In terms of our economics, we've been relatively agnostic, but I'll turn it to Jeremy to expound further.

Yes, you're exactly right, Scott. We price the 2 products to be the same as far as our long-term pricing goes and meeting our ROE targets. So we're totally agnostic to that at this point. And whatever is best for the customer, in this case, the agent working with the customer to decide what is best for them, is also best for us.

Great. Thank you very much. So the next 2 questions are a little bit around market share. So this one references Slide 22, which is the bar -- it shows the bars of the various groups and the number of enrollees, and this talks about there's approximately 25% of total enrollees have no Medicare Supp or MA. Do you think that boomers coming into Medicare right now might be more likely to use Med Supp or MA in future years?

So I know when you first look at that, and I made a statement that said, look, about half of those enrolled in original Medicare buy a Medicare Supplement, you begin to wonder what do the other half do. But in many cases, they have some type of alternative that is giving them the benefits of a Medicare Supplement plan. That may be that they are getting benefits from their employer. It may be that they're participating in another type of government plan, maybe it's a veteran plan, a TRICARE plan or so forth, where Medicare Supplement is not as necessary. And then, of course, there's a portion of the population that simply cannot afford to buy a supplement plan to go along with original Medicare.

What do I think is going to happen over time? I think that over time, the government can only be so much of the solution. I do think that we will see more people who are original Medicare only be compelled to buy a supplement plan because some of the other support programs that are out there are likely to dissipate.

Excellent. Thank you for that one. So again, this is along the similar trend. So in Med Supp, CNO still has a relatively small market share of 1.5%. Do you think there is significant opportunity to grow market share from here?

We do. We're very bullish about it. First of all, when you have 1.5% market share, you're just scratching the surface, right? More than competition, our growth is dependent on ourselves. As I talked about, as well as Karen and Richard, at CNO, we have exclusive distribution. So a lot of our throughput, our production is based on the size of our footprint. And we've been aggressively recruiting. We've been increasing retention. We've been growing our field force at both the Worksite business and the Consumer division. And I think that leads to higher sales. And I think over time, you will see us make gains in market share as a result of our exclusive distribution and the advantages that it brings to us in the marketplace with consumers, having those feet on the street that can win over consumers hand by hand, day by day.

All right. Thank you for that. Next one is a little bit about compliance. So can you speak to compliance? How do you manage the field force around product suitability?

Yes. So look, we sell a lot of products, all of our products where suitability is the utmost importance, particularly our financial products, our annuities and so forth. For Medicare, we really want to make sure we're matching the right product with the right person. Now a lot of the compliance rules are around when you can sell, how you can sell, getting permission to sell and so forth, and we follow all of those.

But even more importantly, what's ingrained in our culture is making sure that we're doing the right thing for the client. Is their doctor in the network? Are they traveling abroad? Do they have -- are they in multiple locations? Do they need these ancillary benefits? What can they afford? We go through and we do a needs-based fact finder to determine what is the right solution for the consumer, and that's the best thing you can do to make a compliant and suitable sale.

All right. Next question. This is around Medicare for All. Some politicians are pushing for Medicare for All. If we got something like that, how would it impact your business?

Yes. So I'll take a run at this. Jeremy, I'll let you chime in for your own thoughts. Obviously, this is all speculation here. Medicare for All has been talked about for quite a long time. There's pros and cons to it. At least from our standpoint, if Medicare was suddenly eligible for all Americans or all Americans over a certain age or what have you, that would expand our addressable market considerably. So I think we'd be in a really good position to capitalize on that. What that means for government spending and other types of private products, look, that's all conjecture and remains to be seen. But the idea that we're going to change the age from age 65 to something lower, at a glance, that really opens up the market to us.

Yes. I don't know that I have a lot to add there. Whatever coverage will be in place and who knows what that is, to your point, it's been around for a long time, and we'll see if anything is implemented, but they will need supplemental coverage in some form, and that will be ripe for us to move in and fill that need.

That concludes the Medicare Q&A portion of today's event. Again, if we did not get your question, please reach out to the Investor Relations team. Thank you, Scott and Jeremy, for a great presentation and Q&A session.

As today's discussion demonstrated, we believe CNO is uniquely positioned to serve the growing needs of middle-income America through differentiated distribution, attractive growth opportunities and a proven track record of delivering results. Thank you for joining us.

If you have any additional questions or would like to learn more about CNO, please contact the Investor Relations team. We thank you for your support of and interest in CNO Financial Group. Have a great rest of your day.

Ladies and gentlemen, thank you for standing by. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome you to CNO Financial Group's Second Quarter 2026 Earnings Call. [Operator Instructions] I would now like to turn the conference over to Adam Auvil. Please go ahead.

Good morning, and thank you for joining us on CNO Financial Group's Second Quarter 2026 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 can obtain the release by visiting our website at cnoinc.com. This morning's presentation is also available on 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 non-GAAP measures to the corresponding GAAP measures in the appendix. Throughout the presentation, we will be making performance comparisons and unless otherwise specified, any comparisons made will refer to changes between the second quarter 2026 and the second quarter of 2025. And with that, I'll turn the call over to Gary.

Thanks, Adam. Good morning, everyone, and thank you for joining us. CNO delivered a very strong quarter and first half of the year. Operating earnings per diluted share were up 45% in the second quarter and up 43% year-to-date, excluding significant items. We delivered our 16th consecutive quarter of sales growth and our 14th consecutive quarter of producing agent count growth. As a result, we are raising our full year operating earnings per share guidance and either improving or reaffirming all other 2026 guidance. We remain pleased with the consistent results we're generating, and we remain focused on growing earnings, improving profitability and reinvesting in the business.

Our business model continues to perform well as we navigate a dynamic macroeconomic environment. Sales results in the quarter were strong across both divisions. Total new annualized premiums were up 7%, and we set multiple sales records. Our exclusive middle market focus and our last mile captive agent distribution model are the foundation of our durable competitive moat. This difficult to replicate model remains a key competitive advantage that drives consistent sales performance and profitable growth. Earnings benefited from strong insurance product margin and investment results, reflecting growth in the business and expansion of the portfolio book yield.

We maintained a robust capital position while returning $77 million to shareholders. Book value per diluted share, excluding AOCI, was $39.92, up 5%. Turning to Slide 5 and our growth scorecard. Nearly all of our growth scorecard metrics were up for the quarter with strong performance across production, distribution and investments in capital. Turning to Slide 6 and our Consumer division. We delivered our 15th consecutive quarter of sustained sales growth, including records in annuities and brokerage and advisory. Total Health NAP was up 17%, marking 16 consecutive quarters of growth. Supplemental health was up 5%, Long-term care was up 4%. Our Medicare business continued to perform well. Medicare Supplement NAP was up 52%, marking the third consecutive quarter of growth over 50%.

Our results benefit from the shift in consumer preferences away from Medicare Advantage and towards Medicare Supplement. This trend underscores the value of offering both Medicare Supplement and Medicare Advantage through our local agent distribution model. Medicare remains a flagship door opening product for C&O, supporting our ability to expand the total number of households we serve. Total Medicare policies sold were up 12%. The baby boomer generation is moving through its peak retirement years with more than 11,000 Americans turning 65 each day. Rising retirement health care costs also continue to pressure household finance. In 2026, the amount that a typical retired couple needs to save for health care increased nearly 8% compared with annual increases of 2% to 3% in recent years.

For these reasons, we expect durable demand for all our health care products. Life NAP was down 9% for the quarter against the strong comparable. Results were primarily driven by lower direct-to-consumer sales. We take a measured approach to managing our D2C channel. We invest where we see productive opportunities and optimize performance over time. This quarter, non-television marketing channels, including web, digital and third-party partners, generated nearly 72% of all D2C life sales. As consumer media habits evolve, we continue to reduce our reliance on television advertising and shift more towards efficient marketing channels.

While this transition may create some quarterly variability, we remain comfortable with the business and its long-term prospects. In general, demand for life insurance remains healthy. However, we do not expect sales to go in a straight line. Our broad product portfolio allows us to meet shifting customer needs across protection, health and retirement income solutions. We set multiple records in our asset accumulation business during the quarter, reflecting the demand for retirement income solutions among middle-income consumers. Annuity collected premiums reached a new record of $536 million, up 3%. Account values were up 7%. We also delivered our 13th consecutive quarter of brokerage and advisory growth.

Client assets were up 24% to a new record and total accounts were up 13%. When combined with our annuity account values, our clients entrust us with more than $19 billion of their assets, up 11%. Strong agent productivity and retention fueled our sales momentum. Producing agent count was up 3%, our 14th consecutive quarter of growth. Registered agent count grew 4%. Next, Slide 7 and our Worksite division performance. We delivered our 17th consecutive quarter of sustained sales growth. Record Life and Health NAP was up 29% for the quarter. This represents our seventh consecutive quarter of double-digit insurance sales growth. Highlights from the quarter include Life, up 44%; Hospital Indemnity, up 33%; Accident, up 31%; and critical illness, up 7%. Our focus on small to midsized businesses and associations drive meaningful sales growth.

Employers invest heavily in employee benefits, but the mix is shifting. To control costs, many are reducing traditional Medicare coverage while increasing the availability of employee-paid voluntary benefits. Our products are designed to address these protection needs, and our career agents and partners are well positioned to help employees understand and address potential gaps in coverage. NAV from new clients increased 84%. This growth is well balanced between geographic expansion and further penetration into existing markets. Life sales continue to experience a significant uptick from these new client relationships. Producing agent count was up 6%, our 16th consecutive quarter of growth.

Productivity remained robust across all agent cohorts. Importantly, our optimized career agency remains a growth engine for the division, generating approximately 90% of our total worksite insurance sales. Given its strong performance and long-term potential, we will continue to invest in expanding this channel. Across both divisions, our results highlight the value of a diversified product portfolio built around customer needs rather than individual products. We think about our product diversification in 3 simple ways. First, we serve a broad range of customer needs with health, wealth and income protection solutions.

Second, our products play different roles in the customer life cycle. Medicare products help us initiate new customer relationships while annuities deepen existing relationships and support long-term customer value. And third, our product portfolio balances risk across mortality, morbidity and longevity. This combination is a unique strength in the marketplace. It enables us to build lasting customer relationships while delivering consistent performance over time. And with that, I'll turn it over to Paul.

Thanks, Gary, and good morning, everyone. Turning to the financial highlights on Slide 8. We delivered a very strong quarter, generating operating earnings per share of $1.26, up 45% from the prior year. The quarter reflects continued strong earnings fundamentals, including the compounding of sustained sales momentum contributing to growth in insurance product margin and net investment income, favorable underwriting across nearly all products and improvement in net investment income not allocated to products, led by alternative investment returns. Fee income results were generally on plan through the first half of the year, and we remain on track to achieve our full year outlook. The expense ratio was 18.4%, reflecting another quarter of favorable expense performance.

We continue to view this as a timing difference and expect expenses to normalize over the remainder of the year. We maintained our disciplined and balanced approach to capital management, deploying $60 million on share repurchases in the quarter, contributing to a 5% reduction in weighted average diluted shares outstanding. On a trailing 12-month basis, operating return on equity was 14.1% and 13.1%, excluding significant items, reflecting steady progress on improving the profitability of the business. Overall, the results demonstrate the strength of our business model and consistent execution over the last several years. Turning to Slide 9. Sales momentum combined with broadly favorable claims experience drove growth in insurance product margin across all 3 major product categories.

Fixed indexed annuities continued to benefit from growth in the block. Other annuities benefited from favorable reserve releases due to higher mortality on closed block policies. Supplemental health benefited from growth in the block, partially offset by a handful of large claims on older policies. We view these claims as isolated events and do not believe they represent the change in the underlying trends. Medicare Supplement benefited from growth in the block, favorable morbidity and rate increases implemented earlier this year. The favorable morbidity resulted in a reserve release from better-than-expected first quarter claims development, which we do not expect to recur. Long-term care benefited from growth in the block and lower morbidity.

Life margins reflected growth in the block and lower mortality across both interest-sensitive life and traditional life. Traditional Life also benefited from lower nondeferrable advertising expense. Turning to Slide 10. Net investment income remained a meaningful contributor to earnings growth, increasing 8% year-over-year and marking the 11th consecutive quarter of growth in total net investment income. The new money rate was 6.16% in the quarter, representing the 14th consecutive quarter above 6%. Investment income allocated to product lines increased 3%, supported by growth in average net insurance liabilities, which were up 4%. Net investment income not allocated to products improved significantly, increasing 46% year-over-year.

The improvement was driven by higher alternative investment income, growth in our FHLB and FABN programs, including a $300 million FABN issuance in the second quarter and a higher level of gains on option forfeitures from annuity surrenders. Turning to Slide 11. At quarter end, our consolidated risk-based capital ratio was 377%. Holding company liquidity was $233 million and debt to capital was 26.1%, all above or within our target levels. The underlying capital generation of the business continues to enable thoughtful reinvestment in the business to support growth and manage risk while also returning capital to shareholders in a disciplined and sustainable manner.

Turning to our 2026 guidance on Slide 12. Given our strong first half results and confidence in the underlying performance of the business, we are increasing our full year operating earnings per share guidance to a range of between $4.60 and $4.80, an 8% increase at the midpoint from our prior 2026 guidance. We are narrowing the expense ratio to a range of 18.8% to 19.0%, reducing the upper end by 20 basis points, reflecting improved operating leverage from continued strong sales results. As mentioned earlier, we expect expense dollars for the full year to be consistent with our original guidance, notwithstanding some lower expense in the first half of the year.

We are lowering our effective tax rate assumption to approximately 21.5%, and we are reaffirming all remaining 2026 guidance metrics. So no change to our target RBC ratio, holdco liquidity or leverage targets and no change to our full year free cash flow expectations. We are expecting to get closer to target capital levels across our operating subsidiaries, including in Bermuda, which will contribute to free cash flow generation in the second half of the year, subject to customary regulatory approvals.

Turning to return on equity. Our 2026 operating return on equity is expected to exceed the 3-year target of 12% we had previously established for year-end 2027. We have been clear that 12% return on equity was not the destination, but rather a waypoint in our journey of continued improvement. Our intention is to improve ROE each year, including in 2027 and beyond as compared to 2026 with the ultimate goal of achieving top quartile ROE relative to our peer group. We expect to establish new ROE targets in February of 2027, in line with our normal planning cadence. And with that, I'll turn it back to Gary.

Thanks, Paul. Turning to Slide 13. C&O delivered a very strong quarter and first half of the year. Consistent, repeatable results continue to drive our momentum as we grow earnings, improve profitability and reinvest in the business. Our performance reflects the strength of our diversified business model and the consistent execution of our team. As we enter the second half of the year, we remain confident in our ability to deliver sustainable growth and long-term value. Before we open up the line for Q&A, we have one calendar announcement.

Our next CNO investor briefing is planned for early September. This 1-hour virtual session will feature both our worksite division and a detailed review of our Medicare business, followed by time for questions with members of our management team. Program registration will start in August, so please ensure that you are signed up to receive our e-mail alerts. Thank you for your support of and interest in CNO Financial Group. We will now open it up for questions. Operator?

[Operator Instructions] Your first question comes from Ryan Krueger with KBW.

My first question was on long-term care. The margins there have been quite strong and seemingly keep improving for a number of years. I guess as you study the claim experience, I think in the past, you just said it's been trending better than you expected. But as you study the underlying drivers, you -- I guess, are you getting closer to the point of thinking this could be more of a long-term level that's sustainable?

Ryan, it's Paul. It's something that we look at every quarter. It's something that we look at in more detail every year. As you know, we switched to the third quarter for our annual review. So we'll be looking at the recent trends as we go through that exercise in the third quarter. We certainly have observed modestly lower claims versus our expectations on the favorable end of the range of current assumptions. So I don't want to get ahead of the annual exercise, but we'll certainly be reporting that on our third quarter call.

And then on the worksite business, I guess, particularly on the life sales, can you talk -- you had quite a lot of growth in the interest-sensitive life sales within worksite. Can you give a little bit more color on kind of what you're seeing there and what you think has been leading to that?

Yes, Ryan, this is Gary. Thanks for the question. We're obviously very pleased with how the worksite business is growing. As we mentioned, the success we continue to have there is a combination of both geographic expansion as well as penetration in existing areas. What we're seeing -- and remember, selling life insurance into the worksite space and really emphasizing it, that's been a project going on for the last several years. I think we're seeing a combination of good market demand.

We're seeing encouragement by employers. And we're seeing, frankly, a maturity of our own sales force in understanding and really using these products to their fullest. So I think we're benefiting from a number of different, what I would describe as just small tactical things that we've been doing over the years. As we've talked about in many of our calls, there's been no major strategic shift. no major changes to products, nothing like that. It's just the continued blocking and tackling. And we have, frankly, a wonderful team out there that's doing a great job, and we expect it to continue.

Your next question comes from the line of Suneet Kamath with Jefferies.

I wanted to start with MedSupp. It looked like the margin had been traveling sort of in the mid-20s on a quarterly basis and now it's sort of mid-30s. Paul, I think you mentioned a reserve release there. So I was wondering if you could size that for us and maybe give us a sense of where you think on a go-forward basis, this margin should be traveling.

Sure. Yes, we saw some favorable claims reserve development, and this is a product where the claims reserves developed quickly. And that was around $4 million. So if you're looking to kind of run rate the margin, you should adjust for that. I think with that adjustment, kind of looking at the first half together, that should give you a decent indication of run rate.

Okay. That's helpful. And then I guess for Gary, and I know we talked about this last quarter, so I can guess what your answer is going to be. But if we just look at consumer NAP, it just looks like it's been decelerating, I guess, the past couple of quarters. And as I look out over the next 2, I think the comps get pretty difficult. So just curious if you think you can keep this kind of growth engine going? Or could we see sort of a decline at least over the next couple of quarters given the comps?

Yes, Suneet, the short answer is, I don't know, but let me give you a few factors to think about. So first of all, we've had 16, 17 quarters of consecutive growth. On the one hand, life never goes in a straight line, and there's going to be some point when that streak breaks. I have no idea when that's going to be. But I would also tell you, I would not bet against this team. The field leadership in the Consumer division is spectacular. They have been doing a fantastic job. We've got a tremendous tailwind in terms of the consumer need. You see still 11,000 folks retiring every day. Every single one of them needs help with Medicare. Every single one of them wants to talk about long-term care and guaranteed lifetime income with the goods.

I don't see any of those trends changing anytime soon. If you ask me, how does our future look over a 3- to 5-year horizon, I would say extremely bright. Can I tell you if Q3 will be above Q2 and by how much? I can't. But if I look out over the long term, we have favorable demographics, an excellent product portfolio, field leadership that is second to none, and it's growing. Look at our productivity numbers. So I would not bet against these results over the long term. In any given quarter, I have no idea.

[Operator Instructions] Your next question comes from the line of Joel Hurwitz with Dowling & Partners.

First one, can you just provide an update on capital deployment priorities? And I guess, specifically, how are you thinking about share repurchases at this point with the stock now trading well above book value?

Joe, I'll take a first crack, and Gary, you may want to jump in. I'd say that the way we think about capital has not changed. So we generate a fair amount of capital to support continued growth. We're reinvesting in the business. The biggest example of that is the TechMod initiative that we're kind of still in the early innings on, but that's a significant reinvestment in the business to update our sort of core applications and infrastructure and reduce risk and position us for growth. After all that, sort of solving for our target capital levels and holdco liquidity, we generate a fair amount of excess capital, and we look for inorganic growth opportunities. We're very selective. We haven't done much of that. And the rest we return to shareholders through the ordinary dividend on a quarterly basis and through share repurchases. So nothing you haven't heard before, really no change to that.

Yes. If I could just add a couple of things. So first of all, I would emphasize Paul's main point, which is we have made no changes to how we think about capital deployment. We see opportunities in the marketplace. We see needs to develop the business for the long term, think about our TechMod initiative that we've talked about. When we see opportunity to let Bermuda, we will continue to take those. But beyond that, there's really been no change. Final comment I would make, it's absolutely true that when we trade above book value, the accounting treatment of share purchases is not as obviously advantageous as when we're trading below book value.

However, I'm hopeful that no one would be surprised to hear the CEO believe that I still think this company is undervalued even above this level or at this level where we're trading. I think we've got an incredibly bright future, and we will continue to execute the way we've been executing. So I think there's a lot more upside here.

Got it. That's helpful. And then, Paul, I just wanted to see if you could provide an update on Bermuda and where you stand with potentially moving other blocks like your life business or a block of your life business to Bermuda.

Sure. So consistent with our past practice, we're not going to provide details because we don't want to get ahead of regulatory approval processes. But there are opportunities for us to seed more of our liabilities, and that's something that we're focused on, and we'll keep you posted as that evolves. As I mentioned in my prepared remarks, we are looking to get closer to target levels of capital across our operating subsidiaries, including in Bermuda. And in the close to 3 years now that we've been operating there, we have built up some excess capital.

And so we're looking to solve for that subject, of course, to regulatory approvals. A third treaty could be a part of that because that -- as you sort of solve for that, you can address some of the excess capital that's been built up. So that's where we are. That's as much as we can tell you at this stage, but stay tuned as that evolves.

Okay. I guess just any color on how much excess capital has been built up in the entity?

I'd rather not be specific, again, just not to get ahead of the process and particularly the regulatory review and approval. But I will say that as you think about free cash flow in the year, that process would -- as we address capital that's been built up over a couple, 3 years, that will be sort of a one-off favorable item in the year. We also have the TechMod investment that's consuming capital that's also one-off in nature. So you net those things together and the free cash flow guidance is pretty close to run rate currently.

Your next question comes from the line of Wilma Burdis with Raymond James.

This is Videep, on for Wilma. I was wondering if you could talk about what you're seeing in the market that led to more corporate bond investments this quarter? And what are some other asset classes that are currently attracting investment for CNO. We saw that RMLs have continued to be attractive.

Yes, I'll take that. This is Eric Johnson. I'm the Chief Investment Officer here. So during the quarter, we had a fairly active quarter in continuing to try to optimize from a return on asset perspective. And that involved a fair amount of activity in corporate bonds, swapping durations as well as some industry sector reallocations. Interestingly enough, we really have not been adding aggressively to our RML portfolio over the period. While they screen pretty well for -- from a return perspective, we feel we have a sufficient allocation there. And in fact, and we've been working pretty hard in this interest rate environment to manage lower the convexity profile of our portfolio.

So we really have been a little less active than historically it was the case in generally in prepayable securities. We've been leaning the other direction actually. We're -- I think I would not -- I would say that our allocation to corporates is probably in line with our -- what we think our expectation would be there in terms of the kind of the ratings breakdown of it. We continue to focus pretty heavily on the single A category as being a little better value for us in the BBB category. So it was a very constructive quarter. We did a lot of good things, put some income on the books, continue to protect the quality of the portfolio and feel good about how the quarter went.

This is Wilma. Just jumping in for the follow-up question. Can you talk a little bit about the annuity spread dynamics? Are you seeing relatively stable crediting rates in the market? Has there been any pressure there? Maybe just give us a little bit of color on what you're seeing.

Wilma, it's Paul. I'm not sure I can provide a whole lot beyond sort of what you'd expect, which is we manage our annuities to sort of a target spread. We're pretty good at doing that in various interest rate environments, and we continue to apply that level of discipline in the current environment.

Yes. Let me just supplement Paul's comments a little bit. I think it's important to remind everybody of a few key factors that make our annuity book different. And I won't say immune, but I will say less subject to some of the other pressures we're seeing in the marketplace. We've absolutely seen new entrants come in. We've absolutely seen a bit of an arms race. There's no question about that. You've seen that in some of the sales figures. But remember, number one, we sell our annuities only through captive distribution. And so our people are not regularly spreadsheeting our products. And then number two, and this is a key thing, the products that we sell are to the dedicated -- dedicated to the middle income market.

They are fair, they are reasonable. They provide a good value. But when our captive distribution force is in there talking to these customers, they're not competing against everybody and their brother because most folks aren't calling on this customer base. As often as anything, our competition is a bank CD. So it's important to remember that we're not immune to these competitive pressures, but we are significantly insulated because of the difference in our distribution model and the focus we have on that middle income market that doesn't attract a lot of attention for most big financial players.

And that concludes our question-and-answer session. I will now turn it back over to Adam Auvil for closing comments.

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 the day.

Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation, and you may now disconnect.

Hello, everyone. Thank you for joining us, and welcome to CNO Financial Group's First Quarter 2026 Earnings Results. [Operator Instructions] I will now hand the call over to Adam Auvil, VP of Investor Relations for opening remarks. Please go ahead.

Good morning, and thank you for joining us on CNO Financial Group's First Quarter 2026 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 can 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 the 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 non-GAAP measures to the corresponding GAAP measures in the appendix. Throughout the presentation, we will be making performance comparisons and, unless otherwise specified, any comparisons made will refer to changes between first quarter 2026 and first quarter 2025.

And with that, I'll turn the call over to Gary.

Thanks, Adam. Good morning, everyone, and thank you for joining us. CNO is off to a strong start to the year, building on our excellent 2025 performance. First quarter operating earnings per diluted share were up 33% to $1.05 and up 42%, excluding significant items. We also delivered our 15th consecutive quarter of sales growth and our 13th consecutive quarter of producing agent count growth.

We remain pleased with the consistent results we're generating, and we remain focused on growing earnings, improving profitability and reinvesting in the business. Our performance in the quarter once again illustrates the strength and resilience of our business model. We continue to perform well through economic uncertainty as we help middle-income households achieve greater financial security and protection.

Sales results in the quarter were strong across both divisions with total new annualized premiums up 11%. Our exclusive middle market focus and our last mile captive agent distribution model create our durable competitive moat. This difficult to replicate model is a clear advantage and a catalyst for profitable growth. Earnings continue to benefit from strong insurance product margin and investment results, reflecting growth in the business and expansion of the portfolio book yield.

We maintained a robust capital position while returning $77 million to shareholders. Book value per diluted share, excluding AOCI, was $38.98, up 5%. Turning to Slide 5 and our growth scorecard. Nearly all of our growth scorecard metrics were up for the quarter with strong performance across production, distribution and investments in capital.

Turning to Slide 6 and our Consumer division. The Consumer business delivered a strong start to the year. This marks our 14th consecutive quarter of sustained sales growth and includes a 9% 3-year compound annual growth rate for Life and Health NAP. Consistent execution and our focus on the middle-income market continue to drive our results. Life and Health NAP was up 9% for the quarter. Total Health NAP was up 20%, marking 15 consecutive quarters of growth.

Supplemental health was up 10%. Our Medicare business continues to perform well, building on the strong results our field leaders delivered during the fourth quarter 2025 annual enrollment period. Total Medicare policies sold were up 24% with Medicare Supplement NAP up 53%. Our results continue to reflect the shift in consumer preferences away from Medicare Advantage and toward Medicare Supplement. During the 2025 AEP, industry-wide MA enrollment growth slowed to about 3%, the weakest pace in 20 years.

The broader MA market also continued to experience significant disruption as many leading carriers pared back plans and benefits over the last 18 months. Approximately 3 million MA members had their plans terminated for the 2026 plan year, requiring them to find new coverage. About 1 in 5 people with Medicare switched plans or carriers, the highest rate ever recorded for an annual enrollment period. This environment underscores the value of offering both Med Supp and Medicare Advantage through our national agent distribution model.

Medicare remains a flagship door opening product for CNO, supporting our ability to expand the total number of households we serve. Life NAP was up 1% for the quarter with more than half of our life production being generated from direct sales. Our approach to the D2C life channel continued to benefit from technology-driven productivity enhancement and diversifying our direct marketing away from television to include more web, digital and third-party channels.

These non-television lead sources generated nearly 65% of all D2C life sales for the quarter. Annuity collected premiums of $434 million were down 2% on a strong comparable. Account values were up 7% over the prior year. We delivered our 12th consecutive quarter of brokerage and advisory growth. Client assets were up 27% to a new record and total accounts were up 13%. When combined with our annuity account values, our clients now entrust us with more than $18 billion of their assets, up 12%.

Strong agent productivity and retention continue to fuel our sustained sales momentum. Agent recruiting is also up as our career path continues to resonate with applicants seeking financial stability and a career of purpose. Producing agent count was up 3%, our 13th consecutive quarter of growth. Registered agent count grew 7%.

Investments in technology, data and artificial intelligence are woven into our strategy to drive greater efficiency and agent productivity and to enhance our customer experience. One example is our Colonial Penn call center, where we are using AI to help answer and intelligently route customer calls to live agents. The early results are very encouraging. We're seeing shorter customer wait times and higher quality sales conversions. We have multiple initiatives underway across the company to advance our technology and AI road map. As these programs move from pilot to execution, we will continue to share examples of the value they deliver.

Next, Slide 7 and our Worksite division performance. The Worksite business also started the year strong with Life and Health NAP up 22%. This represents our 16th consecutive quarter of sales growth with a 20% 4-year compound annual growth rate. Highlights from the quarter included life insurance, up 56%; hospital indemnity insurance, up 121% and accident insurance, up 18%.

Our focus on small to midsized businesses and associations, combined with our career agent model continues to drive meaningful sales growth. NAP from new clients increased 65%, largely driven by geographic expansion and further penetration into existing markets. Life sales, in particular, experienced a significant uptick from these new client relationships.

Our sales performance in the quarter was driven by strong agent productivity. Producing agent count was up for the 15th quarter and agent recruiting was up 8%. Across both divisions, we're pleased with the solid start to 2026. We're executing well and expect that momentum to carry through the remainder of the year.

And with that, I'll turn it over to Paul.

Thank you, Gary, and good morning, everyone. Turning to the financial highlights on Slide 8. Operating earnings per share were $1.05 for the quarter, up 33% and up 42%, excluding significant items in the prior period. The increase reflects continued profitable sales growth, strength in underwriting results, growth in net investment income driven by growth in assets, together with higher yields, and ongoing discipline in expense and capital management.

Fee income was in line with expectations in the quarter. The expense ratio was 18.9%, reflecting lower-than-planned spending in the quarter, which we expect to normalize over the balance of the year. During the quarter, we deployed $60 million of excess capital on share repurchases, contributing to a 7% reduction in weighted average diluted shares outstanding. We continue to take a measured, disciplined approach to expense and capital management, reinvesting in the business to support growth while also generating a healthy level of free cash flow, which we return to shareholders through dividends and share repurchases. On a trailing 12-month basis, operating return on equity was 13.1% and 12.2%, excluding significant items.

Turning to Slide 9. Outstanding sales performance over the last several years continues to drive growth in insurance product margins across each major product category. As a reminder, the first quarter is typically the lowest insurance product margin quarter of the year, reflecting seasonality across several of our products. Against that backdrop, our first quarter '26 results were solid, reflecting the strength of the underlying business.

Fixed index annuities benefited from growth in the block. Supplemental health and long-term care both also benefited from growth in the block with long-term care margin also reflecting favorable morbidity. Medicare Supplement faced modestly adverse claims experience, partially offset by the favorable impact of continued growth. We expect rate increases over the course of 2026 to help address the recent claims experience.

Our traditional life margins benefited from growth in the block, favorable mortality and lower nondeferrable advertising expense. Overall, these results again demonstrate the value of our diversified product portfolio, where individual puts and takes across product lines typically net to stable and growing total margin over time.

Turning to Slide 10. Net investment income increased 6% year-over-year, marking the 10th consecutive quarter of growth in total net investment income. The growth was driven by 2 key factors: growth in net insurance liabilities and related assets, which increased 4.8% in the quarter, and continued improvement in book yields supported by 13 consecutive quarters of new money rates above 6%.

Net investment income not allocated to products increased year-over-year, reflecting growth in the FHLB and FABN programs, while alternative investment income improved over the prior year but was slightly below expectations. Importantly, our portfolio continues to remain high quality and liquid. The average book value of invested assets increased 4.2% year-over-year, reflecting growth in the business.

Our investment posture remains disciplined, supporting durable income generation while maintaining flexibility in a volatile market. Our new investments in the quarter comprised approximately $1.3 billion of assets with an average duration of 5 years. Our new investments are summarized in more detail on Slide 20 of the presentation.

Turning to Slide 11. Our total capital position remains robust. The consolidated risk-based capital ratio remains well within our target range, which we manage between 360% and 390%, recognizing that some variability is expected quarter-to-quarter. Holding company liquidity ended the quarter at $280 million, well above our $150 million minimum target. Debt to capital was 26.4%, remaining comfortably within our 25% to 28% target range. Overall, our capital and liquidity position provides flexibility to support growth, manage risk and deploy capital thoughtfully over time.

Turning to our 2026 guidance on Slide 12. We're pleased with our first quarter results and the momentum we're carrying into the balance of the year. We feel good about the variables within our control and the underlying performance of the business. However, given the volatile macroeconomic environment and the simple fact that we have 3 quarters yet to go in 2026, we are affirming our original guidance at this time and consistent with our historical practice, we will refine our projections later in the year.

Regarding our 3-year operating return on equity target, we have been clear that 12% ROE was not the destination, but rather a waypoint in the journey of our continued improvement. Our recent ROE results make it likely that we will increase our 2027 ROE ambitions. However, just as with our annual guidance, we don't believe it would be appropriate to update our '27 ROE target less than halfway through the 3-year cycle.

We believe credibility is built through delivery, not through frequent recasting of long-term targets, and we intend to update our ROE objectives for '27 and beyond no later than early next year.

And with that, I'll turn it back to Gary.

Thanks, Paul. Turning to Slide 13. Consistent, repeatable results continue to drive our momentum as we grow earnings, improve profitability and reinvest in the business. Our results reflect the resilience of our business model and the strength of our diversified products and distribution. Disciplined execution will continue to drive our growth and create meaningful value for customers, associates and shareholders in 2026 and beyond. Thank you for your support of and interest in CNO Financial Group.

We will now open the call for questions. Operator?

[Operator Instructions] Your first question is from Suneet Kamath with Jefferies.

I wanted to start with the Med Supp business. Paul, I think you talked about in your prepared remarks some pricing plans. Can you flesh that out a little bit and give a sense of the timing of when you'd expect those premiums to sort of kick in?

Sure. So we started seeing some increase in our Med Supp claims last year translating to higher benefit ratios. As you know, as you just mentioned, we have the opportunity to file rate increases annually, allowing us to address emerging experience and maintain profitability of the book over time with a bit of a lag.

So in '25, we filed for rate increases in 2 buckets. The closed block with a January 1, '26 effective date asking for an increase of 10.5%, and we received approvals for 10.2%. And then the closed block with July 1, '26 effective dates, we filed for 16.8%, and we're expecting approvals for around 14.5%.

These rate increases earn in over time with the full quarterly impact over these 2 blocks evident by fourth quarter of this year, which should translate to improved benefit ratios, depending a little bit on claims experience in '26, which we would then address with 2027 rate filings. In the long run, over time, Med Supp is a good product for us, meeting our target returns. The good news is that Med Supp is not our only product. And I think this illustrates the strength and the resiliency of our business model, including its product diversity, which typically translates to puts and takes in product margin across our product portfolio, but relatively stable and growing margin in total, and you certainly see that in our first quarter results.

Got it. And are those 2 buckets that you mentioned similarly sized? Or is one bigger than the other?

The closed block, I'd say, is maybe 2/3 in the open block, about 1/3 roughly.

Okay. And then maybe for Gary, just focusing on the Consumer segment. At the product level, it looked like Health NAP was quite strong, but life, D2C and annuities less so. And I think you had mentioned in annuities, some tough comps. So maybe just give us some color in terms of what you expect there. Are we getting to the point where the comps are getting just too difficult to grow? Or was there something anomalous in the first quarter?

So Suneet, thanks for the question, and thanks for the continued interest in CNO. I didn't see any particular anomalies in the first quarter. And if anything, I would argue that all of the forces that have continued to allow us to grow are still there.

You still got the population. You still got 11,000 folks turning 65 every day. You still got the absence of alternatives. You still got longer lifespans. You've still got the fact that the government can't solve this problem. We expect demand for these products to continue to be very robust. You're right in citing the fact that we had tough comparables or strong comparables, I guess, I should say. Frankly, I would kill to have that problem every quarter.

And even the 2% that we cited, I really regarded that as nothing more than just quarter-to-quarter fluctuation. I mean, remember, if the selling season in 1 quarter is 1 or 2 days shorter than another quarter, you're going to see variance. There's all kinds of stuff that goes on every quarter, to be really blunt, I don't pay that much attention to volume from quarter-to-quarter. I'm way more focused on the 1- and 3-year trends.

And everything I see points me to strong demand, and more importantly or at least as importantly, a really strong ability on our product portfolio and distribution network to be able to execute and meet those demands. So I am extremely bullish, and I wouldn't pay any attention to minor fluctuations of 1% or 2% here or there. It's, in my mind, irrelevant.

Your next question is from Ryan Krueger with KBW.

First question was just on expenses. I know you mentioned normalization during the rest of the year. But I mean, would you consider this all timing related in terms of the abnormally favorable expenses this quarter? Or do you think we are actually seeing some favorability maybe to what you had originally expected?

Ryan, it's Paul. I'm not sure I'm totally following the question. But just to offer some thoughts, and please give me a follow-up if I'm not answering the question. So there's always some variability across quarters. It's somewhat difficult to plan each quarter exactly. Typically, in the first quarter of the year, we have higher expenses, which translates to a higher expense ratio, and that grades down over time. That's been pretty consistent over the last several years.

Honestly, that was our expectation this year. It hasn't played out that way. But we expect that the expenses for the full year will still come in around where we had originally planned, and that should translate to the expense ratio when you do the math. Having said that, the growth we're seeing in the business will drive likely some favorability in the denominator of the ratio. And I think that points to the continued leverage that we're getting in the business from the growth that we're seeing. So Ryan, let me know if that did not answer your question.

No, that was exactly what I was getting at. And then I just had one for Eric Johnson. There's certainly been a lot of volatility and, I guess, concern fluctuation in the credit markets these days. Just curious about your perspective on what you're seeing in the credit markets and also where you're seeing good opportunities to deploy new money right now.

We've always taken the point of view that we wanted to have a stable and consistent investment performance at CNO. And so our asset allocation model over the last couple of years has really been predicated on being capital efficient and storing up dry powder for a more favorable environment where you could really make some money at lower levels of risk versus making very little bits of money at maybe higher levels of risk.

And so as we got into this year and you had some vol in the first quarter, you saw a lot of rate vol. I mean, treasury curve moved up 30, 40 basis points. But credit spreads were actually pretty flat, kind of traveled in a 5 to in IG, maybe a 5, 7 basis point channel, high yield, maybe 30, 40 basis point channel. So you didn't really get the credit market was pretty well behaved largely because there was a lot of demand for product at higher rate levels.

Investors were willing to buy stuff. And you saw that in oversubscriptions and continued good executions on new issues. So through the quarter, we pretty much stuck to our knitting, as you can see, it's in the earnings deck. We worked shorter on the curve largely because that was our ALM need, and we want to keep that in check. And then secondly, we just didn't -- there was not an extreme opportunity to make big money.

So that's reflected in new money rate, which is around a little higher than 6%, consistent with prior quarters. We didn't launch at the market. We're going to let it come to us. Don't think this story is in the ninth inning. And as the economy evolves and the impact of higher energy costs and other things happen, there'll be better entry points for a real change in strategy. We're not there yet.

Your next question is from Joel Hurwitz with Dowling & Partners.

I wanted to start on the ROE target, and good to hear that will likely increase. I guess what do you think are the biggest drivers of the recent outperformance that you guys think is sustainable moving forward? Is it growth, expenses, experience?

Joel, I think it's all of the above. As we've said, as we've been saying for a couple of years, there aren't really any silver bullets here, but it's really a combination of things, actions taken across the value chain of the business that is driving earnings growth. And some of it's earnings, of course, but we're also taking actions in the denominator of the calculation. So being as efficient as possible in capital, we continue to focus on that.

So it's -- again, I feel like a little bit of a broken record on this question, but the answer hasn't changed, and that is that we are focusing on the entire business, and there are things that we are doing to improve effectiveness and efficiency and to drive growth and to drive risk-adjusted returns in the investment portfolio and to optimize capital. You add all that up and, sort of on a compounding basis, it has been driving ROE improvement, and we expect will continue to do so.

Got it. That's helpful. And then shifting to long-term care. Can you just sort of unpack the experience and maybe expectations moving forward, right? Results have been favorable, and they look to improve further this quarter. I guess, is a margin around 50% sort of the new normal for that business?

Yes. So long-term care continues to perform exceptionally well. It continues to surprise us a bit to the upside, including in this quarter. We revised assumptions a bit last third quarter. We'll do that again this year in the third quarter. And we'll see how things evolve, but the claims experience has been reasonably stable and favorable. It continues to be a great business for us. It's a product that our customers need, and it's designed and priced in a way that generates good returns and stable results.

Your next question is from Jack Matten with BMO Capital Markets.

Just one follow-up on the ROE target. And given that the CNO is currently at 12.2%, there's still, I think, some meaningful benefits to emerge from actions you've taken in recent quarters. I'm just wondering if there are any, like, partial offsets or places where there could be some normalization as we think about that overall trajectory because it just seems like there could be some meaningful upside versus the original 12% target based on where things are currently running.

Yes, Jack, I can provide some initial thoughts, and Gary may want to jump in. I guess, 2 points. Number one, the operating earnings, we continue to drive and within a sort of a reasonable range, we expect to be able to continue to drive growth in operating earnings. We'll continue to focus on capital to drive improvement on that side of the equation.

The other comment that I would make is that the denominator is shareholders' equity. And so it is impacted by nonoperating income, which, as you know, is volatile. So that can create some noise, plus or minus in the ratio over time. But over long periods of time, that tends to even out. So I'll leave it there. I don't know, Gary, if you want to offer some higher-level comments.

Yes. Yes. Thanks, Paul. Jack, thanks for the question, and thanks for the interest. I think an important perspective to remember, 12%, we started out at the end of 2024 and said we wanted to improve our ROE by 200 basis points in 3 years. But we have, from the outset, been clear externally and internally that 12% number is not the destination, not even close.

We have to continue to improve. We will continue to improve. So you should absolutely count on the fact that we're going to do everything we can to drive that above 12%. Really, the only question is by when and by how much. So whether we get to 12% in 2026 or 2027 or whatever it is, our aim is to continue to improve upon that. That's not good enough. We can get better, and that's within our reach. The only thing we're stopping short of doing is communicating by how much and by when. But you should absolutely take certainty in the fact that we are driven to improve that beyond 12%. 12% is nothing more than a way point.

That's helpful. And my other question is just on the RBC ratio and cons of that CNO is right in the middle of your target range right now. I guess sequentially this quarter, was there any kind of movement or impact from lower equity markets on hedges, kind of like what you had last year? And I guess if that is the case, would it be fair to think there's been likely a recovery on a mark-to-market basis given what's happened in April? Just curious any sensitivity you can provide around those movements.

Sure. The answer to those questions or comments, Jack, are yes and yes. We did have an impact from the S&P being down about 5% in the quarter. As you know from your question, that drives the reserves for FIAs and interest-sensitive life down. Economically, it drives the call option assets down by roughly the same amount. But because there's a prescribed flooring in the statutory reserves of the FIAs and the ISLs, you end up with some noise, meaning lower surplus, lower RBC, lower dividend capacity. But as the equity markets recover, as they've done already in the quarter-to-date, that unwinds. From a planning perspective, we assume that this is a neutral impact in the year and over time.

Your next question is from Wilma Burdis with Raymond James.

Can you talk a little bit about the FABN market this year? Our understanding is that just the spread environment is a little bit less favorable. Just interested to hear what you're seeing there.

Thanks, Wilma. I'd invite you to take that, Eric.

If you look at what spreads in the market did during the first quarter of the year, financials actually widened out relative to, let's say, industrials, financials, including insurance and banks, widened out relative to industrial. So if you want to think about it as kind of on an arbitrage basis, that's negative to the kind of the basic arb of a funding agreement transaction, which is to be a financial -- an insurance company that issues and then you take the money and invest it, hopefully in high-quality industrials and utilities and things like that.

So because of that negative arb during the quarter, I think we run our program on a pretty strict high-quality basis and a pretty high we have a pretty high target return on equity. And so I think had we tried to do an offering during the quarter, it would have perhaps produced a marginal contribution and not the one that we try to run the program around. That I think is -- that circumstance is moderating a bit since quarter end, financials have come in a little bit more, rates are a little bit higher.

So we've had some relief in that tension, and we'll continue to reassess that as we get into our next window, which will probably be in June. We have meeting about it this morning actually, and we're keeping a close eye on it. I would also say that we don't have to issue unless the time is right for us and we can make achieve our targets without doing violence to our sense of risk and quality.

So under no pressure to do anything. We'd like to because it's a good way to make money. We have a nice program. We're good at it and all that stuff. But we're not going to break the bank.

Makes sense. Sounds like a thoughtful approach. And could you talk a little bit more about your mortality expectations for the year? Seems like there was some favorability in the quarter. But is that just kind of a one-off? Like what are you seeing there? Just any color you can give for the rest of the year would be helpful.

Wilma, it's Paul. So yes, we saw some a bit of favorable mortality in our Trad life business. I'd say, kind of, within the normal range of expectations. And so we'll continue to monitor that and, again, revisit our assumptions in the third quarter.

There are no further questions at this time. I will now turn the call back to Adam Auvil, VP of Investor Relations, for closing remarks. Please go ahead.

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.

This concludes today's call. Thank you for attending. You may now disconnect.

Hello, everyone. Thank you for joining us, and welcome to the CNO Financial Group Fourth Quarter Earnings Call. [Operator Instructions] We will now hand the call over to Adam Auvil, VP of Investor Relations. Please go ahead.

Good morning, and thank you for joining us on CNO Financial Group's Fourth Quarter 2025 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 can 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 non-GAAP measures to the corresponding GAAP measures in the appendix. Throughout the presentation, we'll be making performance comparisons, unless otherwise specified, any comparisons made will refer to changes between full year '25 and full year 2024. And with that, I'll turn the call over to Gary.

Thanks, Adam. Good morning, everyone, and thank you for joining us. CNO once again delivered an excellent quarter and full year results. We are growing and investing in the franchise, growing operating earnings and improving profitability, all at the same time. Our performance remains consistent and repeatable, underpinned by strong execution and a focus on the underserved middle-income market.

We achieved and in most cases, exceeded all of our 2025 guidance, including improving our operating return on equity to 11.4%, excluding significant items. Building on our sustained momentum, 2025 represented one of our best operating performances to date. We delivered our 14th consecutive quarter of sales growth, our 12th consecutive quarter of growth in producing agent count and our most productive year ever for both our Bankers Life and Optavise captive agencies.

For the full year, we delivered record total new annualized premium, up 15%. We set production records across both divisions and in multiple product lines, a clear sign that our model is meeting the broad-based needs of our middle-income consumers. Our exclusive middle market focus and our last mile captive agent distribution model create our durable competitive moat. This difficult-to-replicate model is a clear competitive advantage and a catalyst for profitable growth. I'll cover these results in more detail in each division's comments.

Our consistent sales momentum is driving earnings growth. Operating earnings per diluted share was $4.40, an increase of 11%. Earnings continue to benefit from strong insurance product margin and investment results, reflecting growth in the business and expansion of the portfolio book yield. New money rates have exceeded 6% for 12 consecutive quarters while maintaining portfolio quality. Paul will go into greater detail on our financial performance.

We ended the year with a robust total capital position after returning $386 million to shareholders, an 11% increase over 2024. And for the 13th year in a row, we raised our quarterly common stock dividend. Book value per diluted share, excluding AOCI, was $38.81, representing a 7% compound annual growth rate over the past 3 years. Additional highlights from 2025 include a second reinsurance transaction with our Bermuda affiliate, continued strong capital position and free cash flow generation and an all-time high share price.

Turning to Slide 5 and our growth scorecard. 2025 was a record-setting year and nearly all growth scorecard metrics were up for the quarter and for the full year. As a reminder, our growth scorecard focuses on the 3 key drivers of our performance: production, distribution and investments in capital. I'll discuss each division in the next 2 slides. Paul will cover investments and capital during his remarks.

Beginning with the Consumer division on Slide 6. Our Consumer division delivered an exceptional year capped off by our 13th consecutive quarter of sales growth. 2025 also marked the third consecutive year of record production by the Bankers Life agent force. For the full year, we delivered record total NAP up 15%, double-digit growth in life, supplemental health and Medicare Supplement and record growth in annuities and client assets in brokerage and advisory.

Life NAP was up 10% for the full year, led by record direct-to-consumer life sales, up 20%. Our targeted measured approach to the D2C channel benefited from technology-driven productivity enhancements and diversifying our direct marketing away from television to include more web, digital and third-party channels. These non-television lead sources generated over 70% of all D2C life sales for the year.

Total Health NAP was up 22%, which marks 14 consecutive quarters of growth. Supplemental health was up 15% and long-term care was up 4%. Our field force delivered another exceptional performance during the Medicare annual enrollment period. Medicare Supplement NAP was up 49% for the full year and up 92% for the quarter, our best Med Supp quarter in 15 years. Medicare Advantage policies sold, which are not reflected in NAP, were down 3% for the year. Our results reflect a growing shift in consumer preferences from Medicare Advantage to Medicare Supplement as many of the leading MA carriers pare back plans and benefits reversing a decade-long trend.

Medicare remains a flagship door opening product for us to meet and serve more customers. Total Medicare policies sold were up 5% for the year. With approximately 11,000 Americans turning 65 each day, we expect overall demand for Medicare products to grow and to help us expand the total number of households we serve. Record annuity collected premiums were up 9% for the full year and up 3% for the quarter, our 10th consecutive quarter of growth. Collected premiums in the quarter totaled $508 million and in-force account values were up 7%, exceeding $13 billion. Our captive distribution and the long-term relationships that our agents establish with their clients add stability to our annuity block.

We delivered our 11th consecutive quarter of brokerage and advisory growth. Client assets in the channel were up 24% over the prior year, totaling more than $5 billion. For the full year, total accounts were up 12%. When combined with our annuity account values, our clients now entrust us with more than $18 billion of their assets, up 11% from 2024. Improving agent productivity fueled our sustained sales momentum in 2025. Producing agent count grew for the 12th consecutive quarter and registered agent count was up 8%. The Consumer division delivered another outstanding year. We expect that same focus and momentum to carry into 2026.

Next, Slide 7 and our Worksite Division performance. Worksite insurance sales have never been stronger, with 2025 representing the best production year ever for our worksite business. We finished the year with record full year insurance sales, up 15% and record fourth quarter insurance sales up 13%. This represents our second consecutive year of record production and 15th consecutive quarter of NAP growth. Full year highlights included record life insurance sales, up 36%; hospital indemnity insurance, up 41% and accident insurance up 11%.

Strategic growth initiatives contributed significantly to our Worksite NAP performance in 2025. Our geographic expansion initiative delivered 11% of the NAP growth for the year, and NAP from new group clients was up 23% Producing agent count was up 7%, driven by recruiting up 10%. This marks our 14th consecutive quarter of growth in the agent force. Our previously announced exit of the fee services business within Worksite is progressing on schedule and should be largely complete in the first half of 2026. We are already seeing the benefits of streamlining our focus on core insurance business. As we enter 2026, we remain confident in our ability to execute and continue to grow the business. And with that, I'll turn it over to Paul.

Thank you, Gary, and good afternoon -- or good morning, rather. Good morning, everyone. Turning to the financial highlights on Slide 8. Our results for the quarter and the year demonstrate our ability to deliver sustained profitable growth. Operating return on equity, excluding significant items, was 11.4%, reflecting significant improvement from the 10% run rate return on equity in 2024 and good progress toward our 12% target ROE in 2027.

Operating earnings per share ex significant items grew 10% in the quarter and 6% for the year, reflecting continued strength in both insurance product margin and net investment income. Notably, at $4.02, our full year operating earnings per share, excluding significant items, exceeded the high end of our original guidance. Similarly, our full year expense ratio of 18.9%, excluding significant items, was better than the low end of our original guidance, reflecting improved operating leverage as we grow the business.

The effective tax rate on operating income was 20.6% for the year, coming in below our 22% to 22.5% guidance. This reflects the impact of tax strategies implemented in the fourth quarter related to certain tax credits, reduced impact of state taxes and an increase in tax-exempt interest. We deployed $320 million of excess capital on share repurchases in the year, up 14%, including $60 million in the fourth quarter. This contributed to an 8% reduction in weighted average diluted shares outstanding and reflects the strong free cash flow generation of the business. Overall, the quarter and full year reflect a continuation of the operational momentum we have carried throughout the year.

Turning to Slide 9. Total insurance product margin, excluding significant items, increased again this quarter, supported by outstanding sales performance over the last few years across both divisions and for most products. This growth, coupled with stable underlying claims trends, continues to drive higher margins across the 3 product categories. 2025 again demonstrates the value of our diversified product portfolio where ordinarily puts and takes across product lines consistently net to stable and growing total margin over time.

Turning to Slide 10. Net investment income remains solid, marking the ninth consecutive quarter of growth in total net investment income. Allocated net investment income increased with both growth in average net insurance liabilities, up 4.1% and continued improvement in the average yield on allocated investments. For the year, NII allocated to products was up 6%. Net investment income not allocated to products reflects puts and takes across its various components. The net result in the quarter was strong, supported by alternative investment income, which met yield expectations and a $12 million special dividend from a strategic investment.

Total NII reflects disciplined portfolio management, steady asset growth and durable yield performance, all of which continue to support strong earnings fundamentals. We issued $400 million of FABN in the quarter and $750 million for the full year. This program continues to deliver quality risk-adjusted returns, and we remain very pleased with its performance and expect to continue issuing under the program going forward, subject to market conditions. Our new investments in the quarter comprised approximately $1.6 billion of assets with an average rating of A and an average duration of 6 years. Our new investments are summarized in more detail on Slide 22 of the presentation. The new money rate was 6.11%, the 12th consecutive quarter above 6%.

Turning to Slide 11. Our investment portfolio remains high quality and liquid. As of year-end, we held a record $31 billion of invested assets with 97% rated investment grade and an average rating of single A. The portfolio's strong performance reflects our consistent up and quality positioning and remains diversified and well balanced. Commercial real estate and private credit portfolios continue to perform as expected, supported by conservative underwriting and proactive risk management.

Turning to Slide 12. We ended the year with a robust total capital position. Our consolidated risk-based capital ratio was 380%. You may notice that we're referencing a target RBC range of 360% to 390% with the midpoint consistent with the previously stated 375%. Managing within this range allows for normal quarter-to-quarter variability in the RBC metric. The range is also consistent with how we describe to rating agencies and to regulators, our risk appetite and our approach to risk management.

Holding company liquidity ended the year at $351 million, well above our minimum threshold of $150 million, supported by continued strong free cash flow generation and reflecting our second reinsurance transaction with our Bermuda affiliate announced back in November. Debt to total capital remains within our target range of 25% to 28% Overall, our capital position remains strong, providing flexibility to support growth, maintain financial resiliency and continue deploying capital in a disciplined and sustainable manner.

Turning to Slide 13 and our initial 2026 guidance. We continue to target an improvement in run rate operating return on equity of 200 basis points through 2027 off a run rate 2024 ROE of approximately 10%. Importantly, our 2026 guidance is aligned with that trajectory as we remain focused on delivering improved profitability while maintaining our strong growth momentum and resilient capital position.

We expect operating earnings per share between $4.25 and $4.45, which represents an 8% increase at the midpoint from our 2025 result and reflects continued earnings growth across the business. This outlook assumes a stable macro environment and investment returns consistent with our long-term expectations. Our expense ratio is expected to be in the range of 18.8% to 19.2%. At the midpoint, this reflects stable operating leverage as we continue to grow the business, partially offset by ongoing investments to support growth. As in prior years, we would expect some seasonality within the year with the expense ratio starting higher in the first quarter and trending lower as the year progresses.

We expect fee income of approximately $30 million for the year, with roughly 1/3 in the first quarter, minimal contribution in the second and third quarters and the balance in the fourth quarter. The effective tax rate is expected to be approximately 22.5%. We expect free cash flow of $200 million to $250 million, which supports continued progress on capital deployment while maintaining a strong balance sheet and investing in the business to support growth and execution of our strategic initiatives.

You'll recall that in 2025, we began a 3-year initiative to invest in tech modernization with an expected investment over that period of approximately $170 million. This initiative is on track and on budget. In 2025, we deployed roughly $20 million on the initiative. And in 2026, we expect to deploy an additional $75 million. It's worth noting that our free cash flow guidance is net of this investment. As mentioned, we expect to operate with a risk-based capital ratio in the range of 360% to 390%. Finally, we expect minimum holdco liquidity of $150 million and a debt to total capital ratio of 25% to 28%. And with that, I'll turn it back to Gary.

Thanks, Paul. Turning to Slide 14. CNO once again had exceptional full year results. We achieved and in most cases, exceeded all 2025 guidance metrics. and delivered one of our best operating performances on record. Consistent, repeatable results continue to drive our momentum. We're growing and investing in the franchise while also growing earnings and improving profitability. We enter 2026 with a strong capital position and a path to achieving our 2027 ROE target. Thank you for your support of and interest in CNO Financial Group. We will now open it up for questions. Operator?

[Operator Instructions] Your first question comes from Suneet Kamath from Jefferies.

I wanted to start with earnings emergence, and maybe this one is for Paul. As we think about the strong sales that you guys have generated over the past couple of years, I'm assuming there's some sort of lag between kind of when you write the business and when it sort of fully earns in. So I was just wondering if you can maybe give us a rule of thumb in terms of sort of how long does it take to kind of hit the target returns that you're pricing for?

Sure. Suneet, I appreciate the question. So it depends by product and the duration of the product. I guess what I'd emphasize is that we are hitting our target returns across our product portfolio. And the guidance that we've provided is capturing how earnings are emerging based on the sales trends over the last few years. And given our continued sales momentum and how that translates to earnings, that gives us confidence in our ability to meet the ROE target in 2027. And as Gary has emphasized on a number of occasions, that's not the endpoint, right? The expectation is that beyond 2027, we would continue to see ROE improvement.

Got it. And then I guess maybe for Gary, just wanted to get a sense of how you're thinking about the environment. We're seeing layoffs. We're seeing bad job numbers. On the one hand, it creates an opportunity for you from a recruiting perspective. On the other hand, it could create challenges for your target market. So I was just hoping you could walk us through your thoughts on that. And then do you have an expectation for producer -- producing agent count growth in 2026?

Yes. Good question. I'll start with the last question first. Do we expect to grow producing agent count? Yes, we will continue to grow it. That's our expectation. I would just emphasize, I think producing agent count growth is important, but I think it's a distant second to agent productivity. Ideally, we try and do both. We try and grow the number of agents we have, and we want them all to be more productive. But if you force me to pick, I will always emphasize productivity. That's a very long-winded way of saying we expect the agent count to grow in 2026. but it's not my primary focus. The primary focus is definitely productivity.

In terms of the overall outlook, let me first issue a disclaimer. I have a terrible track record of predicting everything from interest rates to the weather. If you want to know exactly what's not going to happen, you should ask me for a prediction. All of that said, I feel like 2025 was a year of significant lack of visibility. And I have to tell you, I still feel that way. I feel like there are so many variables in terms of what could happen with interest rates and geopolitics and so on. I think that it's very difficult -- it's always difficult to predict, but I really feel like '25 and now '26 during my tenure as running different businesses, these are some of the most lack of visibility I've had as a CEO.

Now all of that said, yes, we have seen the job numbers. We have seen the reports of more layoffs. That typically helps us on the recruiting side, but that, of course, makes consumers more afraid and more reticent to engage in discretionary purchases. So what does that mean? It means our agent counts may go up. It means that things like Medicare Supplement, which are typically a little bit more immune to economic cycles, those sales should still be reasonable, but other discretionary sales such as annuities, life and long-term care, I think, get more difficult when the macro environment gets tougher. All that said, we've continued to work through it. And I think it's really important to remember that no matter what's happening in the economy, there's still 11,000 folks turning 65 every day, and those folks still have an absence of alternatives in terms of long-term planning and so on. So that represents the opportunity for us, but the pressure is definitely growing. The headwinds are definitely growing. Was that the type of detail you were looking for? Or is there something I missed?

No, no, that's great. And if I could just sneak one more in. Paul, I think you mentioned on the last call, it was sort of reasonable to assume sort of a Bermuda transaction a year. I just want to make sure there's -- that's right and that there's no change in that kind of thinking, high level.

Yes. So Suneet, I guess I'd say that we're very pleased to have completed our second treaty in 4Q of last year. We continue to work to further grow our Bermuda operation. But we won't share any specific plans as to not to get ahead of the regulatory review process. Our guidance does not contemplate any additional treaties beyond the two already in place for 2026. But I think, as I said last time, the cadence we've been on should be a decent indication of the cadence going forward.

Suneet, I agree with Paul's comments. I would just like to emphasize one point. We enjoy really good relationships with the regulators there and frankly, in the U.S. as well. And I think part of the reason we have those good relationships is because we're very respectful of their process. We never want to make any predictions that would seem like we're getting ahead of them or their processes, and that's why we don't build those types of things into our projections. We will be working to do what makes sense and what's smart and so on, but we also want to be respectful of the regulatory process.

Your next question comes from Wilma Burdis at Raymond James.

Growth in '25 was strong at kind of high single digits or maybe, I guess, low double digits. But I realize this has been a result of multiple years, Gary, that you've been focused on positioning the business for growth. But is this a sustainable level? Anything unusual in 2025? Or I suppose there could even be some upside, right, with Medicare Advantage issues, tech investments, that kind of thing. So maybe just give us some color.

Yes. I'll -- I think the easiest way to answer your question, Wilma, is probably to give you a little bit of a feel product by product. I think that we would expect our Medicare Advantage sales to go down because of what's happening in the marketplace. That really has nothing to do with CNO. It's just what's going on in the marketplace. Similarly, I would expect our Medicare Supplement sales to continue to go up. That volume, those 11,000 seniors that are turning 65 every day, more of them are going to be buying Medicare Supplement than historically have.

In terms of some of the other products, it starts to get harder to predict. If you think about some of the comments I made with Suneet, depending on what's happening with the macroeconomic conditions, that's really going to impact the discretionary purchases that the consumers make. Now we've been able to continue to work right through all of those. Again, we've really had the demographic tailwinds that have helped us. But if we see increased headwinds, if there are really a lot more layoffs like we've seen early signs of, that's going to slow down discretionary purchases, and we will inevitably be impacted by that.

All in all, we remain pretty comfortable with the guidance that we've provided in terms of ROE and earnings and so on. It might be that we get more in one product and less in another, but we feel pretty good about the guidance we provided. We do acknowledge that there's some macroeconomic headwinds coming.

And then could you help us think through any impacts on Medicare Advantage distribution fees? I think that there's some actuarial component there that's based on the churn. And we've all heard about Medicare Advantage and some of the issues there. I realize that those underwriting issues don't apply to you guys, but could impact the churn. Is that reflected in the '26 outlook? And maybe if you can give us any additional color.

Yes. We have reflected -- I'm sorry, this is Gary. We have reflected what we're expecting to see in terms of the volume on Medicare Advantage in our projections. I would expect there will continue to be pressure there. It's hard to know whether the carriers are going to focus on compensation or they're going to focus on paring back benefits or what other things they're going to do as they go through the process. All of that said, I think the bottom line is Medicare Advantage is going to have some very significant headwinds. And that's another reason we feel good about our model where those consumers that want it, they can get it from us, but we are definitely more focused on Medicare Supplement, and we like the Medicare Supplement better.

Your next question comes from Jack Matten of BMO Capital Markets.

Maybe just one on capital deployment. I guess, given the end of the year with about $200 million above your holding company target. I guess, are you thinking you'll bring that down closer to your target level by the end of this year? And any perspective or thoughts on potential uses of cash would be helpful.

Jack, it's Paul. I would just emphasize that there's really been no change in how we think about deploying excess capital. On the margin, we return it to shareholders through share repurchases, absent more compelling alternatives. We also think there's some wisdom to being somewhat measured in how quickly we take down the excess. So without providing specific guidance, I think the past practice here should be a good indication of our future behavior.

Got it. And maybe just on the unallocated NII. I know there's a lot of things that go into that bucket, but wondering if there's any kind of directional outlook you can provide for that line. I mean I know you called out a $12 million special dividend. If we back that out, is that something close to what a normal run rate that you expect?

Yes. I would point you, Jack, to the detail in the supplement that breaks down what flows through NII not allocated. Certainly, the dividend in the fourth quarter of this year and the fourth quarter of last year is sort of off trend and not something that we expect to be repeated. We may see more of that, but it's not kind of run rate. The one thing that's fairly volatile has been at least the last few years is the income from alts. And certainly, the sequential trend has been good there over the last few quarters, particularly in the fourth quarter of this year, where the yield was actually slightly better than our long-term run rate of sort of 8% to 9%, something in that range. So I wouldn't necessarily predict how that's going to play out over the next 4 quarters. But our guidance does presume that it's generating that long-term return.

Got it. And I guess one more and kind of a follow-up on the Medicare dynamics. I guess I know for Medicare Supplement, you capture both distribution and the underwriting economics. I guess is that then more or less or the same on like an ROE basis versus Medicare Advantage where you really are only counting with the distribution economics of that. Just wondering how we should think about how that plays into your financials and ROE profile.

Yes. Economically, frankly, we're indifferent. There are pros and cons to each as an example, with the Medicare Advantage, you get to recognize the income sooner as an example. But the high-level thing you should take away is, economically, we're really indifferent, and we've designed it that way intentionally. All that said, operationally, I have a strong preference for the Medicare Supplement, number one, because we manufacture it and distribute it, so we control the entire chain, if you will. So that isn't an economic commentary. That's just about the business.

Second, typically, not always, but typically, Medicare Supplement consumers tend to be of higher net worth, and they tend to have a greater ability to buy other products. And I want to emphasize with that, there are some really strict rules about how you can market to consumers when you have a Medicare relationship and so on. And we, of course, follow all of those rules. So I don't want that to get misinterpreted. But the bottom line is, in the context of those rules, we do better with consumers that have a Medicare Supplement because they typically have a greater net worth and typically have a greater interest in talking to us about other products as well. So that's the reason for the preference.

[Operator Instructions] Your next question comes from Wilma Burdis at Raymond James.

Just a couple for you. Are you seeing any dynamics in the investment universe that might influence a shift in allocations to higher-yielding assets in order to just continue to have a good yield given proper risk management with interest rate decreases and ongoing tight spreads.

Thanks for the question. Eric, I'd invite you to offer your perspective on that. We may have lost Eric.

I think Eric is having some technical difficulties.

I think right now, we're largely running back what we did for the second half of last year, which was pretty successful, which was largely around sustaining good portfolio quality, supplemented with some small tactical add-ins around the edges that really produce some yield in the portfolio. I would not expect us to be changing necessarily our risk parameters currently. I don't think spreads continue to be very tight. I don't think there's a particular space right now where you're being rewarded for that. That would include the software space, that would include the BDC space as well. Very closely monitoring those areas for opportunities should it arise. But currently, I don't think the valuations have cheapened enough to attract our money. So running it back, I feel good about how things are trending right now. And it will take a little bit more juice in the orange for us to change that.

And then just one last one. Is there any elevated sales benefit that you're seeing from annuities products as a result of the increased health sales, specifically in Medicare Supplement? Or is it just kind of normal course growth?

I think it's mainly normal course growth. Now that said, we had really strong Medicare Supplement sales, and that, of course, helped us consistent with my earlier comments, the Medicare Supplement consumers typically have a better cross-sell ratio for us, again, within the context of following all the rules that are out there. So we benefit from that. But in terms of that ratio growing where there was a greater level of cross-sell, I wouldn't say so, no.

Your next question comes from John Barnidge from Piper Sandler.

My first question is sticking with the investment portfolio. What's the exposure to software in the investment portfolio as you broadly define it?

John, this is Eric. Hopefully, you can hear me on my first go around. This for us, I think, will be an opportunity if it arises, certainly not a problem. I'm old enough to remember Polaroid and Kodak. And so software has always been a business that's been susceptible to disruption. That's not something I'm learning this year. I've known it for a really long time that's informed how we've allocated to the space. Currently, we have roughly $250 million of software exposure. That's about 60, 70 basis points, a pretty small number. Strong tilt towards software that serves enterprises rather than small businesses or consumers within that small -- within that rather, strong preference for mission-critical software, systems of record, proprietary data repositories and cybersecurity. So I think we are positioned from strength. And when and if the market rewards some risk taking in this area, I think we'll be prepared for it.

Broadening out my answer for you, John, if you looked into our alternatives portfolio, somewhat similar answer in private credit, which is about $1.4 billion allocation. We probably have -- it's less than 10% of that would be exposed to software. And within that, it's very little of it is direct lending. The great bulk of it is in structured form, which means it has good credit support and it is margin and all that stuff. So we've got strong cushions there. In PE, it's about 15% of our PE holdings, which is $400-plus million. So 15% of that, you can do the math, it's about $70 million. And so I think that if you got a big drawdown or bigger than where we've currently experienced at least in PE or even in private credit, you could, I think, dampen alternatives returns, but I don't think you would destroy alternatives returns. So I think on balance, we're in a good spot. And I think we have the ability and the partners to take advantage of opportunities as they emerge. And I think I'll leave it there, but happy to amplify anything you would like.

It was very helpful. My next question for Gary. If we talk about -- I think it was 11,000 people turning 65 a day now, you've certainly positioned yourself to take advantage of this secular dynamic for quite some time with recruitment and productivity. But I'm trying to better understand how we see this 11,000 moving to 12,000 and when it goes back down to 10,000. How long does it take us to get here from 10,000 to 11,000? And can you talk about your product positioning in the life cycle of these individuals turning to 65?

Yes. Thanks, John, Sorry, I'm getting a lot of echo. A couple of comments. I believe we hit the peak. It's either 2030 or 2035 when the number of folks turning 65 starts to go down again. So we're within 5 to 10 years of that peak number, if memory serves correctly, but we expect it to grow or hold stable until then. And even when it starts to come down, it's not like it's going to go from 11,000 down to 2,000, it's going to gradually reduce again. So it still represents a very significant opportunity for us. So we view this as something that will be there for quite some time regardless of what's happening with Medicare Advantage versus Medicare Supplement. The reality is that anyone who turn 65 is going to at least look at these products. So we expect this opportunity to continue for quite some time.

At this time, there are no further questions. I will now turn the call back to Adam Auvil for 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.

This concludes today's call. Thank you for attending. You may now disconnect.

Hello, everyone, and thank you for joining us today for the CNO Financial Group Third Quarter Earnings Call. My name is Sami and I'll be coordinating your call today. [Operator Instructions] I would now like to hand over to your host, Adam Auvil, from CNO to begin. Please go ahead, Adam.

Good morning, and thank you for joining us on CNO Financial Group's Third Quarter 2025 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 can 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 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 refer to changes between third quarter 2025 and third quarter 2024.

And with that, I'll turn the call over to Gary.

Thanks, Adam. Good morning, everyone, and thank you for joining us. Starting on Slide 4. CNO once again delivered a strong quarter, demonstrating our capabilities to generate consistent repeatable results and execute on our strategic plan. We remain focused on growing earnings and improving profitability. To do so, we have taken action on 2 items that we expect will accelerate operating ROE improvement through 2027 by an additional 50 basis points. First, the execution of a second Bermuda treaty; and second, changes to our Worksite Division's fee services business. Further details will be provided later in our prepared remarks.

Sales results in the quarter were excellent, including record total new annualized premiums of $125 million, up 26% and double-digit insurance sales growth in both divisions. We also delivered our 13th consecutive quarter of strong insurance sales and our 11th consecutive quarter of growth in Producing Agent Comp. I'll cover these results in more detail in each division's comments.

Operating earnings per diluted share were $1.29, up 16%. Earnings continue to benefit from favorable insurance product margin and solid investment results, reflecting growth in the business and expansion of the portfolio book yield. New money rates have exceeded 6% for 11 consecutive quarters now, while maintaining portfolio quality. Capital and liquidity remained above target levels, we returned $76 million to shareholders in the quarter and $310 million year-to-date. Book value per diluted share, excluding AOCI, was $38.10, up 6%. Paul will go into greater detail on our financial performance.

Turning to Slide 5. Nearly all of our growth scorecard metrics were up for the quarter. As a reminder, our growth scorecard focuses on 3 key drivers of our performance. Production, distribution and investments in capital. I'll discuss each division in the next 2 slides. Paul will cover investments in capital in more detail during his remarks.

Beginning with the Consumer Division on Slide 6. The Consumer business delivered another quarter of excellent sales results and our 12th consecutive quarter of sustained growth. Nearly all product lines were up most by double digits. Steady execution and our dedication to serving the middle income market continue to fuel our growth. Life and Health NAP once again posted double-digit growth in the quarter up 27%. We are pleased with our Life business results, including total life insurance up 33%, and record direct-to-consumer life insurance sales up 56%.

Our D2C results benefited from 3 key factors. First, process and technology enhancements continue to drive sales productivity. Second, we have been proactively diversifying our direct marketing away from television to include more web, digital and third-party channels. Non-TV lead sources combined generated 72% of all D2C life sales in the quarter. Lastly, our D2C results were bolstered by increased direct marketing spend by some of our third-party partners. We don't expect this level of spending to repeat in the fourth quarter, which is traditionally the lowest selling quarter of the year for the D2C channel.

Our approach to partnerships is intentionally selective, ensuring that distributors complement our existing capabilities and target markets that are different from our typical customer base. This strategy enables us to conduct rapid experiments with minimal investments that augment our in-house development and testing. Sustained growth in our health results continues to underscore strong customer demand for practical solutions to protect against out-of-pocket gaps in medical coverage and the growing cost of health care.

Total Health NAP was up 21%, which marks 13 consecutive quarters of growth. Supplemental Health was up 23% and long-term care was up 7%. Medicare Supplement was up 33% Medicare Advantage policies sold, which are not reflected in NAP were down [ 24% ]. Our Medicare results reflect a growing shift in consumer preferences from Medicare Advantage to Medicare Supplement, reversing a decade-long trend. As many of the leading [ MA ] sponsors pay back plans and benefits, more customers are moving to Medicare Supplement plans. With more than 11,000 people in the U.S. turning 65 every day, overall demand for Medicare products continues to grow, and we have an opportunity to continue to expand the total number of households we serve.

Annuity collected premiums were up 2% in the quarter, our ninth consecutive quarter of growth. Collected premiums in the quarter totaled nearly $475 million, our third highest quarter of all time. Average account size was up 5% and in-force account values were up 8%, exceeding $13 billion for the first time. Our captive distribution and the long-term relationships that our ages established with their clients add stability to our annuity blocks. We delivered our tenth consecutive quarter of brokerage and advisory growth. Client assets in brokerage and advisory were up 28% and hit a new record, surpassing $5 billion.

Total accounts and average account size were each up 13%. When combined with our annuity account values, our clients now entrust us with more than $18 billion of their assets, up 13%. Agent productivity and retention continue to support our sustained sales momentum. Producing agent count grew for the 11th consecutive quarter and registered agent count was up 6%. Investments in technology continue to enable customer experience enhancements and drive operational efficiency. For example, accelerated underwriting on a portion of our simplified life products delivered an 89% instant decision rate on submitted policies in the quarter, up 11%.

Next, Slide 7 in our Worksite Division performance. As a reminder, our Worksite Division encompasses 2 primary components: insurance products and fee services. First, insurance product sales are the larger part of our Worksite business, which once again delivered record sales and our 14th consecutive quarter of growth. I'll touch on our third quarter performance shortly. We have a long and successful history of selling insurance at the Worksite. We like the profile and growth of this business.

The second component is our fee services business which was added through the acquisitions of Web Benefits Design in 2019 and DirectPath in 2021. This includes benefits administration technology and education, advocacy and communication services. This business is small, representing less than 1% of total C&O revenue and contributing a pretax annual loss of approximately $20 million.

In October, we decided to streamline our work site operations and exit the fee services business to sharpen our focus on the core insurance business and align resources to proven growth areas. We expect the exit process to be substantially complete in the first half of 2026. After several years of strategic investment, Worksite fee services has not met our expectations for financial performance or in delivering new insurance customers. Additionally, competition has intensified with lower cost alternatives and new technologies disrupting our market position. Paul will provide more detail on the financial impacts of this decision, which we expect to be favorable to earnings and return on equity.

It was the right strategic decision for CNO and it was not made lightly. We remain grateful to the associates who supported this business and thank them for their service and dedication to our clients and customers. It is important to emphasize that we remain fully committed to our Worksite Insurance products and distribution. Were excited insurance sales have never been stronger. The division adds valuable diversification and balance to our model.

Turning to our results in the quarter. We delivered another record performance for insurance sales with Worksite Life and Health NAP up 20%. This represents our seventh consecutive quarter of record net growth and our 14th consecutive quarter of overall NAP growth. Highlights included life insurance sales up 24%, hospital indemnity insurance up 53%, critical illness insurance up 17%, and accident insurance, up 15%. Strategic growth initiatives contributed significantly to our Worksite NAP performance. Our geographic expansion initiative delivered 42% of the NAP growth in the quarter, marking the seventh consecutive quarter of growth from this program. Recent investments in training and sales tools continue to enhance agent productivity. Worksite recruiting was up 5% in the quarter and agent productivity was up 15%. Producing agent count was up 9% our 13th consecutive quarter of growth. As supported by our strong results, we remain bullish on Worksite insurance growth in the fourth quarter of 2025 and beyond.

And with that, I'll turn it over to Paul.

Thank you, Gary, and good morning, everyone. Before turning to my remarks on the quarter, I'd like to first comment on our second reinsurance treaty with our Bermuda affiliate. Effective October 1, we have ceded approximately $1.8 billion of Supplemental Health U.S. statutory reserves and we'll see 50% of new Supplemental Health business from our [ Indiana domiciled ] Washington National Insurance Company to our Bermuda reinsurance company. We are proud to deepen our commitment to the Bermuda insurance community with this transaction. We are actively exploring additional transactions with our U.S. and Bermuda regulators, which, in aggregate, position us better to carry out our mission of serving middle-income consumers.

Turning to the financial highlights on Slide 8. We had another strong quarter across both operating earnings and capital, reflecting favorable trends in insurance product margins, investment income, and continued expense and capital discipline. The expense ratio was 18.6% in the quarter and 19.0% on a trailing 12-month basis. The income was modestly unfavorable to expectations due to underperformance in our Worksite fee services business. We continue to manage to our capital and holdco liquidity targets while deploying $60 million of excess capital on share repurchases in the quarter. This contributed to an 8% reduction in weighted average diluted shares outstanding. On a trailing 12-month basis, operating return on equity was 12.1% and 11.2%, excluding significant items.

For the third quarter, we are recording an impairment of $96.7 million in nonoperating income on the goodwill and intangibles associated with the acquisitions of web benefit design and direct path. This impairment reflects updated financial projections for the fee services side of our Worksite business, considering recent performance and an increasingly competitive market.

Additionally, as Gary previously discussed, in October, we decided to exit the Worksite fee services business. We anticipate that decision will result in charges estimated to be in the range of $15 million to $20 million, which will also be reported in nonoperating income. The timing of the exit charges will be primarily in the fourth quarter of 2025. We expect this exit decision together with the new Bermuda treaty will improve operating return on equity starting in 4Q '25, with the full effects emerging over the next 5 quarters through year-end 2026. The bulk of the ROE improvement relates to the exit of Worksite Fee Services and stems from the elimination of pretax operating losses previously associated with the fee income segment as well as the effects of the Q3 impairment and exit charges on shareholders' equity. I'll elaborate on the ROE impacts in a moment when I get to the guidance slide.

Turning to Slide 9. Total insurance product margin was strong in the quarter. All major product categories were up year-over-year, reflecting growth in the business and mostly favorable underlying trends. In other annuities, the prior period results benefited from reserve releases due to higher mortality on larger closed block policies. At sub results reflect higher claims year-over-year but improved results sequentially. Life margins reflect lower advertising spend in our traditional life business, partially offset by higher policy benefits in interest-sensitive life.

Finally, our annual actuarial review resulted in a $41.3 million favorable impact to operating income. This was driven by net favorable assumption updates, including most notably, favorable lapse rates in Supplemental Health and surrender rates in fixed index annuities partially offset by unfavorable morbidity within Medicare Supplement. Consistent with past years, we're calling this out as a significant item in the quarter and presenting the margin on this slide ex significant items.

Turning to Slide 10. We continue to deliver strong net investment income results. Q3 marks the 11th consecutive quarter, the new money rate has exceeded 6% and the eighth consecutive quarter of growth in total net investment income. The average yield on allocated investments was 4.91%, up 10 basis points year-over-year. The increase in yield, along with growth in the business drove a 7% increase in net investment income allocated to products for the quarter. Investment income not allocated to product results reflect alternative investment income results better year-over-year but slightly below our long-term run rate expectations. Lower option forfeitures as a result of lower annuity surrenders and lower in the money options, and lower NII from general account assets as the robust capital return in the last 4 quarters has reduced excess capital. Our new investments in the quarter comprised approximately $812 million of assets with an average rating of single A and an average duration of 6 years. Our new investments are summarized in more detail on Slide 22 of the presentation.

Turning to Slide 11. Our high quality and liquid portfolio is producing solid and consistent results. Approximately 97% of our fixed maturity portfolio at quarter end was investment-grade rated with an average rating of single A reflecting our up-in-quality bias over the last several years.

Turning to Slide 12. Our capital position remains strong and our primary capital and liquidity metrics in line with targets.

Turning to Slide 13 and our 2025 guidance. Over the next 5 quarters, we anticipate the combined impact of the exit from the fee services business and the new Bermuda treaty will lead to 50 basis points of incremental operating return on equity over and above our previous projections for the 2025 to 2027 period. So we are revising our operating return on equity 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. We are narrowing our operating earnings per share range to $3.75 to $3.85 while maintaining the same midpoint. This adjustment reflects, among other things, an expense ratio of approximately 19%, down from the prior range of between 19.0% and 19.2%, an effective tax rate between 22% and 22.5% compared to the prior estimate of approximately 23%. And fourth quarter fee income approximately $2 million below 4Q '24, reflecting lower fee income from our distribution of Med Advantage products due to the shift towards Medicare Supplement products and away from Medicare Advantage products, as Gary touched on.

And no impact from the results of the Worksite Fee Services business, which we will include in nonoperating income beginning in as we exit that business. We are raising our 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, which incorporates the impact of our new Bermuda reinsurance transaction. Finally, no change to our target capital, holdco liquidity and leverage targets.

And with that, I'll turn it back to Gary.

Thanks, Paul. CNO delivered another strong quarter. Our performance continues to demonstrate the strength of our business model and our capabilities to generate consistent, repeatable results. We remain well positioned to grow sales across both divisions, drive improved profitability and importantly, keep delivering on our promises to customers and stakeholders. We entered the fourth quarter with meaningful momentum and we once again expect to end the year strong.

Thank you to everyone who joined us in September for our CNO Investor Briefing on the Consumer Division. As a reminder, the webcast and materials from that session are available in the Investor Relations section of our website cnoinc.com. We thank you for your support of and interest in CNO Financial Group.

We will now open it up to questions. Operator?

[Operator Instructions] Our first question comes from Ryan Krueger from Keefe, Bruyette, & Woods.

My first question was on the really strong D2C sales. Can you give us a little bit more color on how much new partnerships are contributing and kind of how to think about those relative to the your D2C volumes, excluding these newer partnerships?

Maybe I'll make some general comments, and then I'll let Paul fill in some of the precise numbers and growth rates and so on in terms of what we disclosed. As I mentioned in the prepared remarks, Ryan, we're very selective about who we work with. I'll give you an example. We believe there's a material opportunity in the Hispanic market. We don't think we're well positioned to tap that on our own. So we partnered with somebody to help us with that. It's those types of things that we are partnering with folks on, it is in addition to what we're doing relative to shifting from our dependence on television advertising.

We expect that growth to continue very nicely as we did reference because some of the growth in Q3 was due to a pull forward of some advertising expenses and so on by our partners, we don't think the fourth quarter will be quite as strong, but we do believe we will continue to see good solid growth there.

Paul, do you want to backfill any of the numbers or percentage growth rates that we disclosed?

Ryan, consistent with our general practice of not providing specific guidance, I won't provide any here, but I would just echo Gary's comments directionally in terms of what you should expect.

Got it. And then just a quick one. Is the current roughly $20 million annual earnings loss from the services business, does that flow through the fee income line from a reporting standpoint?

It does. It's always been part of the fee income segment. And so you should see that segment all else equal improve on an annualized basis by about $20 million.

Our next question comes from John Barnidge from Piper Sandler.

How do you view the opportunity, just kind of following up on the comments about actively exploring additional transactions. The total addressable market for remaining health life and long-term care liabilities that could be available to Bermuda.

John, it's Paul. I'll take a first crack at that. So the question is how much more might we see to Bermuda? I won't give you specific quantitative answer. But I will say that we are looking at opportunities to see additional business. We are looking at life in particular, which we think has some benefit, including some other things, the diversification across products. As you know, we currently have FIAs, now we have [indiscernible], proceeding some life reserves would increase the diversification. We continue to actively explore additional transactions with our U.S. and Bermuda regulators.

And I would just emphasize the comment we made in our prepared remarks, which is that, in aggregate, the Bermuda platform positions us better to carry out our mission of serving more middle income consumers in what are very often underserved markets.

And my follow-up, once DirectPath and Web Benefits Design fully wrapped up in the first half of '26? Does it seem reasonable that the direct expense ratio should fall given that, that wasn't necessarily a profitable business?

So John, the $20 million annualized impact is really all in, including the expenses that were attached to that business. So that's really the expectation at a high level that you should see flow through in the wake of exiting that business.

Our next question comes from Joel Hurwitz from Dowling & Partners.

Paul, on the assumption review, any ongoing earnings benefits from the updates and any statutory impacts?

Sure. So on a GAAP basis, the only go-forward impact that's notable is in sub-Health, that $2 million quarterly. And then on a stat basis, I'll invite [ Jeremy ] to weigh in our [indiscernible].

Yes. Thanks, Paul. No, there's no statutory impacts related to any of the unlocking.

Okay. Got it. And then just 2 quick ones on the fee service exit. One, how much of your Worksite insurance business is linked to these platforms that you're shutting down? And then in terms of that $20 million of a GAAP loss, is that equivalent to sort of what the cash impact was from those businesses?

Yes, I'll take the first question, Joel. We don't expect any material adverse impact to our Worksite insurance sales. I would point out, indeed, that's part of the reason we're exiting this business, it just hasn't delivered enough cross-selling and support and so on. We've been able to grow the insurance business and expect to continue to grow the insurance business without the support of the cross-sell of the fee business. So we expect a minimal impact to the insurance sales and Worksite. Paul?

Yes. So the second part of your question, Joel, I think, is the $20 million pretax GAAP earnings, a reasonable proxy for cash flow. And just thinking out loud, honestly, that I haven't thought of the specific question, but I think there aren't any significant delays in the cash impact as opposed to the GAAP accruals. So I think so, Joel.

Our next question comes from Wilma Burdis from Raymond James.

Is there any way you could help us think a little bit more through the forward cash benefit or impact from rising Supplemental Health business? And maybe if you can talk about -- I know that relates to a specific sub, but just give a little bit more detail there on the portion of that business that we'll be going through that some...

Wilma you were breaking up quite a bit there. I'm not sure I got your question. I think you're asking about the go-forward impacts of the Sup Health assumption update.

Yes. On cash.

On cash, okay. Jeremy, do you want to take that one?

Sure. So certainly, on a cash basis, with the movement of the new business, the flow piece, there's certainly some reduction in strain there. Don't know the exact numbers specific to that, but certainly you can see some reduction in strain and some additional cash flows related to that.

Okay. And then can you guys hear me?

Yes, I can hear you Wilma but you're just breaking up a little bit. You want...

Breaking up a little bit, sorry. Similar like my first question. Is the $20 million freed up from the fee services business? Is that going to also be a cash impact? I guess what I'm trying to get at here is just maybe help us think a little bit about the forward cash benefits from these 2 actions.

Got it. So similar to Joel's previous question. I think that certainly, the expenses supporting the fee services business are real-time cash. And on the revenue side, there aren't material deltas between the cash flow and the gas accruals. So I think the simple answer to your question, Wilma is yes.

Our next question comes from Jack Matten from BMO.

I had one more on the Bermuda transaction and more around the uses of [indiscernible] additional cash flow you're seeing this year. Just something you're kind of planning to earmark for shareholder returns next year? Or are there incremental, I guess, investments in the business and growth or capabilities that you're planning to make?

Sure. So Jack, clearly, we'll have elevated cash at the holdco in the fourth quarter in the wake of their new Bermuda treaty. And we will nevertheless be measured in our level of share repurchases as we continue to invest in sales growth and in the previously announced 3-year tech modernization project. We view these to be an attractive strategic trade-off as both will contribute over time to earnings growth and improved return on equity.

Directionally, I would say that you should view our 3Q '25 share repurchase levels is more indicative of go-forward levels than the more elevated levels that we had in 4Q of last year and the first half of this year, absent, of course, more compelling uses of that capital, we haven't changed in any way, how we think about deploying excess capital, we'll put it to the best and highest use in practice that has and will likely continue to translate to some level of share repurchase activity.

Got it. And on the revised or raised ROE target, just on the cadence of that, should we think about the, I guess, more of a step-up next year since a big driver is just the divestiture of the fee business and then maybe a smaller step in 2027. I guess any other kind of put and takes we should think about regarding the -- just the cadence of the ROE uplift?

Yes, that's the right way to think about it, Jack. Initially, we said expect 150 basis points of '25 to '27 off of a run rate of approximately 10% to '24. And we said, including 50 basis points in 2025, and we're on track to deliver that. The benefit from the exit of fee services together with the second Bermuda treaty will begin to emerge in the fourth quarter, but won't really have a material impact until we begin to move through 2026. So yes, the incremental 50 bps is really in the '26, '27 period.

Jack and Paul, I'd just like to add one other perspective on that. I think it's important to note that even when we hit that 12% ROE that is not a stopping point. We have to continue to improve. Right now, we've made public commitments to our shareholders about things we have line of sight for. But I want to emphasize, even when we get there, and hopefully, we get there sooner, and we're able to, again, increase the target and again, talk about [indiscernible] we have to continue to improve.

So this team is geared around continuing to look for ways to improve. It's just at the moment, we're only willing to commit to things we have line of sight for. But you should not interpret that as accepting that number and the stopping point. It's anything but it's nothing more than a way point. We have to continue to get better. And so we're constantly looking for things. And if we're lucky, we're good and we're lucky we'll be able to say something about that before 2027 and increase that target again. That is our goal.

[Operator Instructions] Our next question comes from [ Joseph Ramileou ] from Jefferies. Joseph, your line is open.

Operator, we're not hearing anything. I don't know if you can hear something, but we cannot.

I don't believe Joseph is there.

We can skip to the next question, operator.

Our next question comes from Jack Matten from BMO.

Just one more on the Medicare Supplement business. I guess tied of what you're seeing regarding claims trends and what the assumption review impact this quarter I think in the last quarter, you talked about expecting a 10% average rate increase in your filing some moving into next year. Is that still roughly your expectation?

Jack, yes, so the annual actual assumption update did incorporate the trends that we've seen. So no real surprise there and no real change in those trends. And as you've pointed out, we have the opportunity each year to address claim trends with pricing and trying to get to that information. So let me circle back on that once I put my finger on it.

Yes. This is Jeremy. I'll go ahead and jump in. We certainly -- we've certainly filed something around the neighborhood of the 10 and expect to get something in that realm. So you're correct.

Our next question comes from [ Joseph Miler ] from Jefferies.

It's Suneet Kamath from Jefferies. I think we might have an issue with me using his pass code. Can you hear me?

Yes. Hi Suneet, we can hear you.

Okay. Perfect. Sorry about that. My first question, just on acknowledging the strong NAP in consumer. We did notice that the producing agent count was sort of flattish, maybe up just a little less than a percent. And I guess I'm just curious if we're running into sort of a tough comp issue there. And if that continues, does that start to put some pressure on the consumer NAP or are you going to be able to continue to grow as you have been?

Suneet, this is Gary. We expect to continue to grow. You are correct that the comps are getting tougher, but we do continue to expect to grow. Conventional wisdom has always held that as employment market softens, more people are interested in trying out a commission-only career. So we expect that to start to help us in coming quarters based on what we're seeing. We also like the results we're getting from a number of our efforts to bring agents in.

All of that said, Suneet, if you force me to pick, I've been consistent about this for a few years. I'm still way more focused on productivity. Productivity is way more important than agent. So ideally, we try and do both. But if I had to prioritize, I'd prioritize productivity and that continues to move nicely.

Got it. Okay. And then I guess on the impairments, I know the numbers aren't huge, but you did reference that you've invested in these businesses and now are exiting them. Does this episode make you think differently about inorganic growth as a use of capital? Or do you just kind of feel like this one kind of got away from you and you're going to continue to look for inorganic opportunities?

This is Gary again, Suneet. Let me -- I guess, we plan spoken about it. There are clearly some lessons we need to take from this. So I want to make sure that you and our shareholders do not think that we are simply saying this is just one that got away. We have to get better, we have to learn from this. And the responsibility for that is mine. So it doesn't sound like we're making excuses or anything like that. So there's definitely is causing us to rethink how we want to handle acquisitions. We'll be presenting a pretty detailed analysis to our Board about lessons learned. So we're taking this very seriously. It will definitely impact the way we move forward.

All that said, I do want to make sure that our shareholders also don't lose sight of some of the things that have gone really well. I mean we've got minority stakes we've taken in partners like [ Tanenbaum ] and [ Rialto ] and [ Victory Park ] and so on, that have done very, very well for us. So there are some good skills here, some people have done some really good work. There are some lessons that need to be learned from these particular investments. And you can rest assured we're taking that very seriously and it will definitely give me pause as we think about other inorganic opportunities. There's no question about that.

That's good to hear. If I could sneak one more in just on the Bermuda. Should we be thinking about sort of the cadence of you guys thinking about reinsuring in-force business as maybe one deal a year, and that's kind of what you're shooting for. Is that a reasonable way to think about it?

Suneet, I think that's reasonable. Yes. I don't think it would be reasonable to expect that we would do more than that. And at some point, with our existing book other than new business will probably hit the right amount of in-force reserves that are ceded. There is a balance, and it's certainly not 100% ceded to Bermuda. So we're not there yet, but at some point, we would reach that sort of right balance. But for the time being, yes, as we mentioned, we're exploring an additional business that we might see to Bermuda.

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

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

This concludes today's call. We thank everyone for joining. You may now disconnect your lines.